Citation Nr: 1550193 Decision Date: 12/01/15 Archive Date: 12/10/15 DOCKET NO. 13-36 136 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Chicago, Illinois THE ISSUES 1. Validity of a debt based on an overpayment of pension benefits from October 1, 2005 through June 30, 2010 due to unreported countable income. 2. Whether the amount of debt of $54,488.00 based on the overpayment of pension benefits is accurate. 3. Whether waiver of recovery of any portion of the debt is warranted. REPRESENTATION Appellant represented by: Veterans of Foreign Wars of the United States ATTORNEY FOR THE BOARD J. Rutkin, Counsel INTRODUCTION The Veteran served on active duty from February 1974 to May 1975. The Veteran also served from September 1976 to June 1978, but received a discharge under other than honorable conditions. VA has not determined the character of service for this second period of active duty for VA benefits purposes. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a July 2010 decision of the Pension Management Center (PMC) in Milwaukee, Wisconsin, which determined that the Veteran's income disqualified him from pension payments effective October 1, 2005, and from an August 2010 decision of the Committee on Waivers and Compromises (COWC) in Milwaukee, which denied waiver of recovery of any portion of the debt resulting from an overpayment of pension benefits. The Veteran was scheduled to testify at a hearing before a Veterans Law Judge of the Board in June 2015. He did not appear for this hearing and has not provided a reason for his failure to appear. Accordingly, the Board will proceed with appellate review. See 38 C.F.R. § 20.704(d) (2015) (providing that failure to appear for a scheduled hearing will be processed as though the request for a hearing had been withdrawn). The issues of the amount of debt owed and whether waiver of recovery of all or a portion of this debt is warranted are addressed in the REMAND portion of the decision below and are REMANDED to the Agency of Original Jurisdiction (AOJ). FINDING OF FACT The Veteran's countable income exceeded the maximum annual pension rate (MAPR) as of October 1, 2005. CONCLUSION OF LAW The creation of the overpayment as of October 1, 2005 and resulting debt was valid. 38 U.S.C.A. §§ 1521, 5112, 5314 (West 2014); 38 C.F.R. §§ 1.911, 1.962, 3.23, 3.500, 3.660 (2015). REASONS AND BASES FOR FINDING AND CONCLUSION I. VA's Duties to Notify and Assist The Veterans Claims Assistance Act of 2000 (VCAA), Pub. L. No. 106-475, 114 Stat. 2096 (2000) (codified as amended at 38 U.S.C.A §§ 5100, 5102, 5103, 5103A, 5107 (West 2014), sets forth VA's duties to notify and assist claimants in substantiating claims for VA benefits. See 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326(a) (2015). The VCAA does not apply to cases involving recovery of overpayment based on indebtedness or the validity of the underlying debt, which are not claims for benefits. See Reyes v. Nicholson, 21 Vet. App. 370, 379-80 (2007) Lueras v. Principi, 18 Vet. App. 435, 438 (2004); Barger v. Principi, 15 Vet. App. 132 (2002). Thus, the provisions of the VCAA do not apply in this matter. II. Analysis An overpayment is created when VA determines that a beneficiary or payee has received benefit payments in excess of the amount due or to which such beneficiary or payee is entitled. 38 C.F.R. § 1.962 (2015). When VA has determined that a debt is owed based on such an overpayment, and once it has satisfied certain procedural requirements, it may collect the debt by offsetting current or future benefit payments until the debt has been repaid. 38 U.S.C.A. § 5314 (West 2014); 38 C.F.R. §§ 1.911, 1.912a(a) (2015). The debtor, in turn, may challenge the validity or amount of the debt owed, among other things. See 38 C.F.R. § 1.911(c)(1); see also VAOPGCPREC 6-98; Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991). In this case, the Board finds that an overpayment was properly created based on the retroactive termination of pension payments effective October 1, 2005. The Board first turns to the issue of whether termination of pension payments was warranted based on the Veteran's income. As relevant to this appeal, VA law provides that basic entitlement to pension exists if a veteran of a period or periods of war (as defined in 38 C.F.R. § 3.3(a)) meets certain net worth requirements and does not have an annual income in excess of the applicable maximum annual pension rate (MAPR), and is either age 65 or older or is permanently and totally disabled from nonservice-connected disability not due to the veteran's own willful misconduct. See 38 U.S.C.A. §§ 1521(a) and (j), 5312; 38 C.F.R. §§ 3.3(a), 3.23(a). Pension is not payable to a veteran whose annual income exceeds the rates set forth in 38 U.S.C. 1521. 38 C.F.R. § 3.252(b); but see 38 C.F.R. § 3.23 (providing, in pertinent part, that the MAPR specified in 38 U.S.C. § 1521 is subject to increase under 38 U.S.C. 5312). The MAPR for improved pension for veterans is set forth in 38 C.F.R. § 3.23. See 38 U.S.C.A. § 1521; 38 C.F.R. §§ 3.21, 3.23(a). As relevant to the issue on appeal, the MAPR for veterans who are permanently and totally disabled is the amount specified in 38 U.S.C.A. § 1521, as increased from time to time under 38 U.S.C. § 5312. 38 C.F.R. § 3.23(a). Each time there is an increase under 38 U.S.C. § 5312, the actual rates will be published in the "Notices" section of the FEDERAL REGISTER. Id. The maximum annual rates of improved pension shall be reduced by the amount of the countable annual income of the veteran, and the income of the veteran's spouse and child. 38 U.S.C.A. § 1521; 38 C.F.R. §§ 3.3(a), 3.23(a)(1), (b), (d)(1) and (d)(4) (2015). To calculate the monthly pension benefit, VA subtracts the total amount of countable income in one year, less excluded income, from the MAPR for that year; if a positive amount remains, the rest is divided by twelve to determine the monthly death pension benefit. 38 C.F.R. § 3.273(a). When a change in the MAPR occurs, VA repeats the calculation with the new MAPR as the starting amount. 38 C.F.R. § 3.273(b)(1). When a change in income occurs, the MAPR will be reduced by the new annualized income effective on the date that the increased income began. 38 C.F.R. § 3.273(b)(2). In determining annual income, all payments of any kind or from any source (including salary, retirement or annuity payments, or similar income) shall be included during the 12-month annualization period in which received, except for listed exclusions. 38 U.S.C.A. § 1503(a); 38 C.F.R. § 3.271(a). The following is excluded from countable income for VA pension purposes: welfare benefits; maintenance benefits furnished by a relative, friend, or a charitable organization; VA pension benefits; casualty loss reimbursement; profit from the sale of property; joint accounts; unreimbursed medical expenses; expenses of last illnesses, burials, and just debts; educational expenses; a portion of the beneficiary's children's income; Domestic Volunteer Service Act Programs payments; distributions of funds under 38 U.S.C. § 1718; survivor benefit annuities; Agent Orange settlement payments; restitution to individuals of Japanese ancestry; cash surrender value of life insurance policies; income received by American Indian beneficiaries from trust or restricted lands; Radiation Exposure Compensation Act payments; and Alaska Native Claims Settlement Act payments. 38 C.F.R. § 3.272. From October 1, 2005 through June 30, 2010, the period at issue in this case, the Veteran was married and had one minor child. The MAPR for this period was no higher than $17,513.00, which represents the MAPR as of December 2009 for a veteran with a spouse and one child. See 38 U.S.C.A. § 1521(c); 38 C.F.R. § 3.23(a)(1). The MAPR as of December 2004 for a veteran with a spouse and one child was $15,043. Thus, the MAPR's for the period at issue were in the range of $15,043 to $17,513.00. VA received information verified by the Veteran's employer and the State government that his annual income (both from wages and unemployment benefits) exceeded the applicable MAPR's in 2005, 2006, 2007, and 2008, as it was above $20,000. The Veteran has not disputed the amount of income received for the annualization periods from September 2005 through 2008 as determined by the AOJ. Moreover, he has not identified any qualifying exclusions that would offset his countable income, including unreimbursed medical expenses. Thus, there is no dispute of fact that the Veteran's income exceeded the applicable MAPR's for the annualization periods from September 2005 through 2008. As discussed in the REMAND section below, it is not clear to what extent the amount of debt was based on the Veteran's total annual income for the annualization periods from late 2008 through June 2010. The Veteran has stated that he did not receive any income in 2009. However, the Veteran was informed in letters dated in March 2010 and July 2010 that absent evidence to the contrary, his annualized income for 2006 would be considered effective October 1, 2005. Moreover, VA received verification from the Veteran's employers and State government that his income for the years 2007 and 2008, including income from wages and income from state unemployment benefits, also exceeded the MAPR for those years. Thus, the Board finds that the Veteran was not entitled to VA pension payments effective October 1, 2005 based on his annualized income since September 23, 2005, which was the date at which the annualization period commenced according to the July 2010 determination by the PMC (based on employer verification as to when the Veteran first began receiving wages). The issue of the proper amount of overpayment of pension benefits determined by the Debt Management Center based on the Veteran's income from September 2005 forward, including his income from late 2008 through June 2010 (which information was not of record at the time of the retroactive discontinuance of pension benefits in July 2010), is addressed in the REMAND section below. However, the issues of the validity of the debt (the legal basis for creating the debt) and the proper amount of the debt are distinct. A decision on the former does not depend on the outcome of the latter. The Board finds it may decide the validity of the debt at this time without prejudice to the Veteran, as there is no dispute that his income disqualified him from pension benefits effective October 1, 2005. See Dent v. McDonald, 27 Vet. App. 362, 387 (2015) (upholding the Board's decision as to the validity of the debt based on an overpayment of pension benefits while remanding for further action the issues of the proper debt amount and the effective date of the reduction and discontinuance of the pension award upon which the overpayment was created). The only question that remains is whether the calculated amount of overpayment of pension benefits may be reduced based on a decrease in income and consequent reinstatement of pension benefits some time after 2008 and before July 1, 2010 (pension benefits having been already reinstated subsequent to July 1, 2010). See 38 C.F.R. § 3.660(b). That question concerns the amount of debt, and is addressed in the REMAND section below along with the issue of how the amount of $54,488.00 in overpayments was calculated. Finding that the Veteran was not entitled to pension payments effective October 1, 2005, the Board next turns to the issue of whether their retroactive discontinuance effective October 1, 2005 was proper. As an initial matter, the Board finds that all procedural due process requirements for discontinuing pension benefits effective October 1, 2005 were satisfied. See 38 U.S.C.A. § 5112 (2015); 38 C.F.R. §§ 3.103, 3.105(f) (2015). A letter dated March 29, 2010 notified the Veteran of the proposal to reduce his pension payments effective October 1, 2005 based on income that exceeded the MAPR. The letter listed the amounts and sources of income and the applicable MAPR. He was also notified in this letter that the adjustment would result in an overpayment of benefits that had been issued to him, and that he would be subsequently notified of the exact amount of overpayment and information about repayment. The Veteran was notified that he had sixty days to submit additional information or evidence to show that the proposed action should not be taken, and that if he continued to accept payments at the present rate during this period, he would have to repay all or part of those benefits as well if it were determined that the proposed adjustment was proper. He was further notified of his right to a personal hearing, and that if he requested such a hearing within thirty days, the payments would continue at the then present rate until the hearing was held. Finally, he was notified of his right to representation. The Veteran did not respond to this letter or request a hearing. He has not stated, and there is no other indication, that he did not receive it. Over three months later, the July 2010 decision was issued from which the present appeal stems, and the Veteran was informed that VA would proceed with the proposed action to discontinue his pension benefits effective October 1, 2005 based on income in excess of the MAPR. Accordingly, the Veteran's rights to advanced notice and opportunity to request a hearing and submit additional information and evidence have been satisfied. See id. The determination as to whether the overpayment of the Veteran's pension benefits was validly created turns on the proper effective date of their discontinuance. With respect to improved pension benefits for veterans, where reduction or discontinuance of a running award of pension is required because of an increase in income, the reduction or discontinuance shall be made effective the end of the month in which the increase occurred. 38 U.S.C.A. § 5112(b)(4)(A); 38 C.F.R. §§ 3.500(c), 3.660(a)(2). Overpayments created by retroactive discontinuance of benefits will be subject to recovery if not waived. 38 C.F.R. § 3.660(a)(3). In this case, as discussed above, the Veteran's income was found to exceed the applicable MAPR for the annualization period beginning September 23, 2005. The discontinuance of pension benefits effective October 1, 2005 was thus proper under 38 C.F.R. § 3.660(a)(2), as this was the first day following the end of the month in which the increased income occurred. The retroactive discontinuance of pension payments effective October 1, 2005 and resulting overpayment was valid. See 38 C.F.R. § 3.660(a)(3). The Board also notes that there was no fault on the part of VA in this matter. In this regard, the effective date of a reduction or discontinuance of an erroneous award of compensation, disability and indemnity compensation (DIC), or pension benefits based on an act of commission or omission by a payee or with a payee's knowledge is the effective date of the award or the day preceding the act of commission or omission of the payee, whichever is later. 38 U.S.C.A. § 5112(b)(9); 38 C.F.R. § 3.500(b)(1). The effective date of a reduction or discontinuance of an erroneous award of compensation, DIC, or pension benefits based solely on administrative error or error in judgment on the part of VA is the date of last payment, with certain exceptions not applicable here. 38 U.S.C.A. § 5112(b)(10); 38 C.F.R. § 3.500(b)(2). The U.S. Court of Appeals for Veterans Claims has held that "the term 'erroneous award' as used in section 5112(b)(9) and (10) includes erroneous payments made subsequent to the initial award." Dent v. McDonald, 27 Vet. App. 362, 374 (2015). In other words, the term "award" in these sections includes both the initial award of benefits and the recurring payments made thereafter. See id. If fault for an overpayment cannot "clearly be ascribed to the beneficiary," VA's policy is to assume that fault and not create a debt against the beneficiary. Dent, 27 Vet. App. at 380 (citing VAOPGCPREC 2-90 (March 1990)). However, when both VA and the beneficiary are partially at fault, the debt based on the effective date of reduction or discontinuance of benefits is properly created. See Jordan v. Brown, 10 Vet. App. 171, 174 (1997). In this case, the Veteran was solely at fault in the creation of the overpayment and resultant debt since he failed to disclose his increased income under the reporting requirements set forth in 38 C.F.R. § 3.256(a). VA law provides, in relevant part, that a veteran who is receiving pension must notify VA of any material change or expected change in his or her income or other circumstances which would affect his or her entitlement to receive, or the rate of, the benefit being paid. 38 C.F.R. § 3.660(a). Such notice must be furnished when the recipient acquires knowledge that he or she will begin to receive additional income. Id. Correspondence sent to the Veteran in November 2003, November 2007, December 2007, November 2008, March 2009, and March 2010 informed him of his current rate of pension, his annual income according to VA's records (which was much less than what he was actually receiving), and that he must inform VA "right away" if his income had changed. Indeed, some of the aforementioned correspondence informed him that VA was only considering his wife's income. In other words, per the Veteran's initial application for pension benefits, VA assumed that the Veteran himself was not receiving any income. The Veteran never reported the fact that he himself was receiving wages during this time period. It was only through an income matching program with other Government agencies and subsequent verification from the Veteran's employers and State government (respecting unemployment benefits) that VA learned that the Veteran had begun receiving income since at least September 2005, and that his income in 2006, 2007, and 2008 exceeded the applicable MAPR for those years. The Veteran's failure to report his income changes from 2005 to 2010 amounted to an "act of omission," thus triggering the effective date provisions of 38 C.F.R. § 3.500(b)(1). He also had knowledge of the erroneous award from the above letters informing him of the income being calculated by VA as the basis for his pension benefits, which was nowhere near his actual income, and that it was his responsibility to report any changes in income "right away." The Court noted in Dent that "[a] person may have actual or constructive knowledge of a fact," and observed that the latter is defined as "knowledge that one using reasonable care or diligence should have, and therefore that is attributed by law to a given person." Dent, 27 Vet. App. at 380 (quoting VAOPGCPREC 2-90 (March 1990)). Further, the U.S. Supreme Court has held that everyone dealing with the Government is charged with knowledge of Federal statutes and lawfully promulgated agency regulations. Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947); cf. Morris v. Derwinski, 1 Vet. App. 260 (1991). Here, in light of the above correspondence sent to the Veteran, the Board finds that he had actual and constructive knowledge of the erroneous award and his duty to report any changes to his income. His knowledge of the erroneous award similarly triggers the effective date provisions of 38 C.F.R. § 3.500(b)(1). Accordingly, as the Veteran failed to report the significant increase in his income beginning September 2005, which exceeded the MAPR, the proper effective date for the discontinuance of pension payments could be no later than October 1, 2005, the first day of the month following the commencement of the annualization period (i.e. September 23, 2005) in which the increase occurred. See 38 C.F.R. § 3.660(a)(3); 38 U.S.C.A. § 5112(b)(9); 38 C.F.R. § 3.500(b)(1); see also 38 C.F.R. §§ 3.23, 3.252(b). The retroactive discontinuance of pension payments effective October 1, 2005, with the consequence of an overpayment of pension and resultant debt, is valid. See 38 C.F.R. § 3.660; see also 38 U.S.C.A. § 5314; 38 C.F.R. §§ 1.911, 1.912a(a). In sum, the overpayment of pension effective October 1, 2005 and resultant debt was properly created under 38 C.F.R. § 3.660 and 38 C.F.R. § 1.962. Because this appeal must be denied as a matter of law, the benefit-of-the-doubt rule does not apply. See Sabonis v. West, 6 Vet. App. 426, 430 (1994); see also 38 U.S.C.A. § 5107 (West 2014); 38 C.F.R. § 3.102 (2015). ORDER The debt based on an overpayment of pension benefits from October 1, 2005 through June 30, 2010 due to unreported countable income is valid; the appeal is denied. REMAND While the Board sincerely regrets the delay, the issues of the amount of debt owed and whether waiver of recovery of any or all of this amount is warranted must be remanded for further development to ensure that they afforded every due consideration, and to aid the Board in making an informed decision. With regard to the amount of debt, a full accounting that shows how the figure of $54,488.00 was calculated must be prepared and added to the claims file. Thereafter, a statement of the case (SOC) must be issued which addresses whether the debt amount is accurate and clearly explains how it was calculated. See Dent v. McDonald, 27 Vet. App. 362, 387 (2015) (remanding for issuance of an SOC that includes the exact amount of debt and an explanation as to how it was calculated in a case involving the validity of an overpayment of pension benefits); see also 38 U.S.C.A § 7105(d)(1) (West 2014); 38 C.F.R. §§ 19.26(d), 19.29 (2015) (setting forth requirements for issuing an SOC). In this regard, the Veteran's July 2010 notice of disagreement (NOD) indicates that he not only disputes the validity of the debt, but its amount as well. Specifically, he wrote: "I disagree with your figures." The Board finds this statement sufficient to raise the issue of whether the amount of debt itself is accurate. See Dent, 27 Vet. App. at 387 (finding that statement in NOD arguing that appellant should only have to pay back part of the benefits he received sufficient to raise the issue of the amount of debt owed under § 1.911(c)); see also Gallegos v. Principi, 283, F.3d 1309, 1314 (Fed. Cir. 2002); Ortiz v. Shinseki, 23 Vet. App. 353, 358 (2010); Jarvis v. West, 12 Vet. App. 559, 561 (1999). The Board may not address the issue of the amount of debt in the first instance. See Dent, 27 Vet. App. at 387 (finding that the appropriate course of action was for the RO to issue an SOC addressing the amount of debt and how it was calculated when an SOC had not previously addressed this issue) (citing Manlincon v. West, 12 Vet. App. 238, 240-41 (1999)); see also 38 C.F.R. § 19.9(c) (2015). Moreover, the record before the Board is not sufficient to determine how the amount of $54,488.00 was calculated. Complicating matters is the fact that the monthly pension rate awarded to the Veteran since October 2005 does not coincide with the actual amounts paid to him from October 2005 through June 2010, since some of the award was being withheld in recoupment of a previous debt owed to VA. The file contains a data sheet listing some the actual pension payments issued to the Veteran, but only for the period from June 2009 to December 2010 (and payments issued from July 2010 to December 2010 are not relevant to the issue on appeal). The Board is thus unable to determine whether the amount of $54,488.00 accurately reflects the amount of pension payments issued to the Veteran from October 1, 2005 through June 30, 2010, or whether there was some other basis for this amount. The Board also notes that the record does not contain verified data as to the amount of countable income for the Veteran in 2009. It is also not clear that the Veteran's actual income through June 2010 (as later verified) was known at the time the debt was created, or whether simply projected based on income in earlier years. The AOJ should ensure that the calculation of the overpayment of pension benefits, which was made in August 2010 by the Debt Management Center, is accurately based on the Veteran's actual total countable income for the annualization periods from late 2008 through June 2010. Because a determination as to the amount of debt owed may impact whether waiver of all or a portion of this debt is warranted, the Board will defer a decision on the waiver issue at this time. See Harris v. Derwinski, 1 Vet. App 180, 183 (1991) (two issues are "inextricably intertwined" when a decision on one issue would have a "significant impact" on the resolution of the second issue); Schaper v. Derwinski, 1 Vet. App. 430, 434, 436-37 (1991) (the propriety and amount of the overpayment at issue, when challenged, are integral to a waiver determination). Accordingly, the case is REMANDED for the following action: 1. An audit thoroughly reflecting all pension payments issued to the Veteran from October 1, 2005 through June 30, 2010 must be added to the claims file. 2. Provide or obtain a clear explanation as to how the debt amount of $54,488.00 was calculated. 3. Ensure that the Veteran's actual countable income for the annualization periods from September 2008 through June 2010 is of record and properly taken into account in determining whether the debt amount of $54,488.00 is correct. In this regard, the claims file does not contain verified data as to the Veteran's income from late 2008 through the end of 2009, and his verified income for 2010 was not of record when the debt was calculated in August 2010. 4. Finally, after completing any other development that may be indicated, readjudicate the issues of (1) the amount of debt and (2) whether a waiver of all or a portion of it is warranted on the merits. The SOC must contain a clear explanation as to how the amount of debt was calculated. If the benefits sought are not granted, the Veteran and his representative must be furnished a supplemental statement of the case (SSOC) and afforded a reasonable opportunity to respond before the record is returned to the Board for further review. The Veteran has the right to submit additional evidence and argument on the matter or matters the Board has remanded. Kutscherousky v. West, 12 Vet. App. 369 (1999). These issues must be afforded expeditious treatment. The law requires that all claims that are remanded by the Board of Veterans' Appeals or by the United States Court of Appeals for Veterans Claims for additional development or other appropriate action must be handled in an expeditious manner. See 38 U.S.C.A. §§ 5109B, 7112 (West 2014). ______________________________________________ P. M. DILORENZO Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs