Citation Nr: 1805587 Decision Date: 01/29/18 Archive Date: 02/07/18 DOCKET NO. 14-24 689 ) DATE ) ) On appeal from the Department of Veterans Affairs Medical and Regional Office Center in Wichita, Kansas THE ISSUES 1. Whether a debt for over payment of nonservice-connected pension benefits in the amount of $7,584.00 was properly created? 2. Entitlement to waiver of recovery of a $7,584.00 overpayment. REPRESENTATION Appellant represented by: The American Legion WITNESS AT HEARING ON APPEAL Veteran ATTORNEY FOR THE BOARD B. Berry, Counsel INTRODUCTION The Veteran served on active duty from April 1969 to August 1970. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a December 2013 decision issued by the Debt Management Center in St Paul, Minnesota, which determined that a debt was created due to overpayment of nonservice-connected pension benefits in the amount of $7,584. In December 2017, the Veteran presented testimony at a Board videoconference hearing before the undersigned Veterans Law Judge. A transcript of the hearing is of record. This appeal has been advanced on the Board's docket pursuant to 38 C.F.R. § 20.900(c) (2017). 38 U.S.C. § 7107(a)(2) (2012). FINDINGS OF FACT 1. The nonservice-connected pension benefits debt of $7,584.00 was created due to the RO's delay in acknowledging the Veteran's timely reported change in financial status; however, the Veteran continued to accept VA pension payments during that period with knowledge that he was not entitled to the higher amount. 2. The Veteran is not shown to have committed fraud, misrepresentation, or bad faith in the creation of the overpayment in the amount of $7,584.00 and the recovery of this overpayment would be against the standards of equity and good conscience. CONCLUSIONS OF LAW 1. The debt in the amount of in the amount of $7,584.00 for overpayment of nonservice-connected pension benefits was properly created. 38 U.S.C. § 5112 (2012); 38 C.F.R. §§ 1.911, 3.274, 3.275, 3.276, 3.277, 3.500 (2017). 2. The recovery of the overpayment in the amount of $7,584.00 for nonservice-connected pension benefits due to the additional income from Social Security, would be against equity and good conscience and, therefore, is waived. 38 U.S.C. §§ 5107, 5302(a) (2012); 38 C.F.R. §§ 1.962, 1.963, 1.965, 3.501 (2017). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS I Notice and Assistance VA has duties to notify and assist claimants in substantiating a claim for VA benefits. 38 U.S.C. §§ 5100, 5102, 5103, 5103A, 5107, 5126; 38 C.F.R. §§ 3.102, 3.156(a), 3.159 and 3.326(a). The notice and assistance requirements are not applicable to cases involving overpayment and indebtedness. Lueras v. Principi, 18 Vet. App. 435 (2004); Barger v. Principi, 16 Vet. App. 132 (2002). Notwithstanding the fact that the notice and development provisions are not controlling in these matters, the Board has reviewed the case and determined that the Veteran has had a fair opportunity to present oral and written arguments and evidence in support of his challenge to the validity of the debt and waiver in question. II. Criteria and Analysis The Veteran contends that he upheld his responsibility by notifying VA in June 2012 that he was going to start receiving Social Security income two months before it was due to start. He asserts that VA was at fault for the creation of the debt as it took 16 months for VA to adjust his income. The Veteran also contends that he has a very limited income and he should not be penalized for VA not being able to process a reported change of income in a timely manner. He further argues that the debt should be waived as he is homeless and the repayment of the debt currently causes and will continue to cause undue hardship. An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. See 38U.S.C. § 5302; 38 C.F.R. § 1.962. Applicable to pension benefits, the monthly rate of pension payable to a beneficiary shall be computed by reducing the beneficiary's applicable maximum pension rate by the beneficiary's countable income, which includes compensation paid by the Social Security Administration (SSA). 38 C.F.R. §§ 3.271(g), 3.273. The preliminary determination in this appeal concerns the validity of the debt. See Schaper v. Derwinski, 1 Vet. App. 430 (1991). A debtor may dispute the amount or existence of a debt, which is a right that may be exercised separately from a request for waiver or at the same time. See 38 C.F.R. § 1.911(c)(1); see also VAOPGCPREC 6-98. The propriety and amount of the overpayment at issue are matters that are integral to a waiver determination. See Schaper, 1 Vet. App. at 434. In order for the Board to determine that an overpayment was not properly created, thereby invalidating the debt, the record must establish the Veteran was legally entitled to the benefits in question or, if he was not legally entitled, then it must be shown that VA was solely responsible for the Veteran being erroneously paid pension benefits. Administrative errors include all administrative decisions of entitlement, whether based upon mistake of fact, misunderstanding of controlling regulations or instructions, or misapplication of law. VAOPGPREC 2-90 (July 17, 1989), 55 Fed. Reg. 27,757 (1990). Sole administrative error connotes the Veteran neither had knowledge of nor should have been aware of the erroneous award. Further, neither the Veteran's actions nor his failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C. § 5112(b) (9), (10); 38 C.F.R. § 3.500(b)(2); Jordan v. Brown, 10 Vet. App. 171 (1997) (sole administrative error is not present if the payee knew, or should have known, that the payments were erroneous). An administrative error resulting in an overpayment will not be classified as a VA administrative error or error in judgment if the error is "based on an act of commission or omission by the beneficiary, or with the beneficiary's knowledge." Dent v. McDonald, 27 Vet. App. 362, 380 (2015) (citing 38 U.S.C. § 5112(b)(9); see 38 C.F.R. § 3.500(b)(1); VAOGC Prec. 2-90 (Mar. 20, 1990)). Thus, a finding of sole administrative error requires not only error on the part of VA, but that the beneficiary is unaware that the payments are erroneous. VA's policy that running awards consisting of recurring monthly payments made as a result of VA administrative error do not create overpayments or valid debts and that VA administrative error must be considered even where the initial award or entitlement to benefits itself was not the result of administrative error. A valid debt is created if a veteran had knowledge that his or her compensation benefits would change with changes in their status, and they continued to accept the amount of compensation benefits direct deposited into their bank account. See Dent, 27 Vet. App. at 384. In this case, the Veteran was awarded nonservice-connected pension benefits in December 1995. In December 1995, a letter was sent to the Veteran informing him that the rate of VA pension depends on total "family" income, which include the payee's income and that of any dependents. The letter also noted that VA must adjust the payments whenever this income changes and that he must notify VA immediately if income is received from any source other than that shown above or any changes in the income shown above. His failure to promptly tell VA about income changes may create an overpayment which will have to be repaid. The letter asked the Veteran to read the enclosed VA Form 21-8768, which contains important information about right to receive this benefit. In June 2012, the Veteran submitted to the RO in Wichita, Kansas a written notification of pending social security income due to start in August 2012 and attached a copy of the social security award letter. In November 2013, the Veteran was notified that his disability pension award was amended based on his report of income change received in July 2012. In December 2013, the Veteran was notified that as a result of the change in entitlement to Compensation and Pension benefits, he was paid $7,584.00 more than he was entitled to receive. As noted above, VA had notice of the Veteran's initial SSA award in June 2012. Nonetheless, the Veteran was also aware that the amount of his pension benefits would change; and, to his credit, he took appropriate action to inform VA. Sole administrative error, however, entails no knowledge or fault on the part of the debtor. See Jordan, 10 Vet. App. 171. In addition, the U.S. Court of Appeals for Veterans Claims has held that a valid debt is created if a veteran had knowledge that his or her compensation benefits would change with changes in their status, and they continued to accept the amount of compensation benefits direct deposited into their bank account. See Dent, 27 Vet. App. at 384. The elapsed time between VA's receipt of notice in June 2012 and its response in November 2013 does not change the fact the Veteran had knowledge that he was not entitled to the full amount of nonservice-connected pension benefits that he continued to receive after he started receiving Social Security income, nor does it mitigate his responsibility. Thus, the Board finds the creation of the overpayment was valid. The Board will now turn to the issue of entitlement to a waiver of the recovery of the $7,584.00 overpayment that was properly created. An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. 38 U.S.C. § 5302; 38 C.F.R. § 1.962. An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, education educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. 38 C.F.R. § 1.956(a). Recovery of overpayment of any benefits made under laws administered by VA may be waived if there is no indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining the waiver. 38 U.S.C. § 5302(c); 38 C.F.R. § 1.963(a). If there is no indication of fraud, misrepresentation, or bad faith in the record, the indebtedness shall be waived if the recovery of the overpayment would be against equity and good conscience. 38 U.S.C. § 5301(a); 38 C.F.R. §§ 1.962, 1.965. VA regulations define "bad faith" as unfair or deceptive dealing by one who seeks to gain thereby at another's expense. Thus, a debtor's conduct in connection with a debt arising from participation in a VA benefits/services program exhibits bad faith if such conduct, although not undertaken with actual fraudulent intent, is undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and results in a loss to the government. 38 C.F.R. § 1.965(b). Consideration of equity and good conscience is intended to reach a result that is not unduly favorable or adverse to either the claimant or the Government. It is intended to achieve a result that is fair. 38 C.F.R. § 1.965(a). Six non-exclusive elements are set forth in the regulations that must be addressed to determine whether the facts and circumstances in a particular case dictate that collection of an overpayment would be against equity and good conscience. The six non-exclusive elements, consist of: (1) the fault of the debtor; (2) balancing of faults between the debtor and VA; (3) undue hardship of collection on the debtor; (4) a defeat of the purpose of an existing benefit to the veteran; (5) the unjust enrichment of the veteran; and (6) whether the veteran changed positions to his/her detriment in reliance upon a granted VA benefit. 38 U.S.C. § 5302; 38 C.F.R. § 1.965(a). Each of the six elements must be addressed. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994) (holding that VA must address all relevant factors in determining whether to exercise its equitable discretion in a waiver of indebtedness claim). In this case, the Board finds no evidence of fraud, misrepresentation, or bad faith. The Veteran informed VA that he was to receive SSA income starting in August 2012 within a few weeks of receiving notification from SSA that he was to receive this income in June 2012. The remaining consideration is whether recovery of the indebtedness would be against equity and good conscience. As noted above, when considering whether recovery of the debt would be against equity and good conscious consideration is given to the following six elements: (1) fault of debtor, (2) balancing of fault, (3) undue hardship, (4) defeat the purpose of the debt, (5) unjust enrichment, and (6) changing position to one's detriment. 38 C.F.R. § 1.965(a). After review of the evidence of record, there are elements both in favor and against granting a waiver of the validly created overpayment. It was the Veteran's responsibility to report all changes to his income with respect to receiving nonservice-connected pension benefits. The Veteran timely informed VA that he was going to start receiving SSA income and included a copy of the letter from SSA which documented the amount of SSA income he was going to receive monthly. The Veteran's actions of accepting the same amount as prior receipt of Social Security income from August 2012 to November 2013, despite his report of his change in income, contributed to the creation of the debt and showed some fault on his behalf. VA was also at fault in the creation of the debt due to the delay of approximately 16 months in processing the Veteran's timely report of a change in financial situation. There is no indication that the Veteran was notified that he should return the money that he received at the higher amount, and the Veteran fulfilled the legal requirements to report his change in income in an attempt to avoid an overpayment. Thus, the Board finds that VA's fault carries more weight than the Veteran's fault in this case. With respect to whether the Veteran would be subjected to undue hardship if the debt were recovered, the Board notes that undue hardship is based on the consideration of whether the collection would deprive the debtor or family of basic necessities. The Veteran contends that continued repayment of the debt would not only create undue hardship, but continue the undue hardship in which he is currently living. A financial status report submitted in December 2017 shows that the Veteran was unemployed due to disability since 1995. He reported that his only income was from VA nonservice-connected pension and Social Security in the amount of $1,059. His monthly expenses for food was $300. Food and fuel was $100. His total monthly expenditures for living expenses was $400. However, the Veteran reported that he was currently homeless and he had been homeless since before he began receiving Social Security benefits. The Veteran testified at the December 2017 Board hearing that he does not have enough money to pay for basic necessities to include a place to live or utilities. See Hearing Transcript at 6. Based on the foregoing, the evidence shows that payment of this debt would cause undue hardship. Furthermore, the recovery of benefits would defeat the purpose of VA pension benefits, which is to provide a subsistence income for a permanently disabled Veteran who is otherwise unable to maintain a basic, minimal income level. Also for consideration is whether a waiver of overpayment would cause "unjust enrichment" (i.e., whether failure to make restitution would result in unfair gain). In this case, if VA waived the overpayment, the Veteran would keep VA nonservice-connected pension benefits to which he was not legally entitled. Thus, the failure of VA to insist upon its right to repayment of the assessed overpayment would result in unjust enrichment of the Veteran. The last element to be considered is whether reliance on VA benefits resulted in a veteran relinquishing a valuable right or incurring a legal obligation. The Veteran has not claimed that he relinquished any right or incurred any legal obligation or that he relied upon VA to his detriment, nor do the facts show such. Furthermore, the record does not demonstrate any additional factors which should be considered in adjudicating the claim for a waiver of the indebtedness, and the Veteran has not identified any other factors. Considering all of the above, the Board finds that recovery of the debt for over payment of nonservice-connected pension benefits in the amount of $7,584.00 would be against the standards of equity and good conscience. Although the Veteran is, in part, at fault for creating the overpayment by not returning a portion of his nonservice-connected pension benefits, it has been shown that VA is more at fault for the creation of the debt and full recovery of the debt would defeat the purposes for which the benefits were intended and it would result in undue hardship. Therefore, a waiver of this debt is granted. 38 C.F.R. §§ 1.962, 1.965. To the extent that the issue of the waiver of the overpayment, as opposed to the validity of the debt, was not explicitly adjudicated below, given the Board's favorable disposition of the waiver issue, a remand would merely delay resolution of the case with unnecessary burdens placed on VA's adjudication system and no benefit flowing to the Veteran. Consequently, the Board finds that the above decision is warranted rather than a remand for adjudication of the waiver issue. Cf. Scott v. McDonald, 789 F.3d 1375, 1381 (Fed. Cir. 2015) (noting that "[a] veteran's interest may be better served by prompt resolution of his claims rather than by further remands to cure procedural errors that, at the end of the day, may be irrelevant to final resolution and may indeed merely delay resolution"). ORDER A debt for overpayment of nonservice-connected pension benefits in the amount of $7,584.00 was properly created. Waiver of recovery of overpayment for nonservice-connected pension benefits in the amount of $7,584.00 is granted, subject to the laws and regulations governing the payment of monetary benefits. ____________________________________________ Jonathan Hager Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs