Citation Nr: 18140995 Decision Date: 10/09/18 Archive Date: 10/09/18 DOCKET NO. 15-16 498 DATE: October 9, 2018 ORDER Waiver of recovery of overpayment of nonservice-connected pension benefits in the amount of $30,736.36 is denied. FINDINGS OF FACT 1. A September 2013 rating decision granted entitlement to nonservice-connected pension benefits. 2. The overpayment of nonservice-connected pension benefits in the amount of $30,736.36 resulted from the Veteran’s failure to report all income. 3. There is no indication of fraud, misrepresentation, or bad faith on the part of the Veteran in the creation of the debt in the amount of $30,736.36. 4. VA’s collection of the $30,736.36 debt would not result in the Veteran being unable to provide for his basic necessities and would not nullify the objective for which nonservice-connected pension benefits were intended. 5. The Veteran did not relinquish a valuable right or incur a legal obligation in reliance on VA compensation benefits and his failure to make restitution would result in an unfair gain to him at the expense of the Government. 6. It would not be against equity and good conscience for VA to recover the amount of the debt. CONCLUSION OF LAW The criteria for a waiver of recovery of an overpayment of VA nonservice-connected pension benefits in the amount of $30,736.36 have not been met. 38 U.S.C. §§ 1503, 5302; 38 C.F.R. §§ 1.962, 1.963, 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served on active duty from September 1970 to September 1973, and February 1975 to February 1979. This matter comes to the Board of Veterans’ Appeals (Board) on appeal from a decision issued in July 2014 by a Department of Veterans Affairs (VA) Committee on Waivers and Compromises (COWC). In November 2015, the Veteran testified at a Board hearing before the undersigned Veterans Law Judge. A transcript of the hearing is associated with the record. At such time, the undersigned held the record open for a period of 60 days for the submission of additional evidence, which was received in January 2016. 38 U.S.C. § 7105(e)(1). Entitlement to a waiver of recovery of overpayment of nonservice-connected pension benefits in the amount of $30,736.36. The Veteran is seeking a waiver of recovery of an overpayment of nonservice-connected pension benefits in the amount of $30,736.36. By way of background, in a September 2013 rating decision, the Agency of Original Jurisdiction (AOJ) granted entitlement to nonservice-connection benefits, effective April 9, 2012, with payments beginning May 1, 2012. In this regard, at the time the Veteran filed his claim in April 2012, he reported that neither he nor his spouse had any income, but he had $150,000 in stocks, bonds, and/or mutual funds. However, in a September 2013 pension eligibility verification report (EVR), which was received in October 2013, the Veteran reported that he received $49,496 and his spouse received $2,473.58 in gross wages the prior year and, as of September 24, 2013, he received $15,137.55 and his spouse received $1,449 in gross wages. He also reported that he received $6,300 in total interest and dividends, and had a monthly income of $2,381.95 and his spouse received a monthly income of $161. He further reported that he had $181,501.33 in stocks, bonds, and/or mutual funds. In an October 2013 statement, the Veteran stated that, in his recently submitted EVR, he meant to report that his retirement pension was $1,617.30 and not $1,668. Due to such statement, in April 2014, the AOJ informed the Veteran that it had not been counting his retirement pension as income for his nonservice-connected pension benefits and requested more information. Thereafter, in an April 2014 statement, the Veteran stated that he had no intention of filing for nonservice-connected pension and was only filing for service-connected compensation, and had contacted VA right away to clarify whether his payment was correct. In such statement, the Veteran’s spouse also stated that the Veteran made more in 2013 due to money he received at retirement for vacation pay, and they took out $13,000 to help their daughters. She also stated that their income for the year would be $32,000. Pursuant to the April 2014 letter from the AOJ, the Veteran also submitted an Improved Pension Eligibility Verification Report that same month. In such report, the Veteran indicated that his monthly income was $2,381.95 and his spouse’s monthly income was $161. He also reported that he made $48,022 and his spouse made $1,474 in gross wages from April 9, 2012, to April 30, 2013, and he made $41,305 and his spouse made $1,674 in gross wages from January 1, 2013, to December 31, 2013. He also reported that he would make $13,000 less in 2014 and had $181,501.33 in stocks, bonds, and/or mutual funds. Thus, in June 2014, the AOJ notified the Veteran that his VA pension benefits were terminated effective May 1, 2012, as his income exceeded the maximum annual pension rate for a Veteran with one dependent of $16,051. In a July 2014 statement, the Veteran reiterated that he did not have any intention of filing for nonservice-connected pension and, when VA started payments, he called his VA representative, who stated that he only filed for service-connected compensation. The Veteran also stated that he sent VA information indicating such fact, but, after not hearing anything for a couple of months, he assumed the decision was correct and the money was his to keep. The Veteran further noted that he never made $84,000 a year as stated in the letter from the Pension Center and the form filled out was incorrect as he had a difficult time determining his income from the middle of one month to the following month due to his retirement. The Veteran also noted that, in January 2013, he received $5,928 in vacation pay and withdrew $16,068 from his stocks, which showed that he was making more money than he was in reality. The Veteran further stated that it was hard to determine his spouse’s income because it varied from month to month and, in 2014, their income would be $21,996 less than it was in 2013. In another July 2014 statement, the Veteran listed one-time bills, and stated that his spouse had to be transported to the emergency room, resulting in a $1,000 deductible to be paid. The Veteran also submitted a Financial Status Report (FSR) in July 2014. In such report, he indicated a monthly income of $2,293.81 and $100 for his spouse. He also reported that his total monthly expenses were $2,327.49. Such expenses included monthly payments of $702.02 for rent/mortgage, $350 for food, $218 for utilities and heat, and $1057.47 in other living expenses, including church tithes, car insurance, Care Source, cable/phone/internet, cell phones, and gas for cars and cutting grass. The Veteran also reported that he had $1,205.19 in his savings account and $1,092,58 in his checking account. He further reported that he had $187,000 in stocks and other bonds. That same month, a decision was issued by the COWC denying the Veteran’s request for waiver of recovery of the overpayment. The decision indicated that the Veteran was found to be free of fraud, misrepresentation, or bad faith, and, since no such finding was made, the decision was based on the elements that assist in defining the principles of equity and good conscience. In this regard, the COWC explained that the Veteran was at fault in the creation of the debt because he did not report all income received. The COWC also found that the Veteran realized an unjust enrichment at the government’s expense. The COWC further noted that a changed position did not apply and repayment of the debt did not defeat the purpose of the benefit. The COWC also found that the Veteran could provide for his basic necessities in life and still repay his debt without causing undue financial hardship, and he was expected to accord a government debt the same regard as any other debt. In his November 2014 notice of disagreement (NOD), the Veteran stated that, on his original application for compensation, he noted that he had stocks, bonds, and mutual funds in the amount of $150,000, which should have disqualified him from pension benefits. He also stated that he did not deceive nor did he try to unjustly enrich himself through fraud or deception. Additionally, in a December 2014 Request for Details of Expenses, the Veteran noted that his monthly expenses included $702 for housing, $300 for food, $100 for taxes, $60 for clothes, and $250 for electricity and gas. A December 2014 Improved Pension Eligibility Verification Report was also received, which listed the same information the Veteran provided in his aforementioned April 2014 Improved Pension Eligibility Verification Report. Moreover, during the November 2015 Board hearing, the Veteran testified that he received the money and a statement about it, but knew it was wrong and contacted VA. However, he stated that, since VA took a long time to respond, he spent the money. He also argued that VA was somewhat at fault in the creation of his debt by not responding to his inquiries or letting him know earlier that he should have not been receiving nonservice-connected pension benefits. Additionally, the Veteran stated that he was responsible for his two grandchildren in addition to his spouse, and submitted court orders documenting that his spouse was awarded custody of his granddaughters in June 2011 and February 2015, respectively. In January 2016, an updated FSR was also received. In such report, the Veteran reported that his total monthly income was $3,209 with monthly expenses totaling $2,853. Such expenses included monthly payments of $733.49 for rent/mortgage, $500 for food, $275 for utilities and heat, with the rest for other living expenses including trash, car insurance, phone/cable/internet, church tithes, Care Source, cell phone, gas, and vitamins. The Veteran also reported that his monthly payments on installment contracts and debts totaled $140, and had $169,780.64 in total assets. Initially, the Board notes that the Veteran does not dispute the underlying basis upon which the debt was created, and does not challenge the calculation of the debt. In this regard, the law is clear that nonservice-connected pension benefits are an income-based award and entitlement to such is hinged on a veteran having a countable family income that is less than the annual pension limit set by Congress. 38 U.S.C. § 1521; 38 C.F.R. § 3.23(b). As of December 1, 2011, the maximum annual pension rate (MAPR) for a veteran with one dependent was $16,051. Further, as court documents show that the Veteran and his spouse had custody of his granddaughter beginning in 2011, the MAPR for a Veteran with one dependent plus a child was $18,144 (as they were not granted custody of their other granddaughter until 2015, she may not be considered as a dependent for the time period in question). As of December 1, 2012, the MAPR for a veteran with one dependent plus a child was $18,453. As of December 1, 2013, the MAPR for a veteran with one dependent plus a child was $18,730. See 38 C.F.R. § 3.23(a)(1); https://www.benefits.va.gov/PENSION/rates_veteran_pen12.asp. The Board notes that in his aforementioned April 2014 Improved Pension Eligibility Verification Report, the Veteran reported that he made $48,022 from April 9, 2012 to April 30, 2013 and $41,305 from January 1, 2013 to December 31, 2013, but was going to make $13,000 less in 2014. Thus, his income exceeded the limit allowable for entitlement to nonservice-connected pension benefits. Therefore, the Board finds that the underlying debt is valid. Furthermore, the Board finds that a waiver of recovery of overpayment is not prohibited as the Committee has determined that the overpayment of compensation benefits was not the result of conduct on the Veteran’s part which amounted to “fraud,” “misrepresentation of a material fact,” or “bad faith.” 38 U.S.C. § 5302(c); 38 C.F.R. §§ 1.962(b), 1.965(b). As the Veteran’s conduct in this matter has not consisted of “fraud,” “misrepresentation of a material fact,” or “bad faith,” his request for a waiver will be evaluated in light of the principles of “equity and good conscience” which are set forth at 38 C.F.R. § 1.965(a). In applying the “equity and good conscience” standard to an individual case, several factors are to be considered by the decision-maker, including (1) fault of debtor (where actions of the debtors contribute to the creation of the debt); (2) balancing of faults (weighing fault of the debtor versus the fault of VA); (3) undue hardship (whether collection would deprive the debtor or family of basic necessities); (4) defeat the purpose (whether withholding of benefits or recovery would nullify the objective for which benefits were intended); (5) unjust enrichment (failure to make restitution would result in unfair gain to the debtor); and (6) changing position to one’s detriment (reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation). With respect to the first and second considerations under the principles of equity and good conscience, the Board finds that the Veteran is at fault in the creation of the debt. In this regard, he indisputably received nonservice-connected pension benefits in the amount of $30,736.36 for the time period of May 1, 2012 to May 31, 2014, when his income exceeded the MAPR. While the Veteran has argued he did not intend to file for pension benefits, his April 2012 application indicates otherwise. Specifically, he did not specify the benefit type for which he wanted to be considered and he completed the sections related to nonservice-connected pension benefits. Additionally, in May 2013, the AOJ sent the Veteran a letter informing him that, if he was not claiming pension, he should notify them of such, which he did not. Furthermore, the Veteran argued that, in his April 2012 application he reported that he had $150,000 in stocks, bonds, and/or mutual funds, which should have precluded him from obtaining pension benefits. However, he also reported that he received no income on such application, which was the basis for the award of nonservice-connected pension benefits. Moreover, as mentioned previously, the Veteran testified that he knew receiving the money was wrong, but since VA took too long to respond to his inquiries, he decided to spend the money. However, in September 2013, he was notified he was receiving nonservice-connected pension benefits based on the fact that his family had no income from April 9, 2012, which he incorrectly reported in his April 2012 application. Thus, the Veteran should have returned the checks rather than spend the money regardless of whether VA responded to his alleged inquiries in a timely manner. Therefore, the Board concludes that he is at fault for the creation of the debt. Turning to whether the Veteran would be subjected to undue hardship if the debt were recovered, the Board notes that financial hardship alone is not sufficient to constitute undue hardship for VA purposes. In this regard, undue hardship is defined as depriving the debtor or his family of basic necessities. 38 C.F.R. § 1.965(a)(3). Basic necessities constitute food, clothing, and shelter. The evidence of record, including the Veteran’s aforementioned FSRs, indicate that his monthly income exceeds the amount that is needed to provide shelter, food, and clothing for his family, including his two grandchildren. Thus, while the Veteran has reported other expenses and debts throughout the appeal period and indicated that repayment of the debt would cause him financial hardship, he would not be subjected to undue hardship if the debt was recovered as he would still be able to afford his basic necessities. Moreover, as the overpayment of nonservice-connected pension benefits is a valid debt to the U.S. Government, there is no reason that the Veteran should not accord the Government the same consideration that he accords his other creditors. The Board next considers whether waiving the debt would nullify the objective for which benefits were intended. The nonservice-connected pension benefit is an income-based program intended to give beneficiaries a minimum level of financial security and any increase in income results in a dollar-for-dollar reduction. Therefore, repayment of this debt does not defeat the purpose of the benefit as the Veteran is able to maintain a minimum level of financial security. Additionally, the Board considers whether the Veteran’s failure to make restitution would result in unfair gain to himself. Here, the Veteran created the debt to VA by continuing to accept need-based benefits despite having income that disqualified him from receiving such benefits. Thus, if a waiver of recovery is granted it would create an unfair gain to him because he would be allowed to retain funds to which he was not legally entitled to receive. Finally, the Board must consider whether reliance on VA compensation benefits resulted in the Veteran relinquishing a valuable right or incurring a legal obligation. The record does not show, and the Veteran does not contend, that he incurred any significant legal obligation as a result of being in receipt of nonservice-connected pension benefits. There is also no indication that his position changed to his detriment or that, in reliance on the overpayment, he relinquished a valuable right. 38 C.F.R. § 1.965(a)(6). Thus, this sixth element does not support the Veteran’s request for a waiver of recovery of overpayment. In sum, consideration of equity and good conscience as to the facts and circumstances in the Veteran’s case does not indicate a need for reasonableness and moderation in the exercise of the Government’s rights. In view of the Board’s findings, recovery of the $30,736.36 debt would not be against equity and good conscience. Accordingly, the Veteran’s request for a waiver of recovery of the overpayment of VA nonservice-connected pension benefits must be denied. A. JAEGER Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD K. Clark, Associate Counsel