Citation Nr: 1808869 Decision Date: 02/13/18 Archive Date: 02/23/18 DOCKET NO. 14-14 075 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Milwaukee, Wisconsin THE ISSUE Whether a Department of Veterans Affairs pension overpayment was properly created due to income received from work therapy programs. Entitlement to waiver of recovery of overpayment of pension benefits for the period from January 2008 to June 2009. REPRESENTATION Appellant represented by: The American Legion ATTORNEY FOR THE BOARD Tahirih S. Samadani, Counsel INTRODUCTION The Veteran had active service from September 1968 to March 1970. This matter comes before the Board of Veterans' Appeals (Board) from a September 2013 decision by the Committee on Waivers and Compromises (COWC) of the Department of Veteran's Affairs (VA) Regional Office (RO) in Indianapolis, Indiana. The Veteran's claims file is a "paperless" claims file. All records in the Veteran's case are maintained in Virtual VA and Veterans Benefits Management System (VBMS). FINDINGS OF FACT 1. The Veteran began participating in a treatment program of psychosocial and vocational rehabilitation under the auspices of the Department of Veteran's Affairs in July 2009. 2. In a March 2013 letter, VA informed Veteran that there was an overpayment of $2,876.00 for the period from January 1, 2008 through January 31, 2013. 3. In a November 2012 letter, the VA Medical Center explained that the Veteran was enrolled in VA rehabilitation program beginning July 2009 and this type of income is exempt when considering pension benefits. 4. The November 2012 letter from the VA Medical Center also noted that the Veteran was working for the Goodwill from 2002 to 2009. 5. In May 2014, the Committee on Waivers granted a waiver of overpayment of $1,724.90 of the debt; but noted that any funds withheld to pay the debt would not be refunded. 6. An overpayment of pension benefits for the period from January 2008 to June 2009 was properly created, but recovery of this overpayment would be against equity and good conscience. CONCLUSIONS OF LAW 1. An overpayment of pension payments from July 2009 to January 2013 was not properly created; the Veteran was participating in vocational rehabilitation under the auspices of the Department of Veteran's Affairs which is exempt from counting and income for pension purposes. 38 U.S.C. 1718 (2012); 38 C.F.R. §§ 3.50, 3.52, 3.53, 3.57, 3.210 (2017). 2. Any overpayment created from January 2008 to July 2009 was properly created but the Veteran is entitled to waiver of recovery of the overpayment. 38 U.S.C. § 5302 (2012); 38 C.F.R. §§ 1.963, 1.965(a) (2017). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS Validity of Debt Basic entitlement to an improved monthly pension exists if a veteran served in the active military, naval or air service for 90 days or more during a period of war (38 U.S.C. 1521 (j)); meets the net worth requirements under §3.274; does not have an annual income in excess of the applicable maximum annual pension rate; and is age 65 or older or is permanently and totally disabled from nonservice-connected disability not due to the veteran's own willful misconduct. 38 C.F.R. § 3.3 (a)(3). For VA pension purposes, net worth includes assets such as bank accounts, stocks, bonds, mutual funds, annuities, and any property other than residence and a reasonable lot area. See M21-1, Part V, Subpart iii, Chapter 1, Section A.1.c. See also 38 C.F.R. §§ 3.274 and 3.275. If a claimant's assets are large enough that the claimant could use these assets to pay living expenses for a reasonable period of time, net worth is considered a bar. M21-1, Part V, Subpart iii, Chapter 1, Section A.1.e. Pension benefits are paid at the maximum annual rate reduced by the amount of annual income received by the veteran. 38 C.F.R. § 3.23 (b). Countable income includes income from most sources as well as from any eligible dependents, and generally includes earnings, disability and retirement payments, interest and dividend payments from annuities, and net income from farming or a business. Some expenses, such as unreimbursed medical expenses, may reduce countable income. See 38 U.S.C. § 1503 (a); 38 C.F.R. §§ 3.260, 3.261, 3.262, 3.271(a), 3.272. In December 2011, the RO was notified that the Veteran had earnings that he had not reported and asked the Veteran to furnish an accurate statement regarding his income from all sources. In a December 2011 letter, the Veterans Health Administration (VHA) confirmed that the Veteran was participating in a physician's prescription in a treatment program of psychosocial and vocational rehabilitation under the auspices of the Department of Veteran's Affairs. He was participating in Incentive Therapy (IT), Supported Employment, and Compensated Work Therapy Program during the period from July 2009 to present. He received money for this participation. These programs are established by 38 U.S.C. 1718 to provide therapeutic and rehabilitative activities for the rehabilitation of disabled and handicapped veteran. To show their earnings in the program, the veteran will receive an Internal Revenue Service Form W-2 reflecting earnings paid by the participating employer. Under 38 U.S.C. 1718(g) and 38 C.F.R. 3.272(l), the income earned from VA or a participating employer, while the veteran is participating in these programs, is excluded as income for pension purposes. In a November 2012 letter, VA Community Rehabilitation Section of the VA Medical Center noted that he was not enrolled in a VA program until July 2009, but instead was working for the Goodwill. In a November 2012 letter, the Veteran's representative argued that although the Veteran was working for the Goodwill from 2002 to 2009, this work was performed in a structured workshop environment for the purpose of exempting those funds from VA pension purposes. A March 2013 letter from the Debt Management Center notes that the Veteran was paid $2,876.00 more than he was entitled to receive. In April 2013, the Veteran requested a waiver of overpayment of this amount due to hardship. In August 2013, the Veteran was informed that $150 would begin to be withheld from his Social Security benefits. The Committee on Waivers has found the Veteran at fault in the creation of the debt because he failed to report income he received since 2008. A waiver was denied in September 2013. The Veteran filed a notice of disagreement in December 2013 explaining that any money received were likely exempt for VA pension purposes. In December 2013, the Veteran asked that his non-service connected pension benefits be reinstated. A statement of the case was issued in February 2014. The Veteran and his representative continued to appeal this decision by way of a March 2014 letter. The Veteran requested to continue with his appeal for a waiver of the entire debt and refund of the amount already withheld. In April 2014, the Veteran and his representative continued their appeal. In May 2014, the Committee on Waivers granted a waiver of part of the overpayment. The Committee explained that the debt was from the period of January 1, 2008 through January 31, 2013. The Committee noted that the Veteran was informed of the overpayment in a February 14, 2013 letter. The Committee proceeded to waive $1,724.90 of the debt. The decision noted that any funds withheld to pay the debt would not be refunded. In a May 2016 letter, the Veteran requested that his pension be reinstated and to be paid retroactive entitlement to pension when his pension benefits are reinstated. The Veteran explained that he has held some part-time jobs and some of them have been employment under a structured environment, such as Goodwill and Work Incentive programs at the VA Medical Center. He reported that he was not currently performing any type of gainful employment full-time or part-time nor enrolled in a VA Work Incentive program. Pension benefits were granted effective April 13, 2016 and payable from May 1, 2016. The term "overpayment" refers only to those benefit payments made to a designated living payee or beneficiary in excess of the amount due or to which such payee or beneficiary is entitled. Absent fraud, misrepresentation, or bad faith, a waiver of indebtedness may be authorized in a case in which collection of the debt would be against equity and good conscience. 38 U.S.C. § 5302(b); 38 C.F.R. §§ 1.962, 1.963, 1.965. However, there shall be no waiver of an overpayment, or any interest, in any case where there is an indication of fraud or misrepresentation of a material fact on the part of the debtor. 38 U.S.C. § 5302(c). A waiver of indebtedness may be authorized in a case in which collection of the debt would be against equity and good conscience. 38 U.S.C. § 5302; 38 C.F.R. § 1.963. In Schaper v. Derwinski, 1 Vet. App. 430 (1991), the United States Court of Appeals for Veterans Claims (Court) held that before a claim for waiver of an overpayment may be adjudicated, the matter of whether the overpayment was properly created must first be addressed if the appellant asserts the invalidity of the debt. The VA General Counsel has reinforced this obligation by holding that where the validity of a debt is challenged that issue must be developed before the issue of entitlement to waiver of the debt can be considered. VAOGCPREC 6-98. The Veteran has challenged the validity of the debt. Where a debt was created as the result of administrative error, the effective date of the reduction of benefits is the date of the last payment based on this error; consequently, there would be no overpayment charged to the veteran for the portion of the overpayment attributable to administrative error. 38 U.S.C. § 511(b)(10); 38 C.F.R. § 3.500(b). Thus, this is a creation issue, as there would be no valid debt. However, where an erroneous award is based on an act of commission or omission by a payee or with the payee's knowledge, the effective date of the discontinuance of the erroneous payment is the date the award became erroneous, but not earlier than the date entitlement ceased. Jordan v. Brown, 10 Vet. App. 171, 174 (1997); see 38 U.S.C. § 5112(b)(9); 38 C.F.R. § 3.500(b). In these circumstances, the overpayment would be properly created. A finding of administrative error requires not only error on the part of VA, but that the beneficiary be unaware that the payments are erroneous. Moreover, knowledge may be imputed where a payee is properly notified of the basis for the erroneous payment, even if the payee did not actually read the notification. Whether written notification was adequate must be considered in determining whether there was sole VA error. Here, the evidence shows that the debt created for the period beginning July 2009 to January 2013 was an administrative error. As noted above, in a December 2011 letter, the Veterans Health Administration (VHA) confirmed that the Veteran was participating in a treatment program of psychosocial and vocational rehabilitation under the auspices of the Department of Veteran's Affairs beginning in July 2009. Under 38 U.S.C. 1718(g) and 38 C.F.R. 3.272(l), the income earned from VA or a participating employer, while the veteran is participating in these programs, is excluded as income for pension purposes. The Veteran also believed that there was no overpayments because he believed that the income made through the VA program were exempt from counting as income for pension purposes. Since the Committee on Waivers improperly counted the Veteran's income from July 2009 to January 2013 as income when it was exempt, the Board concludes the overpayment in question is not a valid debt. Waiver of Overpayment The RO has determined that the Veteran was improperly paid additional pension benefits in total calculated amount of $ 2,876. The payment of these additional benefits occurred for the period from January 1, 2008 through January 31, 2013, and was based upon the Veteran not reporting income. As noted above, the Board has found that debt was not valid for the period from July 2009 to January 2013 as the Veteran's income was exempt for counting for pension purposes. For the period from January 2008 to June 2009, the Veteran appears to have worked for the Goodwill and was not participating in a treatment program of psychosocial and vocational rehabilitation under the auspices of the Department of Veteran's Affairs. Under 38 U.S.C. 1718(g) and 38 C.F.R. 3.272(l), the income earned from VA or a participating employer, while the veteran is participating in these programs, is excluded as income for pension purposes. As the debt appears to be properly created prior to July 2009, the Board will now determine whether a waiver of the overpayment should be granted. Recovery of overpayment of any benefits made under laws administered by VA shall 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, and recovery of the indebtedness from the payee who received such benefits would be against equity and good conscience. 38 U.S.C. § 5302; 38 C.F.R. § 1.963(a). However, if there is an indication of fraud, misrepresentation, or bad faith in the creation of the overpayment, waiver of the overpayment is automatically precluded and further analysis is not warranted. See 38 U.S.C. § 5302(a); 38 C.F.R. §§ 1.962, 1.963, 1.965. The Court has defined bad faith as "a willful intention to seek an unfair advantage." Richards v. Brown, 9 Vet. App. 255, 257-58 (1996). The provisions of 38 C.F.R. § 1.965(b)(2) define bad faith as an 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. The standard of "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate a need for reasonableness and moderation in the exercise of the government's rights. The decision reached should not be unduly favorable or adverse to either side. The phrase "equity and good conscience" means arriving at a fair decision between the obligor and the government. In making this determination, consideration will be given to the following elements, which are not intended to be all-inclusive: (1) Fault of the debtor - where actions of the debtor contribute to the creation of the debt. (2) Balancing of faults - weighing fault of the debtor against Department of Veterans Affairs fault. (3) Undue hardship - whether collection would deprive 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. (6) Changing position to one's detriment - reliance on Department of Veterans Affairs benefits results in relinquishment of a valuable right or incurrence of a legal obligation. 38 C.F.R. § 1.965(a). After reviewing the Veteran's claims file, to include the Veteran's financial documents, statements, and forms, the Board finds that it would be against equity and good conscience for VA to recover the overpayment of pension benefits for the period from January 2008 to June 2009. Specifically, the Board finds the Veteran's statement that he erroneously thought that his part-time work at the Goodwill would be exempt as counting for pension purposes as it was in a structured workshop environment to be credible. See September 2007 statement and December 2013 Notice of Disagreement. In a May 2016 statement, the Veteran reported that he has had some part-time jobs under structured environments, such as the Goodwill and Work Incentive programs at the VA Medical Center. Since July 2009, the Veteran has only participated in employment through the VA work rehabilitation program or has not been employed at all. The Board also accepts the Veteran's credible statements noting significant financial hardship created in making payments for the overpayment. The Board acknowledges that the Committee on Waivers has already waived overpayment in the amount of $1,724.00, but noted that any funds already withheld to pay the debt would not be refunded. Under these circumstances, waiver of recovery of an overpayment of pension benefits is granted and the Veteran should be refunded any payment already recovered for the period from January 2008 to June 2009. Duties to Notify and Assist The Veteran is being granted all benefits sought. Furthermore discussion regarding VCAA is not necessary. ORDER The overpayment of VA pension benefits was not properly created for the period from July 2009 to January 2013 and any funds withheld to pay this debt should be refunded. The appeal is allowed to this extent. Waiver of recovery of overpayment of pension benefits for the period from January 2008 to June 2009 is granted and any funds already withheld to pay the debt should be refunded. ____________________________________________ H. N. SCHWARTZ Veterans Law Judge, Board of Veterans' Appeals180201055.1982 Department of Veterans Affairs