Citation Nr: 20003182 Decision Date: 01/14/20 Archive Date: 01/14/20 DOCKET NO. 18-16 681 DATE: January 14, 2020 ORDER The withholding of compensation benefits to recoup special separation benefits (SSB) in the amount of 60,273.54 dollars (48,218.83 dollars after tax amount), including the remaining amount of 28,127.65 dollars, was proper, and the appeal is denied. FINDING OF FACT The Veteran separated from active service in March 1992, and he received SSB in the pre-tax amount of 60,273.54 dollars; VA is required by law to withhold this amount, less the Federal income tax withheld from such payment, from the Veteran’s VA disability compensation benefits until the SSB paid at service separation are recouped. CONCLUSION OF LAW The withholding of compensation benefits to recoup SSB in the amount of 60,273.54 dollars (48,218.83 dollars after tax amount), including the remaining amount of 28,127.65 dollars, was proper. 10 U.S.C. § 1174; 38 C.F.R. § 3.700. REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran had active service in the United States Army from December 1977 to March 1992. This matter comes to the Board of Veterans’ Appeals (Board) on appeal from an October 2014 decisional letter. 1. Whether the withholding of compensation benefits to recoup the remainder of the Veteran’s SSB in the amount of 28,127.65 dollars was proper. The Board initially notes that VA's General Counsel has determined that the notice and duty to assist provisions of the VCAA are inapplicable where undisputed facts render a claimant ineligible for the benefit claimed and where further factual development could not lead to an award. VAOPGCPREC 2-2004; VAOPGCPREC 5-2004. Where the law is dispositive, the claim must be denied due to a lack of legal merit. As the issue on appeal is decided as a matter of law herein, no discussion of the duties to notify and assist is required. See Sabonis v. Brown, 6 Vet. App. 426, 429-30 (1994); Mason v. Principi, 16 Vet. App. 129 (2002). The recoupment of the Veteran's separation pay from his VA disability compensation is required by law under 10 U.S.C. § 1174(h)(2). Subsection 1174(h)(2) provides that a member who has received separation pay under this section, or severance pay or readjustment pay under any other provision of law, based on service in the armed forces shall not be deprived, by reason of his or her receipt of such separation pay, severance pay, or readjustment pay, of any disability compensation to which she is entitled under the laws administered by VA, but there shall be deducted from that disability compensation an amount equal to the total amount of separation pay, severance pay, and readjustment pay received. Where entitlement to VA disability compensation was established on or after September 15, 1981, a Veteran who has received separation pay may receive disability compensation for disability incurred in or aggravated by service prior to the date of receipt of separation pay subject to recoupment of the separation pay. 38 C.F.R. § 3.700(a)(5). Where payment of separation pay was made on or before September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of separation pay. Where payment of separation pay was made after September 30, 1996, or payment of special separation benefits under 10 U.S.C. § 1174a was made on or after December 5, 1991, VA will recoup from disability compensation an amount equal to the total amount of separation pay less the amount of Federal income tax withheld from such pay. Id. The receipt of separation pay does not affect the payment of disability compensation based on a subsequent period of service. The governing statutes allow very limited exceptions to such recoupment, such as a sole survivorship discharge or where disability severance pay was received for disability incurred in line of duty in a combat zone. See 10 U.S.C. §§ 1174(i), 1212(d). Here, however, there is no argument or indication that the payment of SSB was based on disability severance or sole survivorship provisions. An opinion of the VA General Counsel, VAOGCPREC 14-92, concluded that, in accordance with the provisions of 10 U.S.C. § 1174 and 38 C.F.R. § 3.700, VA disability compensation should be offset to recoup the amount of SSB received by a former member of the armed forces. See VAOGCPREC 12-96 (holding that 10 U.S.C. § 1174(h)(2) requires VA to recoup "nondisability severance pay" received by the Veteran under section 631 of Pub. L. No. 96-513 from VA disability compensation. The Veteran separated from active service on March 1, 1992. The Veteran’s DD 214 listed the narrative reason for separation as Reduction in Authorized Strength – Qualitative Early Transition Program. However, no amount of SSB was noted. The Veteran filed his initial service connection claim in May 1992, and he indicated in the VA Form 51-526 that he had received separation pay in the amount of 60,00.00 dollars. In June 1992, a rating decision granted entitlement to service connection for right and left ankle disabilities, diverticulosis, and a neck disability. Each disability was assigned a noncompensable evaluation effective from March 2, 1992. The record reflects that in November 1996, a DD 215 was issued in which it was noted that the Veteran received a separation payment of 20,091.18 dollars. A subsequent February 2001 rating decision denied entitlement to a compensable rating for the Veteran’s right ankle disability, left ankle disability, cervical spine disability, and diverticulosis. However, the Veteran was awarded a 10 percent evaluation effective from November 2, 2000 based on multiple, noncompensable, service-connected disabilities. A March 2001 letter notified the Veteran of the decision and informed him that due to his receipt of separation pay in the amount of 20,091.18 dollars, his benefits would be withheld until the full amount of his separation pay had been recovered. In August 2010, VA received notification from the Defense Finance and Accounting Service (DFAS) that the amount of SSB reported in the DD 215 of 20,091.18 dollars was inconsistent with DFAS data that showed the Veteran had received 60,273.54 dollars. The notification added that manual calculation of the Veteran’s SSB was also consistent with DFAS data based on the Veteran’s pay grade and years of service. The record stated that the Veteran’s recoupment balance required an increase to agree with DFAS data. On June 19, 2014, a letter sent to the Veteran and copied to his representative noted that the AOJ had received information from DFAS that the Veteran had received an SSB payment of 60,273.54 dollars. Consequently, 48,218.83 dollars, the amount that the Veteran had received after federal taxes, had to be recouped from his VA compensation benefits. Although the AOJ acknowledged that it had previously recouped 20,091.18 dollars from the Veteran’s compensation to repay his SSB, the letter explained that it was necessary to recoup the remaining 22,127.65 dollars beginning on September 1, 2014. The letter proposed to reduce the Veteran’s benefit payment to 0.00 dollars per month effective from September 1, 2014. The letter also informed the Veteran of his right to present additional evidence within 60 days, and his right to request a hearing. On July 9, 2014, the Veteran was sent another letter that was copied to his representative to correct an error in the June 19, 2014 letter regarding the amount of the remaining balance. The letter stated that although the June 19, 2014 letter had stated that the remaining balance was 22,127.65 dollars, the letter should have stated that the remaining balance was 28,127.65 dollars. The remaining information in the letter was largely unchanged from the information noted in the June 19, 2014 letter, but this letter noted that remaining 28,127.65 dollars had to be recouped beginning on October 1, 2014. The letter proposed to reduce the Veteran’s benefit payment to 0.00 dollars effective from October 1, 2014. The Veteran was again notified of his right to present additional evidence within 60 days, and his right to request a hearing. On October 21, 2014, a letter was sent to the Veteran and his representative informing them that the AOJ had reduced the Veteran’s compensation payments to recoup the remaining net amount of SSB that he had received of 28,127.65 dollars. The letter reflects that the Veteran’s VA benefits were reduced to 0.00 dollars effective from November 1, 2014. In this case, the Veteran has not disputed that he received SSB. The Veteran has also not challenged the amount of the withholding, and there is no dispute that the Veteran was entitled to the SSB. The Veteran’s representative has, however, suggested that recoupment was not required as 38 C.F.R. § 3.700(a)(5)(iii) states that “VA will recoup” rather than stating that VA “must” recoup. See August 2019 Informal Hearing Presentation (IHP). In addressing the representative’s interpretation of this regulatory provision, the Board notes that absent an expressly defined term within a statute, "a fundamental canon of statutory construction is that when interpreting a statute, the words of a statute are given 'their ordinary, contemporary, common meaning.'" See Gordon v. Nicholson, 21 Vet. App. 270, 277 (2007). In this regard, the Board notes that the canons of statutory construction apply to regulations as well as statutes. See Smith (William) v. Brown, 35 F.3d 1516, 1523 (Fed. Cir. 1994). As the word “will” is not expressly defined, the Board looks to the dictionary definition of the word. See Gomez v. Principi, 17 Vet. App. 369, 376 (Vet. App. 2003) (citing Black's Law Dictionary for the meaning of "should" and "must" in 38 U.S.C. § 7105); see also Kane v. Principi, 17 Vet. App. 97 (2003) (citing Webster's Third New International Dictionary for the meaning of "attributable" in 38 U.S.C. § 1103). Although there are different definitions for the word “will” when, as here, it functions as an auxiliary verb, the Board finds that the use of “will” in the context of 38 C.F.R. § 3.700(a)(5)(iii) expresses an action that VA is required to take. See will, Dictionary.com, https://www.dictionary.com/browse/will?s=t; Language- will/must. There is nothing in the language of 38 C.F.R. § 3.700(a)(5)(iii) to indicate that “will” is permissive and provides VA with the discretion not to recoup the SSB. Thus, the Board finds that the representative’s interpretation is not persuasive under general principles of statutory construction. The Veteran’s representative has also asserted that the AOJ’s actions were not ex parte in nature as contemplated by 38 C.F.R. § 3.103(a). See August 2019 IHP. The Board notes that 38 C.F.R. § 3.103(a) states that every claimant has the right to written notice of the decision made on his or her claim, the right to a hearing, and the right of representation. Proceedings before VA are ex parte in nature, and it is the obligation of VA to assist a claimant in developing the facts pertinent to the claim and to render a decision which grants every benefit that can be supported in law while protecting the interests of the Government. 38 C.F.R. § 3.103(a). In addition, the representative has contended that there were “numerous irregularities” in the amount of withholding that the AOJ communicated to the Veteran. The representative stated that only the October 21, 2014 letter notified the Veteran of the correct amount of 28,175.65 dollars; and he appeared to identify the June 19, 2014 letter as well as the February 2018 Statement of the Case (SOC) as notifying the Veteran that the withholding amount was 22,175.65 dollars. To the extent that the representative is asserting that improper notice was sent of the correct recoupment amount, the assertion appears to be based on an inaccurate understanding of the evidence of record. The representative appeared to be unaware that the June 19, 2014 letter that initially noted the incorrect amount of the remaining recoupment was followed by the July 9, 2014 letter that explained the error as well the correct recoupment amount that would be withheld. The Board also notes that there is a legal presumption of regularity under which it is presumed that government officials "have properly discharged their official duties." Clear evidence to the contrary is required to rebut the presumption of regularity. See Ashley v. Derwinski, 2 Vet. App. 307 (1992), (quoting United States v. Chemical Foundation, 272 U.S. 1, 14-15 (1926)); see also Mindenhall v. Brown, 7 Vet. App. 271 (1994). If a claimant alleges non-receipt of a VA notice letter, clear evidence to rebut the presumption of regularity "mandates not only a declaration by the appellant of non-receipt, but additional evidence to corroborate the appellant's declaration, such as an addressing error by VA that was consequential to delivery." Clarke v. Nicholson, 21 Vet. App. 130, 133 (2007). In this case, the July 9, 2014 letter was sent to the Veteran's last known address of record, and there is no indication that it was returned undeliverable. Moreover, the Veteran has not asserted that he did not receive the letter. Thus, the Veteran is presumed to have received the July 9, 2014 letter that informed him of the correct amount of the remaining recoupment. The October 21, 2014 letter also repeated the correct amount of 28,175.65 dollars in notifying the Veteran of the remaining recoupment that would be withheld from his compensation benefits. The Board acknowledges that the February 2018 SOC only included the June 19, 2014 predetermination letter in its evidence list without also listing the July 9, 2014 letter. The reasons and bases section of the SOC also incorrectly stated that the Veteran had been notified by an October 21, 2014 predetermination letter of the proposed recoupment of SSB in the amount of 22,127.65 dollars before he was notified on October 21, 2014 of the decision to recoup the full amount. However, as noted above, the Veteran was in fact notified of the correct amount of the remaining recoupment of 28,175.65 dollars by the July 9, 2014 letter. He was then afforded a period of 60 days from the date of the July 9, 2014 letter to make additional argument or request a hearing before the remaining recoupment amount was withheld from his compensation benefits. The Board also notes that the SOC did reference the October 21, 2014 letter that had notified the Veteran of the correct amount of the remaining recoupment. Moreover, any notice defects in the February 2018 SOC did not result in prejudice or affect the essential fairness of the adjudication. See Shinseki v. Sanders, 556 U.S. 396 (2009). Importantly, the representative did not assert that the SOC caused himself or the Veteran any confusion as to the correct amount of the remaining recoupment. Indeed, the representative highlighted the correct amount in the subsequent August 2019 IHP. The Veteran has also had multiple opportunities to submit and identify evidence, request a hearing, and be represented in his appeal. He has had a meaningful opportunity to participate effectively in the processing of his claim by VA. The Board consequently finds that the proceedings were ex parte in nature as described in 38 C.F.R. § 3.103(a). The Veteran’s representative has additionally contended that VA’s delay in recouping the full amount of the Veteran’s SSB imposed an unfair hardship on the Veteran; and the representative highlighted the Veteran’s request for a waiver due to financial hardship. See March 2018 VA Form 9; August 2019 IHP. Although the Board is sympathetic to the Veteran’s circumstances, the Board must follow the applicable statutes and regulations and it is without authority to grant benefits on an equitable basis. See 38 U.S.C. §§ 503, 7104; Harvey v. Brown, 6 Vet. App. 416, 425 (1994). To that end, the amount subject to recoupment is not a debt or overpayment arising out of the operations of VA. Rather, is a statutorily mandated offset of separation pay benefits which were paid to the Veteran by the Department of Defense upon his release from active duty. See 10 U.S.C. § 1174(h)(2); 38 C.F.R. § 3.700(a)(5). Therefore, as the amount subject to recoupment has not resulted from a program administered under any law by VA, but rather is a mandatory prospective recoupment of military separation pay, the provisions regarding waiver of overpayment of VA benefits resulting from the existence of a debt based on equitable principles, including financial hardship, do not apply in this case. The recoupment of an amount equivalent to the Veteran's SSB, less the Federal income tax withheld from such payment, from his VA disability compensation is required by Congress under 10 U.S.C. § 1174(h)(2). See also 38 C.F.R. § 3.700(a)(5)(iii). Here, the law, as written by Congress and implemented by VA regulation, has been correctly applied. Thus, the claim that recoupment of SSB was improper must be denied for lack of legal merit. Sabonis v. Brown, 6 Vet. App. 426, 430 (1994). GAYLE STROMMEN Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board K.C. Spragins, Counsel The Board’s decision in this case is binding only with respect to the instant matter decided. This decision is not precedential, and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.