Citation Nr: 21003616 Decision Date: 01/22/21 Archive Date: 01/22/21 DOCKET NO. 07-31 218 DATE: January 22, 2021 ORDER An overpayment of nonservice-connected pension benefits in the calculated amount of $3,807 was properly created; the appeal is denied. Entitlement to waiver of recovery of an overpayment of nonservice-connected pension benefits in the amount of $3,807 is denied. FINDINGS OF FACT 1. The Veteran received nonrecurring income from lottery winnings and Merrill Lynch after he was awarded VA improved pension benefits; he did not promptly notify VA of this income. 2. The Veteran received increases in his retirement income in February 2001 and February 2002; he did not promptly notify VA of this income. 3. The retroactive action taken to reduce the pension benefits resulted in the creation of the debt at issue; this action was proper. 4. The Veteran did not commit, fraud, misrepresentation, or bad faith in the creation of the debt. 5. Repayment of the $3,807 debt, would not deprive the Veteran of the basic necessities of life, would not result in financial hardship, and recovery of the overpayment would not defeat the purpose for which benefits were intended. 6. A waiver of the debt would result in unjust enrichment to the Veteran. CONCLUSIONS OF LAW 1. The overpayment of nonservice-connected pension benefits in the calculated amount of $3,807 was properly created. 38 U.S.C. §§ 101, 1503, 1521, 1541, 5110, 5313; 38 C.F.R. §§ 3.21, 3.23, 3.271, 3.272. 2. The criteria for entitlement to a waiver of recovery of an overpayment of nonservice-connected pension benefits in the amount of $3,807 have not been met. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.963(a), 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Veteran served on active duty from July 1965 to November 1966. This matter comes to the Board of Veterans’ Appeals (Board) on appeal from a January 2007 decision of the Department of Veterans Affairs (VA) Committee on Waivers and Compromises (COWC) at the Pension Management Center (PMC) in Milwaukee, Wisconsin. In March 2011, June 2012, and August 2017 the Board remanded the appeal to the agency of original jurisdiction (AOJ) for further development. The appeal has been returned to the Board for further consideration. This appeal has been advanced on the Board’s docket pursuant to 38 C.F.R. § 20.900(c) (2018). 38 U.S.C. § 7107(a)(2). Overpayment 1. An overpayment of nonservice-connected pension benefits in the calculated amount of $3,807 was properly created; the appeal is denied The Veteran challenges the validity of a $3,807 debt created from the overpayment of nonservice-connected pension benefits. Specifically, he asserts that the Milwaukee PMC incorrectly considered certain lottery and Merrill Lynch income, explaining that each was a one-time payment and should not have been counted more than once. By way of background, the Veteran was awarded VA nonservice-connected pension benefits in a May 1998 rating decision, effective February 13, 1998. A June 1998 notice letter explained that VA pension rates were income-based, and the Veteran’s award was based on his report of having no income and no dependents. The letter advised him to notify VA immediately if his income or status of dependents changed. In January 2004, the Debt Management Center (DMC) in St. Paul, Minnesota notified the Veteran of a $7,921 overpayment of VA pension benefits. After receiving the Veteran’s financial status report, the DMC advised the Veteran the following month that VA would withhold $220 per month beginning April 1, 2004, liquidating the debt in about three years. In October 2005, VA received the Veteran’s request for a waiver of the remaining balance of his $7,921 overpayment. Later in October 2005, the COWC denied the waiver request because VA received it more than 180 days after the notification of indebtedness. The decision indicated that $3,741 remained of the original $7,921 debt. The DMC notified the Veteran in a separate letter also dated October 25, 2005, that his request for a waiver of pension indebtedness of $7,921 had been denied. The Veteran did not appeal this decision and it became final. As detailed in the prior Remands, most of the documents listed under the heading “adjudicative actions” in the July 2007 statement of the case (SOC), which was issued in September 2007, were missing. In compliance with the March 2011 Remand directives, the AOJ attempted to locate the missing records and associate them with the Veteran’s claims file. The AOJ located approximately half of the documents and notified the Veteran in December 2011 that the income verification match (IVM) folder that likely contained the remaining records was no longer available for review. The Veteran declined the opportunity to submit additional evidence and asked VA to make a decision on the record. Based on the evidence of record and missing documents referenced in the July 2007 SOC, it appears that after the Milwaukee PMC received notice on an unknown date of unreported income, the PMC provided notice to the Veteran on September 24, 2004 of a proposed reduction of pension benefits due to the unreported income. The Veteran apparently requested a hearing in October 2004, testified at a hearing in July 2005, and received a transcript of the hearing in October 2005. A compensation and pension award signed on October 18 and 19, 2006 includes hand-written notations, which appear to list “other retirement” income of $184.48 on February 1, 2001, continuing until it increased to $201.56 on February 1, 2002, and remaining at that rate as of May 1, 2002. The document also lists “other” income of $33 on February 1, 2001, $533 effective May 1, 2001, $500 effective February 1, 2002, and no “other” income effective May 1, 2002. An October 20, 2006 letter apparently provided notice to the Veteran of the final action taken to reduce his pension benefits. In June 2018, the RO provided the Veteran with an explanation of the creation and validity of the overpayment debt. The RO explained that the award action that resulted in an overpayment of $3,807.00 resulted from three actions. First, the one-time lottery winnings of $500.00 received in April 2001 were counted for twelve months from May 1, 2001 through May 1, 2002. Second, the one-time income of $33.00 from Merrill Lynch received in January 2001 was counted for twelve months from February 1, 2001 through February 1, 2002. Finally, the Veteran reported retirement income of $140.73 from 1998 and of $155 per month from 2003. VA was later notified that the Veteran’s actual retirement income during the debt period was $184.48 per month from February 1, 2001 and $201.56 per month from February 1, 2002. The Veteran was provided with a chart, originally provided to him in August 2016, showing how these nonrecurring payments and the increase in recurring retirement income were applied to calculate the monthly pension rate available to the Veteran from February 2001 to May 2002. The Veteran was further informed that the increase in retirement income was counted from February 1, 2001 through September 30, 2006. The Veteran disagrees with the manner that the RO counted his earned income. As noted above, he contends that he received a one-time payment of $500 from lottery winnings and of $33 from Merrill Lynch, and that these payments should have been applied only to the month in which they were received instead of being counted as annualized income over 12 months. See November 2006 Statement in Support of Claim. Basic entitlement to pension exists if, among other things, the claimant's income is not in excess of the maximum annual pension rate (MAPR) specified in 38 C.F.R. § 3.23. 38 U.S.C. § 1521; 38 C.F.R. § 3.3 (a)(3). The MAPR is revised every December 1st and is applicable for the following 12-month period. The MAPR shall be reduced by the amount of the countable annual income of the claimant. 38 U.S.C. §§ 1503, 1521; 38 C.F.R. §§ 3.3, 3.23(b). In determining annual income, all payments of any kind or from any source (including salary, retirement or annuity payments, one-time lump sum payments or similar income, even if waived) shall be included during the 12-month annualization period in which received, except for income specifically excluded. 38 U.S.C. § 1503 (a); 38 C.F.R. §§ 3.271 (a), 3.272. Gross income received is counted rather than the amount of the payment a beneficiary receives, except where certain expenses are allowed to be deducted (e.g., necessary operating expenses are deductible from business, farm or professional income and medical, legal or other expenses incident to an injury or death or expenses incident to the collection or recovery of the amount of an award or settlement for an injury or death are deductible from compensation received for an injury or death). The amount of recurring and irregular income anticipated or received by a beneficiary shall be added to determine the beneficiary's annual rate of income for a 12-month annualization period commencing at the beginning of the 12-month annualization. 38 C.F.R. § 3.273 (d). The amount of nonrecurring income (e.g., an inheritance) received by a beneficiary shall be added to the beneficiary's annual rate of income for a 12-month annualization period commencing on the effective date on which the nonrecurring income is countable. 38 C.F.R. § 3.273 (c). For the purpose of determining initial entitlement, or for resuming payments on an award that was previously discontinued, the monthly rate of pension shall be computed by reducing the applicable maximum pension rate by the beneficiary's countable income on the effective date of entitlement and dividing the remainder by twelve. 38 C.F.R. § 3.273 (a). In essence, VA subtracts the total amount of countable income in one year from the MAPR for that year; then, if a positive amount remains, the rest is divided by 12 to determine the monthly pension benefit. When a change in the MAPR occurs, VA repeats the calculation with the new MAPR as the starting amount on the effective date of the change, typically December 1st. 38 C.F.R. § 3.273 (b)(1). Whenever there is a change in a beneficiary's countable income, VA will repeat the calculation using the beneficiary's new countable income effective the date of the change in the amount of income. 38 C.F.R. § 3.273 (b)(2). With regard to the Veteran’s contention that his earned income should only be counted in the months that he earned it, that is not how the law computes income. Pension benefits are calculated in 12-month annualization periods. Income received during a 12-month annualization period is counted unless specifically excluded. See 38 C.F.R. § 3.271 (a). Income is broken up into three types: recurring, irregular and nonrecurring. The Veteran’s earned income from lottery winnings and Merrill Lynch is nonrecurring because it was not in equal amounts at regular intervals. However, retirement income is considered recurring income because he receives the same amount at regular intervals. 38 C.F.R. § 3.271 (a)(1). Nonrecurring income is income received or anticipated on a one-time basis during a 12-month annualization period. Pension computations of income will include nonrecurring income for a full 12-month annualization period following receipt of the income. 38 C.F.R. § 3.271 (a)(3). It is clear that the RO considered the lottery winnings and Merrill Lynch payment to be nonrecurring income based on the manner they were treated. Thus, VA is required to count this income within the 12-month annualization period following the initial receipt of such income. The income cannot be counted only in the month it was received as the Veteran asserts. It is not a penalization of the beneficiary. It is simply how pension benefits are calculated, which are in a 12-month period. Thus, although the Board understands the Veteran’s argument, it must agree with the RO's handling of his earned income. According to 38 C.F.R. § 3.660 (a)(2), a reduction or discontinuance of pension benefits due to an increase in income is effective the last day of the month in which the increase occurred. Therefore, in the present case, the Merrill Lynch payment was received in January 2001, and the lottery winnings were received in April 2001. The RO properly counted the income from February 1, 2001 and May 1, 2001 to effectuate the reduction in his pension benefits. The income is to be counted for a full 12-month annualization period, which the RO did as it counted the Veteran’s income from February 1, 2001 to May 1, 2002. Therefore, the Board finds that the RO properly counted the Veteran’s nonrecurring income. Furthermore, the Board finds that the RO properly counted the Veteran’s retirement income. The Veteran reported retirement income of $140.73 from 1998 and of $155 per month from 2003. VA was later notified that the Veteran’s actual retirement income during the debt period was $184.48 per month from February 1, 2001 and $201.56 a month from February 1, 2002. The RO properly counted these increases in income on February 1, 2001 and February 1, 2002. Finally, the Board has reviewed the RO’s calculations in determining the Veteran’s pension entitlement and does not find any error in them. Therefore, the Board finds that the RO properly revised the Veteran’s pension benefits as of February 1, 2001, May 1, 2001, February 1, 2002, and May 1, 2002. 2. Entitlement to waiver of recovery of an overpayment of nonservice-connected pension benefits in the amount of $3,807 The Veteran has also requested a waiver of recovery of the overpayment in the amount of $3,807. The Board acknowledges that the Veteran originally requested a waiver in the amount of $4,908. See November 2006 waiver request. As explained below, the correct overpayment amount is $3,807. In a January 2007 decision, the COWC summarized the evidence in this case, explaining that the VA pension award dated October 19, 2006 created an increase in the debt of $3,807 for the period February 1, 2001 through September 30, 2006. The COWC reiterated that an original debt of $7,921 had been denied due to the untimeliness of the Veteran’s waiver request. As a result, the COWC could only consider the increased debt of $3,807 created in October 2006. The COWC noted the Veteran’s waiver request for the $3,807 debt did not include a completed financial status report (FSR), which the DMC had requested from the Veteran, but he did describe a hardship that would be created by repayment of the debt. The COWC concluded that the Veteran had been at fault in creation of the $3,807 debt because he did not report the changes in his income, resulting in financial gain at government expense. The COWC further concluded that because the Veteran did not return a completed FSR as requested, repaying this debt would not defeat the purpose of the intended benefit. Despite the validity of the overpayment debt, the Veteran may still receive a waiver for the debt created. 38 C.F.R. § 1.962. Recovery of overpayments of any benefits made under the 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 if the 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. §§ 1.962, 1.963(a), 1.965. The (COWC) did not find fraud, misrepresentation, or bad faith in this case. The Board agrees with this determination. The next question is whether the facts dictate that a waiver should be granted under the standard of “equity and good conscience.” The phrase “equity and good conscience” means the arrival 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, (2) balancing of faults between the debtor and VA, (3) undue hardship of collection on the debtor, (4) defeat of the purpose of an existing benefit to the appellant, (5) unjust enrichment of the appellant, and (6) whether the appellant changed positions to his or her detriment in reliance upon a granted VA benefit. 38 U.S.C. § 5302; 38 C.F.R. § 1.965(a). After reviewing all the evidence of record, the Board finds that recovery of the debt would not violate principles of equity and good conscience. The first and second elements pertain to the fault of the debtor versus the fault of VA. As the Veteran did not timely report the nonrecurring income from lottery winnings and Merrill Lynch and did not accurately report the amount of retirement income he received from February 2001, the Board finds that the Veteran is at fault in the creation of the debt. With respect to the third factor, financial hardship, the pertinent regulation provides that consideration should be given to whether collection of the indebtedness would deprive the debtor of basic necessities. 38 C.F.R. § 1.965 (a)(3). “Financial hardship” is primarily intended to mean that he or she would be deprived of basic necessities, such as food, clothing, and shelter. The Board has considered whether the Veteran would suffer undue financial hardship if forced to repay the debt. The Veteran asserted in a December 2006 statement that he has financial and health problems. In the March 2007 Notice of Disagreement (NOD), the Veteran asserted that his monthly income is not enough to support himself. In a statement associated with the record in August 2008, the Veteran reported that his monthly income is $1031, that his utilities are $350 per month, and that he gets help from family and friends to pay bills. However, the Veteran has not responded to requests by VA to submit a Financial Status Report. The Board emphasizes that the duty to assist is a two-way street; the Veteran must actively participate in the process of obtaining evidence to support his claim. See Wood v. Derwinski, 1 Vet. App. 190, 193 (1991). Here, he has not provided the requested information to clarify pertinent information on income and expenses to assist in determining whether repayment of the overpayment debt would cause undue financial hardship. Therefore, the Board finds that collection of the debt would not impair the Veteran’s ability to provide for basic necessities. The Board finds that recovery of the overpayment would not defeat the purpose for which benefits were intended. The award and disbursement of nonservice-connected pension benefits was made for the support of the Veteran for the period from February 2001 to September 2006 at a rate based on the Veteran’s income. Because he failed to identify relevant income during this time period, he received benefits in excess of what he was entitled. Thus, the collection of the debt would not defeat the purpose for which the benefits were intended. Because the Veteran was in receipt of VA pension benefits to which he was not entitled, the Board finds that he was unjustly enriched by the amount of the overpayment. The failure of the Government to insist upon its right to repayment of the assessed overpayment would, therefore, result in unjust enrichment of the Veteran. The Board finds that there is no evidence showing that the Veteran relinquished a valuable right or incurred any legal obligations resulting from reliance on VA benefits. The Board also notes that there is no indication that the Veteran detrimentally changed his position in reliance on the overpayment or incurred a legal obligation. Based on the above, the Board finds the weight of the elements of equity and good conscience are not in the Veteran’s favor. Accordingly, waiver of recovery of the overpayment is not warranted, and the claim must be denied. TANYA SMITH Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board T. Bynum, Associate 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.