Citation Nr: 22010944 Decision Date: 02/24/22 Archive Date: 02/24/22 DOCKET NO. 16-10 250 DATE: February 24, 2022 REMANDED A challenge to recoupment of a Voluntary Separation Pay (VSP), to include the amount of recoupment and the rate of recoupment, is remanded. REASONS FOR REMAND The Veteran, who effective June 2011 has been service connected for various disabilities having a combined rating of 80 percent, had active service in the U.S. Air Force (Air Force) from April 2001 to September 2007. Upon his separation from active duty, he received a VSP. This matter is before the Board of Veterans' Appeals (Board) on his appeal of the July 2013 VA Regional Office (RO) notice informing the Veteran of recoupment of his VSP. In June 2021, the Board issued an order extensively detailing the underlying facts of this matter, the history of underlying actions taken by the Secretary of the Air Force (Secretary), the effective dates of the Secretary's actions, the effect that these actions had on both the fact of recoupment of the Veteran's VSP and the rate at which VA should have been conducted the recoupment, as well as the ambiguities that were remaining in this matter. Specifically, the Board directed the RO to obtain a clarification from the Veteran as to when and if he requested a waiver of recoupment of his VSP and from which entity such a request was made. The Board's rationale for such an action ensued from the fact that the record had suggested the Veteran's misunderstanding of the fact that, for the purposes of challenges to debts charged by VA to beneficiaries, the word "waiver" has two, very different meanings. One meaning refers to a scenario when a debtor obtains "permission" to not to repay his debt. To ensure against further confusion, the Board refers to such a waiver as a "VA waiver" because such a "permission" is either granted by VA or directed by the Board upon an equitable finding that the debtor was less at fault than VA for creation of the debt, that (s)he cannot afford to repay his/her debt, etc. However, if the debt arose from a mandate issued by his/her service department, e.g. the Secretary of the Air Force, a waiver means a "permission" by the Secretary of a service department, e.g., the U.S. Air Force, allowing a group of Air Force debtors or a particular Air Force debtor to be excused from repaying their or his/her debt to the Air Force. To ensure against further confusion, the Board refers to such a waiver as a "group service-department waiver" or as a "personalized service-department waiver": to distinguish such waivers from "VA waivers" and to stress that VA cannot usurp the powers of the Secretary of a service department, e.g., the Air Force, by granting a waiver as to a debt owed to the Air Force. To analogize the issue to a generic life setting, if person A lent monies to person B, then A can forgive B's debt. But if person C lent monies to person B (or to persons B and D), then only C can forgive B's and D's debts, and person A has no legal right to forgive those debts, even if person A is employed as a collection agent for person C: because the monies at issue never belonged to person A in the first place. Here, the history of mandates issued by the Secretary of the Air Force created a scenario where the Secretary was in the position of person C, the Veteran was in the position of person B, and VA was in the position of person A. Specifically, in October 2007, the Secretary issued a mandate allowing Air Force veterans who would be separated from service effective the date of that October 2007 mandate to avoid recoupment of their VSPs from their VA benefits in the event such Air Force veterans became VA beneficiaries: because without such a group service department waiver VA would have been obligated to withhold the amount of VA benefits equal to the amount of VSPs and transfer these monies to the Air Force as an offset of the debt to the Air Force arising from a receipt of both a VSP and VA benefits. However, the above-detailed October 2007 "group waiver" was short-lived: because it was revoked by the Secretary's November 2008 mandate eliminating the October 2007 mandate and obligating recoupment of VSPs from Air Force veterans who became or would become VA beneficiaries. Notably, this short-lived mandate was inapposite to the Veteran because he had separated from the Air Force before the October 2007 mandate was issued. This issue had been clarified by the Board in its September 2020 decision (issued by a Veterans Law Judge (VLJ) other than the undersigned) and reiterated in the Board's June 2021 decision (issued by the undersigned VLJ since the VLJ who had issued the September 2020 decision has retired from the bench). Therefore, as explained in the Board's September 2020 and June 2021 decisions, no group service-department waiver was or could have been applicable to the Veteran. However, in its June 2021 decision, the Board directed the RO to invite the Veteran to provide information about a personalized service-department waiver, if any, that he had applied for and was granted by the Secretary of the Air Force. Notably, three weeks after the issuance of the Board's June 2021 decision, the RO duly complied with this aspect of the Board's decision, but no statement from the Veteran indicating that he had been granted a personalized service-department waiver has been associated with the Veteran's electronic claims file, thus strongly suggesting that he did not request and/or was denied such a waiver. In addition, the Board's June 2021 decision directed the Veteran to clarify the bases for his repeated references to a $35,000 amount. The Board's directive ensued from the lack of any immediately apparent accounting information in the record which could have been construed as suggesting the relevance of the $35,000 figure. Indeed, the RO's July 2013 notice informed the Veteran that the pre-tax amount of his VSP was $70,870.80, while the RO's August 2013 notice stated that the amount of the Veteran's pre tax VSP was $69,950.40, rather than $70,870.80. Since VA, acting as a collection agent for the Air Force, was required to recoup from the Veteran's VA benefit and transfer to the Air Force the post-tax amount of his VSP, but federal tax on the Veteran's VSP could not have been equal to almost half of his VSP, the Board needed to obtain the Veteran's clarification as to the basis for his repeated references to $35,000. However, mindful of the complexity of the above-detailed history of the mandates issued by the Secretary of the Air Force and relevant rarity of the type of claims at bar, the Board did not stop its June 2021 analysis at the foregoing, Rather, the Board also clarified that VA Adjudication Procedures Manual (M21) directed VA's recoupment of VSPs through incremental withholdings proportionate to the combined disability ratings of affected VA beneficiaries to ensure that the most disabled VA beneficiaries, to include the Veteran (who has an 80 percent combined rating) would not have a monthly amount withheld from their VA benefits in excess of 50 percent of these VA benefits. In other words, while as a general matter the Board has no jurisdiction to address the rate of recoupment (i.e., the portion of a VA beneficiary's monthly VA benefits being withheld by VA toward recoupment of a debt, be that debt to VA or to a service department), the Board was mindful that the rate of recoupment of VSP-based debts reflected a policy that aimed to ensure that the most disabled beneficiaries would have at least some income from VA while the recoupment of their VSPs were under way, even if it meant that it would take VA a longer period of time to fully recoup their VSPs due to smaller amounts of monthly withholdings. To illustrate, if a veteran was entitled to VA benefits of $2,400 per month due to being among the veterans most disabled by his/her service-connected disabilities, VA could not withhold either the entire $2,400 toward recoupment of his/her VSP or even any amount in excess of $1,200 (i.e., 50 percent of $2,400) since the not withheld $1,200 amount was critically needed by the veteran due to his/her disabilities that substantially prevented the veteran from earning other income. Thus, realizing that the Veteran might have inadvertently confused the 50 percent limitation on the amount of VA monthly withholdings (i.e., the rate of recoupment) with the issue on how much total should be recouped, the Board determined that it was conceivable that the Veteran's repeated references to $35,000 originated from such a confusion. Therefore, in its June 2021 decision, the Board directed the RO to provide the Veteran with an opportunity to clarify the rationale for his repeated references to the $35,000 amount. The RO duly complied with the Board's directive, but the record contains no statement from the Veteran that could be construed as suggesting the rationale for his references to $35,000. Unfortunately, while the RO complied with the tasks detailed supra, the RO omitted to perform additional tasks that are also critical for the Board's adjudication. For instance, the RO omitted to conduct an audit of the Veteran's account for the purposes of determining the exact amount recouped from his VA benefits toward his VSP, as well as the amount that should have been recouped from his VA benefits toward recoupment of his VSP. (The rationale of the Board's directive was rooted in the fact that VA has both the right and obligation to withhold only the amount equal to the amount of the Veteran's post tax VSP.) Here, since the July 2013 RO's notice informed the Veteran that the pre-tax amount of his VSP was $70,870.80, while the RO's August 2013 notice informed him that his pre tax VSP amount was $69,950.40, the Board was left without certainty as to the actual pre-tax amount of the Veteran's VSP. The Board acknowledges that, in June 2021, an RO officer sent an email to VA Finance Office "[r]equesting a paid and due audit for compensation payments from 07/01/2011 to 05/01/2014." However, the task remained incomplete, and no audit report was received. Therefore, in September 2021, the RO operating on incomplete information issued the Veteran a Supplemental Statement of the Case (SSOC) reading: The military paid you separation pay in the amount of $70,870.80, with an after[-]tax amount of $53,150.10. For separation pay received after September 30, 1996, VA will withhold the amount the military paid you minus the amount of Federal income tax withheld. The amount of withholding for your repayment of VSP has been reviewed, and, pursuant to the schedules and formulas from 10 U.S.C Section 1175a, [withholdings] are being recouped at the proper rate. However, the SSOC omitted to explain why and how the RO determined that the amount of the Veteran's pre-tax VSP was $70,870.80, rather than $69,950.40, and how the post-tax amount of $53,150.10 was determined. Moreover, while RO officer's email suggested that the Veteran's debt has been fully recouped (since the email referred to the period that ended on "05/01/2014"), the SSOC suggested that the debt was still being recouped (since it stated "[withholdings] are being recouped at the proper rate"), thus creating an additional ambiguity preventing the Board's adjudication. Therefore, the Board is constrained to find that the RO failed to substantially comply with the Board's June 2021 directives. Accordingly, while the Board regrets additional delay, a remand is required. The matters are REMANDED for the following action: 1. Determine the exact amount of the Veteran's VSP post Federal taxes by obtaining this information from the Defense Finance Accounting Service (DFAS) and associate the DFAS response with the claims file. 2. Conduct a paid and due audit of the Veteran's account reflecting the amount withheld from the Veteran's VA benefits toward recoupment of his VSP and the rate of withholding. Associate the audit report with the claims file. 3. If the amount actually withheld from the Veteran's VA benefits exceeded the amount of the Veteran's post-tax VSP obtained from DFAS, remit the excess to the Veteran. Conversely, if the audited amount withheld from the Veteran toward recoupment of his VSP was below the amount of the Veteran's post-tax VSP obtained from DFAS, but the recoupment process is deemed concluded, provide the Veteran with proper due process to recoup the deficit. See Majeed v. Nicholson, 19 Vet. App. 525, 531 (2006); Majeed v. Principi, 16 Vet. App. 421 (2002). 4. Determine whether recoupment of the Veteran's VSP was conducted through incremental withholdings from his monthly VA benefits in amounts exceeding 50 percent of these monthly VA benefits. If such excessive withholdings were conducted, issue the Veteran an Appeal Notification Letter stating the legal basis for such excessive withholdings (by addressing M21)) and if no valid legal basis for such excessive withholdings was found provide the Veteran with an opportunity to clarify whether he had experienced a financial injury due to such excessive withholdings and to state the nature of such an injury in detail. Cynthia M. Bruce Veterans Law Judge Board of Veterans' Appeals Attorney for the Board Anna Kapellan, 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.