02-24390. Recoupment of Severance Pay From VA Compensation

AGENCY:

Department of Veterans Affairs.

ACTION:

Final rule.

SUMMARY:

This document amends the Department of Veterans Affairs (VA) adjudication regulation governing recoupment of military severance pay from service-connected disability compensation to conform to the statutory provision that, effective September 15, 1981, requires the recoupment of any severance pay from VA compensation. VA is also amending these regulations to reflect the statutory provision that excludes Federal income tax withheld from payments of separation pay, severance pay, and readjustment pay made after September 30, 1996, from VA recoupment.

DATES:

Effective Date: September 27, 2002.

Applicability Dates: The changes will be applied retroactively to conform to statutory requirements. For more information concerning dates of applicability, see the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

John Bisset, Jr., Consultant, Regulations Staff, Compensation and Pension Service, Veterans Benefits Administration, 810 Vermont Avenue, NW., Washington, DC 20420, telephone [phone].

SUPPLEMENTARY INFORMATION:

VA regulations at 38 CFR 3.700(a)(3) currently state that there is no prohibition against payment of compensation if a veteran received nondisability severance pay from the military.

In a precedent opinion (VAOPGCPREC 12-96), VA's General Counsel held that the portion of 38 CFR 3.700(a)(3) which states that there is no prohibition against payment of compensation to a veteran who received nondisability severance pay is of no effect because it is inconsistent with 10 U.S.C. 1174(h)(2), which as added in 1980 by Public Law 96-513, section 109(c), 94 Stat. 2835, 2870 (1980), requires, effective September 15, 1981, recoupment of nondisability severance pay from VA compensation. Therefore, VA is amending 38 CFR 3.700(a)(3) to conform to the governing statute.

Public Law 104-201 amended 10 U.S.C. 1174(h)(2) to exclude Federal income tax withheld from payments of separation pay, severance pay and readjustment pay made after September 30, 1996, from VA recoupment. VA is amending 38 CFR 3.700(a)(2)(iii), (a)(3), and (a)(5)(i) to conform to this governing statute. In addition, VA is making nonsubstantive changes to 38 CFR 3.700 for purposes of clarity.

Except with respect to the amendment relating to income tax, this rule applies to disability compensation paid after September 14, 1981; the amendment relating to income tax applies only to payment of separation pay, special separation benefits under 10 U.S.C. 1174a, severance pay, and readjustment pay made after September 30, 1996.

While this document updates VA regulations concerning statutes enacted in 1981 and 1996, VA procedures have adhered to these statutes since their enactment. This document brings VA regulations into conformance with VA practice and will not create overpayments in any existing claims.

Administrative Procedure Act

Changes made by this final rule merely reflect the statutory requirements in title 10, U.S.C. or are nonsubstantive changes made for purposes of clarity. Accordingly, there is a basis for dispensing with prior notice and comment and delayed effective date provisions of 5 U.S.C. 552 and 553.

Unfunded Mandates

The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before developing any rule that may result in an expenditure by State, local, or tribal governments, in the aggregate, or by the private sector of $100 million or more in any given year. This final rule would have no consequential effect on State, local, or tribal governments.

Paperwork Reduction Act

This document contains no provisions constituting a collection of information under the Paperwork Reduction Act (44 U.S.C. 3501-3520).

Executive Order 12866

This document has been reviewed by the Office of Management and Budget under Executive Order 12866.

Regulatory Flexibility Act

The Secretary hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This amendment would not directly affect any small entities. Only individuals could be directly affected. Therefore, pursuant to 5 U.S.C. 605(b), this final rule is exempt from the initial and final regulatory flexibility analyses requirements of sections 603 and 604.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance program number is 64.109.

List of Subjects in 38 CFR Part 3

• Administrative practice and procedure
• Claims
• Disability benefits
• Individuals with disabilities
• Pensions
• Veterans

Approved: August 16, 2002.

Anthony J. Principi,

Secretary of Veterans Affairs.

For the reasons set forth in the preamble, the Department of Veterans Affairs amends 38 CFR part 3 as follows:

PART 3—ADJUDICATION

Subpart A—Pension, Compensation, and Dependency and Indemnity Compensation

1. The authority citation for part 3, subpart A, continues to read as follows:

Authority: 38 U.S.C. 501(a), unless otherwise noted.

2. Section 3.700 is amended by:

A. In paragraph (a)(2)(iii), removing “of the total amount'; adding two sentences and revising the authority citation at the end of paragraph (a)(2)(iii).

B. In paragraph (a)(3), in the first sentence, removing “severance pay is granted,” and adding, in its place, “severance pay is granted, or where entitlement to disability compensation was established on or after September 15, 1981,”; removing the fifth sentence; in the six sentence, removing “Compensation” and adding, in its place, “Where entitlement to disability compensation was established prior to September 15, 1981, compensation”; adding three sentences at the end of paragraph (a)(3); and revising the authority citation at the end of the paragraph.

C. In paragraph (a)(5), revising the paragraph heading.

D. In paragraph (a)(5)(i), removing “A veteran” and adding, in its place, “Where entitlement to disability compensation was established on or after September 15, 1981, a veteran'; removing “total amount received as”; adding two sentences at the end of paragraph (a)(5)(i).

E. Revising the authority citation at the end of paragraph (a)(5).

The revisions and additions read as follows:

§ 3.700

General.

* * * * *

(a) * * *

(2) * * *

(iii)* * * Where payment of readjustment pay was made on or before September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of readjustment pay. Where payment of readjustment pay was made after September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of readjustment pay less the amount of Federal income tax withheld from such pay.

(Authority: 10 U.S.C 1174(h)(2) and 1212(c))

* * * * *

(3) * * * Where entitlement to disability compensation was established on or after September 15, 1981, a veteran may receive disability compensation for disability incurred or aggravated by service prior to the date of receipt of the severance pay, but VA must recoup from that disability compensation an amount equal to the severance pay. Where payment of severance pay was made on or before September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of the severance pay. Where payment of severance pay was made after September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of the severance pay less the amount of Federal income tax withheld from such pay.

(Authority: 10 U.S.C. 1174(h)(2) and 1212(c))

* * * * *

(5) Separation pay and special separation benefits. (i) * * * Where payment of separation pay or special separation benefits under section 1174a was made on or before September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of separation pay or special separation benefits. Where payment of separation pay or special separation benefits under section 1174a was made after September 30, 1996, VA will recoup from disability compensation an amount equal to the total amount of separation pay or special separation benefits less the amount of Federal income tax withheld from such pay.

* * * * *

(Authority: 10 U.S.C. 1174 and 1174a)

* * * * *