##### Veterans Benefits Administration M21-1, Part IV

#### **Department of Veterans Affairs Change 219**

#### **Washington, DC 20420 April 29, 2005**

Veterans Benefits Manual M21-1, Part IV, "Authorization Procedures," is
changed as follows:

**Page 20-iii:** Remove this page and substitute page 20-iii attached.

**Page 20-XII-3:** Remove this page and substitute pages 20-XII-3
through 20-XII-5 attached.

Paragraph 20.78a (formerly paragraphs 20.78a and b) is revised to
provide an overview of the Radiation Exposure Compensation Act (RECA) of
1990 and to discuss the three different types of claimants: uranium
miners, "downwinders," and on-site participants.

Paragraph 20.78b (formerly paragraph 20.78c) is rewritten to explain the
provisions of Public Law 108-454, which removed the bar to payment of
compensation or DIC benefits for veterans and survivors of veterans who
were issued payments under RECA, once the amount of the RECA payment is
recouped from the compensation or DIC award for months after March 26,
2002.

Paragraph 20.78c (formerly paragraph 20.78e) is rewritten to describe
the actions taken by the Department of Justice and the Compensation and
Pension Service Advisory Review staff when a claim is filed under RECA,
and to provide telephone contact numbers for the Advisory Review staff.

Paragraph 20.78d(1) is added to explain the offset procedures required
to recoup the RECA payment from compensation or DIC awards.

Paragraph 20.78d(2) is added to discuss what action to take if
compensation or DIC benefits were previously denied, reduced or
terminated due to receipt of a RECA payment.

Paragraph 20.78d(3) is added to state the requirement to offset the
entire compensation award if a veteran has no compensable disabilities
other than the one for which the RECA payment was made.

Paragraph 20.78d(4) is added to explain what offset action to take if a
veteran has both RECA and non-RECA disabilities.

Paragraph 20.78d(5) is added to clarify that if a veteran is entitled to
special monthly compensation (SMC), the amount of the SMC benefit should
be applied to recoup the RECA payment only if RECA disabilities would
support entitlement to SMC.

Paragraph 20.78d(6) is added to explain what action to take when
adjusting an award retroactively due to receipt of a RECA payment.

Paragraph 20.78d(7) is added to state that if a beneficiary receives a
RECA payment for a disability or death that is established as
service-connected under a provision of law other than 38 CFR 3.309(d),
compensation or DIC benefits should not be withheld to recoup the RECA
payment.

**Pages 22-i through 22-II-4:** Remove these pages and substitute pages
22-i through 22-II-4 attached.

Chapter 22 is revised to reflect the eligibility criteria for claims
under 38 U.S.C. 1151 received on or after October 1, 1997. For
eligibility to exist as of that date, additional disability or death
must be the proximate result of fault on the part of VA or of an event
not reasonably foreseeable, and not merely be an unintended result of
treatment or hospitalization.

The title of Chapter 22 is changed to "Disability or Death Due to
Hospital Care, Medical or Surgical Treatment, Examination, Training and
Rehabilitation Services, or Compensation Work Therapy (38 U.S.C. 1151)"
to reflect the current 38 U.S.C. 1151 eligibility criteria.

**M21-1, Part IV Veterans Benefits Administration**

**Change 219 Department of Veterans Affairs**

**April 29, 2005 Washington, DC 20420**

Paragraph 22.01a is amended to state that for eligibility to exist under
38 U.S.C. 1151, the additional disability or death incurred must be the
proximate result of fault on the part of the VA or of an event not
reasonably foreseeable. Note 1 is added to provide 38 CFR references for
claims received before and after October 1, 1997. Note 2 clarifies
eligibility requirements in claims received before October 1, 1997. Note
3 explains date-of-claim requirements for claims based on compensated
work therapy.

In paragraphs 22.04c and 22.04g, reference citations are updated.

Paragraph 22.11 is amended to state that eligibility to an automobile or
adaptive equipment may be based on disabilities for which compensation
is payable under 38 U.S.C. 1151. This change reflects the provisions of
Section 304 of Public Law 108-454 effective December 10, 2004. A
reference to 38 CFR 3.808 is added, and references to rescinded
paragraphs in M21-1are replaced by appropriate citations in M21-1MR.

In paragraphs 22.12a, 22.15b, 22.15c and 22.17, reference citations are
updated.

In paragraph 22.18a, the outdated term "Target" is replaced by "Benefits
Delivery Network (BDN)."

In paragraphs 22.19b and 22.20b through f, references to rescinded M21-1
paragraphs are replaced by appropriate citations in M21-1MR.

**RESCISSIONS:** Changes 68 and 156.

> By Direction of the Under Secretary for Benefits

Renée L. Szybala, Director

Compensation and Pension Service

Distribution: RPC: 2068

FD: EX: ASO and AR (included in RPC 2068)

LOCAL REPRODUCTION AUTHORIZED

**M21-1, Part IV April 29, 2005**

**Change 219**

20.57 Notice to Claimant 20-X-2

20.58 Awards to or for Electing Children 20-X-2

20.59 Effect of Election on Other Payees 20-X-3

20.60 Reelections 20-X-3

20.61 Award Actions---Other Payees 20-X-4

**SUBCHAPTER XI. SOCIAL SECURITY BENEFITS UNDER SECTION 217(b),**

**SOCIAL SECURITY ACT\--DEATH CASES**

20.62 Scope 20-XI-1

20.63 General Information 20-XI-1

20.64 Forms Used for Exchange of Information 20-XI-1

20.65 Use of Form SSA 650 20-XI-1

20.66 Initial Action Upon Receipt of Claim for VA Benefits 20-XI-2

20.67 Notice to Claimant and Disallowance Pending Reply 20-XI-2

20.68 Award Action 20-XI-3

20.69 Notice of Gratuitous Death Awards 20-XI-3

20.70 Adjustment of Awards 20-XI-4

20.71 Section 217(b) Benefits Paid to Surviving Spouse for Children
20-XI-4

20.72 VA Award Made Prior to Receipt of Form SSA 651 20-XI-5

**SUBCHAPTER XII. MISCELLANEOUS ELECTIONS**

20.73 Elections of DEA Benefits 20-XII-1

20.74 Payment of DIC at Pension Rates 20-XII-1

20.75 Surviving Spouse DIC Recipient\'s Election of Improved Death
Pension 20-XII-2

20.76 Out-of-Custody Child\'s Right to Improved Pension when Widow
Receives DIC 20-XII-2

20.77 Retired Serviceperson\'s Family Protection Plan (10 U.S.C. 1431)
20-XII-2

20.78 Radiation Exposure Compensation Act (RECA) of 1990 20-XII-3

20.79 Surviving Spouse DIC Recipient\'s Election of \$90 Limited Death
Pension 20-XII-5

Rate---Medicaid Nursing Home (38 CFR 3.551(i))

**SUBCHAPTER XIII. MISCELLANEOUS ELECTIONS**

20.80 Elections of DEA Benefits 20-XIII-1

20.81 Payment of DIC at Pension Rates 20-XIII-1

20.82 Surviving Spouse DIC Recipient's Election of Improved Death
Pension 20-XIII-2

20.83 Out-of-Custody Child's Right to Improved Pension When Widow
Receives DIC 20-XIII-2

20.84. Retired Serviceperson's Family Protection Plan (10 U.S.C. 1431)
20-XIII-2

20.85 Radiation Exposure Compensation Act (RECA) of 1990 20-XIII-3

30. Surviving Spouse DIC Recipient's Election of \$90 Limited Death
    Pension Rate-

> Medicaid Nursing Home (38 CFR 3.551(I)) 20-XIII-3

**ADDENDUM**

A. Public Law 96-272 Notification of Election of Improved Pension 20-A-1

20-iii

April 29, 2005 M21-1, Part IV

**Change 219**

c\. **Proof of Ineligibility Required.** Certain survivors of electees
are not entitled to annuities under this plan until they furnish the
service department proof that they are not eligible for death
compensation or DIC.

d\. **Request Needed.** Notification to service departments of awards of
VA benefits will only be furnished on specific request from the survivor
or service department.

e\. **Notification.** On receipt of a request from the survivor or
service department, complete information concerning the survivor\'s
entitlement or nonentitlement to death compensation or DIC will be
furnished if such determination has been made or is made based on a
claim filed for VA benefits. If a claim has not been filed, advise the
requester that a determination may not be made until an application for
benefits is received.

**20.78 RADIATION EXPOSURE COMPENSATION ACT (RECA) OF 1990**

a\. **General.** The Radiation Exposure Compensation Act (RECA) of 1990
authorized the Attorney General to make one-time payments as restitution
to a limited class of individuals (or survivors of individuals) with
radiation-related diseases. The Department of Justice administers the
RECA program, which includes three different types of claims:

\(1\) Uranium miners. Potentially eligible persons for this benefit,
which may be as high as \$100,000, are persons who had been employed
during a specific period in uranium mines in certain states.

\(2\) "Downwinders." Potentially eligible persons for this benefit,
which may be as high as \$50,000, are persons who had been present
during designated periods at, or in, certain specified areas downwind of
the Nevada Test Site, the Pacific Proving Grounds, or the Trinity Test
Site in Alamogordo, New Mexico.

\(3\) On-site participants. Potentially eligible persons for this
benefit, which may be as high as \$75,000, are veterans who were on-site
participants at an atmospheric nuclear weapon test and who subsequently
are diagnosed with one of the specific radiation-related diseases listed
in 38 CFR 3.309(d)(2), with the exception of bone cancer and cancer of
the urinary tract other than bladder cancer. If the veteran is deceased,
the surviving spouse, children, or parents may be potentially eligible
to receive a RECA payment of up to \$75,000 based on the veteran's
on-site participation in an atmospheric nuclear test.

b\. **Public Law 108-454**

\(1\) **Provisions of Public Law 108-454.** Section 302 of the Veterans
Benefits Improvement Act of 2004, Public Law 108-454, enacted on
December 10, 2004, provides that a veteran who is issued a payment under
RECA shall not be deprived of payment of compensation for the same
disease, for months after March 26, 2002, once the entire amount of the
RECA payment is recouped from compensation otherwise payable for that
same disease. Public Law 108-454 similarly provides that a surviving
spouse shall not be deprived of payment of dependency and indemnity
compensation (DIC), once the entire amount of the RECA payment is
recouped from DIC otherwise payable.

\(2\) **Prior Bar to Compensation/DIC Benefits.** Prior to the enactment
of Public Law 108-454, a veteran or surviving spouse who accepted a RECA
payment made for a radiogenic disease that developed after participation
onsite in an atmospheric nuclear test was thereafter barred from
receiving compensation, or further payment of compensation *for the same
condition.* Similarly, a survivor who accepted a RECA payment was
thereafter barred from receiving DIC based on death resulting from the
same condition. Public Law 108-454 removed the bar to payment of
compensation or DIC benefits for veterans and survivors who were issued
RECA payments, once the amount of the RECA payment is recouped from
compensation or DIC for payments, for months beginning after March 26,
2002.

**20-XII-3**

**M21-1, Part IV April 29, 2005**

**Change 219**

c\. **VACO Directs Required Adjudicative Actions.** The Department of
Justice (DoJ) notifies the Director, Compensation and Pension Service,
when a veteran or survivor of a deceased veteran files a claim under
RECA, and asks the Director to furnish the following information:

-   Type of payment: Disability compensation or DIC.

-   Illness or illnesses based on which payment is made: Diagnosis.

-   Name of payee:

-   Amounts paid each calendar year:

The DoJ inquiry is forwarded to the Advisory Review (211B) staff, which
performs a BIRLS inquiry to determine the VA regional office of
jurisdiction. The Advisory Review staff will then contact the Veterans
Service Center Manager (VSCM), requesting that he or she pull the claims
folder, review the folder, and call back with the information requested
but DoJ. The Advisory Review staff may request copies of applicable
ratings, compensation or DIC awards (VA Forms 21-8947), and notification
letters from which to respond to the DoJ inquiry. In rare instances, the
Advisory Review staff also may request the VSCM to refer the claims
folder to the Finance Activity for an audit. The Advisory Review staff
may direct the regional office to take amended award action as
necessary. Questions regarding processing RECA payment cases should be
directed to the Advisory Review staff at (202) 273-7227 or (202)
273-7241.

d\. **Offset of Compensation/DIC Award**

\(1\) **General.** Offset the compensation or DIC award in the same
manner as shown in Chapter 22 (paragraphs 22.05 through 22.09 and 22.16)
for benefits awarded under the provisions of 38 U.S.C. 1151. Enter the
total amount of the RECA payment in the TORT AWARDS field on the 401
screen, and show the offset of compensation or DIC benefits as a type 7
withholding in the DED-OFFST field on the 403 screen. The amount of the
offset will depend on the circumstances in the case, but it must not
deprive a beneficiary of any VA benefits that would have been payable if
payment under RECA had not been made. Take an end product (EP) 020
credit for cases requiring an award and an EP 690 credit for cases
requiring annotation of the claims folder only.

\(2\) **Prior Denial, Reduction or Termination of Benefits.** When a
case is routinely encountered in which compensation or DIC benefits were
previously denied, reduced or terminated because the veteran or survivor
received a RECA payment, advise the claimant of potential entitlement
under Public Law 108-454. If benefits are subsequently awarded, the
effective date provisions of 38 CFR 3.114(a) would apply. The earliest
date on which recoupment of a RECA payment may begin is April 1, 2002.

\(3\) **No Other Compensable SC Disabilities.** If the veteran has no
compensable service-connected disability(ies) other than the one for
which the RECA payment was made, offset the entire amount of the
compensation award.

(**Note:** Always offset the entire amount of the award in DIC cases
which involve recoupment of a RECA payment.)

**Example:** A \$75,000 RECA payment was issued to a veteran for primary
cancer of the bladder in April 2003. The veteran is subsequently granted
a service-connected evaluation of 100 percent for bladder cancer
effective September 1, 2004. Enter \$75,000 in the TORT AWARDS field on
the 401 screen, and show the total amount of compensation as a type 7
withholding on the 403 screen.

\(4\) **Both RECA and Non-RECA Disabilities.** If a veteran is entitled
to compensation for additional disabilities for which RECA payment was
not made, pay the veteran compensation at the rate for the combined
evaluation of non-RECA disabilities, including the amount payable for
dependents, if applicable. Withhold the difference between the total
combined rate and the combined rate for the non-RECA disabilities in
order to recoup the RECA payment.

**20-XII-4**

**\
**

**April 29, 2005 M21-1, Part IV**

**Change 219**

**Example:** A married veteran received a RECA payment for leukemia in
2003. The veteran is subsequently granted service-connected evaluations
of 60 percent for leukemia, 30 percent for gastritis, and 10 percent for
arthritis. The combined evaluation for both RECA and non-RECA
disabilities is 80 percent, and the combined evaluation for the non-RECA
disabilities alone is 40 percent.

The table below shows the calculation used to determine the amount of
compensation to pay and the amount to withhold for recoupment of the
RECA payment.

+-----------------------------------------------------------+----------+
| # Calculation                                             |          |
+-----------------------------------------------------------+----------+
| Total 80 percent rate for veteran with spouse             | \$1,331  |
+-----------------------------------------------------------+----------+
| Pay the 40 percent rate for veteran with spouse           | [\$      |
|                                                           | 518]{.un |
|                                                           | derline} |
+-----------------------------------------------------------+----------+
| Withhold for recoupment                                   | \$813    |
+-----------------------------------------------------------+----------+

**Note:** If there is a subsequent increase in the compensation rate for
a RECA disability, the increased compensation would be withheld for
recoupment of the RECA payment.

\(5\) **Consideration of SMC.** If a veteran is entitled to special
monthly compensation (SMC) benefits, apply the SMC benefit to the RECA
payment recoupment only if RECA disabilities would support entitlement
to SMC. Request clarification from the rating activity if necessary.

\(6\) **Retroactive** **Adjustment of Awards.** When the Department of
Justice furnishes notice that a payment under RECA has been issued to a
veteran or survivor based on a radiation-related disability or death for
which he or she currently receives benefits, compensation or DIC must be
terminated under 38 CFR 3.500(x) for any period of entitlement prior to
April 1, 2002 and reinstated effective April 1, 2002 for recoupment of
the RECA payment.

**Example:** A veteran is awarded VA compensation for radiogenic bladder
cancer effective June 1, 1998. On

July 16, 2003, the Department of Justice notifies VA that the veteran
was issued a \$75,000 RECA payment for bladder cancer on October 14,
2001. Upon expiration of the due process period, take action to
terminate the compensation award effective October 1, 2001 (38 CFR
3.500(x)), and reinstate benefits effective April 1, 2002. Offset the
entire compensation award under a type 7 withholding for recoupment of
the \$75,000 RECA payment.

\(7\) **Entitlement Under a Different Provision of Law.** If a
beneficiary receives a RECA payment for a disability or death that is
established as service-connected under a provision of law other than 38
CFR 3.309(d), do not offset compensation or DIC benefits to recoup the
RECA payment. Annotate the claims folder to show that no action is
needed, and take an EP 690.

**Example:** If a surviving spouse is entitled to DIC based on death due
to lung cancer for which service connection is established under 38 CFR
3.309(e) for exposure to certain herbicides, then no offset for RECA
payment based on radiation exposure is required.

**20.79 SURVIVING SPOUSE DIC RECIPIENT\'S ELECTION OF \$90 LIMITED DEATH
PENSION RATE\--MEDICAID NURSING HOME (38 CFR 3.551(i))**

A surviving spouse who is eligible for DIC may elect death pension for
the purpose of taking advantage of the \$90 Medicaid provisions of 38
U.S.C. 5503(f). See chapter 39 and paragraph 20.75.

**20-XII-5**

**April 29, 2005 M21-1, Part IV**

**Change 219**

**CHAPTER 22. DISABILITY OR DEATH DUE TO HOSPITAL CARE, MEDICAL OR**

**SURGICAL TREATMENT, EXAMINATION, TRAINING AND REHABILITATION SERVICES
OR COMPENSATED WORK THERAPY (38 U.S.C. 1151)**

**CONTENTS**

PARAGRAPH PAGE

**SUBCHAPTER I. DISABILITY COMPENSATION UNDER 38 U.S.C. 1151**

22.01 General Information 22-I-1

22.02 Claims Requirements 22-I-1

22.03 Development of 38 U.S.C. 1151 Claims 22-I-1

22.04 Prohibition Against Duplication of Benefits 22-I-2

22.05 Effective Date of Offset 22-I-3

22.06 Amount of Offset 22-I-4

22.07 Offset Not Applicable 22-I-4

22.08 Preparation of Awards 22-I-4

22.09 Notice of Award 22-I-5

22.10 Disallowances 22-I-5

22.11 Entitlement to Ancillary Benefits 22-I-5

**SUBCHAPTER II. DEATH BENEFITS UNDER 38 U.S.C. 1151**

22.12 Initiation of Claims 22-II-1

22.13 Claim Requirements 22-II-1

22.14 Determinations 22-II-1

22.15 Prohibition Against Duplication of Benefits 22-II-1

22.16 Awards Subject to Offset 22-II-2

22.17 Preparation of Awards 22-II-3

22.18 Notice of Award 22-II-3

22.19 Disallowances 22-II-4

22.20 Entitlement to Ancillary Benefits 22-II-4

## 

## 

## 

##  22-i

**April 29, 2005 M21-1, Part IV**

**Change 219**

**CHAPTER 22. DISABILITY OR DEATH DUE TO HOSPITAL CARE, MEDICAL OR**

**SURGICAL TREATMENT, EXAMINATION, TRAINING AND REHABILITATION SERVICES
OR COMPENSATED WORK THERAPY OR TRAINING (38 U.S.C. 1151)**

**SUBCHAPTER I. DISABILITY COMPENSATION UNDER 38 U.S.C. 1151**

**22.01 GENERAL INFORMATION**

a\. If a veteran incurs additional disability as a result of hospital
care, medical or surgical treatment, or examination furnished by VA, or
if the veteran incurs disability while participating in a compensated
work therapy program or pursuing a course of vocational rehabilitation
training under any VA-administered law, the veteran is entitled to
disability compensation as if the disability were service-connected. The
additional disability or death must be proximately caused by
carelessness, negligence, lack of proper skill, error in judgment, or
similar finding of fault on the part of the VA, or by an event not
reasonably foreseeable. (38 U.S.C. 1151; 38 CFR 3.361)

NOTE 1: The provisions of 38 CFR 3.361 through 3.363 apply to claims
under 38 U.S.C. 1151 received on or after October 1, 1997. For claims
received before October 1, 1997, see 38 CFR 3.358 and 3.800.

**NOTE 2:** In claims received before October 1, 1997, there was no
requirement that fault on the part of the VA be found or that an
unforeseeable incident must have occurred to establish eligibility under
38 U.S.C. 1151.

**NOTE 3:** Eligibility based on disability or death due to
participation in a compensated work therapy applies only to claims
pending on November 1, 2000, or received after that date.

b\. Compensation is not payable under 38 U.S.C. 1151 if the injury was
due to the veteran\'s own willful misconduct (38 CFR 3.1(n); 38 CFR
3.800(a)).

c\. If compensation is granted for a disability under 38 U.S.C. 1151,
the disability is not \"service connected.\" However, compensation is
payable \"as if it were service connected.\" The distinction is that a
veteran receiving compensation solely under 38 U.S.C. 1151 is not
entitled to all ancillary benefits that are payable to veterans with
service-connected disabilities. See paragraph 22.11.

d\. If compensation is granted for the loss or loss of use of an organ
or extremity under 38 U.S.C. 1151 and the loss or loss of use of the
paired organ or extremity is involved which is neither service connected
nor quasi-service connected under 38 U.S.C. 1151, 38 U.S.C. 1160
requires that the evaluations of the paired organs or extremities be
combined as if both were service connected. See paragraph 20.40d.

**22.02 CLAIMS REQUIREMENTS**

a\. The veteran need only submit a statement showing an intent to apply
for compensation under 38 U.S.C. 1151. There is no requirement for
submission of VA Form 21-526. A formal claim, however, for compensation
or pension is a claim for compensation under 38 U.S.C. 1151 (38 CFR
3.154).

b\. The effective date of entitlement to compensation for a 38 U.S.C.
1151 disability is either the date of the injury or aggravation if a
claim is received within 1 year of the incident or, otherwise, the date
of receipt of the claim. See 38 CFR 3.400(i).

**NOTE:** If a formal claim for compensation or pension is received and
entitlement under 38 U.S.C. 1151 is ultimately established, that formal
claim ordinarily must be accepted as the claim for 38 U.S.C. 1151
benefits.

**22.03 DEVELOPMENT OF 38 U.S.C. 1151 CLAIMS**

a\. **Referral to Rating Activity.** Refer claims for compensation under
38 U.S.C. 1151 to the rating activity for review prior to initiating
development. The purpose of the initial rating activity review is to
determine if the issue can

**22-I-1**

**M21-1, Part IV April 29, 2005**

**Change 219**

be resolved without further development. If development is required, the
rating activity will indicate specific types of evidence to be
requested.

b\. **Requests for Information.** Usually VA Form 10-7131, \"Exchange of
Beneficiary Information and Request for Administrative and Adjudicative
Action,\" does not provide sufficient space for details surrounding the
incident; therefore, request information from the medical facility by
locally generated letter. Furnish as much information as possible about
the incident in the request. The electronic 7131 request functionality
in the Compensation and Pension Record Interchange (CAPRI) will support
text entry of up to four pages and maintains tracking information
regarding the status of requests. Locally generated letters may be
copied and pasted into the general comments area of CAPRI 7131 requests.
If the rating activity does not specify the types of evidence to
request, request all evidence and documents pertinent to the incident
upon which the claim is based. Possible sources of information about the
incident include:

\(1\) Medical records,

\(2\) Surgical records,

\(3\) Hospital clinical records,

\(4\) Nurses\' notes.

**NOTE:** Do not request quality assurance investigative reports. These
reports are confidential under 38 U.S.C. 5705 and cannot be used as
evidence in adjudication of claims under 38 U.S.C. 1151. If quality
assurance investigative reports are received from a VA medical facility,
return the reports immediately. Do not file copies of these reports in
the veteran\'s claims folder.

**22.04 PROHIBITION AGAINST DUPLICATION OF BENEFITS**

a\. **General.** If a veteran is injured under circumstances which
result in possible entitlement to benefits under 38 U.S.C. 1151, the
veteran may also seek a judgment against the United States in a civil
action. The veteran may sue and recover damages after a trial. More
often, the veteran will agree to a settlement or compromise. This means
the veteran signs away the right to sue in court in return for payment
of an agreed amount for damages. The prohibition against duplication of
benefits applies whenever the veteran receives a sum of money or
property to settle a legal claim arising from injury.

b\. **Tort Claim.** It makes no difference if the award or settlement
amount to the veteran is called a settlement, compromise, administrative
award, tort award or judgment. For purposes of this subchapter, the term
\"judgment\" includes all of these terms.

c\. **Offset Required.** The total amount received by the veteran from a
judgment for a disability for which entitlement to benefits arises under
38 U.S.C. 1151 is subject to offset until an amount equal to the
judgment has been recouped from the veteran\'s compensation (38 CFR
3.800(a); 38 CFR 3.362). It does not matter whether the judgment
compensates for economic loss (loss of earning capacity) or for
noneconomic loss, e.g., pain and suffering. Attorney\'s fees, court
costs, and other expenses incident to the claim are **not** deductible
from the total amount awarded (VAOPGPREC 07-94).

d\. **Notice of Action on Tort Claim.** The tort claim against the
Government will be resolved by General Counsel, the U.S. Attorney
General or the District Counsel. The circumstances of the individual
case determine who is responsible for resolving the tort claim. In any
case resolved in favor of the veteran, notice of the results of the tort
claim will be referred to the Veterans Service Center Manager of the
regional office having jurisdiction of the claims folder.

e\. **Deferral of Award Action.** Disability compensation awards under
38 U.S.C. 1151 are subject to offset effective the first of the month
after the month during which the judgment becomes final. Therefore,
defer a

**22-I-2**

**April 29, 2005 M21-1, Part IV**

**Change 219**

compensation award under 38 U.S.C. 1151 if there is reason to believe a
tort claim for damages may have been finalized. Do not defer the
compensation award just because a tort claim has been filed unless there
is reason to believe it has been finalized.

f\. **Pension Beneficiaries.** No offset is required if a tort claim is
concluded in favor of a veteran in receipt of pension or who is eligible
for compensation under 38 U.S.C. 1151 but elects to continue to receive
pension in lieu of compensation. The net proceeds of the settlement or
judgment, however, are countable income for pension purposes (38 CFR
3.262(i); 3.271(g)). Do not adjust a veteran\'s pension award to count
the proceeds of a settlement or judgment without predetermination notice
unless the veteran is the source of information and understands that the
judgment will affect the amount of pension payable.

g\. **Tort Claims Concluded Before December 1, 1962.** An administrative
award or settlement which became final before December 1, 1962, is a bar
to further payments of compensation under 38 U.S.C. 1151.

However, a court judgment which became final before December 1, 1962, is
neither a bar to payment of compensation under 38 U.S.C. 1151 nor
subject to offset unless a bar or offset is provided for by the terms of
the judgment (38 CFR 3.362 and 3.363). If a case is encountered in which
payments under 38 U.S.C. 1151 were continued despite an administrative
award or settlement which became final before December 1, 1962, stop or
reduce the awards DLP under 38 CFR 3.500(b)(2) (38 CFR 3.362 and 3.363)

h\. **Entitlement of Other Beneficiaries.** If a judgment is made to or
for two or more persons (either in individual capacities or as a
personal representative(s) of the estate) and involves a claimant
subject to the 38 U.S.C. 1151 offset, the individual distribution of the
monies must be determined.

\(1\) If the claims folder is in the regional office when the question
of distribution arises, the Adjudication Officer will request the
District Counsel to determine the individual distribution of the
judgment award or of the settlement or compromise payment. Forward the
claims folder with the request.

\(2\) If the claims folder is in Central Office under review when the
question of distribution arises, General Counsel will determine the
distribution.

i\. **Death Claims.** See subchapter II for adjudication of death claims
involving 38 U.S.C. 1151.

**22.05 EFFECTIVE DATE OF OFFSET**

a\. **General.** If withholding is required under 38 U.S.C. 1151, make
the offset effective the first of the month after the month during which
the judgment becomes final. If, however, the terms of the judgment
specifically provide for a different date of offset, the terms of the
judgment control.

\(1\) **Administrative Awards.** Administrative awards made by VA are
considered final on the date of approval.

\(2\) **Attorney General Agreements.** A settlement or compromise
entered into by the Attorney General after suit has been filed is
considered final when the agreement is approved by the court even though
a final order of dismissal may not be entered until a later date.

\(3\) **Finalization Date Uncertain.** If, after reviewing the evidence
of record, there is any question as to the date the judgment became
final, request clarification from the District Counsel.

b\. **Retroactive Adjustments.** Do not offset compensation payable for
any period before the month following the date on which the settlement
or judgment becomes final. Action to adjust a 38 U.S.C. 1151 award for
receipt of a judgment creates a 97K recoupment balance in the C&P master
record. If final notice of a judgment is received after a compensation
award under 38 U.S.C. 1151 is already running, VA must offset
retroactive to the first of the month following the month of the
judgment. This retroactive adjustment to prevent duplication of benefits
will create a 30B accounts receivable in the C&P master record in
addition to the 97K recoupment balance; however, the 97K recoupment
balance will be reduced by the amount of the 30B accounts receivable.
After processing the retroactive award, the sum of the 97K recoupment
balance and the 30B accounts receivable should equal the amount of the
judgment.

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**M21-1, Part IV April 29, 2005**

**Change 219**

**EXAMPLE:** A judgment is final on June 15, 1992. The rating board
later grants compensation effective March 16, 1992, under 38 U.S.C.
1151. Do not offset any portion of the veteran\'s compensation benefits
prior to July 1, 1992, the month following the date the judgment became
final.

**22.06 AMOUNT OF OFFSET**

a\. **General.** The amount of the offset must not deprive a veteran of
any part of the compensation

payable to him or her if a claim under 38 U.S.C. 1151 had not been
filed. Apply this principle in determining an 1151 offset amount.

b\. **No Other Disability.** Offset the full amount of compensation
under 38 U.S.C. 1151 if the veteran has no non-1151 service-connected
disabilities.

c\. **Increased Evaluation.** Determine the compensation for all
disabilities (1151 and non-1151 disabilities). Next determine the
compensation for non-1151 disabilities. Offset the difference.

d\. **Combined Evaluation Unchanged.** Do not offset any amount if the
38 U.S.C. 1151 disability does not increase the total amount of
compensation. If VA established an offset, discontinue it if there is an
increase in the evaluation of a non-1151 disability such that the 38
U.S.C. 1151 disability no longer increases the total amount of
compensation.

**EXAMPLE:** A veteran has two non-1151 service-connected disabilities
each evaluated at 60 percent and a 1151 disability evaluated at 30
percent. The combined evaluation is 90 percent and for the non-1151
disabilities the combined evaluation is 80 percent. Per paragraph c, VA
offsets the difference between the 90-percent rate and the 80-percent
rate. Subsequently, VA increases one of the 60-percent evaluations to 70
percent. Now the combined evaluation of all disabilities has not changed
(remaining 90 percent), but the combined evaluation of the non-1151
disabilities is increased to 90 percent. Therefore, discontinue the
offset. In the reverse situation (the 70 reduced to 60), commence the
offset.

**22.07 OFFSET NOT APPLICABLE**

The offset provisions are applicable if compensation for a disability is
payable **SOLELY** under 38 U.S.C. 1151. If compensation is otherwise
payable for a disability, no offset is required.

**EXAMPLE 1:** A veteran is rated 10 percent disabled because of a
service-connected foot disability. The veteran enters a VA medical
center for treatment of the disability. The evaluation is increased to
30 percent due to an aggravation of the injury as a result of the
medical or surgical treatment. The veteran sues the hospital and
recovers. No offset is required because the foot disability is service
connected without regard to 38 U.S.C. 1151.

**EXAMPLE 2:** A veteran is service connected for a severe pulmonary
condition which requires the administration of significant doses of
steroids. The veteran later develops cataracts and claims that the
cataracts are due to the steroid treatments. The veteran files a
compensation claim under 38 U.S.C. 1151. The rating board should
consider whether the cataracts are proximately due to or the result of a
service-connected disability so that the condition can be service
connected under 38 CFR 3.310. If the rating board does grant service
connection for cataracts under 38 CFR 3.310, no offset is required.

**22.08 PREPARATION OF AWARDS**

The instructions in paragraph 20.34 concerning preparation of awards
involving readjustment and disability severance pay generally apply to
preparation of awards under 38 U.S.C. 1151. The following provisions
apply specifically to 38 U.S.C. 1151 awards:

a\. **Entitlement Code.** If there are service-connected disabilities
for which compensation is payable without regard to 38 U.S.C. 1151, use
the appropriate entitlement code for the service-connected disabilities.
Otherwise, use the peacetime code. See part V, paragraph 6.07.

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**April 29, 2005 M21-1, Part IV**

**Change 219**

b\. **Special Law Code.** Enter special law code 07 in the SLC field on
the 401 Screen if compensation or DIC is granted or increased because of
38 U.S.C. 1151. This includes those cases in which a zero percent 1151
disability first becomes compensable. Use special law code 07 whether or
not offset is required. See part V, paragraph 6.09.

c\. **Withholding for Offset.** Enter the amount of offset as a type 7
withholding in the \"DED-OFFST\" field on the 403 Screen. See part V,
paragraph 6.11.

d\. **Total Amount to be Recouped.** Enter the gross amount of the
judgment in the TORT AWARDS field on the 401 Screen. The maximum amount
that can be entered in the TORT AWARDS field is \$999,999.99. If the
tort award is \$1,000,000 or more, enter \$999,999.99 on the 401 Screen
and refer the file to Finance for entry of the remaining recoupment
balance. Maintain close control to ensure the master record recoupment
balance is correct after the Finance transaction has been processed.

e\. **Changes in Recoupment Amount.** Once a recoupment balance has been
established in the master record, it cannot be changed by amended award
action. If the recoupment balance must be changed, document the claims
folder and send a routing slip to Finance requesting that the recoupment
balance be changed. Maintain close control of the case to verify that
the change is properly posted to the master record.

**22.09 NOTICE OF AWARD**

a\. **Locally Generated Letter Required.** The presence of special law
code 07 in the award automatically suppresses the Target award letter.
Prepare a locally generated letter, but do not refer to the award as
arising out of 38 U.S.C. 1151 unless that was specifically claimed.
Indicate in the letter that the veteran is entitled only to disability
compensation and there is no independent entitlement to ancillary
benefits (unless there is entitlement to ancillary benefits based on
disabilities which are service connected without regard to 38 U.S.C.
1151). See paragraph 20.44.

b\. **Notice of Offset Requirement.** If the award includes offset, this
will be included in the letter. If the award does not provide for
offset, inform the veteran of the offset requirements of the law.
Include this information whether or not there is any indication that a
tort claim has or will be filed.

c\. **Zero Rate Awards.** If a total offset is in effect until an amount
equal to the judgment has been recouped, advise the veteran to keep VA
informed of any changes of address. See paragraph 20.37b.

**22.10 DISALLOWANCES**

a\. **Preparation of Disallowance.** Prepare a formal disallowance of a
38 U.S.C. 1151 claim (when required under pt. V, par. 10.03) in
accordance with part V, paragraph 10.04.

b\. **Disallowance Letter.** In the absence of a specific claim for
benefits under 38 U.S.C. 1151, do not refer to that section or the
circumstances which warranted the rating. Use a locally generated
letter. Inform the veteran of the evidence considered and the reasons
for the determination. See chapter 9 for complete due process
instructions.

**22.11 ENTITLEMENT TO ANCILLARY BENEFITS.** If compensation is granted
for a disability under 38 U.S.C. 1151, the veteran (if otherwise
eligible) may receive the clothing allowance (par. 25.09a). A veteran
may also be eligible for an automobile grant or adaptive equipment or
specially adapted housing or the special housing adaptation grant based
on disabilities for which compensation is payable under 38 U.S.C. 1151,
provided the level of disability meets the requirements of 38 CFR 3.808,
38 CFR 3.809 or 38 CFR 3.809a. (See also M21-1MR, Part IX, Subpart i, 2
and 3.) However, there is no entitlement to the following ancillary
benefits unless the veteran is entitled based on disabilities for which
compensation is payable without regard to 38 U.S.C. 1151:

-   Dependents\' Educational Assistance (par. 14.09).

-   Vocational Rehabilitation (M21-1MR, Part IX, Subpart i, 1 ).

-   CHAMPVA - 38 U.S.C. 1713 (M21-1MR, Part IX, Subpart i, 4).

**22-I-5**

**April 29, 2005 M21-1, Part IV**

####  **Change 219**

# SUBCHAPTER II. DEATH BENEFITS UNDER 38 U.S.C. 1151

**22.12 INITIATION OF CLAIMS**

a\. **Veterans in Receipt of Compensation Under 38 U.S.C. 1151.** If it
is indicated that the veteran\'s death resulted from the disability for
which compensation was being paid under 38 U.S.C. 1151 (38 CFR 3.361),
send the claimant a VA Form 21-534, Application for Dependency and
Indemnity Compensation or Death Pension By A Surviving Spouse or Child,
or VA Form 21-535, Application For Dependency and Indemnity Compensation
By Parent(s).

b\. **Other Cases.** Send VA Form 21-534 or 21-535 to apply for benefits
under 38 U.S.C. 1151 under the following conditions:

\(1\) In response to a request,

\(2\) If an informal claim is filed for 38 U.S.C. 1151 benefits or

\(3\) Under instruction from the Under Secretary for Benefits, or the
Director, Compensation and Pension Service (in which event make no
reference to the law under which benefits may be payable).

**22.13 CLAIM REQUIREMENTS**

a\. A claimant need only submit a statement showing an intent to apply
for benefits under 38 U.S.C. 1151. If VA receives an informal claim,
send the claimant the appropriate application form. A formal claim for
death benefits is a claim for benefits under 38 U.S.C. 1151 (38 CFR
3.154).

b\. The effective date of entitlement to DIC for a 38 U.S.C. 1151 death
is the first day of the month in which the veteran\'s death occurred if
the claim is received within 1 year or, otherwise, the date of receipt
of the claim. See 38 CFR 3.400(i).

**NOTE:** If a formal claim for DIC is received and entitlement under 38
U.S.C. 1151 is ultimately established, that formal claim ordinarily must
be accepted as the claim for 38 U.S.C. 1151 benefits.

**22.14 DETERMINATIONS**

The regional office will make determinations as to:

a\. Cases in which the veteran died while receiving compensation under
38 U.S.C. 1151.

b\. Cases in which the claimant has applied or indicated an intent to
apply for benefits under 38 U.S.C. 1151. In any such case, see paragraph
22.03 regarding development of 38 U.S.C. 1151 claims and prohibition of
requesting quality assurance investigative reports.

**22.15 PROHIBITION AGAINST DUPLICATION OF BENEFITS**

a\. **Tort Claim.** It makes no difference if the award or settlement
amount to the claimant is called a settlement, compromise,
administrative award, tort award, or judgment. For purposes of this
chapter, the term \"judgment\" includes all of these terms. The
prohibition against duplication of benefits applies whenever the
claimant receives a sum of money or property to settle a legal claim
arising from death of the veteran. It does not matter whether the
judgment compensates for economic loss (loss of income) or noneconomic
loss, e.g., pain and suffering.

b\. **Tort Claims Concluded Before December 1, 1962.** An administrative
award or settlement which became final before December 1, 1962, is a bar
to all further payments of death compensation or DIC under 38 U.S.C.
1151. However, a court judgment which became final before December 1,
1962, is neither a bar to

**22-II-1**

## M21-1, Part IV April 29, 2005

## Change 219

payment of death compensation or DIC under 38 U.S.C. 1151 nor subject to
offset, unless a bar or offset is provided for by the terms of the
judgment (38 CFR 3.363).

c\. **Tort Claims Concluded On or After December 1, 1962.** Regardless
of the date of the incident on which the claim is based, the amount
received by a claimant from a tort claim based on a veteran\'s death
under 38 U.S.C. 1151 is subject to offset until an amount equal to the
judgment has been recouped from the claimant\'s DIC (38 CFR 3.362).

d\. **Notice of Action on Tort Claim.** The tort claim against the
Government will be resolved by General Counsel, the US Attorney General
or the Regional Counsel. The circumstances of the individual case
determine who is responsible for resolving the tort claim. In any case
resolved in favor of the claimant, notice of the results of the tort
claim will be referred to the Veterans Service Center Manager of the
regional office having jurisdiction over the claims folder.

e\. **Deferral of Award Action.** DIC awards under 38 U.S.C. 1151 are
subject to offset effective the first of the month after the month
during which the judgment becomes final. Therefore, defer a DIC award
under 38 U.S.C. 1151 if there is reason to believe a tort claim for
damages may have been finalized. Do not defer the award just because a
tort claim has been filed unless there is reason to believe it has been
finalized.

f\. **Entitlement of Other Beneficiaries.** If a judgment is made to or
for two or more persons (either in individual capacities or as a
personal representative(s) of the estate) and involves a claimant
subject to the 38 U.S.C. 1151 offset, the individual distribution of the
monies must be determined.

\(1\) If the claims folder is in the regional office when the question
of distribution arises, the Veterans Service Center Manager will request
the Regional Counsel to determine the individual distribution of the
judgment award or of the settlement or compromise payment. Forward the
claims folder with the request.

\(2\) If the claims folder is in Central Office under review when the
question of distribution arises, General Counsel will determine the
distribution.

g\. **Effect on Pension.** No offset is required if a tort claim is
concluded in favor of a claimant in receipt of pension or who is
eligible for DIC under 38 U.S.C. 1151 but continues to receive pension
in lieu of DIC. However, the net proceeds of the judgment are countable
income for pension purposes (38 CFR 3.262(i); 3.271(g)).

h\. **Effect on Parents\' DIC.** If a tort claim is concluded in favor
of a parent in receipt of DIC, offset is required. Also, the net
proceeds of the judgment are countable income for DIC purposes (38 CFR
3.262(i)).

i\. **Pre-termination/reduction Notice.** Do not adjust an award to
count the proceeds of a judgment without affording
pre-termination/reduction notice unless the claimant is the source of
information and understands how the judgment will affect the amount of
benefits payable.

**22.16 AWARDS SUBJECT TO OFFSET**

a\. **General.** If withholding is required under 38 U.S.C. 1151, make
the offset of the entire benefit to the recipient effective the first of
the month after the month during which the judgment becomes final. If,
however, the terms of the judgment specifically provide for a different
date of offset, the terms of the judgment control.

**NOTE:** If a final court order requires that benefits under this
section not be offset and the Department of Justice does not appeal the
decision, then offset shall not be used. Contact your Regional Counsel
to determine appeal status before awarding benefits.

\(1\) **Administrative Awards.** Administrative awards made by VA are
considered final on the date of approval.

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**April 29, 2005 M21-1, Part IV**

####  **Change 219**

\(2\) **Attorney General Agreements.** A settlement or compromise
entered into by the Attorney General after suit has been filed is
considered final when the agreement is approved by the court even though
a final order of dismissal may not be entered until a later date.

\(3\) **Finalization Date Uncertain.** If, after reviewing the evidence
of record, there is any question as to the date the tort award or
settlement became final, request clarification from the Regional
Counsel.

b\. **Amount of Offset.** The total amount to be recouped will be the
gross amount of the judgment attributable to the award beneficiary. See
paragraph 22.16f.

c\. **Retroactive Adjustments.** Do not offset DIC payable for any
period before the month following the date on which the settlement or
judgment becomes final. Action to adjust a 38 U.S.C. 1151 award for
receipt of a settlement or judgment creates a 97K recoupment balance in
the C&P master record. If VA receives final notice of a settlement or
judgment after a DIC award under 38 U.S.C. 1151 is already running, VA
must offset retroactive to the first of the month following the month of
the judgment. This retroactive adjustment to prevent duplication of
benefits will create a 30B accounts receivable in the C&P master record
in addition to the 97K recoupment balance, however, the 97K recoupment
balance will be reduced by the amount of the 30B accounts receivable.
After processing the retroactive award, the sum of the 97K recoupment
balance and the 30B accounts receivable should equal the amount of the
judgment.

**EXAMPLE:** A judgment is final on June 15, 1992. The rating board
later grants DIC effective March 16, 1992, under 38 U.S.C. 1151. Do not
offset any portion of the claimant\'s DIC benefits prior to July 1,
1992, the month following the date the judgment became final.

**22.17 PREPARATION OF AWARDS**

The benefit payable under 38 U.S.C. 1151 is DIC (38 CFR 3.361(g)). The
following provisions apply specifically to 38 U.S.C. 1151 awards:

a\. **Entitlement Code.** If the veteran had wartime service, use the
entitlement code for the latest entitling war period; otherwise, use the
peacetime entitlement code. See part V, paragraph 6.07.

b\. **Special Law Code.** Enter special law code 07 in the SLC field on
the 401 Screen if DIC is granted because of 38 U.S.C. 1151. Use special
law code 07 whether or not offset is required. See part V, paragraph
6.09.

c\. **Withholding for Offset.** Enter the amount of offset as a type 7
withholding in the DED-OFFST field on the 403 Screen. See part V,
paragraph 6.11.

d\. **Total Amount to be Recouped.** Enter the gross amount of the
judgment in the TORT AWARDS field on the 401 Screen. The maximum amount
that can be entered in the TORT AWARDS field is \$999,999.99. If the
tort award is \$1,000,000 or more, enter \$999,999.99 on the 401 Screen
and refer the file to Finance for entry of the remaining recoupment
balance. Maintain close control to ensure the master record recoupment
balance is correct after the Finance transaction has been processed.

e\. **Changes in Recoupment Amount.** Once a recoupment balance has been
established in the master record, it cannot be changed by amended award
action. If the recoupment balance must be changed, document the claims
folder and send a routing slip to Finance requesting the recoupment
balance be changed. Maintain close control of the case to verify that
the change is properly posted to the master record.

**22.18 NOTICE OF AWARD**

a\. **Locally Generated Letter Required.** The presence of special law
code 07 in the award automatically suppresses the Benefits Delivery
Network (BDN) award letter. Prepare a locally generated letter, but do
not refer to the award as arising out of 38 U.S.C. 1151 unless that was
specifically claimed. State in the letter that the

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## M21-1, Part IV April 29, 2005

## Change 219

claimant is entitled only to DIC and that there is no independent
entitlement to ancillary benefits (unless there is entitlement to
ancillary benefits based on eligibility requirements otherwise met
without regard to 38 U.S.C. 1151). See paragraph 22.21.

b\. **Notice of Offset Requirement.** If the award includes offset, this
will be included in the letter. If the award does not provide for
offset, inform the claimant of the offset requirements of the law.
Include this information whether or not there is any indication that a
tort claim has or will be filed.

c\. **Zero Rate Awards**. If a total offset is in effect until an amount
equal to the settlement or judgment has been recouped, advise the
claimant to keep VA informed of any changes of address.

**22.19 DISALLOWANCES**

a\. **Preparation of Disallowance.** Prepare a formal disallowance of a
38 U.S.C. 1151 claim (when required under pt. V, par. 10.03) under part
V, paragraph 10.04. Regardless of the disallowance reason, annotate the
disallowance sheet that the rating granted or denied the 38 U.S.C. 1151
claim.

b\. **Disallowance Letter.** In the absence of a specific claim for
benefits under 38 U.S.C. 1151, do not refer to that section or the
circumstances that warranted the rating in the disallowance letter. Use
a locally generated letter. Inform the claimant of the evidence
considered and the reasons for the determination. See M21-1MR, Part I,
2, for complete due process instructions.

**22.20 ENTITLEMENT TO ANCILLARY BENEFITS**

There is no entitlement to the following ancillary benefits if the
veteran\'s death was due to disability granted under 38 U.S.C. 1151:

a\. Dependents\' Educational Assistance (par. 14.09).

b\. CHAMPVA - 38 U.S.C. 1713 (M21-1MR, Part IX, Subpart i, 4).

c\. Loan Guaranty to Surviving Spouse (M21-1MR, Part IX, Subpart i, 5).

d\. Special Allowance - 38 U.S.C. 1312(a) (M21-1MR, Part IX, Subpart
ii).

e\. Special Allowance - Section 156, PL 97-377 (M21-1MR, Part IX,
Subpart i, 6).

f\. Service-Connected Burial Allowance (M21-1MR, Part VII, 2.2).

**22-II-4**