## Section H. Improved Pension -- Adjustments Based on Changes in Status

#### Overview

+------------+---------------------------------------------------------+
| #          | > This section contains the following topics:           |
| #### In th |                                                         |
| is Section |                                                         |
+------------+---------------------------------------------------------+

  ------------ ---------------------------------------------- ------------
  Topic        Topic Name                                     See Page

  52           Adjustments Based on Changes in Income         1-H-2

  53           Cost-of-Living Adjustments (COLAs)             1-H-9

  54           Adjustments for the Loss of Disability SS      1-H-16

  55           Effect of Terminated Death Pension Awards on   1-H-18
               Other Beneficiaries                            
  ------------ ---------------------------------------------- ------------

#### 52. Adjustments Based on Changes in Income

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on adjustments based  |
| troduction | > on changes in income. It includes a definition of     |
|            | > ***same calendar year*** and information on           |
|            |                                                         |
|            | -   counting income                                     |
|            |                                                         |
|            | -   the time limit to furnish amended income            |
|            |     information to increase the rate and two examples   |
|            |                                                         |
|            | -   evidence date stamp                                 |
|            |                                                         |
|            | -   the time limit to submit amended income information |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   to reduce an overpayment                            |
|            |                                                         |
|            | -   when a pension award is discontinued because income |
|            |     for VA purposes (IVAP) exceeds the maximum annual   |
|            |     pension rate (MAPR)                                 |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   continuing entitlement established, and             |
|            |                                                         |
|            | -   payment of pension after a break in the entitlement |
|            |     and three examples.                                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > The income counting procedures apply equally to       |
| # a. Count |                                                         |
| ing Income | -   running awards                                      |
|            |                                                         |
|            | -   original awards, and                                |
|            |                                                         |
|            | -   reopened awards.                                    |
|            |                                                         |
|            | > ***Reference***: For more information about counting  |
|            | > income, see M21-1MR, Part V, Subpart iii, 1.E.33.     |
+------------+---------------------------------------------------------+

Continued on next page

52\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ##### b.   | > [38 CFR                                               |
|  Time Limi | > 3.660(b)(1)](http://                                  |
| t to Furni | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC) |
| sh Amended | > provides the time limit for submitting new evidence   |
|  Income In | > to get a higher rate for a particular income year.    |
| formation  | >                                                       |
| to Increas | > For an original award or a reopened award after a     |
| e the Rate | > period of nonentitlement, the "income year" is the    |
|            | > initial period. (Therefore, a claimant can have more  |
|            | > than one "initial period.") Otherwise, the income     |
|            | > year is the Eligibility Verification Report (EVR)     |
|            | > reporting period. Effective January 1, 1995, the EVR  |
|            | > reporting period is the applicable calendar year.     |
|            | >                                                       |
|            | > [38 CFR                                               |
|            | > 3.660(b)(1)](http://                                  |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC) |
|            | > provides that where pension was paid at a lower rate  |
|            | > based on anticipated income, pension may be increased |
|            | > in accordance with the facts found if satisfactory    |
|            | > evidence of entitlement is received within the same   |
|            | > or next calendar year.                                |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### c.   | > The ***same calendar year*** is the calendar year     |
| Definition | > during which the EVR reporting period or initial      |
| : Same Cal | > period ends.                                          |
| endar Year | >                                                       |
|            | > Therefore, a claimant has until the beginning of the  |
|            | > second calendar year, commencing after the calendar   |
|            | > year during which the EVR reporting period ends, to   |
|            | > submit satisfactory evidence of entitlement for the   |
|            | > EVR reporting period in question.                     |
|            | >                                                       |
|            | > ***Note***: If the EVR reporting period coincides     |
|            | > with the calendar year (as is the case after January  |
|            | > 1, 1995), the EVR reporting period will begin and end |
|            | > during the same calendar year.                        |
|            | >                                                       |
|            | > ***Reference***: For the definition of the term       |
|            | > ***initial period***, see M21-1MR, Part V, Subpart    |
|            | > iii, 1.E.34.a.                                        |
+------------+---------------------------------------------------------+

Continued on next page

52\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| #####      | > ***Situation***: A veteran's initial period is July   |
|  d. Exampl | > 12, 2006, through July 31, 2007. The "same calendar   |
| e 1: Time  | > year" refers to 2007, the calendar year during which  |
| Limit to F | > the initial period or other EVR reporting period      |
| urnish Ame | > ends.                                                 |
| nded Incom | >                                                       |
| e Informat | > ***Result***: The veteran has up to and including     |
| ion to Inc | > December 31, 2008, to submit income information (such |
| rease Rate | > as unreimbursed medical expenses) to reduce income    |
|            | > for the period July 12, 2006, through July 31, 2007.  |
|            | >                                                       |
|            | > ***Note***: A veteran under the age of 65 who was not |
|            | > rated PT because income for VA purposes (IVAP)        |
|            | > exceeded the maximum annual pension rate (MAPR) may   |
|            | > be rated permanently and totally disabled ("PT") from |
|            | > the original date of claim (unless the medical        |
|            | > evidence precludes such a rating), if the veteran     |
|            | > submits income information within the [38 CFR         |
|            | > 3.660(b)](http://                                     |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC) |
|            | > time limits that IVAP (and net worth) permits         |
|            | > payment.                                              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > ***Situation***:                                      |
|  e. Exampl |                                                         |
| e 2: Time  | -   A veteran's initial period is November 15, 2006,    |
| Limit to F |     through November 30, 2007.                          |
| urnish Ame |                                                         |
| nded Incom | -   The veteran previously reported receipt of \$500    |
| e Informat |     nonrecurring income on April 1, 2007.               |
| ion to Inc |                                                         |
| rease Rate | -   The nonrecurring income was counted for a 12-month  |
|            |     period from May 1, 2007, through May 1, 2008.       |
|            |                                                         |
|            | > ***Result***: The veteran has up to and including     |
|            | > December 31, 2008, to submit satisfactory evidence    |
|            | > that the amount of nonrecurring income received on    |
|            | > April 1, 2007, was less than \$500.                   |
+------------+---------------------------------------------------------+

Continued on next page

52\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ##### f.   | > [38 CFR                                               |
|  Evidence  | > 3.660(b)](http://                                     |
| Date Stamp | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC) |
|            | > speaks in terms of establishing entitlement to        |
|            | > benefits if satisfactory evidence is received within  |
|            | > specified time limits. This means that evidence       |
|            | > adequate to support award action must be date stamped |
|            | > into the Department of Veterans Affairs (VA) by the   |
|            | > critical date, or by the next workday, if the time    |
|            | > limit expires on a Saturday, Sunday, or legal         |
|            | > holiday.                                              |
|            | >                                                       |
|            | > ***Reference***: For more information on computation  |
|            | > of time limits, see [38 CFR                           |
|            | > 3.110](http://w                                       |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_110.DOC). |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > Under [38 CFR                                         |
| #### g. Ti | > 3.652(b)](http://w                                    |
| me Limit t | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_652.DOC), |
| o Submit A | > there is no time limit to submit evidence of          |
| mended Inc | > continued entitlement, such as income evidence, for   |
| ome Inform | > the purpose of reducing an overpayment.               |
| ation to R | >                                                       |
| educe an O | > However, the evidence submitted must relate to the    |
| verpayment | > EVR reporting period during which the overpayment was |
|            | > created, per [38 CFR                                  |
|            | > 3.660(b)](http://w                                    |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC). |
|            | >                                                       |
|            | > ***Example***:                                        |
|            |                                                         |
|            | -   An overpayment is created in the veteran's account  |
|            |     because IVAP for 2005 was greater than anticipated. |
|            |                                                         |
|            | -   On September 29, 2008, the veteran submits *VA Form |
|            |     21-8416, Medical Expense Report,* showing medical   |
|            |     expenses paid during 2005                           |
|            |                                                         |
|            | -   These expenses can be used to reduce the            |
|            |     overpayment but cannot be used to pay retroactive   |
|            |     benefits.                                           |
|            |                                                         |
|            | > ***Note***: Under [38 CFR                             |
|            | > 3.661(b)(2)(ii)](http://                              |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_661.DOC) |
|            | > there is no time limit for filing new income          |
|            | > information to reduce an overpayment created for      |
|            | > failure to return an EVR, as long as the income       |
|            | > information relates to the EVR reporting period       |
|            | > during which the overpayment was created.             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > When a pension award is discontinued because IVAP     |
| ## h. Time | > exceeds the MAPR, [38 CFR                             |
|  Limit to  | > 3.660(b)](http://                                     |
| Submit Ame | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC) |
| nded Incom | > determines the time limit to submit new income        |
| e Informat | > information.                                          |
| ion When a | >                                                       |
|  Pension A | > Note that the [38 CFR                                 |
| ward Is Di | > 3.660(b)](http://                                     |
| scontinued | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC) |
|  Because I | > time limits cannot be extended because of a delay in  |
| VAP Exceed | > notifying the beneficiary of the termination.         |
| s the MAPR |                                                         |
+------------+---------------------------------------------------------+

Continued on next page

52\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ###        | > A pensioner has up to and including the last day of   |
| ## i. Cont | > the calendar year that follows the end of the initial |
| inuing Ent | > period or EVR period to establish continuing          |
| itlement E | > entitlement for the income counting period during     |
| stablished | > which the discontinuance occurred.                    |
|            | >                                                       |
|            | > ***Example***:                                        |
|            | >                                                       |
|            | > ***Situation***:                                      |
|            |                                                         |
|            | -   A veteran has a running award.                      |
|            |                                                         |
|            | -   The veteran's 2006 EVR shows that the veteran won   |
|            |     \$15,000 in the lottery on August 7, 2006.          |
|            |                                                         |
|            | -   The award is discontinued September 1, 2006,        |
|            |     because projected IVAP exceeds the MAPR.            |
|            |                                                         |
|            | > ***Result***: The veteran has through the end of 2007 |
|            | > to submit evidence of continuing entitlement (for     |
|            | > example, deductible expenses) from September 1, 2006. |
|            | >                                                       |
|            | > ***Note***: In this example, if the veteran responded |
|            | > before January 1, 2008, with information establishing |
|            | > uninterrupted entitlement for the 2006 EVR reporting  |
|            | > period, the amount of time the veteran has to         |
|            | > establish entitlement for the following EVR reporting |
|            | > period (2007), is determined by whether the veteran   |
|            | > had previously submitted income information for that  |
|            | > period.                                               |
|            | >                                                       |
|            | > If the veteran had not previously submitted income    |
|            | > information for 2007, the veteran has 12 months from  |
|            | > the date of request by VA to furnish the required     |
|            | > evidence.                                             |
|            | >                                                       |
|            | > However, if income evidence for 2007 had previously   |
|            | > been submitted but benefits were not awarded because  |
|            | > it appeared IVAP would exceed the MAPR for 2007, then |
|            |                                                         |
|            | -   apply [38 CFR                                       |
|            |     3.660(b)(1)](http://w                               |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC), |
|            |     and                                                 |
|            |                                                         |
|            | -   the pensioner has until the end of 2008 to submit   |
|            |     evidence establishing entitlement for 2007.         |
+------------+---------------------------------------------------------+

Continued on next page

52\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ##### j. P | > The time limit to submit evidence establishing        |
| ayment of  | > entitlement after a break in entitlement is           |
| Pension Af | > determined by [38 CFR                                 |
| ter a Brea | > 3.660(b)(2)](http://w                                 |
| k in the E | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC). |
| ntitlement | > That is, the claimant has two years from the date of  |
|            | > discontinuance to submit evidence establishing        |
|            | > entitlement from 12 months after the date of          |
|            | > discontinuance.                                       |
|            | >                                                       |
|            | > If the claimant re-establishes entitlement from a     |
|            | > date that is 12 months from the date of               |
|            | > discontinuance, [38 CFR                               |
|            | > 3.31](http:/                                          |
|            | /www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_31.DOC) |
|            | > applies in determining the proper payment date.       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### k    | > ***Situation***: The veteran has a running award.     |
| . Example  |                                                         |
| 1: Payment | -   August 7, 2006: The veteran wins the lottery, and   |
|  of Pensio |     the nonrecurring income causes projected IVAP to    |
| n After a  |     exceed MAPR                                         |
| Break in E |                                                         |
| ntitlement | -   September 1, 2006: Date of award discontinuance per |
|            |     the end-of-the-month rule.                          |
|            |                                                         |
|            | -   December 15, 2006: The veteran is notified of the   |
|            |     discontinuance .                                    |
|            |                                                         |
|            | > ***Result***: The veteran has until September 1,      |
|            | > 2008, to submit evidence establishing entitlement     |
|            | > from September 1, 2007, with an October 1, 2007,      |
|            | > payment date.                                         |
|            | >                                                       |
|            | > ***Note***: Before resuming the award from September  |
|            | > 1, 2007, (with an October 1, 2007, payment date)      |
|            | > develop for complete income and expense information   |
|            | > for the 2006 and 2007 EVR periods.                    |
+------------+---------------------------------------------------------+

Continued on next page

52\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ##### l    | > ***Situation***:                                      |
| . Example  |                                                         |
| 2: Payment | -   May 5, 2005: Surviving spouse wins the lottery, and |
|  of Pensio |     the nonrecurring income causes projected IVAP to    |
| n After a  |     exceed MAPR.                                        |
| Break in E |                                                         |
| ntitlement | -   June 1, 2005: Date of award discontinuance per the  |
|            |     end-of-the-month rule.                              |
|            |                                                         |
|            | -   August 7, 2005: Surviving spouse is notified of the |
|            |     award discontinuance.                               |
|            |                                                         |
|            | -   March 14, 2006: Surviving spouse submits 2005       |
|            |     unreimbursed medical expenses. These bring          |
|            |     calendar-year 2005 IVAP below the MAPR and permit   |
|            |     the award to resume from June 1, 2005. However,     |
|            |     2006 IVAP still exceeds the MAPR.                   |
|            |                                                         |
|            | > ***Result***: If the surviving spouse cannot          |
|            | > establish entitlement for the 2006 EVR period, the    |
|            | > surviving spouse has until June 1, 2007, to submit    |
|            | > satisfactory evidence of entitlement from June 1,     |
|            | > 2006, and permit resumption of payments from July 1,  |
|            | > 2006.                                                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### m    | > ***Situation***: A veteran has a running pension      |
| . Example  | > award with calendar-year EVR reporting periods.       |
| 3: Payment |                                                         |
|  of Pensio | -   May 5, 2005: The veteran wins the lottery, and the  |
| n After a  |     nonrecurring income causes projected IVAP to exceed |
| Break in E |     MAPR.                                               |
| ntitlement |                                                         |
|            | -   June 1, 2005: Date of award discontinuance per the  |
|            |     end-of-the-month rule.                              |
|            |                                                         |
|            | -   July 3, 2005: The veteran is notified of the award  |
|            |     discontinuance.                                     |
|            |                                                         |
|            | -   August 7, 2007: The veteran files a new pension     |
|            |     claim.                                              |
|            |                                                         |
|            | -   September 1, 2007: Payment date of new award        |
|            |     (effective date August 7, 2007).                    |
|            |                                                         |
|            | > ***Result***: The veteran's new initial period is     |
|            | > August 7, 2007, through August 31, 2008. Income       |
|            | > received before August 7, 2007, is not countable.     |
+------------+---------------------------------------------------------+

#### 53. Cost-of-Living Adjustments (COLAs)

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on cost-of-living     |
| troduction | > adjustments (COLA). It includes information on        |
|            |                                                         |
|            | -   the effect of COLA adjustments                      |
|            |                                                         |
|            | -   the normal impact of Social Security (SS) COLA on   |
|            |     the Improved Pension rate                           |
|            |                                                         |
|            | -   a reduction in the Improved Pension rate due to     |
|            |     SS's COLA                                           |
|            |                                                         |
|            | -   adjusting the rate of Improved Pension when         |
|            |     calendar-year medical expenses are                  |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   projected to remain constant and an example, and    |
|            |                                                         |
|            | -   projected to increase and an example.               |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   a reduction in the rate of Improved Pension due to  |
|            |     other benefit program's COLA                        |
|            |                                                         |
|            | -   original, reopened, or suspended awards and an      |
|            |     example, and                                        |
|            |                                                         |
|            | -   retroactive increases and two examples.             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Cost-of-living adjustments (COLAs) in other benefits  |
|  a. Effect | > affect the rate of Improved Pension payable.          |
|  of COLA A |                                                         |
| djustments |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > Normally, a Social Security (SS) COLA adjustment will |
| ### b. Nor | > not reduce the rate of Improved Pension because the   |
| mal Impact | > Improved Pension maximum annual pension rate (MAPR)   |
|  of SS COL | > always increases at the same time and by the same     |
| A on the I | > percentage as the rate of SS, per [38 CFR             |
| mproved Pe | > 3.27](http://                                         |
| nsion Rate | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_26.DOC). |
|            | >                                                       |
|            | > If the SS COLA does not reduce the rate of VA         |
|            | > pension, count the increased rate of SS from the      |
|            | > effective date of the COLA (generally December 1).    |
|            | > This is an exception to the general end-of-the-month  |
|            | > rule that increased income is counted from the first  |
|            | > day of the month after the month during which it is   |
|            | > received.                                             |
|            | >                                                       |
|            | > ***Example***: A veteran is receiving Improved        |
|            | > Pension based on SS of \$5,000 per year. Effective    |
|            | > December 1, 2005, the rate of SS goes up to \$5,205   |
|            | > as a result of the COLA. Pay \$447 per month based on |
|            | > IVAP of \$5,205 from December 1, 2005.                |
+------------+---------------------------------------------------------+

Continued on next page

53\. Cost-of-Living Adjustments (COLAs), Continued

+------------+---------------------------------------------------------+
| ###        | > If deductible expenses are a factor, a beneficiary's  |
| ## c. Redu | > rate of Improved Pension may go down as the result of |
| ction in R | > an SS COLA. This happens most often when a            |
| ate of Imp | > beneficiary's annual rate of SS approaches or exceeds |
| roved Pens | > the applicable MAPR.                                  |
| ion Due to | >                                                       |
|  SS's COLA | > If an SS COLA adjustment results in a decrease in the |
|            | > rate of Improved Pension, decrease the pension rate   |
|            | > effective the first of the month after the effective  |
|            | > date of the COLA/MAPR increase.                       |
|            | >                                                       |
|            | > However, if deductible expenses for the EVR calendar  |
|            | > year associated with the COLA are projected to        |
|            | > increase, then carry forward the previous year's      |
|            | > pension payment rate until February 1.                |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### d.   | > Follow the steps in the table below to reduce the     |
|  Adjusting | > rate of Improved Pension benefits due to an SS COLA   |
|  the Rate  | > when deductible expenses are not projected to         |
| of Improve | > increase.                                             |
| d Pension  |                                                         |
| When Deduc |                                                         |
| tible Expe |                                                         |
| nses Remai |                                                         |
| n Constant |                                                         |
+------------+---------------------------------------------------------+

+-------+--------------------------------------------------------------+
| Step  | Action                                                       |
+-------+--------------------------------------------------------------+
| 1     | Assuming a December 1 COLA                                   |
|       |                                                              |
|       | -   omit a December 1 306 screen                             |
|       |                                                              |
|       | -   enter a 306 screen for January 1, and                    |
|       |                                                              |
|       | -   allow the system to generate an award.                   |
+-------+--------------------------------------------------------------+
| 2     | Depending upon when the award is processed and whether a     |
|       | retroactive adjustment is involved, you may or may not       |
|       | require a December 1 line.                                   |
+-------+--------------------------------------------------------------+

Continued on next page

53\. Cost-of-Living Adjustments (COLAs), Continued

  -----------------------------------------------------------------------
  d\. Adjusting the Rate of Improved Pension When Deductible Expenses
  Remain Constant (continued)

  -----------------------------------------------------------------------

+-------+--------------------------------------------------------------+
| Step  | Action                                                       |
+-------+--------------------------------------------------------------+
| 3     | > Is a December line required?                               |
|       |                                                              |
|       | -   If *yes*                                                 |
|       |                                                              |
|       | ```{=html}                                                   |
|       | <!-- -->                                                     |
|       | ```                                                          |
|       | -   change the December 1 reason code to 96                  |
|       |                                                              |
|       | -   establish a Type 1 withholding for the difference        |
|       |     between the generated rate and the rate in effect prior  |
|       |     to December 1                                            |
|       |                                                              |
|       | -   change the January 1 reason code to 37, and              |
|       |                                                              |
|       | -   zero out the Type 1 withholding on the January 1 line.   |
|       |                                                              |
|       | ```{=html}                                                   |
|       | <!-- -->                                                     |
|       | ```                                                          |
|       | -   If *no*                                                  |
|       |                                                              |
|       | ```{=html}                                                   |
|       | <!-- -->                                                     |
|       | ```                                                          |
|       | -   make the adjustment effective January 1, and             |
|       |                                                              |
|       | -   change the January 1 reason code to 37.                  |
|       |                                                              |
|       | > ***Result***: The Benefits Delivery Network (BDN)          |
|       | > generates the proper rate and produces an acceptable award |
|       | > letter.                                                    |
+-------+--------------------------------------------------------------+

+-----------------------------------------------------------------------+
| > ***Notes***:                                                        |
|                                                                       |
| -   If the adjustment will result in reduction of a running award, it |
|     is necessary to furnish notice of proposed adverse action for the |
|     reduction. (***Exception***: A contemporaneous notice may be sent |
|     if the adjustment is based on a Social Security (SS) rate in      |
|     Share that is no more than \$1.00 higher than the rate reported   |
|     by the beneficiary. See M21-1MR, Part V, Subpart iii, 1.A.4.d.)   |
|                                                                       |
| -   Do not adjust the award until at least 60 days after the notice   |
|     of proposed adverse action is sent to the beneficiary, unless the |
|     beneficiary requests the reduction.                               |
+-----------------------------------------------------------------------+

Continued on next page

53\. Cost-of-Living Adjustments (COLAs), Continued

+------------+---------------------------------------------------------+
| ####       | > ***Situation***:                                      |
| # e. Examp |                                                         |
| le: Adjust | -   A veteran is receiving Improved Pension of \$599    |
| ing the Ra |     per month based on IVAP of \$9,319.                 |
| te of Impr |                                                         |
| oved Pensi | -   The veteran receives SS of \$16,555 per year and    |
| on When Me |     has continuing medical expenses of \$7,730 per      |
| dical Expe |     year.                                               |
| nses Remai |                                                         |
| n Constant | -   Effective December 1, 2004, the annual rate of SS   |
|            |     goes up to \$16,994 because of the COLA. This       |
|            |     increases IVAP to \$9,772 and reduces the monthly   |
|            |     rate of pension to \$598.                           |
|            |                                                         |
|            | > ***Result***: Adjust the award to pay at the rate of  |
|            | > \$599 per month through December 31, 2004, and \$598  |
|            | > from January 1, 2005.                                 |
|            |                                                         |
|            | -   Allow BDN to generate an award, but do not enter a  |
|            |     December 1, 2004, 306 screen. The system generates  |
|            |     a January 1, 2005, line on the 403 screen. The      |
|            |     monthly rate is \$598 based on IVAP of \$9,772.     |
|            |                                                         |
|            | -   BDN will generate a December 1 line on the 403      |
|            |     screen. Change the January 1 reason code to 37 and  |
|            |     allow the award to process without a December 1     |
|            |     line.                                               |
+------------+---------------------------------------------------------+

Continued on next page

53\. Cost-of-Living Adjustments (COLAs), Continued

+------------+---------------------------------------------------------+
| ##### f.   | > ***Situation***:                                      |
|  Example:  |                                                         |
| Adjusting  | -   A veteran is receiving Improved Pension of \$599    |
| the Rate o |     per month based on IVAP of \$9,319.                 |
| f Improved |                                                         |
|  Pension W | -   The veteran receives SS of \$16,555 per year and    |
| hen Calend |     has continuing medical expenses of \$7,730 per      |
| ar-Year Me |     year.                                               |
| dical Expe |                                                         |
| nses Are P | -   Effective December 1, 2004, the annual rate of SS   |
| rojected t |     goes up to \$16,994 because of the COLA. This       |
| o Increase |     increases IVAP to \$9,772 and reduces the monthly   |
|            |     rate of pension to \$598.                           |
|            |                                                         |
|            | -   On the 2004 EVR, the veteran shows continuing       |
|            |     medical expenses of \$8,500 for calendar year 2005. |
|            |     This decreases IVAP to \$9,002 and increases the    |
|            |     monthly rate of pension to \$666.                   |
|            |                                                         |
|            | > ***Result***: Adjust the award to pay at the rate of  |
|            | > \$599 per month through January 31, 2005, and \$666   |
|            | > from February 1, 2005 ([38 CFR                        |
|            | > 3.31](http://w                                        |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_31.DOC)). |
|            |                                                         |
|            | -   Enter a 306 screen for February 1 (assuming a       |
|            |     December 1 COLA and higher medical expenses than    |
|            |     the previous year), but omit the 306 screens for    |
|            |     December 1 and January 1. Depending upon when the   |
|            |     award is processed, you may or may not need a       |
|            |     December 1 or January 1 line.                       |
|            |                                                         |
|            | -   If no December 1 or January 1 line is needed, pay   |
|            |     the increase effective February 1. The reason code  |
|            |     will be 11, and there will be no COLA line for that |
|            |     year.                                               |
|            |                                                         |
|            | -   If a December 1 and/or January 1 line(s) are        |
|            |     required, change the December 1 and/or January 1    |
|            |     reason code(s) to 96 and establish a type "*1*"     |
|            |     withholding for the difference between the          |
|            |     generated rate and the continued rate.              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > If a VA beneficiary receives additional income        |
| ## g. Redu | > because of a COLA in a benefit program other than SS, |
| ction in R | > then the general rule for counting recurring income   |
| ate of Imp | > applies. Count the additional income from the first   |
| roved Pens | > of the month after the month during which it is       |
| ion Due to | > received.                                             |
|  Other Ben | >                                                       |
| efit Progr | > ***Reference***: For more more information on         |
| am's COLA  | > counting recurring income, see M21-1MR, Part V,       |
|            | > Subpart iii, 1.E.33.d.                                |
+------------+---------------------------------------------------------+

Continued on next page

53\. Cost-of-Living Adjustments (COLAs), Continued

+------------+---------------------------------------------------------+
| ##### h.   | > If the SS or other benefit program COLA occurs before |
|  Original, | > an original or reopened award is processed or when an |
|  Reopened, | > award is in suspense, adjustments for changes in the  |
|  or Suspen | > rate of SS are the same as if the award were running  |
| ded Awards | > at the time of the COLA.                              |
|            | >                                                       |
|            | > However, if the COLA reduces the rate of VA pension   |
|            | > when the award is not in a running status, no notice  |
|            | > of proposed adverse action for the reduction is       |
|            | > required.                                             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### i    | > ***Situation***:                                      |
| . Example: |                                                         |
|  Original, | -   A veteran's award is effective March 14, 2004, with |
|  Reopened, |     a payment date of April 1, 2004.                    |
|  or Suspen |                                                         |
| ded Awards | -   The original award is not authorized until February |
|            |     13, 2005.                                           |
|            |                                                         |
|            | -   From April 1, 2004, the veteran is entitled to an   |
|            |     Improved Pension rate of \$599 per month, based on  |
|            |     IVAP of \$9,319.                                    |
|            |                                                         |
|            | -   The veteran receives SS of \$16,555 per year and    |
|            |     has continuing medical expenses of \$7,730 per      |
|            |     year.                                               |
|            |                                                         |
|            | -   Effective December 1, 2004, the annual rate of SS   |
|            |     goes up to \$16,994 because of the COLA. This       |
|            |     increases IVAP to \$9,772 and reduces the veteran's |
|            |     monthly rate of pension to \$598.                   |
|            |                                                         |
|            | > ***Result***:                                         |
|            |                                                         |
|            | -   Enter 306 screens for April 1, 2004, and January 1, |
|            |     2005.                                               |
|            |                                                         |
|            | -   Do not enter a 306 screen for December 1, 2004.     |
|            |                                                         |
|            | -   The original award pays \$599 per month from April  |
|            |     1, 2004, with a reduction to \$598 per month        |
|            |     effective January 1, 2005.                          |
|            |                                                         |
|            | -   There is a December 1, 2004, generated award line   |
|            |     paying \$635 based on the continued pre-COLA IVAP   |
|            |     of \$9,319.                                         |
|            |                                                         |
|            | -   Change the 403 screen (using reason code 96) to     |
|            |     protect the \$599 rate on December 1, 2004, and     |
|            |     show a Type "1" withholding of \$36.                |
|            |                                                         |
|            | -   Change the January 1, 2005, reason code from 11 to  |
|            |     37, and zero out the withholding.                   |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### j. R | > Apply the principles in this topic even if the        |
| etroactive | > beneficiary subsequently establishes entitlement to a |
|  Increases | > retroactive increase because of a reduction in        |
|            | > countable income.                                     |
+------------+---------------------------------------------------------+

Continued on next page

53\. Cost-of-Living Adjustments (COLAs), Continued

+------------+---------------------------------------------------------+
| #          | > ***Situation***:                                      |
| #### k. Ex |                                                         |
| ample 1: R | -   A veteran is receiving Improved Pension of \$599    |
| etroactive |     per month based on IVAP of \$9,319.                 |
|  Increases |                                                         |
|            | -   The veteran receives SS of \$16,555 per year, but   |
|            |     has continuing medical expenses of \$7,730 per      |
|            |     year.                                               |
|            |                                                         |
|            | -   Effective December 1, 2004, the annual rate of SS   |
|            |     goes up to \$16,994 because of the COLA. This       |
|            |     increases IVAP to \$9,773 and reduces the veteran's |
|            |     monthly rate of pension to \$598 from January 1,    |
|            |     2005.                                               |
|            |                                                         |
|            | -   The veteran's initial period is May 15, 2004,       |
|            |     through May 30, 2005.                               |
|            |                                                         |
|            | -   In July 2005 the veteran reports having paid        |
|            |     medical expenses of \$7,850. The veteran is now     |
|            |     entitled to \$609 per month based on IVAP of        |
|            |     \$9,200 from May 15, 2004, with a payment date of   |
|            |     June 1, 2004.                                       |
|            |                                                         |
|            | -   The rate goes down to \$608 per month based on IVAP |
|            |     of \$9,652 after the SS COLA. The reduction is      |
|            |     still effective January 1, 2005.                    |
|            |                                                         |
|            | > ***Result***:                                         |
|            |                                                         |
|            | -   Complete the 306 screens for June 1, 2004, January  |
|            |     1, 2005, and June 1, 2005, to reduce the medical    |
|            |     expenses back to the \$7,730 level.                 |
|            |                                                         |
|            | -   Change the 403 screen to show reason code 96 and a  |
|            |     Type 1 withholding on the December 1, 2004, line    |
|            |     and to show reason code 37 and zero the withholding |
|            |     on the January 1, 2005 line.                        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > ***Situation***:                                      |
| #### l. Ex |                                                         |
| ample 2: R | -   A veteran is receiving Improved Pension of \$408    |
| etroactive |     per month based on Railroad Retirement benefits of  |
|  Increases |     \$5,000 per year.                                   |
|            |                                                         |
|            | -   The December 1, 2004, Railroad Retirement COLA      |
|            |     increases the veteran's IVAP to \$5,135. The        |
|            |     Railroad Retirement COLA is received during January |
|            |     2005 and should be counted from February 1, 2005.   |
|            |                                                         |
|            | -   The veteran subsequently reports medical expenses   |
|            |     of \$1,200 for the initial period May 15, 2004,     |
|            |     through May 31, 2005.                               |
|            |                                                         |
|            | > ***Result***: Adjust the award to pay                 |
|            |                                                         |
|            | -   \$467 per month based on IVAP of \$4,295 from June  |
|            |     1, 2004                                             |
|            |                                                         |
|            | -   \$488 per month based on IVAP of \$4,308 from       |
|            |     December 1, 2004                                    |
|            |                                                         |
|            | -   \$477 based on IVAP of \$4,443 from February 1,     |
|            |     2005, and                                           |
|            |                                                         |
|            | -   \$419 based on IVAP of \$5,135 from June 1, 2005    |
|            |     (to remove the \$1,200 medical expenses).           |
+------------+---------------------------------------------------------+

#### 54. Adjustments for the Loss of Disability SS

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on adjustments for    |
| troduction | > the loss of disability SS. It includes information on |
|            |                                                         |
|            | -   the beneficiary's right to SS benefits during       |
|            |     appeal                                              |
|            |                                                         |
|            | -   the SS rate during appeal                           |
|            |                                                         |
|            | -   the report of terminated disability SS received     |
|            |                                                         |
|            | -   determining whether development is needed, and      |
|            |                                                         |
|            | -   end product (EP) control for development.           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a    | > If the Social Security Administration (SSA)           |
| . Benefici | > determines that a beneficiary receiving disability    |
| ary's Righ | > benefits is no longer disabled, the beneficiary may   |
| t to SS Be | > appeal the determination and may elect to have SS     |
| nefits Dur | > benefits continue during the SSA appeal process.      |
| ing Appeal | >                                                       |
|            | > This election is made on the condition that SS        |
|            | > payments issued after the initial SS termination date |
|            | > will have to be repaid if the SSA's decision is       |
|            | > upheld on appeal.                                     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b. S | > The beneficiary may not elect to receive a reduced    |
| S Rate Dur | > rate of SS disability benefits during the appeal, but |
| ing Appeal | > may elect to have the basic benefit continue while    |
|            | > payments for eligible dependents in the household are |
|            | > stopped.                                              |
|            | >                                                       |
|            | > Alternatively, the beneficiary may elect to have the  |
|            | > basic benefit terminated and have payments for one or |
|            | > more dependents in the household continue.            |
|            | >                                                       |
|            | > The beneficiary's election does not control a         |
|            | > dependent outside the household whose payments are    |
|            | > contingent on the beneficiary's entitlement. Such a   |
|            | > dependent, however, is given the right to elect to    |
|            | > have benefits continue during the appeal by accepting |
|            | > responsibility for the overpayment if the appeal is   |
|            | > unsuccessful.                                         |
|            | >                                                       |
|            | > A SS beneficiary who is 62 years old or older may     |
|            | > elect to receive SS retirement benefits in lieu of    |
|            | > disability benefits while the appeal of the           |
|            | > disability determination is pending.                  |
+------------+---------------------------------------------------------+

Continued on next page

54\. Adjustments for the Loss of Disability SS, Continued

+------------+---------------------------------------------------------+
| ##         | > If a pension (or Parents' DIC) beneficiary reports    |
| ### c. Rep | > that disability SS benefits have been terminated, do  |
| ort of Ter | > not increase VA pension benefits unless there is a    |
| minated Di | > statement from the beneficiary on file to the effect  |
| sability S | > that the beneficiary and any dependents               |
| S Received |                                                         |
|            | -   no longer receive SS, and                           |
|            |                                                         |
|            | -   will not appeal the SSA's decision or have elected  |
|            |     to receive no benefits while the appeal is pending. |
|            |                                                         |
|            | > ***Note***: If the beneficiary has elected to receive |
|            | > benefits for certain dependents, the statement must   |
|            | > specify the dependents for whom payments will         |
|            | > continue.                                             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > If the SSA determines that a veteran is no longer     |
| #### d. De | > eligible for SS disability benefits, and the veteran  |
| termining  | > is under age 65, determine if additional development  |
| Whether Ad | > is necessary to ascertain whether the veteran         |
| ditional D | > continues to have a permanent and total (PT)          |
| evelopment | > disability for pension purposes.                      |
|  Is Needed | >                                                       |
|            | > ***Note***: Request medical records from SSA while    |
|            | > developing for records from other sources.            |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > If development is required, control the issue under   |
|  e. EP Con | > end product (EP) code 150 until such time as          |
| trol for D |                                                         |
| evelopment | -   the award can be adjusted for reduced income, or    |
|            |                                                         |
|            | -   a determination is made that no adjustment is in    |
|            |     order.                                              |
|            |                                                         |
|            | > The beneficiary continues to receive unreduced SS     |
|            | > during the appeal.                                    |
|            | >                                                       |
|            | > If the income issue is resolved *before* the case is  |
|            | > referred to the rating activity, take the EP 150 and  |
|            | > establish a separate EP code 310 for the rating       |
|            | > activity's review of the veteran's disabilities.      |
+------------+---------------------------------------------------------+

#### 55. Effect of Terminated Death Pension Awards on Other Beneficiaries

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on the effect of a    |
| troduction | > terminated death pension award on other               |
|            | > beneficiaries. It includes information on             |
|            |                                                         |
|            | -   the method of termination                           |
|            |                                                         |
|            | -   the entitlement of                                  |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   in-custody children, and                            |
|            |                                                         |
|            | -   out-of-custody children                             |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   the remarriage of the surviving spouse              |
|            |                                                         |
|            | -   a terminated child's award.                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a. M | > A stop pay does not generate a letter. Therefore, if  |
| ethod of T | > benefits are stopped by use of a stop pay             |
| ermination | > transaction, send a locally-generated letter          |
|            | > explaining the change to the beneficiary.             |
|            | >                                                       |
|            | > An amended award transaction does generate a letter,  |
|            | > so, if benefits are stopped by use of an amended      |
|            | > award transaction, a locally-generated letter of      |
|            | > explanation is needed only if the BDN-generated       |
|            | > letter is inadequate to inform the beneficiary.       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > If the surviving spouse's entitlement to pension      |
| ## b. Enti | > ceases because IVAP exceeds the MAPR, or net worth is |
| tlement of | > shown to bar pension entitlement, the entitlement of  |
|  In-Custod | > all children in the surviving spouse's legal custody  |
| y Children | > for Improved Pension purposes also ceases. The        |
|            | > children can become entitled in their own right only  |
|            | > if                                                    |
|            |                                                         |
|            | -   the surviving spouse dies or remarries, or          |
|            |                                                         |
|            | -   the children are removed from the surviving         |
|            |     spouse's legal custody.                             |
|            |                                                         |
|            | > ***Reference***: For information about determining    |
|            | > the legal custody of a child for Improved Pension     |
|            | > purposes, see                                         |
|            |                                                         |
|            | -   M21-1MR, Part V, Subpart iii, 1.F.37.e, and         |
|            |                                                         |
|            | -   [38 CFR                                             |
|            |     3.57(d)](http://                                    |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_57.DOC). |
+------------+---------------------------------------------------------+

Continued on next page

55\. Effect of Terminated Death Pension Awards on Other Beneficiaries,
Continued

+------------+---------------------------------------------------------+
| ##### c    | > The termination of an award to a surviving spouse has |
| . Entitlem | > no impact on any award being made to children who are |
| ent of Out | > not in the surviving spouse's legal custody for       |
| -of-Custod | > Improved Pension purposes.                            |
| y Children |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > If a surviving spouse remarries, Improved Pension     |
| ## d. Rema | > eligibility is lost as described in [38 CFR           |
| rriage of  | > 3.500(n)(1)](http://w                                 |
| the Surviv | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_500.DOC). |
| ing Spouse | >                                                       |
|            | > If it appears that a child may be entitled to a       |
|            | > pension in his/her own right, initiate development to |
|            | > determine the income of the child, parent and         |
|            | > stepparent or other custodian of the child with whom  |
|            | > the child resides.                                    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > If there is no surviving spouse, or if a child is out |
| # e. Termi | > of the surviving spouse's legal custody for Improved  |
| nated Chil | > Pension purposes, the child's entitlement is          |
| d's Award  | > completely independent of any benefits paid to any    |
|            | > other beneficiary.                                    |
|            | >                                                       |
|            | > The adjustment or termination of such an award has no |
|            | > impact on any other beneficiaries, unless the other   |
|            | > beneficiaries are receiving Section 306 Pension or    |
|            | > Old Law Pension.                                      |
|            | >                                                       |
|            | > ***Reference***: For more information on handling     |
|            | > another beneficiary's Section 306 Pension or Old Law  |
|            | > Pension award when a surviving spouse's or child's    |
|            | > Section 306 Pension or Old Law Pension award is       |
|            | > terminated, see M21-1MR, Part V, Subpart iii, 1.C.19. |
+------------+---------------------------------------------------------+