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

**Department of Veterans Affairs Change 190**

**Washington, DC 20420 February 6, 2004**

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

**Pages 14-II-3 through 14-II-4:** Remove these pages and substitute
pages 14-II-3 through 14-II-4 attached.

Paragraph 14.13a(1) is amended show the correct regulation citation as
38 CFR 3.503(a)(8), instead of 38 CFR 3.503(h).

Paragraph 14.14a(1) is revised to remove an obsolete reference to the
Adjudication Division.

**Pages 16-VI-15 through 16-VI-16** : Remove these pages and substitute
pages 16-VI-15 through 16-VI-16 , attached.

Paragraph 16.32g. is revised to remove, in the last sentence of
**Example 1**, the phrase "if no other period is more advantageous to
the surviving spouse." In the example given, the expenses were paid
before the date of pension entitlement, and must be deducted from
countable income during the first 12 months of entitlement (16.32f.(4)).

**Pages 20-V-1 and 20-V-2:** Remove these pages and substitute pages
20-V-I and 20-V-2, attached.

Part IV, 20.26 is revised to show the appropriate flat rate percentages
for calculating the Federal income tax withholding for recoupment of
readjustment pay under 10 U.S.C. 3814(a), and separation pay cases under
10 U.S.C 687 and 10 U.S.C. 1174, for payments received after September
30, 1996.

**Pages 29-III-1 through 29-III-2 :** Remove these pages and substitute
pages 29-III-1 through

29-III-2 , attached.

Paragraph 29.07c.(1) is revised to show that development should be
initiated if a beneficiary reports interest-bearing assets of \$5,000 or
more and does not report any interest income.

By Direction of the Under Secretary for Benefits

Ronald J. Henke

> Director, Compensation and Pension Service

Distribution: RPC: 2068

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

LOCAL REPRODUCTION AUTHORIZED

# February 6, 2004 M21-1, Part IV

**Change 190**

commencing date of the award of DEA benefits to the child as provided by
38 CFR 3.503(a)(8) unless, under the provisions of 38 CFR 3.500(b)(2),
termination may be effected as of DLP due to administrative error. See
paragraph 11.31b(l). See part V, paragraph 4.05c(l) concerning
adjustment if the child was receiving benefits under a consolidated
award.

**NOTE:** Recover any overpayment created from the payee authorized
compensation, pension, DIC or death compensation based on the child\'s
school attendance beyond the age of 18. However, an overpayment created
in an award to or for the child will be recouped from the initial
payment on the DEA award by the Finance activity of the office having
jurisdiction over the DEA folder.

\(a\) **DEA Folder in the Same Office.** If jurisdiction over the DEA
folder and the parent folder is in the same office, simultaneous review
is required.

\(b\) **DEA Folder in Another Regional Office.** On receipt of
telephonic or other notice that a chapter 35 award has been prepared in
another regional office, obtain the following information:

[1]{.underline}. Type of benefit being paid,

[2]{.underline}. Station of jurisdiction,

[3]{.underline}. VA file number (including prefix),

[4]{.underline}. Name of person entitled,

[5]{.underline}. Payee number,

[6]{.underline}. Name of child electing chapter 35 benefits,

[7]{.underline}. Monthly rate(s) and date(s) of benefits to or for the
child,

[8]{.underline}. Effective date of reduction or discontinuance,

[9]{.underline}. Processing date, actual or expected, for reduction or
discontinuance action, and

[10]{.underline}. Effective date of child\'s chapter 35 award.

\(2\) **Child Under Age 18 or Helpless.** A child who is under the age
of 18 years or over 18, if entitled because of permanent incapacity for
self-support, may receive death compensation, pension or DIC
concurrently with benefits under 38 U.S.C. chapter 35. This may be in
the same case or in another case based on the death of more than one
parent in the same parental line if both such parents died before June
9, 1960.

\(a\) Do not adjust because of chapter 35 eligibility for any period
prior to the 18th birthday or while permanently incapacitated. See
subpar. c below and paragraph 14.15.

\(b\) However, if one such parent died on or after June 9, 1960, make an
adjustment as provided in subparagraph (1) above, in the award in any
other case based on service of a parent in the same parental line. See
paragraph 20.58.

b\. **Other Payees.** If there are other payees entitled to an increase
by reason of discontinuance of disability or death compensation, pension
or DIC for a beneficiary who has elected DEA, provide the increased
rates from the effective date of the discontinuance of compensation,
pension or DIC entitlement of the eligible person. See 38 CFR 3.651,
3.703(c) and 3.704(a).

**NOTE:** A non-helpless child over age 18 receiving DEA benefits may
not be considered as a dependent of a surviving spouse for the purposes
of establishing income limitations or the rates payable.

**14-II-3**

**M21-1, Part IV February 6, 2004**

**Change 190**

c\. **Periods Preceding Commencement of Attendance Under DEA Program**

\(1\) If the eligible person was attending school at the end of the
preceding term and Target shows that commencement of school attendance
began under the DEA program in the month in which the next term would
normally commence, no additional evidence of school attendance is
required.

\(2\) Compensation, pension or DIC may be awarded covering a vacation
period without requiring completion of VA Form 21-674 if requirements of
subparagraph (1) are met. Otherwise, do not award benefits covering a
vacation period prior to attendance under the DEA program unless VA Form
21-674 has been filed establishing continuous school attendance.

**NOTE:** If the prior school attendance is shown on VA Form 22-5490 and
the claims folder is under the jurisdiction of another office, add a
note as to the school attendance at the end of the preceding term on the
referral copy of VA Form 22-8945, Education Award.

d\. **Notice to Be Furnished Payee.** Furnish the payee notice of the
action taken to include information as to the evidence considered, the
reason for the decision and the right of appeal.

e\. **Copies of Award Actions.** In all cases in which amended or
discontinuance action is taken as the result of election of chapter 35
benefits, make a copy of the award or discontinuance action for the DEA
folder.

**14.14 FINALITY OF ELECTION**

a\. If a claim for disability or death benefits or a request for
resumption of benefits for an eligible child over 18 years of age based
on school attendance is received after a certification of basic
eligibility has been issued or an award of benefits has been made under
38 U.S.C. chapter 35, withhold award action pending verification that
payment of DEA benefits has not been made for any period to be covered
by that award.

**NOTE:** There is no bar to concurrent payment of DEA and disability or
death benefits to or for a child under age 18, a helpless child or to a
spouse or surviving spouse.

\(1\) If the DEA folder is located in another regional office,
accomplish this by a letter of request or by E-Mail or FTS, if
conditions warrant, to the Veterans Service Center of the regional
office having jurisdiction over the DEA folder.

\(2\) If there is no notation of current jurisdiction over the DEA
folder indicated in the claims folder, make an inquiry as to the office
of jurisdiction through BIRLS. If BIRLS has no record, address the
request to the office to which the VA Form 22-5490 was referred.

b\. If a payment has been made under 38 U.S.C. chapter 35, consider the
election of benefits final and disallow the application for disability
or death benefits for the same periods (38 CFR 21.3023(c)(1)).

c\. If no payment has been made, disability or death benefits may be
allowed, subject to other conditions of entitlement. See paragraph
14.12.

14.15 CHILDREN PERMANENTLY INCAPABLE OF SELF-SUPPORT ATTENDING SCHOOL

On authorization of benefits under 38 U.S.C. ch. 35 to or for an
eligible person who is receiving

**14-II-4**

# February 6, 2004 M21-1, Part IV

##  Change 190

beginning the first of the month during which the expenses were paid. In
this case that would be December 1, 1989, through November 30, 1990
(subject to 38 CFR 3.31). The result is to make the surviving spouse\'s
IVAP \$2,000 from September 1, 1989, \$1,000 from January 1, 1990, and
\$0 from September 1, 1990.

\(2\) Payment Made During Calendar Year Following Calendar Year of
Death. If final expenses are paid during the calendar year following the
year of the death which gives rise to the expenses, the expenses may be
deducted for 12 months from the first of the month during which they
were paid or for any 12-month period which begins during the calendar
year of death, whichever is to the claimant\'s advantage (subject to 38
CFR 3.31). See 38 CFR 3.272(h).

**EXAMPLE:** The veteran died on April 19, 1989. Surviving spouse files
a death pension claim on May 2, 1989. Surviving spouse has no income.
However, on August 7, 1989, she receives \$2,000 life insurance and on
September 29, 1989, she receives another \$1,000 life insurance.
Surviving spouse pays \$2,000 in burial expenses on March 14, 1990, and
expenses of the veteran\'s last illness of \$800 on October 28, 1990.
Since the final expenses were paid during the calendar year (1990)
following the calendar year of the veteran\'s death (1989), they can be
allowed for the 12-month period which is most advantageous to the
claimant \-- provided it begins within the calendar year of death
(1989). In this case, that means that the \$2,000 is allowed for the
period September 1, 1989, through August 30, 1990, and the \$800 is
allowed for the period October 1, 1989, through September 30, 1990. The
result is to make the surviving spouse\'s IVAP \$0 from May 1, 1989;
\$200 from October 1, 1989; and \$0 from October 1, 1990.

\(3\) Payment Made After the Calendar Year Following the Calendar Year
of Death. If final expenses are paid after the calendar year following
the calendar year of the death which gives rise to the expenses, allow
the deduction for 12 months from the first of the month during which
payment is made, subject to 38 CFR 3.31. This is the same rule as for
payments made during the calendar year of death.

**EXAMPLE:** The veteran died on April 19, 1989. Surviving spouse files
a death pension claim on May 2, 1989. Surviving spouse has recurring
income of \$100 per month. On August 7, 1989, \$2,000 life insurance is
received. Surviving spouse pays \$1,000 in burial expenses on January
18, 1991. Since the final expenses were not paid during the calendar
year following the calendar year of the veteran\'s death, the adjustment
is based on the date of payment. IVAP should be \$1,200 from May 1,
1989; \$3,200 from September 1, 1989; \$1,200 from September 1, 1990;
\$200 from February 1, 1991; \$1,200 from January 1, 1992.

**NOTE:** A claimant can file for an increased rate of pension based on
payment of final expenses at any time within the time limit for filing
an amended income report. See paragraphs 16.04b(3) and 16.36b. The fact
that the expenses might be paid many years after the veteran\'s death is
of no consequence. The critical date is the date the final expenses were
actually paid by the claimant.

f.  Final Expenses Paid Prior to Date of Entitlement

\(1\) Expenses of last illness and burial expenses, e.g., prepaid
burial, paid before the date of entitlement, can be considered final
expenses if paid by the claimant.

\(2\) Expenses of last illness which were allowed as a medical expense
deduction on the veteran\'s pension or parents\' DIC account during the
veteran\'s lifetime cannot later be claimed by the surviving spouse as a
final expense.

\(3\) Just debts of the veteran paid during the veteran\'s lifetime
cannot be considered as a final expense deduction.

**16-VI-15**

### M21-1, Part IV February 6, 2004

**Change 190**

\(4\) Deduct all last expenses paid before the date of pension
entitlement (whether before or after the veteran's death) from countable
income for the first 12 months of entitlement.

g\. Expenses Paid from Joint Accounts. A question may arise as to
whether final expenses were \"paid\" by the deceased person or the
claimant. If the evidence establishes that payment was made from the
claimant\'s separate funds or from a joint account with the claimant and
another person, consider the expenses to have been paid by the claimant.
However, as indicated in subparagraph f(2) above, do not allow any
expenses as final expenses if they have already formed the basis of a
medical expense deduction on the veteran\'s record.

**EXAMPLE:** The veteran died on October 15, 1991. Surviving spouse
files a pension claim on November 3, 1991. Surviving spouse claims a
deduction for expenses of the veteran\'s prepaid burial. She submits
evidence that the veteran\'s burial expenses were paid in advance by
regular payments made over a period of time extending from January of
1989 through May of 1991. The payments in question were made from a
joint checking account owned by the veteran and the surviving spouse.
The entire amount paid must be deducted from the surviving spouse\'s
IVAP for the initial annualization period (paragraph 16.23i.). See
subparagraph f(4) above.

h\. Reimbursement Received for Final Expenses. If a final expense
deduction is allowed and the beneficiary subsequently receives
reimbursement for some or all expenses, recalculate IVAP for the
annualization period over which the deduction was allowed to remove
those expenses for which reimbursement was received.

**16.33 EDUCATIONAL EXPENSES OF VETERAN OR SURVIVING SPOUSE**

a\. General. Allow a deduction for the unreimbursed expenses of a
veteran or surviving spouse pursuing a course of education or vocational
rehabilitation. Deductible expenses include amounts paid for tuition,
fees, books and necessary materials. See 38 CFR 3.272(i).

b\. Transportation Expenses. Allow unusual transportation expenses ONLY
IF the veteran or surviving spouse is determined by the rating board to
be in need of A&A. If the disabled person is in need of A&A, allow those
transportation expenses which are related to school attendance and which
exceed the reasonable amounts which would be incurred by a nondisabled
person.

c\. Period of Deduction. Allow educational expenses for the duration of
the 12-month EVR reporting period during which they were paid (subject
to 38 CFR 3.31). For original and reopened awards, allow educational
expenses paid between the effective date and the date which is 12 months
from the award payment date for a period of 12 months from the award
payment date. See paragraph 16.01f. Enter educational expenses in the
\"education expense\" field on the 306 Screen.

**16.34 DEDUCTIONS FROM CHILDREN'S INCOME**

a\. Child\'s Earned Income Exclusion\--38 CFR 3.272(j)(1)

\(1\) A child\'s EARNED income is countable only to the extent that it
exceeds an amount equal to the lowest amount of gross income for which a
Federal income tax return must be filed by a single person.

\(2\) This amount is adjusted each year by the Internal Revenue Service
based on changes in the Consumer Price Index. The current amount of the
exclusion can be found in the Improved Pension rate charts in appendix
B.

\(3\) Enter the gross income of a child in the \"earned\" field on the
336 Screen. The system automatically deducts the exclusion and arrives
at the child\'s countable earnings.

> **16-VI-16**

**February 6, 2004 M21-1, Part IV**

**Change 190**

**SUBCHAPTER V. RECOUPMENT OF READJUSTMENT, SEPARATION,**

# SPECIAL SEPARATION BENEFIT (SSB), AND DISABILITY SEVERANCE PAY

**VOLUNTARY SEPARATION INCENTIVE (VSI) INFORMATION**

**20.26 PROHIBITION AGAINST DUPLICATION OF BENEFITS (38 CFR 3.700)**

Once it is determined that a veteran received lump-sum readjustment pay,
disability severance pay, separation pay under 10 U.S.C. 1174, Special
Separation Benefit (SSB) under 10 U.S.C. 1174a, or Voluntary Separation
Incentive (VSI) under 10 U.S.C. 1175, 38 CFR 3.700 prohibits duplication
of benefit payments.

a\. **Compensation**

\(1\) **Readjustment Pay Awarded under 10 U.S.C. 3814(a).** Readjustment
pay under 10 U.S.C. 3814(a) was paid to Regular officers below the grade
of major discharged during a reduction in force. The authority for these
payments expired at the end of 1977. If the veteran received
readjustment pay under 10 U.S.C. 3814(a), the date of entitlement to VA
compensation determines if recoupment of readjustment pay is required.
Recoup the total amount of the readjustment pay awarded if entitlement
to VA compensation was established on or after September 15, 1981. No
recoupment is required if entitlement to VA compensation was established
before that date (38 CFR 3.700(a)(2)(ii), and (iii)). Section 653 of
Public Law 104-201 provides that with respect to payments received after
September 30, 1996, VA shall recoup the amount of readjustment pay
received by the veteran after withholding for Federal income tax. This
withholding should be calculated using the flat tax rate. The
appropriate dates and rates are:

-   October 1, 1996 28%

-   August 6, 2001 27.5%

-   January 1, 2002 27.0%

-   June 23, 2003 25.0%.

For payments received prior to October 1, 1996, recoup the pretax
amount.

\(2\) **Readjustment Pay Awarded under 10 U.S.C. 687.** Readjustment pay
under 10 U.S.C. 687 was paid to Reserve officers who were involuntarily
released after completing at least 5 years of active service but did not
qualify for retirement. The authority for paying readjustment pay under
10 U.S.C. 687 was repealed effective September 15, 1981. Recoupment of
VA compensation is always required if the veteran received readjustment
pay under 10 U.S.C. 687. The date of entitlement to VA compensation
determines the amount to be recouped. Recoup 75 percent of the
readjustment pay when entitlement to VA compensation was established
before September 15, 1981, and the total amount of the readjustment pay
if entitlement to VA compensation was established on or after September
15, 1981 (38 CFR 3.700(a)(2)). Section 653 of Public Law 104-201
provides that with respect to payments received after September 30,
1996, VA shall recoup the amount of readjustment pay received by the
veteran after withholding for Federal income tax. The withholding should
be calculated using the flat tax rate as indicated in
[20.26a.(1]{.underline}) For payments received prior to October 1, 1996,
recoup the pretax amount.

\(3\) **Separation Pay Awarded under 10 U.S.C. 1174.** Separation pay
under 10 U.S.C. 1174 replaced readjustment pay effective September 15,
1981. It is paid to Regular and Reserve officers who are involuntarily
discharged after completing at least 5 years of active duty but who do
not qualify for retirement. Public Law 101-510 enacted November 5, l990,
established separation pay entitlement for certain regular enlisted
members involuntarily discharged after completing at least 6 years of
active duty but not qualifying for retirement. Recoup the full amount of
separation pay received under 10 U.S.C. 1174. (38 CFR 3.700(a)(5)). See
paragraph 20.40 for non-disability severance pay. Section 653 of Public
Law 104-201 provides that with respect to payments received after
September 30, 1996, VA shall recoup the amount of separation pay
received by the veteran after withholding for Federal income tax. The
withholding should be calculated using the flat tax rate as indicated in
[20.26a.(1]{.underline}). For payments received prior to October 1,
1996, recoup the pretax amount.

**20-V-1**

**M21-1, Part IV February 6, 2004**

**Change** **190**

**NOTE:** If the veteran established entitlement to VA compensation on
or after September 15, 1981, always recoup the full amount of
readjustment or separation pay (less amounts withheld for Federal income
tax if the payment was received on or after September 30, 1996).

\(4\) **Special Separation Benefits (SSB) Awarded under 10 U.S.C. 1174a
and Voluntary Separation Incentive (VSI) Awarded under 10 U.S.C. 1175.**
Public Law 102-190 enacted December 5, l991, added sections 1174a and
1175 to Title 10. These two incentive programs are offered to certain
service members in overstrength inventories to encourage them to leave
active duty voluntarily and to shape the force during the downsizing of
the armed forces. Service persons approved under either program must
separate on or before September 30, l995. See paragraph 20.41 for
additional information.

\(5\) **Disability Severance Pay.** Recoup the full amount of disability
severance pay received for the same disability or disabilities at a rate
not in excess of the current rate of compensation payable for the
initial compensable evaluation assigned for those disabilities (38 CFR
3.700(a)(3)). Section 653 of Public Law 104-201 provides that with
respect to payments received after September 30, 1996, VA shall recoup
the amount of disability severance pay received by the veteran after
withholding for Federal income tax. For payments received prior to
October 1, 1996, recoup the pretax amount.

\(6\) **Non-Disability Severance Pay.** Non-disability severance pay is
subject to recoupment at the 100 percent rate if entitlement to VA
compensation was established on or after September 15, 1981. See
paragraph 20.40.

\(7\) **Separation or Readjustment Pay Recouped by Both VA and Service
Department.** A veteran who received separation or readjustment pay may,
subsequent to receipt of that benefit, become entitled to retired pay.
In this event, the separation or readjustment pay is recouped from the
veteran\'s retired pay. If VA previously recouped any amount of
separation or readjustment pay which is also subject to recoupment from
service retired pay, ask the Service Department to confirm if it is
recouping the separation or readjustment pay. Verify the amount the
service department is recouping and only give consideration to the
amount actually recouped, e.g., if the separation pay equals \$30,000,
but the service department is recouping only \$16,000, VA must recoup
\$14,000. If it is being recouped, adjust the veteran\'s compensation
award to repay any amounts previously recouped by VA which are now being
recouped from service retired pay.

**NOTE:** Recoupment of readjustment or separation pay is not required
when compensation is paid for disabilities attributable to a period of
service subsequent to that during which the veteran received
readjustment or separation pay. See paragraph 20.34a(2).

\(8\) **Reservists\' Involuntary Separation Pay (RISP)**. Section 4418
of Public Law 102-484 provides for payment of RISP. RISP is paid to
certain reservists who are involuntarily released from the Selected
Reserve because their units are being deactivated. In VAOPGCPREC 9-96
the General Counsel held that VA is required to offset disability
compensation to recoup the amount of RISP received by a veteran,
provided the VA compensation is for a disability incurred in or
aggravated by service prior to the date of receipt of RISP. For award
purposes, treat RISP as separation pay.

\(9\) **Reservists\' Special Separation Pay (RSSP).** Section 4416 of
Public Law 102-484 provides for payment of RSSP. RSSP is an immediate,
reduced annuity which is paid for a five-year period or until the
reservist reaches age 60. In VAOPGCPREC 9-96 the General Counsel held
that VA is *not* required to offset disability compensation to recoup
the amount of RSSP received by a veteran.

b\. **Pension.** There is no requirement to recoup readjustment pay,
disability severance pay or separation pay under 10 U.S.C. 1174 from VA
pension benefits. However, this benefit is countable income if received
after the date of entitlement to VA pension. Count the gross amount
received, including any amounts withheld for tax purposes. Section 653
of Public Law 104-201 (concerning recoupment of "after tax" amounts)
does not apply to pension.

**20-V-2**

**February 6, 2004 M21-1, Part IV**

**Change 190**

**SUBCHAPTER III. EVR PROCESSING BY VETERANS SERVICE REPRESENTATIVES**

**29.06 SECOND STAGE EVR PROCESSING---GENERAL INFORMATION FOR ALL
BENEFITS**

a\. **Incomplete EVRs/Questionable Signatures.** Under no circumstances
clear EVRs which are incomplete or which are not properly signed. The
instructions in paragraph 29.02b concerning incomplete EVRs and
signatures on EVRs apply to Veterans Service Representatives (VSRs) as
well as to the individuals doing the initial stage review of the EVR. If
an EVR is incomplete or not properly signed, initiate development and
use the PCHG command to extend the 155 PIF for 60 days from the date of
the development letter. Telephone and FAX may be used for developing
incomplete EVRs. See Part III, chapter 11, subchapter III.

**NOTE:** VSRs have no authority to code \"NONE\" on a 306 screen if the
payee has left the corresponding block blank on the EVR.

b\. **Social Security Numbers**

\(1\) The Social Security number of the payee and, if applicable, the
veteran and/or the payee\'s spouse are preprinted on EVR forms generated
by Hines BDC. The preprinted Social Security numbers are the numbers
that were in the C&P master record at the time the EVR was produced.
Under certain circumstances, the person performing the initial review of
the EVR will refer it to the Veterans Service Center if a Social
Security number is missing. See paragraph 29.02d(6).

\(2\) Review the file for evidence of the Social Security number. If it
can be determined, enter it on the 306 screen or do a CORR to the M15
screen.

\(3\) If the payee\'s Social Security number or his or her spouse\'s
Social Security number is not of record or if there is conflicting
information as to a payee\'s or spouse\'s Social Security number,
initiate development. If all other information necessary to clear the
EVR is of record, do so and establish a separate 150 end product for the
required Social Security number information. If other issues must be
developed, control for receipt of Social Security number information by
continuing the same 155 end product.

\(4\) Advise the beneficiary that disclosure of the Social Security
number is mandatory as a condition of continued receipt of benefits and
that failure to furnish the Social Security number will result in
termination of the award. If conflicting information has been furnished
about an individual\'s Social Security number, have the beneficiary
furnish a statement from the Social Security Administration identifying
the correct Social Security number for the person in question. If the
beneficiary fails to furnish the requested Social Security information,
stop the award under 38 CFR 3.500(w).

c\. **Dual Payees.** The following question appears on veteran,
surviving spouse, and parent EVRs: \"Do you receive any other VA
benefits as a veteran, parent, or surviving spouse?\" If the beneficiary
answers yes, cross reference the files on the M15 screen. If one of the
benefits is Improved Pension, ensure that any compensation benefits are
being counted as income on the Improved Pension award. Also, note that
38 CFR 3.700(a)(4) prohibits simultaneous payment of any other pension
to an beneficiary who is entitled to Improved Pension as a veteran. See
paragraph 31.26a(3).

**29.07 ADJUSTMENT OF IMPROVED PENSION AWARDS**

a\. **Increased Income Reported on EVR.** If the beneficiary reports an
increase in income of \$800 or more from any single source but the date
of the increase is unclear, reduce date of last payment and develop for
date of receipt of the increase. Advise the beneficiary that failure to
furnish the requested information will result in adjustment from the
beginning of the EVR reporting period. If the reported increase is less
than \$800 and the date of the increase is not shown or if, after
development, the exact month of increase cannot be determined, count the
income from the beginning of the EVR reporting period in which the
increase occurred.

**29-III-1**

**M21-1, Part IV February 6, 2004**

**Change 190**

**EXAMPLE:** The veteran\'s EVR dated February 17, 1997, reports receipt
of a \$1,000 inheritance. No date of receipt is shown. The Veterans
Service Center writes to the veteran requesting the exact date the
\$1,000 was received. The veteran responds \"I received it last year.\"
Adjust the award effective January 1, 1996, to count the \$1,000
inheritance for the period January 1, 1996, through December 31, 1996.

b\. **Decreased Income Reported on EVR.** If the beneficiary reports a
decrease in recurring income, the increase in benefits is payable the
day after the decrease in income occurred (subject to 38 CFR 3.31). If
the beneficiary reports a decrease in irregular income, the increase in
benefits is payable from the beginning of the EVR reporting period
(subject to 38 CFR 3.31). If the beneficiary reports a decrease in
nonrecurring or short-term income, the increase in benefits is payable
from the date the nonrecurring or short-term income was counted against
the payee. Also see subparagraphs 16.05e and f for more information
about the way 38 CFR 3.31 affects these types of adjustments.

c\. **Interest/Net Worth Development**

\(1\) Initiate development if a beneficiary reports interest-bearing
assets of \$5,000 or more and does not report any interest income.

**NOTE:** Develop if assets are reported which may be earning interest
but it is not clear that they are.

\(2\) Develop if a beneficiary reports interest or dividend income but
does not report the source of the dividends or interest as net worth.

\(3\) Advise the beneficiary that failure to respond to the request for
information will result in termination of the award under 38 CFR 3.652.
Continue the pending EP 155.

d\. **Medical Expenses Reported on EVR---No Continuing Medical Expenses
in Master Record**

\(1\) **General.** If continuing medical expenses were in the master
record at the time the EVR was selected, it may be possible to continue
an existing medical expense deduction without an itemization of medical
expenses. See subparagraph e below. Otherwise, do not allow a deduction
for medical expenses unless the beneficiary has itemized medical
expenses on VA Form 21-8416 or equivalent.

\(2\) **Required Information.** The information in this subparagraph
must be reported whenever itemized medical expenses are required. If any
information is missing, continue the 155 end product for 60 days and ask
the beneficiary to provide the missing information.

\(a\) **Amount Paid.** The claimant must show the actual out-of-pocket
amount paid for which no reimbursement is expected.

\(b\) **Date Paid**. The date the expense was paid must be indicated.
Unless there is an overlapping reporting period, the year in which the
expense was paid will suffice, e.g. "1999." If there is an overlapping
EVR period, the month and year must be shown in order to apply the
procedures in pars. 16.31i and 29.07h.

\(i\) For insurance, "monthly," "quarterly," etc., may be shown. For
private medical insurance, assume that the most recent premium rate was
paid throughout the EVR reporting period unless there is an indication
that a substantial rate change occurred during the EVR reporting period.

\(ii\) Inclusive dates of payment may be shown in all instances provided
the expenses were paid to a single provider and the inclusive dates fall
within a single EVR period. Develop in situations in which no date is
shown or instances in which there is an overlapping EVR period and the
month and year is not shown.

\(c\) **Purpose.** The claimant must show the specific purpose for which
the payments were made.

**29-II-2**