## Section D. Reductions in Awards

#### Overview

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

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

  11           Reductions in Compensation Under 38 CFR        8-D-2
               3.105(e)                                       

  12           Reductions in Percentage Evaluations Under 38  8-D-5
               CFR 3.344                                      

  13           Reductions in Disability Ratings Under 38 CFR  8-D-6
               3.343                                          

  14           Reductions Requiring Consideration of          8-D-8
               Individual Unemployability Under 38 CFR 4.16   

  15           Changes in Pension Entitlement Under 38 CFR    8-D-10
               3.105(f)                                       
  ------------ ---------------------------------------------- ------------

#### 11. Reductions in Compensation Under 38 CFR 3.105(e)

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information about reductions      |
| troduction | > under 38 CFR 3.105(e), including                      |
|            |                                                         |
|            | -   reducing or terminating compensation awards         |
|            |                                                         |
|            | -   handling proof of substantially gainful employment  |
|            |                                                         |
|            | -   when to apply the provisions                        |
|            |                                                         |
|            | -   concurrent increases and reductions                 |
|            |                                                         |
|            | -   authorizing reexamination                           |
|            |                                                         |
|            | -   reviewing new evidence and preparing the final      |
|            |     rating, and                                         |
|            |                                                         |
|            | -   determining the effective date.                     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > December 13, 2005                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > The rating activity prepares a proposed rating        |
| ### a. Red | > decision to reduce a combined evaluation, or          |
| ucing or T | > terminate a running award by reason of a change in    |
| erminating | > the severity of a veteran's service-connected (SC)    |
|  Compensat | > disability or employability status.                   |
| ion Awards |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b.   | > If evidence of substantially gainful employment is    |
| Handling P | > received but not clearly shown, refer the case to the |
| roof of Su | > authorization activity to develop for continued       |
| bstantiall | > individual unemployability.                           |
| y Gainful  | >                                                       |
| Employment | > If substantially gainful employment is established,   |
|            | > take rating action under 38 CFR 3.105(e).             |
+------------+---------------------------------------------------------+

Continued on next page

11\. Reductions in Compensation Under 38 CFR 3.105(e), Continued

+------------+---------------------------------------------------------+
| ##### c    | > Apply the provisions of 38 CFR 3.105(e) *only* if a   |
| . When to  | > lower evaluation of an SC disability would result in  |
| Apply the  | > a reduction or discontinuance of compensation         |
| Provisions | > payments in a running award.                          |
|            | >                                                       |
|            | > ***Note***: If a case is in full suspense, make a     |
|            | > reduction or discontinuance in accordance with the    |
|            | > facts found under the authority of 38 CFR 3.500(a),   |
|            | > but do *not* make a reduction or discontinuance based |
|            | > on a rating action prior to the date of last payment. |
|            | >                                                       |
|            | > ***Reference***: For more information on revising     |
|            | > decisions, see                                        |
|            |                                                         |
|            | -   38 CFR 3.105, and                                   |
|            |                                                         |
|            | -   38 CFR 3.655.                                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > When both increased and reduced evaluations are       |
|  d. Concur | > assigned for different disabilities, but the net      |
| rent Incre | > result is a higher combined evaluation, promulgate    |
| ases and R | > the rating evaluation without applying the provisions |
| eductions  | > of 38 CFR 3.105(e).                                   |
|            | >                                                       |
|            | > Apply the provisions of 38 CFR 3.105(e) if the        |
|            | > decreased evaluation will result in a reduction of    |
|            | > benefits.                                             |
|            | >                                                       |
|            | > ***Note***: The provisions of 38 CFR 3.105(e) do      |
|            | > *not* apply if the combined evaluation, which would   |
|            | > result from a decreased disability, is unchanged.     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > Authorize an examination if evidence, medical or      |
| # e. Autho | > otherwise, received prior to expiration of the first  |
| rizing Ree | > 60-day notice period in accordance with 38 CFR        |
| xamination | > 3.105(e), establishes a reasonable basis for          |
|            | > reexamination.                                        |
|            | >                                                       |
|            | > ***Notes***:                                          |
|            |                                                         |
|            | -   Defer final rating action pending the outcome of    |
|            |     the new examination.                                |
|            |                                                         |
|            | -   An examination that is the basis for reduction must |
|            |     be as thorough as the examination that established  |
|            |     the current rating.                                 |
+------------+---------------------------------------------------------+

Continued on next page

11\. Reductions in Compensation Under 38 CFR 3.105(e), Continued

+------------+---------------------------------------------------------+
| ##### f.   | > Review any new evidence, including a report of        |
|  Reviewing | > reexamination, in the context of the entire record,   |
|  New Evide | > especially in employability cases. If a reduction is  |
| nce and Pr | > still in order, prepare the final rating decision in  |
| eparing Fi | > accordance with 38 CFR 3.105(e) and the provisions of |
| nal Rating | > this Section.                                         |
|            | >                                                       |
|            | > In the *Reasons for Decision*, cite the symptoms and  |
|            | > the findings demonstrating                            |
|            |                                                         |
|            | -   improvement in the context of the whole recorded    |
|            |     history, and                                        |
|            |                                                         |
|            | -   evidence of improved ability to function under the  |
|            |     ordinary conditions of life and work.               |
|            |                                                         |
|            | > ***Notes***:                                          |
|            |                                                         |
|            | -   In psychiatric cases, outline social and economic   |
|            |     adjustments along with other evidence warranting    |
|            |     the reduced evaluation.                             |
|            |                                                         |
|            | -   Although the Rating Veterans Service Representative |
|            |     (RVSR) should review the recorded history of a      |
|            |     disability in order to assign a more accurate       |
|            |     evaluation, regulations do not give past medical    |
|            |     reports precedence over current findings. (See      |
|            |     *Francisco v. Brown* (93-76), 1994.)                |
|            |                                                         |
|            | > ***Reference***: For more information on the          |
|            | > reduction of total evaluations, including total       |
|            | > evaluations based on individual unemployability, see  |
|            | > 38 CFR 3.343.                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > After the notice of proposed adverse action has been  |
|  g. Determ | > sent and the 60-day period following that date has    |
| ining Effe | > passed, prepare a final rating decision to reflect a  |
| ctive Date | > lower evaluation. The lower evaluation is effective   |
|            | > the first day of the month following expiration of a  |
|            | > 60-day period of time that commences the date the     |
|            | > veteran is notified of the final rating decision.     |
+------------+---------------------------------------------------------+

#### 12. Reductions in Percentage Evaluations Under 38 CFR 3.344

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information about reductions in   |
| troduction | > percentage evaluations under 38 CFR 3.344, including  |
|            |                                                         |
|            | -   applying the provisions of 38 CFR 3.344, and        |
|            |                                                         |
|            | -   drafting the rating decision.                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > December 13, 2005                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a.   | > Apply the provisions of 38 CFR 3.344 to percentage    |
|  Applying  | > evaluations that have been at the same level for five |
| the Provis | > or more years.                                        |
| ions of 38 | >                                                       |
|  CFR 3.344 | > Measure the five-year period from the initial         |
|            | > effective date to the effective date of actual or     |
|            | > prospective reduction.                                |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b    | > In the *Reasons for Decision*                         |
| . Drafting |                                                         |
|  the Ratin | -   outline the time period in which application of 38  |
| g Decision |     CFR 3.344 is based                                  |
|            |                                                         |
|            | -   cite evidence of sustained improvement after one    |
|            |     review examination, or a preponderance of evidence  |
|            |     showing sustained improvement based on more than    |
|            |     one examination, and                                |
|            |                                                         |
|            | -   explain why it is reasonably certain that           |
|            |     improvement will be maintained under the ordinary   |
|            |     conditions of life.                                 |
+------------+---------------------------------------------------------+

#### 13. Reductions in Disability Ratings Under 38 CFR 3.343

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information about reductions in   |
| troduction | > disability evaluations under 38 CFR 3.343, including  |
|            |                                                         |
|            | -   applying the provisions of 38 CFR 3.343             |
|            |                                                         |
|            | -   considering the facts of record, and                |
|            |                                                         |
|            | -   drafting the rating decision.                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > December 13, 2005                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a.   | > SC total disability ratings may be reduced only in    |
|  Applying  | > accordance with provisions of 38 CFR 3.343, *except*  |
| the Provis | > in cases established under                            |
| ions of 38 |                                                         |
|  CFR 3.343 | -   the provisions of 38 CFR 4.28, 38 CFR 4.29, or 38   |
|            |     CFR 4.30, or                                        |
|            |                                                         |
|            | -   certain diagnostic codes (DCs) which specify a      |
|            |     period of convalescence and are not protected under |
|            |     38 CFR 3.951(b) or 38 CFR 3.952.                    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b. C | > Evaluate examination reports showing material         |
| onsidering | > improvement in conjunction with all the facts of      |
|  the Facts | > record.                                               |
|  of Record | >                                                       |
|            | > Give particular consideration to whether the          |
|            |                                                         |
|            | -   improvement was attained under the ordinary         |
|            |     conditions of life while working or actively        |
|            |     seeking work, or                                    |
|            |                                                         |
|            | -   symptoms have been brought under control by         |
|            |     prolonged rest or generally by following a regimen  |
|            |     which precludes work.                               |
|            |                                                         |
|            | > ***Note***: When symptoms have been brought under     |
|            | > control and the veteran is employed, do not consider  |
|            | > reduction from a total disability rating without a    |
|            | > reexamination conducted three to six months following |
|            | > a period of employment.                               |
+------------+---------------------------------------------------------+

Continued on next page

13\. Reductions in Disability Ratings Under 38 CFR 3.343, Continued

+------------+---------------------------------------------------------+
| ##### c.   | > Discuss in the rating decision how 38 CFR 3.343 was   |
|  Drafting  | > applied in anytime a total disability rating is       |
| the Rating | > discontinued.                                         |
|  Decision  | >                                                       |
|            | > Cite clear and convincing evidence of actual          |
|            | > employability when discontinuing a total rating based |
|            | > on individual employability.                          |
+------------+---------------------------------------------------------+

#### 14. Reductions Requiring Consideration of Individual Unemployability Under 38 CFR 4.16

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information about reductions      |
| troduction | > requiring consideration of individual unemployability |
|            | > under 38 CFR 4.16, including                          |
|            |                                                         |
|            | -   applying the provisions of 38 CFR 4.16              |
|            |                                                         |
|            | -   preparing the rating decision, and                  |
|            |                                                         |
|            | -   determining the effective date.                     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > December 13, 2005                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a.   | > If the rating activity proposes to reduce a veteran's |
|  Applying  | > total schedular evaluation to a level meeting the     |
| the Provis | > individual unemployability requirements of 38 CFR     |
| ions of 38 | > 4.16, authorization                                   |
|  CFR 4.16  |                                                         |
|            | -   sends the veteran a *VA Form 21-8940, Veterans      |
|            |     Application For Increased Compensation Based on     |
|            |     Unemployability*, and                               |
|            |                                                         |
|            | -   informs the veteran that *VA Form 21-8940* may be   |
|            |     used to request payment at the 100-percent rate     |
|            |     based on individual unemployability.                |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b.   | > Prepare a rating decision granting a total evaluation |
|  Preparing | > based on individual unemployability if evidence is    |
|  the Ratin | > submitted showing the veteran is unemployable due to  |
| g Decision | > SC disabilities.                                      |
|            | >                                                       |
|            | > ***Note***: Refer the claims folder to Central Office |
|            | > (CO) (211B) for consideration under 38 CFR            |
|            | > 3.321(b)(1) if evidence is submitted establishing     |
|            | > individual unemployability but, because of the        |
|            | > reduced evaluation, the percentage requirements of 38 |
|            | > CFR 4.16 are not met.                                 |
+------------+---------------------------------------------------------+

Continued on next page

14\. Reductions Requiring Consideration of Individual Unemployability
Under 38 CFR 4.16, Continued

+------------+---------------------------------------------------------+
| ##### c.   | > The effective date must take into account the date of |
| Determinin | > reduction from the schedular 100 percent. There is no |
| g the Effe | > concurrent entitlement to both the schedular 100      |
| ctive Date | > percent evaluation and individual unemployability.    |
|            | >                                                       |
|            | > Other factors to consider in assigning the effective  |
|            | > date are                                              |
|            |                                                         |
|            | -   the earliest date the evidence shows individual     |
|            |     unemployability, if a claim is received within one  |
|            |     year from such date, or                             |
|            |                                                         |
|            | -   the date of claim, provided that the evidence shows |
|            |     entitlement as of that date and it is not prior to  |
|            |     August 1, 1975.                                     |
|            |                                                         |
|            | > ***Reference***: For more information on effective    |
|            | > dates, see 38 CFR 3.400(o).                           |
+------------+---------------------------------------------------------+

#### 15. Changes in Pension Entitlement Under 38 CFR 3.105(f)

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information about changes in      |
| troduction | > pension entitlement under 38 CFR 3.105(f), including  |
|            |                                                         |
|            | -   applying the provisions of 38 CFR 3.105(f)          |
|            |                                                         |
|            | -   judging ability to maintain/sustain employment      |
|            |                                                         |
|            | -   preparing the final rating decision                 |
|            |                                                         |
|            | -   handling by the authorization activity              |
|            |                                                         |
|            | -   entitlement to both pension and compensation        |
|            |                                                         |
|            | -   handling nursing home discharge                     |
|            |                                                         |
|            | -   determining the effective date of termination of    |
|            |     Aid and Attendance (A&A) following nursing home     |
|            |     discharge, and                                      |
|            |                                                         |
|            | -   preparing the rating decision after nursing home    |
|            |     discharge.                                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > December 13, 2005                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > Use the table below to apply the provisions of 38 CFR |
| #### a. Ap | > 3.105(f), subject to the protection afforded under 38 |
| plying the | > CFR 3.951(b).                                         |
|  Provision |                                                         |
| s of 38 CF |                                                         |
| R 3.105(f) |                                                         |
+------------+---------------------------------------------------------+

+----------------------------------+-----------------------------------+
| If the evidence of record ...    | Then prepare a rating decision    |
|                                  | proposing ...                     |
+----------------------------------+-----------------------------------+
| supports the conclusion that the | discontinuance of the benefit.    |
| veteran no longer meets the      | List the proposed diagnostic      |
| requirements of 38 CFR 4.17      | codes and evaluations in the      |
|                                  | narrative, but do not include a   |
|                                  | formal coded conclusion.          |
+----------------------------------+-----------------------------------+
| indicates that a beneficiary is  | discontinuance of the benefit     |
| no longer entitled to Special    | without formal coding.            |
| Monthly Pension (SMP)            |                                   |
|                                  | If relevant to the decision, list |
|                                  | the proposed diagnostic codes and |
|                                  | evaluations in the narrative.     |
+----------------------------------+-----------------------------------+

Continued on next page

15\. Changes in Pension Entitlement Under 38 CFR 3.105(f), Continued

+------------+---------------------------------------------------------+
| #####      | > Do not automatically conclude that employability has  |
|  b. Judgin | > been regained in cases of serious illness or          |
| g Ability  | > psychiatric disability. It is important that there be |
| to Maintai | > demonstrated an ability to maintain/sustain           |
| n/Sustain  | > employment as well as obtain it.                      |
| Employment | >                                                       |
|            | > ***Rationale***: An untimely decision that            |
|            | > employability is regained could result in an early    |
|            | > loss of pension, although a continuing ability to     |
|            | > remain gainfully employed has not been shown. The     |
|            | > income limitations and annual eligibility             |
|            | > verification reports (EVR) are adequate controls in   |
|            | > pension cases until rehabilitation and employability  |
|            | > are established.                                      |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Refer the case to the rating activity for             |
|  c. Prepar | > reconsideration, 60 days following release of the     |
| ing the Fi | > notice of proposed adverse action, or when all        |
| nal Rating | > development associated with a personal hearing is     |
|  Decision  | > completed.                                            |
|            | >                                                       |
|            | > If any additional evidence has been submitted,        |
|            | > specifically identify it and cite appropriate reasons |
|            | > for its persuasiveness.                               |
|            | >                                                       |
|            | > If the final decision affirms the proposed action,    |
|            | > rate the veteran "*Not PT*" under rating code 9. The  |
|            | > effective date is the end of the month in which the   |
|            | > decision is promulgated.                              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### d    | > Authorization sends the beneficiary a notice of       |
| . Handling | > proposed adverse action upon receipt of a rating      |
|  by the Au | > proposing to discontinue entitlement to pension or    |
| thorizatio | > SMP. For "*Not PT*" cases, this notice must include   |
| n Activity | > the citation of 38 CFR 4.17.                          |
|            | >                                                       |
|            | > Authorization will take action to continue, reduce,   |
|            | > or terminate pension benefits as appropriate upon     |
|            | > receipt of a final rating decision.                   |
|            | >                                                       |
|            | > ***Note***: If authorization action cannot be         |
|            | > completed in time to prospectively implement the      |
|            | > effective date shown on the rating decision, the case |
|            | > is returned to the rating activity for a new decision |
|            | > with an amended effective date.                       |
+------------+---------------------------------------------------------+

Continued on next page

15\. Changes in Pension Entitlement Under 38 CFR 3.105(f), Continued

+------------+---------------------------------------------------------+
| ###        | > If a veteran is entitled to both pension and          |
| ## e. Enti | > compensation, and pension must be discontinued, then  |
| tlement to | > amend the award to authorize compensation.            |
|  Both Pens | >                                                       |
| ion and Co | > Prepare the rating under 38 CFR 3.105(f) with a       |
| mpensation | > proper evaluation for compensation and termination of |
|            | > pension entitlement under code 9.                     |
|            | >                                                       |
|            | > ***References***: For more information on             |
|            |                                                         |
|            | -   the prohibition on concurrent awards of             |
|            |     compensation and pension, see 38 CFR 3.700          |
|            |                                                         |
|            | -   elections of pension or compensation, see 38 CFR    |
|            |     3.701, and                                          |
|            |                                                         |
|            | -   the assumption of an election of benefit type, see  |
|            |     M21-1MR, Part III, Subpart v, 4.A.2 (TBD) or M21-1, |
|            |     Part IV, 20.04.                                     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### f. H | > Consider entitlement to Aid and Attendance (A&A) or   |
| andling Nu | > Housebound benefits on a facts-found basis if         |
| rsing Home |                                                         |
|  Discharge | -   A&A was authorized under 38 CFR 3.351(c)(2) without |
|            |     a rating, and                                       |
|            |                                                         |
|            | -   notice of nursing home discharge is subsequently    |
|            |     received, negating the legal basis for the prior    |
|            |     grant.                                              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### g. D | > Use the table below to determine the effective date   |
| etermining | > for termination of A&A following nursing home         |
|  Effective | > discharge.                                            |
|  Date of T |                                                         |
| ermination |                                                         |
|  of A&A Fo |                                                         |
| llowing Nu |                                                         |
| rsing Home |                                                         |
|  Discharge |                                                         |
+------------+---------------------------------------------------------+

  ----------------------- -----------------------------------------------
  If ...                  Then the effective date ...

  there is no entitlement of termination of SMP is the end of the month
  to either A&A or        in which it is anticipated that award action
  Housebound benefits     will be accomplished by authorization 60 days
                          after notice of the proposed adverse action is
                          mailed.

  Housebound status is to is the end of the month in which it is
  be granted              anticipated that award action will be
                          accomplished by authorization 60 days after
                          notice of the proposed adverse action is
                          mailed.
  ----------------------- -----------------------------------------------

Continued on next page

15\. Changes in Pension Entitlement Under 38 CFR 3.105(f), Continued

+------------+---------------------------------------------------------+
| ##### h    | > Include the following statement in the rating         |
| . Preparin | > decision: "*the authorization activity previously     |
| g the Rati | > awarded the beneficiary A&A benefits effective*       |
| ng Decisio | > **\[date**\]*, based on his/her status as a nursing   |
| n After Nu | > home patient*."                                       |
| rsing Home |                                                         |
|  Discharge |                                                         |
+------------+---------------------------------------------------------+