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

**Department of Veterans Affairs Change 220**

**Washington, DC 20420 June 6, 2005**

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

**Pages 26-i through 26-IV-8:** Remove these pages and substitute pages
26-i through 26-IV-7 attached.

Paragraph 26.01j is modified to include two additional examples of cases
requiring a determination as to a surviving spouse's entitlement to a
deceased veteran's benefit or rate of payment for the month of death.

Paragraph 26.01j(2) has been clarified to state that if the surviving
spouse's claim for death benefits is received within one year from the
date of the veteran's death and the rate of payment awarded is higher
than the veteran's rate for the month of death, there is no entitlement
to the month of death payment under either 38 CFR 3.20(b) or (c).

The remaining pages have been changed as a result of reformatting the
chapter.

Rescissions: Changes 56, 112, 174 and 216

By Direction of the Under Secretary for Benefits

Renée Szybala, Director

> Compensation and Pension Service

Distribution: RPC: 2068

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

LOCAL REPRODUCTION AUTHORIZED

June 6, 2005 M21-1, Part IV

Change 220

CHAPTER 26. SPECIFIC DEATH AWARDS AND RELATED ACTIONS

**CONTENTS**

PARAGRAPH PAGE

**SUBCHAPTER I. GENERAL APPLICATIONS**

26.01 Initial Awards to Dependents upon Death of Veteran 26-I-1

26.02 Award to Survivor upon Death of Dependent of a Deceased Veteran
26-I-6

26.03 DIC Payable in NSC Death Cases (5 or 10 Years Total SC Disability)
26-I-7

26.04 Imprisonment in Penal Institutions 26-I-9

26.05 Apportionment Cases 26-I-12

26.06 DIC Awards to Children Pending Determination of Surviving
Spouse\'s Entitlement 26-I-13

26.07 Remarriage of a Surviving Spouse 26-I-15

26.08 Marriage of Child 26-I-19

26.09 Change of Law or VA Issue 26-I-20

26.10 Adjustment for Loss of Dependent\--End-of-Year Rule 26-I-20

26.11 Application of End-of-Month and End-of-Year Rule\--Increased
Income 26-I-20

26.12 Aid and Attendance Allowance for Surviving Spouses and Parents and
Housebound

Benefits for Surviving Spouses Entitled to DIC or Improved Pension
26-I-20

26.13 Election of Benefits 26-I-21

26.13.1 DIC Reform---Public Law 102-568 26-I-22

26.13.2 DIC Reform---Public Law 106-117 26-I-22

26.13.3 DIC Reform---Public Law 108-454 26-I-23

**SUBCHAPTER II. OFFICE OF PERSONNEL MANAGEMENT\--AWARDS**

**BARRED BY RECEIPT OF FEDERAL EMPLOYEES\' GROUP LIFE INSURANCE**

26.14 Scope 26-II-1

26.15 Obtaining Information 26-II-1

26.16 Simultaneous Development 26-II-1

26.17 Action on Reply from the Office of Personnel Management 26-II-1

**SUBCHAPTER III. SERVICE DEPARTMENTS\--ALLOWANCE,**

**ALLOTMENT OR SERVICE PAY\--38 U.S.C. 5110(j)**

26.18 Scope 26-III-1

26.19 Award Action 26-III-1

26.20 Effective Dates and Remarks 26-III-2

26.21 Corrections of Reports of Actual Death 26-III-3

26.22 Awards to Other Beneficiaries 26-III-3

26.23 Service Department Payment to Estates 26-III-3

**SUBCHAPTER IV. SERVICE DEPARTMENTS\--THE SURVIVOR BENEFIT PLAN**

26.24 Scope 26-IV-1

26.25 Death Pension Cases\--SBP Minimum Income Plan 26-IV-1

26.26 Dependency and Indemnity Compensation\--Offsets of Payments
26-IV-4

26.27 Notices to Service Departments 26-IV-6

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# SUBCHAPTER I. GENERAL APPLICATIONS

**26.01 INITIAL AWARDS TO DEPENDENTS UPON DEATH OF VETERAN**

**a.** **Effective Date Based on Death of a Veteran After Separation
From Service**

**(1)** **Death Before October 1, 1982.** If entitlement is established,
make original awards of death compensation, pension and DIC effective
the first day of the month in which the veteran died provided the claim
is filed within 1 year following the date of death; otherwise,
entitlement will be from the date of receipt of claim.

**(2)** **Death After September 30, 1982.** The procedures set forth in
subparagraph (1) above pertaining to the effective date still apply.
Effective October 1, 1982, the commencing date of payment for children
or parents may not be established for any period before the first day of
the calendar month following death of the veteran. The rate of benefits
payable and date of claim determine the commencing date of an award to a
surviving spouse of a veteran who died after September 30, 1982 (38 CFR
3.20b).

**(3)** **Applications Received After September 30, 1984, with Veteran's
Death Occurring Before December 10, 2004.** For applications received
after September 30, 1984, the effective date of an award of death
benefits is the first day of the month in which the veteran died, if the
death occurred prior to December 10, 2004, and the claim was filed
within 45 days after the date of death. Otherwise, entitlement will be
from the date of receipt of claim. The procedures set forth in
subparagraph a(2) above, referring to the commencing date of payment,
apply equally in these claims.

**(4)** **Death On or After December 10, 2004.** If entitlement to death
benefits is established, and the veteran died on or after December 10,
2004, the effective date is the first day of the month of death when
application is received within one year of the date of death. If the
claim is received more than one year from the date of death, entitlement
is from the date of receipt of claim.

**b.** **Effective Date Based on Death in Service.** Determine the
commencing date of benefits as provided in 38 CFR 3.400(c) and 38 CFR
3.31. See also subchapter III.

**c.** **Monthly Rate - Surviving Spouse\'s Rate for Month of Death.**
If a surviving spouse files a claim which establishes entitlement
commencing the first day of the month of the veteran\'s death after
separation from service, determine the rate payable as follows:

**(1)** **Death on or After October 1, 1982.** Per 38 CFR 3.20(b), if
the veteran died after September 30, 1982, payment to the surviving
spouse for the month of death will only be made if the veteran\'s rate
for the month of death is greater than the monthly rate of death pension
or DIC to which the surviving spouse is entitled. Otherwise, payments of
death pension or DIC will commence the first day of the month following
death.

*Note 1:* Apportioned disability awards will be terminated
simultaneously with the veteran\'s award. See paragraph 19.15.

*Note 2:* If a veteran in receipt of military retired pay would have
been awarded the available difference for the month of death pending
total waiver of retired pay, the veteran\'s rate for the month of death
is the net rate the veteran would have received had death not occurred.
Even though the veteran\'s gross entitlement to VA benefits might have
exceeded the surviving spouse\'s rate, the surviving spouse is not
entitled to payment for the month of death if the veteran\'s net rate
would have been less than the rate payable to the surviving spouse in
his or her own right.

**(2) Death Before October 1, 1982.** Per 38 CFR 3.20(b), if the veteran
was receiving or was entitled to receive disability compensation,
pension or Medal of Honor pension at the time of death, and the veteran
died after November 30, 1962, but before October 1, 1982, the rate
payable for the month of death under 38 CFR 3.20 will be whichever is
greater:

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**Change 220**

\(a\) The monthly rate of the specific death benefit or

\(b\) The full rate payable to the veteran. The full rate payable to the
veteran includes additional compensation for dependents, special monthly
compensation, allowance for A&A or housebound status, Medal of Honor
pension and any apportioned shares. Use reason code 00 for this award
line as well as the first award line at the recurring specific death
benefits rate. Show the veteran\'s entitlement code for the special
rates awarded for the month of death, followed by the code for the
recurring rate authorized on the succeeding award lines.

**(3)** **Apportionment Required.** If the surviving spouse is entitled
to the veteran\'s disability rate for the month of death and the award
is to be apportioned, the child\'s apportioned share for the month of
death will be the same apportioned rate payable for such child for the
month after the month of death, based on the recurring death benefit
rate and not the veteran\'s disability rate. The surviving spouse\'s
benefit for the month of death will be the difference between the
veteran\'s disability rate and the child\'s apportioned share.

**(4)** **Veteran EOR Case.** If the veteran was receiving or entitled
to receive only emergency officers\' retirement pay, the surviving
spouse will not be eligible for payment of DIC or death pension for the
month of death. EOR unpaid through the date of death is payable as
accrued.

**(5)** **Restrictions.** 38 CFR 3.20 is applicable only to surviving
spouse awards and then only if entitlement to death benefits commences
the first day of the month of the death of a veteran who was receiving
or was entitled to receive payments of other than emergency officers\'
retirement pay. If entitlement commences after the first day of the
month of the death of the veteran, determine whether, under the
provisions of 38 CFR 3.20(c), the surviving spouse is entitled to the
veteran's compensation or pension for the month of the veteran's death.

\(a\) If the surviving spouse\'s entitlement is limited to death pension
commencing the first day of the year following the year in which the
veteran died because of excessive income during the year of death, 38
CFR 3.20 does not apply. Determine whether, under the provisions of 38
CFR 3.20(c), the surviving spouse is entitled to the veteran's
compensation or pension for the month of the veteran's death.

\(b\) If the surviving spouse\'s award of DIC or death pension commences
as of the first day of the month following the veteran\'s death (death
after September 30, 1982) or is effective as of the first day of the
month of the veteran\'s death (death after November 30, 1962 and before
October 1, 1982) and it is later determined the veteran was entitled to
a greater rate, prepare an amended award to pay the surviving spouse the
increased monthly rate for the month of death.

**d.** **Improved Pension and Reallocation of Social Security.** If
Social Security recipients are receiving the maximum family Social
Security benefit, there is generally a reallocation of benefits if a
member of the family loses entitlement. The total benefit is usually
reallocated equally to the remaining family members. No controls are
necessary in these cases. Follow the procedures and examples in
paragraph 16.27e.

**e.** **Action When ALL Dependents Do Not Apply (38 CFR 3.107)**

**(1)** **Claim by Surviving Spouse or Child.** Generally, award action
on a claim filed by a surviving spouse within 1 year following the date
of the veteran\'s death will neither be delayed simply because it is
shown that there is a child (not included in the claim of record) for
whom a claim has not been filed, nor, on a child\'s claim, if the
surviving spouse has not filed a claim. Make any necessary attempts to
locate such additional dependents for the purpose of furnishing an
application form. However, if a surviving spouse files a claim for
Improved Pension and does not include a child in custody or if a child
in custody of the surviving spouse files a claim for Improved Pension
without a claim from the surviving spouse, 38 CFR 3.107 is not for
application. Apply the family unit concept. Prior to further action on
the claim, inform the claimant the income, net worth and dependency
evidence for the other potential beneficiary must be of record. Do not
delay award action on a claim filed by or for a child out of the legal
custody of the surviving spouse pending receipt of claims from the
surviving spouse or other children.

(a) Until the expiration of the period within which a retroactive share
    may be awarded to such additional dependent for a period prior to
    the date of claim, any awards to persons who have filed a claim will
    be at the rates payable as though all dependents had filed a claim.

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# June 6, 2005 M21-1, Part IV

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\(b\) If a surviving spouse has filed a claim, withhold the apportioned
shares for the child or children from the surviving spouse\'s award.
Conversely, if there is a surviving spouse who has not filed a claim,
award the apportioned share to a child for whom a claim is filed pending
timely claim by the surviving spouse. If there is no surviving spouse
and not all children have filed a claim, pay the appropriate share to
those who have filed based on the total number of potentially entitled
children.

\(c\) Maintain an appropriate control for retroactive adjustment of
approved awards in case a claim by or for the additional dependents is
not received by the expiration of the period allowed. An adjustment may
also be required prior to such time by the death or marriage of such
additional dependent or election by a child of another benefit prior to
filing a claim and establishing entitlement.

*Note:* Reliance on issuance of message code 880, NOT ALL W/H OR
DEPENDENTS BEING PAID, is not sufficient for control purposes.

\(d\) At the expiration of the control, if no claim has been made by the
additional dependents, amend the running awards to authorize the full
rate (share) from the award effective date with no change in reason
code.

**(2)** **Claim by Parent**

**(a)** **DIC Cases.** If there are two parents living and only one
parent has filed a claim, the mere continued existence of the other
parent (whose potential right continues until death or receipt of
evidence of a legal bar to entitlement, other than excessive income)
affects the rate payable to the claimant (38 CFR 3.251(a)(4)). If it is
determined the nonclaiming parent no longer has entitlement to DIC
because of abandonment of the veteran (par. 13.07) or because another
person, now deceased, was last in loco parentis, the claiming parent
would be allowed DIC at the rate payable as if there were only one
surviving parent. See part V, paragraph 6.06a for dependency codes.

**(b)** **Death Compensation Cases.** If there are two parents and only
one has filed a claim, 38 CFR 3.107 does not require a withholding of
the share for another parent who has not filed a claim . Pay the parent
who has filed a claim the higher one-parent rate. Use appropriate
dependency coding to support this higher rate. See part V, paragraph
6.06a.

**f.** **Action on Receipt of Claim by Additional Dependent (38 CFR
3.650).** See 38 CFR 3.650 for rules used to determine the effective
date of entitlement for additional claimants and for the adjustment of
any running award from which a share should have been withheld under 38
CFR 3.107. If benefits were not withheld and a claim is received from
another member of the same class who apparently is entitled to share in
the same benefit (pending development), follow the due process
procedures of chapter 9 before reducing any running award. At the
expiration of the control period, reduce any running awards under reason
code 26 (dependent added) effective the date of last payment. If a
protest is received from a payee whose award is reduced, follow the
contested claims procedure in chapter 5. Do not use these rules in
Improved Pension cases as there is no withholding for additional
claimants.

\(1\) If it is determined the additional claimant is not entitled,
restore or release the full rate payable to persons on the rolls from
the date of reduction or entitlement.

(2) If the entitlement of an additional claimant is established, award
    the claimant\'s full share effective the date of entitlement. Adjust
    any running awards, as follows:

\(a\) If the additional claimant is entitled from a date before the date
of claim, reduce the running awards from the first day of the month
following the date of entitlement. Any resulting overpayment due to
failure to withhold benefits will be subject to recovery or waiver of
recovery.

\(b\) If the additional claimant is entitled only from the date of
claim, reduce the running awards from the first day of the calendar
month following date of claim or the date of last payment, whichever is
later. In these cases, consider a failure to reduce any running award as
due to administrative error and

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# M21-1, Part IV June 6, 2005

**Change 220**

make adjustments under 38 CFR 3.500(b)(2) and 38 CFR 3.650(a)(2). Enter
a notation \"Administrative error, M21-1, part IV, paragraph 26.01e\"
under Remarks on the award form, and prepare an administrative decision
in accordance with paragraph 11.31b(1).

*Note:* For any case where the effective date of entitlement of the
additional claimant is before October 1, 1982, the date of reduction of
any running award will be effective date of entitlement (subpar. f(2)(a)
above) or date of claim or DLP, whichever is later (subpar. f(2)(b)
above).

**g.** **Adjustment of Existing Awards.** During otherwise required
adjudication, adjust cases encountered in which a claimant was awarded
less than the full rate because payments had been previously authorized
for another member of the same class under the foregoing subparagraphs.
Do this without regard to the requirements of 38 CFR 3.114(a). Authorize
the retroactive increase effective the commencing date of the award but
not prior to December 1, 1962. If the payee has died, the adjustment
amount may be payable as accrued subject to the 1-year limitation on
payment of accrued covering a retroactive period.

**h.** **Adjustments Based on Claims Filed With the Social Security
Administration (SSA).** An application filed with the SSA on or after
January 1, 1957, for survivors\' benefits because of the death of a
veteran constitutes a claim for VA death benefits even if VA Form
21-4182, "Application for Dependency and Indemnity Compensation or Death
Pension (Including Accrued Benefits and Death Compensation Where
Applicable) from the Department of Veterans Affairs," is not received by
VA (38 CFR 3.153). See part III, paragraphs 2.13 and 9.05.

\(1\) If VA Form 21-4182 has not been received at the time award action
is taken but it appears an earlier commencing date may be established on
the basis of an application allegedly filed with the SSA, ask the
appropriate Social Security payment center to verify the date the
application was filed with that agency. Upon receipt, adjust the
effective date of the award, if otherwise in order.

\(2\) If an award is made effective from the date of claim for VA
benefits filed more than 1 year after the date of death of the veteran
and there is no indication in the claims folder that a claim for
survivors\' benefits was or was not filed with the SSA, inform the
claimant of the possibility of adjustment to an earlier commencing date
if a claim for such benefits was filed prior to filing the application
with VA. If the claimant responds indicating such application was filed,
take action as prescribed in subparagraph h(1) above. The same criteria
apply to death pension claims received on or after October 1, 1984,
filed more than 45 days after the death of the veteran.

**i.** **Payment of the Veteran's Rate for the Month of Death under 38
CFR 3.20(c).** Under

Section 506 of Pub. L. 104-275, if the surviving spouse of a veteran who
dies after December 31, 1996, is not entitled to benefits for the month
of death, the surviving spouse is entitled to a 1-time payment of the
veteran's rate for the month of death. A merit determination for death
benefits is *not* required for non-entitlement to exist in this
circumstance.

\(1\) Consider any communication from the surviving spouse requesting
the veteran's rate for the month of death as a claim for this benefit.
This includes a request over the phone or written notification.
Authority 38 U.S.C. 5101.

\(a\) Requests over the phone must be recorded on VA Form 119, "Report
of Contact" and the caller must provide oral verification satisfactory
to the veteran's service representative that the caller is the surviving
spouse.

\(b\) If there is any question as to the validity of the surviving
spouse status, appropriate development should be undertaken.

(a) If a request for the veteran's rate for the month of death is
    accompanied by VA Form 21-534,

"Application for Dependency and Indemnity Compensation, Death Pension,
and Accrued Benefits," a merit determination for death benefits will be
made prior to awarding benefits under 38 CFR 3.20(c).

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# June 6, 2005 M21-1, Part IV

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\(2\) Use a locally generated letter to send one of two possible
messages, depending on whether TINQ (Treasury Inquiry) shows that the
veteran's check or direct deposit has been returned, either:

\(a\) We will re-issue payment to you; or

\(b\) Since you are entitled to the veteran's payment for the month of
death, you are not required toreturn the check or direct deposit.

\(3\) In either instance, send the claims folder to Finance with the
following notation on OF 41:

"Surviving spouse entitled to 1-time payment of \[amount of monthly
compensation or pension received by the veteran at time of death\] per
38 CFR 3.209(c)." If payment has been returned, request Finance to
re-issue the payment to the surviving spouse (06A transaction). If
payment has not been returned, notify Finance that the overpayment
should be removed (08E transaction). Input of the 08E transaction must
be accomplished within 45 days of the debt being established. The
finance activity must notify the Debt Management Center (DMC) of the
action so that they can stop the reclamation process. If the debt has
been in the system for 60 days, DMC cannot stop the reclamation process
when the finance activity inputs the 08E transaction.

*Note:* If a surviving spouse files a claim for Dependency and Indemnity
Compensation (DIC) more than one year after the veteran's death, or
death pension more than 45 days after the veteran's death and
establishes entitlement, the claimant is still eligible for the
veteran's rate for the month of death under 38 CFR 3.20(c).

*Note 2:* Payment as described under 38 CFR 3.20(c) should not be
confused with payment of the veteran's rate for the month of death under
38 CFR 3.20(b). Under 38 CFR 3.20(b), payment should be made to the
surviving spouse for the month of death on the original death award (see
36.01(a)).

\(4\) If, after payment under 38 CFR 3.20(c), the surviving spouse
subsequently becomes entitled to death

benefits from the date of the veteran's death at a rate higher than the
amount paid under 38 CFR 3.20(c), an offset should be established (38
CFR 3.20(b) and 3.31). Create the offset for recovery of the veteran's
rate for the month of death prior to the original award of DIC or death
pension.

\(a\) Withhold all benefits under Type 1 withholding from the date of
entitlement. Suppress the

award letter. After the award showing total withholding has been
authorized, route the claims folder to Finance for action to establish
the offset. Deliver these folders to Finance daily.

\(b\) When the folder is returned from Finance, ensure the offset
appears on the M01 screen. Process an amended award. Remove the
withholding (show "0" entry under Type Withholding) and pay full
benefits to which the surviving spouse is entitled.

**j. Four Types of Cases Requiring a Determination as to a Surviving
Spouse's Entitlement to a Deceased Veteran's Benefit or Rate of Payment
for the Month of Death.** If the veteran was in receipt of benefits at
the time of death and a merit determination regarding the surviving
spouse's claim for improved death pension or Dependency and Indemnity
Compensation (DIC) has been made, an additional determination must be
made regarding the surviving spouse's entitlement to the veteran's
benefit or rate of payment for the month of the veteran's death.

\(1\) A surviving spouse's entitlement to death benefits has been
established. The claim was received more than one year after the
veteran's death. The surviving spouse is entitled to the veteran's
benefit for the month of death under 38 CFR 3.20(c). Send OF 41 to
Finance (see 26.01i(3)). The provisions of § 3.20(b) do not apply, as
the surviving spouse was not entitled to death benefits for the month of
the veteran's death. Therefore, a comparison between the veteran's rate
of payment at the time of death and the surviving spouse's rate of
DIC/death pension is unnecessary.

\(2\) A surviving spouse's entitlement to death benefits has been
established. The claim was received within one year of the veteran's
death. The surviving spouse's rate of payment is greater than the
veteran's rate for the

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month of death. Because the surviving spouse's rate is greater, death
benefits may not be paid for the month of the veteran's death under 38
CFR 3.20(b). In this case, 38 CFR 3.31 requires the payment of benefits
from the first of the month following death. Although the surviving
spouse is *entitled* to death benefits for the month of the veteran's
death, *payment* is prohibited by 38 CFR 3.20(b) and 38 CFR 3.31.
Accordingly, the surviving spouse may not be paid the benefit the
veteran would have received for the month of the veteran's death, under
the provisions of 38 CFR 3.20(c).

\(3\) A surviving spouse's entitlement to death benefits has been
established. The claim was received within one year of the veteran's
death. The surviving spouse's rate of payment is less than the veteran's
rate for the month of the veteran's death. The surviving spouse is
entitled to the veteran's rate for the month of death under 38 CFR
3.20(b). Payment for the month of death is included in the original
award to the surviving spouse.

\(4\) The surviving spouse's entitlement to death benefits has been
denied. The surviving spouse is entitled to the veteran's benefit for
the month of death under 38 CFR 3.20(c)(1). Send OF 41 to Finance (see
26.01i(3)).

**26.02 AWARD TO SURVIVOR UPON DEATH OF DEPENDENT OF A DECEASED
VETERAN**

**a. General.** Upon receipt of an acceptable statement or evidence of
death of a payee, discontinue the award to the deceased payee using
reason code 22, Death of Person Entitled.

\(1\) If evidence is required to establish continued entitlement for one
or more surviving beneficiaries, do not change his or her payments
pending receipt of the required evidence within the 60-day control
period established for this purpose. If the evidence is not received by
the expiration of the control period, terminate any affected awards
(reason code 16) as of date of last payment. Notice is required, as well
as the right to appeal.

\(2\) If necessary evidence is received within 1 year of the request,
adjust or reopen any award to a surviving payee as of the effective date
of termination of the decedent\'s award (38 CFR 3.651). Include an
appropriate notation in \"Remarks\" as to the date of death and name and
relationship of the deceased. Enter the applicable dependency codes to
reflect the change in the number of dependents on which the entitlement
is based.

\(3\) Unless a statement furnishing month and year of death may be
accepted under 38 CFR 3.213, proof of death of the payee meeting the
requirements of 38 CFR 3.211 will be required in all cases.

**b.** **Death of a Surviving Spouse.** Terminate the surviving
spouse\'s award using reason code 22 effective the first day of the
month of death. The provisions of subparagraph 26.07e relating to
remarriage of a surviving spouse are for equal application in
establishing the entitlement of children in cases involving the death of
a surviving spouse.

**c.** **Death of a Child.** Terminate payment of any benefits or share
of benefits to a deceased child effective the first day of the month of
death (38 CFR 3.500(g)(1)). Adjust awards to surviving beneficiaries as
provided below.

**(1)** **No Surviving SpouseConsolidated Award to Children.** Adjust
the consolidated award to pay the rates payable to the surviving
children by reason of exclusion of the deceased child. The effective
date will be the first day of the month of death unless an increase in
Total Benefits is payable, in which case the effective date will be the
first day of the calendar month following the death of the child.

**(2) Surviving Spouse Entitled**

**(a)** **DIC Being Paid to Child Over Age 18, Now Deceased or Separate
Entitlement Under Improved Pension.** Since the award to such a child is
a separate and additional benefit, do not adjust the award to the
surviving spouse or to any other children.

**(b)** **Apportioned Award.** If the deceased child was receiving an
apportioned share of a surviving spouse\'s award, adjust the surviving
spouse\'s award under the end-of-month rule to authorize payment to the
surviving spouse of the amount not paid to the deceased child (38 CFR
3.500(n)(2)). If the deceased child was not the only

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apportionee, make a special apportionment authorizing the increased
shares to the surviving children based on the reduced dependency code
from the date of termination of the deceased child\'s award. The
surviving spouse\'s share will be the balance remaining of the total
amount payable based on the continued dependency code, including the
deceased child, until the appropriate effective date for reduction or
termination required to reflect loss of the dependent (par. 25.07c).

**(c)** **Child Included in Surviving Spouse\'s Award.** If the award to
a surviving spouse included an additional amount for the deceased child,
effect reduction or termination of the payee 10 award as provided in
paragraph 26.08b.

**d.** **Death of a Parent**

\(1\) For DIC cases, see paragraph 16.18.

\(2\) For death compensation cases, see paragraph 13.15d(1).

**26.03 DIC PAYABLE IN NSC DEATH CASES (5 OR 10 YEARS TOTAL SC
DISABILITY)**

**a. General.** If a veteran was in receipt of or entitled to receive
disability compensation for service-connected disability totally
disabling for 10 or more years immediately preceding death or
continuously for a period of not less than 5 years from time of
discharge until death, pay DIC to a surviving spouse or children in the
same manner as if death were service connected. A total rating based on
individual unemployability meets the total disability requirement (38
CFR 3.22).

*Note:* Disability acquired after discharge from service as a result of
treatment in a VA medical facility or as a result of vocational
rehabilitation training under any VA-administered law (38 U.S.C. 1151),
or disability compensation granted for paired organs or extremities
under 38 U.S.C. 1160 qualifies for entitlement to DIC under 38 U.S.C.
1318. Entitlement to DIC under the provisions of 38 U.S.C. 1318 in the
same manner as if death were service connected does not, however,
establish entitlement to other benefits based on service-connected death
(e.g., the \$1,500 burial allowance). The provisions of 38 U.S.C. 1318
establish potential entitlement ONLY to benefits under chapter 13 of
title 38.

\(1\) If the cause of death is found to have been the result of the
veteran\'s own willful misconduct (see par.

11.04) or the veteran\'s death is wrongfully and intentionally caused by
the claimant (see par. 11.09a), DIC is not payable.

\(2\) In order to establish entitlement to DIC under 38 U.S.C. 1318, a
surviving spouse must have been married to the veteran for at least 1
year immediately preceding the veteran\'s death or for any period if a
child was born of the marriage or was born to them before the marriage.

\(3\) A surviving spouse may be considered for nonservice-connected
pension if entitlement to DIC cannot be established because the
veteran\'s death was due to the veteran\'s willful misconduct.

\(4\) On February 3, 1998, the Court of Appeals for Veterans Claims
(Court) issued an order in

*Blount v. West,* Vet.App. 97-947. Surviving spouses in receipt of death
pension benefits prior to Pub. L. 95-479 were not notified by VA of
their potential entitlement to DIC benefits under section 1318, even
though veterans were advised of potential entitlements to other benefits
established by Pub. L. 95-479. The Court suggested that VA take steps to
notify all VA death pension recipients of the availability of DIC
benefits pursuant to 38 U.S.C. 1318.

\(a\) Since section 1318 was effective October 1, 1978, and would have
been considered in all cases where the veteran's death was on or after
that date, notice of this change has been limited to survivors of
veterans who died on or before September 30, 1978.

\(b\) If a claim is received from a surviving spouse where the veteran's
death occurred on or before

September 30, 1978, review the claims folder to determine if DIC
benefits under the provisions of section 1318 should be granted. 26-I-7

# M21-1, Part IV June 6, 2005

**Change 220**

**b.** **Rating Required.** Refer the case to the rating activity to
determine if the cause of death was service connected. See part III,
paragraph 3.07.

\(1\) The rating activity will review all cases in which the veteran was
rated totally disabled at time of death for consideration as to service
connection for cause of death.

\(a\) If service connection for cause of death is denied, the rating
activity must consider entitlement to payment as if death were service
connected.

[1]{.underline}. If the rating denies service connection for cause of
death but grants entitlement to payment as if death were service
connected, prepare an award using SL code 19 and annotate the award to
read \"DIC awarded per 38 U.S.C. 1318 based on rating dated

[2]{.underline}. If the rating denies entitlement to both service
connection for cause of death and to payment as if death were service
connected, any disallowance or pension award prepared must contain a
remark that these issues were considered.

\(b\) If development is needed to dispose of the issue of service
connection for cause of death and eligibility to payment as if death
were service connected exists, the rating activity must prepare a rating
decision granting entitlement to this benefit and deferring the issue of
service connection for cause of death.

[1]{.underline}. In such a case prepare an award using SL code 19 and
annotate it \"Decision of SC death deferred.\"

[2]{.underline}. If subsequent rating action establishes service
connection for death, remove the SL code 19 and notify the beneficiary
of the change in status.

\(2\) If a veteran was rated totally disabled due to service-connected
disability for the required period but was not in receipt of
compensation due to receipt of retired pay, refer the case to the rating
activity for a determination as to whether or not total benefits would
have been payable for the entire period.

**c.** **Prohibition Against Duplication of Benefits.** If the claimant
receives money or property of value based on any cause of action for
damages for the death of the veteran as a result of a judicial or
administrative proceeding, settlement or compromise, DIC otherwise
payable must be recouped in an amount equal to the money received and
fair market value of the property received. Attorney\'s fees, court
costs and other expenses incident to the civil claim

are not deductible from the total amount awarded or accepted. This
requirement for recoupment exists even if the award or settlement was
made prior to passage of Public Law 95-479.

\(1\) Even if the claimant has made a positive statement that a claim
has been or will be made through court action or administrative
channels, take award action otherwise in order. The offset required in
the event of a judgment, compromise or administrative award will not be
made effective prior to the first day of the month following the month
such judgment, compromise or administrative award is granted.

\(a\) Spell out the offset requirements of the law in the award letter.

\(b\) Upon initiation of recoupment, inform the claimant that, although
no payment of DIC may be made until the amount received is recouped, the
claimant must keep VA informed of his or her current address, marital
and dependency changes so that there will be no delay in resuming
benefits.

\(2\) Prepare awards in the regular format pursuant to instructions in
part V, chapter 6. In addition, the following specific instructions
apply:

\(a\) Show no withholding code or amounts on the award. This allows
payment to be made automatically when the full amount to be offset has
been recouped.

\(b\) Show the amount of offset on the award form with the statement
\"Subject to offset of \$[      ]{.underline} under 38 U.S.C. 1318.\"

26-I-8

# June 6, 2005 Part IV

**Change 220**

\(c\) Route the claims folder, with Optional Form 41 attached, to
Finance, instructing that activity to establish a 30B accounts
receivable for the amount to be recouped with a deduction for the full
amount of the award.

**26.04 IMPRISONMENT IN PENAL INSTITUTIONS**

**a. Discontinuance or Reduction Because of Imprisonment.** Reduce DIC
or death compensation payments or discontinue pension payments to a
surviving spouse, child or parent pursuant to 38 CFR 3.665 (38 U.S.C.
5313) or 3.666 (38 U.S.C. 1505) under the applicable provisions of
paragraph 25.04 relating to imprisoned veterans.

**b.** **Surviving Spouse Imprisoned - Discontinuance of Pension.** In
the termination notice, inform an imprisoned surviving spouse who was
receiving or entitled to receive pension on account of a child or
children of the effect such imprisonment will have on their rights and
advise him or her to furnish information concerning the child\'s or
children\'s individual incomes, net worths and the name and address of
the person or persons responsible for their care during the
imprisonment.

(1) Pay pension to or for a child or children effective the 61st day of
    the surviving spouse\'s imprisonment

in the same manner and at the rate payable as if there were no surviving
spouse, provided the combined income of the child and the custodian is
not excessive and net worth does not constitute a bar.

\(2\) If the surviving spouse\'s award was apportioned for a child, do
not change payments to or for such child. If current evidence is not of
record, request income and net worth evidence from the child\'s
custodian or the child, if of age of majority, such evidence to be
received within 60 days.

\(a\) If the reply shows a bar to entitlement due to excessive income or
value of estate, discontinue the apportioned award as of date of last
payment using reason code 11, Excess Income, or 12, Excess Net Worth, as
appropriate.

\(b\) If no reply is received at the expiration of the control period,
discontinue payments as of date of last payment using reason code 16,
Failure To Furnish Evidence. Inform the child\'s custodian or the child,
as appropriate, of the reason for the discontinuance. Include appellate
rights in the notification.

\(c\) If satisfactory income evidence is received, award the child the
full (nonapportioned) rate. Use reason code 40.

\(d\) In Improved Pension cases, adjusting an apportioned award to a
child in the legal custody of the surviving spouse may result in either
a termination or reduction in the child\'s award. This adjustment will
be effective the later of either the date of last payment or the date of
termination of the surviving spouse\'s award.

\(e\) In Section 306 and Old Law cases, any award to children either in
or out of the surviving spouse\'s custody will be at the Improved
Pension rates.

**c.** **Surviving Spouse Imprisoned - Reduction of DIC or Death
Compensation.** In the award notice, provide an imprisoned surviving
spouse who has eligible children with notification that apportionment
may be made to the children, and request the surviving spouse to advise
whether an apportionment is desired. Request that the surviving spouse
furnish the name and address of the person or persons responsible for
the children\'s care during the imprisonment. See paragraph 25.04b(4)
regarding apportionment criteria.

\(1\) If an apportionment is authorized, award payment effective the
61st day of the surviving spouse\'s imprisonment.

\(2\) Limit the amount of the apportionment to the amount of payment not
payable while the surviving spouse is imprisoned.

**d.** **Child Imprisoned - Pension.** Adjust any award to a surviving
spouse or another child or children in Section 306 and Old Law cases who
have continued entitlement (reason code 28) effective the 61st day of a
child\'s imprisonment as if the imprisoned child did not exist.

26-I-9

# M21-1, Part IV June 6, 2005

**Change 220**

\(1\) If the only eligible child is imprisoned, the surviving spouse\'s
status becomes the same as that of a surviving spouse without children
and is subject to income limitations as such.

\(2\) If the annual income questionnaire or other current evidence
reflecting income is available, make a decision on that evidence. If
such evidence is insufficient or not on hand, or if a borderline
situation is indicated, undertake development as required in
subparagraph b(2) above. Such development is not needed if there is at
least one other eligible child.

**e.** **Child Imprisoned - DIC or Death Compensation Cases.** If there
is an eligible surviving spouse or any other children, apportion the
amounts not paid to the imprisoned child to the surviving spouse or
children.

\(1\) If an apportionment is authorized, award payment effective the
61st day of the child\'s

imprisonment. See paragraph 25.04b(4) and part V, paragraph 6.09a(10).

\(2\) If there is no eligible surviving spouse or any other children,
adjust the award to one half of the veteran\'s 10-percent rate using
special law code 10 without a withholding. See part V, paragraph
6.09a(10).

**f. Parent Imprisoned.** If two parents are both entitled to DIC and
were living together prior to the time the DIC payable to one parent was
reduced due to incarceration, consider them as two parents not living
together for the purpose of determining entitlement to DIC. Should the
imprisoned parent\'s award be less than half of the veteran\'s
10-percent rate, do not adjust the award. For these cases, a parent\'s
DIC award will be subject to reduction below the incarcerated rate due
to increased income or a parent\'s death

compensation award would be subject to termination should net worth
become excessive. Maintain current income and net worth data as in other
parent cases.

**g.** **Recommencement of Payments and Other Related Readjustments**

**(1)** **General.** Upon receipt of notice from any reliable source
that an imprisoned surviving spouse,

child or parent has been released from prison, resume DIC, death
compensation or pension payments, if otherwise in order, effective the
date of release if notification is received within 1 year thereof.
Otherwise, the effective date will be the date of receipt of notice (38
CFR 3.666(c)).

**(2)** **Release of Imprisoned Surviving Spouse With Eligible Child.**
For pension cases request evidence of the surviving spouse\'s income and
net worth, and, in all cases, information as to if the child or children
are remaining in his or her custody. On the release of a beneficiary who
was receiving Section 306 or Old Law benefits prior to imprisonment,
continue to pay this benefit provided the income and net worth are
within the applicable limits.

**(a)** **Children\'s Awards**

[1]{.underline}. Adjust awards to children who were not in the surviving
spouse\'s custody at the time of imprisonment, except in Improved
Pension cases, to the apportioned rate effective the dates provided in
subparagraph g(1) above, or, if an overpayment would result, date of
last payment.

[2]{.underline}. Discontinue any award to a child or children who are
restored to the surviving spouse\'s custody as of the effective date of
the surviving spouse\'s award or, if an overpayment would result, date
of last payment.

[3]{.underline}. Use reason code 40 on all actions adjusting or
terminating children\'s awards under this subparagraph.

**(b)** **Surviving Spouse\'s Award.** The surviving spouse\'s award
will be subject to any payments made to or for a child or children
subsequent to the effective date of reentitlement. Award the surviving
spouse the difference between the rate paid to the children and the
total payable through the date of last payment.

**(3)** **Release of Imprisoned Child**

26-I-10

# June 6, 2005 M21-1, Part IV

**Change 220**

**(a)** **Surviving Spouse Entitled.** If the imprisoned child is
released, adjust the surviving spouse\'s award under reason code 28 to
include this child as of the date provided in subparagraph g(1) above.

[1]{.underline}. If the imprisoned child was the only child and the
surviving spouse\'s pension award was discontinued because of income
exceeding the limitation for a surviving spouse alone, resumption from
the date of release will be contingent on timely submission of evidence
reestablishing entitlement.

[2]{.underline}. If the imprisoned child is released and legally out of
the surviving spouse\'s custody, adjust any Old Law surviving spouse\'s
awards and apportioned awards for any other children as provided in

subparagraph g(2) above.

**(b)** **No Surviving Spouse - Another Child or Children.** Adjust all
awards under reason code 28 as of the date of release or receipt of
notice of release or, if an overpayment would result, from date of last
payment. Adjust as provided above.

*Example 1:* Widow in receipt of Improved Pension imprisoned 10-18-90.
Only one eligible child in legal custody of the widow. Born 6-9-78.
Child was receiving apportionment of \$40 monthly; child and custodian
have no income.

Widow\'s Improved Pension award is terminated on 406 screen effective
12-18-90.

### Child\'s Award

403 DISABILITY/DEATH AWARD

> FILE NUMBER END PRODUCT NAME

DATE RSN RATE DISAB DEPEN S H INC SLC EC WITHHOLD DED-OFFSET

12/18/90 40 101.00 81/81 0000 2D

6/9/96 24 00.00

*Note:* Use a locally generated letter to inform the custodian of the
basis for the change.

*Note:* Enter complete income information for the child and any person
legally responsible for the child\'s support.

*Example 2:* Widow, in example 1, released 6-20-91. Entitlement
reestablished and award action taken 8-7-91. DLP 8-1-91. Widow has
income of \$1000.

**Child\'s Award** DISABILITY/DEATH AWARD

FILE NUMBER END PRODUCT NAME

DATE RSN RATE EC DISAB DEPEN S H INC SLC WITHHOLD DED-OFFSET

8/1/91 40 40.00 2D 11/81 0000

6/9/96 24 00.00

26-I-11

# M21-1, Part IV June 6, 2005

**Change 220**

### Widow\'s Award

403 DISABILITY/DEATH AWARD

FILE NUMBER END PRODUCT NAME

DATE RSN RATE EC DISAB DEPEN S H INC SLC WITHHOLD DED-OFFSET

6/20/91 60 337.00 2D 11/10 1000 1-101.00

8/1/91 27 398.00 1-40.00

6/9/96 44 315.00 l0/10 0

*Note:* Use a locally generated letter to inform both the surviving
spouse and the custodian of the basis for the awards.

**(4)** **Release of Imprisoned Parent - DIC.** For those cases where an
imprisoned parent\'s payment status was changed from that of two DIC
parents living together to two parents not living together, upon release
from imprisonment restore payment status to that of two DIC parents
living together. Presume the parents are reunited unless there is
evidence to the contrary.

**26.05 APPORTIONMENT CASES**

**a.** **General.** Subject to the applicable provisions of 38 CFR
3.450, apportion death benefits in accordance with 38 CFR 3.459 through
3.461, effective as provided by 38 CFR 3.400(e), except awards may be
specially apportioned under 38 CFR 3.451 if warranted by the equities
and demonstrated hardship.

Other than as provided in subparagraph b below, the instructions in this
paragraph are intended only for cases involving regular apportionments.
See subparagraph b below for Improved Pension cases.

**b.** **Special Apportionments.** The provisions of 38 CFR 3.451 and
3.460(c) and paragraph 19.05, insofar as they are applicable, are for
equal application in Improved death pension cases, including the
provisions for treatment of appeals as contested claims. The formal
memorandum required by paragraph 19.03 in disability cases will be
required in Improved death pension cases. Assign special law code 13 in
special apportionment cases except for Improved Pension, Spanish
American War, Indian and Civil War apportionments.

**c.** **Rates Payable.** Regular apportionments of Section 306 and Old
Law death pension and compensation will be at the rates provided by the
appropriate table in appendix B, subject to the provision that a
consolidated award for *all* the children will be at the full statutory
rate less only the amount provided as the surviving spouse\'s share. In
pension cases VA might pay the children a few pennies more by taking the
total children\'s share from the chart rather than multiplying the share
for each child by the number of children. See part V, paragraph 6.01.

\(1\) Add the additional amount payable for any child or children in
custody to the surviving spouse\'s share, except that any amounts
payable for a child in the surviving spouse\'s custody but living with
someone else may be apportioned if the surviving spouse is not
reasonably contributing to the child\'s support (38 CFR 3.450(e)).
Deduct any amounts payable for children not in custody from the
surviving spouse\'s award and show this as a type 1 withholding.

\(2\) The additional amount awarded because of the surviving spouse\'s
need for A&A or housebound is *not* apportionable (38 CFR 3.459 (b),
3.460 and 3.461(b)(2)).

d\. **Child Leaves Surviving Spouse\'s Custody, Section 306.** Take the
following action upon receipt of notice that a child has left the
custody of the surviving spouse:

\(1\) If notification is received from the surviving spouse, reduce the
surviving spouse\'s award under reason code 27 effective the first of
the following month or date of last payment, whichever is the earlier
(38 CFR 3.400(e)(2)). Withhold the amount payable as an apportioned
share to such child. Under paragraph 17.01, pay the child from the same
effective date.

26-I-12

**June 6, 2005 M21-1, Part IV**

**Change 220**

\(2\) If notification is received from a third-party source, follow the
due process provisions of chapter 9 before taking action under
subparagraph c(1) above.

e\. **Termination of Apportionment.** In addition to terminations
provided by future ending dates required in anticipation of a child\'s
18th birthday, termination of schooling or the 23rd birthday of a
schoolchild, terminate apportionments and adjust or terminate the
surviving spouse\'s award on the occurrence of one of the following:

\(1\) **Child\'s Entitlement Terminates**

\(a\) **Child Returns to Surviving Spouse\'s Custody.** Adjust awards
using reason code 27, as of date of last payment to or for the child (38
CFR 3.500(d)(1)).

\(b\) **Death of Child.** See paragraph 26.02c.

\(c\) **Marriage of Child.** See paragraph 26.08.

\(d\) **Unanticipated Termination of School.** See paragraph 14.03 and
38 CFR 3.667(c).

\(e\) **Election of DEA Benefits.** See paragraph 14.13.

\(f\) **Election to Receive Benefits in a Dual Parent Case.** See
paragraph 20.60.

\(g\) **Imprisonment in Pension Cases.** See paragraph 26.04.

\(h\) **Election of Improved Pension Benefits.** See paragraph 20.07.

\(2\) **Surviving Spouse\'s Entitlement Terminates**

\(a\) **Remarriage of Surviving Spouse.** See paragraph 26.07e.

\(b\) **Death of Surviving Spouse.** See paragraph 26.02b.

\(c\) **Excessive Income or Net Worth.** See paragraphs 16.11 and 16.38.

\(d\) **Failure to Return Income Questionnaire.** See paragraph 29.11.

\(e\) **Imprisonment in Pension Cases.** See paragraph 26.04b.

**26.06 DIC AWARDS TO CHILDREN PENDING DETERMINATION OF SURVIVING
SPOUSE\'S ENTITLEMENT**

a\. **General.** If determination of a surviving spouse\'s entitlement
will be unduly delayed in a claim involving children, award benefits for
such child or children if and when their entitlement can be established.

b\. **All Children in Custody.** Award benefits to the surviving spouse
claimant under either payee 11 or 31 as custodian under 38 CFR 3.850(c).
See paragraph 17.14. If all children are in custody of the surviving
spouse, make payment at the children only rates.

*Note:* If one or more of the children leaves the custody of the
surviving spouse before a final determination is made as to the
surviving spouse\'s entitlement, initiate the procedure outlined in
subparagraph c below as of DLP.

c\. **Child or Children Not in Custody.** If there is a child not in the
surviving spouse\'s custody, apportionment is required.

26-I-13

### M21-1, Part IV June 6, 2005

**Change 220**

\(1\) If it is necessary to prepare VA Form 21-592, "Request for
Appointment of a Fiduciary, Custodian or Guardian," for children not in
custody, note on the form that any awards to children will be made
pending a determination of the surviving spouse\'s entitlement and that
benefits awarded may be subject to adjustment.

\(2\) Determine the rate payable from the apportionment schedule for
children as if the surviving spouse were entitled.

*Example 1:* Veteran dies 4/15/93 and the surviving spouse\'s
entitlement is pending. There are two children not in custody of the
surviving spouse.

Payee 31 Award

403 DISABILITY/DEATH AWARD

FILE NUMBER END PRODUCT NAME

DATE RSN RATE EC DISAB DEPEN S H INC SLC WITHHOLD DED-OFFSET

5-1-93 00 200.00 47 12/82

10-1-93 37 300.00 12/82

8-7-94 24 150.00 12/81

10-1-94 37 200.00 12/81

8-8-96 24 00.00

*Example 2:* Same facts as Example 1, except one child in custody of the
surviving spouse and one child out of custody.

Payee 11 (child out of custody)

403 DISABILITY DEATH AWARD

FILE NUMBER END PRODUCT NAME

DATE RSN RATE EC DISAB DEPEN S H INC SLC WITHHOLD DED-OFFSET

5-1-93 00 100.00 47 12/81

10-1-93 37 150.00 12/81

8-7-94 24 00.00

Payee 12 (child in custody)

403 DISABILITY/DEATH AWARD

FILE NUMBER END PRODUCT NAME

DATE RSN RATE EC DISAB DEPEN S H INC SLC WITHHOLD DED-OFFSET

5-1-93 00 100.00 47 12/81

10-1-93 37 150.00 12/81

8-7-94 44 150.00 11/81

10-1-94 37 200.00 11/81

8-8-96 24 00.00

\(3\) If the surviving spouse does not establish entitlement, take
action to pay children only rates and correct the dependency codes.
Establish a future date control under reason code 30 for receipt of the
evidence within 1 year of the date requested. Annotate the award that a
control has been established and the reason therefore. Reliance on
message code 880, NOT ALL W/H OR DEPENDENTS BEING PAID, is not
sufficient for control purposes.

26-I-14

**June 6, 2005 M21-1, Part IV**

**Change 220**

d\. **Surviving Spouse\'s Claim Subsequently Allowed.** If an award has
been made for a child or children under either subparagraph b or c above
and the surviving spouse\'s entitlement is subsequently established,
take the following action.

\(1\) If all children are in the surviving spouse\'s custody, terminate
the payee 11 or 31 award DLP. Pay the available balance under a payee 10
award. Adjust the payee 10 award DLP to remove the withholding.

\(2\) If none of the children are in the custody of the surviving
spouse, no action will be necessary on the children\'s award. Prepare a
payee 10 award with proper withholding for the children out of custody.

\(3\) If there are children both in and out of custody of the surviving
spouse, take no action on the award for the children out of custody.
Terminate the award for the children in custody DLP, and prepare a payee
10 award from date of entitlement with appropriate withholding for prior
payments adjusted as of DLP.

*Example 3:* Same facts as in Example 2 above. The surviving spouse
established entitlement. DLP is 7/1/93. No action is necessary on payee
11 award. Terminate the payee 12 award DLP and prepare a payee 10 award.

403 DISABILITY/DEATH AWARD

FILE NUMBER END PRODUCT NAME

DATE RSN RATE EC DISAB DEPEN S H INC SLC WITHHOLD DED-OFFSET

5-1-93 00 750.00 47 12/11 1/200.00

7-1-93 27 850.00 1/100.00

10-1-93 37 900.00 1/150.00

8-7-94 44 900.00 11/11 0

10-1-94 37 950.00

8-8-96 24 750.00 10/10

e\. **Surviving Spouse\'s Claim Disallowed.** If the surviving spouse\'s
claim cannot be granted, prepare a disallowance and take appropriate
action as follows:

\(1\) If all children are in the custody of the surviving spouse, take
no action to adjust the children\'s award.

\(2\) If all children are out of the custody of the surviving spouse,
take action as of date of entitlement to authorize payment at the
children only rates with appropriate withholding through DLP when the
award will be adjusted to zero out the withholding. Change the
dependency codes to show those for children.

\(3\) If there are children both in and out of the custody of the
surviving spouse, adjust all awards per subparagraph e(2) above.

\(4\) In addition to the notice of awards to or for the children, inform
the surviving spouse why his or her claim could not be granted and of
the action taken on the children\'s entitlement.

**26.07 REMARRIAGE OF A SURVIVING SPOUSE**

a\. **General.** A surviving spouse-beneficiary\'s statement which
furnishes, as a minimum, the month and year of remarriage and, if a
widow, her present name, will be accepted to establish the fact and date
of remarriage (38 CFR 3.213(a)(2)). (See subparagraphs c and d for an
exception to the requirement that a widow furnish her present name.)
Remarriage may also be inferred under the procedures in part III,
paragraph 6.14. Formal proof under 38 CFR 3.205 will not be required in
the absence of contradictory information in the claims folder (38 CFR
3.213(c)).

b\. **Suspension of Payments.** As provided in 38 CFR 3.213(b), if
information as to the month and year of marriage or the remarried name
is not of record (unless the new name is not required), suspend the
award, reason

26-I-15

###### M21-1, Part IV June 6, 2005

**Change 220**

code 15, Surviving Spouse Remarried, as of DLP if such action has not
already been taken. Application of due process procedures may be
required before suspension of payments. See chapter 9.

\(1\) Request any necessary information as to remarriage and, in pension
cases, income for any children in custody, using Target-generated
development letter or locally generated letter. Request persons having
custody of children to furnish information as to the remarriage and
whereabouts of the surviving spouse if such information is not of
record.

\(2\) If children are involved, establish a 60-day control and take
action in accordance with subparagraph e below.

\(3\) If no children are involved, establish no control. In the absence
of a reply at the end of a 6-month suspense, the surviving spouse\'s
award will be automatically terminated as of date of last payment. See
message code 616, part V, paragraph 19.08.

c\. **Change of Name.** When evidence establishes that a widow has
remarried and her name has changed, a CNAM transaction must ordinarily
be processed. If the new name is not available, however, develop for it
only if the widow has custody of the veteran\'s child(ren) and/or an
overpayment is involved.

d\. **Surviving Spouse Alone - No Children.** Use a STOP action to
terminate benefits. If other retroactive adjustment is required, use an
amended award. If a widow with no children of the veteran in custody has
not reported her current name and no overpayment is involved, do not
develop for the current name. Simply terminate benefits as described in
subparagraph (1) below, and eliminate the processing steps described in
subparagraph (2).

\(1\) Terminate benefits the first day of the month of remarriage (38
CFR 3.500(n)(1)) using reason code 15.

\(2\) If a female beneficiary requires a name change (subparagraph c
above), take the following steps in the order listed.

\(a\) GAP a STOP transaction from the 406 Screen, but do not authorize
this action.

\(b\) While the STOP is pending authorization, prepare and authorize a
CNAM transaction to effect the changes in the person entitled and the
address segments to both the PIF and master record.

\(c\) Authorize the STOP transaction the day after authorizing the CNAM
transaction.

*Note:* Because of the order of processing, the CNAM transaction will
process first, updating the address segment as well as changing the stub
name of the person entitled, both in the master record and the PIF (EP
130) for the STOP transaction pending authorization. Follow
check-intercept procedures as outlined in part V, paragraph 12.06, if
applicable.

e\. **Surviving Spouse and Children.** If there are children entitled to
benefits or increased benefits in their own right due to remarriage of a
surviving spouse, develop their entitlement concurrently with the action
taken on the payee 10 award. In Old Law and Section 306 pension cases,
the children in custody are entitled only to Improved Pension. Develop
accordingly. Termination of a surviving spouse\'s entitlement to Old Law
or Section 306 pension does not deprive a child not in custody of
continued entitlement to the same rate of payment he or she was
receiving as an apportionment. If it is advantageous and they elect to
do so, such children may be paid Improved Pension. If the protected
apportioned rate is paid, use special law code 10, and submit a copy of
the award to the Compensation and Pension Service (213B). If the
protected apportioned rate is paid, use the Old Law or Section 306
entitlement code.

*Note:* For children in the surviving spouse\'s custody, use the income
of the surviving spouse and stepparent to determine children\'s
eligibility for Improved Pension.

26-I-16

**June 6, 2005 M21-1, Part IV**

**Change 220**

\(1\) **Suspension of Payments.** If acceptable notice of remarriage has
been received too late to avoid creation of an overpayment, suspend the
award and follow the check-intercept procedure in part V, paragraph
12.06. After the cycle updates, check Target for DLP. Maintain a 30-day
control for this purpose.

\(a\) Do not change apportioned pension and death compensation awards to
any children, separate Improved Pension awards to children out of
custody or DIC awards to children over age 18 at the time of suspending
payments to the surviving spouse. Request an income statement (if not
current) in pension cases or claim on VA Form 21-4183, "Application for
Dependency and Indemnity Compensation by Child" (when required under 38
CFR 3.152(c) in DIC cases), to be submitted within 60 days. If it is not
submitted, suspend payments DLP.

\(b\) If the evidence is received within 1 year of request, take action,
if otherwise in order and subject to action under subparagraph (2)
below, to authorize the full rates payable to children.

\(2\) **Action on Surviving Spouse\'s Award.** If DLP is of record,
apply the provisions of 38 CFR 3.657(b)(2) to reduce or eliminate the
overpayment. Take action as follows for the various benefits.

\(a\) **Improved Pension, DIC, and Death Compensation Cases**

[1]{.underline}. If the surviving spouse received payment at a rate in
excess of that payable to the child or children in custody in their own
right, amend the payee 10 award to authorize only the rate to which such
child or children would be entitled from the first day of the month of
remarriage to the date of last payment.

[2]{.underline}. If payment to the surviving spouse was at a rate less
than that payable to the child or children in custody, discontinue the
award by STOP action as provided in subparagraph d above, except that
the effective date of termination will be the date of last payment in
the payee 10 award.

[3]{.underline}. Prepare amended awards to the surviving spouse as
above, completing the following items, as required:

[a]{.underline}. **Award Data.** The dependency codes for retroactive
periods providing for differential rates will reflect the applicable
code in the 80 series for the rate payable for the children (pt. V, par.
6.06). Use reason code 15 for the award line entry of None, with the
applicable effective date, as well as for any differential rate line.

[b]{.underline}. **Remarks.** Other than when an explanation may be
required for retroactive adjustment necessitated by changes in
entitlement not related to the remarriage, concisely state the reason
for the amendment, e.g., \"Surviving spouse remarried
([date]{.underline}), DLP ([date]{.underline}).\"

*Example:* Surviving spouse with 3 children in her custody and receiving
Improved Pension of \$724.00 per month remarried May 15, 1991, DLP, July
1, 1991.

Adjustment of the surviving spouse\'s award will show: (Assume no income
for surviving spouse, stepparent, or any of the children.)

403 DISABILITY/DEATH AWARD

FILE NUMBER END PRODUCT NAME

DATE RSN RATE EC DISAB DEPEN S H INC SLC WITHHOLD DED-OFFSET

5/1/91 15 303.00 2D 83 0000

7/1/91 15 00.00

*Note 1:* Use a locally generated letter to explain the action taken.

*Note 2:* The consolidated award for the children would be effective
July 1, 1991 and would award \$303.00 monthly to the remarried surviving
spouse as custodian under 38 CFR 3.850(c).

26-I-17

**M21-1, Part IV June 6, 2005**

**Change 220**

\(b\) **Section 306 and Old Law Pension Cases.** Adjust as in
subparagraph (2)(a) above except that remarriage of the surviving spouse
will result in the children in custody having entitlement only to
Improved Pension. Children out of custody retain continued entitlement
to the same rate of payment they were receiving as an apportionment. If
it is advantageous and they elect to do so, they may be paid Improved
Pension. If the protected apportioned rate is paid, use special law code
10, and submit a copy of the award to the Compensation and Pension
Service (213B).

*Example:* Surviving spouse has two children in custody. She is
receiving Section 306 pension of \$185 monthly. She remarried January
10, 1991. DLP is April 1, 1991. Each child\'s annual income is \$600 in
Social Security benefits. The remarried surviving spouse and stepparent
have no income.

Surviving Spouse\'s Award

403 DISABILITY/DEATH AWARD

FILE NUMBER END PRODUCT NAME

DATE RSN RATE EC DISAB DEPEN S H INC SLC WITHHOLD DED-OFFSET

1/1/91 15 102.00 28 82 0000

4/1/91 15 00.00

*Note:* Use a locally generated letter to explain the action taken.

Children\'s Consolidated Award

403 DISABILITY/DEATH AWARD

FILE NUMBER END PRODUCT NAME

DATE RSN RATE EC DISAB DEPEN S H INC SLC WITHHOLD DED-OFFSET

4/1/91 00 102.00 2D 82 1200

7/15/90 24 51.00 81 600

9/2/94 24 00.00

*Note:* Establish control for possible reallocation of Social Security
benefits. See subparagraph 26.01d.

\(3\) **Determining Children\'s Entitlement.** The same type of benefit
being paid to the surviving spouse will be payable to the children
unless the surviving spouse\'s benefit was Section 306 or Old Law death
pension and remarriage occurred after December 31, 1978. In that
instance, the entitlement of children in custody is limited to Improved
Pension (pars. 16.11a and 20.47a).

\(a\) A claim is not required for any child for whom payments are being
made under a separate award (including an award in suspense) or for any
child who was included in the surviving spouse\'s claim (38 CFR
3.152(c)(4)).

*Note:* In death compensation cases, send a VA Form 21-4183 with
appropriate explanation when there is a right to elect DIC as the
greater benefit.

\(b\) In pension cases, request necessary information by
Target-generated development letter or by locally generated letter.

\(c\) In DIC cases, apply the provisions of 38 CFR 3.107 to withhold
benefits for any additional child who may be payable on the basis of a
claim filed within 1 year after the date such child\'s entitlement
arises by reason of termination of the surviving spouse\'s entitlement.

\(4\) **Action on Children\'s Awards**

26-I-18

## June 6, 2005 M21-1, Part IV

##  Change 220

\(a\) If the surviving spouse\'s award has been adjusted to reduce an
overpayment under subparagraph e(2)(a)[1]{.underline} above, awards for
children will be at the children only rate, effective from DLP to the
surviving spouse.

\(b\) If the surviving spouse\'s award was terminated under subparagraph
e(2)(a)[2]{.underline} above, awards for children will be effective the
first day of the month of the surviving spouse\'s remarriage and will be
at the old rate which was payable for the spouse and children in custody
for the month of remarriage. The award will be increased to the rate
payable for children only from the first day of the month following
remarriage until DLP, subject to prior payments.

*Note:* The procedures set forth in subparagraph (b) above are effective
October 1, 1982. The provisions of

38 U.S.C. 5111 apply since there has been an increase in the total
benefits payable.

\(c\) If no overpayment to the surviving spouse exists, terminate the
surviving spouse\'s award effective the first day of the month of
remarriage.

[1]{.underline}. If the rate payable for children is less than the
amount previously paid for the spouse and children, the children\'s
award will be effective from the first day of the month of remarriage.

[2]{.underline}. If the rate payable for children is greater than the
amount previously paid for the spouse and children, the children\'s
award will be effective from the first day of the month of remarriage of
the surviving spouse at the old rate payable for spouse and children
and, as of the first day of the month following remarriage, at the rate
payable for children only.

\(d\) Amend all child apportionee awards with reason code 40,
Adjustment, Child Award-Surviving Spouse\'s Entitlement Terminated. For
any original or reopened award to children whose entitlement is
established because of the remarriage, use reason code 00.

f\. **Notice to Surviving Spouse.** If a surviving spouse\'s award is
terminated because of remarriage, notice must be given of the action
taken regardless of whether or not an adjustment is made under 38 CFR
3.657(b)(2).

**26.08 MARRIAGE OF CHILD**

On receipt of an acceptable statement (38 CFR 3.213(a)(3)) or evidence,
if required by reason of contradictory information in the claims folder,
showing the marriage of a child to or for whom payments of pension,
compensation or DIC are being made, take the following action subject to
the applicable provisions of paragraph 26.07.

a\. **Termination of a Child\'s Award**

\(1\) **General.** Terminate payments being made to a child in his or
her own right or as apportionee, directly or through a fiduciary, as of
the first day of the month of marriage using reason code 15, Person
Entitled Married (38 CFR 3.500(2)(1)). Show the reason in Remarks as
\"Child ([name if consolidated award]{.underline}) married
([date]{.underline}).\"

\(2\) **Marriage of a Male Child.** Terminate a male child\'s award by
reason of marriage using the STOP command unless an amended award is
required under part V, paragraph 12.01c.

\(3\) **Marriage of a Female Child.** Termination an award to a female
child receiving direct payment using the procedures for termination of a
remarried surviving spouse\'s award under paragraphs 26.07c and d. If
payment to a female child is being made through a fiduciary, effect
termination as provided in the preceding subparagraph.

b\. **Adjustments to Surviving Spouse\'s Award**

26-I-19

**M21-1, Part IV June 6, 2005**

**Change 220**

\(1\) **Child Included in Payee 10 Award.** Upon the marriage of a child
on account of whom payments are being made to a surviving spouse, reduce
or terminate the payee 10 award in accordance with the provisions of
paragraph 25.07. See paragraph 16.10d for loss of only or last child in
Section 306 and Old Law pension cases and paragraph 16.28 for Improved
Pension cases when the child is in the surviving spouse\'s custody.

\(2\) **Award Apportioned.** If the married child is receiving an
apportioned share of a surviving spouse\'s award, the provisions of
paragraph 25.07 apply.

c\. **Adjustments to Awards Involving Other Children**

\(1\) **Separate Awards.** Except as provided for reapportionment of
awards to other apportionees (subpar. 25.07c(2)), make adjustments in
separate awards to other children (no surviving spouse entitled)
effective the date of termination of the married child\'s award under
reason code 45 (38 CFR 3.651).

*Note:* The adjustment of the remaining children\'s rates due to the
loss of a child is one of the few occasions an increase may be made in a
Section 306 or Old Law rate.

\(2\) **Consolidated Awards.** If the married child\'s benefits are
being paid under a consolidated award, follow the provisions of part V,
paragraph 4.05 in making adjustments pursuant to this paragraph.

**26.09 CHANGE OF LAW OR VA ISSUE**

See paragraph 25.18.

**26.10 ADJUSTMENT FOR LOSS OF DEPENDENT \-- END-OF-YEAR RULE**

See paragraph 25.07.

**26.11 APPLICATION OF END-OF-MONTH AND END-OF-YEAR RULES \-- INCREASED
INCOME**

See paragraphs 16.09, 16.16 and 16.36.

**26.12 AID AND ATTENDANCE ALLOWANCE FOR SURVIVING SPOUSES AND PARENTS
AND HOUSEBOUND BENEFITS FOR SURVIVING SPOUSES ENTITLED TO DIC OR
IMPROVED PENSION**

a\. **General.** Surviving spouses and parents who are receiving or
entitled to receive death pension (including Section 306, Old Law
pension and service pension) or DIC or death compensation may qualify
for aid and attendance (A&A) under 38 CFR 3.351. For those surviving
spouses receiving Old Law or Section 306 pension the additional amount
payable once entitlement to A&A is established will be paid only if he
or she elects Improved Pension. A Spanish American War surviving spouse
who is receiving either Old Law or Section 306 pension as the greater
benefit can be paid the additional amount for A&A without electing
Improved Pension. Surviving spouses who are receiving or entitled to
receive DIC or Improved Pension may qualify for the Housebound rate
under 38 CFR 3.351(d). Any communication from the claimants or their
accredited representatives indicating a desire for increased benefits
because of disability or nursing home status will be accepted as a claim
for Housebound or A&A, as applicable.

b\. **Development.** Examinations by VA are not generally contemplated
(but see pt. VI, par. 1.01d) and determinations of a claimant\'s need
for A&A or Housebound will be based, if possible, on medical reports and
findings by private physicians or non-VA facilities. Statements by
private physicians meeting the requirements of 38 CFR 3.326(d) are
acceptable for rating purposes. Statements by responsible officials of
nursing homes are acceptable without need for physical examination to
establish patient\'s status (38 CFR 3.351(c)(2)).

c\. **Rating Required**

26-I-20

**June 6, 2005 M21-1, Part IV**

**Change 220**

\(1\) **General.** A memorandum rating is required if entitlement to A&A
is not based on nursing home patient status and in all Housebound
claims. Apply the criteria in 38 CFR 3.351(c)(1) and (3) in determining
the need for A&A and the criteria in 38 CFR 3.351(e) and (f) for
Housebound benefits. Decide other basic issues on separate memorandum
ratings.

\(2\) **Legend.** Use \"FOR (SURVIVING SPOUSE\'S) (PARENT\'S)
ENTITLEMENT TO AID AND ATTENDANCE OR FOR SURVIVING SPOUSE\'S ENTITLEMENT
TO HOUSEBOUND\" as the legend.

\(3\) **Conclusion.** The Conclusion will consist of a statement the
claimant is or is not entitled to A&A or Housebound and, if entitled,
the effective date of entitlement. (See app. A.)

d\. **Authorization Without Rating.** If evidence establishes the
claimant\'s nursing home patient status, authorize A&A without a rating.
(See par. 25.08 for applicable procedures.) Housebound is not subject to
presumption and is payable only as the result of a rating.

\(1\) **Discharge From Hospital to Nursing Home.** If a period of
hospitalization results in a discharge within 90 days to a nursing home
as a patient, authorize A&A without a rating from the first day of the
month following such hospital admission, subject to the effective date
provisions of 38 CFR 3.402(c) or 3.404. See 38 CFR 3.31.

\(2\) **Discharge From Nursing Home.** If the claimant is discharged
from a nursing home, procedures outlined in paragraph 25.08g for
disability cases are for equal application in death cases.

e\. **Award Action.** Required entries on the 401 Screen for the grant
or termination of A&A or Housebound benefits to surviving spouses or
parents are in part V, paragraph 5.08.

*Note:* If a surviving spouse or parent is furnished hospital,
domiciliary or nursing home care at VA expense, the A&A allowance
payable is subject to reduction under 38 CFR 3.552(b) regardless of
whether or not the payee is concurrently receiving an A&A allowance as a
veteran based on his or her own service.

f\. **Apportionments.** If the award is apportioned for a child or
children not in the surviving spouse\'s custody, add the entire
additional amount payable because of need for A&A or Housebound to the
award to the surviving spouse.

g\. **Reconsideration**

\(1\) If, after the grant of A&A or Housebound, evidence is received the
parent\'s or surviving spouse\'s condition has improved and it appears
he or she is no longer seriously disabled, refer the case to the rating
board for a redetermination of entitlement.

\(2\) If it is determined there no longer is a need for A&A or
Housebound, the rating board will prepare a memorandum rating decision,
showing as the heading \"PROPOSAL TO DISCONTINUE (A&A) (HOUSEBOUND)
BENEFITS.\" Follow the normal memorandum rating format, but omit the
coding/conclusion segment.

\(3\) After the 60-day predetermination period expires or all
development associated with a personal hearing is completed (if the
beneficiary requests the hearing within 30 days of the predetermination
notice), whichever is later, refer the case to the rating board for
reconsideration. If the facts contained in the proposed rating were
complete, they need not be repeated in the final formal rating decision
but need only be referenced by citing the proposed decision by date. If
additional evidence has been submitted, it should be specifically
disposed of in the final rating. If the final rating affirms the
proposed action, terminate the additional allowance effective date of
last payment (38 CFR 3.502(e)(1)).

**26.13 ELECTION OF BENEFITS**

Change a beneficiary\'s entitlement from one type of benefit to another
by amended award action using reason

26-I-21

**M21-1, Part IV June 6, 2005**

**Change 220**

code 30. Reflect the change in entitlement code as provided in part V,
paragraph 6.07c. Detailed instructions for effecting these changes in
specific types of cases are furnished in other paragraphs as follows:

a\. An election by the surviving spouse or child, if there is no
surviving spouse entitled, or by a parent, from death compensation to
DIC. See chapter 20, subchapter IX.

b\. Payment of DIC or death compensation after a prior award of death
pension benefits. See part III, paragraphs 3.07b and 3.09e.

c\. Possible change in entitlement of a child in receipt of an
apportioned share of Section 306 or Old Law pension to Improved Pension
upon the termination of the surviving spouse\'s entitlement. See
paragraphs 20.47 and 26.07e.

d\. An election by the surviving spouse or child, if there is no
surviving spouse entitled, from Section 306 or Old Law pension to
Improved Pension. See chapter 20, subchapter VIII.

**26.13.1 DIC REFORM\--PUBLIC LAW 101-568**

The Veterans\' Benefits Act of 1992, Pub. L. 102-568, reformed the DIC
program effective January l, l993.

**a. Veteran Died Prior to January l, l993.** If the veteran died prior
to January l, l993, DIC shall be paid to a surviving spouse based on the
pay grade of the person upon whose death entitlement is predicated, at
monthly rates set forth in the table under 38 U.S.C. 1311a(3) **OR**
payment as determined under 38 U.S.C. 1311a(1) and (2), whichever
provides the greater benefit.

**b. Veteran Died On or After January l, l993**. If the veteran died on
or after January l, l993, DIC shall be paid to a surviving spouse at the
basic monthly rate as provided under 38 U.S.C. 1311a(1). An additional
monthly allowance shall be paid as established under 38 U.S.C. 1311a(2)
if, at the time of the veteran\'s death, the veteran was in receipt of
or entitled to receive compensation for a service-connected disability
rated totally disabling (including a rating based on individual
unemployability) for a continuous period of at least 8 years immediately
preceding death **AND** the surviving spouse was married to the veteran
for those same 8 years. Both requirements must be met in order to
establish entitlement to this supplemental allowance. Determinations
will be made based on evidence in file, or deemed in file, at the time
of the veteran's death. See Part VI, paragraph 5.06c.

**c. Allowance for Dependent Children\--38 U.S.C. 1311(b).** A surviving
spouse shall be paid an additional monthly allowance for each child
under age 18. The DIC apportionment rates approved by the Under
Secretary for Benefits under 38 CFR 3.461(b) will be the additional
allowance received for each child, except where hardship is shown to
exist and special apportionment consideration under 38 CFR 3.451 is
warranted.

**26.13.2 DIC REFORM---PUBLIC LAW 106-117**

**a. Payment of Ancillary Benefits.** Section 502 of Pub. L. 106-117
restores entitlement to health care benefits under 38 U.S.C. Chapter 17
(CHAMPVA), Chapter 35 education benefits, and housing loans under 38
U.S.C. Chapter 37 if the remarriage has been terminated by death or
divorce. This provision of the law also applies to a surviving spouse
who has ceased living with another person and holding himself or herself
out openly to the public as that person's spouse. This provision of the
law is effective December 1, 1999. These benefits are *not* payable for
the period from October 1, 1998, through November 30, 1999.

**b**. **Payment of DIC under 38 U.S.C. 1318 for Former Prisoners of War
(POW).** Section 501 of Pub. L. 106-117 authorizes payment of DIC to the
survivors of former POWs who died after September 30, 1999, and who were
rated totally disabled for a service-connected disability continuously
for a period of not less than one year immediately preceding death. This
provision is effective November 30, 1999.

Use special law code 25 in these cases.

26-I-22

**June 6, 2005 M21-1, Part IV**

**Change 220**

**26.13.3 DIC REFORM---PUBLIC LAW 108-454**

The Veterans\' Benefits Act of 2004, Public Law 108-454, reformed the
DIC program effective January l, 2005.

**a. Payment of Additional DIC Benefits.** Section 301 of Public Law
108-454 authorizes payment of an additional monthly amount to a
surviving spouse receiving DIC with one or more minor children on the
award.

> \(1\) An additional monthly amount of \$250.00 is payable to a
> surviving spouse, if

-   Original entitlement to DIC was granted within the last two years,
    and

-   One or more children under age 18 are on the surviving spouse's
    award.

\(2\) 38 U.S.C. 1311, Section 301(b), which provides for the additional
payment, was enacted January 1, 2005. If a surviving spouse is entitled
from the date of enactment, payments may not be made before February 1,
2005.

\(3\) The additional amount only applies to the months occurring during
the two-year period beginning from the date entitlement to DIC began.
Entitlement terminates at the end of the two-year period or when the
last minor child on the surviving spouse's award reaches the age of 18
or is removed from the award, whichever occurs first.

\(4\) Only **one** additional monthly amount (\$250.00) is payable,
regardless of the number of minor children on the surviving spouse's
award.

*Example 1:* A surviving spouse with at least one child under the age of
18 was awarded DIC, effective July 1, 2004. The two-year period from the
date of initial entitlement ends June 30, 2006. The surviving spouse
would be entitled to the additional \$250.00 monthly amount from January
1, 2005, through June 30, 2006. (Payments from February 1, 2005, to July
1, 2006.)

*Example 2:* A surviving spouse with at least one child under the age of
18 was awarded DIC, effective February 1, 2003. The two-year period from
date of initial entitlement ends January 31, 2005. In this case, the
surviving spouse would be entitled to the additional \$250.00 for one
month, from January 1, 2005, through January 31, 2005.

a.  **Identification of claims involving the additional monthly DIC and
    work credit for adjustment.**

\(1\) Use special law code 28 to identify DIC claims in which the
additional monthly amount is being paid.

\(2\) Use end product 690 if adjusting an award exclusively to add this
benefit.

26-I-23

### June 6, 2005 M21-1, Part IV

**SUBCHAPTER II. OFFICE OF PERSONNEL MANAGEMENT - AWARDS**

**BARRED BY RECEIPT OF FEDERAL EMPLOYEES\' GROUP LIFE INSURANCE**

**26.14 SCOPE**

This subchapter is applicable only to cases in which the deceased person
served as a commissioned officer of the Coast and Geodetic Survey
(NOAA - National Oceanic and Atmospheric Administration, formerly ESSA -
Environmental Science Services Administration) or the Public Health
Service after August 16, 1954, and prior to January 1, 1957, and whose
death occurred on or after May 1, 1957.

a\. If death occurred prior to May 1, 1957, death compensation or DIC
may be paid to dependents of these deceased officers without regard to
Federal Employees\' Group Life Insurance (FEGLI) coverage.

b\. If death occurred on or after May 1, 1957, death compensation or DIC
may not be paid if FEGLI is payable to **ANY** person based on that
death (38 CFR 3.5(d)).

**26.15 OBTAINING INFORMATION**

When a claim for death compensation or DIC is based on a death which
occurred on or after May 1, 1957, and the deceased person was a
commissioned officer of the Coast and Geodetic Survey (NOAA, ESSA) or
the Public Health Service after August 16, 1954, and prior to January 1,
1957, send a letter to the Compensation Group, Office of Personnel
Management, Washington, DC 20415, requesting a statement as to whether
or not FEGLI has been paid or is payable to any person and stating that:

a\. A claim has been filed with VA and

b\. The deceased veteran performed active service as a commissioned
officer of the Coast and Geodetic Survey (NOAA, ESSA) or the Public
Health Service.

**26.16 SIMULTANEOUS DEVELOPMENT**

To avoid piecemeal development and to keep the claimant informed of
possible delays, when the request is sent to the Office of Personnel
Management, notify the claimant of the action taken. If there is
evidence to be submitted by the claimant which could be supplied without
expense or undue expenditure of time and effort, include a request for
such evidence. Unless it is readily apparent that FEGLI would not be
payable and, therefore, not a bar, defer such requests for evidence from
the claimant. This does not preclude any development necessary to obtain
records or evidence from other sources, e.g., VA Form 21-3101 requests.

**26.17 ACTION ON REPLY FROM THE OFFICE OF PERSONNEL MANAGEMENT**

a\. If the reply states such insurance has been paid or is payable
either to the claimant or to any other person or persons, disallow the
claim using disallowance code 30. Annotate the disallowance document:
\"Federal Employees Group Life Insurance payable, 38 CFR 3.5(d).\"

b\. If the reply is negative and entitlement or nonentitlement is
otherwise established, take appropriate award or disallowance action.

26-II-1

### June 6, 2005 M21-1, Part IV

**SUBCHAPTER III. SERVICE DEPARTMENTS - ALLOWANCE, ALLOTMENT**

**OR SERVICE PAY - 38 U.S.C. 5110(j)**

**26.18 SCOPE**

a\. **General.** The provisions of 38 CFR 3.400(c)(1) (38 U.S.C.
5110(j)) apply in all death-in-service cases.

\(1\) When a claim for service-connected death benefits is filed within
1 year after the date of death of a serviceperson or the date on which a
report of actual death or a finding of presumptive death is made by the
Secretary of the service department concerned, VA payments may be
affected by payments made to the claimant by the service department.

\(2\) Payment of death compensation or DIC to any dependent is precluded
for any period for which such dependent has received or is entitled to
receive an allowance, allotment or service pay of the deceased
(excluding the 6-month death gratuity). See part II, paragraph 5.29 for
furnishing applications.

b\. **More Than One Report or Finding of Death**

\(1\) If the XC-folder contains more than one report of actual death or
finding of presumed death, use the first report or finding made by the
service department to determine if the original claim was filed within
the prescribed l-year period.

\(2\) Retroactive death compensation or DIC is not authorized under 38
U.S.C. 5110(j) unless the dependent filed a claim within 1 year from the
earliest date the report or finding of death was made by the service
department as shown by the service report.

**26.19 AWARD ACTION**

a\. **Initial Award - Payment Data Not Furnished.** Do not delay
adjudication of a claim for death compensation or DIC solely because
information from the service department concerning the payment of an
allowance, allotment or service pay of the deceased to his or her
dependents is not of record. If a claim is received within 1 year of the
date of report or finding, take initial award action, if otherwise in
order, to authorize payments subject to possible adjustment, as follows:

\(1\) Enter the date of death, in the space provided, as the date of
reported or presumptive death.

\(2\) Show the effective date in case of:

\(a\) **Reports of Actual Death.** As of the day following the date of
reported death or, if the deceased was held to be in a missing status
subsequent to the date of reported death, as of the day following the
date of the report of missing status.

\(b\) **Findings of Presumptive Death.** As of the day following the
date of the report.

\(3\) Enter in remarks: \"Report (Finding) of death made
([date]{.underline}) subject to possible adjustment to an earlier
commencing date (38 U.S.C. 5110(j)).\"

\(4\) Establish a 30-day control for receipt of DD Form 1515, Pay and
Allotment Information - Deceased Member. At the expiration of the
control period, request the necessary payment data using VA Form 21-3101
as provided in part III, chapter 4. In the award letter make no
reference to the possibility of a future adjustment of the commencing
date.

26-III-1

**M21-1, Part IV June 6, 2005**

\(5\) Upon receipt of payment information:

\(a\) Under paragraph 26.20, if an adjustment in the commencing date of
an award under this subparagraph is not required on receipt of the
information from the service department, an adjudicator will annotate
the VA Form 21-3101 with the notation, \"NAN,\" date and initial it.

\(b\) If an adjustment is necessary, prepare an amended award annotated
with the appropriate statement for \"Remarks\" as set forth in paragraph
26.20.

b\. **Initial Award - Payment Data Furnished.** If the DD Form 1300,
Report of Casualty, or other report or finding of actual death or DD
Form 1515 contains the necessary information as to the
beneficiary-claimant\'s receipt of an allowance, allotment or service
pay of the deceased, VA Form 21-3101 action will not be necessary. Take
award action, determine the commencing date and enter remarks as
provided in paragraph 26.20.

c\. **Claim Received More Than 1 Year After Initial Report or Finding.**
If the claim is filed more than 1 year after the date the report or
finding was made, the commencing date will be the date the claim was
filed if otherwise in order. Service department payment information will
not be required except for basic pay data needed to determine a
surviving spouse\'s entitlement to DIC.

**26.20 EFFECTIVE DATES AND REMARKS**

Determine effective dates and prepare awards using the appropriate
remarks as provided in this paragraph. As used in this paragraph, the
term \"payments from the service department\" means allowance, allotment
or service pay of the deceased which the claimant received or is
entitled to receive. See paragraph 16.05.

a\. **Reports of Actual Death.** When a claim is received within 1 year
after the date of a report of actual death was made, the following
apply:

> Effective Remarks To Be
>
> Date Entered on Award

\(1\) No payments from service First day of month Report of death made
([date]{.underline}).

department for any period of death. Payee did not receive and is

on or after first day of not entitled to receive any

> month of death. allowance, allotment or service pay of the deceased
> (38 U.S.C. 5110(j) (formerly) 3010(j)))..

\(2\) Payments from service The day following Report of death made
([date]{.underline}).

department for a period on the date of actual Payee received (entitled
to receive)

or after the date of death. allowance (allotment) (service pay) of

actual death. the deceased through ([date]{.underline}) (38 U.S.C.

5110(j) (formerly 3010(j))).

\(3\) Deceased was carried in Day following final Report of death made

a **missing status** and date of period ([date]{.underline}). Payee
received

payments from service covered by service (entitled to receive)

department were for a department payments. allowance (allotment)

period subsequent to the (service pay) of deceased

date of death. through ([date]{.underline}). (38 U.S.C.\
5110(j) (formerly 3010(j))).

> 26-III-2

**June 6, 2005 M21-1, Part IV**

b\. **Finding of Presumptive Death Corrected by Report of Actual
Death.** When an award has been made on a claim filed within 1 year
after a finding of presumptive death, on receipt of a report of actual
death and necessary payment information, adjust the effective date as
follows:

Effective Remarks To

Date Be Entered on Award

\(1\) No payments from service First day of month Finding of presumptive

department for any period of actual death. death made
([date]{.underline})

on or after the first day corrected by report of

of the month of death. actual death.

\(2\) Payments from service Day following the Finding of presumptive

department for a period final date of death made ([date]{.underline})

subsequent to date of period covered by corrected by report of

death and prior to the service department actual death. Payee

date the finding of payments. received (entitled to

presumptive death was receive) allowance

made. (allotment) (service pay) of the

> deceased through ([date]{.underline}). (38 U.S.C.\
> 5110(j)) (formerly 3010(j))).

**26.21 CORRECTIONS OF REPORTS OF ACTUAL DEATH**

a\. **Correction of Date of Death in a Prior Award.** if a report of
actual death is received correcting the date of death shown in the
previous report, do not amend the award solely to correct the date of
death unless an adjustment in commencing date is required.

\(1\) The authorizer will line out the incorrect date on the prior
award, enter the correct date and initial the change.

\(2\) Correct the master record under part V, paragraph 18.09. Update
BIRLS using the BUPD command.

b\. **Amended Award Required.** If the award must be amended to adjust
the commencing date, enter the appropriate \"Remarks\" from paragraph
26.20. Precede the entry with: \"Report of actual death made
([date]{.underline}) corrected by subsequent report of actual death.\"

**26.22 AWARDS TO OTHER BENEFICIARIES**

a\. **Apportionments.** Do not authorize an award to, for or on account
of a child of an apportioned share of death compensation or DIC for any
period during which the payment of such benefit to the surviving spouse
is barred by reason of the provisions of 38 U.S.C. 5110(j).

b\. **Children (No Surviving Spouse) or Parents.** When payment of death
compensation or DIC to only one child or parent is barred during any
period by reason of the provisions of 38 U.S.C. 5110(j), authorize
payments during such period for the other children or parent, if
otherwise in order, but only at the rate which would be payable if all
children or both parents were receiving payments.

**26.23 SERVICE DEPARTMENT PAYMENT TO ESTATES**

a\. **Determination of Service Pay Paid to Claimant.** If information
furnished by the service department shows that service pay of the
deceased was paid to the fiduciary, executor, administrator or other
representative of

26-III-3

**M21-1, Part IV June 6, 2005**

**Change 220**

the veteran\'s estate and a determination is necessary as to whether any
claimant for death compensation or DIC may be considered to have
received or to be entitled to receive service pay of the deceased,
predicate the determination on a statement from the fiduciary or the
court of jurisdiction.

\(1\) Ask the claimant to submit a statement from one of these sources
as to whether any part of the veteran\'s estate has been or will be paid
to the claimant.

\(2\) Use this procedure regardless of whether the claimant and
fiduciary of the estate are separate individuals or are one and the same
individual.

\(3\) If the claimant received the service pay of the deceased in his or
her official capacity as fiduciary of the estate, ascertain if he or she
received any amount from the estate as distributee.

b\. **Time Limit.** The request for this information is a request for
evidence and will be subject to the 1-year time limit for the submission
of evidence in connection with a pending claim.

26-III-4

# June 6, 2005 M21-1, Part IV

###  Change 220

**SUBCHAPTER IV. SERVICE DEPARTMENTS - THE**

**SURVIVOR BENEFIT PLAN**

**26.24 SCOPE**

a\. **General.** Effective September 21, 1972, the Survivor Benefit Plan
(SBP) was established under Public Law 92-425 for retired service
personnel and commissioned officers of the Public Health Service and the
National Oceanic and Atmospheric Administration.

b\. **SBP Annuity.** Eligible persons can designate all or a part of
retired pay as a basis for survivors\' annuity, payable to a surviving
spouse, children, or persons having an insurable interest in the
retiree. The designated beneficiary will receive 55 percent of the base
amount selected.

c\. **SBP Minimum Income Annuity Plan.** The SBP alternatively provided
for a guaranteed minimum income for the limited class of eligible
surviving spouses of military retirees who did not participate in the
Plan and who died prior to September 21, 1973. This plan is identified
as an annuity paid to Minimum Income Widow/ers and referred to as the
MIW-SBP. To be eligible, the surviving spouse must not be remarried,
must be eligible for VA death pension, and must have income for VA
purposes, excluding any SBP annuity, of less than the MIW-SBP annuity
limitation.

d\. **Annuities for Certain Military Surviving Spouses (ACMSS).**
Certain widow(er)s of military retirees are eligible to draw an annuity
under this program which was established under Public Law 105-85 on
November 18, 1997. The program was established because a portion of the
widows(ers) of military retiree population were "forgotten" when SBP was
created. Hence, ACMSS is often referred to as the "forgotten widows
annuity." There are two categories of surviving spouses who qualify for
ACMSS:

(1) A surviving spouse of a retired (regular or reserve) member who died
    before March 21, 1974,

    and who was already drawing retired pay at the time of death.

(2) A surviving spouse of a qualified reserve member (i.e., one who had
    completed 20 qualifying

years of service toward retired pay) who was not yet in receipt of
retired pay because he/she had not reached age 60. The qualified reserve
member must have died prior to October 1, 1978.

e\. **SBP Relationship to VA Benefits**

\(1\) **Pension Entitlement.** Any payments under SBP, MIW-SBP, and
ACMSS will be considered \"Retirement or Annuity\" income for VA pension
purposes (38 CFR 3.261(a)(14)).

\(2\) **DIC Entitlement.** Payment of SBP survivor\'s annuity to a
surviving spouse or payment of ACMSS is subject to reduction or
discontinuance if he or she becomes entitled to DIC. Concurrent payment
of SBP and DIC to children and parents is not prohibited.

**26.25 DEATH PENSION CASES - SBP MINIMUM INCOME PLAN**

a\. **Referrals by Service Department for Eligibility Determination**

\(1\) If a surviving spouse meets eligibility requirements for the SBP
minimum income plan (par. 26.24c) and has applied to the Defense
Department for such benefits, the service department will forward an
original and one copy of DD Form 1895, Request for Veterans
Administration Pension and Annual Income Information, together with a
copy of DD Form 1985, Survivor Benefit Plan, Minimum Income Claim.

\(2\) If Retired Servicemen\'s Family Protection Plan (RSFPP) benefits
are payable, the service department will partially complete the
\"Eligibility Determination\" portion of DD Form 1895, showing
subtraction of the RSFPP annuity (which is not counted in VA income
computations for Section 306 or

26-IV-1

# M21-1, Part IV June 6, 2005

### Change 220

Old Law cases - 38 CFR 3.261(a)(14)) from the basic income limitation,
and establishing the actual income limit which can be supplemented by
the MIW-SBP annuity.

\(3\) In Improved Pension cases, RSFPP benefits are countable as income
for VA purposes. Enter RSFPP annuities as type M retirement (type 0 if
more than one retirement benefit is involved) and use special law code
06.

b\. **Eligibility Determinations by Adjudication**

\(1\) **Surviving Spouse Not Entitled to VA Pension.** Appropriately
complete the items, \"Is Widow Entitled to VA Pension?\" and \"Reason
Widow Not Entitled to VA Pension\" of DD Form 1895, checking the box
\"Income Exceeds,\" when VA pension is not payable because of income in
excess of the applicable annual income limitation. If \"other\" is
checked, briefly state the reason for the nonentitlement to VA pension
in \"Remarks,\" e.g., \"Excessive Net Worth,\" \"Relationship Not
Established.\"

\(2\) **Surviving Spouse Entitled to VA Pension.** In addition to
showing entitlement to VA pension on DD Form 1895, complete the
\"Entitlement Computation\" part of the form.

**NOTE:** Use this form only in Improved Pension cases. Use locally
generated letters in Section 306 or Old Law cases.

\(a\) In the \"Current Year\" column, insert the four-digit net
countable income for VA purposes (IVAP) on which pension payments are
currently being made. Subtract this amount from the dollar amount as
previously entered by the service department. Enter the balance as the
MIW-SBP payable. If the amount entered as the IVAP equals or exceeds the
limit entered by the service department, enter \"none\" on the line for
MIW-SBP payable.

\(b\) If a change in the surviving spouse\'s income is anticipated for
the following year, complete these lines for IVAP and MIW-SBP payable,
inserting the year in the caption under the \"next year\" column as
under subparagraph (a) above.

**EXAMPLE:** Surviving spouse\'s 1992 income for VA purposes is \$1000.
Anticipated countable income for 1993 is \$4,500. The eligibility
determination of DD Form 1895 would be completed as follows:

+---+---+--------------------------+------+----------+-----------------+
| E |   |                          |      |          |                 |
| L |   |                          |      |          |                 |
| I |   |                          |      |          |                 |
| G |   |                          |      |          |                 |
| I |   |                          |      |          |                 |
| B |   |                          |      |          |                 |
| I |   |                          |      |          |                 |
| L |   |                          |      |          |                 |
| I |   |                          |      |          |                 |
| T |   |                          |      |          |                 |
| Y |   |                          |      |          |                 |
| D |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| T |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| R |   |                          |      |          |                 |
| M |   |                          |      |          |                 |
| I |   |                          |      |          |                 |
| N |   |                          |      |          |                 |
| A |   |                          |      |          |                 |
| T |   |                          |      |          |                 |
| I |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| N |   |                          |      |          |                 |
| * |   |                          |      |          |                 |
| ( |   |                          |      |          |                 |
| L |   |                          |      |          |                 |
| I |   |                          |      |          |                 |
| N |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| S |   |                          |      |          |                 |
| 1 |   |                          |      |          |                 |
| B |   |                          |      |          |                 |
| A |   |                          |      |          |                 |
| N |   |                          |      |          |                 |
| D |   |                          |      |          |                 |
| 1 |   |                          |      |          |                 |
| C |   |                          |      |          |                 |
| T |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| B |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| C |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| M |   |                          |      |          |                 |
| P |   |                          |      |          |                 |
| L |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| T |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| D |   |                          |      |          |                 |
| B |   |                          |      |          |                 |
| Y |   |                          |      |          |                 |
| D |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| D |   |                          |      |          |                 |
| ; |   |                          |      |          |                 |
| L |   |                          |      |          |                 |
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| N |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| S |   |                          |      |          |                 |
| 1 |   |                          |      |          |                 |
| D |   |                          |      |          |                 |
| A |   |                          |      |          |                 |
| N |   |                          |      |          |                 |
| D |   |                          |      |          |                 |
| 1 |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| B |   |                          |      |          |                 |
| Y |   |                          |      |          |                 |
| V |   |                          |      |          |                 |
| A |   |                          |      |          |                 |
| ) |   |                          |      |          |                 |
| * |   |                          |      |          |                 |
+---+---+--------------------------+------+----------+-----------------+
| 1 |   |                          | 2\.  |          |                 |
| \ |   |                          | RE   |          |                 |
| . |   |                          | ASON |          |                 |
| I |   |                          | W    |          |                 |
| S |   |                          | IDOW |          |                 |
| W |   |                          | NOT  |          |                 |
| I |   |                          | ENTI |          |                 |
| D |   |                          | TLED |          |                 |
| O |   |                          | TO   |          |                 |
| W |   |                          | VA   |          |                 |
| E |   |                          | PEN  |          |                 |
| N |   |                          | SION |          |                 |
| T |   |                          |      |          |                 |
| I |   |                          | !    |          |                 |
| T |   |                          | [](m |          |                 |
| L |   |                          | edia |          |                 |
| E |   |                          | /ima |          |                 |
| D |   |                          | ge1. |          |                 |
| T |   |                          | emf) |          |                 |
| O |   |                          | IN   |          |                 |
| V |   |                          | COME |          |                 |
| A |   |                          | EXC  |          |                 |
| P |   |                          | EEDS |          |                 |
| E |   |                          | !    |          |                 |
| N |   |                          | [](m |          |                 |
| S |   |                          | edia |          |                 |
| I |   |                          | /ima |          |                 |
| O |   |                          | ge1. |          |                 |
| N |   |                          | emf) |          |                 |
| ? |   |                          | O    |          |                 |
|   |   |                          | THER |          |                 |
| ! |   |                          | (SPE |          |                 |
| [ |   |                          | CIFY |          |                 |
| ] |   |                          | IN   |          |                 |
| ( |   |                          | REMA |          |                 |
| m |   |                          | RKS) |          |                 |
| e |   |                          |      |          |                 |
| d |   |                          |      |          |                 |
| i |   |                          |      |          |                 |
| a |   |                          |      |          |                 |
| / |   |                          |      |          |                 |
| i |   |                          |      |          |                 |
| m |   |                          |      |          |                 |
| a |   |                          |      |          |                 |
| g |   |                          |      |          |                 |
| e |   |                          |      |          |                 |
| 1 |   |                          |      |          |                 |
| . |   |                          |      |          |                 |
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| m |   |                          |      |          |                 |
| f |   |                          |      |          |                 |
| ) |   |                          |      |          |                 |
| Y |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| S |   |                          |      |          |                 |
| ! |   |                          |      |          |                 |
| [ |   |                          |      |          |                 |
| ] |   |                          |      |          |                 |
| ( |   |                          |      |          |                 |
| m |   |                          |      |          |                 |
| e |   |                          |      |          |                 |
| d |   |                          |      |          |                 |
| i |   |                          |      |          |                 |
| a |   |                          |      |          |                 |
| / |   |                          |      |          |                 |
| i |   |                          |      |          |                 |
| m |   |                          |      |          |                 |
| a |   |                          |      |          |                 |
| g |   |                          |      |          |                 |
| e |   |                          |      |          |                 |
| 1 |   |                          |      |          |                 |
| . |   |                          |      |          |                 |
| e |   |                          |      |          |                 |
| m |   |                          |      |          |                 |
| f |   |                          |      |          |                 |
| ) |   |                          |      |          |                 |
| N |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| ( |   |                          |      |          |                 |
| I |   |                          |      |          |                 |
| F |   |                          |      |          |                 |
| \ |   |                          |      |          |                 |
| " |   |                          |      |          |                 |
| N |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| \ |   |                          |      |          |                 |
| " |   |                          |      |          |                 |
| C |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| M |   |                          |      |          |                 |
| P |   |                          |      |          |                 |
| L |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| T |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| I |   |                          |      |          |                 |
| T |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| M |   |                          |      |          |                 |
| 2 |   |                          |      |          |                 |
| ) |   |                          |      |          |                 |
+---+---+--------------------------+------+----------+-----------------+
| E |   |                          | CUR  |          | NEXT YEAR       |
| N |   |                          | RENT |          | (1993)          |
| T |   |                          | YEAR |          |                 |
| I |   |                          | IF   |          | OR CURRENT      |
| T |   |                          |      |          |                 |
| L |   |                          | CHA  |          | AND CONTINUING  |
| E |   |                          | NGED |          |                 |
| M |   |                          | NEXT |          |                 |
| E |   |                          |      |          |                 |
| N |   |                          | YEAR |          |                 |
| T |   |                          | OR   |          |                 |
| C |   |                          | LESS |          |                 |
| O |   |                          |      |          |                 |
| M |   |                          | THAN |          |                 |
| P |   |                          | FULL |          |                 |
| U |   |                          | YEAR |          |                 |
| T |   |                          |      |          |                 |
| A |   |                          |      |          |                 |
| T |   |                          |      |          |                 |
| I |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| N |   |                          |      |          |                 |
+---+---+--------------------------+------+----------+-----------------+
| 1 | L |                          | \$   |          | \$ 4,918        |
|   | I |                          | 4    |          |                 |
| A | M |                          | ,918 |          |                 |
|   | I |                          |      |          |                 |
|   | T |                          |      |          |                 |
|   | O |                          |      |          |                 |
|   | N |                          |      |          |                 |
|   | I |                          |      |          |                 |
|   | N |                          |      |          |                 |
|   | C |                          |      |          |                 |
|   | O |                          |      |          |                 |
|   | M |                          |      |          |                 |
|   | E |                          |      |          |                 |
|   | T |                          |      |          |                 |
|   | O |                          |      |          |                 |
|   | B |                          |      |          |                 |
|   | E |                          |      |          |                 |
|   | S |                          |      |          |                 |
|   | U |                          |      |          |                 |
|   | P |                          |      |          |                 |
|   | P |                          |      |          |                 |
|   | L |                          |      |          |                 |
|   | E |                          |      |          |                 |
|   | M |                          |      |          |                 |
|   | E |                          |      |          |                 |
|   | N |                          |      |          |                 |
|   | T |                          |      |          |                 |
|   | E |                          |      |          |                 |
|   | D |                          |      |          |                 |
+---+---+--------------------------+------+----------+-----------------+
| 1 |   | LESS RSFPP               | \-   |          | \- 480          |
|   |   |                          | 480  |          |                 |
| B |   |                          |      |          |                 |
+---+---+--------------------------+------+----------+-----------------+
| 1 | D | LIMIT ON INCOME (EXCEPT  | \$   |          | \$ 4,438        |
|   |   | PENSION) FOR\            | 4    |          |                 |
| C | O | SBP PURPOSES (LINE A     | ,438 |          |                 |
|   |   | MINUS B)                 |      |          |                 |
|   | D |                          |      |          |                 |
+---+---+--------------------------+------+----------+-----------------+
| 1 | V | INCOME FOR VA PURPOSES   | \-   |          | \- 4,500        |
|   |   | BEFORE                   | 1    |          |                 |
| D | A |                          | ,000 |          |                 |
|   |   | SBP                      |      |          |                 |
+---+---+--------------------------+------+----------+-----------------+
| 1 |   | SBP PAYABLE (LINE C      | \$   |          | \$ NONE         |
|   |   | MINUS D)                 | 3    |          |                 |
| E |   |                          | ,438 |          |                 |
+---+---+--------------------------+------+----------+-----------------+
| 3 |   |                          |      |          |                 |
| \ |   |                          |      |          |                 |
| . |   |                          |      |          |                 |
| R |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| M |   |                          |      |          |                 |
| A |   |                          |      |          |                 |
| R |   |                          |      |          |                 |
| K |   |                          |      |          |                 |
| S |   |                          |      |          |                 |
+---+---+--------------------------+------+----------+-----------------+
| 5 |   |                          |      | 4A. VA   |                 |
| \ |   |                          |      | OFFICE   |                 |
| . |   |                          |      |          |                 |
| R |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| T |   |                          |      |          |                 |
| U |   |                          |      |          |                 |
| R |   |                          |      |          |                 |
| N |   |                          |      |          |                 |
| T |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| : |   |                          |      |          |                 |
+---+---+--------------------------+------+----------+-----------------+
|   |   |                          |      | 4B.      |                 |
|   |   |                          |      | S        |                 |
|   |   |                          |      | IGNATURE |                 |
+---+---+--------------------------+------+----------+-----------------+
|   |   |                          |      | 4C DATE  |                 |
+---+---+--------------------------+------+----------+-----------------+
| * |   |                          |      |          |                 |
| * |   |                          |      |          |                 |
| D |   |                          |      |          |                 |
| D |   |                          |      |          |                 |
| F |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| R |   |                          |      |          |                 |
| M |   |                          |      |          |                 |
| 1 |   |                          |      |          |                 |
| 8 |   |                          |      |          |                 |
| 9 |   |                          |      |          |                 |
| 5 |   |                          |      |          |                 |
| * |   |                          |      |          |                 |
| * |   |                          |      |          |                 |
| O |   |                          |      |          |                 |
| / |   |                          |      |          |                 |
| P |   |                          |      |          |                 |
| , |   |                          |      |          |                 |
| 1 |   |                          |      |          |                 |
| D |   |                          |      |          |                 |
| E |   |                          |      |          |                 |
| C |   |                          |      |          |                 |
| 7 |   |                          |      |          |                 |
| 2 |   |                          |      |          |                 |
+---+---+--------------------------+------+----------+-----------------+

26-IV-2

### June 6, 2005 M21-1, Part IV

**Change 220**

\(3\) **Entitlement to Death Pension Not Determined.** If there is a
pending claim for death pension, advise the service department of the
status of the claim and that a final reply will be furnished at a later
date. On final disposition of the pending claim, dispose of DD Form 1895
as provided in subparagraph (4) below. If no claim has been received,
check the reason not entitled to VA pension, \"Other\" and enter
appropriate information in \"Remarks.\" Back-file the copy in the claims
folder so as to remain on top of all subsequent file material so the
service department may be informed if a claim is filed at a later date.

\(4\) **Disposition of DD Form 1895.** Complete DD Form 1895 by entering
the VA office, signing in the name of the Adjudication Officer and
dating the form. Return the original to the service department for
initiation of their payments, if any are to be made, or to furnish
notice of denial when the MIW-SBP payable has been determined as
\"None.\" The person preparing the form will sign and date the copy and
file it in the claims folder.

c\. **Recomputation of Income.** If it is determined MIW-SBP is payable,
recompute the surviving spouse\'s income for VA purposes since this
annuity is included as countable income. Make the required adjustment of
pension when the DD Form 1895 is released.

d\. **Preparation of Pension Award Involving MIW-SBP.** The following
specific requirements apply:

\(1\) **Income Data.** Enter the MIW-SBP payable, as determined above,
as a type M, Other Annuity or Retirement. If the surviving spouse is
also receiving any other annuity or retirement (other than RSFPP, which
is not countable and not for entry), enter the total income from this
source (SBP and Other) as type 0.

\(2\) **Special Law Codes.** Reduce pension under either the
end-of-month or the end-of-year rule (38 CFR 3.660(a)(2)). See paragraph
16.25 for use of special law code 18. See part V, paragraph 6.09. In
addition, use the following for entry in miscellaneous code on pension
awards involving SBP Minimum Income Plan **ONLY**. They are not for use
when the SBP benefit is the Survivor Annuity.

\(a\) **Special Law Code 06.** Use this code when the MIW-SBP is the
only annuity or retirement received or in Improved Pension cases when
the surviving spouse is in receipt of RSFPP.

\(b\) **Special Law Code 08.** Use this code in Section 306 or Old Law
cases when the surviving spouse is receiving RSFPP in addition to the
MIW-SBP.

**NOTE 1:** Using the CORR command, enter special law code 06 or 08, as
appropriate, when award action is not required. Even though the MIW-SBP
payable is \"None,\" this will be maintained in the master record until
the pension award is terminated so as to provide identification for
computer actions.

**NOTE 2:** To ensure that the automatic notices (par. 26.27) are
directed to the proper service department, verify the correctness of the
Branch of Service Code previously entered.

**NOTE 3:** When the SBP **Survivor Annuity** is the benefit paid to the
surviving spouse, do **NOT** use special law codes 06 and 08 since their
use would trigger erroneous automatic recomputation of \"SBP payable\"
and issuance of an improper notice to the service department. The amount
of this SBP Survivor Annuity will be entered as a type M annuity and
used in determining the pension rate payable.

e\. **Subsequent Actions Due to Changes in Income.** If a change in
income received or anticipated is reported, there must be a
recomputation of income, a redetermination of the MIW-SBP payable (from
an amount to \"None\" or vice versa) and, if required, adjustment in the
award. For these purposes, even when the MIW-SBP payable is initially or
subsequently determined as \"None,\" the special law code 06 (or 08)
must continue to be maintained in the master record.

\(1\) Automatic computer adjustment required by the processing of a
transaction 49 will include the redetermination of the MIW-SBP payable
in the income computation routine when the record carries special law
code 06 and a type M annuity amount.

26-IV-3

**M21-1, Part IV June 6, 2005**

**Change 220**

\(2\) When the pension record is under special law code 08, computer
redetermination of the MIW-SBP payable is not possible. In these
instances the adjudicator must compute and enter the new MIW-SBP payable
regardless of the type of transaction used to enter the data. In
computer processing of EVR transactions against such accounts, the EVR
is referred for adjudicative action.

\(a\) When the \"other annuity or retirement\" field is type M under
special law code 08, the amount is considered in the automatic
adjustment program as the \"New\" MIW-SBP payable without any need for
computer reduction when computing income for VA purposes.

\(b\) When there is a type 0 annuity under special law code 08 or 06,
the automatic adjustment program accepts and uses the type 0 amount
without attempting any recalculation of MIW-SBP payable.

f\. **Notices to Service Departments.** See paragraph 26.27

**26.26 DEPENDENCY AND INDEMNITY COMPENSATION - OFFSETS OF PAYMENTS**

a\. **General**

\(1\) **Relationship Between DIC and SBP Payments.** When a surviving
spouse is entitled to both SBP and DIC benefits, the service finance
center may only pay the amount of SBP in excess of the basic DIC. There
is no bar against full payment of both SBP and DIC to a child or parent.

\(2\) **Basic DIC Defined**

\(a\) For purposes of this subchapter, basic DIC means the rate payable
to the surviving spouse as if there were no children (total dependency
code 10) for the veteran\'s pay grade excluding any allowance for A&A.

\(b\) In an apportionment case, if the amount paid to the surviving
spouse is less than the basic DIC, consider the lesser amount to be the
basic DIC for purposes of this subchapter.

\(c\) Under 38 CFR 3.20 a surviving spouse\'s benefit rate for the month
of the veteran\'s death may not be less than the rate of compensation or
disability pension the veteran would have received but for the
veteran\'s death. This applies only to the rate of payment and does not
redefine the death benefit being paid. If death was service connected,
the benefit payable for the month of death is DIC and not compensation,
but do not consider the veteran\'s rate for the month of death as the
DIC rate for reporting purposes. In replying to service department
inquiries, furnish the basic DIC rate (38 CFR 3.5) and award effective
date, i.e., the first day of the month of the veteran\'s death.

\(3\) **Overpayment of SBP.** If SBP was paid to a surviving spouse
entitled to DIC, VA will offset any overpayment of SBP from the DIC
award in an amount not greater than the basic DIC payable. Finance will
send the monies offset to the appropriate service finance center.

\(4\) **Effective Dates.** The effective dates of DIC and SBP may not
coincide since the effective date of an SBP annuity is always the day
following the date of death. The effective date of DIC is determined
under 38 CFR 3.400.

b\. **Service Department Payments of SBP**

If a surviving spouse is entitled to SBP, the service finance center
begins payment regardless of whether or not DIC is payable. When SBP
payments begin, the service finance center will notify the VA regional
office of jurisdiction (as indicated by service finance centers records
or, if not of record, based on beneficiary residence). The notice will
include an authorization for DIC offset signed by the surviving spouse.
On receipt of this notice, take action under this subchapter. If the
notice is not of record in a claim for DIC and evidence on file
indicates SBP is payable, e.g., the records show the deceased veteran
was a service retiree, take award action under subparagraph c(3) below.
Otherwise, take award action under subparagraph c(7) below.

26-IV-4

**June 6, 2005 M21-1, Part IV**

**Change 220**

c\. **Adjudication Procedures**

\(1\) **DIC Claim Pending, Disallowed or No DIC Claim Filed.** If no
claim for DIC was filed or a claim is pending or was disallowed, check
the appropriate block on the form received from the inquiring service
finance center to show the status of the case. Return the form to the
finance center, and annotate the claims folder by file flash. If DIC is
subsequently awarded, take action under the instructions in this
subchapter.

\(2\) **DIC Award Running Before Notice of SBP Award.** If the DIC award
is running when VA receives notice of the SBP award from the service
finance center:

\(a\) Enter special law code 06 in the master record to ensure
computer-generated notification to the service finance center when the
DIC award is amended or terminated.

\(b\) Route the folder by OF 41 to Finance so that they may obtain a
statement of the amount of SBP payment to be deducted from the DIC
award. As the basic DIC rate (as defined in subparagraph a(2) above) may
be different from the DIC rate being paid, annotate the OF41 to show the
basic DIC rate to be used by Finance in taking deduction action.

\(c\) Take steps to ensure Finance returns the folder within 5 workdays.

\(d\) On return of the folder, ensure Finance took deduction action and
review the master record to ensure the action to enter the special law
code 06 did not reject.

\(3\) **Grant of DICEntitlement or Potential Entitlement to SBP
Indicated.** When an original award of DIC is made to a surviving spouse
and there is evidence in file that the payee is entitled or is
potentially entitled to SBP:

\(a\) Prepare the DIC award, but do not generate (GAP) the award.
Instead, enter GAD (Generate And Display) in the next screen field and
make a copy of the displayed award.

**NOTE:** If the pay grade is not known, the Retired Pay Coordinator
**MUST** telephone the service finance center to obtain the correct pay
grade.

\(b\) Show the basic DIC rate (subpar. a(2) above) on the award and
refer it and the claims folder to Finance. Maintain control to ensure
the folder is returned within 5 workdays.

\(c\) Finance will complete a report of contact and return the folder to
Adjudication.

[1]{.underline}. If the report of contact shows there is no SBP
entitlement, GAP the award (do not show special law code 06) and
authorize (CAUT) as appropriate.

[2]{.underline}. If the report of contact shows there is entitlement to
SBP but there is no amount to be recovered, GAP the award and authorize
as above but show SL06 on the award line.

**NOTE:** The generated award letter is appropriate in the above two
instances because there are no SBP deductions.

[3]{.underline}. If the report of contact indicates there is an amount
of SBP for offset, prepare the award as follows. Enter total withholding
on the award line using type 1 withholding from the date of entitlement
and show special law code 06. Suppress the award letter. After the award
showing total withholding has been authorized, route the claims folder
to Finance for their action to establish the offset. Deliver these
folders to Finance daily. Do not take the appropriate end product at
this time; maintain the pending issue.

[4]{.underline}. When the folder is returned from Finance ensure the
offset appears on the M01 screen. Process an amended award as follows to
release payment. Show special law code 06 and remove the withholding
(show \"0\" entry under Type withholding) to pay full DIC to which
entitled. When the award is generated, the legend \"A/R

26-IV-5

**M21-1, Part IV June 6, 2005**

**Change 220**

EXISTS\--REFER TO FINANCE IF RETROACTIVE INCREASE IS INVOLVED\" will
appear. Send the award, with the claims folder, to Finance for necessary
FISA action. Leave the end product pending until the folder is returned
from Finance and the award is authorized.

**NOTE:** In the cases above, do not file the copy of the displayed
award in the claims folder. Destroy these awards in accordance with RCS
VB-1, part I, item No. 13-052.400. File the report of contact in the
claims folder.

\(4\) **Notice to Claimant.** In all DIC awards involving SBP deduction,
suppress the Target-generated letter. Prepare a locally generated award
letter. It must fully advise the claimant of the award (38 CFR 3.103(e))
and that the award is subject to offset for concurrent payments of the
SBP annuity. Enclose VA Form 21-8765, Service-Connected Death Award
Attachment, with locally generated award letters for original or
reopened DIC awards.

\(5\) **DIC Claim Not Timely Filed.** If a DIC claim is not filed within
1 year from the date of death of a veteran and the claimant is receiving
SBP, deductions for SBP overpayment can be made only from the effective
date of the DIC award instead of the effective date of SBP payments.
Annotate the OF 41 to the Finance activity to alert Finance of the
effective date of the award for any DIC claim not filed timely.

\(6\) **Communications With the Military Finance Centers.** Finance will
take deduction actions and make telephone contact with the service
finance centers. After necessary adjustment, reduction or termination of
the SBP annuity account, the service finance center will inform the
regional office if any additional offset is required. Refer this notice,
with the claims folder, to Finance for necessary action.

\(7\) **DIC Award - No Indication of Entitlement to SBP.** Due to the
potential for large overpayments in DIC awards for surviving spouses
also entitled to SBP, the message, \"REFER TO FINANCE FOR SBP A/R
REVIEW,\" will appear each time an original DIC award to a surviving
spouse is GAP\'ed.

\(a\) SBP is payable to a surviving spouse only if the deceased spouse
was a service retiree or eligible to retire at time of death but was
still on active duty. Process any case showing no potential entitlement
to SBP without referring it to Finance. In addition to the signature of
an adjudicator and approval of an authorizer, one individual within the
division (designated by the Adjudication Officer) is required to review
and approve awards not being referred to Finance. The designee will
sign, date and make the annotation \"No SBP payable\" in the lower right
margin beneath the authorizer\'s signature on the award print.

\(b\) If there is any question as to whether or not SBP is payable,
process the award under subparagraph c(3) above.

d\. **Finance Procedures.** Finance procedures are found in MP-4, part
IV, chapter 3.

e\. **Special Instructions for the Manila Regional Office.** The Manila
regional office will follow the procedures contained in this subchapter
with the following exceptions:

\(1\) Since the Finance Division establishes and maintains accounts
receivables locally, two-step award processing is not required.

\(2\) Contact the service finance centers by teletype rather than by
telephone.

**26.27 NOTICES TO SERVICE DEPARTMENTS**

a\. **When Required.** Notify the appropriate service department of
changes in the entitlement of any death pension beneficiary having
entitlement to SBP under either annuity plan, as follows:

\(1\) **Section 306 Pension.** Notify the service department of
termination for any reason other than death or remarriage. Also notify
the service department of any changes to 1978 protected income. For
Section 306 pension cases, income changes (except change to terminate
due to excess income or change to 1978 protected income) do not affect
MIW-SBP payment. The service department will continue payment based on
the MIW-SBP rate during

26-IV-6

#### June 6, 2005 M21-1, Part IV

1978 plus an amount equal to the cumulative cost-of-living adjustment
(COLA) increase in the MIW-SBP limit. The \"protected\" MIW-SBP amount
plus the amount equal to all increases in the limit will be included in
the master record income segment as \"other retirement\" income. During
COLA processing, the existing \"other retirement\" amount will be
increased by the increase in the MIW-SBP limit, provided special law
code is 06 and retirement type is M. If special law code is 08 or
retirement type is not M, the case will be written out under MSG 741,
NOT ADJUSTED-SPECIAL LAW XX. An adjudicator will review the case for
submission of the current income data, including the adjusted MIW-SBP
amount.

\(2\) **Improved Pension.** Notify the service department of termination
for any reason other than death or remarriage. Also notify the service
department of all income changes, specifying recomputed IVAP and
recomputed MIW-SBP annuity. These cases will not be automatically
adjusted during the COL adjustment. MSG 741, NOT ADJUSTED-SPECIAL LAW
XX, will issue.

\(3\) **SBP Survivor Annuity Cases With Type M Annuity Income.** Advise
the service department of surviving spouse\'s death or remarriage
(special law code 06 or 08 not in order).

b\. **Computer-Generated Notices**

\(1\) **Death Pension.** As determined only by use of special law code
06 or 08, generated notice to the service department identified by the
master record branch of service code will issue when benefits terminate
due to the death or remarriage of the surviving spouse. MSG 718, SBP
BENE\--VA BENEFITS TERMINATED (REMARRIAGE) (DEATH), on VA Form 20-8270
will issue when a pension account is so terminated.

\(2\) **DIC.** VA Form 20-8270 will issue to the service department only
if there is no veteran\'s Social Security number in the master record.
All other transactions will be transmitted to the service department by
magnetic tape if the following criteria are met.

\(a\) Master record type is A, B or E (if terminated this cycle).

\(b\) Payee code is 10.

\(c\) Special law code (FI 043) or miscellaneous code (FI 066) is 06 or
08.

\(d\) Entitlement code ends in 7.

\(e\) A transaction 09, 11, 13, 28 or 98 updated the master record this
cycle..

26-IV-7