**DEPARTMENT OF**

**VETERANS AFFAIRS**

**M21-1**

**ADJUDICATION PROCEDURES**

**Compensation and Pension**

**Dependency and Indemnity Compensation**

**Accrued Amounts**

**Burial Allowance**

**Special Benefits**

**Veterans Benefits Administration**

**Washington, DC 20420**

**PROLOGUE**

\"to care for him who shall have borne the

battle and for his widow and his orphan\....\"

Abraham Lincoln

Abraham Lincoln emphasized the debt owed to America\'s veterans and our
citizens have honored that debt by creating the Department of Veterans
Affairs whose responsibility it is to place into deeds those words.

Veterans Benefits Administration employees have a unique opportunity to
serve America\'s veterans. Our mission is to see that our country\'s
veterans and their dependents receive the benefits they so richly
deserve. We are fortunate to have the opportunity to help repay those
who so courageously and unselfishly served their country.

In performing our duties we must be constantly aware of the special
status of those we serve. They responded willingly when called to duty
to defend the people of the United States, risking their lives and
limbs. We must respond just as willingly to their needs and those of
their families.

This manual provides procedures for administering compensation and
pension benefits. While these procedures are important to our
accomplishing our task, VA employees must never lose sight of the
humanity of those people we serve. We must commit ourselves to seeing
that they are treated sympathetically and with respect and dignity.

As you go about your daily duties, keep in mind Abraham Lincoln\'s
pledge and our commitment.

J. Gary Hickman

**FOREWORD**

This manual provides procedures for the adjudication of claims for
compensation, pension, dependency and indemnity compensation, accrued
benefits and burial allowance. Part I, Introduction, presents an
overview of the history and organization of the Department of Veterans
Affairs (VA). It also describes the organization, positions and
responsibilities of an adjudication division. Part II, Clerical
Procedures, outlines clerical responsibilities and actions. Part III,
Authorization and Clerical Procedures, covers claims development,
evidence requests and those areas where clerical and claims examiner
functions overlap.

Part IV, Authorization Procedures, pertains to the responsibilities that
fall within the realm of the authorization activity, such as award
procedures, administrative decisions and benefit authorization. Part V,
Computer Processing, explains the concepts of award processing on our
computer systems. It gives examples and instructions for each type of
transaction processed in adjudication.

Part VI, Rating Board Procedures, covers the responsibilities of the
rating activity. It contains instructions for specific types of ratings,
explanations of special procedures for certain medical conditions and
the overall descriptions of the duties of the rating specialist.

Material is divided into numbered chapters and chapter titles are listed
in the table of contents. Specific subjects for each Part are found in
the index included with that Part. Chapters are subdivided into
subchapters where appropriate. Paragraphs are given a decimal number
starting with the digit 1. The digit or digits to the left of the
decimal indicate(s) the chapter number, and the digits to the right of
the decimal indicate a main paragraph. Pages are numbered from 1 within
each chapter and subchapter while paragraphs are numbered from 1 within
each chapter.

Revisions will generally be issued in increments no smaller than a
subchapter. If a change is needed, the entire subchapter, chapter or
part will usually be replaced. Changes will carry the date and number of
the change.

Procedural changes requiring immediate implementation may be E-mailed in
letter format, over the signature of the Director, Compensation and
Pension Service. Those changes will be incorporated into the manual as
soon thereafter as possible.

Deviation from any of the prescribed procedures without prior
authorization of the Service Director is prohibited.

**CONTENTS**

**PART I. INTRODUCTION**

**CHAPTER**

1\. INTRODUCTION TO THE DEPARTMENT OF VETERANS AFFAIRS

2\. THE ADJUDICATION DIVISION

3\. LAWS - REGULATIONS - DIRECTIVES - RECORDS

CONSOLIDATED INDEX

APPENDIXES

A. DISABILITY AND DEATH RATING CODE PROCEDURES

B. RATE TABLES AND CODES

C. TABLE AND CODES

**RESCISSIONS**

1\. Manuals

M8-1 Revised

M8-2, dated December 15, 1955

M8-3, Revised, dated August 20, 1954

M8-5, Revised, dated October 1, 1954

M8-8 Revised, dated November 1, 1954

2\. Interim Issues

II 20-69-2

II 20-69-7

II 20-70-2, paragraph C-2

II 20-70-12

II 20-72-4

II 20-72-7

3\. Circulars

Circular 20-66-36, Appendix B and changes 3 through 10 Circular 20-72-54

Circular 20-67-77 and erratum, Appendixes A, B, and Circular 20-72-71

erratum and Appendix C Circular 20-72-73 and Change 1

Circular 20-68-79 Circular 20-72-78

Circular 20-68-106 Circular 20-72-79

Circular 20-68-108 Circular 20-72-91

Circular 20-69-118 Circular 20-72-92 and Change 1

Circular 20-69-16 Circular 20-72-96

Circular 20-69-40 Circular 20-73-45 and Appendix A

Circular 20-69-42 Circular 20-73-79

Circular 20-69-48 Circular 20-73-84

Circular 20-69-53 Circular 20-73-113 and Appendixes and Change 1

Circular 20-60-59 Circular 20-74-16

Circular 20-69-72 Circular 20-74-20

Circular 20-69-81 Circular 20-74-36

Circular 20-70-14 Circular 20-74-45

Circular 20-70-40 Circular 20-74-56

Circular 20-70-46 Circular 20-74-62 and Appendixes

Circular 20-70-51 Circular 20-74-84, Pars. 1 through 4 and

Circular 20-70-57 Changes 2 and 3

Circular 20-70-71 Circular 20-74-95

Circular 20-70-72 Circular 20-75-5 and Appendixes A and B and

Circular 20-70-73 Change 1

Circular 20-70-74 Circular 20-75-21

Circular 20-70-86 Circular 20-75-39

Circular 20-70-88 Circular 20-75-56

Circular 20-70-90 Circular 20-75-75 and Changes 1 and 2

Circular 20-70-92 Circular 20-75-83

Circular 20-71-12 Circular 20-75-85 and Appendixes

Circular 20-71-29 Circular 20-75-108

Circular 20-71-31 Circular 20-76-2 and Appendixes

Circular 20-71-40 Circular 20-76-81 and errata, Exhibits and Appendixes

Circular 20-71-44 Circular 20-76-93

Circular 20-71-59 Circular 20-76-102 and Appendixes and Change 1

Circular 20-71-93 Circular 20-77-7

Circular 20-71-97 Circular 20-77-18 and Exhibits A and B

Circular 20-71-114 Circular 20-77-39

Circular 20-72-1 Circular 20-77-102, Change 1 and Appendix A

Circular 20-72-6 Paragraphs 1,2,3,4,6,7,8,9,12,13,14 and

Circular 20-72-21 Appendixes B,C, and D of

Circular 20-72-25 Circular 20-78-18

Circular 20-72-33 Circular 20-82-6

Circular 20-82-39 Circular 21-81-1

Circular 20-83-20,Revised paragraphs 1 through 4 and Circular 21-81-10
and Change 2

6 through 9 Circular 21-81-14

Circular 20-85-18 Revised and Changes 1 through 5 Circular 21-82-11 and
Change 1

Circular 21-66-24 Circular 21-82-17, Paragraph 10 of

Circular 21-66-35 Circular 21-83-16 and Change 1

Circular 21-69-2 Circular 21-83-19, Paragraphs 1,2,3,5, of

Circular 21-69-6 Circular 21-84-5 and

Circular 21-69-13 Circular 21-84-7 and Change 1

Circular 21-69-21 Circular 21-84-9 Revised and Change 1

Circular 21-70-2 Circular 21-85-2

Circular 21-70-17 Circular 21-85-6 Revised and Changes 1 through 6

Circular 21-78-5 Circular 21-85-7 Revised

Circular 21-78-10,Changes 1 and 2 and Appendix A Circular 21-85-10

Circular 21-79-5 Revised Circular 21-86-6

Circular 21-79-6 Circular 21-86-10 and Change 1

Circular 21-79-13 and Change 1 Circular 21-87-13

Circular 21-80-1 Circular 21-87-17 and Change 1

Circular 21-80-4 and Changes 1 and 2 Circular 21-88-6

Circular 20-89-5

Circular 21-86-9

4\. Transmittal Letters (M21-1). (Keep all Transmittal Letters.) All
transmittal Letters A through V and errata have been rescinded.

5\. Changes (M21-1). (Keep All Transmittal Sheets.)

Changes (and errata) 1 through 112, 114, 115 and errata, 116 through
124, 126 through 131, 134 through 136, 139, 140, 143, 145 through 151,
153, 154, erratum to 155, 156, 158 through 162, 163, 164, 165, 167, 168,
and erratum, 169 through 172, 175, 176, 178, erratum to change 179, 180,
181, 183, 184, 187 through 192, 194, 195, 196 and errata, 197, through
199, 201, 203, 204, 206, 208, 210, 213, 214, 217, 219 through 222, 224,
226, 229, 230 and erratum 233, 234, 236, 238, 242 and errata, 243 and
erratum, 245, 246, 248, 250, 251, 252 and erratum, 254, 255, 257, 258
and erratum, 259, 260, errata to 266, 267 and erratum, 270, 271, 273,
274, 277, 278, 280, 281, 284, 285, 287, 289, 293, 295, 296, 298, 300,
305, 307 through 312, 315, 316, 317, 319, 321, 331, 335, 338, 340, 345,
352, 355, 357, 360 and erratum, 374, 376, 384, (per C-480) 390, errata
to 430, 438, 482.

**CONTENTS**

CHAPTER

SECTION 1. GENERAL

1\. GENERAL

2\. JURISDICTION AND TRANSFER

3\. POWERS OF ATTORNEY

4\. AUTHORIZATION RESPONSIBILITY AND CLAIMS PROCESSING

5\. CORRESPONDENCE

6\. REQUESTS FOR SERVICE RECORDS

7\. EVIDENCE - GENERAL

8\. RELATIONSHIP - MARITAL AND PARENTAL

9\. INCOME

10\. CHILDREN - RELATIONSHIP AND SCHOOL ATTENDANCE

11\. PERMANENT INCAPACITY FOR SELF-SUPPORT

12\. FIDUCIARY RELATIONSHIP

13\. CERTIFICATES FOR SPECIAL PURPOSES AND INFORMATION REQUESTS TO OR

FROM OTHER FEDERAL AND STATE AGENCIES.

14\. SPECIAL DETERMINATIONS

15\. AWARD PROCEDURES - GENERAL

16\. DISALLOWANCES

17\. DISCONTINUANCE - SUSPENSION - RESUMPTION - CHANGE OF NAME, ADDRESS

OR FIDUCIARY

18\. APPEALS

19\. ADMINISTRATIVE REVIEWS AND OTHER SUBMISSIONS TO CENTRAL OFFICE

20\. PENAL AND FORFEITURE DISCONTINUANCE PROVISIONS

SECTION 2. AUTHORIZATION - LIVING VETERANS

21\. CLAIMS APPLICATION AND INITIAL ACTIONS

22\. DEVELOPMENT OF ORIGINAL DISABILITY CLAIMS

23\. DISABILITY AWARDS

24\. SPECIFIC DISABILITY AWARDS AND RELATED ACTIONS

25\. HOSPITALIZATION OF COMPETENT VETERANS

26\. APPORTIONMENT OF DISABILITY AWARDS

27\. RECONSIDERATION OF CLAIMS BASED ON ADDITIONAL EVIDENCE

28\. INCOMPETENT VETERANS

29\. ELECTIONS, WAIVERS AND RECOUPMENTS

30\. ELIGIBILITY REQUESTS AND DETERMINATIONS FOR SPECIAL PURPOSES

SECTION 3. AUTHORIZATION - DECEASED VETERAN

31\. INITIAL ACTIONS ON DEATH OF VETERAN

32\. CLAIMS APPLICATIONS AND DEVELOPMENT

33\. DEATH DUE TO HOSPITALIZATION, MEDICAL OR SURGICAL TREATMENT,

EXAMINATION OR TRAINING

34\. SUBMISSION FOR RATING DECISIONS

35\. PHILIPPINE CASES

36\. CONTESTED CLAIMS

37\. ACCRUED BENEFITS

38\. DEATH AWARDS

39\. SPECIFIC DEATH AWARDS AND RELATED ACTIONS

40\. SPECIAL ALLOWANCE - 38 U.S.C. 412(a)

41\. AWARDS INVOLVING OTHER DEPARTMENTS OR AGENCIES

42\. ELECTIONS IN DEATH CASES

43\. BURIAL/PLOT-INTERMENT ALLOWANCE

44\. SERVICEMEN\'S INDEMNITY

SECTION 4. RATING

45\. ORGANIZATION AND FUNCTIONS OF THE RATING BOARD

46\. RATING DECISIONS

47\. MEMORANDUM RATING DECISIONS

48\. SEVERANCE OF SERVICE CONNECTION

49\. PREPARATION OF THE RATING DECISION

50\. RATING PROCEDURE RELATIVE TO SPECIFIC ISSUES

51\. THE DENTAL RATING

52\. REDUCTION RATINGS

53\. PRESTABILIZATION, HOSPITALIZATION EXCEEDING 21 DAYS AND TEMPORARY

SURGICAL RATINGS.

54\. INCOMPETENCY RATINGS

55\. PHYSICAL EXAMINATIONS AND SOCIAL SURVEYS

56\. DEATH RATINGS

APPENDIX

A. DISABILITY AND DEATH RATING CODE PROCEDURES

B. RATE TABLES

C. TABLES AND CODES

**CHAPTER 1. INTRODUCTION TO THE DEPARTMENT OF VETERANS AFFAIRS**

**CONTENTS**

PARAGRAPH PAGE

**SUBCHAPTER I. OVERVIEW OF VA**

1.01 History 1-I-1

1.02 Mission 1-I-2

1.03 Organization and Relationships 1-I-2

**SUBCHAPTER II. VBA PROGRAM ELEMENTS**

1.04 Veterans Benefits Administration. 1-II-1

1.05 VA Central Office (VACO) 1-II-2

1.06 VA Regional Office (VARO). 1-II-2

**SUBCHAPTER III. COMPENSATION AND PENSION HISTORY**

1.07 Compensation 1-III-1

1.08 Pension 1-III-2

**CHAPTER 1. INTRODUCTION TO THE DEPARTMENT OF VETERANS AFFAIRS**

**SUBCHAPTER I. OVERVIEW OF VA**

**1.01 HISTORY**

a\. **Bureau of Pensions.** The first U.S. Congress passed a law in 1789
to provide pensions to disabled veterans and their dependents. This law
was administered by Congress. The workload became so great that Congress
transferred the responsibility to the Secretary of War in 1818. In 1833,
the program was assigned to the Bureau of Pensions. In 1849, this
activity moved from the War Department to the Department of the
Interior.

b\. **National Home for Disabled Volunteer Soldiers.** After the Civil
War, Congress established the National Home for Disabled Volunteer
Soldiers. This organization provided domiciliary, hospital and medical
care for indigent and disabled veterans of the Civil War, Indian Wars,
Spanish-American War, Mexican War and discharged regular members of the
armed forces. During the 19th century, access to a national home was
considered to be admission to a place of residence, not a hospital. The
level of medical care was elevated to that of an accredited hospital
when absorbed by VA in 1930.

c\. **Public Health Service.** The Public Health Service (PHS) provided
physical examinations to veterans applying for compensation as well as
medical and hospital care. Those PHS hospitals caring for veterans were
assigned to the Veterans\' Bureau in 1922.

d\. **Bureau of War Risk Insurance.** The administration of veterans
benefits was further complicated during and after World War I. Congress
created the Bureau of War Risk Insurance under the jurisdiction of the
Treasury Department. Its mission was to insure U.S. ships and cargoes
against war risks. When America entered WWI, Congress provided new
benefits, including disability compensation, insurance, a family
allotment program and vocational rehabilitation. All but vocational
rehabilitation were administered by the Bureau of War Risk Insurance.
This agency was merged into the Veterans\' Bureau in 1921.

e\. **Federal Board of Vocational Education.** The Federal Board of
Vocational Education was charged with providing vocational
rehabilitation to persons having a disability incurred or aggravated
while a member of the armed forces.

f\. **Veterans\' Bureau.** The U.S. Veterans\' Bureau was established in
1921 to consolidate the powers, functions and duties of the agencies
which administered veterans\' benefits, including some phases of medical
care.

g\. **Veterans Administration.** The Veterans Administration was
established in 1930 when Congress authorized the President to
\"consolidate and coordinate government activities affecting war
veterans.\" The three component agencies, the Veterans\' Bureau, the
Bureau of Pensions of the Department of the Interior and the National
Home for Disabled Volunteer Soldiers, became bureaus within the VA. In
addition to established duties, the new agency had to deal with the
administration of recently increased pension for Spanish-American War
veterans, disability allowances for World War I veterans and the
administration of nearly three million loans under the World War I
Adjusted Compensation Act. The VA experienced enormous growth near the
end of World War II with the return of some 16 million veterans and the
large number of new benefits enacted by Congress for veterans of the
war. In 1946, the Department of Medicine and Surgery was established. In
1953 the Department of Veterans Benefits (DVB), the predecessor of the
current Veterans Benefits Administration, was created to administer the
GI Bill and VA\'s huge compensation and pension program. The VA
insurance program became part of DVB in 1963. The National Cemetery
System was transferred to the VA in 1973 from the Department of the
Army.

h\. **Cabinet Status.** On March 15, 1989, the Veterans Administration
became the Department of Veterans Affairs (VA), the 14th department in
the President\'s Cabinet.

**1.02 MISSION**

The mission of VA is to serve America\'s veterans and their families as
their principal advocate in ensuring that they receive the care,
support, and recognition they have earned in service to this nation.

**1.03 ORGANIZATION AND RELATIONSHIPS**

a\. **Functional Areas.** Many separate functional areas make up the
Department of Veterans Affairs (VA). Among the major areas are:

\(1\) **Office of the Secretary.** The Secretary is appointed by the
President, by and with advice and consent of the Senate. The Secretary
is charged with the overall responsibility of running the second largest
department in the Federal Government.

\(2\) **Office of the General Counsel (GC).** The General Counsel is
appointed by the President, by and with the advice and consent of the
Senate. The General Counsel serves as the chief legal officer on all
matters of law, litigation, and legislation. The Office of the General
Counsel interprets all laws pertaining to the Department and provides
necessary legal services.

\(3\) **Veterans Benefits Administration.** The Veterans Benefits
Administration (VBA) provides an integrated program of veterans\'
benefits. The major benefits include compensation, pension, burial
benefits, rehabilitation assistance, education and training assistance,
home loan guarantees and insurance coverage. It is led by the Under
Secretary for Benefits who is appointed by the President, by and with
the advice and consent of the Senate.

\(4\) **Veterans Health Administration.** The Veterans Health
Administration (VHA) operates and maintains the nationwide network of VA
medical centers, research centers, and information resource centers. VHA
is committed to serve the veteran population by providing inpatient and
outpatient care, ranging from acute inpatient to chronic care, including
geriatric evaluation, nursing home, domiciliary, home health, adult day,
residential and respite care programs. It is led by the Under Secretary
for Health who is appointed by the President, by and with the advice and
consent of the Senate.

\(5\) **National Cemetery System.** The primary mission of the National
Cemetery System (NCS) is to serve veterans by meeting their final needs
with compassion and dignity. NCS provides burial and gravesite services
and cares for all national cemeteries except Arlington, which continues
to be maintained by the Department of the Army.

\(6\) **Board of Veterans\' Appeals (BVA).** All questions in any area
falling under section 511 of Title 38 U.S.C., which are subject to a
decision by the Secretary of Veterans Affairs, may also be appealed to
the Secretary. The final decisions on these appeals will be made by the
BVA after providing the claimant an opportunity for a hearing. The BVA
consists of a chairman, vice chairman and an appropriate number of
members as is necessary to conduct hearings and timely dispose of
appeals before the BVA. The Chairman is appointed by the President, by
and with the advice and consent of the Senate, for a period of 6 years.
The other members, including the Vice Chairman, are appointed by the
Secretary of Veterans Affairs, with the approval of the President, based
on the recommendations of the Chairman.

\(7\) **Office of the Inspector General (OIG).** The Inspector General
is responsible for:

\(a\) Conducting and supervising audits and investigations.

\(b\) Recommending policies designed to promote economy and efficiency
in the administration of, and to prevent and detect fraud and abuse in,
the programs and operations of the Department.

\(c\) Keeping the Secretary and the Congress fully informed about
problems and deficiencies in VA programs and operations and the need for
corrective action.

\(8\) **National Service Organizations Liaison.** National service
organizations recognized by the Secretary of Veterans Affairs represent
the interests of all veterans but particularly those whom they represent
individually. Service organizations are not a part of VA, but many
occupy space in regional offices (furnished by VA on a space available
basis) where they have access to claims files for those individuals for
whom they hold power of attorney.

\(9\) **Other Elements.** In addition to the sections listed above, VA
has a Board of Contract Appeals and Office of Small and Disadvantaged
Business Utilization. These divisions report directly to the Secretary.

b\. **United States Court of Veterans Appeals (The Court).** The Court
was created by an act of Congress on November 18, 1988. The Court is
located in Washington, DC, but is a national court and may sit anywhere
in the United States that it deems appropriate. Although not a part of
VA, the Court has exclusive jurisdiction to review BVA decisions. Only
the claimant may seek review of a BVA decision. The Court is empowered
to affirm, modify, reverse or remand a decision of the Board as
appropriate. The law provides for a limited review of the Court\'s
judgments by the United States Court of Appeals for the Federal Circuit.

**SUBCHAPTER II. VBA PROGRAM ELEMENTS**

**1.04 VETERANS BENEFITS ADMINISTRATION**

a\. VBA administers a wide variety of benefit programs authorized by the
Congress of the United States. VBA is headed by the Under Secretary for
Benefits who is appointed by the President, by and with the advice and
consent of the Senate.

b\. VBA is composed of many functional areas usually referred to as
services. Among those which deal directly with our claimants and
benefits are:

\(1\) **Compensation and Pension Service.** The Compensation and Pension
(C&P) Service is charged with the administration of the compensation and
pension programs. The programs fall into eight broad categories:

\(a\) Disability Compensation (38 U.S.C., Ch. 11);

\(b\) Dependency and Indemnity Compensation (DIC) (38 U.S.C., ch. 13)
and Death Compensation (38 U.S.C., ch. 11);

\(c\) Disability Pension (38 U.S.C., ch. 15);

\(d\) Death Pension (38 U.S.C., ch. 15);

\(e\) Burial Benefits (38 U.S.C., ch. 23);

\(f\) Automobile Allowance/Adaptive Equipment (38 U.S.C., ch 39);

\(g\) Clothing Allowance (38 U.S.C., ch 17); and

\(h\) Specially Adapted Housing (38 U.S.C., ch 21).

\(2\) **Vocational Rehabilitation Service.** The Vocational
Rehabilitation Service administers programs carried out by vocational
rehabilitation and counseling (VR&C) divisions at regional offices.
These programs provide services and assistance for disabled veterans to
help them achieve maximum independence in daily living and, to the
extent feasible, prepare for, obtain, and maintain suitable employment.
In addition, counseling services are provided to veteran participants of
other programs.

\(3\) **Education Service.** The Education Service administers a number
of programs for veterans, servicepersons, reservists and eligible
dependents seeking assistance for education or training.

\(4\) **Loan Guaranty Service.** The Loan Guaranty Service provides
housing credit assistance. The mortgage credit needs of veterans and
servicepersons are satisfied by private capital on more liberal terms
than are generally available to nonveterans, without the assumption of
undue risks by the Government. The assistance given is primarily the use
of the Government\'s guaranty on loans in lieu of the substantial down
payment and other investment safeguards applicable to conventional
mortgage transactions.

\(5\) **Veterans Assistance Service.** The Veterans Assistance Service
(VAS) provides national program direction to the veterans services
divisions. Through its outreach programs, VAS encourages all eligible
veterans and their dependents to apply for the benefits and services
available. VAS also facilitates economic assistance for needy veterans
and their spouses/surviving spouses to aid their readjustment to
civilian life. In addition, VAS has a longstanding commitment to reach
other veteran groups in need of special assistance such as the homeless,
sick and elderly.

\(6\) **Insurance Service.** VA administers a variety of life insurance
programs.

c\. There are other divisions and services that make up VBA, providing
the support necessary to the organization. These include a finance
staff, a budget staff, an administrative support staff, a human
resources service, Information Resources Management and others.

**1.05 VA CENTRAL OFFICE (VACO)**

VACO or \"Central Office\" is a collective term for the Washington
headquarters staff of the Department of Veterans Affairs. This staff is
broken down by service and organization. Responsibilities are assigned
for all areas within the Department. The Compensation and Pension staff
is organized as follows:

\(1\) **Office of the Director (21).** The Director is responsible for
the control and direction of the Compensation and Pension programs for
VA.

\(2\) **Policy and Planning (211).** The policy and planning staff is
concerned with recommending VA policy on specific issues of national
importance such as post traumatic stress disorder (PTSD), agent orange
and radiation. They draft regulations for the service, specifically
those appearing in 38 Code of Federal Regulations (CFR), parts 3
(Adjudication) and 4 (Rating Schedule). They issue advisory opinions on
specific issues raised by field stations.

\(3\) **Program Management (212).** This staff handles material which
includes questions dealing with correspondence on individual veteran or
beneficiary inquiries. They are involved with matters relating to CVA,
including assessing the impact of CVA decisions, expediting remands,
assisting in the preparation of briefs and legal memoranda and
responding to issues raised on the Judicial Review Hotline. This staff
also conducts compensation and pension training for new adjudicators and
refresher training for others involved in the compensation and pension
program.

\(4\) **Adjudication Procedures (213).** This section formulates and
recommends policies and plans for implementing procedures which cover
all aspects of Compensation and Pension Service programs. They write
manuals, circulars and other procedural directives. They are responsible
for implementing changes and modifications to the Benefits Delivery
Network (BDN) and are involved in the development of new computer
applications. They review suggestions involving the program and provide
technical assistance to regional office personnel, other operating
elements within VA and government agencies. This staff develops and
modifies compensation and pension forms.

\(5\) **Field Operations (214).** Field operations monitors regional
office adjudication divisions\' efforts to process claims in compliance
with program requirements. They perform semi-annual analyses of each
adjudication division. These analyses assess timeliness, quality,
productivity and division management. They also do periodic on-site
surveys. They establish work rate credit for claims processing. They
monitor data in DOOR (Distribution of Operational Resources) and are
responsible for most of M21-4. They review selected files and evaluate
each station\'s quality. Data from other reports and reviews are
gathered to show trends of compliance and results of changes in laws and
regulations. The information is used to prepare quarterly training
letters for field stations. They also formulate and justify the
Compensation and Pension Service\'s budget, including projection of
benefit expenditures and general operating expenses.

**1.06 VA REGIONAL OFFICE (VARO)**

A regional office is composed of divisions which carry out the functions
of VBA. At some locations the support functions, such as human
resources, may be shared with a VA medical center. In other areas,
certain functions such as Loan Guaranty are consolidated with other
offices. Generally, a regional office includes:

a\. Adjudication Division (21)

b\. Administrative Division (23)

c\. Finance Division (24)

d\. Support Services Division (2324). In some offices this division
combines the duties of the administrative and finance divisions.

e\. Human Resources Division (25)

f\. Loan Guaranty Division (26)

g\. Veterans Services Division (27)

h\. Vocational Rehabilitation and Counseling Division (28)

**SUBCHAPTER III. COMPENSATION AND PENSION HISTORY**

**1.07 COMPENSATION**

a\. **Compensation.** Compensation is a monthly payment made to a
veteran because of a disability incurred in or aggravated during
military service. In death cases, it is called dependency and indemnity
compensation (DIC) and it is a monthly payment to the deceased
veteran\'s eligible survivors based on death in service or death caused
by a service-connected disability. A surviving spouse of a veteran who
died before January 1, 1957, as the result of injury or disease incurred
in or aggravated by active service, in line of duty, was entitled to
death compensation. These surviving spouses were and are permitted to
elect DIC in lieu of death compensation. See part IV, paragraph 20.48.
In virtually all cases, this election would be beneficial to the
surviving spouse. However, some surviving spouses have not elected DIC
and are still receiving death compensation.

b\. **Colonial.** In 1636, the Plymouth Colony enacted into law a
provision that \"if any man shalbee sent forth as a souldier and shall
return maimed hee shalbee maintained competently by the Collonie during
his life.\" Most of the colonies provided some kind of compensation for
their disabled soldiers with the intention of satisfying justice and
encouraging other men to volunteer their services.

c\. **Early Federal.** The first national \"pension\" law (1776)
promised half pay for life, or during disability, to every officer,
soldier, or sailor losing a limb or being so disabled as to render him
incapable of earning a livelihood. For enlisted members, this amounted
to \$5 monthly for total disability. For partial disability, the amount
was proportioned. In 1802, widows and orphans of officers were granted
half pay for 5 years. During the budget surplus following the war of
1812, nonservice-connected pension was provided but became so
intermingled with service-connected compensation that it was impossible
to distinguish between them.

d\. **Civil War**

\(1\) The start of the Civil War found the country without adequate
provisions for its disabled veterans. The Commissioner of Pensions asked
for explicit and detailed legislation. The General Law System, passed in
1862, applied to military and naval service on and after March 4, 1861.
It provided compensation for officers and enlisted men in the Army,
Navy, and Marine Corps including regulars, volunteers, or militia. It
provided compensation for wound, injury or disease directly as a
consequence of service in U.S. forces and in line of duty. Payment was
based on military rank and provided for total or partial disability.
Examinations were provided and the physician was required to state his
opinion regarding the degree of disability (one-fourth, one-half, total,
etc.) which determined the amount payable. There was no uniformity in
decisions because of a lack of instructions.

\(2\) The Consolidation Act (1873) set rates for disabilities, granting
total disability if the veteran could not perform manual labor. A
statutory rate was established for deafness. The Commissioner of
Pensions was given authority to establish rates for disabilities not
specified by law. The Civil War Veterans Act (1890) required that
veterans be unable to perform crude manual labor and provided
\"arbitrary\" ratings somewhat akin to average impairment so a veteran
could be employed at a lighter task without losing \"pension.\"

e\. **World War I**

\(1\) The War Risk Insurance Act (1917) designated service-connected
benefits as \"compensation\" to indicate indemnity for loss and
eliminated rank as a factor. The system was based on the developing
workmen\'s compensation system. Extra allowances were provided for
specified dependents including wife, children and dependent mother. The
Bureau of War Risk Insurance set up a schedule for rating disabilities
based on average impairment of earning capacity caused by specific
injuries. Payment was not reduced or terminated on entering the labor
force. In this way, the man who overcame his handicap would not be
penalized.

\(2\) Legislation enacted in 1919 established rates for temporary
partial and temporary total disabilities and permanent partial and
permanent total disabilities. Rates were based on a percentage of the
compensation payable for a total disability. The early schedule did not
contain diagnostic codes, had few descriptive criteria and no
instructions on how awards should be made in cases of multiple
disabilities. The 1921 version was more sophisticated and contained
instructions, definitions, policies and procedural guidelines for the
bureau.

f\. **World War Veterans Act of 1924.** This law provided for the
adoption of a schedule for rating reductions in earning capacity from
injuries, based on average impairment of earning capacity resulting from
injuries in civilian occupations similar to the disabled veteran\'s
occupation at the time of enlistment. This was a departure from the
prior \"average impairment.\" There were three tables \-- an
occupational rating, disability rating and combined rating. Disability
was ascertained and considered with regard to the injury variants for
the occupations. For example, the variant for fingers would be higher
for a typist or pianist than for most occupations. Problems arose
because many WWI veterans had entered service never having been employed
and could only be classified as students. Disabilities were rated and
compensated in multiples of one percent, but no payment was made for
less than 10 percent.

g\. **Economy Period**

\(1\) From 1919 to 1933 a number of liberalizations, including extension
of the presumptive period for certain disabilities, establishment of
statutory awards and a relaxed interpretation of willful misconduct,
were incorporated in the law. The National Economy Act (1933) repealed
all laws providing benefits for veterans with service after the Civil
War. It eliminated the term \"compensation\" and designated all benefits
as \"pension.\" It eliminated many presumptions of service connection
such as those for tuberculosis and psychiatric disorders. It reduced the
rate of compensation for diseases.

\(2\) There was a storm of protest and Congress found that reductions
were greater than anticipated and, therefore, the act was amended before
it went into effect. Special boards were created to review cases. In
1934, veterans removed under prior reviews were restored to the
compensation rolls if they had served before the end of WWI. This action
also prohibited reductions in compensation. By 1935, most benefits in
effect before 1933 had been restored.

h\. **Current Rating Schedule**

\(1\) The 1933 Rating Schedule was developed under broad authority given
to the President to revise veterans\' benefits. It abandoned the
occupation variants and reverted to the average-man concept. All
reasonable doubt would be resolved in favor of the claimant. It required
evidence of actual impairment of function affecting industrial
adjustment, and correlated this with clinical and laboratory findings.

\(2\) The 1945 schedule reflected society\'s reduced reliance on manual
labor and had a greater appreciation of the effect of mental disability.
It was more detailed than the 1933 schedule. There was a clear policy
statement regarding ratings for hospitalization and convalescent
periods. The 1945 schedule has remained in effect since then with
changes made as the need arises and with the assistance of the Veterans
Health Administration.

\(3\) The present legal authority in 38 U.S.C. 1155 requires the
Secretary \"to adopt and apply a schedule of rating of reductions in
earning capacity from specific injuries or combinations of injuries. The
ratings shall be based as far as is practicable, upon the average
impairments of earning capacity resulting from such injuries in civil
occupations.\" It further provides that the Secretary \"shall from time
to time readjust this schedule of ratings in accordance with
experience.\" It is left to the Secretary to determine what is meant by
\"average impairments of earning capacity.\"

\(4\) Until July 1, 1973, compensation benefit amounts for disabilities
incurred in wartime eras were higher than for those incurred in
peacetime. Public Law 92-328 equalized the rates regardless of the
period in which the compensable disability was incurred.

**1.08 PENSION**

a\. **Revolutionary through Spanish-American War.** During this period,
very little effort was made to help veterans readjust to civilian life.
No attention was given to medical care or rehabilitation. Pension was an
afterthought intended to aid aged and disabled veterans and their
survivors. These pension laws were enacted many years after the specific
war and the veteran population was generally older than the average
population. These older veterans earned less and social assistance
programs such as Social Security, workers\' compensation and
unemployment compensation were not available. Need was inherent in these
early pension laws. An exception to this is pension paid to veterans and
widows based on service in the Spanish-American War. Beyond the fact
that the veteran served a specific period of time during the
Spanish-American War, no other condition applied to the receipt of
pension for a veteran or surviving spouse. Pensions were and still are
intended to relieve distress from disability and destitution among the
aging population of veterans and surviving spouses.

b\. **World War I**

\(1\) As the U.S. entered WWI, Congress realized millions of veterans
would be returning from the war, many of whom would need some sort of
aid. A new system of veterans\' benefits was enacted into law October 6,
1917, as an amendment to the War Risk Insurance Act. It provided five
classes of benefits: (1) support of the dependents of members of the
Armed Forces during service; (2) low cost insurance on a voluntary
basis; (3) compensation for the war disabled and the dependents of the
dead; (4) vocational rehabilitation for the disabled in need of such
training; and (5) medical and hospital care. This act did not provide
for pension for veterans with nonservice-connected pensions.

\(2\) From 1925 to 1930, Congress was besieged with petitions and
demands to aid those who could not establish service connection for
their disabilities. A bill was passed which provided a pension for WWI
veterans who, because of virtually no income, were exempt from federal
income taxation for the year preceding the filing of their application.
The rates varied depending on their evaluation as 25, 50, 75 percent or
totally disabled.

c\. **The 1930\'s**

\(1\) Through the Economy Act, Congress amended the prior pension law to
pay ex-servicepersons permanently and totally disabled from
nonservice-connected causes. A single veteran\'s income limit was
\$1,000 annually and a married couple was limited to \$2,500. The
President issued 41 executive orders dealing with veterans\' affairs.
The regulations resulting from these executive orders formed the basis
for benefits provided for veterans of WWII, Korea, Vietnam and the
Persian Gulf.

\(2\) The first bill to provide pension for widows and children of
veterans who died of nonservice-connected causes was enacted in 1934. It
provided for payment of compensation to a surviving spouse, child or
children of deceased WWI veterans who, while receiving or entitled to
receive pension, compensation or retirement pay for a 30-percent
service-connected disability, died from nonservice-connected causes, not
the result of his or her own misconduct, but only if that person had
been exempt from federal income taxation for the previous year.

d\. **World War II.** Legislation was enacted to include those who
entered into service on or after December 7, 1941, and before the
termination of hostilities, providing WWII veterans with compensation,
pension and other benefits administered by the VA. Public Law 78-313
provided disability pension to WWII veterans on the same basis as WWI
veterans. Surviving spouses of WWII veterans were provided pensions by
Public Law 78-312, dated May 27, 1944. Pension was limited to surviving
spouses of those WWII veterans who at the time of death received or were
entitled to receive compensation, pension, or retirement pay for
30-percent disability directly incurred in or aggravated by service.

e\. **Korean Conflict.** At the outbreak of the Korean conflict,
servicepersons were in an unusual position. They were fighting a war,
being shot at, disabled and killed. However, since the war in which they
were fighting was undeclared, the wartime benefits established for WWII
veterans were not applicable. Public Law 82-28 (May 1951) extended the
program to veterans and surviving spouses of veterans of the Korean
conflict.

f\. **Vietnam Era.** Public Law 90-77 (August 1967) extended eligibility
to veterans and surviving spouses of those who served after August 4,
1964. Pensioners qualified under that law with the same requirements and
benefits as veterans of preceding conflicts.

g\. **Protected Pension-Old Law.** Until 1959, the pension program
consisted of \"all or nothing\" determinations as to eligibility. This
meant that beneficiaries either fell below the income limitation and
received pension or they exceeded the income limitation and did not
receive pension. There was no provision for a gradation in the amounts
of pension entitlement. This particular feature of the system resulted
in drastic consequences to those whose allowable income increased above
the determined eligibility limits by even one dollar.

h\. **PL 86-211**

\(1\) In 1959, Congress revised this \"all or nothing\" system. It was
decided that variations in the amounts of pensioners\' income required
gradation in amounts of pension. Congress also wanted to cure other
inequities, such as failure to take into consideration the number of the
dependents for whom a veteran was responsible.

\(2\) Congress enacted PL 86-211, establishing a new pension program and
protecting the prior pension program, which became known as \"old law.\"
This program, effective July 1960, was an attempt to rectify the
inadequacies of previous laws. Pension entitlement was adjusted to
correspond with income. A three-tier structure replaced the one-level
limit. To protect those pensioners whose pension entitlement might be
reduced by the new program, a \"grandfather\" clause permitted those on
the rolls to continue their eligibility under the old law, subject to
the requirements of that law.

i\. **PL 88-664**

\(1\) In 1964, the law was revised to exclude 10 percent of all payments
to an individual under public or private retirement, annuity, endowment,
or similar plans in determining the \"annual income\" of the veteran.
The rationale for this change was to provide a constant rate of payment
in accordance with continuing need.

\(2\) In addition to a general rate increase, the 10-percent exclusion
generally assured that no individual pensioner would be adversely
affected because of a contemplated Social Security increase. Another
exclusion was created by not counting \"whichever is the greater, \$1200
or the total earned income of the spouse.\"

j\. **PL 90-77; PL 90-275.** In 1967 Congress provided an average
cost-of-living increase of 5.4 percent. The following year pension rates
were increased along with a \$200 increase in the annual income
limitations to mitigate against a pension loss because of the increase
in Social Security. The same law replaced the three-level system of
rates with a multilevel increment system. Under the three-level system,
a slight increase in outside income often could result in a
disproportionate decrease in pension. The enactment of a
20-plus-increment system of \$100 gradations was designed to permit a
more orderly and gradual reduction in monthly benefits whenever there
was an increase in outside income.

k\. **PL 91-588.** This law allowed VA to furnish necessary drugs and
medicines to veterans on the pension rolls who were permanently
housebound or in need of regular aid and attendance. VA continued to
furnish drugs and medicines to pensioners entitled to aid and attendance
whose pension entitlement had been discontinued because of excess income
as long as the annual income did not exceed the maximum by more than
\$500.

l\. **PL 92-198.** Veterans complained that whatever Social Security
increase Congress gave with one hand, it took back in reduced pension
with the other. More important, the reduction in a veteran\'s pension
was often greater than the increase in Social Security benefits, thereby
producing a net loss of aggregate income. In response to Social Security
increases over the years, Congress not only increased pension rates and
the maximum annual income limitations, but also adopted a new formula
approach to payment of pension. Under the formula, each individual\'s
monthly benefit was computed by reducing the maximum rate by a specified
number of cents for each dollar by which the maximum income for that
group is exceeded. The variable reduction formula permitted those with
little or no income to keep more of each dollar of outside income than
those with greater income. The formulas were designed so that with every
change in outside income, while entitlement exists, aggregate income
would be greater than before the income change. Another important
liberalization permits the exclusion from annual income of any
unreimbursed amounts paid within the calendar year for unusual medical
expenses. Unreimbursed expenditures which exceed 5 percent of the
pensioner\'s reported annual income are considered unusual.

m\. **PL 94-432.** This law provided a 7-percent increase in rates and
raised the annual income limitations. It further provided a 25-percent
increase in rates for veterans 78 years of age or older. It also
provided a special allowance for veterans in need of aid and attendance
whose income exceeded the limit by less than \$500.

n\. **PL 95-588.** The current \"Improved Pension\" is Public Law 95-588
and was effective January 1, 1979. Detailed information concerning this
program is found in various chapters in part IV of this manual.