59072 Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 5 

RIN 2900–AL71 

Accrued Benefits, Death 

Compensation, and Special Rules 

Applicable Upon Death of a Beneficiary

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

SUMMARY: The Department of Veterans 

Affairs (VA) proposes to amend its 

regulations relating to accrued benefits, 

death compensation, and certain special 

rules applicable upon the death of a VA 

beneficiary and to relocate them in a 

new part of the Code of Federal 

Regulations (CFR). We propose to 

reorganize these regulations in a more 

logical order, add new section and 

paragraph headings, rewrite certain 

sections, divide certain sections into 

two or more separate new regulations, 

and add changes required by relevant 

court decisions and by the Veterans 

Benefits Act of 2003.

DATES: Comments must be received by 

VA on or before November 30, 2004.

ADDRESSES: Written comments may be 

submitted by: Mail or hand-delivery to 

Director, Regulations Management 

(00REG1), Department of Veterans 

Affairs, 810 Vermont Ave., NW., Room 

1068, Washington, DC 20420; fax to 

(202) 273–9026; e-mail to 

VAregulations@mail.va.gov; or, through 

http://www.Regulations.gov. Comments 

should indicate that they are submitted 

in response to ‘‘RIN 2900–AL71.’’ All 

comments received will be available for 

public inspection in the Office of 

Regulation Policy and Management, 

Room 1063B, between the hours of 8 

a.m. and 4:30 p.m., Monday through 

Friday (except holidays). Please call 

(202) 273–9515 for an appointment.

FOR FURTHER INFORMATION CONTACT: Bill 

Russo, Chief, Regulations Rewrite 

Project (00REG2), Department of 

Veterans Affairs, 810 Vermont Avenue, 

NW., Washington, DC 20420, (202) 273–

9515.

SUPPLEMENTARY INFORMATION: The 

Secretary of Veterans Affairs has 

established an Office of Regulation 

Policy and Management (ORPM) to 

provide centralized management and 

coordination of VA’s rulemaking 

process. One of the major functions of 

this office is to oversee a Regulation 

Rewrite Project (the Project) to improve 

the clarity and consistency of existing 

VA regulations. The Project responds to 

a recommendation made in the October 

2001 ‘‘VA Claims Processing Task 

Force: Report to the Secretary of 

Veterans Affairs.’’ The Task Force 

recommended that the compensation 

and pension regulations be rewritten 

and reorganized in order to improve 

VA’s claims adjudication process. 

Therefore, the Project began its efforts 

by reviewing, reorganizing, and 

redrafting the regulations in 38 CFR part 

3 governing the Compensation and 

Pension (C&P) program of the Veterans 

Benefits Administration (VBA). These 

regulations are among the most difficult 

VA regulations for readers to 

understand and apply. 

Once rewritten, the proposed 

regulations will be published in several 

portions for public review and 

comment. This is one such portion. It 

includes proposed regulations 

concerning accrued benefits, benefits 

awarded but unpaid at death, death 

compensation, the disposition of the 

proceeds of certain VA benefits upon 

the death of the person receiving those 

benefits, and effective dates applicable 

to various death benefits.

Outline 

Overview of New Part 5 Organization 

Overview of Proposed Subpart G 

Organization 

Table Comparing Current Part 3 Rules With 

Proposed Part 5 Rules 

Content of Proposed Rules 

Accrued Benefits 

5.550 Definitions. 

5.551 Persons entitled to accrued benefits 

or benefits awarded, but unpaid at death. 

5.552 Claims for accrued benefits or 

benefits awarded, but unpaid at death. 

5.553 Notice of incomplete claims. 

5.554 Evidence of school attendance in 

claims by a veteran’s children for 

accrued benefits or benefits awarded, but 

unpaid at death. 

5.555 What VA benefits are potentially 

payable as accrued benefits or benefits 

awarded, but unpaid at death? 

5.556 Period for which accrued benefits 

are paid. 

5.557 Relationship between accrued 

benefits claim and claims filed by the 

deceased beneficiary. 

5.558 Special rule for certain cases 

involving deaths prior to December 16, 

2003. 

5.559 Accrued benefits reference table. 

Death Compensation 

5.560 Eligibility criteria for payment of 

death compensation. 

5.561 Time of marriage requirements for 

death compensation claims. 

5.562 Eligibility criteria for special 

monthly death compensation. 

Special Provisions 

5.563 Special rules when a beneficiary 

dies while receiving apportioned 

benefits. 

5.564 Special rules when VA benefit 

checks have not been negotiated prior to 

the beneficiary’s death. 

5.565 Special rules for payment of VA 

benefits on deposit in a special deposit 

account when a payee living in a foreign 

country dies. 

5.566 Special rules for payment of 

gratuitous VA benefits deposited in a 

personal funds of patients account when 

an incompetent veteran dies. 

Effective Dates 

5.567 Effective dates for DIC or death 

compensation awards. 

5.568 Effective date for discontinuance of 

DIC or death compensation payments to 

a person no longer recognized as the 

veteran’s surviving spouse. 

5.569 Effective date for award, or 

termination of award, of DIC or death 

compensation to a surviving spouse 

where DIC or death compensation 

payments to children are involved. 

5.570 Effective date for reduction in 

DIC—surviving spouses. 

5.571 Effective date for an award or 

increased rate based on amended income 

information—parents’ DIC. 

5.572 Effective dates for reduction or 

discontinuance based on increased 

income—parents’ DIC. 

Removal of 38 CFR 3.400(h) and 3.503(a)(9). 

Endnote Regarding Removals (Deletions) 

From Part 3 of 38 CFR 

Paperwork Reduction Act 

Regulatory Flexibility Act 

Executive Order 12866 

Unfunded Mandates 

Catalog of Federal Domestic Assistance 

Numbers 

List of Subjects in 38 CFR Part 5

Overview of New Part 5 Organization

We plan to remove the compensation 

and pension benefit regulations from 38 

CFR part 3 and relocate them in new 

part 5. We also plan to reorganize the 

regulations so that all provisions 

governing a specific benefit are located 

in the same subpart, with general 

provisions pertaining to all 

compensation and pension benefits also 

grouped together. We believe this 

reorganization will allow claimants and 

their representatives, as well as VA 

adjudicators, to find information 

relating to a specific benefit more 

quickly. 

The first major subdivision is 

‘‘Subpart A—General Provisions.’’ It 

would include information regarding 

the scope of the regulations in new part 

5, delegations of authority, general 

definitions, and general policy 

provisions for this part. 

‘‘Subpart B—Service Requirements for 

Veterans’’ would include information 

regarding a veteran’s military service, 

including the minimum service 

requirement, types of service, periods of 

war, and service evidence requirements. 

Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 59073

This subpart was published as proposed 

on January 30, 2004. See 69 FR 4820. 

‘‘Subpart C—Adjudicative Process, 

General’’ would inform readers about 

types of claims and filing procedures, 

VA’s duties, rights and responsibilities 

of claimants, and general effective dates, 

as well as revision of decisions and 

protection of VA ratings. 

‘‘Subpart D—Dependents of Veterans’’

would provide information about how 

VA determines whether an individual is 

a dependent and the evidence 

requirements for such determinations. 

‘‘Subpart E—Claims for Service 

Connection and Disability 

Compensation’’ would define serviceconnected compensation, including 

direct and secondary service 

connection. This subpart would inform 

readers how VA determines entitlement 

to service connection. The subpart 

would also contain provisions 

governing presumptions related to 

service connection, disability rating 

principles, and effective dates, as well 

as several special ratings. 

‘‘Subpart F—Nonservice-Connected 

Disability and Death Pensions’’ would 

include information regarding the three 

types of nonservice-connected pension: 

Improved pension, Old law pension, 

and Section 306 pension. This subpart 

would also include those provisions 

that state how to establish entitlement 

for pension, where applicable, and the 

effective dates governing each pension. 

‘‘Subpart G—Dependency and 

Indemnity Compensation, Death 

Compensation, Accrued Benefits, and 

Special Rules Applicable Upon Death of 

a Beneficiary’’ would contain 

regulations governing claims for 

dependency and indemnity 

compensation (DIC); death 

compensation; accrued benefits; benefits 

awarded, but unpaid at death; and 

various special rules that apply to the 

disposition of VA benefits, or proceeds 

of VA benefits, when a beneficiary dies. 

This subpart would also include related 

definitions, effective-date rules, and 

rate-of-payment rules. The portion 

concerning accrued benefits, death 

compensation benefits, special rules 

applicable on death of a beneficiary, and 

effective dates is the subject of this 

document. 

‘‘Subpart H—Special Benefits for 

Veterans, Dependents, and Survivors’’

would pertain to ancillary and special 

benefits available, including benefits for 

children with various birth defects. 

‘‘Subpart I—Benefits for Certain 

Filipino Veterans and Survivors’’ would 

pertain to the various benefits available 

to Filipino veterans. 

‘‘Subpart J—Burial Benefits’’ would 

pertain to burial allowances. 

‘‘Subpart K—Matters Affecting 

Receipt of Benefits’’ would contain 

provisions regarding bars to benefits, 

forfeiture of benefits, and renouncement 

of benefits. 

‘‘Subpart L—Regulations Related to 

Payments and Adjustments to 

Payments’’ would include general ratesetting rules, several adjustment and 

resumption regulations, and election of 

benefit rules. 

The final subpart, ‘‘Subpart M—

Apportionments and Payments to 

Fiduciaries or Incarcerated 

Beneficiaries,’’ would include 

regulations governing apportionments, 

benefits for incarcerated beneficiaries, 

and guardianship. 

Some of the regulations in this Notice 

of Proposed Rulemaking (NPRM) crossreference other compensation and 

pension regulations. If those regulations 

have been published in this or earlier 

NPRMs for the Project, we cite the 

proposed part 5 section. We also cite the 

Federal Register page where a proposed 

part 5 section published in an earlier 

NPRM may be found. However, where 

a regulation proposed in this NPRM 

would cross-reference a proposed part 5 

regulation that has not yet been 

published, we cite to the current part 3 

regulation that deals with the same 

subject matter. The current part 3 

section we cite may differ from its 

eventual part 5 replacement in some 

respects, but we believe this method 

will assist readers in understanding 

these proposed regulations where no 

part 5 replacement has yet been 

published. If there is no part 3 

counterpart to a proposed part 5 

regulation that has not yet been 

published, we have inserted 

‘‘[regulation that will be published in a 

future Notice of Proposed Rulemaking]’’

in the place where the part 5 regulation 

citation would be placed. 

In connection with this rulemaking, 

VA will accept comments relating to a 

prior rulemaking issued as a part of the 

Project, if the matter being commented 

on relates to both NPRM’s. VA will 

provide a separate opportunity for 

public comment on each segment of the 

proposed part 5 regulations before 

adopting a final version of part 5. 

Overview of Proposed Subpart G 

Organization 

This NPRM pertains to those 

regulations governing accrued benefits, 

death compensation, special rules 

applicable upon death of a beneficiary 

and, with regard to effective dates only, 

DIC benefits. These regulations would 

be contained in proposed Subpart G of 

new 38 CFR part 5. While these 

regulations have been substantially 

restructured and rewritten for greater 

clarity and ease of use, many of the 

basic concepts contained in these 

proposed regulations are the same as in 

their existing counterparts in 38 CFR 

part 3. However, we also propose 

substantive changes, including those 

stemming from relevant court decisions 

and from provisions of the Veterans 

Benefits Act of 2003.

Table Comparing Current Part 3 Rules 

With Proposed Part 5 Rules. 

The following table shows the 

correspondence between the current 

regulations in part 3 and those proposed 

regulations contained in this NPRM:

Proposed part 5

section or paragraph 

Based in whole or in

part on 38 CFR part 3 

section or paragraph 

(or ‘‘New’’) 

5.550(a) ..................... 3.1000(a). 

5.550(b) ..................... New. 

5.550(c) ..................... 3.1000(d)(2). 

5.550(d) ..................... New. 

5.550(e) ..................... New. 

5.550(f) ...................... 3.1000(d)(3). 

5.550(g) ..................... 3.1000(d)(4). 

5.550(h) ..................... 3.1000(d)(1). 

5.551(a) ..................... New. 

5.551(b) ..................... 3.1000(a)(1). 

5.551(c) ..................... 3.1000(a)(2), (f). 

5.551(d) ..................... 3.1000(d)(2). 

5.551(e) ..................... 3.1000(a)(4), 3.1002. 

5.551(f) ...................... 3.1000(c)(2). 

5.552(a) ..................... New. 

5.552(b) and (c) ........ 3.1000(c). 

5.553 ......................... 3.1000(c)(1). 

5.554 ......................... 3.667(e). 

5.555 ......................... 3.1000(e) through (h), 

3.803(d). 

5.556(a) ..................... 3.1000(a). 

5.556(b) ..................... New. 

5.557 ......................... New. 

5.558 ......................... New. 

5.559 ......................... New. 

5.560(a) ..................... 3.4(a). 

5.560(b) ..................... 3.4(c)(1). 

5.560(c) ..................... 3.5(d). 

5.560(d) ..................... New. 

5.561(a) ..................... Introduction to 3.54. 

5.561(b) and (c), except for (c)(1).3.54(b). 

5.561(c)(1) ................. 3.54(b) and (e). 

5.562(a) ..................... 3.351(a)(6), (b), and 

(c). 

5.562(b) ..................... 3.351(c). 

5.563 ......................... 3.1000(b). 

5.564(a)(1) ................ Introduction to 3.1003 

and 3.1003(a). 

5.564(a)(2) ................ New. 

5.564(b) ..................... 3.1003(a)(1). 

5.564(c) ..................... 3.1003(a)(2). 

5.564(d) ..................... 3.1003(b). 

5.564(e) ..................... 3.1003(c). 

5.565(a) through 

(d)(1).

New. 

5.565(d)(2) ................ 3.1008. 

5.566(a) ..................... Introduction to 

3.1009. 

5.566(b) and (c) ........ New. 

5.566(d) ..................... 3.1009(a). 

5.566(e) ..................... 3.1009(b). 

59074 Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 

Proposed part 5

section or paragraph 

Based in whole or in

part on 38 CFR part 3 

section or paragraph 

(or ‘‘New’’) 

5.567(a) ..................... 3.400(c)(1). 

5.567(b) ..................... 3.400(c)(2). 

5.567(c) ..................... 3.400(c)(4)(i). 

5.567(d) ..................... 3.400(c)(4)(ii). 

5.567(e) ..................... 3.402(a). 

5.568(a) ..................... Introduction to 3.657. 

5.568(b)(1) ................ 3.657(a)(1). 

5.568(b)(2) ................ 3.657(a)(2). 

5.568(b)(3) ................ New. 

5.569(a) ..................... Introduction to 3.657. 

5.569(b) ..................... 3.657(b)(1). 

5.569(c)(1) and (2) .... 3.657(b)(2). 

5.569(c)(3) ................. New. 

5.570(a) ..................... Introduction to 3.502. 

5.570(b)(1) ................ 3.502(a)(1). 

5.570(b)(2) ................ 3.502(a)(2). 

5.570(c) ..................... 3.502(b). 

5.571(a) ..................... 3.660(b)(1). 

5.571(b) ..................... 3.660(b)(2). 

5.571(c) ..................... 3.660(b) introduction. 

5.572(a) and (b) ........ 3.660(a)(2) second 

sentence. 

5.572(c) ..................... New. 

5.572(d) ..................... 3.660(a)(3). 

Readers who use this table to compare 

existing regulatory provisions with the 

proposed provisions, and who observe a 

substantive difference between them, 

should consult the text that appears 

later in this document for an 

explanation of significant changes in 

each regulation. Not every paragraph of 

every current part 3 section affected by 

these proposed regulations is accounted 

for in the table. In some instances other 

portions of the part 3 sections that are 

contained in these proposed regulations 

appear in subparts of part 5 that will be 

published for public comment at a later 

time. For example, a reader might find 

a reference to paragraph (a) of a part 3 

section in the table, but no reference to 

paragraph (b) of that section because 

paragraph (b) will be addressed in a 

future NPRM. The table also does not 

include material from the current 

sections that will be removed from part 

3 and not carried forward to part 5. A 

listing of material VA proposes to 

remove from part 3 appears later in this 

document. 

Content of Proposed Rules 

Accrued Benefits 

5.550 Definitions 

The first proposed regulation, § 5.550, 

defines ‘‘accrued benefits’’ and other 

terms important in determining 

entitlement to benefits under 38 U.S.C. 

5121, ‘‘Payment of certain accrued 

benefits upon death of a beneficiary.’’

These proposed definitions are 

influenced by court opinions relating to 

benefits for survivors under 38 U.S.C. 

5121 and by changes to 38 U.S.C. 5121 

made by section 104 of the Veterans 

Benefits Act of 2003 (‘‘the Act’’), Pub. L. 

108–183, 117 Stat. 2656. 

Understanding the complex 

background of our first two proposed 

definitions, ‘‘accrued benefits’’ and 

‘‘benefits awarded, but unpaid at death’’

is critical to understanding these 

proposed definitions and other issues in 

this NPRM. 

Prior to its amendment by section 104 

of the Act, the introductory portion of 

38 U.S.C. 5121(a) read as follows:

Except as provided in sections 3329 and 

3330 of title 31, periodic monetary benefits 

(other than insurance and servicemen’s 

indemnity) under laws administered by the 

Secretary to which an individual was entitled 

at death under existing ratings or decisions, 

or those based on evidence in the file at date 

of death (hereinafter in this section and 

section 5122 of this title referred to as 

‘‘’accrued benefits’’’) and due and unpaid for 

a period not to exceed two years, shall, upon 

the death of such individual be paid as 

follows. ***

VA traditionally construed 38 U.S.C. 

5121(a) as providing only one type of 

benefit to survivors: accrued benefits. 

The United States Court of Appeals for 

Veterans Claims (CAVC) in Bonny v. 

Principi, 16 Vet. App. 504 (2002) 

interpreted section 5121(a) differently. 

The CAVC’s analysis includes the 

following:

The comma in the middle of paragraph (a), 

between ‘‘decisions’’ and ‘‘or,’’ and the use 

of the conjunction ‘‘or’’ after the comma, 

indicate that the separated phrases state 

substantive alternatives. 38 U.S.C. 5121(a). 

The paragraph provides for payment of (1) 

periodic monetary benefits to which an 

individual was entitled at death under 

existing ratings or decisions, which the Court 

will call ‘‘benefits awarded but unpaid’’, or 

(2) periodic monetary benefits based on 

evidence in the file at the date of an entitled 

individual’s death and due and unpaid for a 

period not to exceed two years, which are 

called ‘‘accrued benefits’’ for purposes of 

sections 5121 and 5122. Id.

* * * * *

The important distinction between the two 

types of periodic monetary benefits is that 

one type of benefits is due to be paid to the 

veteran at his death and one type is not. As 

to the former, when the benefits have been 

awarded but not paid pre-death, an eligible 

survivor is to receive the entire amount of the 

award. The right to receive the entire amount 

of periodic monetary benefits that was 

awarded to the eligible individual shifts to 

the eligible survivor when payment of the 

award was not made before the eligible 

individual died. This interpretation of 38 

U.S.C. 5121(a) is completely consistent with 

the plain language of the statute, as 

previously quoted and interpreted herein. 

As to the latter type of periodic monetary 

benefits, what is determinative regarding 

accrued benefits is that evidence in the 

individual’s file at the date of death supports 

a decision in favor of awarding benefits. 

Because the benefits cannot be awarded to 

the deceased individual, an eligible survivor 

can claim a portion of those accrued benefits.

16 Vet. App. at 507–08. The CAVC’s 

analysis recognized two kinds of 

benefits under 38 U.S.C. 5121, which 

we propose to call ‘‘accrued benefits’’

and ‘‘benefits awarded, but unpaid at 

death.’’ These terms are defined in 

§ 5.550(a) and (b), respectively, to 

comply with the court’s analysis. 

These proposed definitions are also 

influenced by the Act. Section 104(a) of 

the Act removed the 2-year limitation 

on accrued benefits payable under 38 

U.S.C. 5121. Section 104(c) of the Act 

made certain ‘‘technical amendments’’

to 38 U.S.C. 5121, including removal of 

the comma after ‘‘or decisions’’ in the 

introductory text of paragraph (a). This 

is the same comma relied upon by the 

CAVC in Bonny for interpreting 38 

U.S.C. 5121 to require a distinction 

between accrued benefits and benefits 

awarded, but unpaid at death. 

Therefore, an important question is 

whether Congress intended to change 

the interpretation of 38 U.S.C. 5121 

required by the Bonny decision by 

removing this comma. Based on the 

following analysis, we believe that it 

did. 

The text of section 104 of the Act is 

identical to the text of a provision in the 

House bill, H.R. 2297, as amended, 

108th Cong. (2003). The ‘‘Explanatory 

Statement on Senate Amendment to 

House Bill, H.R. 2297, as Amended’’

notes that the Act reflects a compromise 

agreement reached by the House and 

Senate Committees on Veterans’ Affairs 

on provisions of a number of House and 

Senate bills affecting veterans’ benefits. 

Section 104 of the Act was based on 

portions of two of these bills, section 6 

of H.R. 1460, 108th Cong. (2003), and 

section 105 of S. 1132, as amended, 

108th Cong. (2003). See 149 Cong. Rec. 

S15,133–34 (daily ed. Nov. 19, 2003). 

The removal of the comma in 

question in 38 U.S.C. 5121(a) comes 

from section 105(b) of S. 1132, as passed 

by the Senate. See 149 Cong. Rec. 

S13,745 (daily ed. Oct. 31, 2003). S. 

1132 was also based on a number of 

other bills, including S. 1188, 108th 

Cong. (2003). A principal purpose of S. 

1188 was to amend 38 U.S.C. 5121 ‘‘to 

repeal the two-year limitation on the 

payment of accrued benefits that are due 

and unpaid by the Secretary of Veterans 

Affairs upon the death of a veteran or 

other beneficiary under laws 

administered by the Secretary.’’ 149 

Cong. Rec. S7,476 (daily ed. June 5, 

2003). As originally drafted, S. 1188 did 

not include the ‘‘technical 

Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 59075

amendments’’ in section 104(c) of the 

Act. 

On July 10, 2003, the Senate 

Committee on Veterans’ Affairs held a 

hearing on a number of the bills that 

would become the sources of S. 1132. 

Persons who testified at that hearing 

included Daniel L. Cooper, VA’s Under 

Secretary for Benefits, whose statement 

to the Committee included the following 

comment concerning S. 1188:

In addition, we note one technical change 

needed in section 2 of S. 1188 should it be 

enacted. The comma in current section 

5121(a) following ‘‘existing ratings or 

decisions’’ should be deleted to clarify, for 

purposes of 38 U.S.C. §§ 5121(b) and (c) and 

5122, that the term ‘‘accrued benefits’’

includes both benefits that have been 

awarded to an individual in existing ratings 

or decisions but not paid before the 

individual’s death, as well as benefits that 

could be awarded based on evidence in the 

file at the date of death.

S. Rep. No. 108–169, at 46–47. 

Further, in its discussion of section 

105 of S. 1132, the Committee noted 

that:

At the Committee’s hearing on July 10, 

2003, Under Secretary Cooper commented as 

follows: ‘‘The distinction the Bonny decision 

draws between the two categories of 

claimants—those whose claims had been 

approved and those whose entitlement had 

yet to be recognized when they died—is 

really one without a difference. In either 

case, a claimant’s estate is deprived of the 

value of benefits to which the claimant was, 

in life, entitled.’’

Id. at 8. 

Based on this legislative history, we 

conclude that Congress’ purpose in 

removing the comma from the 

introductory paragraph of 38 U.S.C. 

5121(a) was to provide for only one type 

of benefit under section 5121, removing 

the distinction between accrued benefits 

and benefits awarded, but unpaid at 

death, that resulted from the Bonny

decision. 

The interplay between Bonny and 

section 104 of the Act is also affected by 

the fact that different portions of section 

104 of the Act became effective at 

different times. Because there is no 

specific effective date in the Act for 

section 104(c) (the ‘‘technical 

amendments’’ which include removal of 

the comma that was a basis for the 

CAVC’s interpretation of 38 U.S.C. 5121 

in Bonny), that portion of the Act 

became effective when the Act was 

signed into law on December 16, 2003. 

On the other hand, under section 104(d) 

of the Act, the amendment to 38 U.S.C. 

5121(a), removing the provision 

restricting benefits to those that were 

due and unpaid ‘‘for a period not to 

exceed two years’’ applies to deaths 

occurring on or after December 16, 2003. 

These factors lead to consideration of 

what, if any, viability the Bonny

distinctions between accrued benefits 

and benefits awarded, but unpaid at 

death, still have. For the reasons 

discussed in the following paragraphs, 

we conclude that these distinctions are 

still applicable in a very limited number 

of cases. Particularly because of the 

differences in effective date provisions 

for different provisions of section 104 of 

the Act, sorting this out involves 

looking at the time line for when the 

deceased beneficiary died and when 

claims for 38 U.S.C. 5121 benefits were 

received and decided. (For purposes of 

this discussion, ‘‘deceased beneficiary’’

has the meaning we propose in 

§ 5.550(e) (‘‘the deceased person whose 

VA benefits are being claimed as 

accrued benefits or benefits awarded, 

but unpaid at death’’).) 

Based on the plain language of the 

Act, we believe the Bonny division of 38 

U.S.C. 5121 benefits clearly does not 

apply if the deceased beneficiary died 

on or after December 16, 2003. Effective 

on that date, the statutory basis for 

Bonny’s interpretation of 38 U.S.C. 5121 

as creating two different types of VA 

benefits was removed. In any event, 

there would be little benefit to claimants 

for preserving the distinction in such 

cases because the 2-year benefit 

limitation has been repealed in cases 

where the deceased beneficiary died on 

or after December 16, 2003.

For claims filed on or after December 

16, 2003, VA must apply 38 U.S.C. 5121 

as amended by the Act. However, the 2-

year limitation applies to all 38 U.S.C. 

5121 accrued benefit claims VA 

received on or after December 16, 2003, 

if the deceased beneficiary died before 

December 16, 2003. This is true because 

(1) the Act removed the statutory 

underpinnings of the Bonny decision 

effective on December 16, 2003, but (2) 

Congress very clearly intended the 

removal of the 2-year limitation in 

amended 38 U.S.C. 5121 to be effective 

only where the deceased beneficiary 

died on or after December 16, 2003. 

The last question is how VA should 

apply 38 U.S.C. 5121 to those cases 

where the deceased beneficiary died 

before December 16, 2003, and a claim 

for § 5121 benefits was pending on 

December 16, 2003. For the following 

reasons, we propose not to apply the 

Act’s amendments in such cases. 

VA’s General Counsel addressed 

retroactive application of a statute in 

VAOPGCPREC 7–2003, holding:

In Kuzma v. Principi, 341 F.3d 1327 (Fed. 

Cir. 2003), the United States Court of Appeals 

for the Federal Circuit overruled Karnas v. 

Derwinski, 1 Vet. App. 308 (1991), to the 

extent it conflicts with the precedents of the 

Supreme Court and the Federal Circuit. 

Karnas is inconsistent with Supreme Court 

and Federal Circuit precedent insofar as 

Karnas provides that, when a statute or 

regulation changes while a claim is pending 

before the Department of Veterans Affairs 

(VA) or a court, whichever version of the 

statute or regulation is most favorable to the 

claimant will govern unless the statute or 

regulation clearly specifies otherwise. 

Accordingly, that rule adopted in Karnas no 

longer applies in determining whether a new 

statute or regulation applies to a pending 

claim. Pursuant to Supreme Court and 

Federal Circuit precedent, when a new 

statute is enacted or a new regulation is 

issued while a claim is pending before VA, 

VA must first determine whether the statute 

or regulation identifies the types of claims to 

which it applies. If the statute or regulation 

is silent, VA must determine whether 

applying the new provision to claims that 

were pending when it took effect would 

produce genuinely retroactive effects. If 

applying the new provision would produce 

such retroactive effects, VA ordinarily should 

not apply the new provision to the claim. If 

applying the new provision would not 

produce retroactive effects, VA ordinarily 

must apply the new provision.

As to the first criterion, the Act does 

not ‘‘identif[y] the types of claims to 

which it applies.’’ The question then 

becomes whether applying the Act’s 

provisions to claims pending before VA 

on December 16, 2003, would produce 

a ‘‘genuinely retroactive’’ effect. For the 

reasons stated below, we believe that it 

would. Therefore, VA will not apply the 

Act’s amendments to claims for 38 

U.S.C. 5121 benefits pending before VA 

on December 16, 2003. 

As discussed at some length in 

VAOPGCPREC 7–2003, determining 

whether applying changes in the law 

would produce a genuinely retroactive 

effect is a complex undertaking. 

However, we believe that the principles 

discussed in the following portion of 

paragraph 17 of the General Counsel’s 

opinion control the question at hand 

and call for application of 38 U.S.C. 

5121 as it existed prior to the Act to 

claims pending on December 16, 2003:

[S]tatutes or regulations that restrict the 

bases for entitlement to a benefit might have 

disfavored retroactive effects as applied to 

some claims that were pending when they 

took effect. For example, if a veteran was 

entitled to benefits based on the law existing 

when he or she filed an application with VA, 

and a restrictive change in the governing law 

occurs before VA adjudicates the claim, 

application of the new restriction might 

retroactively extinguish the claimant’s 

previously existing right to benefits for 

periods before the new law took effect. In 

those circumstances, Landgraf [v. USI Film 

Products, 511 U.S. 244 (1994)] indicates that 

the intervening restriction would not apply 

in determining the claimant’s rights for such 

periods.

59076 Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 

Applying the technical amendment to 

section 5121(a) made by the Act to 

pending claims would limit the amount 

of accrued benefits some claimants 

could receive under Bonny. We believe 

this would constitute a genuine 

retroactive effect. We propose to amend 

the regulations so as to avoid such an 

effect. 

Accordingly, we propose to provide 

in § 5.550(a)(2) and (3) that:

(2) ‘‘Accrued benefits’’ also includes 

benefits awarded, but unpaid at death: 

(i) If the deceased beneficiary died on or 

after December 16, 2003; 

(ii) If the deceased beneficiary died prior 

to December 16, 2003, but VA received the 

claim for benefits under 38 U.S.C. 5121 on 

or after December 16, 2003; and 

(iii) For purposes of § 5.558, ‘‘Special rule 

for certain cases involving deaths prior to 

December 16, 2003.’’

(3) ‘‘Accrued benefits’’ does not include 

benefits awarded, but unpaid at death, when 

the deceased beneficiary died prior to 

December 16, 2003, and a claim for benefits 

under 38 U.S.C. 5121 was pending before VA 

on December 16, 2003. (For purposes of 

paragraph (a)(3) of this section, VA will 

consider a claim to be pending if there was 

no final decision on that claim as of 

December 16, 2003. See [regulation that will 

be published in a future Notice of Proposed 

Rulemaking] (defining a final decision)).

Proposed § 5.550(c) addresses the 

definition of ‘‘child.’’ Because ‘‘child’’ is 

defined in great detail in § 3.57, we 

believe that the material should not be 

repeated here. Therefore, the definition 

in proposed § 5.550(c) consists of a 

simple cross-reference to § 3.57, together 

with text preserving the intent of the 

current rule in § 3.1000(d)(2) stating that 

a ‘‘child’’ includes ‘‘an unmarried child 

over the age of 18 but not over 23 years 

of age, who was pursuing a course of 

instruction within the meaning of § 3.57 

at the time of the payee’s death.’’ This 

is accomplished by reference to ‘‘the age 

range specified by § 3.57(a)(1)(iii).’’

(Note that current § 3.57(a)(1)(iii) 

correctly describes the relevant age 

range while current § 3.1000(d)(2) is 

potentially misleading in this regard. 

See 38 U.S.C. 101(4)(A)(iii).) 

The United States Court of Appeals 

for the Federal Circuit clarified another 

aspect of benefits under 38 U.S.C. 5121 

in Jones v. West, 136 F.3d 1296, 1299 

(Fed. Cir. 1998):

Reading [38 U.S.C.] 5101 and 5121 together 

compels the conclusion that, in order for a 

surviving spouse to be entitled to accrued 

benefits, the veteran must have had a claim 

pending at the time of his death for such 

benefits or else be entitled to them under an 

existing rating or decision.

Proposed § 5.550(d) defines a ‘‘claim 

for VA benefits pending on the date of 

death’’ as ‘‘a claim filed with VA which 

had not been finally adjudicated by VA 

on or before the date of death.’’ That is, 

VA would consider the claim to have 

been pending on the date of death if it 

had not been adjudicated or, if the claim 

had been adjudicated, the time to appeal 

had not expired or there is no final 

decision by the Board of Veterans’

Appeals (BVA). 

We note this definition does not 

preclude a survivor from filing an 

accrued benefits claim based on a 

decedent’s claim that had been 

judicially appealed. In that case, the 

CAVC typically vacates the BVA 

decision in order to preserve potential 

accrued benefits claims. For example, 

the CAVC noted the following in 

Sagnella v. Principi, 15 Vet. App. 242, 

246 (2001):

This Court held in Landicho [v. Brown, 7 

Vet. App. 42 (1994)] that the appropriate 

remedy [when a veteran dies while his or her 

BVA decision is on appeal] is to vacate the 

Board decision from which the appeal was 

taken and to dismiss the appeal. Landicho, 7 

Vet. App. at 54. This ensures that the Board 

decision and the underlying VA regional 

office (RO) decision(s) will have no 

preclusive effect in the adjudication of any 

accrued-benefits claims derived from the 

veteran’s entitlements. It also nullifies the 

previous merits adjudication by the RO 

because that decision was subsumed in the 

Board decision.

Consistent with long-standing VA 

practice, § 5.550(d) also provides that 

such a claim may include a deceased 

beneficiary’s claim to reopen a finally 

disallowed claim based upon new and 

material evidence or a deceased 

beneficiary’s claim of clear and 

unmistakable error in a prior rating or 

decision. 

Proposed § 5.550(e) defines ‘‘deceased 

beneficiary.’’ This would provide a 

convenient way to refer to the deceased 

VA beneficiary throughout these 

proposed regulations and to distinguish 

that person from the living beneficiary 

claiming survivors’ benefits.

The proposed definitions of 

‘‘dependent parent’’ at § 5.550(f) and of 

‘‘evidence in the file on the date of 

death’’ at § 5.550(g) are plain language 

restatements of the definitions of those 

terms in current § 3.1000(d). 

Next, in § 5.550(h), we propose to 

replace the definition of ‘‘spouse’’ in 

current § 3.1000(d)(1) with a definition 

of ‘‘surviving spouse.’’ Section 

3.1000(d)(1) provides that a ‘‘spouse’’ is 

the surviving spouse of a veteran whose 

marriage meets the requirements of 

§ 3.1(j) or § 3.52. ‘‘Surviving spouse’’ is 

defined in § 3.50(b), which also requires 

compliance with either § 3.1(j) or § 3.52. 

Therefore, subject to one exception, we 

propose to define ‘‘surviving spouse’’ by 

reference to § 3.50(b). The exception 

arises because § 3.50(b)(1) imposes a 

requirement for the surviving spouse to 

have lived with the veteran 

continuously from the date of marriage 

to the date of the veteran’s death, except 

where there was a separation which was 

due to the misconduct of, or procured 

by, the veteran without the fault of the 

spouse. Section 3.1000(d)(1), in part, 

specifies that ‘‘[w]here the marriage 

meets the requirements of § 3.1(j) date of 

marriage and continuous cohabitation 

are not factors.’’ In § 5.550(h)(2), we 

propose to preserve this exception from 

the § 3.50(b)(1) continuous cohabitation 

requirements and various potentially 

applicable date-of-marriage 

requirements. 

5.551 Persons Entitled to Accrued 

Benefits or Benefits Awarded, but 

Unpaid at Death 

In the next proposed regulation, 

§ 5.551, we propose to recognize the 

category of ‘‘benefits awarded, but 

unpaid at death,’’ where appropriate. 

We also propose to clarify several 

points. 

We propose in § 5.551(a) to state the 

scope of this section, including crossreferences to several special provisions 

applicable to accrued benefits and 

benefits awarded, but unpaid at death. 

One clarification, in proposed 

§ 5.551(b), concerns the references to the 

veteran’s spouse, children, and 

dependent parents in current 

§ 3.1000(a)(1). Proposed § 5.551(b)(2) 

specifies that this means the surviving 

spouse, surviving children, and 

surviving dependent parents. This is not 

a substantive change. It is implicit in the 

current regulation and in its authorizing 

statute (38 U.S.C. 5121(a))(2)), both of 

which require that the claimants be 

living. 

Proposed 5.551(c) clarifies provisions 

of current § 3.1000(f), which provides 

rules for distributing unpaid 

dependents’ educational assistance 

allowance or special restorative training 

allowance, authorized by 38 U.S.C. 

chapter 35, when the recipient of those 

benefits dies. Current § 3.1000(f) 

contains two different rules concerning 

distribution of those benefits when the 

deceased beneficiary is the veteran’s 

spouse. This is necessary because, 

under 38 U.S.C. 5121(a), the disposition 

of benefits differs depending on whether 

the veteran was or was not living at the 

time of the death of the veteran’s 

spouse. 

Upon the death of a surviving spouse, 

the spouse’s benefits go first to the 

surviving children of the deceased 

veteran. See 38 U.S.C. 5121(a)(3). If 

there are no surviving children, the 

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accrued benefits may be paid as 

necessary to reimburse the person who 

bore the expense of the last sickness 

and/or burial of the deceased spouse. 

See 38 U.S.C. 5121(a)(6). On the other 

hand, there is no specific rule in 38 

U.S.C. 5121(a) for distribution of 

benefits when the spouse of a living 

veteran dies. In that case, the default 

provision of 38 U.S.C. 5121(a)(6) applies 

and the accrued benefits may be paid 

only as necessary to reimburse the 

person who bore the expense of the last 

sickness and/or burial of the deceased 

spouse. 

We propose to make these 

distinctions much clearer in § 5.551(c) 

by using two separate paragraphs. One 

would be applicable when the deceased 

beneficiary was the surviving spouse of 

a deceased veteran, and one would be 

applicable when the deceased 

beneficiary was the spouse of a living 

veteran. In fact, these distinctions 

would apply generally if the deceased 

beneficiary was the veteran’s spouse, 

not just in cases involving chapter 35 

educational benefits, and that broader 

application is also reflected in proposed 

§ 5.551(c). 

Section 104(b) of the Act amends 38 

U.S.C. 5121(a) to provide that surviving 

parents may claim accrued benefits 

upon the death of a child who had 

claimed benefits under 38 U.S.C. 

chapter 18. Under section 104(d) of the 

Act, this amendment applies when the 

child dies on or after December 16, 

2003. Proposed § 5.551(d)(3) reflects this 

change. 

A consequence of the Bonny decision 

construing 38 U.S.C. 5121(a) to provide 

for two different kinds of benefits is that 

statutory provisions that explicitly 

apply to only one of those benefits 

necessarily do not apply to the other. 

One of those provisions (38 U.S.C. 

5121(a)(5) prior to the Act, but now 38 

U.S.C. 5121(a)(6)) provides that, if there 

is no other qualified claimant, ‘‘only so 

much of the accrued benefits may be 

paid as may be necessary to reimburse 

the person who bore the expense of [the 

deceased beneficiary’s] last sickness and 

burial.’’

Because it expressly applies to 

‘‘accrued benefits,’’ it could not, prior to 

the Act, have applied to the category of 

benefits recognized by the Bonny

decision we propose to call ‘‘benefits 

awarded, but unpaid at death.’’ In 

keeping with the previous discussion of 

the extent to which Bonny is still 

applicable, we propose to provide in 

§ 5.551(e) that ‘‘[b]enefits awarded, but 

unpaid at death, are not payable under 

this paragraph if the deceased 

beneficiary died prior to December 16, 

2003, and a claim for such benefits was 

pending before VA on December 16, 

2003.’’

5.552 Claims for Accrued Benefits or 

Benefits Awarded, but Unpaid at Death 

Proposed § 5.552 provides rules for 

claims for accrued benefits. These 

proposed rules also apply to claims for 

benefits awarded, but unpaid at death, 

if the deceased beneficiary died prior to 

December 16, 2003, and a claim for such 

benefits was pending on December 16, 

2003. Proposed § 5.552(a) clarifies that 

proposed § 5.552 does not apply to 

claims for the proceeds of benefit checks 

a deceased beneficiary failed to 

negotiate prior to death (see proposed 

§ 5.564), or to claims for benefits under 

§ 3.816 by members of a certain classaction litigation. 

Proposed § 5.552(b) states rules 

concerning the time limit for filing 

claims for accrued benefits and the 

absence of a time limit for filing claims 

for benefits awarded, but unpaid at 

death. Proposed § 5.552(b)(1), based on 

38 U.S.C. 5121(c), states that ‘‘[a] claim 

for accrued benefits must be filed within 

one year after the date of the deceased 

beneficiary’s death.’’ Under both 

proposed § 5.552(b)(1) and 38 U.S.C. 

5121(c), the one-year time limit only 

applies to ‘‘accrued benefits.’’ Therefore, 

as provided in proposed § 5.552(b)(2), it 

does not apply to claims for ‘‘benefits 

awarded, but unpaid at death.’’

However, as the previous discussion 

concerning the interplay between Bonny

v. Principi and the Act shows, ‘‘benefits 

awarded, but unpaid at death’’ now 

exists as a separate category of benefits 

in only very limited circumstances. 

Therefore proposed § 5.552(b)(2) states 

the following:

Benefits awarded, but unpaid at death.

There is no time limit for filing a claim for 

benefits awarded, but unpaid at death, if the 

deceased beneficiary died prior to December 

16, 2003, and a claim for such benefits was 

pending before VA on December 16, 2003. 

Paragraph (b)(1) of this section applies where 

‘‘accrued benefits’’ includes ‘‘benefits 

awarded, but unpaid at death.’’ See

§ 5.550(a)(2).

5.553 Notice of Incomplete Claims 

The provisions of proposed § 5.553 

are similar to those of current 

§ 3.1000(c)(1) with modifications to 

reflect the structure of proposed part 5. 

5.554 Evidence of School Attendance 

in Claims by a Veteran’s Children for 

Accrued Benefits or Benefits Awarded, 

but Unpaid at Death 

Proposed § 5.554 is based on current 

§ 3.667(e). We propose to include 

information about the new category of 

‘‘benefits awarded, but unpaid at death’’

within the scope of its provisions, to 

correct an error in current § 3.667(e), 

and to clarify the rule concerning when 

verification of school attendance is 

required. 

Current § 3.667(e) refers to ‘‘a 

veteran’s child over 18 but under 23 

years of age, who was pursuing a course 

of instruction at the time of the payee’s 

death.’’ This description of the 

beginning point of this age range may be 

misleading. The relevant statutory 

provision is found at 38 U.S.C. 

101(4)(A)(iii), which includes within 

the definition of ‘‘child’’ a person who 

otherwise qualifies as a child and ‘‘who, 

after attaining the age of eighteen years 

and until completion of education or 

training (but not after attaining the age 

of twenty-three years), is pursuing a 

course of instruction at an approved 

educational institution.’’ The statutory 

period begins when the child attains the 

age of 18. The current regulation could 

be read as suggesting that the child must 

be age 19. Proposed § 5.554(a) clarifies 

this by referring to ‘‘a veteran’s child 

who has attained the age of 18, but is 

under the age of 23.’’

Current § 3.667(e) provides that 

school attendance need not be 

confirmed when a claim for accrued 

benefits is filed by, or on behalf of, a 

child within a specified age range who 

was pursuing a course of instruction at 

the time of the payee’s death and only 

payment of accrued benefits is involved. 

It also provides that ‘‘[w]hen the payee’s 

death occurred during a school vacation 

period, the requirements [of the section] 

will be considered to have been met if 

the child was carried on the school rolls 

on the last day of the regular school 

term immediately preceding the date of 

the payee’s death.’’ Of course, it may be 

necessary to obtain information from the 

school in order for VA to know whether 

the child was carried on the school’s 

rolls at the relevant time. Proposed 

§ 5.554(b) and (c) have been drafted to 

allow for this contingency. 

5.555 What VA Benefits Are 

Potentially Payable as Accrued Benefits 

or Benefits Awarded, but Unpaid at 

Death? 

We propose in § 5.555 to state which 

benefits are potentially available as 

accrued benefits or benefits awarded, 

but unpaid at death, and which benefits 

are not. 

The terms of 38 U.S.C. 5121(a) 

provide that benefits included as 

accrued benefits must be ‘‘periodic 

monetary benefits (other than insurance 

and servicemen’s indemnity) under 

laws administered by the Secretary.’’

This would clearly include VA pension, 

compensation, and DIC. Medal of Honor 

special pension under 38 U.S.C. 1562 

59078 Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 

and monetary benefits for veterans’

children under 38 U.S.C. 1805, 1815, 

and 1821 are also ‘‘periodic monetary 

benefits * * * under laws administered 

by the Secretary.’’ Therefore, we 

propose to explicitly include all such 

benefits as qualifying benefits in 

§ 5.555(b). 

Section 156 of Pub. L. 97–377, 96 Stat. 

1920–22, restored certain Social 

Security benefits that were reduced or 

terminated by the Omnibus Budget 

Reconciliation Act of 1981, Pub. L. 97–

35, 95 Stat. 357. Benefits payable under 

section 156 are commonly called REPS 

(Restored Entitlement Program for 

Survivors) benefits. We also propose to 

add REPS benefits to the list of those 

benefits that qualify as accrued benefits. 

REPS benefits are periodic monetary 

benefits because they are monthly 

payments, and, in the language of 38 

U.S.C. 5121(a), they are paid ‘‘under 

laws administered by the Secretary.’’

Pub. L. 97–377 provides that these 

payments are to be paid by ‘‘the head of 

the agency’’ and it defines the term 

‘‘head of the agency’’ as ‘‘the head of 

such department or agency of the 

Government as the President shall 

designate to administer the provisions 

of this section.’’ (Sec. 156(i)(1), Pub. L. 

97–377, 96 Stat. 1922). Executive Order 

12436, 48 FR 34929 (Aug. 2, 1983), 

designated ‘‘the Administrator of 

Veterans’ Affairs’ (now ‘‘the Secretary of 

Veterans Affairs’’) to administer the 

provisions of section 156 of Pub. L. 97–

377. Therefore, we propose to include 

REPS benefits in the list of qualifying 

benefits in proposed § 5.555(b)(8). 

Various benefits are excluded because 

they are not ‘‘periodic monetary 

benefits.’’ The CAVC has determined 

that VA assistance in acquiring 

automobiles and adaptive equipment 

under 38 U.S.C. chapter 39 (see Gillis v. 

West, 11 Vet. App. 441 (1998)) and 

assistance in acquiring specially 

adapted housing under 38 U.S.C. 

Chapter 21 (see Pappalardo v. Brown, 6 

Vet. App. 63 (1993)) are not ‘‘periodic 

monetary benefits.’’ We propose to 

include these benefits as exclusions in 

§ 5.555(c)(1) and (2). 

Next, we propose to include 

insurance benefits as § 5.555(c)(3) in the 

list of benefits that do not qualify as 

potential accrued benefits or benefits 

awarded, but unpaid at death, because 

such benefits are specifically excluded 

by 38 U.S.C. 5121(a). The proposed 

exclusion of Naval pension in 

§ 5.555(c)(4) is based on current 

§ 3.803(d). 

The list of exclusions we propose also 

includes a special allowance authorized 

by 38 U.S.C. 1312(a). This allowance is 

payable to the survivors of certain 

veterans who die while in service or as 

the result of a service-connected 

disability incurred after September 15, 

1940, and who were not fully and 

currently insured individuals under title 

II of the Social Security Act (42 U.S.C. 

401 et seq.). 

The special allowance payable under 

section 1312(a) is not available as 

accrued benefits because 38 U.S.C. 5121 

applies to ‘‘periodic monetary benefits 

* * * under laws administered by the 

Secretary [of Veterans Affairs].’’ Under 

38 U.S.C. 1322(a), as amended by the 

Act, it is the Commissioner of Social 

Security, not the Secretary of Veterans 

Affairs, who primarily determines 

whether any survivor is entitled to the 

section 1312(a) special allowance and, if 

so, the amount of those benefits. 

Therefore, we propose to exclude this 

special allowance from the list of 

benefits available under 38 U.S.C. 5121 

in proposed § 5.555(c)(5). 

We propose to omit reference to an 

obsolete category of benefits referred to 

in current § 3.1000(a) as 

‘‘servicemembers’ indemnity.’’ In 

particular, the Servicemen’s Indemnity 

Act of 1951, Pub. L. 82–23, 65 Stat. 34, 

authorized VA to pay indemnity in the 

form of $10,000 automatic life insurance 

coverage to the survivors of members of 

the Armed Forces who died in service. 

However, the Act authorizing such 

benefits was repealed in 1956 by section 

502(9) of the Servicemen’s and 

Veterans’ Survivor Benefits Act, Pub. L. 

84–881, 70 Stat. 886. Therefore, we 

propose to remove the obsolete 

reference to this benefit. 

5.556 Period for Which Accrued 

Benefits Are Paid 

In keeping with the provisions of 

section 104 of the Act, proposed 

§ 5.556(a) provides that, if the deceased 

beneficiary died prior to December 16, 

2003, accrued benefits are limited to a 

period not to exceed 2 years. Note that 

through operation of the definitions in 

proposed § 5.550(a) and (b), this 

limitation would not apply to claims for 

benefits awarded, but unpaid at death, 

that were pending on December 16, 

2003.

Historically, VA understood the 2-

year limitation on payment of accrued 

benefits to mean a limitation to benefits 

accruing during the 2 years immediately 

preceding the veteran’s death. In Terry

v. Principi, No. 03–7107, 2004 U.S. App. 

LEXIS 9056, at *13 (Fed. Cir. May 10, 

2004), the United States Court of 

Appeals for the Federal Circuit held that 

38 U.S.C. 5121(a), prior to its 

amendment by the Act, ‘‘only limits a 

survivor’s recovery of accrued veteran’s 

benefits to a maximum two-year period 

of benefits accrued at any time during 

the veteran’s life.’’ We propose to state 

in § 5.556(a) that ‘‘[i]f benefits accrued 

for a period in excess of 2 years during 

the beneficiary’s life, VA will pay 

benefits for the period of 24 consecutive 

months that produces the highest 

payment to the accrued benefits 

claimant.’’

Finally, proposed § 5.556(b) calls 

attention to a special exception to the 2-

year limitation rule in § 3.816 

concerning payments related to a certain 

class-action lawsuit. 

5.557 Relationship Between Accrued 

Benefits Claim and Claims Filed by the 

Deceased Beneficiary 

This Notice of Proposed Rulemaking 

addresses another key court decision 

concerning the nature of accrued 

benefits claims and the interpretation of 

38 U.S.C. 5121. In Zevalkink v. Brown, 

102 F.3d 1236, 1241 (Fed. Cir. 1996), 

cert. denied, 521 U.S. 1103 (1997), the 

court stated the following concerning 

claims for accrued benefits:

A claim for accrued benefits under [38 

U.S.C.] § 5121, as the Court of Veterans 

Appeals [now Court of Appeals for Veterans 

Claims] correctly held, is a separate claim 

from the veteran’s claim for service 

connection because it is based on a separate 

statutory entitlement for which an 

application must be filed in order to receive 

benefits. See 38 U.S.C. § 5121(c) 

(‘‘Applications for accrued benefits must be 

filed within one year after the date of 

death.’’). At the same time, however, an 

accrued benefits claim is derivative of the 

veteran’s claim for service connection, i.e., 

the claimant’s entitlement is based on the 

veteran’s entitlement.

The concepts explained in Zevalkink

are incorporated in proposed § 5.557. 

Specifically, proposed § 5.557(a) 

provides that while an accrued benefits 

claim is a separate claim, the claimant’s 

entitlement is based on the deceased 

beneficiary’s entitlement. 

A consequence of this principle is 

addressed in proposed § 5.557(b). The 

court set out the following explanation 

in Zevalkink, 102 F.3d at 1242:

If the existing decisions were adverse, then 

no benefits are payable. While living, the 

veteran was bound by those existing 

decisions and could not have had them 

reconsidered absent new and material 

evidence. Sections 5108 and 7104 of title 38 

expressly preclude the [regional office] and 

[the Board of Veterans’ Appeals] from 

considering a prior adjudicated claim unless 

new and material evidence is presented 

* * * 

Appellants have presented no compelling 

argument, nor pointed to any statutory 

language, showing why existing ratings and 

decisions should be reopened without such 

new and material evidence. Appellants 

argue, in effect, that the clause that states that 

Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 59079

accrued benefits may be ‘‘based on evidence 

in the file at date of death’’ allows them to 

reopen, and have a new adjudication of, any 

existing decision or rating. As shown, 

however, this would be inconsistent with the 

other provisions of § 5121 and with the 

central purpose of the statute which is to pay 

accrued benefits based on ‘‘existing ratings 

and decisions.’’ Thus, we interpret the clause 

relied on by appellants as permitting the new 

adjudication of a prior claim only if there is 

new and material evidence in the file which 

has not previously been considered.

Proposed § 5.557(b) incorporates the 

court’s holding by providing that a 

claimant for accrued benefits is bound 

by any existing VA decisions to the 

same extent as the deceased beneficiary 

would have been bound. 

5.558 Special Rule for Certain Cases 

Involving Deaths Prior to December 16, 

2003 

As previously discussed in this 

NPRM, VA regulations in effect at the 

time of the Bonny decision apply if the 

deceased beneficiary died prior to 

December 16, 2003, but VA received a 

claim for 38 U.S.C. 5121 benefits on or 

after December 16, 2003. This is 

because, effective on December 16, 

2003, the basis for the Bonny court’s 

interpretation of 38 U.S.C. 5121(a) is no 

longer viable. 

Therefore, we propose to provide in 

§ 5.558 that if the deceased beneficiary 

died prior to December 16, 2003, but VA 

received a claim for benefits under 38 

U.S.C. 5121 on or after that date, the 

claim will be adjudicated under the 

provisions of 38 CFR 3.1000, and 

sections cited therein, in effect on 

December 16, 2003. Because of the 

definition of ‘‘accrued benefits’’ in 

proposed § 5.550(a), § 3.1000 and the 

sections it cites would be applied 

uniformly to accrued benefits and to 

benefits awarded, but unpaid at death, 

in these cases. 

5.559 Accrued Benefits Reference 

Table 

The interrelationships of the proposed 

regulations concerning benefits under 

38 U.S.C. 5121 are necessarily very 

complex, given the Bonny decision as 

modified by the provisions of the Act. 

Therefore, we propose to provide a 

table, with appropriate cross-references 

concerning differences in application of 

the one-year time limit to file a claim 

and the 2-year limitation on the benefit 

payable, as well as a list of potential 

benefit claimants. 

Death Compensation 

The second major portion of this 

NPRM concerns death compensation. 

5.560 Eligibility Criteria for Payment of 

Death Compensation 

The first regulation concerning death 

compensation is proposed § 5.560, a 

revision of current 38 CFR 3.4(a). In its 

current form, § 3.4(c)(2) informs readers 

that death compensation is available if 

the veteran died on or after May 1, 1957, 

and before January 1, 1972, if at the time 

of death a policy of United States 

Government Life Insurance (USGLI) or 

National Service Life Insurance (NSLI) 

was in effect under waiver of premiums 

pursuant to 38 U.S.C. 1924, ‘‘In-service 

waiver of premiums,’’ unless the waiver 

was granted under the first provision of 

section 622(a) of the National Service 

Life Insurance Act of 1940 (now 38 

U.S.C. 1924), and the veteran died 

before or within 120 days of return to 

military jurisdiction. We propose to 

remove this provision because it is 

obsolete. 

The DIC program was established in 

1956 by Pub. L. 84–881, 70 Stat. 862, 

which provided that DIC, rather than 

death compensation, would be payable 

for service-related deaths after 

December 31, 1956. However, section 

501(a)(3)(B) of Pub. L. 84–881, 70 Stat. 

880, provided that DIC could not be 

paid in cases when an NSLI or USGLI 

policy was in effect under a waiver of 

premiums based on section 622 of the 

National Service Life Insurance Act of 

1940. Section 501(a)(3)(B) stated that 

death compensation could be paid in 

those cases, even though the death 

occurred after December 31, 1956. In 

1958, this provision was codified, as 

amended, at 38 U.S.C. 417(a). Also in 

1958, Congress enacted 38 U.S.C. 321 

and 341 (now 38 U.S.C. 1121 and 1141, 

respectively) to provide that death 

compensation could be paid when a 

veteran died before January 1, 1957 ‘‘(or 

after April 30, 1957, under the 

circumstances described in section 

417(a) of this title).’’ Secs. 321, 341, Pub. 

L. 85–857, 72 Stat. 1122–23. 

In 1971, Congress removed 38 U.S.C. 

417(a) and amended sections 321 and 

341 by removing the provision 

authorizing death compensation for 

deaths after April 30, 1957. See secs. 5, 

6, Pub. L. 92–197, 85 Stat. 662. Congress 

also provided that any person who was 

receiving or entitled to receive death 

compensation on December 31, 1971, 

would continue to receive that 

compensation unless they elected to 

receive DIC. Sec. 8, Pub. L. 92–197, 85 

Stat. 662.

As the foregoing indicates, there is 

currently no authority to award death 

compensation for deaths on or after 

January 1, 1957. After that date, VA 

compensation for such deaths is 

governed exclusively by the DIC 

provisions in chapter 13 of title 38, 

United States Code. Therefore, we 

propose to remove current § 3.4(c)(2). 

Proposed § 5.560(d) provides that VA 

will apply the same rules for 

determining the dependency of parents 

for death compensation purposes that it 

uses to determine the dependency of 

parents for the purpose of awarding 

additional compensation to a veteran 

with a dependent parent. The rules are 

the same and, particularly in view of the 

fact that there are now relatively few 

death compensation claimants, we 

believe this is preferable to repeating the 

complex rules for determining 

dependency in proposed subpart G of 

part 5. 

5.561 Time of Marriage Requirement 

for Death Compensation Claims 

Proposed § 5.561, based on relevant 

portions of current § 3.54, provides rules 

related to the time of marriage 

requirement for surviving spouses 

claiming entitlement to death 

compensation. As explained in 

proposed § 5.561(a), a marriage between 

the veteran and the veteran’s surviving 

spouse that occurred before or during 

the veteran’s military service meets time 

of marriage requirements for death 

compensation purposes. 

A surviving spouse who married the 

veteran after service may meet the time 

of marriage requirement for death 

compensation eligibility under 38 

U.S.C. 1102 in four ways, as explained 

in proposed § 5.561(b) and (c), which 

are based on current § 3.54(b). The first 

way is stated in proposed § 5.561(b), 

which preserves the provisions of the 

introductory paragraph of current 

§ 3.54(b) and 38 U.S.C. 1102(b) that 

permit a surviving spouse to qualify for 

death compensation if the surviving 

spouse would have qualified under the 

law in effect on December 31, 1957. 

Proposed § 5.561(c)(1) addresses the 

second way a surviving spouse may 

meet the time of marriage requirements 

for death compensation. As stated in 38 

U.S.C. 1102(a)(1), this is for the marriage 

to have occurred ‘‘before the expiration 

of fifteen years after the termination of 

the period of service in which the injury 

or disease causing the death of the 

veteran was incurred or aggravated.’’ We 

propose to include a provision, based on 

38 U.S.C. 103(b) and current § 3.54(e), 

that states that ‘‘[w]here the surviving 

spouse has been married legally to the 

veteran more than once, the date of the 

original marriage will be used in 

determining whether this requirement 

has been met.’’

We have not included the 

introductory clause in the first sentence 

59080 Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 

of current § 3.54(e) in proposed 

§ 5.561(c)(1). That clause limits the 

scope of § 3.54(e) to ‘‘periods 

commencing on or after January 1, 

1958.’’ January 1, 1958, is the effective 

date of the Veterans’ Benefits Act of 

1957 (1957 Act), Pub. L. 85–56, 71 Stat. 

83. The 1957 Act primarily served to 

consolidate laws concerning veterans’

benefits into one statute. The text of one 

of the 1957 Act’s provisions is similar 

to current 38 U.S.C. 103(b). See sec. 103, 

Pub. L. 85–56, 71 Stat. 90. However, the 

law in effect prior to passage of the 1957 

Act also permitted using the original 

date of marriage to determine if date of 

marriage requirements had been met in 

death compensation cases where the 

surviving spouse and the veteran had 

been married more than once. See sec. 

3, Pub. L. 78–483, 58 Stat. 804. 

We also propose to clarify in 

§ 5.561(c)(1) that ‘‘period of service’’ in 

this context means a period of active 

military service from which the veteran 

was discharged under other than 

dishonorable conditions. Death 

compensation is payable to the 

surviving spouse of a ‘‘veteran’’ and, 

except for persons who die in service, 

a veteran is a person who was 

discharged or released from service 

under conditions other than 

dishonorable. 38 U.S.C. 101(2). 

The third way in which a surviving 

spouse who married the veteran after 

service may meet the time of marriage 

requirements is to have been married to 

the veteran for a year or more. The 

statutory provision that sets the oneyear marriage requirement relating to 

death compensation claims, 38 U.S.C. 

1102(a)(2), is silent as to whether the 

one year of marriage must have been 

continuous. We propose to permit 

adding periods of marriage together to 

determine whether the one-year 

requirement has been met in cases 

where the surviving spouse and the 

veteran were married more than once. 

The one-year marriage requirement is 

designed to prevent abuse by sham 

‘‘death bed’’ marriages to obtain 

benefits. We believe that there is much 

less risk of such abuse where the 

veteran and the surviving spouse have 

had an ongoing close relationship 

demonstrated by previous marriage. 

Finally, a surviving spouse who 

married the veteran after service may 

meet the time of marriage requirement 

for death compensation if a child was 

born of the marriage, or born before the 

marriage. Proposed § 5.561(c)(3) 

includes this rule and refers the user to 

§ 3.54(d) for definitions of ‘‘child born 

of the marriage’’ and child ‘‘born ‘‘

before the marriage.’’

5.562 Eligibility Criteria for Special 

Monthly Death Compensation 

Proposed § 5.562, based on current 

§ 3.351(a)(6), (b), and (c), provides for 

payment of increased death 

compensation based on the need for 

regular aid and attendance. We propose 

to correct an omission from current 

§ 3.351(a)(6), which provides for 

increased death compensation only for 

a surviving spouse who is in need of aid 

and attendance. The underlying statute, 

38 U.S.C. 1122(b), provides for special 

monthly death compensation for 

dependent parents in need of aid and 

attendance, as well as for surviving 

spouses. Proposed § 5.562(a) clarifies 

that both classes of claimants are 

potentially eligible. While the correction 

of the omission in the regulation is new, 

this does not represent a change in VA 

practice, inasmuch as VA complies with 

the authorizing statute. 

Special Provisions 

The next section of this NPRM 

contains proposed regulations that set 

out special provisions concerning the 

disposition of the proceeds of certain 

VA benefits upon the death of the 

person receiving those benefits. 

5.563 Special Rules When a 

Beneficiary Dies While Receiving 

Apportioned Benefits 

The first proposed regulation in this 

group, § 5.563, is based on current 

§ 3.1000(b). Proposed § 5.563(a) would 

implement the broad authority given to 

VA under 38 U.S.C. 5121(a)(1): ‘‘Upon 

the death of a person receiving an 

apportioned share of benefits payable to 

a veteran, all or any part of such benefits 

[shall be paid] to the veteran or to any 

other dependent or dependents of the 

veteran, as may be determined by the 

Secretary.’’

The current regulation provides that 

when a person receiving an apportioned 

share of a veteran’s benefits dies, all or 

any part of an unpaid apportionment is 

payable to the veteran or to the veteran’s 

surviving dependents. However, it does 

not specify how VA makes 

determinations concerning surviving 

dependents. Proposed § 5.563(a), 

following long-standing VA practice, 

provides for payment of the unpaid 

apportionment to the veteran, if the 

veteran survives, or to the surviving 

dependents of a deceased veteran. We 

propose to use the same order of priority 

specified in 38 U.S.C. 5121(a)(2), which 

is applicable to accrued benefits and 

benefits awarded, but unpaid at death, 

to determine which dependents of a 

deceased veteran are entitled to these 

funds. This is accomplished through a 

cross-reference to proposed § 5.551(b).

5.564 Special Rules When VA Benefit 

Checks Have Not Been Negotiated Prior 

to the Beneficiary’s Death 

The second proposed regulation in 

this group of special provisions is 

§ 5.564, which is based on current 

§ 3.1003. This regulation provides rules 

concerning the disposition of VA benefit 

checks that were not negotiated at the 

time of the death of the beneficiary. We 

propose to use the term ‘‘beneficiary,’’

rather than ‘‘payee’’ as currently used in 

§ 3.1003, to clarify that the provisions of 

this proposed section would not apply 

to payees who die and who are not VA 

beneficiaries themselves, such as 

fiduciaries who receive VA benefit 

checks on behalf of a minor or 

incompetent VA beneficiary. In 

VAOPGCPREC 8–96, VA’s General 

Counsel noted that the statutory scheme 

and the legislative history of 38 U.S.C. 

5122, the statutory authority for this 

regulation, suggest that the statute 

applies only when the individual 

actually entitled to VA benefits has died 

before a VA check in payment of such 

benefits has been negotiated. 

Proposed § 5.564(a)(1) states the 

general rule that non-negotiated VA 

benefit checks must be returned to the 

office that issued the checks upon the 

death of the beneficiary. Proposed 

§ 5.564(a)(2) provides an exception to 

the general rule, which is currently 

found in 38 CFR 3.20(c)(2), that under 

certain circumstances a surviving 

spouse may negotiate a veteran’s check 

for compensation or pension for the 

month in which the veteran died. 

5.565 Special Rules for Payment of VA 

Benefits on Deposit in a Special Deposit 

Account When a Payee Living in a 

Foreign Country Dies 

The next regulation in this proposed 

rulemaking is comprised of rules for 

disposition of funds deposited in an 

account called ‘‘Secretary of the 

Treasury, Proceeds of Withheld Foreign 

Checks’’ (‘‘special deposit account’’) 

upon the death of the payee. Such 

accounts are necessary because of 

provisions in 31 U.S.C. 3329, 

‘‘Withholding checks to be sent to 

foreign countries,’’ and 31 U.S.C. 3330, 

‘‘Payment of Department of Veterans 

Affairs checks for the benefit of 

individuals in foreign countries.’’

Under 31 U.S.C. 3329, the Secretary of 

the Treasury must prohibit Federal 

payments from being sent to a foreign 

country when the Secretary of the 

Treasury decides that there is no 

reasonable assurance the payee will 

receive it or, if they receive it, will be 

Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 59081

able to negotiate it for its full value. 

Subject to certain conditions, the funds 

are deposited in the special deposit 

account. 

A companion statute, 31 U.S.C. 3330, 

provides special rules for implementing 

31 U.S.C. 3329 when the Federal 

payment in question involves VA 

benefit checks. Among other things, 

section 3330 limits the amount to be 

deposited in the special deposit account 

to $1,000 and provides rules for 

disposition of the money in that account 

when the payee dies. 

The rules for disposition of funds in 

the special deposit account upon the 

death of the payee are the subject of 

current § 3.1008. The current section, 

however, refers to obsolete legal 

authorities. In addition, the current 

section omits practical details about 

how the funds in the special deposit 

account are distributed, information 

about statutory time limits for filing a 

claim for the funds and filing 

supporting evidence, and other 

information that would be helpful to 

users of the regulation. Proposed § 5.565 

addresses all of these concerns. 

In § 5.565(b)(3) we propose to provide 

that ‘‘[i]f the deceased payee was the 

recipient of an apportioned share of the 

veteran’s pension or compensation, [the 

funds in the special deposit account are 

payable] to the veteran to the extent the 

special deposit account consists of such 

apportionment payments.’’ This is based 

upon our interpretation of language in 

31 U.S.C. 3330(c)(3):

(c) If the payee of a check for pension, 

compensation, or emergency officers’

retirement pay under laws administered by 

the Secretary of Veterans Affairs dies while 

the amount of the check is in the special 

deposit account, the amount is payable 

(subject to section 3329 of this title and this 

section) as follows:

* * * * *

(3) after the death of an apportionee of a 

part of the veteran’s pension, compensation, 

or emergency officers’ retirement pay but 

before all of the apportioned amount is paid 

to the veteran, the apportioned amount not 

paid.

The original statutory language in 

section 3(c) of Pub. L. 76–828, 54 Stat. 

1087, was clearer. It provided that:

* * * upon the death, prior to disbursement 

of all or any part of the apportioned amount, 

of an apportionee of a part of the veteran’s 

pension, compensation, or emergency 

officers’ retirement pay, such apportioned 

amount not disbursed shall be payable to the 

veteran.

This language was codified as part of 

31 U.S.C. 125 and carried forward for 

many years. See, e.g., 31 U.S.C. 125 

(1976). 

Pub. L. 97–258 completely recodified 

title 31, United States Code. Among 

other things, it substituted the current 

language of 31 U.S.C. 3330(c) for the 

pertinent provisions of former 31 U.S.C. 

125. Pub. L. 97–258, 96 Stat. 954. The 

United States Code Congressional and 

Administrative News includes the 

House Report submitted with this 

legislation. The commentary concerning 

section 3330 does not explain the 

changes introduced in section 

3330(c)(3). H.R. Rep. No. 97–651, at 107 

(1982), reprinted in 1982 U.S.C.C.A.N. 

1895, 2001. Nevertheless, the statement 

of the purpose of the legislation 

indicates that ‘‘[t]he purpose of the bill 

is to restate in comprehensive form, 

without substantive change, certain 

general and permanent laws related to 

money and finance and to enact those 

laws as title 31, United States Code.’’ H. 

Rep. No. 97–651, at 1, reprinted in 1982 

U.S.C.C.A.N. at 1895 (emphasis added). 

Particularly in view of this legislative 

history, we believe that proposed 

§ 5.565(c)(3) accurately interprets 31 

U.S.C. 3330(c)(3) and is clearer.

We also propose to omit the reference 

to ‘‘servicemembers indemnity’’ found 

in current § 3.1008. As explained in the 

discussion of proposed § 5.555, this is 

an obsolete VA benefit program. 

Paragraph (c) of proposed § 5.565 

contains rules regarding filing 

requirements for claims under this 

section and follows language in 31 

U.S.C. 3330(d). Under 31 U.S.C. 

3330(d)(1)(A), claims for VA benefits in 

the special deposit account when the 

payee dies must be ‘‘filed with the 

Secretary of Veterans Affairs by the end 

of the first year after the date of the 

death of the individual entitled to 

payment.’’ As with the language 

discussed earlier concerning the 

disposition of accrued benefit payments 

in the special deposit account, the 

claim-filing deadline was clearer in Pub. 

L. 76–828 and its original codification. 

‘‘[N]o disbursement shall be made 

unless claim therefor be filed in the 

Veterans’ Administration within one 

year from the date of the death of the 

person entitled.’’ 31 U.S.C. 125 (1976). 

Again, the legislative history shows no 

intent to make any substantive change 

in the 1982 recodification. Therefore, 

we propose to state that ‘‘[a] claim for 

the funds in the special deposit account 

must be received by VA within one year 

after the date of the payee’s death.’’

Proposed § 5.565(d) provides rules 

relating to two restrictions on claims 

governed by proposed § 5.565. The first, 

a restriction on payments to amounts 

due at the time of death under ratings 

or decisions existing at the time of the 

death in paragraph (d)(1), is based on 31 

U.S.C. 3330(d)(2). The second, a 

restriction concerning the loyalty of the 

claimant and the deceased beneficiary 

to the United States in paragraph (d)(2), 

is based on the last sentence of current 

§ 3.1008. This restriction is consistent 

with provisions of 38 U.S.C. 6104, 

‘‘Forfeiture for treason.’’

5.566 Special Rules for Payment of 

Gratuitous VA Benefits Deposited in a 

Personal Funds of Patients Account 

When an Incompetent Veteran Dies 

The final regulation in this section 

governs disposition of certain VA 

benefits upon the death of a veteran 

who was unable to conduct his or her 

own financial affairs. One way to 

safeguard VA benefits awarded to a 

mentally incompetent institutionalized 

veteran is to order that the funds be held 

in a personal funds of patients (PFOP) 

trust fund account and disbursed for the 

benefit of the veteran or the veteran’s 

dependents. See 38 U.S.C. 5502(d) and 

5504. Proposed § 5.566, based on 

current § 3.1009, sets out how benefits 

described in 38 U.S.C. 5502(d) as 

‘‘gratuitous’’ VA benefits in the PFOP 

account are distributed when the 

veteran dies. 

Proposed § 5.566(b) includes a crossreference to a proposed new definition 

of the statutory term ‘‘gratuitous VA 

benefits’’ that will appear in another 

NPRM as part of the Project. Proposed 

§ 5.566(b) also clarifies that the section 

only applies to funds on deposit in the 

PFOP account at the date of the 

veteran’s death. 

Proposed § 5.566(c)(1) provides that 

the section does not apply to funds that 

were deposited in the PFOP account by 

the veteran or others (as opposed to 

benefits deposited in the PFOP account 

by VA). Proposed § 5.566(c)(2) states 

that this section does not apply to 

earned interest or similar increases in 

value following the original deposit by 

VA. As to the latter exclusion, we adopt 

the rationale stated in VAOPGCPREC 6–

91:

16. The third question in subparagraph c. 

of your memorandum is as to the 

applicability of the provisions of Section 

3202(d) to the interest earned on U.S. Savings 

Bonds purchased by a Manager on behalf of 

a veteran from gratuitous VA benefits in a 

PFOP account where the bonds are redeemed 

during the veteran’s lifetime. It must be 

accepted as a fact that such interest is not a 

gratuitous benefit under the laws 

administered by the VA within the meaning 

of the language in Section 3202(d), as defined 

in paragraph D.3.a. of Interim Issue (CONTR–

169), quoted supra. The portions of H.R. 

Report No. 303 quoted in paragraphs 9 and 

12 of this memorandum show that the 

Committee used the term ‘‘derived’’ from 

veterans’ benefits to describe the funds to 

59082 Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 

which Section 3202(d) relates and, as stated 

in paragraph 13 hereof, the Congress appears 

to have used that phrase with its usual or 

ordinary meaning. It would, therefore, appear 

to be a proper construction that the term was 

intended to mean the source or origin of the 

particular thing under consideration 

(gratuitous VA benefits here), and hence, not 

an increased value of the gratuitous benefits 

but only their value at the original source. 

Accordingly, it is the opinion of this office 

that such interest should not be considered 

to be subject to disposition in accordance 

with the provisions of Section 3202(d) of 

Title 38, U.S.C., as amended.

Proposed § 5.566(d) governs 

entitlement to the funds in the PFOP 

account upon the death of the veteran. 

Consistent with the authorizing statute, 

38 U.S.C. 5502(d), we propose to clarify 

that the recipient must be living at the 

time of settlement and that in this 

context ‘‘settlement’’ means the time 

when VA pays out the PFOP account. 

Current § 3.1009(a) lists the persons 

eligible for funds in the PFOP account 

upon the veteran’s death. It gives the 

highest priority to the veteran’s spouse 

and incorporates the definition of 

spouse in current § 3.1000(d)(1) by 

reference. For the reasons noted in the 

discussion of proposed § 5.550(h), we 

have proposed replacing the 

§ 3.1000(d)(1) definition of ‘‘spouse’’

with a definition of ‘‘surviving spouse.’’

This is clearly appropriate because the 

authorizing statute specifies surviving 

spouse. Therefore, we propose 

providing that the potential recipient 

with the highest priority is ‘‘[t]he 

veteran’s surviving spouse, as defined in 

§ 5.550(h).’’

Effective Dates 

5.567 Effective Dates for DIC or Death 

Compensation Awards 

Proposed § 5.567 is based on portions 

of current §§ 3.400(c) and 3.402(a). 

Current § 3.400(c)(4)(ii), the basis for 

proposed § 5.567(d), states that the 

effective date for the award of DIC to a 

child is the ‘‘[f]irst day of the month in 

which entitlement arose if claim is 

received within 1 year after the date of 

entitlement; otherwise, date of receipt of 

claim.’’ Because a number of VA 

effective date regulations use various 

language concerning the ‘‘date 

entitlement arose,’’ VA will be 

proposing a new centralized definition 

of ‘‘date entitlement arose’’ as part of a 

separate rulemaking document 

published for public comment at 

another time. Therefore, where 

applicable, we have cross-referenced the 

proposed new centralized definition. 

With respect to § 3.400(c)(4), the 

omission of a proposed rule based on 

§ 3.400(c)(4)(iii) is intentional. Current 

§ 3.400(c)(4)(iii) concerns the effective 

date of awards of DIC to persons who 

elect DIC in lieu of death compensation 

in certain cases involving veterans who 

died from May 1, 1957, to January 1, 

1972. See also current §§ 3.5(b)(3) and 

3.702(a). For the reasons discussed 

earlier, see the supplementary 

information concerning proposed 

§ 5.560, the provisions that once 

permitted the award of death 

compensation for death occurring on or 

after May 1, 1957, are now obsolete. 

Therefore, § 3.400(c)(4)(iii) is also 

obsolete. Persons who are still receiving 

death compensation under the old law 

because of the death of a veteran from 

May 1, 1957, to January 1, 1972, and 

who now elect DIC in lieu of death 

compensation would be covered by the 

general DIC election effective date in 

proposed § 5.567(c). 

5.568 Effective Date for 

Discontinuance of DIC or Death 

Compensation Payments to a Person No 

Longer Recognized as the Veteran’s 

Surviving Spouse. 

Current § 3.657 addresses two 

different effective date and payment 

adjustment scenarios that may arise 

when an individual is recognized as the 

surviving spouse and is awarded DIC or 

death compensation. The first scenario 

is addressed in § 5.568 and the second 

in § 5.569.

The first scenario occurs when VA is 

paying DIC or death compensation to 

one person who claims to be the 

surviving spouse of a veteran, but 

another person later claims DIC or death 

compensation and successfully 

establishes that he or she is actually the 

veteran’s lawful surviving spouse. 

Current § 3.657(a) governs the effective 

date for the discontinuance of the award 

to the person previously recognized as 

the veteran’s surviving spouse. 

Proposed § 5.568(b) is taken from 

current § 3.657(a) with two exceptions. 

First, 38 U.S.C. 5112(b)(6) provides that 

the effective date for a reduction or 

discontinuance of compensation, DIC, 

or pension ‘‘by reason of change in law 

or administrative issue’’ or a ‘‘change in 

interpretation of a law or administrative 

issue’’ will be ‘‘the last day of the month 

following sixty days from the date of 

notice to the payee (at the payee’s last 

address of record) of the reduction or 

discontinuance.’’ See also current 

§ 3.114(b). We propose to add this 

exception as § 5.568(b)(3). Second, 

current § 3.657(a)(1) and (2) refer to 

payments to the legal surviving spouse 

being effective either prior to or from 

the date of ‘‘filing claim.’’ The operative 

effective date is not the date of filing, 

but the date VA receives the claim. See

38 U.S.C. 5110(a). Therefore, we 

propose to clarify the relevant language 

so that it refers to date of receipt, rather 

than date of ‘‘filing.’’

5.569 Effective Date for Award, or 

Termination of Award, of DIC or Death 

Compensation to a Surviving Spouse 

Where DIC or Death Compensation 

Payments to Children Are Involved 

Proposed § 5.569 addresses the 

second effective date and payment 

adjustment scenario in current § 3.657. 

It concerns DIC or death compensation 

effective dates and payment adjustments 

when a veteran is survived by a spouse 

and a child or children. (In the 

remainder of this discussion concerning 

proposed § 5.569, ‘‘children’’ means a 

child or children.) 

This scenario, in turn, involves two 

possible situations: (1) The surviving 

spouse is awarded DIC or death 

compensation, and a separate award for 

the surviving children therefore 

terminates; or (2) the surviving spouse’s 

eligibility for DIC or death 

compensation terminates (by 

remarriage, for example), and the 

veteran’s surviving children are eligible 

to receive DIC or death compensation 

because of termination of the surviving 

spouse’s entitlement, but the surviving 

spouse continues to receive DIC or 

death compensation after termination of 

his or her entitlement. 

The current rules for situation (2) are 

not as comprehensive as those for 

situation (1). For situation (1), current 

§ 3.657(b)(1) provides effective date and 

payment adjustment rules that apply 

where the rate for the children is lower 

than the rate for the surviving spouse 

and where the rate for the children is 

the same as or higher than the rate for 

the surviving spouse. Current 

§ 3.657(b)(2) provides effective date 

rules that apply to situation (2) where 

the children’s rate is lower than the rate 

for the surviving spouse and where the 

children’s rate is higher than the rate for 

the surviving spouse. However, there is 

no guidance about what to do if the 

rates are the same. We propose, in 

§ 5.569(c)(3), to add rules that would 

apply in situation (2) when the 

children’s rate is the same as the rate for 

the surviving spouse. 

We believe that this proposed change 

would produce a correct and equitable 

result. Current § 3.657 essentially looks 

at the overall family unit for setting 

rules for these payment adjustments and 

effective dates. Section 3.657(b)(2) 

provides that when the rate for the 

children is lower than the rate for the 

surviving spouse, payments to the 

surviving spouse are retroactively 

reduced to the children’s rate effective 

Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 59083

from the date the surviving spouse’s 

entitlement terminated. The award for 

the children is effective from the day 

following the date of last payment to the 

surviving spouse. If the rate for the 

children is higher than the rate for the 

surviving spouse, the award to the 

surviving spouse is terminated as of the 

date of the last payment to the spouse. 

The award for the children consists of 

an amount equal to the difference 

between the children’s rate and the 

surviving spouse’s rate from the date the 

surviving spouse’s entitlement 

terminated until the date of last 

payment to the surviving spouse, and 

then the full rate thereafter. These rules 

result in benefits flowing to the family 

unit as a whole in the amounts properly 

payable to the various family members. 

When the rates for the children and 

surviving spouse are the same, we 

propose to terminate the award to the 

surviving spouse on the date of last 

payment and to make the award to the 

children effective the following day. 

This would also achieve the same result. 

That is, benefits would flow to the 

overall family unit in the amounts 

properly payable to the family members. 

5.570 Effective Date for Reduction in 

DIC—Surviving Spouses 

Proposed § 5.570 is based on the 

introductory paragraph and paragraphs 

(a) and (b) of current § 3.502. We 

propose to omit the references to 

§ 3.500(n)(3) that appear in current 

§ 3.502(a)(1) and (2) because 

§ 3.500(n)(3) does not deal with the 

situations described in proposed 

§ 5.570. 

5.571 Effective Dates for an Award or 

Increased Rate Based on Amended 

Income Information—Parents’ DIC 

Proposed § 5.571, based on current 

§ 3.660(b), provides information 

regarding effective dates for increases or 

awards of parents’ DIC following the 

submission of amended income 

information. 

Current § 3.660(b)(1) provides that if 

payments were not made, or were made 

at a lower rate, on the basis of 

anticipated income, parents’ DIC may be 

awarded or increased ‘‘in accordance 

with the facts found but not earlier than 

the beginning of the appropriate 12-

month annualization period if 

satisfactory evidence is received within 

the same or the next calendar year.’’

It has been VA’s historical procedure 

to make income determinations for 

entitlement to parents’ DIC on a 

calendar-year basis. Although the ‘‘12-

month annualization period,’’ would 

include a calendar year, we believe that 

this language could be confusing to 

readers and adjudicators. Therefore, we 

propose to use the term ‘‘calendar year’’

instead of ‘‘12-month annualization 

period.’’

Another change has to do with the use 

of the term ‘‘facts found’’ in current 

§ 3.660(b)(1). VA interprets ‘‘facts 

found’’ and another phrase used in 

several effective date rules, ‘‘date 

entitlement arose,’’ to have the same 

basic meaning. As explained previously, 

we propose to use only one of these 

terms, ‘‘date entitlement arose,’’ to 

improve consistency. Therefore, where 

applicable, we propose to replace the 

phrase ‘‘in accordance with the facts 

found’’ with a cross-reference to the 

proposed new standardized definition 

of ‘‘date entitlement arose.’’

Proposed § 5.571(c) refers to a 

regulation to be published in another 

NPRM. That proposed regulation will 

provide rules concerning the 

submission of amended income 

information by parents’ DIC 

beneficiaries. Those rules will include 

the time limits for submitting amended 

income information currently found in 

§ 3.660(b). 

5.572 Effective Dates for Reduction or 

Discontinuance Based on Increased 

Income—Parents’ DIC

The last regulation in this NPRM, 

based in part on current § 3.660(a), is 

§ 5.572, which provides information 

regarding effective dates for parents’ DIC 

reductions or discontinuances based on 

increased income. 

Proposed § 5.572(c) addresses a gap in 

current § 3.660, which does not specify 

the effective date rule VA uses when it 

is unable to determine the month in 

which income increased. It has been 

VA’s practice in such situations to 

reduce or discontinue the parent’s 

award effective the beginning of the 

calendar year in which the income 

increased. We believe the regulation 

will be more comprehensive by 

including this information. We also 

believe that the stated rule is equitable 

because proposed § 5.572(c) provides 

that the effective date of the reduction 

or discontinuance will be adjusted 

accordingly if VA later receives 

information regarding the month 

income increased. 

Removal of 38 CFR 3.400(h)(4) and 

3.503(a)(9). 

We next propose to remove current 

§ 3.400(h)(4) as part of this NPRM. That 

section concerns the effective date for 

an award of VA death benefits based 

upon a difference of opinion with a 

prior denial of those benefits. Paragraph 

(h)(4) provides this rule:

Where the initial determination for the 

purpose of death benefits is favorable, the 

commencing date will be determined without 

regard to the fact that the action may reverse, 

on a difference of opinion, an unfavorable 

decision for disability purposes by an 

adjudicative agency other than the Board of 

Veterans[’] Appeals, which was in effect at 

the date of the veteran’s death.

We understand this provision to mean 

that VA will apply the normal effective 

date rule applicable to death benefit 

claims, rather than rules applicable to 

awards based on a difference of opinion, 

when it grants a dependant’s claim for 

death benefits even though a claim from 

the veteran, based on similar facts, may 

have been denied during his or her 

lifetime. For example, if a veteran were 

denied service connection for a 

particular type of cancer, but a VA 

regional office later granted service 

connection for the cause of the veteran’s 

death from that same type of cancer, VA 

would establish the effective date 

without regard to the fact that the 

veteran’s claim had been denied in the 

past. 

We propose to omit this provision 

from new part 5. Although it does not 

lead to an incorrect result, it is 

unnecessary. Further, it implies a 

relationship, which does not exist, 

between two entirely different types of 

claims: a veteran’s disability claim and 

a survivor’s claim for death benefits. 

(‘‘Death benefits’’ in this context include 

death compensation, DIC, and death 

pension. See Zevalkink, 102 F.3d at 

1242.) 

Certainly, as in the illustration about 

a veteran whose claim for service 

connection for cancer was denied while 

the survivor’s claim for service 

connection for the cause of the veteran’s 

death from the same illness was granted, 

a veteran’s disability claim and a 

survivor’s claim for death benefits can 

involve similar factual and legal issues. 

However, it is now quite clear that a 

veteran’s disability claim does not 

survive his or her death. Richard v. 

West, 161 F.3d 719, 723 (Fed. Cir. 1998). 

A claim for death benefits by a survivor 

is considered a new, independent claim.

When a veteran dies from a serviceconnected disability, the veteran’s 

surviving spouse is eligible for DIC. See

38 U.S.C. § 1310; 38 CFR § 3.5(a) (1995). 

Such a claim for DIC is generally treated 

as an original claim by the survivor, 

regardless of the status of adjudications 

concerning service-connected-disability 

claims brought by the veteran before his 

or her death. 

59084 Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 

Green v. Brown, 10 Vet. App. 111, 114 

(1997). 

Because the claims are separate, a 

denial of a veteran’s disability claim 

followed by an award of a surviving 

dependent’s claim for death benefits is 

not an award based on a difference of 

opinion, even though there may be some 

overlapping factual and legal issues. 

Therefore, because current § 3.400(h)(4) 

adds nothing substantive and could be 

a source of confusion, we propose its 

removal. 

We also propose to remove current 

§ 3.503(a)(9). The current regulation 

states, in pertinent part:

(a) The effective date of discontinuance of 

pension, compensation, or dependency and 

indemnity compensation to or for a child, or 

to or for a veteran or surviving spouse on 

behalf of such child, will be the earliest of 

the dates stated in this section. Where an 

award is reduced, the reduced rate will be 

payable the day following the date of 

discontinuance of the greater benefit.

* * * * *

(9) Surviving spouse becomes entitled. Date 

of last payment. See § 3.657.

Because the subject matter of this rule 

would be adequately addressed in 

proposed § 5.569, ‘‘Effective date for 

award, or termination of award, of DIC 

or death compensation to a surviving 

spouse where DIC or death 

compensation payments to children are 

involved,’’ we believe § 3.503(a)(9) 

would become unnecessary and we 

propose to remove it. 

Endnote Regarding Removals 

(Deletions) From Part 3 of 38 CFR 

For the reasons shown in the 

preceding supplementary information, 

the amendments proposed in this 

document would, if adopted, result in 

removal of current §§ 3.1000 and 3.1002 

through 3.1009, and portions of §§ 3.4, 

3.54, 3.503, 3.351, 3.400, 3.657, 3.660, 

3.667, 3.704, and 3.803. This would be 

the case because those part 3 sections, 

or portions of sections, would be 

replaced by new part 5 sections or they 

would be removed entirely. Readers are 

invited to comment both on these part 

3 removals and on the proposed new 

part 5 rules at this time. 

NPRMs frequently include formal 

‘‘amendatory language’’ listing the 

sections, or portions of sections, that 

would be removed if the proposed 

amendments are adopted. However, we 

have not included such ‘‘amendatory 

language’’ in this NPRM because of the 

nature of this Project. Because of the 

very large scope of the Project, we are 

publishing proposed amendments in 

several NPRMs. Then, after public 

comments in response to all of the 

NPRMs making up the Project have been 

reviewed and considered, VA will 

propose to remove all of part 3, 

concurrent with the implementation of 

part 5. 

Paperwork Reduction Act 

This document contains no provisions 

constituting a collection of information 

under the Paperwork Reduction Act (44 

U.S.C. 3501–3521). 

Regulatory Flexibility Act 

The Secretary hereby certifies that 

this proposed regulatory amendment 

will not have a significant economic 

impact on a substantial number of small 

entities as they are defined in the 

Regulatory Flexibility Act , 5 U.S.C. 

601–612. This proposed amendment 

would not affect any small entities. 

Only VA beneficiaries could be directly 

affected. Therefore, pursuant to 5 U.S.C. 

605(b), this proposed amendment is 

exempt from the initial and final 

regulatory flexibility analysis 

requirements of sections 603 and 604. 

Executive Order 12866 

This document has been reviewed by 

the Office of Management and Budget 

under Executive Order 12866. 

Unfunded Mandates 

The Unfunded Mandates Reform Act 

requires, at 2 U.S.C. 1532, that agencies 

prepare an assessment of anticipated 

costs and benefits before developing any 

rule that may result in an expenditure 

by State, local, or tribal governments, in 

the aggregate, or by the private sector of, 

$100 million or more in any given year. 

This proposed rule would have no such 

effect on State, local, or tribal 

governments, or the private sector. 

Catalog of Federal Domestic Assistance 

Numbers 

The Catalog of Federal Domestic 

Assistance program numbers for this 

proposal are 64.100–102, 64.104–110, 

64.115, and 64.127. 

List of Subjects in 38 CFR Part 5 

Administrative practice and 

procedure, Claims, Disability benefits, 

Health care, Pensions, Radioactive 

materials, Veterans, Vietnam.

Approved: June 18, 2004. 

Anthony J. Principi, 

Secretary of Veterans Affairs.

For the reasons set out in the 

preamble, VA proposes to further 

amend 38 CFR part 5, as proposed to be 

added at 69 FR 4832, January 30, 2004, 

by adding subpart G to read as follows:

PART 5—COMPENSATION, PENSION, 

BURIAL, AND RELATED BENEFITS

Subpart G—Dependency and Indemnity 

Compensation, Death Compensation, 

Accrued Benefits, and Special Rules 

Applicable Upon Death of a Beneficiary 

Sec. 

5.500–5.549 [Reserved] 

Accrued Benefits 

5.550 Definitions. 

5.551 Persons entitled to accrued benefits 

or benefits awarded, but unpaid at death. 

5.552 Claims for accrued benefits or 

benefits awarded, but unpaid at death. 

5.553 Notice of incomplete claims. 

5.554 Evidence of school attendance in 

claims by a veteran’s children for 

accrued benefits or benefits awarded, but 

unpaid at death. 

5.555 What VA benefits are potentially 

payable as accrued benefits or benefits 

awarded, but unpaid at death? 

5.556 Period for which accrued benefits are 

paid. 

5.557 Relationship between accrued 

benefits claim and claims filed by the 

deceased beneficiary. 

5.558 Special rule for certain cases 

involving deaths prior to December 16, 

2003. 

5.559 Accrued benefits reference table. 

Death Compensation 

5.560 Eligibility criteria for payment of 

death compensation. 

5.561 Time of marriage requirements for 

death compensation claims. 

5.562 Eligibility criteria for special monthly 

death compensation. 

Special Provisions 

5.563 Special rules when a beneficiary dies 

while receiving apportioned benefits. 

5.564 Special rules when VA benefit checks 

have not been negotiated prior to the 

beneficiary’s death. 

5.565 Special rules for payment of VA 

benefits on deposit in a special deposit 

account when a payee living in a foreign 

country dies. 

5.566 Special rules for payment of 

gratuitous VA benefits deposited in a 

personal funds of patients account when 

an incompetent veteran dies. 

Effective Dates 

5.567 Effective dates for DIC or death 

compensation awards. 

5.568 Effective date for discontinuance of 

DIC or death compensation payments to 

a person no longer recognized as the 

veteran’s surviving spouse. 

5.569 Effective date for award, or 

termination of award, of DIC or death 

compensation to a surviving spouse 

where DIC or death compensation 

payments to children are involved. 

5.570 Effective date for reduction in DIC—

surviving spouses. 

5.571 Effective date for an award or 

increased rate based on amended income 

information—parents’ DIC. 

5.572 Effective dates for reduction or 

discontinuance based on increased 

income—parents’ DIC.

Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 59085

5.573–5.579 [Reserved]

Authority: 38 U.S.C. 501(a) and as noted in 

specific sections.

Subpart G—Dependency and 

Indemnity Compensation, Death 

Compensation, Accrued Benefits, and 

Special Rules Applicable Upon Death 

of a Beneficiary

§§ 5.500–5.549 [Reserved] 

Accrued Benefits

§ 5.550 Definitions. 

The following definitions apply to 

§§ 5.551 through 5.559: 

(a) Accrued benefits. (1) ‘‘Accrued 

benefits’’ means unpaid periodic 

monetary VA benefits to which an 

individual was entitled, based on the 

evidence in the file on the date of his 

or her death, from a claim for VA 

benefits pending on the date of death. 

(2) ‘‘Accrued benefits’’ also includes 

benefits awarded, but unpaid at death: 

(i) If the deceased beneficiary died on 

or after December 16, 2003; 

(ii) If the deceased beneficiary died 

prior to December 16, 2003, but VA 

received the claim for benefits under 38 

U.S.C. 5121 on or after December 16, 

2003; and 

(iii) For purposes of § 5.558, ‘‘Special 

rule for certain cases involving deaths 

prior to December 16, 2003.’’

(3) ‘‘Accrued benefits’’ does not 

include benefits awarded, but unpaid at 

death, when the deceased beneficiary 

died prior to December 16, 2003, and a 

claim for benefits under 38 U.S.C. 5121 

was pending before VA on December 16, 

2003. (For purposes of paragraph (a)(3) 

of this section, VA will consider a claim 

to be pending if there was no final 

decision on that claim as of December 

16, 2003. See [regulation that will be 

published in a future Notice of Proposed 

Rulemaking] (defining a final decision)). 

(b) Benefits awarded, but unpaid at 

death, means unpaid periodic monetary 

VA benefits awarded to an individual by 

a VA rating or decision before the 

individual died. 

(c) Child means a child as defined in 

§ 3.57 of this chapter. If qualification as 

a child for purposes of accrued benefits 

or benefits awarded, but unpaid at 

death, is based on pursuit of a course of 

instruction at an approved educational 

institution, the child must have been 

within the age range specified by 

§ 3.57(a)(1)(iii) of this chapter on the 

date of the deceased beneficiary’s death. 

(d) Claim for VA benefits pending on 

the date of death means a claim filed 

with VA which had not been finally 

adjudicated by VA on or before the date 

of death. Such a claim may include a 

deceased beneficiary’s claim to reopen a 

finally disallowed claim based upon 

new and material evidence or a 

deceased beneficiary’s claim of clear 

and unmistakable error in a prior rating 

or decision. Any new and material 

evidence must have been in VA’s 

possession on or before the date of the 

beneficiary’s death. 

(e) Deceased beneficiary means the 

deceased person whose VA benefits are 

being claimed as accrued benefits or 

benefits awarded, but unpaid at death. 

(f) Dependent parent means a parent 

as defined in § 3.59 of this chapter who 

was dependent within the meaning of 

§ 3.250 of this chapter at the date of the 

veteran’s death. 

(g) Evidence in the file on the date of 

death means evidence in VA’s 

possession on or before the date of the 

deceased beneficiary’s death, even if 

such evidence was not physically 

located in the VA claims folder on or 

before the date of death.

(h) Surviving spouse. (1) Except as 

provided in paragraph (h)(2) of this 

section, ‘‘surviving spouse’’ means a 

surviving spouse as defined in § 3.50(b) 

of this chapter. 

(2) If the marriage between the veteran 

and the surviving spouse meets the 

definition of marriage in § 3.1(j) of this 

chapter, the following requirements do 

not apply: 

(i) The marriage requirements for 

death pension in § 3.54(a) of this 

chapter, for dependency and indemnity 

compensation in § 3.54(c) of this 

chapter, and for death compensation in 

§ 5.561; and 

(ii) The continuous cohabitation 

requirement in § 3.50(b)(1) of this 

chapter.

(Authority: 38 U.S.C. 501(a), 5121(a); Sec. 

104, Pub. L. 108–183, 117 Stat. 2656)

§ 5.551 Persons entitled to accrued 

benefits or benefits awarded, but unpaid at 

death. 

(a) Purpose. This section provides the 

general rules for determining who is 

entitled to accrued benefits or benefits 

awarded, but unpaid at death. These 

general rules are subject to § 3.1001 of 

this chapter (concerning payment of 

certain amounts withheld from VA 

benefits awarded to hospitalized 

veterans); § 5.558, ‘‘Special rule for 

certain cases involving deaths prior to 

December 16, 2003’’; § 5.563, ‘‘Special 

rules when a beneficiary dies while 

receiving apportioned benefits’’; and 

§ 5.565, ‘‘Special rules for payment of 

VA benefits on deposit in a special 

deposit account when a payee living in 

a foreign country dies.’’ See also § 3.816 

of this chapter, ‘‘Awards under the 

Nehmer Court Orders for disability or 

death caused by a condition 

presumptively associated with herbicide 

exposure.’’

(b) Deceased beneficiary was the 

veteran. If the deceased beneficiary was 

the veteran, benefits are payable to a 

living person, or persons, in the 

following order: 

(1) The veteran’s surviving spouse. 

(2) The veteran’s surviving children 

(in equal shares). 

(3) The veteran’s surviving dependent 

parents (in equal shares) or the 

surviving dependent parent if only one 

is living. 

(c) Deceased beneficiary was the 

veteran’s spouse—(1) Surviving spouse 

of a deceased veteran. If the deceased 

beneficiary was the surviving spouse or 

remarried surviving spouse of a 

deceased veteran, then VA will pay 

benefits to the veteran’s children in 

equal shares. If there are no such 

children, then VA will pay accrued 

benefits as stated in paragraph (e) of this 

section. 

(2) Spouse of a living veteran. If the 

deceased beneficiary was the spouse of 

a living veteran, then VA will pay 

accrued benefits as stated in paragraph 

(e) of this section. 

(d) Deceased beneficiary was the 

veteran’s child—(1) General rule. If the 

deceased beneficiary was the veteran’s 

child, then VA will pay benefits to the 

veteran’s surviving children who are 

entitled to death pension, death 

compensation, or dependency and 

indemnity compensation. 

(2) Surviving child who elected 38 

U.S.C. chapter 35 educational benefits.

A surviving child who has elected 

dependents’ educational assistance 

under 38 U.S.C. chapter 35 may receive 

benefits under paragraph (d)(1) of this 

section for periods prior to the 

commencement of benefits under 

chapter 35. 

(3) Deceased child’s 38 U.S.C. chapter 

18 benefits. If a child claiming benefits 

under 38 U.S.C. chapter 18 dies on or 

after December 16, 2003, any accrued 

benefits resulting from such a claim are 

payable to the child’s surviving 

parent(s). If there is no surviving parent, 

such accrued benefits are payable to the 

extent provided in paragraph (e) of this 

section. 

(e) No other eligible claimant survives.

If there are no eligible claimants under 

paragraphs (b) through (d) of this 

section, then VA will pay accrued 

benefits to the person who bore the 

expense of the deceased beneficiary’s 

last sickness and/or burial, but only to 

the extent necessary to reimburse that 

person for such expense. VA will not 

pay accrued benefits due under this 

paragraph to any political subdivision of 

the United States, as defined in § 3.1(o) 

59086 Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 

of this chapter (for example, a State 

government). Benefits awarded, but 

unpaid at death, are not payable under 

this paragraph if the deceased 

beneficiary died prior to December 16, 

2003, and a claim for such benefits was 

pending before VA on December 16, 

2003. 

(f) Effect of failure to claim benefits, 

or waiver of benefits, on rights of other 

claimants. The fact that a claimant with 

a higher priority claim to benefits under 

the provisions of this section fails to file 

a timely claim for such benefits, or 

waives rights to such benefits, does not 

create a right to the benefits in a 

claimant with a lower priority. The fact 

that one or more claimants falling 

within the same category of claimants 

(children, for example) fails to file a 

timely claim for accrued benefits, or 

waives rights to such benefits, will not 

increase the amount payable to any 

other claimant in the category.

(Authority: 38 U.S.C. 501(a), 5121(a); Sec. 

104, Pub. L. 108–183, 117 Stat. 2656)

§ 5.552 Claims for accrued benefits or 

benefits awarded, but unpaid at death. 

(a) Scope. This section applies to 

claims for accrued benefits. It also 

applies to claims for benefits awarded, 

but unpaid at death, if the deceased 

beneficiary died prior to December 16, 

2003, and a claim for such benefits was 

pending on December 16, 2003. It does 

not apply to claims for the proceeds of 

a benefit check the deceased beneficiary 

did not negotiate prior to death (see

§ 5.564, ‘‘Special rules when VA benefit 

checks have not been negotiated prior to 

the beneficiary’s death’’), or for benefits 

under § 3.816 of this chapter, ‘‘Awards 

under the Nehmer Court Orders for 

disability or death caused by a 

condition presumptively associated 

with herbicide exposure.’’

(b) Time limit for filing—(1) Accrued 

benefits. A claim for accrued benefits 

must be filed within one year after the 

date of the deceased beneficiary’s death. 

(2) Benefits awarded, but unpaid at 

death. There is no time limit for filing 

a claim for benefits awarded, but unpaid 

at death, if the deceased beneficiary 

died prior to December 16, 2003, and a 

claim for such benefits was pending 

before VA on December 16, 2003. 

Paragraph (b)(1) of this section applies 

where ‘‘accrued benefits’’ includes 

‘‘benefits awarded, but unpaid at 

death.’’ See § 5.550(a)(2). 

(c) Other claims accepted as a claim 

for accrued benefits or benefits 

awarded, but unpaid at death. A claim 

filed with VA by, or on behalf of, an 

apportionee, surviving spouse, child or 

parent for any of the following benefits 

will also be accepted as a claim for 

accrued benefits and, if applicable, for 

benefits awarded, but unpaid at death: 

(1) Death pension, 

(2) Death compensation, or 

(3) Dependency and indemnity 

compensation. See also § 3.152(b) of this 

chapter.

(Authority: 38 U.S.C. 5101(b), 5121(c))

§ 5.553 Notice of incomplete claims. 

If a claim for benefits is incomplete 

because the claimant has not furnished 

information necessary to establish that 

he or she is within the category of 

persons eligible for benefits under the 

provisions of § 5.551, ‘‘Persons entitled 

to accrued benefits or benefits awarded, 

but unpaid at death,’’ or § 5.563, 

‘‘Special rules when a beneficiary dies 

while receiving apportioned benefits,’’

and if the claimant may be entitled to 

payment of all or part of any benefits 

which may have accrued, then VA will 

notify the claimant: 

(a) Of the type of information required 

to complete the application; 

(b) That VA will take no further action 

on the claim unless VA receives the 

required information; and 

(c) That if VA does not receive the 

required information within one year of 

the date of the original VA notification 

of information required, no benefits will 

be awarded on the basis of that 

application.

(Authority: 38 U.S.C. 5121(c))

§ 5.554 Evidence of school attendance in 

claims by a veteran’s children for accrued 

benefits or benefits awarded, but unpaid at 

death. 

(a) Scope. This section applies to 

claims for accrued benefits or benefits 

awarded, but unpaid at death, filed by 

or on behalf of a veteran’s child who has 

attained the age of 18, but is under the 

age of 23, who was pursuing a course of 

instruction at the time of the deceased 

beneficiary’s death. 

(b) Confirmation by school not 

required. Subject to paragraph (c) of this 

section, school confirmation of evidence 

of school attendance is not required to 

support a claim described in paragraph 

(a) of this section. 

(c) Death of deceased beneficiary 

during school vacation period. When 

the deceased beneficiary’s death 

occurred during a school vacation 

period, VA will consider the child to 

have been pursuing a course of 

instruction at the time of the death if 

school records show that the child was 

carried on the school rolls on the last 

day of the regular school term 

immediately preceding the date of the 

deceased beneficiary’s death.

(Authority: 38 U.S.C. 101(4)(A), 501(a))

§ 5.555 What VA benefits are potentially 

payable as accrued benefits or benefits 

awarded, but unpaid at death? 

(a) Scope. This section lists which VA 

benefits potentially qualify, and which 

do not qualify, for payment as accrued 

benefits or benefits awarded, but unpaid 

at death. 

(b) Qualifying benefits. (1) Clothing 

allowance under 38 U.S.C. 1162. 

(2) Compensation, including death 

compensation under 38 U.S.C. chapter 

11. 

(3) Dependency and indemnity 

compensation under 38 U.S.C. chapter 

13. 

(4) Dependents’ educational 

assistance allowance or special 

restorative training allowance under 38 

U.S.C. chapter 35. 

(5) Medal of Honor special pension 

under 38 U.S.C. 1562. 

(6) Monetary benefits for eligible 

children under 38 U.S.C. chapter 18. 

(7) Pension, including death pension 

under 38 U.S.C. chapter 15. 

(8) Restored Entitlement Program for 

Survivors (REPS) benefits (Pub. L. 97–

377, § 156, 96 Stat. 1830, 1920–22 

(1982)). 

(9) Subsistence allowance under 38 

U.S.C. chapter 31. 

(10) Veterans’ educational assistance 

under 38 U.S.C. chapters 30, 32, or 34 

and 10 U.S.C. 1606. 

(c) Non-qualifying benefits. (1) 

Assistance in acquiring automobiles and 

adaptive equipment under 38 U.S.C. 

chapter 39. 

(2) Assistance in acquiring specially 

adapted housing under 38 U.S.C. 

chapter 21. 

(3) Insurance under 38 U.S.C. chapter 

19. 

(4) Naval pension under 10 U.S.C. 

6160. 

(5) Special allowance under 38 U.S.C. 

1312(a).

(Authority: 38 U.S.C. 5121(a))

§ 5.556 Period for which accrued benefits 

are paid. 

(a) Two-year limitation. If the 

deceased beneficiary died prior to 

December 16, 2003, VA may only pay 

accrued benefits for a period during the 

beneficiary’s life not to exceed 2 years. 

If benefits accrued for a period during 

the beneficiary’s life which was in 

excess of 2 years, VA will pay benefits 

for the period of 24 consecutive months 

that produces the highest payment to 

the accrued benefits claimant. 

(b) Exception to 2-year limitation. See

§ 3.816 of this chapter, ‘‘Awards under 

the Nehmer Court Orders for disability 

or death caused by a condition 

presumptively associated with herbicide 

exposure.’’

Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 59087

(Authority: 38 U.S.C. 5121(a); Sec. 104, Pub. 

L. 108–183, 117 Stat. 2656)

§ 5.557 Relationship between accrued 

benefits claim and claims filed by the 

deceased beneficiary. 

(a) Claim for accrued benefits results 

from the deceased beneficiary’s 

entitlement. A claim for accrued 

benefits is a separate claim filed by a 

person eligible for such benefits under 

§ 5.551, ‘‘Persons entitled to accrued 

benefits or benefits awarded, but unpaid 

at death.’’ However, the claimant’s 

entitlement is based on the deceased 

beneficiary’s entitlement. 

(b) Accrued benefits claimant bound 

by existing decisions. A claimant for 

accrued benefits is bound by any 

existing VA benefits decision(s) on 

claims by the deceased beneficiary 

concerning those benefits to the same 

extent that the deceased beneficiary was 

bound.

(Authority: 38 U.S.C. 501(a), 5101, 5121, 

7104(b), 7105(c))

§ 5.558 Special rule for certain cases 

involving deaths prior to December 16, 

2003. 

If the deceased beneficiary died prior 

to December 16, 2003, but VA received 

a claim for benefits under 38 U.S.C. 

5121 on or after that date, the claim will 

be adjudicated under the provisions of 

§ 3.1000 of this chapter, and sections 

cited therein, in effect on December 16, 

2003.

(Authority: 38 U.S.C. 5121; Sec. 104, Pub. L. 

108–183, 117 Stat. 2656)

§ 5.559 Accrued benefits reference table.

Deceased beneficiary died prior to December 16, 2003 

Deceased beneficiary died on or after 

Claim pending on December 16, 2003 

December 16, 2003 

Claim received on or after

December 16, 2003 

(a) Does the one-year time limit to file 

the claim apply? 

(1) Yes for accrued benefits. See

§ 5.552(b)(1).

(2) No for benefits awarded, but unpaid 

at death. See § 5.552(b)(2).

Yes for accrued benefits. See

§ 5.552(b)(1).

In this situation ‘‘accrued benefits’’ includes benefits awarded, but unpaid 

at death. See §§ 5.550(a)(2)(ii), (iii), 

and 5.558.

Yes for accrued benefits. See

§ 5.552(b)(1). 

In this situation ‘‘accrued benefits’’ includes benefits awarded, but unpaid 

at death. See § 5.550(a)(2)(i). 

(b) Does the two-year limitation on the 

benefit-payable period apply? 

(1) Yes for accrued benefits. See

§ 5.556.

(2) No for benefits awarded, but unpaid 

at death. See §§ 5.550(a)(3).

Yes for accrued benefits. See § 5.556 ..

In this situation ‘‘accrued benefits’’ includes benefits awarded, but unpaid 

at death. See §§ 5.550(a)(2)(ii), (iii), 

and 5.558.

No. See § 5.556; sec. 104, Pub. L. 

108–183, 117 Stat. 2656. 

This limitation does not apply if a deceased beneficiary died on or after 

December 16, 2003. 

(c) Are accrued benefits and benefits 

awarded, but unpaid at death, potentially payable to beneficiaries described in § 5.551(b), (c), (d)(1), and 

(d)(2)? 

Yes ........................................................ Yes ........................................................ Yes. 

(d) Are accrued benefits and benefits 

awarded, but unpaid at death, potentially payable to beneficiaries described in § 5.551(d)(3)? 

No .......................................................... No .......................................................... Yes. 

(e) Are accrued benefits and benefits 

awarded, but unpaid at death, potentially payable to beneficiaries described in § 5.551(e)? 

(1) Yes for accrued benefits .................

(2) No for benefits awarded, but unpaid 

at death. See § 5.551(e).

Yes for accrued benefits .......................

In this situation ‘‘accrued benefits’’ includes benefits awarded, but unpaid 

at death. See §§ 5.550(a)(2)(ii), (iii), 

and 5.558.

Yes for accrued benefits, yes. See

§ 5.551(e). 

In this situation ‘‘accrued benefits’’ includes benefits awarded, but unpaid 

at death. See § 5.550(a)(2)(i). 

(Authority: 38 U.S.C. 501(a), 5121; Sec. 104, 

Pub. L. 108–183, 117 Stat. 2656)

Death Compensation

§ 5.560 Eligibility criteria for payment of 

death compensation.

(a) Definition. Death compensation

means a monthly payment made by VA 

to a surviving spouse, child or children, 

or dependent parent or parents of a 

veteran because of the serviceconnected death of the veteran. 

(b) Basic eligibility. Death 

compensation may be payable to a 

surviving spouse, child or children, or 

dependent parent or parents if the 

veteran died before January 1, 1957. If 

the veteran was discharged or released 

from service, the discharge or release 

must have been under conditions other 

than dishonorable. 

(c) Exception—certain Federal 

employees. VA cannot pay death 

compensation to any surviving spouse, 

child, or parent based on the death of a 

commissioned officer of the Public 

Health Service, the Coast and Geodetic 

Survey, the Environmental Science 

Services Administration, or the National 

Oceanic and Atmospheric 

Administration occurring on or after 

May 1, 1957, if any amounts are payable 

based on the same death under the 

Federal Employees’ Group Life 

Insurance Act of 1954 (Pub. L. 598, 83d 

Cong., as amended). 

(d) Dependency of parents. VA will 

apply the same rules for determining the 

dependency of parents for death 

compensation purposes that it uses to 

determine the dependency of parents for 

the purpose of awarding additional 

compensation to a veteran with a 

dependent parent. See § 3.250 of this 

chapter, ‘‘Dependency of parents; 

compensation.’’

(Authority: 38 U.S.C. 101(13), 1121, 1141)

§ 5.561 Time of marriage requirements for 

death compensation claims. 

(a) Marriage before or during service.

A surviving spouse who married the 

veteran before or during the veteran’s 

military service meets the time of 

marriage requirements for death 

compensation. See also § 3.50(b) of this 

chapter (defining ‘‘surviving spouse’’). 

(b) Marriage after service—laws in 

effect on December 31, 1957. A 

surviving spouse who, with respect to 

time of marriage, could have qualified 

as a surviving spouse for death 

compensation under any law 

administered by VA in effect on 

December 31, 1957, meets the time of 

marriage requirement for death 

compensation. 

(c) Marriage after service—other 

means of qualification. A surviving 

spouse who married the veteran after 

the veteran’s discharge or release from 

military service meets the time of 

marriage requirements for death 

compensation if at least one of the 

following conditions is met: 

(1) The marriage occurred within 15 

years from the date of termination of the 

period of service in which the injury or 

disease causing the veteran’s death was 

incurred or aggravated. Where the 

59088 Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 

surviving spouse has been married 

legally to the veteran more than once, 

the date of the original marriage will be 

used in determining whether this 

requirement has been met. For purposes 

of this section, ‘‘period of service’’

means a period of active military 

service, as defined in [regulation that 

will be published in a future Notice of 

Proposed Rulemaking], from which the 

veteran was discharged under other 

than dishonorable conditions. 

(2) The surviving spouse was married 

to the veteran for one year or more 

preceding the veteran’s death. Multiple 

periods of marriage may be added 

together to meet the 1-year marriage 

requirement. 

(3) A child was born of the marriage 

between the veteran and the veteran’s 

surviving spouse or a child was born to 

them before the marriage. See also

§ 3.54(d) of this chapter (defining ‘‘child 

born of the marriage’’ and child ‘‘born 

* * * before the marriage’’).

(Authority: 38 U.S.C. 101(2), 1102)

§ 5.562 Eligibility criteria for special 

monthly death compensation. 

(a) Basic eligibility. A surviving 

spouse or surviving dependent parent in 

receipt of death compensation is eligible 

for special monthly compensation if he 

or she is helpless, or so nearly helpless, 

as to need the regular aid and 

attendance of another person. Except as 

provided in paragraph (b) of this 

section, VA considers the presence of 

factors listed in § 3.352(a) of this chapter 

when determining whether a person 

demonstrates this degree of 

helplessness. 

(b) Automatic consideration. VA 

automatically considers an individual to 

be in need of regular aid and 

attendance, without having to 

demonstrate the degree of helplessness 

described in paragraph (a) of this 

section, if the individual: 

(1) Is blind or so nearly blind as to 

have corrected visual acuity of 5/200 or 

less, in both eyes, or has concentric 

contraction of the visual field to 5 

degrees or less; or 

(2) Is a patient in an approved nursing 

home because of mental or physical 

incapacity. See § 3.1(z) of this chapter 

(defining ‘‘nursing home’’).

(Authority: 38 U.S.C. 1122(b))

Special Provisions

§ 5.563 Special rules when a beneficiary 

dies while receiving apportioned benefits. 

(a) Person receiving apportioned share 

of veteran’s benefits dies. When a 

person receiving an apportioned share 

of a veteran’s benefits dies, any unpaid 

benefits payable to that person will be 

paid to the veteran, if living, or to 

surviving dependents of the deceased 

veteran in the priority specified in 

§ 5.551(b). 

(b) Payment to person receiving 

apportionment when the veteran dies.

When a person is receiving an 

apportioned share of a veteran’s benefits 

and the veteran dies, that person will be 

paid their apportioned share of those 

benefits for periods prior to the last day 

of the month before the veteran’s death.

(c) Payment of child’s apportionment 

of surviving spouse’s death benefits 

when the child dies. If an apportioned 

share of a surviving spouse’s death 

pension, death compensation, or 

dependency and indemnity 

compensation was payable for a child 

and the child dies, VA will pay any 

unpaid apportioned share to the person 

who bore the expense of the deceased 

child’s last sickness and/or burial under 

the provisions of § 5.551(e).

(Authority: 38 U.S.C. 5112(b)(1), 5121(a), 

5502(d))

§ 5.564 Special rules when VA benefit 

checks have not been negotiated prior to 

the beneficiary’s death. 

(a) Death of a beneficiary—(1) 

Disposition of non-negotiated VA 

benefit checks’general rule. Upon the 

death of a beneficiary, non-negotiated 

VA benefit checks should be returned to 

the issuing office and canceled. VA will 

pay the amount represented by the 

returned checks, or any amount 

recovered following improper 

negotiation of the checks, to the person 

or persons indicated in § 5.551(b) 

through (e), as applicable. The amount 

payable does not include any payment 

for the month in which the beneficiary 

died. See § 3.500(g) of this chapter. 

(2) Exception. The rule in paragraph 

(a)(1) of this section requiring return of 

non-negotiated VA benefit checks upon 

the death of the beneficiary is subject to 

§ 3.20(c)(2) of this chapter (permitting, 

under specific circumstances, a 

surviving spouse to negotiate a check for 

a veteran’s compensation or pension for 

the month in which the veteran died). 

(b) No time limit. There is no limit on 

the retroactive period for which 

payment of the amount represented by 

the checks may be made, and no time 

limit for filing a claim to obtain the 

proceeds of the checks or for furnishing 

evidence to perfect a claim. 

(c) Payment to a claimant having a 

lower order of precedence. In the case 

where there was a survivor having a 

higher order of precedence, VA will 

make payment to a claimant having a 

lower order of precedence under 

§ 5.551(b) through (e), as applicable, if it 

is shown that the person or persons 

having a higher order of precedence are 

deceased at the time the claim is 

adjudicated. 

(d) Payment to estate. Subject to the 

limitations in § 3.500(g) of this chapter, 

any amount not paid in the manner 

provided in paragraph (a) of this section 

will be paid to the estate of the deceased 

beneficiary, provided that the estate will 

not escheat (e.g., revert to a 

governmental entity). 

(e) Payment of amounts withheld 

during hospitalization. The provisions 

of this section do not apply to checks for 

lump sums representing amounts 

withheld under § 3.551(b) of this 

chapter (concerning reduction of 

benefits when a veteran is hospitalized), 

or withheld prior to December 27, 2001, 

under former § 3.557 of this chapter 

(concerning reduction of benefits when 

an incompetent veteran is hospitalized). 

These amounts are subject to the 

provisions of § 3.1001 of this chapter, 

‘‘Hospitalized competent veterans,’’ and 

§ 3.1007 of this chapter, ‘‘Hospitalized 

incompetent veterans.’’

(Authority: 38 U.S.C. 501(a), 5122)

§ 5.565 Special rules for payment of VA 

benefits on deposit in a special deposit 

account when a payee living in a foreign 

country dies. 

(a) Purpose. VA benefit payments may 

not be sent to a payee living in a foreign 

country if the Secretary of the Treasury 

determines that there is no reasonable 

assurance the payee will receive the 

benefit check or will be able to negotiate 

it for full value. Up to $1,000.00 of such 

VA benefit payments may be deposited 

in an account entitled ‘‘Secretary of the 

Treasury, Proceeds of Withheld Foreign 

Checks’’ (special deposit account). This 

section provides information about who 

is entitled to the funds in that account 

when the payee dies, about claims for 

those funds, and about restrictions on 

payment. 

(b) Persons entitled to funds in special 

deposit account upon death of payee.

When the payee of a check for pension 

or compensation dies, the deceased 

payee’s funds in the special deposit 

account are payable as follows: 

(1) If the deceased payee was the 

veteran, to the surviving spouse or, if 

there is no surviving spouse, to children 

of the veteran under 18 years of age at 

the time of the veteran’s death. 

(2) If the deceased payee was the 

veteran’s surviving spouse, to children 

of the spouse under 18 years of age at 

the time of the spouse’s death. 

(3) If the deceased payee was the 

recipient of an apportioned share of the 

veteran’s pension or compensation, to 

the veteran to the extent the special 

Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 59089

deposit account consists of such 

apportionment payments. 

(4) In any other case, to the person 

who bore the expense of the burial of 

the payee, but only to the extent 

necessary to reimburse that person for 

such expenses. 

(c) Time limit for filing claims and 

evidence. (1) A claim for the funds in 

the special deposit account must be 

received by VA within one year after the 

date of the payee’s death. 

(2) The claimant must submit 

necessary evidence in support of the 

claim within six months after the date 

VA requests that evidence. 

(d) Other restrictions. (1) Payment 

made under this section is limited to 

amounts due at the time of the payee’s 

death under ratings or decisions existing 

at the time of the death. 

(2) Payment will be made under this 

section only if both the deceased 

beneficiary and the claimant have not 

been guilty of mutiny, treason, sabotage, 

or rendering assistance to an enemy of 

the United States or of its allies.

(Authority: 31 U.S.C. 3329, 3330; 38 U.S.C. 

6104)

§ 5.566 Special rules for payment of 

gratuitous VA benefits deposited in a 

personal funds of patients account when an 

incompetent veteran dies. 

(a) Purpose. This section provides 

rules relating to the disposition of 

certain funds on deposit in a personal 

funds of patients (PFOP) account for a 

veteran who was incompetent at the 

date of his or her death and who died 

after November 30, 1959. 

(b) Funds included. The funds 

included are those on deposit in the 

PFOP account at the date of the 

veteran’s death that were derived from 

gratuitous VA benefits deposited in the 

account by VA. See [regulation that will 

be published in a future Notice of 

Proposed Rulemaking] (defining 

‘‘gratuitous VA benefits’’). Funds 

derived from such deposits are those 

that resulted from the VA deposits, even 

though there may have been an 

intervening change in the form of the 

asset. For example, if amounts 

representing gratuitous VA benefits 

deposited by VA are withdrawn to 

purchase bonds on the veteran’s behalf 

and redeposited upon the maturity of 

the bonds, an amount equal to the 

amount withdrawn for the purchase will 

be considered as derived from the 

deposits.

(c) Funds excluded. This section does 

not apply to the disposition of: 

(1) Amounts resulting from funds 

deposited in the PFOP account by the 

veteran or others besides VA, regardless 

of the source of the deposit. 

(2) Amounts, such as interest, 

representing an increase in the value of 

funds originally deposited by VA. 

(d) Eligible persons. The funds 

described in paragraph (b) of this 

section will be paid to a person, or 

persons, living at the time of settlement 

(that is, when VA pays out the PFOP 

account) in the following priority: 

(1) The veteran’s surviving spouse, as 

defined in § 5.550(h). 

(2) The veteran’s surviving children, 

as defined in § 3.57 of this chapter, in 

equal shares, but without regard to their 

age or marital status. 

(3) The veteran’s parents, as defined 

in § 3.59 of this chapter, who are 

dependent within the meaning of 

§ 3.250 of this chapter, in equal shares, 

or the surviving parent if only one is 

living. 

(4) If no recipient listed in paragraphs 

(d)(1) through (3) of this section is living 

at the time of settlement, the person 

who bore the expense of the veteran’s 

last sickness and/or burial, but only to 

the extent necessary to reimburse that 

person for such expense. 

(e) Claims for funds governed by this 

section— (1) Time limit for filing. A 

person eligible for the funds governed 

by this section must file a claim for the 

funds with VA within 5 years after the 

death of the veteran. However, if any 

person otherwise entitled is under legal 

disability at the time of the veteran’s 

death, the 5-year period will run from 

the date of termination or removal of the 

legal disability. 

(2) Submission of evidence. There is 

no time limit for submitting evidence of 

entitlement to the funds governed by 

this section. 

(3) Effect of failure to claim funds, or 

waiver of claim, on rights of other 

claimants. The fact that a claimant with 

a higher priority claim to the funds 

governed by this section fails to file a 

timely claim for such funds, or waives 

rights to such funds, does not create a 

right to the funds for a claimant with a 

lower priority. The fact that one or more 

claimants falling within the same 

category of claimants (children, for 

example) fails to file a timely claim for 

the funds governed by this section, or 

waives rights to such funds, will not 

increase the amount payable to any 

other claimant in the category.

(Authority: 38 U.S.C. 5502(d))

Effective Dates

§ 5.567 Effective dates for DIC or death 

compensation awards. 

(a) Death in Service— (1) Claim 

received within one year from date of 

initial report or finding of death. (i) 

General. If VA receives a claim for 

dependency and indemnity 

compensation (DIC) or death 

compensation within one year from the 

date the Secretary concerned makes an 

initial report of the veteran’s actual 

death or finding of the veteran’s 

presumed death in active military 

service, then benefits are payable from 

the first day of the month fixed by that 

Secretary as the month of death in the 

report or finding. See § 3.1(g) of this 

chapter (definition of ‘‘Secretary 

concerned’’) and [regulation that will be 

published in a future Notice of Proposed 

Rulemaking] (definition of ‘‘active 

military service’’). 

(ii) Exception. Benefits are not 

payable under paragraph (a)(1)(i) of this 

section for any period for which the 

claimant received or was entitled to 

receive an allowance, allotment, or 

service pay of the veteran. 

(2) Claim received more than one year 

after date of initial report or finding of 

death. If VA receives a claim for DIC or 

death compensation more than one year 

after the date of the initial report or 

finding of death described in paragraph 

(a)(1)(i) of this section, then benefits are 

payable from the date VA received the 

claim. 

(b) Service-connected death after 

separation from service— (1) Claim 

received within one year of death. If VA 

receives a claim for DIC or death 

compensation within one year of the 

veteran’s death, then benefits are 

payable from the first day of the month 

in which the veteran’s death occurred. 

(2) Claim received more than one year 

after death. If VA receives a claim for 

DIC or death compensation more than 

one year after the veteran’s death, then 

benefits are payable from the date VA 

received the claim. 

(c) DIC elected in lieu of death 

compensation. DIC is payable from the 

date VA receives the election of DIC in 

lieu of death compensation. See § 3.702 

of this chapter (concerning election of 

DIC in lieu of death compensation). 

(d) DIC award to a child— (1) Claim 

received within one year from date 

entitlement arose. If VA receives a claim 

for DIC within one year of the date 

entitlement arose, as defined in 

[regulation that will be published in a 

future Notice of Proposed Rulemaking], 

then benefits are payable from the first 

day of the month in which entitlement 

arose. 

(2) Claim received more than one year 

after date entitlement arose. Except as 

otherwise provided in this part, if VA 

receives a claim for DIC more than one 

year after the date entitlement arose, as 

defined in [regulation that will be 

published in a future Notice of Proposed 

Rulemaking], then benefits are payable 

59090 Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 

from the date VA received the claim. 

See also § 3.403(a) of this chapter 

(concerning effective dates of awards to 

or for a child) and § 3.667 of this chapter 

(concerning effective dates of awards to 

certain children attending school after 

reaching 18 years of age). 

(e) Additional allowance for children.

Any additional allowance for children is 

payable beginning the date the surviving 

spouse’s award is payable as provided 

in paragraphs (a), (b), or (c) of this 

section.

(Authority: 38 U.S.C. 5110(d)(1), (e)(1), (j))

§ 5.568 Effective date for discontinuance 

of DIC or death compensation payments to 

a person no longer recognized as the 

veteran’s surviving spouse. 

(a) Purpose. This section applies 

when VA is paying dependency and 

indemnity compensation (DIC) or death 

compensation to one person (‘‘former 

payee’’) as a veteran’s surviving spouse 

and another person (‘‘new payee’’) 

establishes that he or she is the lawful 

surviving spouse entitled to those 

benefits. It provides the effective date 

for the termination of the payment of 

DIC or death compensation to the 

former payee. For information 

concerning the effective date of the 

award of DIC or death compensation to 

the new payee, see § 5.567, ‘‘Effective 

dates for DIC or death compensation 

awards.’’

(b) Effective date for termination of 

payments to former payee. For periods 

on or after December 1, 1962, DIC or 

death compensation payments to the 

former payee will be discontinued as 

follows: 

(1) Termination date of payments to 

the former payee if the award to the new 

payee is effective prior to the date VA 

received the new payee’s claim. Subject 

to paragraph (b)(3) of this section, if 

benefits are payable to the new payee 

from a date prior to the date VA 

received the new payee’s claim, then the 

award to the former payee will be 

terminated the day preceding the 

effective date of the award to the new 

payee. 

(2) Termination date of the award to 

the former payee if the award to the new 

payee is effective the date VA received 

the new payee’s claim. Subject to 

paragraph (b)(3) of this section, if 

benefits are payable to the new payee 

from the date VA received the new 

payee’s claim, then the award to the 

former payee will be terminated 

effective the date of receipt of the new 

payee’s claim or the date of last 

payment to the former payee, whichever 

is later. 

(3) Exception if termination is due to 

a change in, or interpretation of, the law 

or an administrative issue. An award to 

the former payee will be terminated on 

the last day of the month following sixty 

days from the date of notice of the 

termination to the former payee at his or 

her last address of record, if payments 

to the former payee are terminated 

because of: 

(i) A change in the law or an 

administrative issue; or 

(ii) A change in the interpretation of 

the law or an administrative issue. 

See also § 3.114(b) of this chapter.

(Authority: 38 U.S.C. 5110(a), 5112(a), (b)(6))

§ 5.569 Effective date for award, or 

termination of award, of DIC or death 

compensation to a surviving spouse where 

DIC or death compensation payments to 

children are involved. 

(a) Purpose. This section provides 

effective date and payment adjustment 

rules applicable when: 

(1) A surviving spouse becomes 

entitled to dependency and indemnity 

compensation (DIC) or death 

compensation when VA is already 

paying DIC or death compensation to 

the veteran’s child or children, or 

(2) A surviving spouse’s award of DIC 

or death compensation is terminated 

and the veteran’s child or children are 

entitled to DIC or death compensation 

upon termination of the spouse’s DIC or 

death compensation. 

(b) Surviving spouse establishes 

entitlement—(1) Rate for child or 

children lower than rate for surviving 

spouse—(i) Effective date. If a veteran’s 

child or children received DIC or death 

compensation at a rate lower than the 

rate payable to the surviving spouse, the 

award of DIC or death compensation to 

the surviving spouse is effective the date 

provided by § 5.567, ‘‘Effective dates for 

DIC or death compensation awards.’’

(ii) Rate payable to the surviving 

spouse. The initial amount of DIC or 

death compensation payable to the 

surviving spouse is the difference 

between the rate paid to the child or 

children and the rate payable to the 

surviving spouse. The full rate is 

payable to the surviving spouse effective 

the day following the date of last 

payment to or on behalf of the child or 

children. 

(2) Rate for child or children same as 

or higher than the rate for surviving 

spouse. If a veteran’s child or children 

received DIC or death compensation at 

a rate the same as or higher than the rate 

payable to the surviving spouse, the 

award of DIC or death compensation to 

the surviving spouse is effective the day 

following the date of last payment to or 

on behalf of the child or children. 

(c) Surviving spouse receives DIC or 

death compensation after his or her 

entitlement terminates and a veteran’s 

child or children are entitled to DIC or 

death compensation—(1) Rate for child 

or children lower than rate for surviving 

spouse. If a surviving spouse receives 

DIC or death compensation after his or 

her entitlement terminates and the 

veteran’s child or children are entitled 

to a rate of DIC or death compensation 

lower than the rate paid to the surviving 

spouse, the award to the surviving 

spouse will be reduced to the rate 

payable to the child or children as if 

there were no surviving spouse. This 

reduced award is effective from the date 

the surviving spouse’s entitlement 

terminated to the date of last payment 

to the surviving spouse. The award of 

DIC or death compensation to the child 

or children is effective the day following 

the date of last payment to the surviving 

spouse. 

(2) Rate for child or children higher 

than rate for surviving spouse.—(i)

Effective date of termination of award to 

surviving spouse. If a surviving spouse 

receives DIC or death compensation 

after his or her entitlement terminates 

and the veteran’s child or children are 

entitled to rate higher than the rate paid 

to the surviving spouse, the termination 

of the award to the surviving spouse is 

effective the date of last payment to the 

surviving spouse. 

(ii) Effective date and rate for child or 

children. The award to the veteran’s 

child or children is effective the day 

following the date the surviving 

spouse’s entitlement terminated. The 

initial amount is the difference between 

the rate payable to the child or children 

and the rate paid to the surviving 

spouse. The full rate is payable to or on 

behalf of the child or children effective 

the day following the date of last 

payment to the surviving spouse. 

(3) Rate for child or children same as 

rate for the surviving spouse.

(i) Effective date of termination of 

award to surviving spouse. If a surviving 

spouse receives DIC or death 

compensation after his or her 

entitlement terminates and the veteran’s 

child or children are entitled to the 

same rate as the rate paid to the 

surviving spouse, the termination of the 

award to the surviving spouse is 

effective the date of last payment to the 

surviving spouse. 

(ii) Effective date and rate for child or 

children. The full rate is payable to or 

on behalf of the veteran’s child or 

children effective the day following the 

date of last payment to the surviving 

spouse.

(Authority: 38 U.S.C. 501(a), 5110(a), 5112(a))

Federal Register / Vol. 69, No. 190 / Friday, October 1, 2004 / Proposed Rules 59091

§ 5.570 Effective date for reduction in DIC 

‘‘surviving spouses. 

(a) General. If the circumstances 

described in this section require a 

reduction in an award of dependency 

and indemnity compensation (DIC) 

payable to a surviving spouse, VA will 

pay the reduced rate effective the day 

following the date of discontinuance of 

the greater benefit. 

(b) Marriage of child(ren) for whom a 

surviving spouse receives an additional 

allowance of DIC—(1) Marriage prior to 

October 1, 1982. If a child married prior 

to October 1, 1982, VA will reduce the 

surviving spouse’s DIC effective from 

the earlier of the following dates: 

(i) The day preceding the child’s 18th 

birthday; or 

(ii) The last day of the calendar year 

in which the marriage occurred (see 

§ 3.500(n)(2)(i) of this chapter). 

(2) Marriage on or after October 1, 

1982. If a child married on or after 

October 1, 1982, VA will reduce the 

surviving spouse’s DIC effective from 

the earlier of the following dates: 

(i) The day preceding the child’s 18th 

birthday; or 

(ii) The last day of the month in 

which the marriage occurred (see 

§ 3.500(n)(2)(ii) of this chapter). 

(c) Recertification of pay grade. If 

recertification of a veteran’s military pay 

grade results in reduced DIC, VA will 

reduce the award effective the date of 

the last payment.

(Authority: 38 U.S.C. 501(a); 5112(b)(2), (10); 

1311(a))

§ 5.571 Effective date for an award or 

increased rate based on amended income 

information—parents’ DIC. 

(a) Expected income. Subject to 

paragraph (c) of this section, if 

payments of parents’ dependency and 

indemnity compensation (DIC) were not 

made or if payments were made at a 

reduced rate for a particular calendar 

year because of expected income, the 

effective date of any later award or 

increase for that calendar year based on 

amended income information will be 

the date entitlement arose, as defined in 

[regulation that will be published in a 

future Notice of Proposed Rulemaking], 

but not earlier than the beginning of that 

calendar year. 

(b) Actual income. Subject to 

paragraph (c) of this section, if 

payments of parents’ DIC were not made 

or if payments were made at a reduced 

rate for a particular calendar year 

because of actual income, the effective 

date of any award or increase for the 

next calendar year based on amended 

income information will be the 

beginning of the next calendar year. 

(c) Time limit. The effective dates in 

paragraphs (a) and (b) of this section are 

subject to the applicable time limit for 

the submission of amended income 

information in [regulation that will be 

published in a future Notice of Proposed 

Rulemaking]. If VA does not receive the 

amended income information within the 

time specified in that section, benefits 

may not be authorized for any period 

prior to the date of receipt of a new 

claim.

(Authority: 38 U.S.C. 501(a), 1315(e), 5110(a))

§ 5.572 Effective dates for reduction or 

discontinuance based on increased 

income—parents’ DIC. 

(a) General. If VA determines that a 

reduction or discontinuance of a 

running award of parents’ dependency 

and indemnity compensation (DIC) is 

required because the parent’s expected 

or actual income for a particular 

calendar year increased, VA will reduce 

or discontinue the award as provided in 

paragraphs (b) or (c) of this section, as 

applicable. 

(b) Effective date for reduction or 

discontinuance. VA will reduce or 

discontinue the award effective the end 

of the month in which income 

increased. 

(c) Date of receipt or increase cannot 

be determined. If the month in which 

income increased cannot be determined, 

VA will reduce or discontinue the 

award effective the beginning of the 

calendar year in which the income 

increased. If VA later receives evidence 

showing the month in which the income 

increased, VA will adjust the effective 

date accordingly. 

(d) Overpayments. If an overpayment 

is created by retroactive discontinuance 

of benefits, the overpayment will be 

subject to recovery by VA if not waived. 

If DIC was being paid to two parents 

living together, the overpayment will be 

established on the award to each parent.

(Authority: 38 U.S.C. 501(a), 5112(b)(4))

[FR Doc. 04–21541 Filed 9–30–04; 8:45 am] 

BILLING CODE 8320–01–P