[Federal Register Volume 65, Number 14 (Friday, January 21, 2000)]
[Rules and Regulations]
[Pages 3388-3392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1507]



[[Page 3388]]

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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 3

RIN 2900-AJ65


DIC Benefits for Survivors of Certain Veterans Rated Totally 
Disabled at Time of Death

AGENCY:  Department of Veterans Affairs.

ACTION:  Final rule.

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SUMMARY:  This document establishes an interpretive rule reflecting the 
Department of Veterans Affairs (VA) conclusion that 38 U.S.C. 1318(b) 
authorizes payment of dependency and indemnity compensation (DIC) only 
in cases where the veteran had, during his or her lifetime, established 
a right to receive total service-connected disability compensation from 
VA for the period required by that statute or would have established 
such a right if not for clear and unmistakable error by VA. This 
document also makes certain non-substantive changes.

DATES:  Effective Date: Janaury 21, 2000.

FOR FURTHER INFORMATION CONTACT:  Don England, Senior Consultant, 
Regulations Staff, Compensation and Pension Service, Veterans Benefits 
Administration, 810 Vermont Avenue, NW., Washington, DC 20420, 
telephone (202) 273-7210.

SUPPLEMENTARY INFORMATION:  This document establishes an interpretive 
rule reflecting VA's conclusion that 38 U.S.C. 1318(b) authorizes 
payment of DIC only in cases where the veteran had, during his or her 
lifetime, established a right to receive total service-connected 
disability compensation from VA for the period required by that statute 
or would have established such a right if not for clear and 
unmistakable error by VA.

I. History of 38 CFR 3.22

    Under chapter 13 of title 38, United States Code, VA is authorized 
to pay DIC to certain survivors of veterans who died as a result of 
service-connected disability. In 1978, Congress enacted Public Law 95-
479, which authorized VA to pay DIC to the survivors of a veteran whose 
death was not caused by service-connected disability, but who, at the 
time of death, ``was in receipt of (or but for the receipt of retired 
or retirement pay was entitled to receive)'' compensation for a 
service-connected disability rated 100 percent disabling for 10 years 
immediately preceding death, or for a period of at least five years 
extending from date of discharge from service until date of death. That 
provision was codified in 38 U.S.C. 410(b)(1). In 1979, VA issued 38 
CFR 3.22 to implement the statute (44 FR 22716, 22718 (1979)).
    A 1981 opinion by the VA General Counsel (Op. G.C. 2-81) concluded 
that 38 U.S.C. 410(b)(1) did not permit a DIC award to the survivors of 
a veteran who was not actually in receipt of compensation for a total 
disability for a full ten years prior to death, but who would have been 
in receipt of such benefits if not for error by VA in a decision 
rendered during the veteran's lifetime.
    In 1982, Congress enacted Public Law 97-306, which amended 38 
U.S.C. 410(b)(1) in response to the General Counsel's 1981 decision. 
The amended statute, now codified at 38 U.S.C. 1318(b), authorizes 
payment of DIC in cases where the veteran ``was in receipt of or 
entitled to receive (or but for the receipt of retired or retirement 
pay was entitled to receive)'' compensation for a service-connected 
disability rated totally disabling for 10 years immediately preceding 
death or a period of five years from the date of discharge. The 
legislative history stated that the purpose of the amendment was ``to 
provide that the requirement that the veteran have been in receipt of 
compensation for a service-connected disability rated as total for a 
period of 10 years prior to death (or for 5 years continuously from the 
date of discharge) is met if the veteran would have been in receipt of 
such compensation for such period but for a clear and unmistakable 
error regarding the award of a total disability rating.'' (Explanatory 
Statement of Compromise Agreement, 128 Cong. Rec. H7777 (1982), 
reprinted in 1982 U.S.C.C.A.N. 3012, 3013.)
    In 1983, VA revised 38 CFR 3.22 to state that DIC would be payable 
under 38 U.S.C. 410(b)(1) (now 38 U.S.C. 1318(b)) when the veteran 
``was in receipt of or for any reason (including receipt of military 
retired or retirement pay or correction of a rating after the veteran's 
death based on clear and unmistakable error) was not in receipt of but 
would have been entitled to receive compensation at the time of death'' 
for service-connected disability rated totally disabling for 10 years 
prior to death or five years continuously from date of discharge to 
date of death (48 FR 41160, 41161 (1983)).
    In Wingo v. West, 11 Vet. App. 307 (1998), the United States Court 
of Appeals for Veterans Claims (CAVC) (formerly United States Court of 
Veterans Appeals) interpreted 38 CFR 3.22(a) as permitting a DIC award 
in a case where the veteran had never established entitlement to VA 
compensation for a service-connected total disability and had never 
filed a claim for such benefits which could have resulted in 
entitlement to compensation for the required period. The CAVC concluded 
that the language of Sec. 3.22(a) would permit a DIC award where it is 
determined that the veteran ``hypothetically'' would have been entitled 
to a total disability rating for the required period if he or she had 
applied for compensation during his or her lifetime.
    The CAVC's interpretation of Sec. 3.22(a) does not accurately 
reflect VA's intent in issuing that regulation. Section 1318 of the 
statute authorizes DIC where the veteran was ``in receipt of or 
entitled to receive'' compensation for total service-connected 
disability for a specified period preceding death. The statute does not 
authorize VA to award DIC benefits in cases where the veteran merely 
had hypothetical, as opposed to actual, entitlement to compensation. VA 
does not have authority to provide by regulation for payment of DIC in 
a manner not authorized by 38 U.S.C. 1318. Section 3.22(a) is an 
interpretive rule that was intended to explain the requirements of 38 
U.S.C. 1318, and not to establish any substantive rights beyond those 
authorized by section 1318. However, VA acknowledges that the language 
of Sec. 3.22(a) has apparently caused confusion regarding VA's 
interpretation of 38 U.S.C. 1318. Accordingly, VA is revising 
Sec. 3.22(a) to ensure that it clearly expresses VA's interpretation of 
section 1318.

II. Scope of This Rule

    This document revises existing paragraph (a) of 38 CFR 3.22 and 
redesignates it as paragraphs (a) through (d). VA is also redesignating 
existing paragraphs (b) through (e) as new paragraphs (e) through (h), 
respectively.
    Paragraph (a), as revised, states that even though a veteran died 
of non-service-connected causes, VA will pay benefits to the surviving 
spouse or children in the same manner as if the veteran's death was 
service-connected service connected if:

    (1) the veteran's own willful misconduct did not cause his or 
her death, and (2) at the time of death, the veteran was receiving, 
or was entitled to receive, compensation for a service-connected 
service connected disability that was (i) rated by VA as totally 
disabling for a continuous period of at least 10 years immediately 
preceding death, or (ii) rated by VA as totally disabling 
continuously since the veteran's release from active duty and for at 
least 5 years immediately preceding death.

    Paragraph (b), as revised, states that the phrase ``entitled to 
receive'' means

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that, at the time of death the veteran had a service-connected 
disability rated by VA as totally disabling, but was not actually 
receiving compensation because:

    (1) VA was paying the compensation to the veteran's dependents; 
(2) VA was withholding the compensation to offset an indebtedness of 
the veteran; (3) the veteran had not received total disability 
compensation solely because of clear and unmistakable error in a VA 
decision; (4) the veteran had not waived retired or retirement pay 
in order to receive compensation; (5) VA was withholding payments 
under the provisions of 10 U.S.C. Sec. 1174(h)(2); (6) VA was 
withholding payments because the veteran's whereabouts was unknown, 
but the veteran was otherwise entitled to receive continued payments 
based on a total service-connected disability rating; or (7) VA was 
withholding payments under 38 U.S.C. 5308 but determines that 
benefits were payable under 38 U.S.C. Sec. 5309.

    The revision reflects VA's conclusion that 38 U.S.C. 1318(b) 
authorizes payment of DIC only in cases where the veteran had, during 
his or her lifetime, established a right to receive total service-
connected disability compensation for the required period or would have 
established such a right if not for clear and unmistakable error by VA. 
The basis for VA's interpretation of 38 U.S.C. 1318(b) is set forth 
below.

III. Interpretation of 38 U.S.C. 1318

    Section 1318 authorizes payment of DIC in cases where the veteran 
was, at the time of death, ``in receipt of or entitled to receive (or 
but for the receipt of retired or retirement pay was entitled to 
receive)'' compensation for service-connected disability that ``was 
continuously rated totally disabling for a period of 10 or more years 
immediately preceding death'' or was so rated for 5 years continuously 
from date of discharge to date of death. The phrase ``in receipt of * * 
* compensation'' unambiguously refers to cases where the veteran was, 
at the time of death, actually receiving compensation for service-
connected disability rated totally disabling for the required period. 
VA has concluded that the phrase ``entitled to receive *  *  *   
compensation'' is most reasonably interpreted as referring to cases 
where the veteran had established a legal right to receive compensation 
for the required period under the laws and regulations governing such 
entitlement, but was not actually receiving the compensation.
    Under 38 U.S.C. 5101, ``a specific claim in the form prescribed by 
the Secretary * * * must be filed in order for benefits to be paid or 
furnished to any individual under the laws administered by the 
Secretary.'' No person can have a right to receive compensation from VA 
in the absence of a properly filed claim. (See Jones v. West, 136 F.3d 
1296, 1299-1300 (Fed. Cir.), cert. denied, 119 S. Ct. 90 (1998)). 
Section 5110(a) of title 38, United States Code, provides that an award 
of compensation may not be made effective earlier than the date of the 
claimant's application, unless specifically provided otherwise by 
statute. Accordingly, a person cannot have a right to receive 
compensation from VA for any period prior to the date of an application 
for benefits except as expressly authorized by specific statutory 
provision.
    The legislative history of Public Law 97-306 indicates that the 
purpose of adding the phrase ``or entitled to receive'' to what is now 
38 U.S.C. 1318 was to provide that DIC may be paid in cases where the 
veteran would have been in receipt of compensation for a total service-
connected disability for the specified period prior to death if not for 
a clear and unmistakable error by VA. A ``clear and unmistakable 
error'' is an error in a prior final VA decision which materially 
affected the outcome of the decision. Pursuant to law and regulation, a 
decision containing a clear and unmistakable error may be revised 
retroactively, and entitlement to benefits may be established 
retroactively as if the error had not occurred (38 U.S.C. 5111, 7109A; 
38 CFR 3.105(a)).
    A retroactive award predicated on a finding of clear and 
unmistakable error is, like all awards of VA benefits, subject to the 
requirement that the veteran have filed a claim for benefits under 38 
U.S.C. 5101(a). Further, the period of the veteran's retroactive 
entitlement is governed by the effective-date provisions of 38 U.S.C. 
5110, and generally may not be earlier than the date of the veteran's 
claim which resulted in the erroneous decision. In using the phrase 
``entitled to receive'' to refer to the specific class of cases where 
the veteran's entitlement was established by correction of clear and 
unmistakable error, Congress plainly contemplated that determinations 
concerning the existence and duration of the veteran's entitlement to 
benefits would continue to be governed by the requirements of 38 U.S.C. 
5101(a) and 5110.
    The legislative history also suggests that final decisions 
concerning a veteran's disability rating and effective date would be 
binding for purposes of determinations under 38 U.S.C. 1318(b) unless 
there was clear and unmistakable error in such decisions. Sections 
7104(b) and 7105(c) of title 38, United States Code provide that 
determinations of the Board of Veterans' Appeals and VA regional 
offices, respectively, are final unless a timely appeal is filed. Such 
final decisions may be revised only on the basis of clear and 
unmistakable error. In providing that DIC benefits may be awarded if 
there was clear and unmistakable error in a prior final decision which 
prevented the veteran from receiving total disability compensation for 
the specified period, Congress plainly contemplated that the prior 
final decision would continue to be binding in the absence of clear and 
unmistakable error. Accordingly, if a regional office or the Board had 
rendered a final decision which establishes that the veteran was not 
entitled to a total rating for at least ten years immediately preceding 
death (or at least five years from date of discharge to date of death), 
such decision would preclude VA from reaching a contrary conclusion in 
adjudicating a claim for DIC under 38 U.S.C. 1318(b).
    In view of Congress' clear intent, VA has concluded that 
determinations concerning the existence and duration of the veteran's 
entitlement to compensation for a service-connected disability rated 
totally disabling are governed by the generally-applicable provisions 
of 38 U.S.C. 5101(a), 5110, 7104(b), and 7105(c), governing claim-
filing requirements, effective dates of entitlement, and the finality 
of regional-office and Board decisions. Congress' stated purpose to 
authorize DIC in cases where clear and unmistakable error was the only 
obstacle to the veteran's receipt of total disability compensation for 
the required period fits logically within this well-established 
statutory scheme.
    In contrast, interpreting 38 U.S.C. 1318(b) as permitting DIC 
awards where the veteran ``hypothetically'' could have been entitled to 
benefits would create a substantially broader rule which would be 
inconsistent with the general statutory requirements governing a 
veteran's entitlement to compensation. VA has found no indication in 
section 1318(b) or its legislative history that Congress intended VA to 
ignore those established statutory requirements in making 
determinations regarding the veteran's entitlement to compensation for 
purposes of section 1318(b). To the contrary, Congress indicated that 
the purpose of the phrase ``or entitled to receive'' was to authorize 
DIC awards in a specific class of cases where the veteran's entitlement 
is established under those generally-applicable statutory requirements.
    The language of 38 U.S.C. 1318(b) is consistent with Congress' 
stated purpose. Section 1318(b) authorizes

[[Page 3390]]

payment of DIC in cases where the veteran was entitled to receive 
compensation for a service-connected disability that ``was continuously 
rated totally disabling for a period of 10 or more years immediately 
preceding death.'' The requirement that the disability have been 
``continuously rated'' totally disabling for the specified period is 
most reasonably construed as referring to ratings which had actually 
been assigned by VA for the duration of that period in accordance with 
the established statutory requirements governing claims, ratings, and 
effective dates. A contrary interpretation would render the term 
``rated'' wholly unnecessary, for Congress could simply have provided 
that DIC would be payable based on a posthumous determination that the 
veteran had a service-connected disability that ``was continuously * * 
* totally disabling for a period of 10 or more years immediately 
preceding death.''
    This interpretation of 38 U.S.C. 1318(b) is consistent with VA's 
prior interpretation of that provision. In a 1990 precedent opinion 
(VAOPGCPREC 68-90) which is binding on all VA officials and employees, 
the VA General Counsel examined the language and history of section 
1318(b) (previously section 410(b)). The General Counsel concluded that 
the legislative history clearly indicated that Congress intended to 
authorize DIC in cases where the veteran had a total service-connected 
disability rating for the specified period, or would have had such a 
rating but for clear and unmistakable error by VA. The General Counsel 
concluded that VA could not award DIC in cases where the veteran did 
not have a total service-connected rating for the specified period and 
there was no clear and unmistakable error which could have provided a 
basis for retroactively assigning such a rating.

IV. The CAVC's ``Wingo'' Decision

    In Wingo, the CAVC did not expressly discuss the meaning of 38 
U.S.C. 1318 and did not analyze the language and history of that 
provision. The CAVC stated that 38 U.S.C. 1318 and 38 CFR 3.22(a) allow 
a claimant to establish entitlement to DIC merely by showing that the 
veteran hypothetically would have been entitled to total service-
connected disability compensation for the required period if the 
veteran had applied for such compensation. (11 Vet. App. at 311.) The 
CAVC did not, however, state that section 1318 alone established such a 
right. Further, the CAVC's discussion indicates that its conclusion was 
based primarily, if not exclusively, on the language of Sec. 3.22(a). 
The CAVC reversed a determination by the Board of Veterans' Appeals 
that DIC could not be paid under section 1318 in a case where the 
veteran had not applied for compensation during his lifetime. In 
support of that conclusion, the CAVC stated repeatedly that the Board's 
determination was inconsistent with the language of Sec. 3.22(a). (11 
Vet. App. at 311, 312.) Because the CAVC did not expressly analyze the 
language and history of section 1318, and because its holding was 
predicated primarily on the language of the regulation, it does not 
appear that the CAVC has concluded that section 1318 by its terms 
requires VA to pay DIC in cases where the veteran had no more than a 
``hypothetical'' entitlement to total disability compensation for the 
required period.
    The CAVC also did not expressly address the issue of whether 38 CFR 
3.22(a), as construed by that court, is a valid exercise of VA's rule-
making authority. Although the CAVC's interpretation of Sec. 3.22(a) 
may be a plausible construction of the language of that regulation, the 
CAVC's construction creates a conflict between Sec. 3.22(a) and 38 
U.S.C. 1318 that is inconsistent with VA's authority, as well as with 
VA's intent. VA has no authority to provide by regulation for the 
payment of DIC in a manner not authorized by section 1318. Section 
3.22(a) is an interpretive rule, which was intended to explain the 
requirements of the statute rather than to establish new legal rights 
or obligations beyond those provided by statute. An interpretive rule 
is one which merely clarifies or explains existing statutes or 
regulations. (Animal Legal Defense Fund v. Quigg, 932 F.2d 920, 927 
(Fed. Cir. 1991).) In contrast, a legislative, or substantive, rule is 
one which effects a change in existing law or policy which affects 
individual rights and obligations. (Animal Legal Defense Fund, 932 F.2d 
at 927.) A rule can be legislative only if Congress has delegated 
legislative power to an agency with respect to a particular matter and 
the agency intended to use that power in promulgating the rule. 
(Schuler Indus. v. United States, 109 F.3d 753, 755 (Fed. Cir. 1997); 
American Postal Workers Union, AFL-CIO v. United States Postal Serv., 
707 F.2d 548, 558 (D.C. Cir. 1983), cert. denied, 465 U.S. 1100 
(1984).)
    38 U.S.C. 1318 authorizes VA to pay DIC only in cases where a 
veteran had an actual, rather than merely hypothetical, right to 
receive compensation for service-connected disability rated by VA as 
totally disabling for 10 years preceding death or 5 years continuously 
from date of discharge to date of death. Congress has not delegated 
authority to VA to establish legislative rules restricting or expanding 
the class of persons eligible for DIC under the statute, and VA did not 
intend to exercise any such authority in issuing or amending 
Sec. 3.22(a).
    In contrast to a legislative rule, an interpretive rule can 
``create no law and have no effect beyond that of the statute.'' 
(Pickus v. United States Board of Parole, 507 F.2d 1107, 1113 (D.C. 
Cir. 1974).) Because 38 U.S.C. 1318 does not authorize VA to pay DIC 
benefits in cases where the veteran had no more than ``hypothetical'' 
entitlement to the underlying compensation, and because Congress has 
not authorized VA to establish legislative rules creating a right to 
DIC in such cases, VA has no authority to create such a right. In 
Wingo, the CAVC concluded that the language of 38 CFR 3.22(a) 
recognizes such a right existing under section 1318, but did not 
address VA's authority to recognize or establish such a right in view 
of the language and purpose of the statute and the principles governing 
the effect of interpretive rules. Because Sec. 3.22(a), as interpreted 
by the CAVC, does not accurately reflect the requirements of the 
statute and VA's intention in issuing that regulation, VA has 
determined that it is necessary to revise the regulation.

V. Definition of ``Entitled To Receive''

    In order to clarify the requirements of 38 U.S.C. 1318, VA is 
revising 38 CFR 3.22 to expressly define the statutory term ``entitled 
to receive.'' VA is defining that term to refer to each specific 
circumstance where a veteran could have had a service-connected 
disability rated totally disabling by VA but may not have been 
receiving VA compensation for such disability at the time of death. 
Those circumstances are as follows.
    In certain circumstances, VA may pay a veteran's compensation 
directly to his or her dependents. (See 38 U.S.C. 1158, 5307, 5308(c).) 
VA may also withhold a veteran's compensation in order to offset the 
veteran's indebtedness to the United States arising out of 
participation in a program administered by VA. (See 38 U.S.C. 5314.) In 
such cases, where the veteran's compensation is being applied to 
satisfy an obligation of the veteran, VA believes that the veteran may 
be considered to have been entitled to receive compensation within the 
meaning of 38 U.S.C. 1318.
    There are other circumstances in which a veteran who has 
established entitlement to compensation for disability rated totally 
disabling by VA

[[Page 3391]]

may not have been receiving payments of compensation at the time of 
death. A veteran will be considered to have been entitled to receive 
compensation for such disability at the time of death if he or she had 
filed a claim and would have received compensation for the required 
period but for clear and unmistakable error by VA. Additionally, a 
veteran will be considered to have been entitled to receive 
compensation if, at the time of death, the veteran had a service-
connected disability (or disabilities) that was rated 100 percent 
disabling by VA for the required period, but the veteran was not 
receiving compensation because he or she had not waived military 
retired or retirement pay, or because VA was withholding payments under 
certain circumstances. Payments of compensation may be withheld under 
10 U.S.C. 1174(h)(2) to offset the amount of certain payments to the 
veteran from the Department of Defense. It may also be necessary for VA 
to withhold compensation if the veteran's whereabouts is unknown. 
Additionally, under 38 U.S.C. 5308, VA may withhold payments to aliens 
located in the territory of an enemy of the United States or any of its 
allies. A veteran is entitled to receive payments withheld under 
section 5308 if it is shown that the veteran was not guilty of mutiny, 
treason, sabotage, or rendering assistance to an enemy of the United 
States or its allies (38 U.S.C. 5309). Accordingly, revised 
Sec. 3.22(b) states that the phrase ``entitled to receive'' refers to 
veterans who were not receiving payments at the time of death for one 
of the reasons stated above.
    This definition also reflects VA's conclusion that the language 
``rated totally disabling'' in 38 U.S.C. 1318 requires that the 
disability or disabilities have been rated totally disabling by VA. 
Section 1155 of title 38, United States Code, requires the Secretary of 
Veterans Affairs to ``adopt and apply a schedule of ratings of 
reductions in earning capacity from specific injuries or combinations 
of injuries.'' Under this authority, VA has created its Schedule for 
Rating Disabilities (38 CFR Part 4). Given the very specific 
requirements of 38 U.S.C. 1155 as well as 38 U.S.C. 1114, which 
establishes the rates of compensation for the ten levels of disability, 
including disabilities ``rated as total'' (section 1114(j)), we believe 
that the term ``rated'', as it is used in section 1318, can only mean 
``rated by VA''.

VI. Other Changes

    New paragraph (c) of Sec. 3.22 is a restatement of material 
previously contained in paragraph (a). New paragraph (c) provides that 
a rating based on individual unemployability under 38 CFR 4.16 
qualifies as a disability rated by VA as totally disabling. New 
paragraph (d) of Sec. 3.22 provides the criteria for being considered a 
surviving spouse for purposes of 38 U.S.C. 1318 and 38 CFR 3.22. These 
criteria are merely a restatement of 38 U.S.C. 1318(c) and 38 CFR 
3.54(c)(2). We are simultaneously removing Sec. 3.54(c)(2) as 
unnecessary. New paragraphs (e) through (h) are redesignations of 
former paragraphs (b) through (e), respectively.
    This document establishes interpretive rules. It also restates 
statutory provisions and makes other nonsubstantive changes. 
Accordingly, under the provisions of 5 U.S.C. 553, we are dispensing 
with prior notice and comment and with a 30-day delay of effective 
date.
    The Secretary hereby certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities 
as they are defined in the Regulatory Flexibility Act (RFA), 5 U.S.C. 
601-612. The reason for this certification is that this final rule 
would not directly affect any small entities. Only VA beneficiaries 
could be directly affected. Therefore, pursuant to 5 U.S.C. 605(b), 
this final rule is exempt from the initial and final regulatory 
flexibility analyses requirements of sections 603 and 604.
    The Catalog of Federal Domestic Assistance program number is 
64.110.

List of Subjects

 38 CFR Part 3

    Administrative practice and procedure, Claims, Disability benefits, 
Health care, Pensions, Veterans, Vietnam.

    Approved: September 7, 1999.
Togo D. West, Jr.,
Secretary of Veterans Affairs.

    For the reasons set forth in the preamble, 38 CFR part 3 is amended 
as follows:

PART 3--ADJUDICATION

Subpart A--Pension, Compensation, and Dependency and Indemnity 
Compensation

    1. The authority citation for part 3, subpart A continues to read 
as follows:

    Authority:  38 U.S.C. 501(a), unless otherwise noted.

    2. In Sec. 3.22, paragraphs (b) through (e) are redesignated as 
paragraphs (e) through (h), respectively; and the section heading, 
paragraph (a) and newly redesignated paragraph (f) are revised; and new 
paragraphs (b) through (d) are added, to read as follows:


Sec. 3.22  DIC benefits for survivors of certain veterans rated totally 
disabled at time of death.

    (a) Even though a veteran died of non-service-connected causes, VA 
will pay death benefits to the surviving spouse or children in the same 
manner as if the veteran's death were service-connected, if:
    (1) The veteran's death was not the result of his or her own 
willful misconduct, and
    (2) At the time of death, the veteran was receiving, or was 
entitled to receive, compensation for service-connected disability that 
was:
    (i) Rated by VA as totally disabling for a continuous period of at 
least 10 years immediately preceding death; or
    (ii) Rated by VA as totally disabling continuously since the 
veteran's release from active duty and for at least 5 years immediately 
preceding death.
    (b) For purposes of this section, ``entitled to receive'' means 
that at the time of death, the veteran had service-connected disability 
rated totally disabling by VA but was not receiving compensation 
because:
    (1) VA was paying the compensation to the veteran's dependents;
    (2) VA was withholding the compensation under authority of 38 
U.S.C. 5314 to offset an indebtedness of the veteran;
    (3) The veteran had applied for compensation but had not received 
total disability compensation due solely to clear and unmistakable 
error in a VA decision concerning the issue of service connection, 
disability evaluation, or effective date;
    (4) The veteran had not waived retired or retirement pay in order 
to receive compensation;
    (5) VA was withholding payments under the provisions of 10 U.S.C. 
1174(h)(2);
    (6) VA was withholding payments because the veteran's whereabouts 
was unknown, but the veteran was otherwise entitled to continued 
payments based on a total service-connected disability rating; or
    (7) VA was withholding payments under 38 U.S.C. 5308 but determines 
that benefits were payable under 38 U.S.C. 5309.
    (c) For purposes of this section, ``rated by VA as totally 
disabling'' includes total disability ratings based on unemployability 
(Sec. 4.16 of this chapter).
    (d) To be entitled to benefits under this section, a surviving 
spouse must have been married to the veteran--

[[Page 3392]]

    (1) For at least 1 year immediately preceding the date of the 
veteran's death; or
    (2) For any period of time if a child was born of the marriage, or 
was born to them before the marriage.

(Authority: 38 U.S.C. 1318)
* * * * *
    (f) Social security and worker's compensation. Benefits received 
under social security or worker's compensation are not subject to 
recoupment under paragraph (e) of this section even though such 
benefits may have been awarded pursuant to a judicial proceeding.
* * * * *


Sec. 3.54  [Amended]

    3. In Sec. 3.54, paragraph (c)(2) and its authority citation are 
removed, and paragraphs (c)(1), (c)(1)(i), (c)(1)(ii), and (c)(1)(iii) 
are redesignated as paragraphs (c), (c)(1), (c)(2), and (c)(3), 
respectively.

[FR Doc. 00-1507 Filed 1-20-00; 8:45 am]
BILLING CODE 8320-01-P