99–006

107TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 107–472

VETERANS’ AND SURVIVORS’ BENEFITS EXPANSION ACT OF

2002

MAY 16, 2002.—Committed to the Committee of the Whole House on the State of

the Union and ordered to be printed

Mr. SMITH of New Jersey, from the Committee on Veterans’ Affairs,

submitted the following

R E P O R T

[To accompany H.R. 4085]

[Including cost estimate of the Congressional Budget Office]

The Committee on Veterans’ Affairs, to whom was referred the

bill (H.R. 4085) to increase, effective as of December 1, 2002, the

rates of disablity compensation for veterans with service-connected

disabilities and the rates of dependency and indemnity compensation for survivors of certain service-connected disabled veterans,

and for other purposes, having considered the same, reports favorably thereon with amendments and recommends that the bill as

amended do pass.

The amendments are as follows:

Strike all after the enacting clause and insert the following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Veterans’ and Survivors’ Benefits Expansion Act

of 2002’’.

SEC. 2. INCREASE IN RATES OF DISABILITY COMPENSATION AND DEPENDENCY AND INDEMNITY COMPENSATION.

(a) RATE ADJUSTMENT.—The Secretary of Veterans Affairs shall, effective on December 1, 2002, increase the dollar amounts in effect for the payment of disability

compensation and dependency and indemnity compensation by the Secretary, as

specified in subsection (b).

(b) AMOUNTS TO BE INCREASED.—The dollar amounts to be increased pursuant to

subsection (a) are the following:

(1) COMPENSATION.—Each of the dollar amounts in effect under section 1114

of title 38, United States Code.

(2) ADDITIONAL COMPENSATION FOR DEPENDENTS.—Each of the dollar amounts

in effect under sections 1115(1) of such title.

(3) CLOTHING ALLOWANCE.—The dollar amount in effect under section 1162 of

such title.

(4) NEW DIC RATES.—The dollar amounts in effect under paragraphs (1) and

(2) of section 1311(a) of such title.

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(5) OLD DIC RATES.—Each of the dollar amounts in effect under section

1311(a)(3) of such title.

(6) ADDITIONAL DIC FOR SURVIVING SPOUSES WITH MINOR CHILDREN.—The dollar amount in effect under section 1311(b) of such title.

(7) ADDITIONAL DIC FOR DISABILITY.—The dollar amounts in effect under sections 1311(c) and 1311(d) of such title.

(8) DIC FOR DEPENDENT CHILDREN.—The dollar amounts in effect under sections 1313(a) and 1314 of such title.

(c) DETERMINATION OF INCREASE.—(1) The increase under subsection (a) shall be

made in the dollar amounts specified in subsection (b) as in effect on November 30,

2002.

(2) Except as provided in paragraph (3), each such amount shall be increased by

the same percentage as the percentage by which benefit amounts payable under

title II of the Social Security Act (42 U.S.C. 401 et seq.) are increased effective December 1, 2002, as a result of a determination under section 215(i) of such Act (42

U.S.C. 415(i)).

(3) Each dollar amount increased pursuant to paragraph (2) shall, if not a whole

dollar amount, be rounded down to the next lower whole dollar amount.

(d) SPECIAL RULE.—The Secretary may adjust administratively, consistent with

the increases made under subsection (a), the rates of disability compensation payable to persons within the purview of section 10 of Public Law 85–857 (72 Stat.

1263) who are not in receipt of compensation payable pursuant to chapter 11 of title

38, United States Code.

(e) PUBLICATION OF ADJUSTED RATES.—At the same time as the matters specified

in section 215(i)(2)(D) of the Social Security Act (42 U.S.C. 415(i)(2)(D)) are required

to be published by reason of a determination made under section 215(i) of such Act

during fiscal year 2003, the Secretary of Veterans Affairs shall publish in the Federal Register the amounts specified in subsection (b), as increased pursuant to that

section.

SEC. 3. RETENTION OF DEPENDENCY AND INDEMNITY COMPENSATION FOR SURVIVING

SPOUSES REMARRYING AFTER AGE 65.

(a) EXCEPTION TO TERMINATION OF BENEFITS UPON REMARRIAGE.—Paragraph (2)

of section 103(d) of title 38, United States Code, is amended by striking ‘‘if the remarriage’’ and all that follows and inserting ‘‘if—

‘‘(A) the remarriage occurs after the surviving spouse attains age 65 ;

‘‘(B) the remarriage has been terminated by death; or

‘‘(C) the remarriage has been terminated by divorce, unless the Secretary determines that the divorce was secured through fraud or collusion.’’.

(b) CONFORMING AMENDMENTS.—Paragraph (4) of such section is amended—

(1) by striking ‘‘The first month’’ and all the follows through ‘‘shall be’’ and

inserting the following ‘‘When eligibility for benefits for a surviving spouse is

restored by reason of this subsection, the first month of eligibility for such benefits shall be’’; and

(2) in subparagraph (A), by striking ‘‘described in’’ and inserting ‘‘with a remarriage described in subparagraph (B) or (C) of’’.

(c) INCLUSION OF DEATH COMPENSATION AMONG RESTORED BENEFITS.—Subparagraph (A) of paragraph (5) of such section is amended to read as follows:

‘‘(A) Sections 1121 and 1311, relating to death compensation and dependency

and indemnity compensation, respectively.’’.

(d) APPLICATION FOR BENEFITS.—In the case of an individual who but for having

remarried would be eligible for dependency and indemnity compensation under section 1311 of title 38, United States Code, or death compensation under section 1121

of such title, and whose remarriage was before the date of the enactment of this

Act and after the individual had attained age 65, the individual shall be eligible for

such compensation by reason of the amendments made by subsection (a) only if the

individual submits an application for such compensation to the Secretary of Veterans Affairs not later than the end of the one-year period beginning on the date

of the enactment of this Act.

(e) COORDINATION OF BENEFITS.—Section 1311 of such title is amended by adding

at the end the following new subsection:

‘‘(e) In the case of an individual who is eligible for dependency and indemnity

compensation under this section by reason of section 103(d)(2)(A) of this title who

is also eligible for benefits under another provision of law by reason of such individual’s status as the surviving spouse of a veteran, then, notwithstanding any other

provision of law, no reduction in benefits under such other provision of law shall

be made by reason of such individual’s eligibility for benefits under this section.’’.

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SEC. 4. UNIFORM HOME LOAN GUARANTY FEES FOR QUALIFYING MEMBERS OF THE SELECTED RESERVE AND ACTIVE DUTY VETERANS.

(a) IN GENERAL.—Paragraph (2) of section 3729(b) of title 38, United States Code,

is amended—

(1) by inserting ‘‘(A)’’ after ‘‘(2)’’;

(2) by inserting ‘‘for any loan closed after September 30, 2005’’ after ‘‘paragraph (1)’’; and

(3) by adding at the end the following:

‘‘(B) The loan fee table referred to in paragraph (1) for any loan closed during the

period beginning on October 1, 2002, and ending on September 30, 2005, is as

follows:

‘‘LOAN FEE TABLE

Type of loan Veteran Other obligor

(A)(i) Initial loan described in section 3710(a) to purchase or

construct a dwelling with 0-down, or any other initial loan

described in section 3710(a) other than with 5-down or 10-

down (closed before October 1, 2008) .................................... 2.00 NA

(A)(ii) Initial loan described in section 3710(a) to purchase or

construct a dwelling with 0-down, or any other initial loan

described in section 3710(a) other than with 5-down or 10-

down (closed on or after October 1, 2008) ............................. 1.25 NA

(B)(i) Subsequent loan described in section 3710(a) to purchase or construct a dwelling with 0-down, or any other

subsequent loan described in section 3710(a) (closed before

October 1, 2008) ...................................................................... 3.00 NA

(B)(ii) Subsequent loan described in section 3710(a) to purchase or construct a dwelling with 0-down, or any other

subsequent loan described in section 3710(a) (closed on or

after October 1, 2008) ............................................................. 1.25 NA

(C)(i) Loan described in section 3710(a) to purchase or construct a dwelling with 5-down (closed before October 1,

2008) ........................................................................................ 1.50 NA

(C)(ii) Loan described in section 3710(a) to purchase or construct a dwelling with 5-down (closed on or after October

1, 2008) .................................................................................... 0.75 NA

(D)(i) Initial loan described in section 3710(a) to purchase or

construct a dwelling with 10-down (closed before October

1, 2008) .................................................................................... 1.25 NA

(D)(ii) Initial loan described in section 3710(a) to purchase or

construct a dwelling with 10-down (closed on or after October 1, 2008) .............................................................................. 0.50 NA

(E) Interest rate reduction refinancing loan ............................ 0.50 NA

(F) Direct loan under section 3711 ............................................ 1.00 NA

(G) Manufactured home loan under section 3712 (other than

an interest rate reduction refinancing loan) ......................... 1.00 NA

(H) Loan to Native American veteran under section 3762

(other than an interest rate reduction refinancing loan) .... 1.25 NA

(I) Loan assumption under section 3714 .................................. 0.50 0.50

(J) Loan under section 3733(a) .................................................. 2.25 2.25’’.

(b) CONFORMING AMENDMENT.—Paragraph (4)(A) of such section is amended by

inserting before the period at the end the following: ‘‘, and the term ‘veteran’ means

any veteran eligible for the benefits of this chapter’’.

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SEC. 5. LIFE INSURANCE PROGRAMS.

(a) INCREASE OF VETERANS’ MORTGAGE LIFE INSURANCE COVERAGE TO $150,000.—

(1) Section 2106(b) of title 38, United States Code, is amended by striking ‘‘$90,000’’

and inserting ‘‘$150,000’’.

(2) The amendment made by paragraph (1) shall apply with respect to insurance

payable under section 2106 of title 38, United States Code, in the case of a veteran

insured under that section who dies on or after the date of enactment of this Act.

(b) AUTHORITY FOR VETERANS’ MORTGAGE LIFE INSURANCE TO BE CARRIED BEYOND AGE 70.—Section 2106 of such title is amended—

(1) in subsection (a), by inserting ‘‘age 69 or younger’’ after ‘‘any eligible veteran’’; and

(2) in subsection (i), by striking paragraph (2) and redesignating paragraphs

(3) and (4) as paragraphs (2) and (3), respectively.

SEC. 6. INCREASE IN AGGREGATE ANNUAL AMOUNT AVAILABLE FOR STATE APPROVING

AGENCIES FOR ADMINISTRATIVE EXPENSES FOR FISCAL YEARS 2003, 2004, AND

2005.

Section 3674(a)(4) of title 38, United States Code, is amended by inserting before

the period at the end of the first sentence the following: ‘‘, and for each of fiscal

years 2003, 2004, and 2005, $18,000,000’’.

Amend the title so as to read:

A bill to amend title 38, United States Code, to provide a cost-of-living increase

in the rates of compensation for veterans with service-connected disability and dependency and indemnity compensation for surviving spouses of such veterans, to expand certain benefits for veterans and their survivors, and for other purposes.

INTRODUCTION

The reported bill reflects the Committee’s consideration of several bills introduced during the 107th Congress, to include H.R.

1108, H.R. 2095, H.R. 2222, H.R. 3731, and H.R. 4085.

On April 11, 2002, the Subcommittee on Benefits held a hearing

and considered the following bills: H.R. 1108, to provide that remarriage of the surviving spouse of a veteran after age 55 shall not

result in termination of dependency and indemnity compensation;

H.R. 2095, the Reservist VA Home Loan Fairness Act of 2001; H.R.

2222, the Veterans Life Insurance Improvement Act of 2001; and

H.R. 3731, to increase amounts available to state approving agencies to ascertain the qualifications of educational institutions for

furnishing courses of education to veterans and eligible persons

under the Montgomery GI Bill and under other programs of education administered by the Department of Veterans Affairs.

On May 2, 2002, the Subcommittee on Benefits met and unanimously ordered H.R. 4085, as amended, reported favorably to the

full Committee.

On May 9, 2002, the full Committee met and ordered H.R. 4085

reported favorably, as amended, to the House by unanimous voice

vote.

SUMMARY OF THE REPORTED BILL

H.R. 4085, as amended, would:

1. Provide, effective December 1, 2002, a cost-of-living adjustment to the rates of disability compensation for veterans

with service-connected disabilities and to the rates of dependency and indemnity compensation for survivors of certain

service-connected disabled veterans; the percentage amount

would be equal to the increase for benefits provided under

the Social Security Act, which is calculated based upon

changes in the Consumer Price Index.

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2. Provide that remarriage of the surviving spouse of a veteran

after attaining age 65 would not result in termination of dependency and indemnity compensation, eligibility for

CHAMPVA medical care, education, and housing loan benefits; those surviving spouses who remarried at or after age 65

prior to enactment of the bill would have one year from date

of enactment to reapply for benefits.

3. Provide that, through fiscal year 2005, the home loan fees

charged qualifying members of the Selected Reserve be equal

to those fees charged active duty veterans.

4. Increase Veterans’ Mortgage Life Insurance coverage from

$90,000 to $150,000.

5. Allow veterans over the age of 70 to continue coverage under

Veterans’ Mortgage Life Insurance.

6. Increase funding for state approving agencies in fiscal years

2003–2005 to $18 million per year.

BACKGROUND AND DISCUSSION

Increase in rates of disability compensation and dependency and

indemnity compensation. Section 2 of the bill would increase, effective December 1, 2002, the rates of compensation for service-connected disabilities and the rates of dependency and indemnity compensation (DIC) for surviving spouses and children of veterans who

die of service-connected causes, as well as the additional amounts

for dependents and survivors, and clothing allowances for certain

veterans. The percentage of increase would be the same as that received by Social Security recipients.

The Committee annually reviews the service-connected disability

compensation and DIC programs to ensure that the benefits provide reasonable and adequate compensation for disabled veterans

and their families. Based on this review, the Congress acts annually to provide a cost-of-living adjustment (COLA) in compensation

and DIC benefits. The Congress has provided annual increases in

these rates for every fiscal year since 1976.

Retention of dependency and indemnity compensation for surviving spouses remarrying after age 65. Dependency and indemnity

compensation (DIC) is a tax-free monthly benefit paid to the surviving spouse of a veteran who dies as a result of military service.

While current law prevents payment of DIC during the course of

a subsequent marriage, Public Law 105–178 allowed reinstatement

of this benefit to the surviving spouse if the remarriage is terminated. As the Honorable Michael Bilirakis stated in testimony before the Subcommittee on Benefits on April 11, 2002, ‘‘DIC is the

only federal annuity program that does not allow a widow who is

receiving compensation to remarry at an older age and retain her

annuity.’’ It is the Committee’s intent that an older surviving

spouse who chooses to remarry should not be discouraged from

doing so by the loss of DIC benefits.

Section 3 would allow a surviving spouse, who remarry after attaining age 65, to retain dependency and indemnity compensation

and related benefits. Spouses who remarried after attaining age 65

prior to enactment of the bill would have one year from date of enactment to apply for reinstatement of this benefit. Health insurVerDate 11-MAY-2000 22:46 May 16, 2002 Jkt 099006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR472.XXX pfrm01 PsN: HR472
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ance, home loan, and education benefits for these surviving spouses

would also be restored. Moreover, the Committee has included language so that this additional amount will be paid to all remarried

surviving spouses, and that no reduction of other benefits to which

the surviving spouse may be entitled, such as Survivor Benefit

Plan payments, would occur.

The Committee has not been able to obtain accurate data with

respect to the numbers of surviving spouses likely to be affected by

this provision. However, for oversight purposes, the Committee expects the Department of Veterans Affairs to obtain and maintain

data concerning the number and age of those surviving spouses

who apply for reinstatement of their DIC benefits under this

provision.

Uniform home loan guaranty fees for qualifying members of the

Selected Reserve and active duty veterans. Section 4 would amend

the Loan Fee Table in section 3729(b) of title 38, United States

Code, to provide for uniform funding fees charged to members of

the Selected Reserve and active duty veterans for home loans

under VA’s Home Loan Guaranty Program. The fee would be reduced for the period beginning on October 1, 2002 and ending on

September 30, 2005.

Currently, members of the Select Reserve pay a 0.75 percent

higher funding fee under the home loan program than other eligible veterans. According to VA, the average foreclosure rate for reservists since the start of the program in 1993 has been 2.71 percent, a low rate compared to 3.95 percent for other home loan beneficiaries. Thus, the additional funding fee is not justified on the

basis of an increased risk. In order to evaluate the effect of this

provision, the Committee expects VA to continue to obtain and

maintain data concerning the number of reservists who participate

in this program and to separately identify their foreclosure rates.

Veterans’ Mortgage Life Insurance coverage. Section 5(a) would

increase the amount of coverage provided under Veterans’ Mortgage Life Insurance (VMLI) from $90,000 to $150,000. VMLI is designed to provide financial protection to cover eligible veterans’

home mortgages in the event of death. VMLI is issued to those severely disabled veterans who have received grants for Specially

Adapted Housing from the Department of Veterans Affairs. Section

5(a) would increase the amount of VMLI allowed an eligible veteran to $150,000, which is payable if the veteran dies before the

mortgage is paid off.

Section 5(b) would permit service-connected veterans to continue

their VMLI coverage beyond age 70. Under current law, the insurance is cancelled on the veteran’s 70th birthday. Although no new

policies would be issued after age 70, this section provides that the

policy will not be terminated due to age. This is consistent with insurance practice under commercial policies.

Increase in aggregate annual amount available for state approving agencies for administrative expenses for fiscal years 2003, 2004,

and 2005. Section 6 would increase the funding available for state approving agencies (SAAs) from $14 million a year to $18 million

a year during fiscal years 2003 through 2005.

From fiscal years 1995 to 2000, SAA funding was capped—with

no annual increase—at $13 million. Public Law 106–419 increased

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SAA funding to $14 million for fiscal years 2001 and 2002. Under

current law, the authorization amount would be reduced to $13

million as of October 1, 2002.

State approving agencies review and evaluate education programs in each state, and subsequently approve or deny each program for use of VA education benefits under the Montgomery GI

Bill and three other VA veterans’ educational assistance programs.

SAAs usually operate through state departments of education or

postsecondary education commissions. SAAs also approve employer-sponsored on-the-job training and apprenticeship programs,

some through state departments of labor.

The need to increase funding for SAAs primarily reflects new

statutory duties, under Public Law 107–14 and Public Law 107–

103, in occupational licensing and credentialing, as well as expanded outreach to veterans, servicemembers and employers.

SECTION-BY-SECTION ANALYSIS

Section 1 would provide that this Act may be cited as the ‘‘Veterans’ and Survivors’ Benefits Expansion Act of 2002’’.

Section 2(a) would authorize the Secretary of Veterans Affairs to

increase, effective December 1, 2002, the dollar amounts in effect

for the payment of disability compensation and dependency and indemnity compensation.

Section 2(b) would specify the programs to receive increased dollar amounts as compensation, additional compensation for dependents, clothing allowance, new DIC rates, old DIC rates, additional

DIC for surviving spouses with minor children, additional DIC for

disability, and DIC for dependent children.

Section 2(c)(1) would increase the dollar amounts for those programs specified in subsection (b) based on the amount in effect on

November 30, 2002.

Section 2(c)(2) would specify that each amount shall be increased

by the same percentage by which benefits are increased under title

II of the Social Security Act (42 U.S.C. 415(i)).

Section 2(c)(3) would round down to the next lower dollar amount

all compensation and DIC benefits, when the amount is not a

whole dollar amount.

Section 2(d) would provide a special rule authorizing the Secretary of Veterans Affairs to adjust administratively, consistent

with the increases made under subsection (a), the rates of disability compensation payable to persons within the purview of section 10 of Public Law 85–857, who are not in receipt of compensation payable pursuant to chapter 11 of title 38, United States Code.

Section 2(e) would require the Secretary of Veterans Affairs to

publish in the Federal Register the amounts specified in subsection

(b), as increased pursuant to that section.

Section 3(a) would amend paragraph 2 of section 103(d) of title

38, United States Code, to provide in subparagraph (A) that remarriage of a surviving spouse after attaining age 65 shall not bar the

furnishing of dependency and indemnity compensation, death compensation, medical care for survivors and dependents of certain veterans, educational assistance, and housing loan benefits. SubparaVerDate 11-MAY-2000 22:46 May 16, 2002 Jkt 099006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR472.XXX pfrm01 PsN: HR472
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graphs (B) and (C) of paragraph (2) of section 103(d) are restatements of current law.

Section 3(b) would provide that when eligibility for benefits is restored under subparagraph (B) or (C) of paragraph (2) of section

103(d), the first month of eligibility shall be the month after the

remarriage has been terminated by death or divorce.

Section 3(c) would amend subparagraph (A) of section 103(d)(5)

of title 38, United States Code, to add section 1121 of title 38,

United States Code, relating to death compensation, to section

1311 on dependency and indemnity compensation.

Section 3(d) would provide that a surviving spouse who would

have been eligible for dependency and indemnity compensation but

for having remarried, would be eligible to have benefits reinstated

if the remarriage took place after the surviving spouse attained 65

years of age before enactment of this Act, if application for such

compensation is made not later than the end of the one year period

beginning on the date of enactment of this Act.

Section 3(e) would provide that in the case of an individual who

is eligible for dependency and indemnity compensation under section 3(a) of the bill, and who is also entitled to benefits under any

other provision of law, there shall be no reduction in benefits under

such other provision of law, by reason of eligibility for dependency

and indemnity compensation.

Section 4(a) would amend paragraph (2) of section 3729(b) of title

38, United States Code, to eliminate the additional 0.75 percent

funding fee charged to members of the Select Reserve for the period beginning on October 1, 2002 and ending on September 30,

2005, and establish a separate loan fee table for VA home loans

guaranteed between October 1, 2002 and September 30, 2005.

Section 4(b) would amend section 3729(b)(4) of title 38, United

States Code, by adding the definition of ‘‘veteran’’ for purposes of

the loan table in effect between October 1, 2002 and September 30,

2005 as any veteran eligible for the benefits of this chapter.

Section 5(a)(1) would amend section 2106(b) of title 38, United

States Code, by increasing coverage under the Veterans’ Mortgage

Life Insurance program from $90,000 to $150,000.

Section 5(a)(2) would provide that amendments made by this section shall apply to deaths occurring on or after the date of enactment of this Act.

Section 5(b) would amend section 2106 of title 38, United States

Code, to provide that Veterans’ Mortgage Life Insurance may be

issued only to eligible veterans who are age 69 or younger.

Section 6 would amend section 3674(a)(4) of title 38, United

States Code, to provide $18 million for each of fiscal years 2003,

2004, and 2005.

PERFORMANCE GOALS AND OBJECTIVES

The reported bill would authorize veteran and survivor benefits

enhancements and program improvements under laws administered by the Secretary of Veterans Affairs. Their performance goals

and objectives are established in annual performance plans and are

subject to the Committee’s regular oversight.

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STATEMENT OF THE VIEWS OF THE ADMINISTRATION

Statement of Daniel L. Cooper, Under Secretary for Benefits, Department

of Veterans Affairs Before the House Veterans’ Affairs, Subcommittee on

Benefits, Thursday, April 11, 2002

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity

to testify today on several legislative items of interest to the Department of Veterans Affairs (VA). Accompanying me today are Robert Epley, Associate Deputy

Under Secretary for Policy and Program Management, and John Thompson, Deputy

General Counsel.

Before I discuss the bills the Subcommittee is considering today, I would like to

note that, as you know, these measures would affect direct spending and receipts

and, therefore, would be subject to pay-as-you-go (PAYGO) rules. Accordingly, the

support VA expresses here for the subject bill provisions is contingent on accommodating the provisions within the budget submitted by the President.

H.R. 1108

First, Mr. Chairman, I would like to provide VA’s views on H.R. 1108. This bill

would amend 38 U.S.C. § 103(d), to remove the bar on the payment of Dependency

and Indemnity Compensation (DIC) benefits to surviving spouses who remarry after

age 55. VA supports enactment of this legislation.

The DIC program provides tax-free monthly benefits to the surviving spouses of

veterans who die in or as a result of military service. Current law denies DIC during periods of surviving spouses’ subsequent marriages or (in cases not involving remarriage) during periods when they live with another person and hold themselves

out openly to the public to be that persons’ spouses.

DIC was created for two purposes: to replace family income lost due to the

servicemember’s or veteran’s death and to serve as reparation for the death. In

1956, the Servicemen’s and Veterans’ Survivor Benefits Act replaced the preexisting death compensation program and the $10,000 Servicemen’s Indemnity Act payment

with DIC. The House Select Committee on Survivor Benefits explained, in a 1955

report, H.R. Rep. No. 84–993, that, ‘‘these two separate and distinct survivor benefit

programs . . . would become one. To this limited extent one of the objectives of the

committee, greater simplicity, would be accomplished and the long-term interest and

equity of survivors protected.’’ This Act established a monthly DIC rate for widows

consisting of a fixed rate plus a percentage of the basic pay prescribed for the deceased servicemember’s pay grade and length of service. It is apparent from this

Committee Report that the fixed rate represented the ‘‘indemnity’’ or reparation element of the compensation and the percentage of the deceased servicemember’s basic

pay represented the ‘‘dependency’’ or income-replacement element. In this manner,

DIC was intended to meet, at least in part, the Government’s obligation to those

who died in the defense of our country. An expansion of eligibility for DIC would

well serve this purpose for the following reasons.

Marital decisions often involve consideration of economic consequences, and often

those consequences are different for older surviving spouses, who may no longer be

in the job market and who may have insufficient income apart from DIC to maintain a basic standard of living regardless of whether they remarry. The beneficiaries

targeted by this proposal are particularly disadvantaged by loss of DIC upon remarriage because they are often retired or contemplating retirement, may be disabled,

and may be living on a fixed income. Those whose deceased-veteran spouses had

been severely disabled may have foregone careers of their own in order to care for

them. Thus, they are often unable to offset lost DIC by earnings or other income.

Furthermore, when a surviving spouse of advanced age remarries, termination of

DIC may impose severe financial hardship because the new spouse, similarly advanced in age, is generally preparing for retirement or is already retired, may be

disabled, and may be living on a fixed income. In other words, the new spouse also

may have limited income and may be unable, because of age or disablement, to augment it. To the extent the DIC program was intended to provide a replacement for

a veteran’s contribution to household support, this contribution is still necessary for

a surviving spouse of advanced age even if the surviving spouse remarries, because

remarriage often does not adequately provide for his or her subsistence needs. Further, to the extent that DIC provides indemnification for the veteran’s death, the

basis for compensation is not eliminated by the surviving spouse’s remarriage.

The new provision would assist surviving spouses by allowing those over age 55

to maintain their standards of living, thus removing any economic disincentive to

remarriage. A veteran’s surviving spouse would be able to enter into a second marriage without fear of economic deprivation, and the elderly couple would be permitted to live together in comfort and dignity—legally married.

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Benefits for surviving spouses of military retirees through the Department of Defense’s (DoD) Survivor Benefit Plan do not terminate if remarriage takes place at

age 55 or thereafter. In addition, we note that Social Security survivors’ benefits do

not terminate if remarriage takes place at age 60 or thereafter. The proposed

amendment would thus better align DIC benefits with benefits provided to surviving

spouses of military retirees under DoD’s Survivor Benefit Plan and to surviving

spouses under the Social Security program.

This amendment is subject to the PAYGO limitations of the Omnibus Budget Reconciliation Act of 1990. If enacted, it would increase direct spending in VA benefits

programs. VA estimates that enactment of this provision would result in benefit

costs of $269 million for the five-year period Fiscal Year (FY) 2003 through FY 2007

and $749 million for the ten-year period FY 2003 through FY 2012.

H.R. 2095

The next bill I will discuss, Mr. Chairman, is H.R. 2095. This measure would reduce the VA home loan funding fee paid by Reservists to the same level at most

other veterans. VA supports this proposal to eliminate the additional 0.75 percent

of the loan amount currently imposed on Reservists to obtain VA housing loan benefits.

In 1992, the Congress granted VA housing loan entitlement to persons whose only

military service was in the Selected Reserve (including the National Guard). To be

eligible for these benefits, Reservists must have completed 6 years of honorable

service in the Selected Reserve, or have been released earlier for a service-connected

disability. Entitlement for Reservists sunsets September 30, 2009. In most cases,

Reservists pay a funding fee that is 0.75 percent higher than the fee charged veterans who served on extended active duty. For example, Reservists who have never

used VA housing benefits before would pay a 2.75 percent fee to obtain a no-downpayment loan to purchase a home. Generally, veterans with qualifying active duty

would pay a 2 percent fee to obtain the same loan. Veterans entitled to compensation for service-connected disabilities are exempt from the fee.

Under H.R. 2095, Reservists would pay the same fee currently charged other vet- erans. In recent years, there has been an increased emphasis on the use of Reservists

as part of the Armed Forces actively employed for national defense. Many members

of the Reserves and National Guard were activated following the terrorist attacks

of September 11, 2001. They have played and continue to play a vital role in support

of our active forces and in homeland security. In addition, Reservists have been deployed to other trouble spots around the world such as Bosnia, Kosovo, and the Persian Gulf. In recognition of the importance of the Selected Reserve to our current

defense efforts, VA supports this measure.

VA estimates that enactment of H.R. 2095 would result in PAYGO costs of ap- proximately $3.27 million in the first year and approximately $32.66 million

through FY 2009.

H.R. 2222

Mr. Chairman, VA supports the enactment of H.R. 2222. This bill would make improvements to various life insurance programs for veterans. The bill’s estimated

PAYGO costs are $93.9 million over five years.

Section 2 of H.R. 2222 would authorize the payment of unclaimed National Service Life Insurance (NSLI) and United States Government Life Insurance (USGLI)

proceeds to an alternate beneficiary.

Under current law, there is no time limitation under which a named beneficiary

of an NSLI or USGLI policy is required to file a claim for proceeds. Consequently,

when the insured dies and the beneficiary does not file a claim for the proceeds,

VA is required to hold the unclaimed funds indefinitely in order to honor any possible future claims by the beneficiary. VA holds the proceeds as a liability. While

extensive efforts are made to locate and pay these individuals, there are cases where

the beneficiary simply cannot be found. Under current law, we are not permitted

to pay the proceeds to a contingent or alternate beneficiary unless we can determine

that the principal beneficiary predeceased the policyholder. Consequently, payment

of the proceeds to other beneficiaries is withheld.

A majority of the existing liabilities of unclaimed proceeds were established over

ten years ago. As time passes, the likelihood of locating and paying the principal

beneficiary becomes more remote. In fact, the older the liability becomes, the more

unlikely it is that it will ever be paid even though other legitimate heirs of the insured have been located.

Section 2 of H.R. 2222 would grant the Secretary authority to authorize payment

of NSLI and USGLI proceeds to an alternate beneficiary when the proceeds have

11

not been claimed by the named beneficiary within two years following the death of

the policyholder or within two years of this bill’s enactment, whichever is later. The

principal beneficiary would have two years following the death of the insured to file

a claim. Afterwards, a contingent beneficiary would then have two years to file a

claim. Payment would be made as if the principal beneficiary had predeceased the

insured. If there were no contingent beneficiary to receive the proceeds, payment

would be made to those equitably entitled, as determined by the Secretary. As occurs under current law, no payment would be made if payment would escheat to

a State. Such payment would be a bar to recovery of the proceeds by any other individual.

Section 2 of the bill would apply retroactively as well as prospectively, and is similar to the time-limitation provisions of the Servicemembers’ and Veterans’ Group

Life Insurance programs and the Federal Employees Group Life Insurance program.

Insofar as payment to beneficiaries is made from the insurance trust funds, there

are no direct appropriated benefit costs associated with this section of the bill. The

liabilities are already set aside and would eventually be paid, either as payment to

beneficiaries that eventually claim the proceeds, or released from liability reserves

and paid as dividends.

There are approximately 4,000 existing policies in which payment has not been

made due to the fact that we cannot locate the primary beneficiary, despite extensive efforts. Over the years, the sum of moneys held has aggregated to approximately $23 million. On a yearly basis, about 200 additional policies (with an average face value of $9600, or approximately $1.9 million annually) are placed into this

liability because the law prohibits payment to a contingent beneficiary or to the veteran’s heirs. It is estimated that approximately two-thirds of the 4,000 policies will

eventually be paid as a result of this legislation. Additionally, in anticipation of the

fact that VA will not be able to pay about one-third of these policies, nearly $7 million has already been released to surplus and made available for dividend distribution.

VA estimates that the enactment of this section would result in PAYGO costs of

$15 million during FYs 2003–2007 and a total of $25 million during FYs 2003–2012.

Adjudication of these 4,000 policies would entail administrative costs of approximately $154,000, representing two full-time employee equivalence (FTE) in claims

processing and support. Approximately 94 percent of this cost would be reimbursed

to the Veterans Benefits Administration’s General Operating Expense (GOE) account from the surplus of the trust funds, leaving about $9,000 in government costs

(which assumes that about six percent of the policies are Service-Disabled Veterans

Insurance, which has no surplus and for which appropriated funds are used to cover

administrative costs).

Section 3 of H.R. 2222 would reduce the premium rates for Service-Disabled Veterans Insurance (S–DVI) by prospectively changing the mortality table upon which

premiums are based. The S–DVI program was intended to provide service-disabled

veterans with the ability to purchase insurance coverage at ‘‘standard’’ premium

rates. S–DVI premiums are currently based on an old mortality table, i.e., the 1941

Commissioners Standard Ordinary (CSO) Mortality Table with 2.25 percent interest. In 1951, when this program began, these premium rates were competitive with

commercial insurance policy rates. Insofar as life expectancy has significantly improved over the past fifty years, a more recent mortality table would reflect lower

mortality and, hence, lower premium rates. Section 3 would provide that S–DVI premiums be based on the 1980 CSO Basic Mortality Table with an interest rate of

five percent. While just changing to a more recent mortality table would assist new

entrants into the program, it would not render any assistance to those already insured under the program unless the new mortality table, with its inherent lower

premiums, was made available to them also.

Section 3 of this bill would provide service-connected disabled veterans parity

with the average American’s ability to purchase adequate amounts of life insurance

at competitive rates. This section of H.R. 2222 would ensure that service-connected

disabled veterans have the ability to obtain life insurance at standard premium

rates without regard to their physical disabilities. Our goal is to provide insurance

protection to veterans who have lost their ability to purchase commercial insurance

at standard (healthy) rates because of their service-connected disabilities. Participants receive a subsidy equal to the difference between the premiums they pay—

which account for age but not disabilities—and the actual cost of coverage.

VA estimates that the enactment of section 3 of H.R. 2222 would result in PAYGO

costs of $66 million during FY 2003–2007 and a total of $150.7 million during FYs

2003–2012.

Section 4 of H.R. 2222 would increase the maximum coverage under the Veterans’

Mortgage Life Insurance (VMLI) program to $200,000. VMLI provides mortgage life

insurance coverage to certain severely service-disabled veterans who have received

12

specially-adapted housing grants from VA. The insurance is intended to pay off the

outstanding balance of the mortgage in the event of the veteran’s death. The current

maximum amount of VMLI allowed an eligible veteran is $90,000.

The maximum amount of mortgage life insurance was last increased on December

1, 1992, when it was raised from $40,000 to $90,000. This resulted in the VMLI program covering a high percentage (91 percent) of the total mortgage balances that

these severely disabled veterans held. With the increase in housing costs over the

past nine years, the percentage of total mortgage balances covered has decreased

significantly.

As of the start of this fiscal year, the VMLI program was providing $201 million

of coverage while the outstanding mortgage balances for these veterans totaled $255

million. The coverage percentage has declined from 91 percent to 79 percent. This

points to the inadequacy of the VMLI current maximum of $90,000. If the maximum

coverage amount were increased to $200,000, the program would cover 98 percent

of the total mortgage balances outstanding. The need for the increase is even more

compelling if viewed from the perspective of the number of veterans in the VMLI

program who have their entire mortgage balances insured. At the current level of

$90,000, only 62 percent of participants have their entire mortgage balance covered.

This means that in 38 percent of the cases, if the veteran died, the survivors would

still have mortgages remaining on their homes. If the maximum were raised to

$200,000, 98 percent of participants would be able to have their mortgages fully

covered.

The VMLI program is subsidized with appropriated funds since these veterans are

charged standard premium rates. An increase in the maximum coverage amount to

$200,000 would affect 1,286 of the 3,385 veterans covered by the program. While

the premiums charged these veterans would increase, the subsidy required from the

government would also rise. A consulting team of Systems Flow, Economic Systems,

Macro International, and Hay Group recently completed a Program Evaluation of

Benefits for Survivors of Veterans with Service-Connected Disabilities, and many of

the provisions of the proposed bill, including the provisions of this section, are consistent with the recommendations of that evaluation.

VA estimates that the enactment of section 4 of H.R. 2222 would result in PAYGO

costs of $10.8 million during FYs 2003–2007 and a total of $28.4 million during FYs

2003–2012.

Section 5 of H.R. 2222 would provide that Veterans’ Mortgage Life Insurance

(VMLI) may be carried by the insured beyond age 70, but would limit new issues

to ages 69 and below. These policy provisions are fairly comparable to those of commercial life insurance policies, except for the VMLI provision that coverage terminates at age 70. As part of the Program Evaluation of Benefits for Survivors of Veterans with Service-Connected Disabilities, the contracting company, Systems Flow,

compiled a report, ‘‘VA Insurance and DIC Programs—Profile of Users and NonUsers and Beneficiaries,’’ of the VA insurance and DIC programs. This report included a finding that, among users whose VMLI insurance was terminated, 12 percent of them had their insurance terminated due to their reaching age 70. Because

of such terminations, VA is not providing financial security to the veterans’ families.

Insofar as premium income for the VMLI program only covers about 25 percent

of claims costs, this is a relatively heavily subsidized program. However, since it is

only open to a small group of veterans (those eligible for specially-adapted housing),

the increase in the subsidy to allow coverage past age 70 is relatively nominal. The

provisions of this section are consistent with the recommendations of the beforementioned Program Evaluation Report.

VA estimates that the enactment of section 5 of H.R. 2222 would result in PAYGO

costs of $2.1 million during FYs 2003–2007 and a total of $5.3 million during FYs

2003–2012.

H.R. 3731

The final bill I will be discussing today, Mr. Chairman, is H.R. 3731. This bill provides for an increase in the annual limit on funds available to compensate State approving agencies (SAA’s) for work undertaken on behalf of VA, including approving

educational institutions and programs for which veterans and other entitled participants receive VA-administered education benefits. VA supports this bill.

H.R. 3731 would increase the annual limit on funds available to compensate

SAA’s from $14,000,000 in FY 2002 to $18,000,000 in FY 2003. The amounts for FYs

2004 and 2005 would increase by 3 percent each year ($18,540,000 in 2004,

$19,096,000 in 2005). Funding for FY 2006 and each succeeding fiscal year would

remain fixed at the FY 2005 level. (If there is no change to the current law, the

$14,000,000 level of funding will revert to $13,000,000 for FY 2003 and thereafter.)

This bill also specifies that the various SAAs would receive the same proportion of

13

payments under the newly allocated funding limits as they would receive if those

funding limits did not exist.

Because of the cost-of-living pay increases mandated by State law, salaries for

State employees have gone up since the last SAA funding increase in 1994. Additionally, over the last two years, the SAAs have been called upon to perform new

and time-consuming duties as part of their mission. For example, Public Law 106– 419, enacted on November 1, 2000, initiated the licensing and certification test payment program and allowed VA to delegate the approval responsibility under the program to the SAAs. The SAAs accepted this additional responsibility even though it

was not covered in their contracts.

In recent years, a number of SAAs have worked closely with private industry and

State and local governments to encourage placement of veterans in apprenticeship

and on-job training programs. However, many other SAAs that wanted to do more

outreach could not do so due to a lack of resources. Now, newly-enacted Public Law

107–103 requires SAAs, in addition to VA, to actively promote the development of

VA programs of on-job training (including apprenticeship programs). Furthermore,

that law requires SAAs to conduct outreach programs and provide outreach services

to eligible persons and veterans about education and training benefits available

under applicable Federal and State laws. Clearly, increased funding is needed to enable the SAAs to carry out these additional duties effectively. VA estimates that enactment of this provision would result in PAYGO costs of $5 million for FY 2003, $29 million for the five-year period FY 2003 through FY 2007,

and $59 million for the ten-year period FY 2003 through FY 2012.

Thank you, Mr. Chairman. I will be pleased to answer any questions you or other

members of the Subcommittee may have.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

The following letter was received from the Congressional Budget

Office concerning the cost of the reported bill:

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, May 13, 2002.

Hon. CHRISTOPHER H. SMITH

Chairman, Committee on Veterans’ Affairs,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4085, the Veterans’ and

Survivors’ Benefits Expansion Act of 2002.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Michelle S. Patterson,

who can be reached at 226–2840.

Sincerely,

DAN L. CRIPPEN,

Director.

Enclosure.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

May 13, 2002 

H.R. 4085, VETERANS’ AND SURVIVORS’ BENEFITS EXPANSION ACT OF

2002, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON VET- ERANS’ AFFAIRS ON MAY 9, 2002

SUMMARY

H.R. 4085 contains provisions that would affect a range of veterans’ programs, including disability compensation, dependency

and indemnity compensation (DIC), housing, insurance, and readjustment benefits. CBO estimates that enacting this bill would increase direct spending by $25 million in 2003, $123 million over the

14

2003–2007 period, and $260 million over the 2003–2012 period. Direct spending could also increase in fiscal year 2002 should the bill

be enacted before the end of this fiscal year, but CBO estimates

that any such outlays would be insignificant because it takes the

Department of Veterans Affairs (VA) several months to process

most benefit claims.

H.R. 4085 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA)

and would not affect the budgets of state, local, or tribal governments.

ESTIMATED COST TO THE FEDERAL GOVERNMENT

The estimated budgetary impact of H.R. 4085 is shown in the following table. This estimate assumes the legislation will be enacted

by October 1, 2002. The costs of this legislation fall within budget

function 700 (veterans benefits and services).

By Fiscal Year, in Millions of Dollars

2003 2004 2005 2006 2007

CHANGES IN DIRECT SPENDING

Dependency and Indemnity Compensationa

Estimated Budget Authority ..................... 13 15 16 18 19

Estimated Outlays ..................................... 13 15 16 18 19

Housing Loan Guaranty Fees

Estimated Budget Authority ..................... 6 6 6 0 0

Estimated Outlays ..................................... 6 6 6 0 0

Veterans Mortgage Life Insurance

Estimated Budget Authority ..................... 1 2 2 2 3

Estimated Outlays ..................................... 1 2 2 2 3

State Approving Agencies

Estimated Budget Authority ..................... 5 5 5 0 0

Estimated Outlays ..................................... 5 5 5 0 0

Total Changes

Estimated Budget Authority .............. 25 28 29 20 22

Estimated Outlays .............................. 25 28 29 20 22

a H.R. 4085 also would increase DIC payments by the same COLA payable to Social

Security recipients. That change would have a cost, relative to current law, but the

effect is already assumed in CBO’s baseline.

BASIS OF ESTIMATE

The bill would affect direct spending in several veterans’ programs, including disability compensation, DIC, housing, insurance,

and readjustment benefits.

Dependency and Indemnity Compensation

Section 3 would allow a surviving spouse who remarries after age

65 to continue receiving DIC payments. The provision would apply

retroactively, allowing surviving spouses who have already remarried after age 65 to resume receiving DIC payments but only if

they apply for the benefit within one year after this bill is enacted.

CBO estimates that the total cost to provide DIC payments to surviving spouses who remarry over age 65 would be $13 million in

2003, $81 million over the 2003–2007 period, and $203 million over

the 2003–2012 period.

Under current law, VA provides DIC payments to the surviving

spouse of certain deceased veterans. If a surviving spouse remarries, DIC payments cease. Should the subsequent marriage end, eiVerDate 11-MAY-2000 22:46 May 16, 2002 Jkt 099006 PO 00000 Frm 00014 Fmt 6659 Sfmt 6602 E:\HR\OC\HR472.XXX pfrm01 PsN: HR472
15

ther because of divorce or death of the new spouse, DIC payments

can resume. In fiscal year 2001, about 300,000 surviving spouses

received such payments. CBO estimates that in that year, about

180 surviving spouses over age 65 (or about 0.06 percent of all surviving spouses receiving DIC) remarried and stopped receiving DIC

payments as a result. CBO projects that, under current law, the

number of remarriages would gradually increase each year as the

overall population of DIC recipients increases and would exceed

260 a year by 2012.

CBO estimated the costs for three groups of surviving spousesthose over age 65 who would remarry under current law, those

over age 65 who would choose not to remarry under current law

but would remarry if H.R. 4085 were enacted, and those who remarried after age 65 before enactment of this bill.

Surviving Spouses Over Age 65 Who Would Remarry Under Current Law. CBO estimates that over the 2003–2012 period, 245 surviving spouses over age 65 would remarry each year on average

under current law. Under this bill, federal spending for DIC would

increase because those surviving spouses would now receive DIC

payments that would have stopped under current law. The average

DIC payment in fiscal year 2001 was $11,942. Such payments are

adjusted annually for increases in the cost of living. After accounting for expected mortality of the remarried surviving spouses as

well as their new spouses, CBO estimates that the additional cost

to provide DIC payments to surviving spouses over age 65 who

would remarry under current law would be $3 million in 2002, $42

million over the 2003–2007 period, and $145 million over the 2003–

2012 period.

Surviving Spouses Over Age 65 Who Would Choose Not to Remarry Under Current Law. Under this bill, some surviving spouses

over age 65 might choose to remarry who would not have done so

under current law. CBO estimates there would be no additional

cost to provide DIC payments to those individuals. Because those

surviving spouses would choose to remain unmarried and receive

DIC payments continuously under current law, providing DIC payments if they remarry would result in no additional costs to the

program.

Surviving Spouses Who Remarried After Age 65 Before Enactment of the Bill. Section 3 also would apply retroactively, allowing

surviving spouses who remarried after age 65 before enactment of

this legislation to resume receiving DIC once this legislation was

enacted. The bill institutes a deadline, however, that requires all

those eligible to apply for this benefit within one year after the enactment date. After accounting for expected mortality of the remarried surviving spouses as well as their new spouses, CBO estimates

that about 800 surviving spouses who remarried after age 65 would

apply within the time limit and resume receiving DIC payments.

That number represents about 30 percent of the total number of

retroactive cases that CBO estimates would be eligible to reapply

for DIC payments. CBO estimates that the additional cost to provide DIC payments to this population would be $10 million in 2003,

$39 million over the 2003–2007 period, and $58 million over the

2003–2012 period. Such costs could obviously be much higher or

lower, depending on the portion of eligible people that apply for

16

this retroactive benefit. Based on data provided by VA about the

number of claims a full-time employee can process in a year, CBO

estimates that no additional personnel would need to be hired to

handle the added applications for benefits expected under this

section.

Cost-of-Living Adjustment (COLA)

Section 2 would increase the amounts paid to veterans for disability compensation and to their survivors for DIC by the same

COLA payable to Social Security recipients. The increase would

take effect on December 1, 2002, and the results of the adjustment

would be rounded to the next lower dollar.

The COLA that would be authorized by this bill is assumed in

the baseline, pursuant to section 257 of the Balanced Budget and

Emergency Deficit Control Act, and savings from rounding it down

were achieved by the Balanced Budget Act of 1997 (Public Law

105–33). The authority to round down the COLA increase was extended to 2011 by the Veterans Education and Benefits Expansion

Act of 2001 (Public Law 107–103). Because the COLA is assumed

in the baseline, the COLA provision would have no budgetary effect

relative to the baseline. Relative to current law, CBO estimates

that enacting this provision would increase spending for these programs by about $295 million in 2003. (The annualized cost would

be about $400 million in subsequent years.) This estimate assumes

that the COLA effective on December 1, 2001, would be 1.9

percent.

Home Loan Guaranty Fees

Section 4 would lower certain fees paid by members of the selected reserves who use the VA home loan program for the first

time over the 2003–2005 period. Under current law, reservists pay

fees ranging from 2.75 percent to 2 percent of the loan amount, depending on the down payment made. The bill would lower these

fees by 75 basis points to the same range used for active-duty veterans-a range of 2 percent to 1.25 percent. Based on an average

loan amount of $131,000, a caseload of 6,000 loans a year, and a

fee cut of 75 basis points, CBO estimates that under the bill, VA

would lose collections of about $6 million a year over the 2003–

2005 period. Lowering the fees would also save an average borrower roughly $980, but CBO estimates these savings would not be

significant enough to encourage additional loans or larger loan

amounts.

Life Insurance Program

Veterans Mortgage Life Insurance (VMLI) provides coverage to

certain severely disabled veterans who have received grants for

specially adapted housing from VA. VMLI pays off the outstanding

balance of the mortgage upon the veteran’s death. Under current

law, the maximum coverage allowed under VMLI is $90,000. Section 5 would increase this amount to $150,000. By doing so, this

provision would increase the number of veterans who have their

entire mortgage balance covered by insurance from 62 percent to

90 percent. According to VA, about 3,000 veterans participate in

the program. Since the premiums charged to these veterans are

based on the mortality rates of comparable nondisabled individuals,

the program requires a subsidy from VA to cover the costs of the

17

claims. While the proposed change in coverage would increase the

premiums paid by the policyholders, it would also increase the

amount of the subsidy required from VA. CBO used data provided

by VA that compared the projected subsidies to the VMLI program

if the current coverage level was maintained against the estimated

subsidies needed if the coverage was expanded to $150,000. The

difference represents the additional subsidy that would be required

from VA. CBO estimates that enacting this provision would cost

about $1 million in 2003, $8 million over the 2003–2007 period,

and $19 million over the 2003–2012 period.

Section 5 also would allow veterans who already have VMLI to

maintain coverage regardless of age. Under current law, VMLI coverage terminates at age 70. A recent survey conducted for VA

found that 12 percent of veterans whose VMLI was terminated had

their coverage terminated due to the age restriction. Based on data

from VA, CBO estimates that the increased subsidy required under

this provision would cost less than $1 million a year.

State Approving Agencies

Section 6 would increase the amount available to state approving

agencies by $5 million each year in 2003, 2004, and 2005. CBO expects this change would increase direct spending by $15 million

over the 2003–2005 period.

PAY-AS-YOU-GO CONSIDERATIONS

The Balanced Budget and Emergency Deficit Control Act sets up

pay-as-you-go procedures for legislation affecting direct spending or

receipts. The net changes in outlays that are subject to pay-as-yougo procedures are shown in the following table. For the purposes

of enforcing pay-as-you-go procedures, only the effects through fiscal year 2006 are counted.

By Fiscal Year, in Millions of Dollars

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Changes in outlays 0 25 27 29 20 22 24 25 27 29 32

Changes in receipts Not Applicable

INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT

H.R. 4085 contains no intergovernmental or private-sector mandates as defined in UMRA and would not affect the budgets of

state, local, or tribal governments.

PREVIOUS CBO ESTIMATES

On August 14, 2001, CBO transmitted a cost estimate for H.R.

2095, the Reservist VA Home Loan Fairness Act of 2001, as introduced on June 7, 2001. Section 4 of H.R. 4085 is similar to H.R.

2095, but H.R. 2095 would permanently lower fees paid by reservists and would have higher costs.

On February 28, 2002, CBO transmitted a cost estimate for H.R.

2222, the Veterans Life Insurance Improvement Act of 2001, as introduced on June 19, 2001. Section 5 of H.R. 4085 is similar to sections 4 and 5 of H.R. 2222, but H.R. 2222 would increase the maxVerDate 11-MAY-2000 22:46 May 16, 2002 Jkt 099006 PO 00000 Frm 00017 Fmt 6659 Sfmt 6602 E:\HR\OC\HR472.XXX pfrm01 PsN: HR472
18

imum coverage of VMLI to $200,000 and thus would have higher

costs.

On April 19, 2002, CBO transmitted a cost estimate for H.R.

1108, as introduced on March 20, 2001. Section 3 of H.R. 4085 is

similar H.R. 1108, except that the latter would provide DIC to surviving spouses who remarry after age 55. H.R. 4085 also would put

a time limit on applications from surviving spouses who remarried

before enactment of the bill; H.R. 1108 would not.

ESTIMATE PREPARED BY:

Federal Costs:

Veterans Compensation, DIC, and Insurance: Michelle S.

Patterson

Veterans Housing: Sunita D’Monte

State Approving Agencies: Sarah Jennings

Impact on State, Local, and Tribal Governments: Elyse Goldman

Impact on the Private Sector: Sally Maxwell

ESTIMATE APPROVED BY:

Peter H. Fontaine

Deputy Assistant Director for Budget Analysis

STATEMENT OF FEDERAL MANDATES

The preceding Congressional Budget Office cost estimate states

that the bill contains no intergovernmental or private sector mandates as defined in the Unfunded Mandates Reform Act.

STATEMENT OF CONSTITUTIONAL AUTHORITY

Pursuant to Article I, section 8 of the United States Constitution,

the reported bill is authorized by Congress’ power to ‘‘provide for

the common Defense and general Welfare of the United States.’’

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics,

existing law in which no change is proposed is shown in roman):

TITLE 38, UNITED STATES CODE

* * * * * * *

PART I—GENERAL PROVISIONS

* * * * * * *

CHAPTER 1—GENERAL

* * * * * * *

§ 103. Special provisions relating to marriages

(a) * * *

* * * * * * *

19

(d)(1)***

(2) The remarriage of the surviving spouse of a veteran shall not

bar the furnishing of benefits specified in paragraph (5) to such

person as the surviving spouse of the veteran øif the remarriage

has been terminated by death or divorce unless the Secretary determines that the divorce was secured through fraud or collusion.¿

if— (A) the remarriage occurs after the surviving spouse attains

age 65 ;

(B) the remarriage has been terminated by death; or

(C) the remarriage has been terminated by divorce, unless the

Secretary determines that the divorce was secured through

fraud or collusion.

* * * * * * *

(4) øThe first month of eligibility for benefits for a surviving

spouse by reason of this subsection shall be¿ When eligibility for

benefits for a surviving spouse is restored by reason of this subsection, the first month of eligibility for such benefits shall be the

month after—

(A) the month of the termination of such remarriage, in the

case of a surviving spouse ødescribed in¿ with a remarriage described in subparagraph (B) or (C) of paragraph (2); or

* * * * * * *

(5) Paragraphs (2) and (3) apply with respect to benefits under

the following provisions of this title:

ø(A) Section 1311, relating to dependency and indemnity

compensation.¿

(A) Sections 1121 and 1311, relating to death compensation

and dependency and indemnity compensation, respectively.

* * * * * * *

PART II—GENERAL BENEFITS

* * * * * * *

CHAPTER 13—DEPENDENCY AND INDEMNITY

COMPENSATION FOR SERVICE–CONNECTED DEATHS

* * * * * * *

SUBCHAPTER II—DEPENDENCY AND INDEMNITY

COMPENSATION

* * * * * * *

§ 1311. Dependency and indemnity compensation to a surviving spouse

(a) * * *

* * * * * * *

(e) In the case of an individual who is eligible for dependency and

indemnity compensation under this section by reason of section

103(d)(2)(A) of this title who is also eligible for benefits under another provision of law by reason of such individual’s status as the

surviving spouse of a veteran, then, notwithstanding any other proVerDate 11-MAY-2000 22:46 May 16, 2002 Jkt 099006 PO 00000 Frm 00019 Fmt 6659 Sfmt 6603 E:\HR\OC\HR472.XXX pfrm01 PsN: HR472
20

vision of law, no reduction in benefits under such other provision

of law shall be made by reason of such individual’s eligibility for

benefits under this section.

* * * * * * *

CHAPTER 21—SPECIALLY ADAPTED HOUSING FOR

DISABLED VETERANS

* * * * * * *

§ 2106. Veterans’ mortgage life insurance

(a) The United States shall automatically insure any eligible veteran age 69 or younger who is or has been granted assistance in

securing a suitable housing unit under this chapter against the

death of the veteran unless the veteran (1) submits to the Secretary in writing the veterans’ election not to be insured under this

section, or (2) fails to respond in a timely manner to a request from

the Secretary for information on which the premium for such insurance can be based.

(b) The amount of insurance provided a veteran under this section may not exceed the lesser of ø$90,000¿ $150,000 or the

amount of the loan outstanding on the housing unit. The amount

of such insurance shall be reduced according to the amortization

schedule of the loan and may not at any time exceed the amount

of the outstanding loan with interest. If there is no outstanding

loan on the housing unit, insurance is not payable under this section. If an eligible veteran elects not to be insured under this section, the veteran may thereafter be insured under this section, but

only upon submission of an application, payment of required premiums, and compliance with such health requirements and other

terms and conditions as may be prescribed by the Secretary.

* * * * * * *

(i) Insurance under this section shall terminate upon whichever

of the following events first occurs:

(1) * * *

ø(2) The veteran’s seventieth birthday.¿

ø(3)¿ (2) Termination of the veteran’s ownership of the property securing the loan.

ø(4)¿ (3) Discontinuance of payment of premiums by the veteran.

* * * * * * *

PART III—READJUSTMENT AND RELATED

BENEFITS

* * * * * * *

CHAPTER 36—ADMINISTRATION OF EDUCATIONAL

BENEFITS

* * * * * * *

SUBCHAPTER I—STATE APPROVING AGENCIES

* * * * * * *

21

§ 3674. Reimbursement of expenses

(a)(1)***

* * * * * * *

(4) The total amount made available under this section for any

fiscal year may not exceed $13,000,000 or, for each of fiscal years

2001 and 2002, $14,000,000, and for each of fiscal years 2003, 2004,

and 2005, $18,000,000. For any fiscal year in which the total

amount that would be made available under this section would exceed the amount applicable to that fiscal year under the preceding

sentence except for the provisions of this paragraph, the Secretary

shall provide that each agency shall receive the same percentage

of the amount applicable to that fiscal year under the preceding

sentence as the agency would have received of the total amount

that would have been made available without the limitation of this

paragraph.

* * * * * * *

CHAPTER 37—HOUSING AND SMALL BUSINESS LOANS

* * * * * * *

SUBCHAPTER III—ADMINISTRATIVE PROVISIONS

* * * * * * *

§ 3729. Loan fee

(a) * * *

(b) DETERMINATION OF FEE.—(1) * * *

(2)(A) The loan fee table referred to in paragraph (1) for any loan

closed after September 30, 2005 is as follows:

LOAN FEE TABLE

Type of loan Active duty

veteran Reservist Other obligor

(A)(i) Initial loan described in section 3710(a) to purchase or construct a dwelling with 0-down, or any

other initial loan described in section 3710(a) other

than with 5-down or 10-down (closed before October 1, 2011) .................................................................. 2.00 2.75 NA

(A)(ii) Initial loan described in section 3710(a) to purchase or construct a dwelling with 0-down, or any

other initial loan described in section 3710(a) other

than with 5-down or 10-down (closed on or after

October 1, 2011) .......................................................... 1.25 2.00 NA

(B)(i) Subsequent loan described in section 3710(a) to

purchase or construct a dwelling with 0-down, or

any other subsequent loan described in section

3710(a) (closed before October 1, 2011) ..................... 3.00 3.00 NA

(B)(ii) Subsequent loan described in section 3710(a)

to purchase or construct a dwelling with 0-down, or

any other subsequent loan described in section

3710(a) (closed on or after October 1, 2011) ............. 1.25 2.00 NA

(C)(i) Loan described in section 3710(a) to purchase

or construct a dwelling with 5-down (closed before

October 1, 2011) .......................................................... 1.50 2.25 NA

22

LOAN FEE TABLE—Continued

Type of loan Active duty

veteran Reservist Other obligor

(C)(ii) Loan described in section 3710(a) to purchase

or construct a dwelling with 5-down (closed on or

after October 1, 2011) ................................................. 0.75 1.50 NA

(D)(i) Initial loan described in section 3710(a) to purchase or construct a dwelling with 10-down (closed

before October 1, 2011) ............................................... 1.25 2.00 NA

(D)(ii) Initial loan described in section 3710(a) to purchase or construct a dwelling with 10-down (closed

on or after October 1, 2011) ....................................... 0.50 1.25 NA

(E) Interest rate reduction refinancing loan ................ 0.50 0.50 NA

(F) Direct loan under section 3711 ............................... 1.00 1.00 NA

(G) Manufactured home loan under section 3712

(other than an interest rate reduction refinancing

loan) ............................................................................. 1.00 1.00 NA

(H) Loan to Native American veteran under section

3762 (other than an interest rate reduction refinancing loan) ............................................................... 1.25 1.25 NA

(I) Loan assumption under section 3714 ...................... 0.50 0.50 0.50

(J) Loan under section 3733(a) ...................................... 2.25 2.25 2.25

(B) The loan fee table referred to in paragraph (1) for any loan

closed during the period beginning on October 1, 2002, and ending

on September 30, 2005, is as follows:

LOAN FEE TABLE

Type of loan Veteran Other obligor

(A)(i) Initial loan described in section 3710(a) to purchase or construct a dwelling with 0-down, or any other initial loan described

in section 3710(a) other than with 5-down or 10-down (closed before October 1, 2008) ........................................................................... 2.00 NA

(A)(ii) Initial loan described in section 3710(a) to purchase or construct a dwelling with 0-down, or any other initial loan described

in section 3710(a) other than with 5-down or 10-down (closed on

or after October 1, 2008) ..................................................................... 1.25 NA

(B)(i) Subsequent loan described in section 3710(a) to purchase or

construct a dwelling with 0-down, or any other subsequent loan

described in section 3710(a) (closed before October 1, 2008) ............ 3.00 NA

(B)(ii) Subsequent loan described in section 3710(a) to purchase or

construct a dwelling with 0-down, or any other subsequent loan

described in section 3710(a) (closed on or after October 1, 2008) .... 1.25 NA

(C)(i) Loan described in section 3710(a) to purchase or construct a

dwelling with 5-down (closed before October 1, 2008) ..................... 1.50 NA

(C)(ii) Loan described in section 3710(a) to purchase or construct a

dwelling with 5-down (closed on or after October 1, 2008) .............. 0.75 NA

(D)(i) Initial loan described in section 3710(a) to purchase or construct a dwelling with 10-down (closed before October 1, 2008) ..... 1.25 NA

23

LOAN FEE TABLE—Continued

Type of loan Veteran Other obligor

(D)(ii) Initial loan described in section 3710(a) to purchase or construct a dwelling with 10-down (closed on or after October 1,

2008) .................................................................................................... 0.50 NA

(E) Interest rate reduction refinancing loan ......................................... 0.50 NA

(F) Direct loan under section 3711 ........................................................ 1.00 NA

(G) Manufactured home loan under section 3712 (other than an interest rate reduction refinancing loan) .............................................. 1.00 NA

(H) Loan to Native American veteran under section 3762 (other than

an interest rate reduction refinancing loan) ..................................... 1.25 NA

(I) Loan assumption under section 3714 ............................................... 0.50 0.50

(J) Loan under section 3733(a) .............................................................. 2.25 2.25

* * * * * * *

(4) For the purposes of paragraph (2):

(A) The term ‘‘active duty veteran’’ means any veteran eligible for the benefits of this chapter other than a Reservist, and

the term ‘‘veteran’’ means any veteran eligible for the benefits of

this chapter.

* * * * * * *

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