47246 Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Rules and Regulations 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 3 

RIN 2900–AO73 

Net Worth, Asset Transfers, and 

Income Exclusions for Needs-Based 

Benefits 

AGENCY: Department of Veterans Affairs. 

ACTION: Final rule. 

SUMMARY: The Department of Veterans 

Affairs (VA) amends its regulations 

governing veterans’ eligibility for VA 

pensions and other needs-based benefit 

programs. The amended regulations 

establish new requirements for 

evaluating net worth and asset transfers 

for pensions and identify which medical 

expenses may be deducted from 

countable income for VA’s needs-based 

benefit programs. The amendments help 

to ensure the integrity of VA’s needsbased benefit programs and the 

consistent adjudication of pension and 

parents’ dependency and indemnity 

compensation claims. Lastly, the 

amendments effectuate: Statutory 

changes for pension beneficiaries who 

receive Medicaid-covered nursing home 

care; a statutory income exclusion for 

disabled veterans; and longstanding 

statutory income exclusions for all VA 

needs-based benefits. 

DATES: Effective Date: This rule is 

effective October 18, 2018. 

FOR FURTHER INFORMATION CONTACT: 

Timothy Bailey, Acting Assistant 

Director, Pension and Fiduciary Service, 

Veterans Benefits Administration, 

Department of Veterans Affairs, 21P1, 

810 Vermont Ave. NW, Washington, DC 

20420, (202) 632–8863. (This is not a 

toll-free number.) 

SUPPLEMENTARY INFORMATION: 

A. Overview of Proposed Provisions 

Producing the Majority of Public 

Comments 

In a notice of proposed rulemaking 

published in the Federal Register on 

January 23, 2015 (80 FR 3840), VA 

proposed to amend its adjudication 

regulations governing its needs-based 

pension benefit for wartime veterans 

and for surviving spouses and children 

of wartime veterans, as well as its 

adjudication regulations governing its 

older pension programs and parents’ 

dependency and indemnity 

compensation (DIC). 

The 60-day public comment period 

ended on March 24, 2015. VA received 

over 850 comments from an array of 

constituencies, including advocates, 

advisors, law firms, members of 

Congress, State government agencies, 

professional associations, veterans 

service organizations, and other 

interested members of the public. We 

read, analyzed, and considered each 

comment and are grateful to all who 

invested their time to comment. Some 

commenters stated that our explanation 

for certain provisions is unclear. We 

believe that we provided adequate 

justification in the proposed rule for this 

rulemaking but nonetheless provide 

further justification for this rulemaking 

in this final rule document. Many made 

valuable contributions, and we made 

changes in the final rule as a result. We 

grouped the comments by topic and 

discuss them by topic group later in this 

document. 

The majority of the comments focused 

on several specific provisions, and we 

summarize those here. First, we 

proposed changes to the pension benefit 

program with respect to the amount of 

net worth a claimant could have to 

qualify for pension (for purposes of this 

supplementary information, references 

to a claimant include a beneficiary). We 

proposed a bright-line net worth limit 

and proposed as the limit the dollar 

amount of the maximum community 

spouse resource allowance (CSRA) for 

Medicaid purposes, at the time of 

publication of the final rule. We 

proposed to define net worth for VA 

purposes as the sum of a claimant’s 

assets and annual income. 

Second, we proposed to set forth the 

manner in which VA calculates a 

claimant’s assets. We proposed to clarify 

VA’s treatment of a claimant’s residence 

for asset calculation purposes. We 

proposed a definition of ‘‘residential lot 

area’’ to mean the lot on which a 

residence sits that is similar in size to 

other residential lots in the vicinity, but 

not to exceed 2 acres (87,120 square 

feet), unless the additional acreage is 

not marketable. 

Third, we proposed to establish a 36- 

month ‘‘look-back’’ period and a penalty 

period not to exceed 10 years for those 

who transfer assets during this lookback period to qualify for pension. We 

proposed that a transfer for less than fair 

market value would include an asset 

transfer to, or purchase of, any financial 

instrument or investment that reduces 

net worth and would not be in the 

claimant’s financial interest were it not 

for the claimant’s attempt to qualify for 

pension. We proposed that examples of 

such instruments or investments would 

include trusts and annuities. We further 

proposed to create a presumption that, 

in the absence of clear and convincing 

evidence showing otherwise, an asset 

transfer made during the look-back 

period was for the purpose of decreasing 

net worth to establish pension 

entitlement. We proposed that the 

presumption could be rebutted by clear 

and convincing evidence that the 

claimant transferred the asset as the 

result of fraud, misrepresentation, or 

unfair business practice related to the 

sale or marketing of financial products 

or services for purposes of establishing 

entitlement to pension. The proposed 

rule provided that VA would not 

consider as a transfer for less than fair 

market value a trust established on 

behalf of a child whom VA has rated 

incapable of self-support. The proposed 

rule provided that VA would not 

recalculate a penalty period unless the 

original calculation was shown to be 

erroneous or VA received evidence, 

within 60 days after VA notified the 

claimant of the decision, that all 

covered assets were returned to the 

claimant before the date of claim or 

within 30 days after the date of claim. 

Finally, we proposed to define and 

identify medical expenses that VA may 

deduct from countable income for its 

needs-based benefits that utilize such 

deductions. We proposed definitions of 

‘‘activities of daily living’’ (ADLs); 

‘‘instrumental activities of daily living’’ 

(IADLs); ‘‘custodial care’’; and ‘‘assisted 

living, adult day care, or similar 

facility.’’ We proposed to define 

‘‘custodial care’’ as regular assistance 

with two or more ADLs or supervision 

because an individual with a mental 

disorder is unsafe if left alone due to the 

mental disorder. The proposed rule 

provided that, generally, medical 

expenses do not include either 

assistance with IADLs or meals and 

lodging in an independent living 

facility. The proposed rule provided 

that an in-home care attendant’s ‘‘hourly 

rate may not exceed the average hourly 

rate for home health aides published 

annually’’ in the Market Survey of LongTerm Care Costs published by the 

MetLife Mature Market Institute. 

For the reasons set forth in the 

proposed rule and in the discussion 

below, we are adopting the proposed 

rule as final, with changes as explained 

below to proposed 38 CFR 3.261, 3.262, 

3.263, 3.270, 3.272, 3.274, 3.275, 3.276, 

3.278, and 3.279. 

B. Terminology Clarifications 

Regarding VA Pension and Other VA 

Needs-Based Benefits 

Multiple commenters did not 

understand various VA benefits and one 

commenter expressed confusion by our 

use of the term ‘‘needs-based.’’ As used 

in this supplementary information, 

‘‘needs-based’’ refers to a VA benefit in 

which the claimant’s income is an 

entitlement factor or both a claimant’s 


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income and assets are entitlement 

factors. ‘‘Need’’ as used here refers to 

financial need and does not refer to a 

claimant’s level of disability. Another 

term for ‘‘needs-based’’ is ‘‘meanstested.’’ The following VA benefits are 

needs-based: Pension for veterans and 

survivors under current pension laws 

(‘‘current-law pension,’’ formerly called 

‘‘improved pension’’), section 306 

pension for veterans and survivors, oldlaw pension for veterans and survivors, 

and parents’ DIC. The following VA 

benefits are not needs-based (i.e., the 

amount of a claimant’s income or assets 

does not impact the benefit amount or 

entitlement to the benefit): Disability 

compensation for veterans; DIC for 

surviving spouses or children; death 

compensation for surviving parents, 

spouses, or children; and SpanishAmerican War pension. There is a 

minor exception to these lists: A veteran 

who receives disability compensation 

may receive additional compensation 

when the veteran has a parent or parents 

who are dependent on the veteran for 

support. See 38 U.S.C. 1115. Because 

VA evaluates a veteran’s parent’s 

income and assets when determining if 

the parent is dependent on the veteran 

for support, such cases are considered 

‘‘needs-based’’ insofar as the parent’s 

need is concerned. 

At least one commenter expressed the 

belief that our proposed rule was 

proposing to turn benefits that are not 

needs-based into new needs-based 

benefits. It is not. This final rule does 

not apply to VA benefits that are not 

needs-based. This final rule pertains 

only to the VA needs-based benefits 

identified above. The new and revised 

net worth and asset-transfer rules apply 

only to current-law pension for veterans 

and survivors. This benefit is simply 

called ‘‘pension’’ or ‘‘VA pension,’’ 

unless it is necessary to distinguish 

between current-law pension and 

previous VA pension programs. Also, if 

it is necessary to distinguish between 

veterans and survivors, we may refer to 

the pension programs as ‘‘veterans 

pension’’ or ‘‘survivors pension.’’ 

We note that a number of commenters 

referred to pension as ‘‘Aid and 

Attendance.’’ This is a misnomer and 

can be confusing because a higher ‘‘aid 

and attendance rate’’ may be payable 

under all of the following VA benefit 

programs: Pension, parents’ DIC, 

disability compensation, DIC (for 

surviving spouses), and death 

compensation. In addition, a veteran 

who receives disability compensation 

may receive additional compensation 

when the veteran has a spouse and the 

spousal allowance is higher if the 

spouse meets aid and attendance 

criteria. The additional ‘‘spousal aid and 

attendance rate’’ is available only to 

certain compensation beneficiaries and 

is not available to pension claimants. A 

‘‘housebound rate’’ that is a lesser 

amount than the aid and attendance rate 

may be paid to qualifying individuals 

who do not qualify at the aid and 

attendance level. This housebound rate 

is available to: Veterans and surviving 

spouses who receive pension; veterans 

who receive disability compensation; 

and surviving spouses who receive DIC. 

The aid and attendance and 

housebound rates are sometimes 

collectively called ‘‘special monthly 

compensation (SMC)’’ when the benefit 

is disability compensation, ‘‘special 

monthly DIC’’ when the benefit is DIC, 

and ‘‘special monthly pension (SMP)’’ 

when the benefit is pension. We 

emphasize that this final rule does not 

apply to disability compensation for 

veterans or to DIC for surviving spouses 

or children. It also does not apply to 

Family Caregiver benefits and General 

Caregiver benefits authorized by 38 

U.S.C. 1720G; those benefits are 

available to veterans with certain 

injuries that were incurred in or 

aggravated in active military, naval, or 

air service. This final rule only applies 

to needs-based benefits. 

Multiple commenters expressed the 

belief that, like most pensions, the VA 

pension benefit is a benefit into which 

veterans previously paid so it would be 

available later in life. Others expressed 

the opinion that VA pension should not 

be means-tested or that it is or should 

be available to all veterans. We make no 

changes based on such comments. 

Although veterans certainly ‘‘pay into’’ 

VA pension in terms of serving their 

country during a period of war, VA 

pension is not a benefit into which 

veterans previously directly contributed 

financially. The statutes governing VA 

pension are found in 38 U.S.C. chapter 

15. Under the current pension statutes, 

pension is a benefit in which the annual 

amount of the benefit is reduced dollarfor-dollar by annual income received. 

See 38 U.S.C. 1521, 1541, and 1542. VA 

calculates annual income by deducting 

or excluding (not counting) amounts 

noted in 38 U.S.C. 1503 and other 

applicable statutes, such as a portion of 

unreimbursed medical expenses and 

educational expenses. 

Multiple commenters pointed out that 

VA no longer considers a veteran’s net 

worth when deciding if the veteran is 

eligible to receive VA hospital, nursing 

home, or domiciliary care. For this 

reason, these commenters state or 

indicate that net worth should not be a 

factor for pension entitlement. 

Moreover, several commenters stated 

that the proposed provisions would 

cause fewer veterans to qualify for VA 

hospital care at Priority Groups 4 and 5. 

We disagree. The VA statutes governing 

net worth for pension entitlement (38 

U.S.C. 1522 and 1543) are different than 

those governing net worth for hospital 

care eligibility (38 U.S.C. 1722). Under 

38 CFR 17.36(b)(4), Priority Group 4 

includes veterans who receive increased 

pension based on their need for regular 

aid and attendance or by reason of being 

permanently housebound. It also 

includes veterans determined 

catastrophically disabled by the VA 

facility where they are examined. 

Priority Group 5 includes veterans 

whom the Veterans Health 

Administration (VHA) determines are 

unable to defray the expenses of 

necessary care under 38 U.S.C. 1722(a). 

38 CFR 17.36(b)(5). Although VHA 

assumes that veterans who receive 

pension meet Priority Group 5 criteria, 

veterans are not required to receive 

pension to qualify for Priority Group 5. 

To the extent that some veterans might 

not be entitled to pension under this 

final rule, this does not mean these 

veterans would not be entitled to VA 

hospital care at the same priority. VA 

must consider net worth as an 

entitlement factor for pension (38 U.S.C. 

1522 and 1543); it does not have 

discretion in this regard as it does for 

hospital care eligibility. Therefore, we 

make no changes based on such 

comments. 

C. Discussion of Public Comments 

Regarding VA’s Authority To 

Promulgate Regulations Governing 

Requirements for Net Worth, Asset 

Transfers, and Income Exclusions for 

Needs-Based Benefits 

Numerous commenters questioned 

VA’s authority to promulgate 

regulations governing the requirements 

for net worth, asset transfers, and 

income exclusions in order to qualify 

for VA’s pension program. VA disagrees 

with these commenters and, therefore, 

does not make any changes to this 

rulemaking based on these comments. 

As discussed in the proposed rule, 

under 38 U.S.C. 1522 and 1543, VA may 

not pay pension to a veteran or to a 

veteran’s surviving spouse when the 

corpus of the individual’s estate (and a 

veteran’s spouse’s estate, if applicable) 

is such that, under all the 

circumstances, including consideration 

of the individual’s income and that of 

the individual’s spouse and dependent 

children, it is reasonable that the 

individual consume some part of the 

estate for his or her maintenance prior 

to receiving pension. 


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VA’s authority here is derived from 38 

U.S.C. 501(a), which permits VA to 

prescribe all rules and regulations 

which are necessary or appropriate to 

carry out the laws administered by VA 

and are consistent with those laws. VA 

may administer the Congressionallycreated pension program by formulating 

policy and enacting rules to fill any gap 

left, implicitly or explicitly, by 

Congress. See Morton v. Ruiz, 415 U.S. 

199, 231 (1974). These rules may effect 

a change in existing law, so long as VA 

promulgates them through a notice-andcomment procedure and its ‘‘action is 

reasonable and consistent in light of the 

statute and congressional intent.’’ 

Disabled Am. Veterans v. Gober, 234 

F.3d 682, 691 (Fed. Cir. 2000). Inasmuch 

as Congress did not define what is 

considered reasonable consumption of 

net worth prior to receiving VA’s needsbased pension, this rulemaking 

promulgates reasonable gap-filling 

regulations. 

As previously stated, sections 1522 

and 1543 require VA to deny or 

discontinue pension when it is 

reasonable to require the individual to 

consume some portion of his or her net 

worth for personal maintenance. We 

interpret the statutory requirement that 

a pension claimant must reasonably 

consume excessive net worth prior to 

receiving needs-based pension as 

precluding pension entitlement to an 

individual who has sufficient net worth 

for his or her maintenance (over 

$123,600, for 2018), transfers assets to 

get below that threshold, and then 

applies for VA pension leaving the 

Government to fund his or her 

maintenance. The text of the statute 

makes clear that Congress did not 

intend for claimants who have sufficient 

assets for self-support to use the pension 

program as an estate planning tool, 

under which they may preserve or gift 

assets to their heirs and shift 

responsibility for their support to the 

Government, at the expense of 

taxpayers. See also H.R. Rep. No. 95– 

1225, at 33 (1978), reprinted in 1978 

U.S.C.C.A.N. 5583, 5614 (Congress’s 

intent that ‘‘a needs-based system . . . 

apply only to those veterans who are, in 

fact, in need’’). 

Many commenters also pointed out 

that, in recent years, Congress has failed 

to implement legislation that would 

have implemented many of the changes 

that VA seeks to make in this 

rulemaking. Such failure does not 

negate VA’s authority to provide 

reasonable rules in furtherance of 

Congress’s directive for a net worth 

limitation. 38 U.S.C. 501(a), 1522, 1543. 

Moreover, VA notes that ‘‘unsuccessful 

attempts at legislation are not the best 

of guides to legislative intent.’’ Red Lion 

Broad. Co. v. FCC, 395 U.S. 367, 381– 

382 n.11 (1969). The Government 

Accountability Office (GAO), U.S. 

Senate Special Committee on Aging, 

and others have advocated for changes 

to bolster the integrity of the pension 

program. See Pension Poachers: 

Preventing Fraud and Protecting 

America’s Veterans, Hearing Before the 

S. Special Comm. on Aging, S. Hrg. 

112–542 (2012); U.S. Government 

Accountability Office, GAO–12–540, 

Veterans’ Pension Benefits: 

Improvements Needed to Ensure Only 

Qualified Veterans and Survivors 

Receive Benefits (2012). And Congress’ 

contemporaneous statements in 

enacting the current pension program, 

discussed above, are clear that this 

program is a needs-based program 

intended to serve only those claimants 

in need. Accordingly, VA declines to 

make any changes to this rulemaking 

based on these comments. 

D. Discussion of Public Comments 

Regarding Net Worth Provisions 

1. Net Worth Limit and Definition 

(Proposed § 3.274(a) and (b)) 

Multiple commenters took issue with 

our proposal to use a bright-line net 

worth limit for pension entitlement. 

Several commenters argued that a 

bright-line net worth provision is 

arbitrary and does not take into account 

age, disability, life expectancy, rate of 

depletion of assets, liquidity of assets, 

normal living expenses for healthy 

dependents, nursing home status, or 

medical expenses in relation to income. 

Some commenters proposed alternative 

net worth calculation and decision 

methodologies that included these 

factors. A number of commenters argued 

that our proposed changes to net worth 

provisions will make it more difficult 

for claimants to qualify for pension, and 

stated their belief that not as many will 

qualify, causing individuals more stress 

during a difficult time. Some stated that 

claimants would essentially have to 

deplete their net worth to qualify. Some 

suggested that VA could make 

exceptions for veterans who are over age 

75. 

We make no changes based on these 

comments. As stated in the preamble of 

the proposed rule, the way that net 

worth decisions are made now is often 

inconsistent and arbitrary. See 80 FR 

3842. According to the GAO, the current 

regulatory scheme has left adjudicators 

to their own discretion, leading to 

inconsistent decisions for similarly 

situated claimants. Id. Having a clear 

net worth limit promotes consistency 

and uniformity in decisions. It also 

reduces the amount of time claim 

processors have to spend on lengthy, 

subjective net-worth determinations— 

freeing them up for other claim-related 

activities. A clear limit will result in 

quicker benefits decisions for veterans 

and the potential for future automation. 

It also benefits claimants by providing a 

clear pension entitlement criterion that 

is easy to understand and apply. 

While net worth determinations will 

no longer take into account life 

expectancy, rate of depletion of assets, 

and other factors, it is that multitude of 

factors that have resulted in 

inconsistent, and sometimes unfair, 

decisions. For example, we have 

reviewed cases in which elderly 

claimants with short life expectancies 

have been denied pension with as little 

as $10,000 of net worth. We have seen 

claims processors deny pension if assets 

are projected to last the claimant’s 

lifetime or longer, and others require 

complete or almost complete spenddown of net worth before granting 

pension. Accordingly, we decline to 

create an exception for claimants over 

75; in fact, we believe that more pension 

claims will be granted under these 

regulations than under the previous 

regime. 

Instead, we believe the best approach 

moving forward, for both pension 

claimants and the efficiency of the 

system, is employing, as the net worth 

limit, the standard maximum CSRA 

prescribed by Congress. We have 

considered the possibility of finding a 

solution within the current standard, as 

well as other solutions commenters set 

forth, but many of them, such as 

establishing upper and lower limits, 

would be less favorable to claimants 

than a net worth limit at the maximum 

CSRA. We believe that setting the net 

worth limit at the maximum CSRA— 

which in 2018 is $123,600—allows 

more claimants to qualify for the benefit 

than before. Our impact analysis 

concurrent with the proposed rule 

indicated that 1,149 pension denials 

would have been grants (and only 40 

grants would have been denials) if the 

maximum CSRA had been the net worth 

limit in fiscal year 2014. See https://

www.va.gov/orpm/RINs_2900_AO.asp 

(RIN 2900–AO73). 

We understand, as many pointed out, 

that the CSRA was prescribed by 

Congress for Medicaid, which is a 

fundamentally different program than 

VA pension. But it is a number that was 

adopted by Congress to prevent the 

impoverishment of the noninstitutionalized spouse of a Medicaidcovered individual. Similarly, we do not 

desire any net worth limitation that 

could subject wartime veterans and 


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their survivors to impoverishment. See 

H.R. Rep. 95–1225, at 27 (reflecting 

Congress’ intention to ‘‘assure[ ] a level 

of assistance’’ for veterans and survivors 

‘‘that places them above the official 

poverty line’’); 44 FR 45930 (1979). 

Congress has indicated that individuals 

with net worth beyond the maximum 

CSRA are sufficiently protected from 

impoverishment for Medicaid purposes. 

It is no stretch, then, for VA to conclude 

that individuals with net worth beyond 

the maximum CSRA are sufficiently 

protected from impoverishment and do 

not need VA pension. Moreover, using 

the maximum CSRA allows pension 

claimants to retain a reasonable portion 

of their assets to respond to unforeseen 

events, including medical care. 

Multiple commenters stated that VA’s 

proposal to establish the bright-line net 

worth limit by using the CSRA 

prescribed by Congress for Medicaid 

was out of context, i.e., that VA ‘‘cherry 

picked’’ some parts of the Medicaid 

resource statutes and disregarded 

others. According to these commenters, 

VA overlooked the following: (1) 

Medicaid covers all of the medical 

expenses of the institutionalized spouse; 

(2) there are significant differences 

between States in what assets are 

countable assets toward the CSRA; (3) 

the community (non-institutional) 

spouse is allowed to keep all of his or 

her income as well as part of the 

institutionalized spouse’s income if the 

community spouse’s income is lower 

than the spousal allowance; (4) 

Medicaid does not have a penalty 

period longer than 60 months; (5) 

Medicaid does a fairly good job of 

explaining its rules and making the 

public aware that transfers made more 

than 60 months before applying for 

Medicaid will not create any penalty; (6) 

Medicaid will allow trusts to be used to 

reduce net worth; (7) Medicaid allows 

the purchase of immediate annuities to 

reduce net worth; (8) Medicaid applies 

the CSRA only to married claimants, 

whereas VA would apply it to all 

claimants, whether married or single, (9) 

Medicaid allows community spouses to 

retain net worth greater than the 

maximum CSRA; and (10) adopting the 

Medicaid asset limitation for VA 

purposes is much more limiting and 

impoverishing in nature than the 

Medicaid system. 

To be clear, these programs are 

governed by different statutes and serve 

different purposes. VA pension is a 

monetary benefit paid to wartime 

veterans and survivors to supplement 

their income, based on need. On the 

other hand, Medicaid is a health 

insurance program for individuals and 

families with low income and limited 

resources. As such, incorporating all of 

Medicaid’s net worth rules into the VA 

pension program is neither legally 

required nor sensible. But, because 

Congress has established a level of net 

worth sufficient to avoid 

‘‘impoverishment’’ in administering 

Medicaid, we find it sensible to employ 

that Congressional determination for VA 

pension. Similarly, as further discussed 

in the proposed rule and later in this 

supplementary information, we find it 

sensible to take aspects of the look-back 

period implemented in Medicaid (per 

GAO’s recommendation) to form a lookback period. 

Thus, though we reviewed these 

comments on Medicaid and made 

changes in this final rule in response to 

some of them, we disagree with the 

comments above that highlighted 

favorable Medicaid policies, as they 

overlooked particular rules of VA 

pension that are also favorable to 

claimants. For instance, although VA 

does not pay for medical expenses as 

Medicaid does, VA does deduct 

unreimbursed medical expenses that 

exceed 5 percent of the maximum 

annual pension rate (MAPR) allowed by 

Congress, to reduce income for VA 

purposes. Overall, we did not intend in 

our proposed rule to equate all aspects 

of VA pension to Medicaid, or to mimic 

other aspects of Medicaid provisions, 

and there is no legal requirement that 

any particular Medicaid policies or 

procedures be incorporated into VA 

pension. 

Several commenters stated that the 

proposed regulations fail to provide for 

a maintenance income and an asset 

allowance, as well as an exception for 

a divestment of gifts and conversion of 

assets for a community spouse such as 

those provided by Medicaid rules, and 

these omissions are likely to result in 

the impoverishment of community 

spouses. Several commenters also stated 

that, under 38 U.S.C. 1522, VA is 

required to take into account ‘‘all the 

circumstances’’ of a veteran and a 

veteran’s family in evaluating annual 

income and other real and personal 

property. Commenters stated or implied 

that the failure of current regulations, as 

well as the proposed regulations, to 

provide for the maintenance needs of a 

community spouse arguably violates 

VA’s duty to consider ‘‘all the 

circumstances’’ in determining whether 

it is ‘‘reasonable’’ that some part of an 

institutionalized veteran’s estate should 

be consumed for the veteran’s 

maintenance. 

VA makes no changes based on these 

comments. By selecting the maximum 

CSRA as the net worth limit and 

deducting payments for 

institutionalized care from net worth, 

we strongly disagree that these 

regulations do not take into account the 

needs of community spouses. Indeed, in 

this final rule, as discussed below, VA 

has expanded its net worth deductions 

for payments to care facilities other than 

nursing homes to ensure that ‘‘all the 

circumstances’’ are considered for 

situations where the veteran can no 

longer live at home. Succinctly stated, 

while the regulations adopted herein 

might depart from specific Medicaid 

rules—as a program with a different 

purpose is permitted to do—they do not 

leave community spouses unprotected 

from impoverishment. 

One commenter also mentioned that 

VHA’s net worth provisions at 38 CFR 

17.111 do not take into account the 

amount of the maximum CSRA when 

determining whether a veteran is 

required to pay a co-payment for VAprovided extended care services. We 

make no change based on this comment. 

Noted above in the information 

pertaining to terminology clarifications, 

the VA statutes governing net worth for 

pension entitlement are different from 

those governing VA hospital care 

eligibility. Although VA no longer 

considers net worth when determining 

a veteran’s eligibility for VA hospital 

care, VA is required to consider net 

worth when determining pension 

entitlement. 38 U.S.C. 1522, 1543. 

Some commenters said that the 

bright-line net worth limit does not take 

into account future increases in costs of 

care or inflation. To the contrary, 

proposed and final § 3.274(a) provide 

for cost-of-living increases in the net 

worth limit to account for inflation. 

Another commenter stated that, if a 

claimant’s deductible medical expenses 

exceed the claimant’s income, the net 

worth limit does not take this into 

account. As further discussed below, 

however, medical expenses affect net 

worth in two ways: First, a claimant’s 

predictable medical expenses are 

subtracted from countable income; 

second, the actual payment of the 

medical expenses will (other things held 

constant) reduce assets. Thus, medical 

expenses exceeding income do affect net 

worth. 

Other commenters noted that the 

bright-line net worth limit does not take 

locality differences into account. We 

first note that the statutory MAPRs 

under 38 U.S.C. 1521, 1541, and 1542 

are fixed and not adjusted by locality. 

Second, we believe that, in choosing as 

our net worth limit the maximum CSRA 

($123,600 in 2018) rather than the 

minimum CSRA ($24,720 in 2018) or 

any amounts within this range, we have 

adequately accounted for different 


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localities. Thus, we make no changes 

based on such comments. 

Several commenters asserted that our 

proposed rule regarding the bright-line 

net worth limit contained faulty 

reasoning in stating that ‘‘current rules 

require development of additional 

information not solicited in the initial 

[pension] application.’’ 80 FR 3842. 

These commenters pointed out that 

having insufficient forms is a reason to 

change forms, not rules. Some of these 

commenters proposed alternative net 

worth decision methodologies and form 

modifications. While their point that 

rules need not be changed for a problem 

with forms is certainly valid, our desire 

to establish a bright-line limit has less 

to do with forms and more to do with 

consistency, uniformity, and clarity, as 

discussed above. Moreover, although 

some commenters stated that neither 

pension application nor development 

forms request information regarding 

living expenses, a claimant’s completion 

of VA Form 21–8049, Request for 

Details of Expenses, has been an 

administrative requirement in order for 

claims processors to make net worth 

determinations. Among other things, 

this form includes monthly living 

expenses such as housing, food, 

utilities, clothing, and education. The 

information requested on this form will 

no longer be necessary for net worth 

determinations under this final rule. We 

further note that VA is amending 

application forms in conjunction with 

this final rule to incorporate information 

previously received on the VA Form 21– 

8049, as well as other information. 

One change that we are making is to 

the example in proposed § 3.274(b)(4). 

The final rule uses a more current 

number (the maximum CSRA for 2018) 

for the net worth limit and eliminates 

superfluous language. 

2. How Net Worth Decreases (Proposed 

§ 3.274(f)) 

One commenter noted that proposed 

§ 3.274(f)(1) is overly restrictive in 

providing that assets could only 

decrease by spending them on ‘‘[b]asic 

living expenses’’ or educational or 

vocational rehabilitation. As proposed, 

the rule could be read to preclude 

expenditures for items such as 

vacations, televisions, and sprinkler 

systems. We agree, and, therefore, we 

are withdrawing proposed 

§ 3.274(f)(1)(i) and (ii) and revising 

§ 3.274(f)(1) to provide that a claimant 

may decrease assets by spending them 

on items or services for which fair 

market value is received. A claimant 

could not, of course, spend down assets 

by purchasing an item whose value VA 

would still include as an asset—such as 

a $50,000 painting or gold coins—and 

this final rule so states. Although a 

claimant can certainly purchase a 

$50,000 painting or gold coins, the 

value of the painting or coins would 

still be included as an asset. Final 

paragraph (f)(1) is significantly more 

liberal than proposed paragraph (f)(1). 

We note here that, in general, VA does 

not require receipts or other proofs of 

purchase to show decreased assets, 

although it is permitted to request them 

under 38 U.S.C. 1506(1). 

Due to this change and based on our 

further administrative review, final 

§ 3.274(f) does not include proposed 

paragraph (f)(3). Proposed paragraph 

(f)(3) was a provision that erroneously 

stated that VA would ‘‘deduct’’ certain 

expenses from assets. VA does not 

deduct the value of future expenses 

from current assets when determining 

asset values; rather, VA deducts 

projected unreimbursed medical 

expenses from income when the 

medical expenses are reasonably 

predictable. Therefore, for example, if a 

claimant’s net worth exceeds the net 

worth limit in a given year even though 

projected medical expenses have 

reduced income to zero, the actual 

payment of these medical expenses the 

next year may cause assets to decrease 

and the claimant to then qualify for 

pension. 

We renumbered proposed paragraphs 

(f)(4) and (5) as final paragraphs (f)(3) 

and (4), respectively. We also amended 

the text of final paragraphs (f)(3) and (4) 

to reflect the clarification discussed 

above. 

3. Residential Exclusion From Assets 

(Proposed § 3.275) 

Multiple commenters criticized 

proposed § 3.275(a)(3), claiming that the 

definition of ‘‘residential lot area’’ is too 

restrictive by limiting the lot area to 2 

acres (87,120 sq. ft.). Many commenters 

stated that claimants living in rural 

areas would be unfairly penalized 

because of zoning and other restrictions 

which would prevent them from being 

able to sell the excess land. VA 

disagrees because the definition of 

‘‘residential lot area’’ includes the 

provision that the lot cannot exceed 2 

acres unless the additional acreage is 

not marketable. The additional property 

might not be marketable if, for example, 

the property is only slightly more than 

2 acres, the additional property is not 

accessible, or there are zoning 

limitations that prevent selling the 

additional property. Therefore, lot sizes 

that exceed 2 acres may still be 

excluded from the claimant’s asset 

calculation if the additional property is 

deemed unmarketable. However, VA 

recognizes that the proposed provision 

that lots must be ‘‘similar in size to 

other residential lots in the vicinity of 

the residence’’ may be unnecessarily 

restrictive for claimants with less than 

2 acres, but more acreage than their 

neighbors. Therefore, the final rule does 

not include the ‘‘similar in size to other 

residential lots in the vicinity’’ 

requirement. 

Several commenters interpreted the 

proposed rule to mean that VA would 

require claimants to sell their residences 

and/or their land if the residential lot 

area was greater than 2 acres. We note 

that when a claimant’s residential lot is 

greater than 2 acres, VA will still 

exclude the value of the residence and 

2 acres worth of property from the 

claimant’s assets. VA is not requiring 

claimants to sell either their residence 

or land. VA will only include the value 

of the additional property in the asset 

calculation. 

One commenter stated that the 2-acre 

limit would cause claimants to sell their 

land, which would lead to more 

development, thus endangering wildlife 

and harming the environment. As noted 

above, VA is not requiring any claimant 

to sell his or her land, nor can we 

speculate on whether a claimant might 

do so or for what purpose the land 

might be used. The concern has been 

taken into consideration, but we make 

no change to the final rule based on the 

comment. 

One commenter stated that the rule 

does not address treatment of property 

listed for sale. VA excludes the value of 

the primary residence from net worth 

(and includes the value of other 

residences) regardless of whether or not 

the property is listed for sale. We make 

no change based on this comment. 

Several commenters noted that it is 

already VA policy to exclude from net 

worth a claimant’s residence and a 

reasonable lot area and did not agree 

with VA’s decision to place a limit on 

the lot area VA considers reasonable. As 

stated in the proposed rule, the limit 

supports our policy choice to exclude a 

claimant’s primary residence from 

assets, while at the same time placing a 

reasonable limit on excluded property 

to preserve the pension program for 

veterans and survivors who have an 

actual need. We make no changes based 

on such comments. 

Many commenters questioned why 

the residential lot exclusion is based on 

acreage rather than value. VA clarifies 

that the purpose of using acreage 

instead of value is so that claimants who 

live on small, but valuable land 

(regardless of what that value is derived 

from) are not penalized. For example, a 

claimant could live in a small, meager 


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home in northern Virginia that has been 

passed down for generations. Even 

though the house is meager and the lot 

is small, because property values in 

northern Virginia have skyrocketed over 

the last few decades, that claimant 

might be disadvantaged for not moving 

to cheaper land. VA further clarifies that 

the definition of ‘‘residential lot area’’ is 

specifically designed to provide 

consideration to claimants who live in 

residences on small but highly valuable 

lots, as well as claimants who live in 

residences on large but less valuable (or 

at least partially unmarketable) lots. 

One commenter asked if VA claims 

adjudicators would require claimants to 

provide property deeds or other 

evidence to determine lot size. Under 38 

CFR 3.277(a), claims adjudicators 

always have a right to request that a 

claimant submit evidence to support 

entitlement to a benefit. We make no 

change based on this comment. 

Many commenters questioned why 

proposed § 3.275(b) included the 

provision that ‘‘[i]f the residence is sold, 

any proceeds from the sale is an asset 

except to the extent the proceeds are 

used to purchase another residence 

within the same calendar year as the 

year in which the sale occurred.’’ These 

commenters stated that it is 

unreasonable to expect claimants to sell 

a residence and buy a new one in the 

same year, especially if the sale occurs 

toward the end of the year. Although we 

understand their point, 38 U.S.C. 

5112(b)(4) requires that changes in net 

worth be recognized at the close of the 

calendar year in which the change 

occurred, and we make no change based 

on these comments. We note that this 

provision only applies to home sales 

after pension entitlement is established. 

The final rule makes this clear by 

providing that it only applies ‘‘[i]f the 

residence is sold after pension 

entitlement is established.’’ If the 

residence is sold at any time before the 

date of claim, i.e., within the 3-year 

look-back period, another residence 

could be purchased (or funds from the 

sale could be used to purchase other 

items or services for fair market value) 

at any time before the date of claim 

without penalty or effect. 

For residential sales after pension 

entitlement is established, the rule 

provides that the residences need to be 

sold and purchased within the same 

calendar year because 38 U.S.C. 

5112(b)(4) provides that the effective 

date of reduction or discontinuance of 

pension due to a change in net worth is 

the end of the year in which net worth 

changes. Therefore, for example, if an 

individual is receiving pension and in 

July 2017 receives proceeds from the 

sale of a residence which make net 

worth excessive, the statutory effective 

date of discontinuance is December 31, 

2017, and VA would discontinue 

pension as of January 1, 2018. However, 

if the claimant spends down the funds 

or purchases another residence before 

the effective date, VA would not 

discontinue pension. We understand 

and recognize the disparity between a 

person who sells his or her residence in 

January, for example, versus a person 

who sells his or her residence in 

December. However, we are bound by 

the effective date statute. We note that 

if an individual sells his or her 

residence in December 2017, and 

spends down the net worth or purchases 

a new residence in February 2018, VA 

would discontinue pension as of 

January 1, 2018, and resume pension as 

of March 1, 2018, assuming entitlement 

factors continue to be met and the 

claimant informs VA of the spend-down 

or purchase before VA’s decision 

regarding the discontinuance becomes 

final. Of course, these examples assume 

that the sale of the residence makes net 

worth excessive; not all residential sales 

would result in discontinuance. 

One commenter stated that the rule is 

unfair to those who choose to rent— 

rather than purchase another home— 

after selling their residence. Others 

commented more generally that rent (to 

a care facility or otherwise) should be 

deducted from net worth. To the extent 

there is a concern about the effect of 

selling a residence in order to move into 

a nursing home or other care facility, we 

believe that our changes to the 

deductible medical expense provisions, 

described below, will alleviate much of 

this concern. Under final § 3.278(d), 

amounts paid to a care facility for 

lodging will often be considered a 

medical expense, deducted from income 

pursuant to 38 U.S.C. 1503(a)(8). 

However, as to the request to deduct 

other rent payments from net worth, we 

are unaware of any statutory authority 

for doing so. While we are continuing 

our longstanding policy of excluding the 

value of primary residences from assets, 

it does not follow that we have an 

obligation or the authority to deduct 

rent from income. To be clear, neither 

rent payments (to a non-care facility) 

nor mortgage payments are deducted 

from income, and money set aside for 

both rent payments and mortgage 

payments (prior to being spent) are 

included as assets. It is only the primary 

residence’s value that is excluded from 

assets. We make no changes based on 

such comments. 

One commenter asked that a 

definition of ‘‘proceeds from the sale’’ 

be included. To alleviate any confusion, 

the final rule refers to ‘‘net proceeds 

from the sale.’’ We believe this change 

adequately addresses the commenter’s 

concern. The definition is readily 

available from many sources. The term 

net proceeds refers to the amount of 

money a seller receives from the sale. It 

is the sales price of the residence minus 

selling costs. Net proceeds do not 

include payoff of existing mortgages or 

fees such as brokerage commissions and 

closing costs. 

4. Other Net Worth Matters 

One commenter believed that VA’s 

asset calculation methodology was not 

explained in detail in the proposed 

regulation. We disagree; proposed and 

final §§ 3.274 and 3.275 address the 

types of assets included and excluded in 

an asset calculation, VA generally 

accepts the statements of its claimants 

regarding assets unless there is reason to 

question them, and VA does not plan to 

change this practice. 

One commenter seemed to have 

misunderstood proposed § 3.275(b)(1)(i), 

which provides that VA will not 

subtract from a claimant’s assets the 

amount of mortgages or other 

encumbrances on a claimant’s primary 

residence. We clarify here that VA 

excludes a claimant’s primary residence 

from assets, regardless of the value of 

the residence. Section 3.275(b)(1)(i) 

simply means that VA does not subtract 

mortgages and encumbrances on a 

primary residence from other assets. For 

example, assume a claimant owns a 

primary residence worth $100,000, still 

owes $20,000 on the residence, and the 

claimant’s only other asset is a $50,000 

bank account. Assets for VA purposes 

would total $50,000 because we exclude 

the primary residence and do not 

subtract the mortgage on a primary 

residence from other assets. Under 

§ 3.275(a), mortgages and encumbrances 

specific to the mortgaged or encumbered 

property (that is not the primary 

residence) are deducted from the value 

of the property. One commenter 

relatedly questioned the treatment of 

liens on a property. Liens qualify as 

encumbrances. We make no change 

based on these comments. 

Some commenters questioned why 

the income and assets of any child 

living in the primary residence must be 

considered as included in an applicant’s 

net worth. Others stated that VA should 

not bar a veteran’s pension because of 

a child’s net worth, to include an 

inheritance or job income. We make no 

change based on these comments 

because we believe statute governs this 

issue. Under 38 U.S.C. 1521(h)(1) and 

1541(g), a veteran’s or surviving 

spouse’s income generally includes a 


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dependent child’s income. However, 

under 38 U.S.C. 1522(a) and 1543(a), a 

veteran’s or surviving spouse’s assets do 

not include a child’s assets (though the 

rate of pension may be impacted by a 

child’s assets, 38 U.S.C. 1522(b) and 

1543(a)(2)). Proposed and final 

§ 3.274(b)(3) and (c)(1) and (2) are 

consistent with statute. 

One commenter believed that a 

veteran’s assets should not include the 

assets of his or her spouse if the spouse 

and the veteran do not reside together. 

Again, this issue is addressed by statute 

and we make no change based on this 

comment. See 38 U.S.C. 1521(h)(2). 

Another commenter stated that a 

surviving child’s assets should not 

include the assets of his or her guardian. 

We make no changes based on this 

comment because, by statute, the assets 

of an individual are included when the 

child is residing with the individual and 

the individual is legally responsible for 

the child’s support. See 38 U.S.C. 

1543(b). The same commenter stated 

that trust corpus should not be included 

in a disabled child’s assets. As 

discussed further below, pursuant to 

final § 3.276(a)(5)(ii), trusts are generally 

not included as an asset, unless they can 

be entirely liquidated for the claimant’s 

own benefit. 

One commenter believed that assets 

should not include personal property. 

We make no changes based on this 

comment because most general 

definitions of assets include personal 

property. We note that, under proposed 

and final § 3.275(b)(2), VA does not 

include as an asset the value of personal 

effects suitable to and consistent with a 

reasonable mode of life, such as 

appliances and family transportation 

vehicles. We further note that this 

provision is not a change from past 

practice. 

Another commenter stated there 

should be a clear and defined difference 

between net worth and liquid net worth. 

The commenter seemed to believe that 

VA bases its pension entitlement 

decisions on liquid assets alone. 

Normally, we think of a liquid asset as 

a cash asset or an asset that can easily 

be converted to cash. Real estate and 

other types of personal property are 

considered to be non-liquid assets. Save 

certain exceptions discussed in this 

preamble and noted in the final rule, VA 

does not distinguish between liquid and 

non-liquid assets when making pension 

entitlement determinations. A claimant 

who has $50,000 in a bank account and 

a claimant who owns property worth 

$50,000 (that is not his or her primary 

residence) are both considered to have 

$50,000 in assets. VA generally accepts 

as true a claimant’s statement regarding 

the value of his or her assets in the 

absence of conflicting information. We 

make no changes based on the 

comment. 

Multiple commenters complained that 

VA is counting income twice: Once for 

its net worth determinations and again 

in the calculation of the pension 

entitlement rate. Although we are 

sympathetic with this concern, we are 

again bound by the pension statutes, 

and thus make no changes. Sections 

1522 and 1543 of 38 U.S.C. require VA 

to consider the amount of claimants’ 

and certain dependents’ income when 

making net worth determinations. 

Sections 1521, 1541, and 1542 of 38 

U.S.C. then require VA to reduce the 

MAPRs by the annual income of the 

claimant and certain dependents. One 

commenter asked us to provide 

additional justification; however, we 

decline to do so because we believe the 

statute is sufficient. We re-emphasize 

that a claimant’s reasonably predictable 

projected unreimbursed medical 

expenses can be deducted from income 

when calculating a claimant’s net worth. 

Therefore, for many claimants who are 

paying in-home care or facility expenses 

for themselves or a dependent, the 

income component of net worth will be 

zero, and this issue will not be a 

concern. 

Some commenters appeared to believe 

that total net worth would have to be 

spent on the applicant’s needs in order 

to obtain pension, leaving nothing for 

the needs of the surviving spouse (and 

child) in the future. As clarified above, 

a child is not required to consume his 

or her assets for a parent to qualify for 

pension. 38 U.S.C. 1522(a) and 1543(a). 

And, again, we have chosen a net worth 

limit for pension that enables a claimant 

to retain a reasonable portion of assets 

to respond to unforeseen events. 

One commenter suggested that the 

proposed rule makes no provision for 

small business owners or farmers who 

own property and have to liquidate 

assets to provide income for themselves 

and employees. The commenter 

questions how small business assets 

will be calculated if they are sold to pay 

employees. We believe that our 

definition of ‘‘fair market value’’ covers 

such a situation and make no change 

based on the comment. Although an 

individual might sell an asset for less 

than its appraised value, depending on 

the circumstances and in the absence of 

information showing otherwise, VA 

could consider such a sale to be a 

transfer for fair market value and would 

consider the net proceeds from the sale 

to be an asset. Distribution of the net 

proceeds to employees would then 

decrease that individual’s assets. 

A commenter asked: If VA determines 

the need to re-evaluate net worth based 

on a matching program with the Internal 

Revenue Service (IRS), how will VA 

know what unreimbursed medical 

expenses exist for the many elderly 

individuals who do not file income 

taxes? In response to this commenter, at 

the time a veteran or survivor applies 

for VA pension, VA uses a claimant’s 

projected unreimbursed medical 

expenses to calculate the claimant’s 

pension entitlement rate as long as the 

claimant reports the expenses and the 

expenses are reasonably predictable. It 

is the claimant’s responsibility to keep 

VA informed at all times of any changes 

that affect continued entitlement. 

A commenter noted that this 

rulemaking does not address how VA 

would treat real property held as a life 

estate. The commenter asked how VA 

would treat a life tenant’s primary 

residence if the residence is sold and 

suggested that VA adopt the IRS’s 

valuation of life estates. Because the 

proposed rule did not address the 

treatment of life estates, we are 

concerned that addressing this issue in 

the final rule would deprive interested 

parties the opportunity to meaningfully 

comment on any related proposal. VA 

will consider whether to address this 

issue in a future rulemaking. However, 

VA is unable to make any changes to 

this rulemaking based on these 

comments. 

5. Correction of Net Worth EffectiveDate Table 

In the preamble of our proposed rule, 

we included an explanatory derivation 

table to summarize the rather complex 

effective dates pertaining to net worth. 

See 80 FR 3845. Unfortunately, the table 

contained two errors. The word 

‘‘increase’’ in the ‘‘Effective Date’’ 

column in the first row should have 

been ‘‘decrease.’’ Also, the second row 

of the ‘‘Change from current rule’’ 

column should not have included 

language regarding a certified statement. 

We are re-publishing the table with 

those corrections here, although we now 

use ‘‘New § 3.274’’ and ‘‘Change from 

Previous Rule’’ in the column headings. 


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TABLE 1—NET WORTH (NW) EFFECTIVE-DATE PROVISIONS DERIVATIONS

New § 3.274 Derived from Situation Effective date Change from previous rule 

3.274(g) ................ 3.660(d) .......................... NW has decreased after VA 

denial, reduction, or discontinuance.

Entitlement from date of NW 

decrease if information received timely.

No date change. Addition of 

certified statement requirement. 

3.274(h) ................ 3.660(a)(2) ..................... NW has increased and reduction or discontinuance necessary.End-of-the-year that NW increases.No date change. 

3.274(i)(1) ............. New Cross-Reference.

3.274(i)(2)(1) ......... 3.660(d) .......................... Dependent child’s NW has 

decreased and adding the 

child results in a rate decrease for the veteran or 

surviving spouse.

End-of-the-year that NW decreases.No date change 

3.274(i)(2)(2) ......... 3.660(c) .......................... Dependent child’s NW has increased and removing the 

child results in a rate increase for the veteran or 

surviving spouse.

Date of receipt of claim for increased rate based on 

child’s NW increase.

No date change. Claim required for increased rate. 

E. Discussion of Public Comments 

Regarding Asset Transfer Provisions 

1. Inclusion of Annuities and Trusts in 

Definition of ‘‘Transfer for Less Than 

Fair Market Value’’ (Proposed 

§ 3.276(a)(5)(ii)) 

Multiple commenters expressed that 

certain types of trusts and annuities 

should not be included in the definition 

of ‘‘transfer for less than fair market 

value.’’ We agree that certain annuities 

and trusts should not be included as a 

transfer for less than fair market value. 

Thus, based on a number of comments 

discussed below, we are revising 

§ 3.276(a)(5)(ii) to provide that a transfer 

for less than fair market value means a 

voluntary asset transfer to, or purchase 

of, any financial instrument or 

investment that reduces net worth by 

transferring the asset to, or purchasing, 

the instrument or investment unless the 

claimant establishes that he or she has 

the ability to liquidate the entire balance 

of the asset for the claimant’s own 

benefit. We also provide that, if the 

claimant establishes that the asset can 

be liquidated, the asset is included as 

net worth. 

First, some commenters 

misunderstood proposed 

§ 3.276(a)(5)(ii), believing that a transfer 

to any revocable or irrevocable trust 

would be considered a transfer for less 

than fair market value. We want to be 

clear that transfers to annuities or trusts 

over which a claimant retains control 

and the ability to liquidate are transfers 

for fair market value under this final 

rule and are not subject to a penalty 

period. Annuities and trusts that can be 

liquidated for the benefit of the claimant 

will instead be considered as an asset in 

net worth calculations. Of course, we 

would not require claimants to liquidate 

their assets; we simply would not 

consider funds over which a claimant 

still has complete control to have been 

transferred for less than fair market 

value. Such funds are assets. 

Second, several commenters noted 

that some transfers to annuities are 

mandated upon retirement. The 

conversion of deferred accounts to an 

immediate annuity is required under 

some retirement plans. We concur with 

these comments and final 

§ 3.276(a)(5)(ii) excludes mandatory 

conversions. This means that we will 

not count, as a covered asset, the 

amount transferred to such an annuity, 

although distributions from the annuity 

will continue to count as income. 

Third, a commenter asked us to 

explain why annuities and trusts are 

included in proposed § 3.276(a)(5)(ii) as 

‘‘any financial instrument or investment 

that reduces net worth and would not be 

in the claimant’s financial interest.’’ The 

commenter asked us to explain why 

annuities and trusts are not in the 

financial interest of the claimant. We 

agree that this language is confusing and 

would be difficult to apply, and it has 

been removed. 

Fourth, one commenter requested we 

explicitly exclude implied trusts from 

the definition of a trust by replacing the 

word ‘‘arrangement’’ in 

§ 3.276(a)(5)(ii)(B) with the word 

‘‘instrument.’’ We agree with this 

comment, and the final rule uses the 

word ‘‘instrument’’ as suggested. 

Several commenters asked why VA 

seemed to be singling out annuities and 

further pointed out that bank accounts 

and stocks are sometimes unwise 

investments for seniors. As noted in the 

proposed rule, annuities and trusts are 

simply two examples of instruments 

that could possibly be used to 

restructure a claimant’s assets to make 

it appear that the claimant’s net worth 

is less than it is. This rulemaking is not 

an attempt to eradicate all unwise 

investments undertaken by seniors; it is 

an effort to discourage those who are 

financially secure from transferring 

assets to qualify for VA pension. Asset 

transfers to stocks, bonds, or bank 

accounts do not reduce net worth at the 

time of transfer. 

One commenter questioned why 

establishing a trust or annuity was 

considered a ‘‘less than fair market 

value’’ transfer. That commenter also 

stated that veterans should not be 

penalized for establishing trusts or 

annuities for purposes not related to VA 

pension. Our response is two-fold. First, 

these instruments are considered 

transfers of less than fair market value 

because they are the primary tools of the 

over 200 organizations identified by the 

GAO as manipulating assets to reduce a 

claimant’s net worth. See GAO–12–540, 

at 15–21. The GAO chronicled the 

misleading marketing strategies, 

erroneous information, and 

commissions and fees charged by 

financial planners that raise significant 

doubt about considering such 

instruments fair market value transfers. 

Id. Second, given the changes to 

proposed § 3.276(a)(5) noted above and 

the fact that there is no penalty for trusts 

established on behalf of a child 

incapable of self-support (§ 3.276(d)), 

transfers prior to the look-back period 

(§ 3.276(e)), or claimants whose net 

worth would have been below the 

bright-line limit regardless of the 

transfer (§ 3.276(a)(2)(iii)), we believe 

that individuals transferring assets for 

reasons completely unrelated to VA 

pension will be penalized rarely, if ever. 

Many commenters thought that 

establishing a trust and/or annuity 

under the proposed regulation would 

always result in a penalty period. As 


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noted above, that is not the case. Only 

when assets are transferred during the 3- 

year look-back period to a trust or 

annuity that is incapable of being 

liquidated, and when net worth would 

have been excessive without such 

transfer, will a penalty period be 

assessed based on the portion of the 

transferred assets that would have made 

net worth excessive. For example, a 

veteran transfers $90,000 into an 

irrevocable trust one year before she 

claims VA pension. The veteran has 

$10,000 remaining in a checking 

account. Because the $90,000 transfer 

would not have made her net worth 

excessive, this claimant incurs no 

penalty period. We expect the asset 

transfer changes to affect a very small 

number of pension claimants, while 

nevertheless, helping bolster the 

integrity of the program by 

counteracting the hundreds of financial 

planners noted in the GAO report that 

are targeting and enabling those who are 

not in financial need to transfer assets 

and qualify for VA pension. 

Several commenters expressed 

confusion regarding how VA would 

value an annuity. We believe the 

changes above clarify the issue. If an 

annuity cannot be liquidated, then the 

annuity is not considered an asset; 

however, distributions from the annuity 

count as income (as further discussed 

below) and the purchase could warrant 

a penalty period. If the annuity can be 

liquidated for the claimant’s benefit, the 

annuity purchase is included as an 

asset. 

One commenter stated that the 

purchase of an immediate annuity meets 

the definition of an installment sale. 

VA’s current procedure manual defines 

an installment sale for pension purposes 

as any sale in which the seller receives 

more than the sales price over the 

course of the transaction. However, 

there are different types of annuity 

plans, and the seller (annuitant) might 

not receive more than the sales price 

over the course of the transaction, for 

example, if the plan terminates 

payments upon the seller’s death. 

Although the commenter draws this 

comparison to an installment sale in 

furtherance of his argument that annuity 

payments should not be treated as 

income, Congress has spoken explicitly 

on the question of whether annuity 

payments are income, as further 

discussed below. See 38 U.S.C. 1503(a) 

(‘‘all payments of any kind or from any 

source (including . . . retirement or 

annuity payments . . .),’’ shall be 

considered income unless expressly 

excluded by statute). We make no 

change based on the comment. 

Some commenters noted that § 3.276 

does not provide a specific exemption 

for purchase of burial policies or 

planning for funeral and final expenses. 

VA would regard the purchase of a 

burial policy as a fair market value 

purchase. In addition, VA deducts from 

income certain family members’ final or 

burial expenses. 38 U.S.C. 1503(a)(3)- 

(4); 38 CFR 3.272(h). We make no 

change based on these comments. 

2. Presumption Regarding Asset 

Transfers (Proposed § 3.276(c)) 

Many commenters expressed 

concerns with the presumption and the 

‘‘clear and convincing’’ standard of 

evidence VA proposed in § 3.276(c). See 

80 FR 3860. Several commenters stated 

that the evidentiary standard set forth in 

proposed § 3.276(c) conflicted with the 

standard permitted by 38 U.S.C. 

5107(b). Section 5107(b), commonly 

known as the ‘‘benefit of the doubt’’ 

rule, states that ‘‘[w]hen there is an 

approximate balance of positive and 

negative evidence regarding any issue 

material to the determination of a 

matter, [VA] shall give the benefit of the 

doubt to the claimant.’’ After further 

consideration, we agree that a claimant 

should not be subject to the ‘‘clear and 

convincing’’ standard when attempting 

to prove that an asset transfer was the 

result of fraud, misrepresentation, or 

unfair business practice. Accordingly, 

final § 3.276(c) is retitled and revised to 

simply state that VA will not consider 

an asset as a ‘‘covered asset’’ if the 

transfer was the result of fraud, 

misrepresentation, or unfair business 

practice related to the sale or marketing 

of financial products or services for 

purposes of establishing entitlement to 

VA pension; it also provides examples 

of evidence that will support the 

exception. This revision preserves the 

‘‘benefit of the doubt’’ for claimants. We 

thank the commenters for their input on 

this issue. 

3. Exception for Trust Established for 

Child Incapable of Self-Support 

(Proposed § 3.276(d)) 

Multiple commenters requested that 

we expand the trust exception to 

children disabled after age 18, as well as 

children of the surviving spouse (and 

not the veteran). We decline to do so. 

Statute defines ‘‘child’’ for VA purposes 

to include children of the veteran who 

became permanently incapable of selfsupport before their 18th birthday, not 

after. See 38 U.S.C. 101(4)(A); see also 

38 CFR 3.57(a). Nevertheless, as noted 

above, many transfers to any child will 

result in no penalty period. Only when 

assets are transferred or gifted during 

the 3-year look back period, and the 

asset would have made net worth 

excessive, will a penalty period be 

calculated based on the portion of the 

transferred assets that would have made 

net worth excessive. For example, a 

surviving spouse establishes a $90,000 

trust for the surviving spouse’s disabled 

child (who is not the veteran’s child) 

one year before the surviving spouse 

claims VA pension. The surviving 

spouse has $20,000 remaining in a 

checking account. Because the $90,000 

transfer would not have made the 

surviving spouse’s net worth excessive, 

no penalty period is assessed. As noted 

above, we expect the asset transfer 

changes will affect a very small portion 

of pension claimants. 

One commenter expressed the belief 

that the exception should apply where 

distributions from the trust to a veteran 

or spouse are used for care rendered to 

the incapable child, shelter, and other 

expenses. We have considered the 

suggestion, but ultimately believe that 

the language of proposed § 3.276(d)(2) 

more precisely executes the goal of this 

limited exception. Therefore, no change 

is warranted. 

Some commenters stated that VA 

should overturn a VA precedential 

General Counsel opinion, 

VAOPGCPREC 33–97, to conform to 

special needs trust laws at 42 U.S.C. 

1396p(d)(4)(A) and (C). VA declines to 

make any changes based on this 

comment. The statute cited by the 

commenters pertains to the treatment of 

certain special needs trusts under SSI 

law. The statute does not apply to VA. 

Another commenter asked that VA 

‘‘exempt’’ transfers to any trusts allowed 

under SSI law. As explained above and 

in the supplementary information to the 

proposed rule, SSI employs a 

significantly lower net worth limit than 

VA will be using and VA need not 

implement the exact same limits and 

exceptions as other needs-based 

programs governed by separate statutes. 

Multiple commenters requested that 

we provide a general hardship 

exclusion. One commenter noted that 

there are times when individuals sell 

assets under market value because they 

have to find liquidity and a means of 

meeting their obligations. We interpret 

this comment to mean that if, for 

example, an individual had property 

appraised at $10,000, the individual 

might be required to sell the property 

for $6,000 because no buyer could be 

found to purchase the property at the 

appraised value. We believe that our 

definition of ‘‘fair market value’’ would 

adequately cover this situation, and VA 

would consider such a sale to be a 

transfer for fair market value. More 

generally, VA does not agree that a 


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general hardship exclusion should be 

included because (1) it would result in 

inconsistent benefit decisions, and (2) 

all pension claimants are under 

hardship, considering the very nature of 

this needs-based benefit. Therefore, we 

make no changes based on such 

comments. 

4. Penalty Period Calculation and 

Length (Proposed § 3.276(e)) 

Multiple commenters pointed out an 

error in our proposed penalty period 

calculation that resulted in significantly 

longer penalty periods for surviving 

spouses and surviving children as 

compared to veterans, as well as longer 

penalty periods for single veterans as 

compared to married veterans. Many 

commenters stated that the proposed 

penalty period was discriminatory and 

violated the Constitution. We proposed 

to use a claimant-specific MAPR as a 

divisor when calculating a claimant’s 

penalty period. We agree that our 

proposal would have produced unfair 

and undesirable results and are grateful 

to all of those who identified this error. 

We have amended proposed § 3.276(e); 

final § 3.276(e)(1) uses a single divisor 

for all claimants, which will result in 

equal penalty periods for equal amounts 

of precluded asset transfers regardless of 

the type of claimant. The single divisor 

is the MAPR in effect on the date of the 

pension claim at the aid and attendance 

level for a veteran with one dependent. 

As stated in the proposed rule, we 

divide that amount by 12 and drop the 

cents. We chose this rate because most 

of VA’s pension claimants qualify at the 

aid and attendance level and because a 

higher divisor results in a shorter 

penalty period. The penalty period 

calculation example at final § 3.276(e)(4) 

reflects the single divisor. One 

commenter asked the purpose of using 

the benefit amount to calculate the 

penalty period. Although the 

commenter was possibly referring to our 

mistake in using the claimant-specific 

MAPR for penalty period calculations, 

we note that the purpose of the penalty 

period calculation is to approximate the 

number of months that a claimant could 

have used the assets for his or her own 

needs rather than disposing of them. 

Many commenters wrote that a 

penalty period of up to 10 years is 

excessive, essentially resulting in a 

‘‘permanent’’ denial for most claimants 

due to their age and life expectancy at 

the time of application. Some 

commenters suggested that VA set a 

maximum of 36 months as the penalty 

period. Based on the comments we 

received, we decided to shorten the 

maximum penalty period to 5 years. 

Under proposed and final § 3.276(e)(2), 

a penalty period begins on the first day 

of the month that follows the last asset 

transfer. Therefore, having a maximum 

36 month penalty period would result 

in no penalty if the asset transfer 

occurred 3 years before the date of the 

pension claim. Instead, we think a 5 

year maximum provides the appropriate 

balance of protecting the integrity of the 

pension program, while avoiding the 

‘‘permanent’’ denials that could have 

resulted with a 10-year maximum 

penalty, given the age of many pension 

claimants. We further emphasize that, 

under proposed and final § 3.276(e), 

only that portion of assets that would 

have made net worth exceed the brightline limit is subject to penalty. We 

appreciate the public comments on this 

issue. 

5. Penalty Period Recalculations 

(Proposed § 3.276(e)(5)) 

Numerous commenters requested that 

the time limit for curing asset transfers 

be amended and that VA allow partial 

cures. We agree that our proposal did 

not allow adequate time to cure asset 

transfers and did not allow enough time 

for claimants to notify VA of the cure. 

We also agree that partial cures are 

acceptable and should constitute a basis 

for recalculation. We have amended 

proposed § 3.276(e)(5) to allow 

claimants 60 days following a penalty 

period decision notice to cure or 

partially cure a transfer and allow 90 

days following a penalty period 

decision notice to notify VA of the cure. 

We are grateful to all of those who 

suggested these changes. 

6. Other Comments Regarding Proposed 

§ 3.276, Asset Transfers and Penalty 

Periods 

Several commenters asked why we 

are making changes regarding asset 

transfers when the impact analysis for 

the proposed rule stated that only 1 

percent of claimants transfer assets. VA 

is making these changes to protect the 

integrity of the pension program and to 

counteract the hundreds of 

organizations targeting elderly veterans 

and spouses with financial schemes that 

wrest away these individuals’ own 

assets for the promise of qualifying for 

VA pension. See GAO 12–540. VA 

believes that the changes are an 

important improvement over past 

practices, regardless of the number of 

claimants that have transferred assets in 

the past. We note that the 1 percent of 

claimants estimated to transfer assets 

before claiming pension was simply an 

estimate—nevertheless, whether that 

estimate is high or low, maintaining the 

regulatory status quo would only serve 

to condone these financial schemes 

noted by GAO, which are reported to 

charge seniors up to $10,000 in fees for 

these transfers and then leave these 

individuals locked out from their assets, 

potentially ineligible for Medicaid for a 

period of time, and exceedingly 

vulnerable to unforeseen events. 

Multiple commenters expressed 

concern that the asset transfer 

provisions would be applied 

retroactively. In order to ease this 

concern, paragraphs (a)(7) and (b) of 

final § 3.276 explicitly state that VA will 

not ‘‘look back’’ to a time before the 

effective date of the final rule. VA will 

disregard asset transfers made before 

that date. 

One commenter stated that claims are 

already being denied under these assettransfer provisions. We are unaware of 

such cases; however, we note that VA’s 

previous asset-transfer provision at 38 

CFR 3.276(b) did state that VA would 

not regard certain asset transfers as a 

reduction of net worth. For example, 

VAOPGCPREC 33–97, mentioned above, 

states that VA should include trust 

assets in net worth calculations if the 

trust assets are available for use for the 

claimant’s support. This applied to preclaim transfers as well, although 38 CFR 

3.276(b) did not so state. This would 

also be true under this final rule and we 

make no change based on the comment. 

Many commenters were concerned 

that any transfer of assets such as a gift 

to family members or charitable 

donations would cause VA to impose a 

penalty period. Not all gifts and 

charitable donations are prohibited or 

will result in a penalty period. Only 

when assets are transferred or gifted 

during the 3-year look back period, and 

the asset would have caused or partially 

caused net worth to be excessive, will 

a penalty period, not to exceed 5 years, 

be calculated based on the portion of the 

transferred assets that would have made 

net worth excessive. For example, a 

veteran gives $90,000 to charity one 

year before she claims VA pension, and 

she has $10,000 remaining in a checking 

account. Because the $90,000 amount 

transferred would not have made net 

worth excessive, no penalty period is 

assessed. Again, we expect the asset 

transfer changes will affect a very small 

portion of pension claimants, while 

bolstering the integrity of the program. 

Multiple commenters expressed 

concern that a look-back period would 

delay claims processing and would 

create undue stress and hardship if 

claimants have to provide VA with 3 

years’ worth of bank statements and 

other documentation. VA generally will 

not require 3 years’ worth of 

documentation from claimants, but will 

only require additional documentation 


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in some instances. VA will use 

matching programs with other 

government agencies to determine 

whether an asset transfer constituted 

transfer of a covered asset. In 

accordance with § 3.277(a), VA may in 

its discretion require documentation. 

This requirement for document 

production is permissive on the part of 

VA. Not every case will warrant such 

documentation. We make no changes 

based on such comments. 

One commenter asked how VA would 

determine the uncompensated value of 

an asset under § 3.276, and who within 

VA will make these determinations. The 

commenter also wanted to know if VA 

will conduct application review 

conferences like Medicaid, and if so, 

who will conduct the conferences. VA 

has no plans to conduct application 

review conferences under this final rule. 

Rather, VA adjudicators will render 

determinations on value based on the 

best available information, though they 

will generally accept, as true, statements 

that claimants make on their application 

forms, unless there is reason to question 

the statements. We make no change 

based on the comment. 

One commenter stated that VA does 

not have educated staff members who 

are able to estimate property values and 

that the rulemaking gives VA claims 

processors the ability to approve or 

disapprove pension claims based on the 

claims processor’s personal assumption 

of value. We disagree. Final § 3.276(a)(4) 

defines ‘‘fair market value’’ as the price 

at which an asset would change hands 

between a willing buyer and willing 

seller who are under no compulsion to 

buy or sell and who have reasonable 

knowledge of relevant facts, and further 

states that VA will use the best available 

information to determine fair market 

value, such as inspections, appraisals, 

public records, and the market value of 

similar property, if applicable. We 

believe the final rule makes it clear that 

VA does not rely on the personal 

assumptions of a claims processor to 

value assets and, as previously 

mentioned, claims processors have the 

authority, under 38 U.S.C. 1506 and 38 

CFR 3.277(a), to request additional 

information when a claimant’s estimate 

of property values is suspect. VA 

declines to make any changes based on 

the comment. 

One commenter took issue with our 

proposal to use the best available 

information to determine fair market 

value, such as inspections, appraisals, 

public records, and market value of 

similar property, if applicable. The 

commenter apparently interpreted this 

to mean that VA would be hiring third 

parties to provide such information. 

This interpretation is not accurate, and 

VA has no intention of hiring nongovernmental employees to research 

property values. As indicated above, the 

use of independent sources to assist VA 

in determining asset values, when 

necessary, is longstanding VA policy 

authorized by statute and regulation, 

and no change is warranted based on 

the comment. 

One commenter stated that applicants 

for DIC should not have to disclose asset 

transfers on VA Form 21P–534, 

Application for Dependency and 

Indemnity Compensation, Survivors 

Pension and Accrued Benefits by a 

Surviving Spouse or Child (Including 

Death Compensation if Applicable). The 

commenter also expressed belief that 

DIC and survivors pension applications 

should be separate forms. As stated 

above, in the information regarding 

needs-based benefits, this final rule 

applies only to needs-based benefits; 

and DIC for surviving spouses and 

children is not a needs-based benefit. 

We also understand the commenter’s 

view that DIC and survivors pension 

should be separate applications; 

however, 38 U.S.C. 5101(b)(1) provides 

that, for surviving spouses and children, 

a claim for DIC must also be considered 

a claim for survivors pension, and a 

claim for survivors pension must also be 

considered a claim for DIC. (Either 

claim must also be considered a claim 

for accrued benefits.) Accordingly, we 

make no changes based on this 

comment. 

One commenter noted our mistake in 

the preamble of the proposed rule, with 

respect to the beginning date of the 

penalty period. In the preamble, we 

said, ‘‘[u]nder proposed § 3.276(e)(2), 

the penalty period would begin on the 

date that would have been the payment 

date of an original or new pension 

award if the claimant had not 

transferred a covered asset and the 

claimant’s net worth had been within 

the limit.’’ 80 FR 3849. This was an 

error because proposed § 3.276(e)(2) 

actually provided that the penalty 

period would begin on the first day of 

the month that follows the date of the 

last transfer. 80 FR 3861. No changes are 

necessary in this regard because the 

proposed regulatory text correctly stated 

the rule and is more advantageous to 

claimants than the erroneous preamble 

statement. 

F. Discussion of Public Comments 

Regarding Deductible Medical Expense 

Provisions 

We received almost 300 comments 

that pertained to our proposed medical 

expense provisions. Many predicted 

dire consequences if the proposed 

regulations were to be implemented, 

including forcing claimants into nursing 

homes and onto Medicaid, thus 

increasing costs to taxpayers, creating 

unfunded mandates to States, affecting 

small businesses (such as care facilities), 

and forcing seniors to avoid seeking care 

or taking prescribed medications due to 

lack of affordability. Based on some of 

these comments as well as our own 

internal administrative review, this final 

rule reflects a number of changes from 

the proposed rule that we believe will 

allay most, if not all, of the commenters’ 

concerns. 

1. Deductible Medical Expenses for InHome Care Attendants, Care Facilities 

Other Than Nursing Homes, and 

Custodial Care 

Statute permits VA to deduct amounts 

paid by a veteran, veteran’s spouse, or 

surviving spouse or by or on behalf of 

a veteran’s child for unreimbursed 

medical expenses, to the extent that 

such amounts exceed 5 percent of the 

maximum annual rate of pension 

(including any amount of increased 

pension payable on account of 

dependents, but not including any 

amount of pension payable because a 

person is in need of regular aid and 

attendance or because a person is 

permanently housebound) payable to 

such veteran, surviving spouse, or child. 

See 38 U.S.C. 1503(a)(8). For parents’ 

DIC purposes, VA ‘‘may provide by 

regulation for the exclusion from 

income under [section 1315] of amounts 

paid by a parent for unusual medical 

expenses.’’ 38 U.S.C. 1315(f)(3). 

Neither statute defines ‘‘medical 

expenses.’’ As we mentioned in the 

preamble of the proposed rule, there is 

currently no regulation that adequately 

defines ‘‘medical expenses’’ for VA 

purposes—i.e., for purposes of the 

medical expense deduction from 

countable income for VA needs-based 

benefit calculations. See 80 FR 3850. 

VA’s primary guidance on the topic was 

issued in October 2012 as Fast Letter 

12–23, Room and Board as a Deductible 

Unreimbursed Medical Expense. 

Multiple commenters mentioned this 

fast letter in their comments, discussed 

further below. 

2. Definitions for Medical Expense 

Deduction Purposes 

We received many comments 

pertaining to our definitions of various 

terms, including custodial care, health 

care provider, ADLs, and IADLs. We 

first defined a health care provider to 

mean an individual licensed by a State 

or country to provide health care in the 

State or country in which the individual 

provides the health care, as well as a 


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nursing assistant or home health aide 

who is supervised by such a licensed 

health care provider. Some commenters 

asked us to remove the supervision or 

licensing requirements. We make no 

changes based on these comments. In 

our view, it is essential that health care 

providers be appropriately licensed. To 

the extent these comments are based on 

confusion regarding when VA requires 

an attendant to be a health care 

provider, we note here that in-home 

attendants are not often required to be 

health care providers. Paragraph (d) of 

final § 3.278, discussed below, makes 

this clear. 

Numerous commenters urged us to 

expand our definition of ADLs. Some 

commenters suggested that we use the 

definition of ADLs from the Medicare 

Benefit Policy Manual which is 

referenced in Fast Letter 12–23. The 

Medicare Benefit Policy Manual, which 

provides that custodial care is not 

covered under Medicare, describes 

activities of daily living as including, for 

example, ‘‘assistance in walking, getting 

in and out of bed, bathing, dressing, 

feeding, and using the toilet, 

preparation of special diets, and 

supervision of medication that usually 

can be self-administered.’’ Medicare 

Benefit Policy Manual, Chapter 16— 

General Exclusions from Coverage, 

https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/ 

Downloads/bp102c16.pdf (last visited 

Feb. 2018). The purpose of this 

particular reference in the Medicare 

Benefit Policy Manual is to describe 

custodial care, in general terms, rather 

than to define ADLs. This reference 

does not distinguish between ADLs and 

IADLs. We reviewed 33 regulations in 

the Code of Federal Regulations that 

pertained to ADLs. Ten of these were in 

VA’s title 38. The other 23 were in titles 

7, 20, 24, 29, 32, 42, and 45. We also 

reviewed other sources. A 1963 study 

limited ADLs to ‘‘bathing, dressing, 

going to the toilet, transferring, 

continence, and feeding.’’ Sidney Katz, 

et al., ‘‘Studies of Illness in the Aged, 

The Index of ADL: A Standardized 

Measure of Biological and Psychosocial 

Function,’’ Journal of the Am. Med. 

Assoc., Vol. 185, No. 12, 914–919 (Sept. 

21, 1963). The IADLs were added later. 

Since that time, health, insurance, and 

governmental agencies have used these 

definitions for various purposes. There 

is now considerable variation between 

sources with respect to the activities 

included as an ADL. After further 

consideration, we have added, in 

§ 3.278(b)(2), ‘‘ambulating within the 

home or living area’’ to our list of ADLs. 

This addition is consistent with the U.S. 

Census Bureau’s Survey of Income and 

Program Participation, which lists the 

following ADLs: ‘‘difficulty getting 

around inside the home, getting in/out 

of a bed/chair, bathing, dressing, eating, 

and toileting.’’ https://www.census.gov/ 

topics/health/disability.html (last 

visited Feb. 2018). Other governmental 

regulations also include mobility or 

ambulation to some extent. See 7 CFR 

1944.252; 32 CFR 728.4(h); 38 CFR 

51.120(b)(1); 38 CFR 52.2; 38 CFR 71.15; 

42 CFR 409.44(c)(1)(iv); 42 CFR 

483.25(c). 

Several commenters asked us in 

particular to define ‘‘handling 

medications’’ as an ADL instead of an 

IADL. Although we decline to do this, 

we note here that there is a difference 

between ‘‘medication administration’’ 

and other sorts of assistance with taking 

medications such as medication 

reminders. Medication administration, 

if performed by a health care provider, 

would be a health care expense under 

§ 3.278(c)(1). A medication reminder 

from a provider who is not a health care 

provider would not be a medical 

expense unless the individual requires 

custodial care and the provisions of 

final § 3.278(d) apply. 

Many commenters also urged us to 

include IADLs in the definition of ADLs 

or, similarly, to include IADLs alone as 

medical expenses. We note that the final 

rule liberalizes the circumstances in 

which payment for assistance with 

IADLs constitutes a medical expense, as 

discussed below. We believe this 

obviates the commenters’ concerns 

without the need for changing 

definitions in this regard. We have, 

however, made one change to our list of 

IADLs based on our further 

administrative review. In the proposed 

rule, we proposed to exclude as an 

IADL, and as a medical expense under 

proposed paragraph (e)(5), fees paid to 

a VA-appointed fiduciary. See 80 FR 

3850. Upon further review, we have 

determined that no statute precludes the 

use of such fees as an IADL. Therefore, 

we removed the last sentence of 

proposed § 3.278(b)(3), ‘‘Managing 

finances does not include services 

rendered by a VA-appointed fiduciary.’’ 

In addition, we removed proposed 

paragraph (e)(5), which provided that 

fees for VA-appointed fiduciary services 

are not medical expenses. We also 

amended the introductory paragraph of 

§ 3.278(e) to refer to paragraphs (e)(1) 

through (4) instead of (e)(1) through (5). 

We received a number of comments 

regarding our definition of ‘‘custodial 

care’’ and we have made changes. The 

commenters believed that the proposed 

rule unfairly excluded, as a medical 

expense, payments for the care of 

individuals with dementia. Many of 

these commenters said that such 

individuals would no longer qualify, 

because they may not require assistance 

with two ADLs. Other comments stated 

that physical disorders should be 

included. We agree. Final 

§ 3.278(b)(4)(ii) includes physical, 

developmental, and cognitive disorders 

along with mental disorders. 

Further, we received several 

comments from individuals who were 

concerned that the language used in 

proposed § 3.278(b)(4)(ii) (requiring 

‘‘regular . . . [s]upervision because an 

individual . . . is unsafe if left alone’’) 

was too limiting. These commenters 

seemed to read the proposed rule to say 

that the disabled individual could never 

be left alone under any circumstances. 

To avoid such misunderstandings, final 

§ 3.278(b)(4)(ii) now includes 

supervision ‘‘to protect the individual 

from hazards or dangers incident to his 

or her daily environment,’’ the same 

phrase used in 38 CFR 3.352(a). 

On that point, several commenters 

appeared to confuse the purpose of 

proposed § 3.278 with the purpose of 38 

CFR 3.351 and 3.352(a). One commenter 

stated that proposed § 3.278 conflicts 

with and ‘‘amends’’ § 3.352. To be clear, 

§§ 3.351 and 3.352(a) provide the 

criteria for determining whether an 

individual is housebound, or requires 

aid and attendance, as well as the 

compensation or pension rate to apply; 

those regulations apply to both needsbased and non-needs-based benefits, 

and do not address income calculations 

or deductions. The purpose of § 3.278 is 

quite different because it describes 

medical expenses that can be deducted 

from income for pension, parents’ DIC, 

and section 306 pension. (These are the 

only VA needs-based benefits for which 

deductible medical expenses may be 

used to reduce income.) Because the 

purpose of § 3.278 differs from that of 

§§ 3.351 and 3.352(a), it is not essential 

for § 3.278 to precisely mirror §§ 3.351 

and 3.352(a). Nevertheless, there is 

some value in consistent terminology 

across part 3, and the changes in this 

final rule to proposed § 3.278(b)(4)(ii) 

provide that. 

One commenter believed that needing 

regular assistance with only one ADL 

could constitute custodial care. We 

make no change based on this comment. 

We continue to believe that two ADLs 

is appropriate, particularly given the 

fact that we have expanded the 

definition of ADLs to include an 

additional ADL and have added 

additional types of disorders to the 

definition of custodial care. The final 

definition of custodial care, 

§ 3.272(b)(4), is regular (i) assistance 


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with two or more ADLs, or (ii) 

supervision because an individual with 

a physical, mental, developmental, or 

cognitive disorder requires care or 

assistance on a regular basis to protect 

the individual from hazards or dangers 

incident to his or her daily 

environment. Combined with the 

further changes discussed below, if an 

individual is shown to require regular 

assistance to be protected from hazards 

or dangers incident to his or her daily 

environment due to a physical, mental, 

developmental, or cognitive disorder, 

then assistance with ADLs or IADLs 

from an in-home care attendant or 

within a care facility is a medical 

expense. 

Multiple commenters discussed the 

wide variation among States with 

respect to ‘‘assisted living facility,’’ 

‘‘independent living facility,’’ and other 

facility types, both in terms of the type 

of care provided and licensure 

requirements. We agree with the 

commenters who emphasized that the 

medical expense deduction should be 

contingent on the sort of care the 

disabled individual is receiving in the 

facility and the necessity for the 

individual to be there—not the name of 

the facility. For this reason, we have 

revised the term and definition used for 

these facilities. The term proposed at 

§ 3.278(b)(8), ‘‘Assisted living, adult day 

care, or similar facility,’’ is now ‘‘[c]are 

facility other than a nursing home’’ and 

defined in final § 3.278(b)(7) to mean ‘‘a 

facility in which a disabled individual 

receives health care or custodial care 

under the provisions of paragraph (d) of 

this section.’’ Such a facility must be 

licensed if facilities of that type are 

required to be licensed in the State or 

country in which the facility is located. 

The regulation also provides that a 

facility that is residential must be 

staffed 24 hours per day with care 

providers and that the providers do not 

have to be licensed health care 

providers. 

Our proposed definition at 

§ 3.278(b)(8) required residential 

facilities to be staffed 24 hours per day 

with ‘‘custodial care providers.’’ Several 

commenters urged us to clarify whether 

such providers were required to be 

licensed health care providers. The final 

rule, in § 3.278(b)(7), does not use the 

term ‘‘custodial care provider’’ and, as 

noted above, clarifies that these 

providers do not have to be licensed 

health care providers. 

We made two additional changes to 

the definitions section; these are 

discussed in the information pertaining 

to institutional forms of care. 

3. Institutional Forms of Care and Fast 

Letter 12–23 

As mentioned above, in October 2012, 

VA issued Fast Letter 12–23 to its field 

stations in order to clarify and address 

inconsistencies that had arisen in VA’s 

procedures manual, particularly with 

respect to when room and board in a 

facility could be considered a 

deductible medical expense. Numerous 

commenters wrote that Fast Letter 12– 

23 was more liberal in many respects 

than the proposed rule and urged us to 

incorporate these aspects of the fast 

letter in this final rule. We agree and 

have significantly revised § 3.278(d)(3) 

in the following ways: 

The title of the paragraph is now 

‘‘Care facilities other than nursing 

homes’’ instead of ‘‘Assisted living, 

adult day care, and similar facilities,’’ 

consistent with final § 3.278(b)(7). By 

not mentioning any particular facility 

type in the title, we hope to avoid the 

impression that we are not allowing 

payments made to certain facilities 

based on the name of the facility. As 

mentioned above, we are focusing on 

the care that the individual receives 

within the facility and the need for the 

individual to be in the facility rather 

than the facility name. 

Final paragraph (d)(3) provides 

clearly that care ‘‘in a facility’’ may be 

provided by the facility, contracted by 

the facility, obtained from a third-party 

provider, or provided by family or 

friends. Many commenters urged us to 

make this clarification. This provision is 

consistent with Fast Letter 12–23, 

although the fast letter did not address 

family or friends. Fast Letter 12–23 

spoke only to contracts that a claimant 

made with third-party providers. 

However, we heard from a number of 

commenters telling us that their loved 

one needed to live in a facility to receive 

care provided by a third party or by 

family or friends and we agree that this 

is reasonable. 

One commenter expressed extreme 

dismay that we would permit thirdparty contractors to provide the care, 

believing this would lead to 

‘‘warehousing’’ veterans in nongovernment facilities. We disagree. We 

believe that it is appropriate to allow 

veterans and their survivors to receive 

care in a facility or from a provider of 

their choice. We make no changes based 

on the comment. 

The ‘‘general rule,’’ now found at 

paragraph (d)(3)(ii), simply provides 

that payments for health care provided 

by a health care provider are medical 

expenses. We stress that this rule 

applies to all individuals in a care 

facility, including those who do not 

need A&A, are not housebound, do not 

require custodial care, and do not need 

to be in a protected environment. We 

moved assistance with ADLs to final 

§ 3.278(d)(3)(iii), which now 

incorporates IADLs and is discussed 

below. We note that this general rule is, 

in fact, no different from § 3.278(c)(1), 

which simply states that payments to a 

health care provider for services 

performed within the scope of the 

provider’s professional capacity are 

medical expenses. 

Final paragraph (d)(3)(iii) 

incorporates the intent of Fast Letter 12– 

23 by stating that the provider does not 

need to be a health care provider, and 

that payments for assistance with ADLs 

and IADLs are medical expenses, if the 

disabled individual is receiving health 

care or custodial care in the facility and 

either: (A) Needs A&A or is 

housebound; or (B) a physician, 

physician assistant, certified nurse 

practitioner, or clinical nurse specialist 

states in writing that, due to a physical, 

mental, developmental, or cognitive 

disorder, the individual has a need to be 

in a protected environment. This is a 

liberalization from proposed paragraph 

(d)(3), which would have required a 

veteran or a surviving spouse (or parent 

for parents’ DIC purposes) to be in need 

of A&A or to be housebound in order for 

VA to consider certain medical 

expenses as deductible; the physician’s 

or physician assistant’s statement option 

was only for dependents and other 

relatives. Fast Letter 12–23, however, 

permits the ‘‘physician’s statement’’ 

option for veterans and surviving 

spouses as well. We determined that the 

‘‘physician’s statement’’ option should 

be permitted for veterans and surviving 

spouses because not doing so could 

mean that veterans and surviving 

spouses might be subject to a higher 

level of disability requirement than their 

dependents and relatives for their ADL 

and IADL assistance payments to be 

authorized as medical expenses. Also 

regarding the ‘‘physician’s statement’’ 

option, which previously only included 

physicians and physician assistants, this 

final rule expands this option to include 

certified nurse practitioners and clinical 

nurse specialists as well. We recognize 

that a claimant’s primary medical 

provider may not be a physician or 

physician assistant. 

On this issue, one commenter stated 

that the rule should be modified to 

eliminate the need for a statement from 

a physician or physician assistant that 

‘‘due to physical or mental disability, 

the qualified relative requires the health 

care services or custodial care that the 

in-home attendant provides.’’ The 

commenter opined this is burdensome 


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and potentially demeaning to a person 

with disabilities. However, as another 

commenter pointed out, there are two 

groups of individuals who avail 

themselves of the services provided by 

independent living (or similar) facilities: 

Those who are there for convenience 

and those who are there for necessity. 

We agree with this latter comment; VA 

must have a way to distinguish between 

these groups. We do not believe the 

requirement for a statement is overly 

burdensome, particularly inasmuch as 

we have expanded qualified signers of 

such statements to physicians, 

physician assistants, certified nurse 

practitioners, and clinical nurse 

specialists. The requirement is in no 

way intended to be demeaning. 

We have amended proposed 

paragraph (d)(3)(i)(B) to now provide, in 

final paragraph (d)(3)(iv), that payments 

for meals and lodging, as well as 

payments for other facility expenses not 

directly related to health or custodial 

care, are medical expenses when either 

of the following are true: (A) The facility 

provides or contracts for health care or 

custodial care for the disabled 

individual; or (B) a physician, physician 

assistant, certified nurse practitioner, or 

clinical nurse specialist states in writing 

that the individual must reside in the 

facility (or a similar facility) to 

separately contract with a third-party 

provider to receive health care or 

custodial care or to receive (paid or 

unpaid) health care or custodial care 

from family or friends. This change is 

consistent with Fast Letter 12–23; 

however, as noted above, we are 

including family and friends. 

Final paragraphs (d)(3)(iii) and (iv) 

also differ from proposed paragraph 

(d)(3)(i)(B) by eliminating the proposed 

‘‘primary reason’’ requirement. The 

proposed rule stated that medical 

expenses included all payments to the 

facility when the ‘‘primary reason’’ for 

the individual to be in the facility was 

to receive health care or custodial care. 

We agree with the many commenters 

who said the proposed provision was 

too restrictive. We believe these 

liberalizing changes satisfy the 

commenters’ concerns. 

Consistent with our revisions to 

paragraph (d)(3) described above as well 

as to our revisions to paragraph (d)(2) 

described below, we have made two 

additional changes to the definitions 

section. First, we have removed 

proposed § 3.278(b)(5), the definition for 

‘‘qualified relative,’’ and renumbered 

§ 3.278(b) accordingly. Under this final 

rule, it is no longer necessary to define 

a qualified relative. We previously 

proposed, at 80 FR 3850, to define a 

qualified relative because we were 

distinguishing between (A) veterans, 

surviving spouses, and parents’ DIC 

claimants, versus (B) other individuals, 

when it came to the ‘‘physician’s 

statement’’ option. We no longer need 

the definition because under this final 

rule, as noted above, we have liberalized 

the requirements to allow any disabled 

individual to utilize the type of 

physician’s statement that had been 

proposed solely for qualified relatives. 

We emphasize that the deletion of the 

definition of ‘‘qualified relative’’ in no 

way limits the scope of the individuals 

whose medical expenses VA may 

deduct. 

Second, we added a definition of 

‘‘needs A&A or is housebound’’ as final 

§ 3.278(b)(8), to simplify the rest of the 

regulation and to account for another 

type of individual whom VA may 

determine to need aid and attendance. 

As briefly mentioned above, in the 

section titled ‘‘Terminology 

Clarifications Regarding VA Pension 

and Other VA Needs-Based Benefits,’’ 

VA pays a higher disability 

compensation (i.e., service-connected) 

rate to veterans when the veteran’s 

spouse needs aid and attendance. 

Usually, disability compensation is a 

greater benefit than pension but 

sometimes it is not. VA generally pays 

the greater benefit automatically, but 

veterans always have the option of 

choosing whether they wish to receive 

pension or compensation. It may be the 

case that a veteran who is entitled to 

compensation may have a spouse who 

needs aid and attendance and that 

veteran may have chosen to receive 

pension instead of compensation. 

(Veterans must have service-connected 

conditions rated at least 30 percent 

disabling to receive additional 

compensation for dependents. See 38 

U.S.C. 1115.) These spouses were not 

included in the proposed rule but they 

are included in VA’s procedures manual 

and should be here, as well. Therefore, 

our definition of ‘‘needs A&A or is 

housebound’’ refers to a disabled 

individual who meets the criteria in 

§ 3.351 for needing regular aid and 

attendance (A&A) or being housebound 

and is a veteran; surviving spouse; 

parent (for parents’ DIC purposes); or 

spouse of a living veteran with a 

service-connected disability rated at 

least 30 percent disabling, who is 

receiving pension. 

Consistent with these changes, this 

final rule does not include proposed 

§ 3.278(e)(3), which previously stated 

that VA does not consider payments for 

meals and lodging to facilities that do 

not provide health care services or 

custodial care to be medical expenses. 

Instead, final § 3.278(d)(3)(iv)(B) allows 

for those payments to be medical 

expenses if specified individuals attest 

that the individual must reside in the 

facility to separately contract with a 

third-party provider to receive health 

care or custodial care or to receive such 

care from family and friends. 

4. In-Home Care 

Numerous commenters expressed 

their opinion that our proposal, at 

§ 3.278(d)(2), to limit the deductible 

hourly rate for in-home attendants was 

a bad idea for many reasons: (1) It is 

patently unfair to set a national average 

as a limit, so there must be a 

geographical component; (2) using an 

average does not take into consideration 

overtime or holiday time; (3) there was 

no cap proposed on facility costs; (4) the 

proposed limit was far too low and 

based on an outdated source (the 

MetLife Mature Market Institute no 

longer produces its Market Survey of 

Long-Term Care Costs); and (5) the 

authorizing statute (38 U.S.C. 

1503(a)(8)) does not permit VA to set a 

limit on the medical expense amount. 

While we disagree with this comment 

regarding our authority, we agree with 

many of the other commenters, and the 

final rule does not include a limit to the 

hourly rate of in-home care. We have 

also removed the last sentence of 

proposed § 3.278(d)(2), which referred 

to the website where VA would publish 

the hourly rate limit. Several 

commenters suggested alternative inhome care limits such as the Genworth 

Cost of Care Survey or using 150 percent 

of the limit we proposed. We make no 

changes based on these suggestions 

because we have removed the in-home 

care hourly rate limit at this time, and 

we will consider whether we should 

revisit the issue in a future rulemaking. 

One commenter urged us to ‘‘consider 

adding language to the final rule that 

would ensure greater protection for 

veterans to ensure they are not open to 

potential liability through the 

employment of a registry model of home 

care.’’ They urged us to require that all 

home care providers employ their home 

care workforce and thus train, bond, and 

withhold taxes for their employees. 

They went on to point out that some 

home care providers are simply staffing 

agencies that link a senior or disabled 

individual with an independent 

contractor who comes into the home 

without the training or insurance 

needed to provide real protections for 

the claimant. They believe VA should 

require the home care provider to 

employ their workforce rather than 

using independent contractors in an 

effort to eliminate the burden of 

potential liability. We decline to 


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implement such a requirement at this 

time. We do not believe that this type 

of provision would be a logical 

outgrowth of our proposed rule. 

The final rule, regarding in-home 

attendants, is much simpler than the 

proposed rule, consistent with the 

changes we made to the care facility 

provisions, and for many of the same 

reasons: 

(1) The final rule at § 3.278(d)(2) 

provides that payments for assistance 

with ADLs and IADLs by an in-home 

attendant are medical expenses, as long 

as the attendant provides the disabled 

individual with health care or custodial 

care. The proposed rule would not have 

considered payments for IADLs to be a 

medical expense for a veteran or 

surviving spouse (or parent for parents’ 

DIC) unless the claimant needed A&A or 

was housebound and providing health 

care or custodial care was the ‘‘primary 

responsibility’’ of the attendant. 

(2) The final rule at § 3.278(d)(2)(i) 

and (ii) provides that the attendant must 

be a health care provider, unless the 

disabled individual needs A&A or is 

housebound, or a physician, physician 

assistant, certified nurse practitioner, or 

clinical nurse specialist states in writing 

that due to a physical, mental, 

developmental, or cognitive disorder, 

the individual requires the health care 

or custodial care that the in-home 

attendant provides. The proposed rule 

did not permit a ‘‘doctor’s statement’’ 

option for veterans, surviving spouses, 

or parents’ DIC claimants. 

5. Other Deductible Medical Expense 

Matters 

Numerous commenters urged us to 

provide a ‘‘grandfathering provision’’ for 

our proposed changes to institutional 

care and in-home care provisions. 

Although we do not believe that the 

final rule necessitates such a provision, 

we are providing one because we have 

no desire or intent to harm or displace 

any person. We do not want to take a 

chance that previous guidance might 

have been interpreted more liberally 

than this final rule, in any individual 

case. Some commenters, who were 

residing in independent living facilities, 

expressed hesitation to submit a 

medical expense deduction claim for 

eyeglasses, for example, for fear that VA 

would re-consider and disallow their 

existing care facility expenses. We want 

to allay any concern or fear in this 

regard. Therefore, the final rule 

provides, in an introductory paragraph 

of final § 3.278(d), that paragraph (d), 

which pertains to institutional forms of 

care and in-home care, applies with 

respect to unreimbursed medical 

expense claims for institutional forms of 

care or in-home care received on or after 

October 18, 2018 that VA has not 

previously granted. Previous medical 

expense grants pertaining to 

institutional or in-home care made 

before that date would continue unless 

the claimant moves to a different facility 

or employs a different in-home 

attendant or in-home care agency. 

In paragraph (c) of proposed § 3.278, 

we provided that ‘‘[g]enerally, medical 

expenses for VA needs-based benefit 

purposes are payments for items or 

services that are medically necessary or 

that improve a disabled individual’s 

functioning.’’ One commenter pointed 

out that such a provision effectively 

restricts payments for medical expenses 

when no improvement is anticipated, 

such as hospice care. To clarify this 

provision, final § 3.278(c) provides that 

medical expenses for VA needs-based 

benefit purposes are payments for items 

or services ‘‘that are medically 

necessary; that improve a disabled 

individual’s functioning; or that 

prevent, slow, or ease an individual’s 

functional decline.’’ 

The same commenter noted that we 

had not included payments for 

Medicare Part A in § 3.278(c)(5). Most 

individuals in the U.S. qualify for free 

Part A benefits; however, a small 

number purchase this benefit. Although 

§ 3.278(c)(5) would not have prohibited 

deducting Part A payments as a medical 

expense, we agree that for the sake of 

clarity and completeness Part A 

payments should be included, and we 

have added it in the final rule. 

One commenter requested that we 

include, as a medical expense, any 

expense made necessary due to a 

claimant’s medical condition or 

disability, such as a heated blanket to 

regulate body temperature for a veteran 

with quadriplegia; cranberry juice to 

prevent urinary tract infections for a 

veteran with a spinal cord injury; or 

home modifications to allow disabled 

individuals to live safely in the 

community. We make no changes based 

on this comment. Although we are 

sympathetic and understand the 

impetus behind this suggestion, it is 

longstanding VA policy not to consider 

such expenses to be deductible medical 

expenses. VA’s procedures manual 

provides, ‘‘Mechanical and electronic 

devices that compensate for disabilities 

are deductible medical expenses to the 

extent that they represent expenses that 

would not normally be incurred by 

nondisabled persons. Do not allow a 

medical expense deduction for 

equipment that would normally be used 

by a nondisabled person, such as an air 

conditioner or automatic transmission.’’ 

M21–1MR, V.iii.1.G.43.k (May 20, 

2011). We believe this policy is 

consistent with common understanding 

of medical expenses and have decided 

to continue that policy. 

One commenter found it unjust that 

proposed paragraph (c)(4) does not take 

into consideration higher mileage rates 

in certain geographical areas when 

calculating mileage for medical 

purposes. As previously stated in this 

document, statutory MAPRs are also not 

adjusted by locality. For its mileage 

rates, VA uses the privately owned 

vehicle mileage reimbursement rates 

provided by the U.S. General Services 

Administration, which we believe is a 

reasonable and fair standard. We make 

no changes based on the comment. 

G. Discussion of Public Comments 

Regarding Income and/or Income and 

Asset Exclusions 

We now address comments we 

received regarding exclusions from 

income or income and assets (or 

‘‘corpus of the estate’’ for parents as 

dependents and section 306 pension). In 

38 CFR part 3, there are currently three 

regulations that address exclusions from 

income, §§ 3.261, 3.262, and 3.272, and 

this rulemaking adds a fourth, § 3.279. 

There are also currently three 

regulations that address exclusions from 

assets, §§ 3.261, 3.263, and 3.275, and 

this rulemaking adds a fourth, § 3.279. 

The reason for so many regulations is 

that sometimes a statutory exclusion is 

written in such a way that the exclusion 

applies to all VA needs-based benefits; 

however, sometimes a statutory 

exclusion is written in such a way that 

the exclusion applies only to some VA 

needs-based benefits. Sections 3.261 

and 3.262 apply only to: (1) Parents as 

dependents for compensation purposes; 

(2) parents’ DIC; and (3) section 306 

pension and old-law pension, which are 

VA’s previous and largely obsolete 

pension programs. Section 3.263, also 

largely obsolete, applies only to parents 

as dependents for compensation 

purposes and to section 306 pension. 

Sections 3.272 and 3.275 apply only to 

current-law pension. Section 3.279 will 

apply to all VA needs-based benefits 

(parents as dependents, parents’ DIC, 

section 306 pension, old-law pension, 

and pension under the current law). 

This part of the preamble applies to all 

comments we received on exclusions 

regardless of where the exclusion is 

listed. 

1. Changes to Exclusions 

One commenter noted that our 

proposed rules did not contain a general 

statutory exclusion, i.e., a ‘‘catch all’’ to 

state that regardless of whether or not an 

exclusion is listed in the applicable 


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regulation, VA will exclude any type of 

payment that is excluded by statute. We 

agree that such a general exclusion is 

necessary and the final rule amends 

§§ 3.261, 3.262, 3.263, 3.272, and 3.275 

to provide one, and we have added one 

to final § 3.279. 

Two commenters noted that we failed 

to list in § 3.279 that Federal income tax 

refunds are excluded income. They are 

also excluded from resources (i.e., 

assets) for one year after receipt. We 

have made this addition to final 

§§ 3.261, 3.262, and 3.272, and final 

§ 3.279 lists this exclusion at paragraph 

(e)(1). We have also renumbered 

proposed § 3.279(e)(1) through (8) as 

final § 3.279(e)(2) through (9), 

respectively. 

This final rule does not include 

proposed § 3.272(k), under which only 

the interest component of annuity 

payments would have counted as 

income in certain situations. See 80 FR 

3857. One commenter stated that 38 

U.S.C. 1503 does not permit VA to 

count a partial payment. The same 

commenter stated that, as written, the 

proposed addition would be very 

difficult to implement because often it 

is impossible to calculate the amount of 

interest in an annuity payment due to 

varying types of annuities. Other 

commenters argued there is no way to 

determine the interest component of an 

annuity. Additional commenters 

questioned why income from an annuity 

purchase worthy of a penalty would 

only count in part. Although some 

commenters liked the exclusion, 

commenters also noted confusion and 

conflict between this exclusion and the 

proposed net worth and asset transfer 

provisions. 

On further review, proposed 

§ 3.272(k) was in conflict with several 

VA precedential General Counsel 

opinions, which provide that 

distributions from individual retirement 

accounts (IRAs) and annuities are 

income for purposes of VA’s needsbased benefits. See VAOPGCPREC 

2–2010, VAOPGCPREC 1–97, 

VAOPGCPREC 1–93, and 

VAOPGCPREC 23–90. As noted in those 

opinions, 38 U.S.C. 1503(a) provides 

that ‘‘all payments of any kind or from 

any source (including . . . retirement or 

annuity payments . . .),’’ shall be 

considered income unless expressly 

excluded by statute. In consideration of 

the comments received and the rationale 

contained in the Office of the General 

Counsel opinions, this final rule does 

not include proposed § 3.272(k). Final 

§ 3.272(k) was previously proposed as 

§ 3.272(r). Final § 3.272(r) consists of the 

income tax return exclusion discussed 

above. 

Final § 3.279 includes some 

corrections and a clarification, in 

addition to the ‘‘catch all’’ statutory 

exclusion of paragraph (a), and the 

income tax return exclusion of 

paragraph (e)(1). We have changed the 

title of paragraph (a) from ‘‘Scope of 

section’’ to ‘‘Statutory exclusions not 

countable’’ because we believe the new 

title is more descriptive. Final 

paragraphs (c)(1), (2), and (3) use the 

term ‘‘assets’’ in the first column rather 

than the term ‘‘net worth’’ as proposed. 

Using the previous term was an 

oversight. The actual statutory language 

at 25 U.S.C. 1407 and 1408 is ‘‘income 

or resources’’; however, VA terminology 

for resources is now assets. 

Several commenters noted that our 

proposed rule did not include a 

statutory exclusion found at 38 U.S.C. 

1503(a)(5). The statute excludes 

reimbursements for loss; Public Law 

112–154 added it to 38 U.S.C. 1503 in 

August 2012. We thank the commenters 

for pointing this out and have added 

this exclusion as final § 3.272(s). We 

note that we informed our field stations 

of the exclusion soon after the law 

change. 

2. Other Comments Pertaining to 

Exclusions 

Several commenters referred to a 

statement we made in the preamble of 

the proposed rule that VA counts 

distributions from IRAs as income. See 

80 FR 3854. These commenters opined 

that counting the distributions from 

IRAs as income penalizes those who 

have saved money in an IRA more than 

those who have, for example, saved 

their money in a bank account or 

certificate of deposit. Although we 

understand this concern, our 

rulemaking may not contradict the 

precedential General Counsel opinions 

mentioned above, which came to their 

conclusion after a thorough analysis of 

the legislative history of the pension 

program. One commenter specifically 

argued that the principal of an IRA 

should not count as an asset. However, 

38 CFR 3.263(b) defines net worth as all 

real and personal property owned by the 

claimant, except the claimant’s dwelling 

(single family unit), including a 

reasonable lot area, and personal effects 

suitable to and consistent with the 

claimant’s reasonable mode of life, 

which would include funds in an IRA. 

Once the principal in an IRA is 

accessible without penalty, it would 

count as an asset that would be reduced 

with any distributions, and any 

distributions from that account would 

count as income. Therefore, we make no 

changes based on such comments. 

One commenter noted that our 

proposed rule did not amend § 3.272(e) 

to incorporate the decision of the United 

States Court of Appeals for Veterans 

Claims (Veterans Court) in Osborn v. 

Nicholson, 21 Vet. App. 223 (2007), 

which held that interest received from 

the redemption of a Series EE U.S. 

Savings Bond is excludable from 

income in determining annual income 

for improved pension (i.e., current-law 

pension) purposes. VA is bound by 

Osborn and has issued a precedential 

General Counsel opinion, 

VAOPGCPREC 2–2010, addressing the 

Veterans Court’s holding. But we 

decline to explicitly incorporate that 

holding into § 3.272(e) at this time, 

because (1) that paragraph’s current 

language and Osborn are not in conflict, 

and (2) such an amendment in the final 

rule would deprive interested parties 

the opportunity to meaningfully 

comment. 

One commenter took issue with the 

income exclusions located at proposed 

§ 3.279(c)(1), (2), (3), and (6). These 

exclude from income payments to 

American Indians of up to $2,000 per 

year received from Tribal Judgment 

Fund distributions, interests in trust or 

restricted lands, or per capita 

distributions, as well as cash payments 

to Alaska Natives of up to $2,000 per 

year received from the Alaska Native 

Claims Settlement Act. The commenter 

disagreed with the $2,000 cap on such 

payments. We make no change based on 

this comment because the $2,000 cap is 

statutory. See 25 U.S.C. 1407, 1408; 43 

U.S.C. 1626(c). 

One commenter stated that there 

should not be a cap on the exclusion at 

proposed § 3.272(r), which incorporates 

a statutory income exclusion found at 

38 U.S.C. 1503(a)(11). The exclusion, 

now incorporated in this final rule at 

§ 3.272(k), provides that VA will 

exclude up to $5,000 per year that a 

State or municipality pays to a veteran 

as a veterans’ benefit due to injury or 

disease. Because the statute specifically 

provides for the $5,000 cap, no change 

is warranted based on the comment. 

One commenter opined that our 

proposed exclusion at § 3.279(b)(1) is 

erroneous because it ‘‘is inconsistent 

with 25 U.S.C. 1408’’ and because 

‘‘relocation payments under 25 U.S.C. 

1408 are treated as assets.’’ We make no 

change because the statute cited, section 

1408, pertains to interests of American 

Indians in trusts or restricted lands and 

is listed in § 3.279(c)(2), where we note 

such payments are excluded from 

income (up to $2,000 per year) and 

assets. 

However, the commenter goes on to 

quote from 42 U.S.C. 4636, which is the 


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basis of the relocation payment 

exclusion listed at § 3.279(b)(1). To the 

extent the commenter is suggesting that 

payments issued pursuant to section 

4636 should be excluded from assets, 

we disagree. The statute’s plain 

language, including its title, is clear that 

payments pursuant to section 4636 are 

excluded from income only. In addition, 

when Congress does not want a 

payment to be considered as either 

income or as an asset, Congress will 

instruct that the payment shall not be 

considered as either income or 

resources. An example of this is 42 

U.S.C. 10602(c) (reclassified as 34 

U.S.C. 20102(c)), which uses all three 

terms (income, resources, and assets). 

Because Congress did not exclude 

relocation payments from resources or 

assets, we make no changes based on 

this comment. 

One commenter opined that payments 

received under the Workforce 

Investment Act of 1998 (29 U.S.C. 

chapter 30) should not be considered an 

asset. This payment type is listed as an 

income exclusion at proposed and final 

§ 3.279(d)(1). Although the authority for 

this exclusion, 29 U.S.C. 2931(a)(2), has 

been moved to 29 U.S.C. 3241(a)(2), the 

statutory text still only excludes these 

payments from income, not assets. 

Therefore, the only change we make 

here is to update the statutory citation. 

Similarly, the same commenter stated 

that payments to AmeriCorps 

participants, listed as an exclusion from 

income at § 3.279(d)(2), should not be 

considered an asset for the 

annualization period in which the 

payment is received. Since the statutory 

authority for this exclusion, 42 U.S.C. 

12637(d), does not authorize the 

exclusion of these payments from assets, 

we make no changes based on this 

comment. 

The same commenter expressed the 

opinion that, if a payment type is 

excluded from income, then it should be 

excluded as an asset during the 

annualization period in which it is 

received. We understand the 

commenter’s point of view; however, 

absent statutory authority, there is no 

reason to suppose that excluding a 

payment from income necessarily 

equates to excluding that payment from 

assets during the annualization period 

in which the payment is received. 

Indeed, if that was Congress’ intent, 

Congress would have made its intent 

known. In 26 U.S.C. 6409, for example, 

Congress plainly stated that the refund 

payment is not to be considered income 

and is not to be considered a resource 

for the annualization period of receipt. 

No such statement is present for the 

statutes pertaining to AmeriCorps or 

Workforce Investment payments. 

Without an instruction from Congress, 

we decline to subtract certain types of 

payments, once received, from assets. 

To the extent this commenter believes 

this practice constitutes doublecounting, we disagree. Double counting 

would be including a payment as 

income and assets in the year of receipt; 

these payments are being excluded from 

income, but included as assets. The 

income exclusion still benefits the 

claimant inasmuch as it affects his or 

her pension rate. 38 U.S.C. 1521. 

One commenter stated that, due to the 

fact that payments from the Retired 

Serviceman’s Family Protection Plan are 

excluded from income, Survivor Benefit 

Plan payments should likewise be 

excluded from income. The Retired 

Serviceman’s Family Protection Plan 

was the Department of Defense (DoD) 

survivor program that was in effect 

before September 21, 1972, which was 

replaced by the Survivor Benefit Plan. 

Payments under the Retired 

Serviceman’s Family Protection Plan are 

specifically excluded under 10 U.S.C. 

1441. There is no similar statutory 

exclusion for the Survivor Benefit Plan 

in 10 U.S.C. chapter 73 or in any other 

statute. See 10 U.S.C. 1450(h). 

Therefore, we make no change based on 

this comment. 

The same commenter stated that life 

insurance payouts provided under the 

Servicemembers’ Group Life Insurance 

(SGLI) and Veterans’ Group Life 

Insurance (VGLI) should be excluded. 

Under 38 U.S.C. 1503(a)(12), the lumpsum proceeds of any life insurance 

policy on a veteran are excluded—but 

only for survivors pension purposes. 

This exclusion is currently located at 

§ 3.272(x) and, as proposed, will be 

relocated to § 3.272(q) by this final rule. 

Given the statute, we make no change 

based on this comment. 

This commenter also stated that death 

transitional payments such as death 

gratuities or ‘‘transitioning child 

allowances’’ should be excluded. The 

death gratuity is a payment that DoD 

pays when a service member dies on 

active duty. Congress has provided for 

the exclusion of the death gratuity for 

parents’ DIC purposes at 38 U.S.C. 

1315(f)(1)(A). It was previously called 

the ‘‘six months’ death gratuity’’ and is 

listed as an exclusion in § 3.261(a)(12). 

However, there is no statutory authority 

to exclude death gratuity payments from 

current-law survivors pension, so we 

make no change based on this comment. 

We note that it would be extremely rare 

for a survivor to receive a death gratuity 

payment and also receive VA survivors 

pension. When a service member dies 

on active duty, his or her survivor is 

generally entitled to receive DIC from 

VA, which is a greater benefit than 

survivors pension. As previously 

discussed, DIC for surviving spouses 

and children is not a needs-based 

benefit and is not part of this final rule. 

Likewise, we believe the 

‘‘transitioning child allowance’’ that the 

commenter mentions is the additional 

DIC amount paid to a surviving spouse 

under 38 U.S.C. 1311(f) when the 

surviving spouse has a child or children 

under the age of 18. A surviving spouse 

receiving DIC and the ‘‘transitioning 

child allowance’’ would not receive VA 

pension, see 38 U.S.C. 5304(a), and 

therefore there would be no need for the 

suggested exclusion for the 

‘‘transitioning child allowance.’’ We 

make no changes based on this 

comment. 

The same commenter noted that 

proposed § 3.279(e)(7) would exclude 

from income and assets the amount of 

student financial assistance received 

under Title IV of the Higher Education 

Act of 1965. The commenter stated that 

this exclusion should cover VA 

education benefits. We note that under 

38 U.S.C. 1503(a)(9), educational and 

vocational rehabilitation expenses for 

books, fees, tuition, and materials are 

deductible from income for pension 

purposes, as are transportation fees in 

certain situations. Therefore, if a veteran 

uses his or her education benefit to pay 

for school and supplies (or allowable 

transportation fees), then the amounts 

paid would be deducted. Similarly, 

when a VA educational benefit is 

payable directly to the school, VA 

considers it received by the veteran and 

then paid to the school, so VA does not 

count it as income. However, if the 

educational benefit includes a stipend 

to pay for living expenses or dormitory 

fees, then such payments are countable 

income for pension. Thus, while there is 

no statute that excludes all VA 

education benefits, portions of 

educational expenses will not count as 

income. VA regulations note this 

exclusion at § 3.272(i). 

The same commenter also noted that 

payments ‘‘under the Atomic 

Commission appear to be missing from 

the list of exclusions.’’ We believe the 

commenter is referring to payments 

under the Radiation Exposure 

Compensation Act of 1990, which are 

excluded from income for current-law 

pension, parents’ DIC, and parents as 

dependents for compensation purposes. 

Such payments are not excluded from 

income for section 306 or old-law 

pension purposes; therefore, the 

exclusion is not listed in § 3.279. Rather, 

this exclusion is listed in the portions 

of §§ 3.261 and 3.262 that apply to 


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parents’ DIC and parents as dependents, 

and it is listed in §§ 3.272 and 3.275 for 

current-law pension. Therefore, no 

change is necessary based on this 

comment. 

The same commenter questioned our 

proposal to remove the statutory 

exclusion of payments received under 

the Medicare transitional assistance 

program and any savings associated 

with the Medicare prescription drug 

discount card, saying our explanation 

was confusing. These programs no 

longer exist. See 42 U.S.C. 1395w– 

141(a)(2)(C). Therefore, we decline to 

incorporate them into proposed § 3.279. 

While there are undoubtedly payments 

listed in § 3.279 that individuals no 

longer receive, the drug card program 

was not actually a ‘‘payment’’ in the 

common use of the word, and the 

statute specifically provides that the 

program has ended. We do not believe 

we are disadvantaging any VA claimant 

by not listing this exclusion in 38 CFR 

part 3. The statute for the new program, 

the Medicare coverage gap discount 

program, does not address the program’s 

effect on other Federal programs. See 42 

U.S.C. 1395w–114a. The program 

impacts the price of prescription drugs; 

it is not a payment that individuals 

receive. The only impact the program 

could have on those receiving VA 

needs-based benefits is to possibly 

decrease an individual’s unreimbursed 

medical expenses. In any case, as noted, 

the statutory authority for the Medicare 

coverage gap discount program does not 

include any exclusionary language, as 

did the previous program. Therefore, we 

have not included information about the 

new program in final § 3.279, and we 

make no changes based on the 

comment. 

One commenter expressed the belief 

that child support payments should not 

be countable income for VA pension 

purposes. We decline to make any 

change based on this comment. Section 

1503 of 38 U.S.C. provides that all 

payments of any kind or from any 

source count unless excluded, and there 

is no statute that excludes these 

payments. 

3. Distribution and Derivation Tables for 

Exclusions 

As an aid to readers of this 

supplementary information, we are 

providing the following distribution and 

derivation tables. Table 2 is a derivation 

table for the ‘‘chart’’ portion of new 

§ 3.279. It lists the provisions in 

previous § 3.272 that were the basis for 

new § 3.279. Provisions that are new to 

part 3 are listed as new. The derivation 

table providing this information in the 

proposed rule had one error that has 

been corrected here. 

Tables 3 and 4 are distribution and 

derivation tables for previous and 

revised § 3.272. We note here that 

‘‘previous § 3.272’’ is current until the 

effective date of this final rule. 

TABLE 2—SECTION 3.279 DERIVATION

FROM PREVIOUS § 3.272 

New § 3.279 

Derived from 

previous 

§ 3.272 

(or ‘‘New’’) 

3.279(b)(1) ............................. New. 

3.279(b)(2) ............................. 3.272(v). 

3.279(b)(3) ............................. 3.272(p). 

3.279(b)(4) ............................. New. 

3.279(b)(5) ............................. 3.272(o). 

3.279(b)(6) ............................. 3.272(u). 

3.279(b)(7) ............................. New. 

3.279(c)(1) .............................. New. 

3.279(c)(2) .............................. 3.272(r). 

3.279(c)(3) through (c)(5) ...... New. 

3.279(c)(6) .............................. 3.272(t) 

3.279(c)(7) through (d)(2) ...... New. 

3.279(d)(3) ............................. 3.272(k). 

3.279(e)(1) through (e)(9) ...... New. 

TABLE 3—PREVIOUS § 3.272 

DISTRIBUTION

Previous § 3.272 

Distributed to 

or no change 

in location 

3.272(a) through (j) ................ No change. 

3.272(k) .................................. 3.279(d)(3). 

3.272(l) through (n) ................ No change. 

3.272(o) .................................. 3.279(b)(5). 

3.272(p) .................................. 3.279(b)(3). 

3.272(q) .................................. 3.272(o). 

3.272(r) ................................... 3.279(c)(2). 

3.272(s) .................................. 3.272(p). 

3.272(t) ................................... 3.279(c)(6). 

3.272(u) .................................. 3.279(b)(6). 

3.272(v) .................................. 3.279(b)(2). 

3.272(w) ................................. Removed. 

3.272(x) .................................. 3.272(q). 

TABLE 4—SECTION 3.272 DERIVATION

Revised § 3.272 Derived from, no 

change, or ‘‘new’’ 

3.272(a) through (f) ....... No change. 

3.272(g), last sentence New. 

3.272(h) through (j) ....... No change. 

3.272(k) ......................... New. 

3.272(l) through (n) ....... No change. 

3.272(o) ......................... Previous 3.272(q). 

3.272(p) ......................... Previous 3.272(s). 

3.272(q) ......................... Previous 3.272(x). 

3.272(r) .......................... New. 

3.272(s) ......................... New. 

3.272(t) .......................... New. 

H. Discussion of Public Comments 

Regarding Other Matters 

1. Other Regulatory Changes 

One commenter stated that the 

supplementary information in our 

proposal pertaining to Medicaidcovered nursing home care for veterans, 

surviving spouses, and surviving 

children was so ‘‘vague and convoluted 

as to be unintelligible.’’ See 80 FR 3855. 

Although we make no changes based on 

the comment, we are providing 

additional information here for clarity. 

This final rule, consistent with the 

proposed rule, amends 38 CFR 3.551(i) 

and 3.503 to implement statutory 

changes to 38 U.S.C. 5503(d). This 

statute, which provides for a reduced 

pension rate where a pension recipient 

is receiving Medicaid-covered nursing 

home care, previously applied only to 

veterans and surviving spouses with no 

dependents, but was amended in 2010 

to apply also to surviving children. 38 

U.S.C. 5503(d)(5)(B). This statutory 

change will now be reflected in 

§ 3.551(i). The proposed and final rule 

also amends the effective-date provision 

of § 3.503 to state that VA does not 

create overpayments in such cases 

unless there is the willful concealing of 

information, consistent with 38 U.S.C. 

5503(d)(4). Finally, because of the 

multiple changes to the expiration date 

of section 5503(d), as proposed, final 38 

CFR 3.551(i) references the statute 

rather than stating the specific date. We 

proposed to do this to avoid multiple 

future changes in the regulation. 

One commenter took issue with our 

proposal to amend 38 CFR 3.277(c)(2) to 

replace the word ‘‘shall’’ with the 

permissive word ‘‘may’’ with respect to 

annual Eligibility Verification Reports 

(EVRs). See 80 FR 3849. The commenter 

believed this change would allow VA to 

‘‘target’’ certain individuals, leading to a 

‘‘Big Brother’’ mentality. We make no 

changes based on this comment because 

the change simply reflects the statutory 

terminology of 38 U.S.C. 1506. VA does 

not currently require annual EVRs from 

any pension recipient; Congress has 

given VA discretionary authority to 

require or not to require them. 

One commenter expressed concern 

regarding that discretion, stating that an 

adjudicator may withhold payment if 

there is an appearance of fraud. 

Although there remains some discretion 

when it comes to individual 

adjudicators discerning fraud, we 

believe this rulemaking generally 

provides clearer guidance for pension 

entitlement decisions than existed 

previously, which will promote 

consistent benefit decisions, streamline 

processes, and constitute an important 


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improvement over past practices. We 

make no change based on the comment. 

2. Costs, Savings, and Time 

One commenter suggested this final 

rule will increase annual reporting 

forms and reviewing documents from 

the past, which would lead to higher 

administrative costs. As stated, VA has 

no plans to require annual EVRs or 

increase the number of documents to be 

submitted and reviewed; thus, VA 

makes no changes based on this 

comment. 

One commenter stated that VA has 

wasted significant amounts of time on 

requests for information on income 

matches, and elderly claimants must 

spend money on accountants to review 

records for years in which EVRs were 

filed. As stated, VA is not requiring 

annual EVRs, so we anticipate no 

reporting burden on all pension 

recipients. VA conducts income 

matches with the IRS and the Social 

Security Administration before 

awarding pension benefits, which 

reduces VA reliance on self-reported 

and unverified information from 

claimants. VA is moving toward a more 

streamlined claims process, which will 

benefit pension claimants and VA alike. 

One commenter questioned if VA has 

considered the costs associated with 

this rulemaking, as well as the other 

requirements discussed by Executive 

Orders 12866 and 13563. As we stated 

in the proposed rule, VA’s impact 

analysis, which includes the costs 

associated with this rulemaking, is 

published on https://www.va.gov/ 

ORPM/RINs_2900_AO.asp (RIN2900– 

AO73). Our discussion of Executive 

Orders 12866 and 13563 is below. 

A few commenters mentioned a 

November 2013 Congressional Budget 

Office (CBO) cost estimate for a Senate 

bill introduced in the 113th Congress, S. 

944, which, among other things, would 

have enacted a 3-year look-back period 

for VA pension. Commenters noted that 

the CBO estimate showed a cost and 

questioned why our impact analysis for 

the proposed rule showed a savings. 

Although we are not obligated to 

compare the two estimates, we first note 

that the CBO cost estimate was based on 

its assumption that VA would have to 

hire 70 additional claims processors. VA 

does not believe that additional claims 

processors will be required; in fact, we 

believe that somewhat fewer claims 

processors will be needed, given the 

bright-line net worth limit implemented 

here that was not present in S. 944. 

Those personnel will be re-directed to 

other mission-critical activities. Second, 

to the extent the CBO and our impact 

analysis have different estimates 

regarding the savings to be gained 

through a look-back period, we reiterate 

here that the impetus for the look back 

is preserving the integrity of the pension 

program—consistent with Congress’ 

directive that pension be reserved for 

those with financial need—not a 

specific desire to ‘‘save money’’ in the 

pension program. 

One commenter noted that GAO 

reported that VA’s asset transfer 

provisions would cost taxpayers more 

money and increase the need for 

additional claims processors. We make 

no change based on the comment; we 

found no evidence of GAO making such 

a statement and, as stated above, we do 

not believe more claims processors will 

be required under this final rule. 

One commenter suggested that VA 

should commission an independent 

study to weigh administrative expense 

against savings. VA has completed a 

cost benefit analysis that analyzed the 

costs and savings of this rule, is not 

required to complete an independent 

study, and declines to do so. 

One commenter requested that VA 

consult with additional professionals 

before implementing this rule, 

specifically the National Governors 

Association (NGA), with regard to the 

effect of this rule on State Medicaid 

budgets. We thank the commenter for 

the suggestion and appreciate the input; 

however, VA declines to consult with 

the NGA at this time. VA has considered 

the recommendations of GAO with 

regard to ensuring the integrity of the 

pension program, has heard from a 

variety of interested parties through the 

notice and comment process coincident 

with this rulemaking and believes that 

no further consultation is necessary for 

implementation. Another commenter 

recommended that we consult with 

additional professionals, because this 

rule would cause significant internal 

cost to VA, to include adding claims 

processors. We make no change based 

on the comment. Again, we disagree 

that more claims processors will be 

necessary, we have completed a cost 

benefit analysis, and we do not believe 

further consultation is necessary for 

implementation. 

Several commenters stated that VA is 

cutting benefits to save money, instead 

of helping claimants receive pension 

benefits. However, VA is not cutting 

benefits; as stated, we believe that more 

claimants will qualify for pension under 

this final rule. One commenter stated 

that, instead of taking away veterans’ 

benefits, legislators should assess 

financial penalties for those who defer 

military service, which the commenter 

argued should cover the cost of VA and 

our veterans’ needs as well as pay the 

national war debt. As stated, VA is not 

taking away any veterans’ benefits. We 

make no changes based on these 

comments. 

Several commenters expressed 

concern that this rulemaking would 

discourage claimants from applying for 

VA pension benefits, that the 

rulemaking would result in unnecessary 

delays, and that more appeals would 

result. VA disagrees with these 

comments. VA is streamlining its claims 

process to increase efficiency and 

decrease claims processing times. VA 

believes that this rule provides clearer 

pension entitlement criteria that will 

encourage claimants to apply for 

pension and decrease appeals. 

Therefore, VA does not make any 

changes to this rulemaking based on 

these comments. 

Several commenters referred to a 

purported VA estimate of an extra 30 

minutes per applicant to process claims. 

These commenters stated that it will 

take more time to review 36 months of 

financial documents. VA does not 

anticipate adding an additional 30 

minutes to the processing time for each 

application and will generally not 

request 36 months of financial 

documents. We believe the processing 

time for pension claims will decrease 

with a bright-line net worth limit and 

other aspects of this final rule. The 

Paperwork Reduction Act section of the 

proposed rule did state that the 

‘‘[e]stimated respondent burden’’ for VA 

Form 21P–8416 would be 30 minutes 

per form (consistent with past versions 

of VA Form 21P–8416), but it never 

stated that this rulemaking would 

require VA claims processors to spend 

30 additional minutes on each claim. 

We make no change based on these 

comments. 

3. Applicability, Effective Date, and 

Related Matters 

A commenter asked how VA would 

treat applicants who have a claim 

pending on the effective date of this 

final rule. As explained above in the 

information pertaining to asset transfers, 

VA will not review asset transfers that 

occurred before the effective date of this 

final rule. Moreover, as explained above 

in the information pertaining to medical 

expense definitions, the new provisions 

pertaining to institutional forms of care 

or in-home care will only apply to 

claimants who move to a different 

institution or change in-home providers. 

In addition, if a claimant is receiving 

pension on the effective date of this 

final rule, although his or her net worth 

exceeds the net worth limit under final 

§ 3.274(a), the claimant will continue to 

receive pension, unless he or she loses 


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pension for another reason. If a claimant 

has a pension application pending on 

the effective date of this final rule, VA 

will advise claims processors not to 

deny pension if the claimant’s net worth 

is below the net worth limit under final 

§ 3.274(a). However, an administrative 

determination will still be required 

under the previous provisions when a 

claimant’s net worth exceeds the net 

worth limit. The income and asset 

exclusions, in final § 3.279, that we are 

incorporating in regulations have been 

statutory law for some time, and we 

have applied them since enacted; 

explicitly noting them in regulation now 

provides the public with one location 

for all the exclusions. Similarly, the 

Medicaid nursing home provisions in 

final §§ 3.551(i) and 3.503 chronicle in 

regulations provisions that VA has been 

applying since October 13, 2010, in 

accordance with section 606 of the 

Veterans Benefits Act of 2010, Public 

Law 111–275. 

One commenter suggested that 

veterans of World War II or the Korean 

Conflict, as well as their surviving 

spouses, should be grandfathered in as 

a class of potential claimants, and all 

pension recipients should be exempt. 

We make no change based on this 

comment. It is unclear why those two 

groups in particular—or even all current 

recipients—should be exempt from the 

new rules, especially when the new 

rules will benefit many elderly 

claimants. Another commenter 

expressed concern that this rulemaking 

would permit VA to audit every claim 

and deny those already receiving 

benefits. This is not the case; VA has no 

intention of systematically denying 

benefits to claimants who are currently 

receiving pension benefits. Therefore, 

we make no change based on such 

comments. 

Numerous commenters asked VA to 

extend the comment period. Consistent 

with existing Executive Orders, VA 

provided a comment period of 60 days. 

See E.O. 12866 section 6(a), 58 FR 

51735, 51735 (1993) (‘‘[E]ach agency 

should afford the public a meaningful 

opportunity to comment on any 

proposed regulation, which in most 

cases should include a comment period 

of not less than 60 days.’’); E.O. 13563 

section 2(b), 76 FR 3821, 3821–22 (2011) 

(‘‘To the extent feasible and permitted 

by law, each agency shall afford the 

public a meaningful opportunity to 

comment through the Internet on any 

proposed regulation, with a comment 

period that should generally be at least 

60 days.’’). VA received over 850 

comments. The comments were from 

current and prospective VA pension 

claimants, individuals from the estate 

and financial planning industry, and 

others. Given the number of comments 

received from such a wide range of 

individuals, VA found that extending 

the comment period would not likely 

result in any additional information VA 

has not already considered in issuing 

this final rule. Therefore, VA declined 

to extend the comment period. 

Several commenters stated that these 

rules should not be effective until one 

year or longer after date of publication. 

These commenters, however, failed to 

identify a compelling reason for such an 

extension, and we do not believe that 

the final rules are so onerous as to 

require such a delayed effective date. 

4. Notice and Outreach 

One commenter stated that the 

proposed rule contained an incorrect 

telephone number. The phone numbers 

listed in the proposed rule are the 

correct numbers to VA’s Office of 

Regulation Policy and Management and 

Pension and Fiduciary Service. 

Therefore, no change to this rulemaking 

is warranted based on this comment. 

One commenter noted that this 

rulemaking does not appear on the 

Office of Management and Budget’s 

(OMB’s) website and asked why VA has 

not submitted this rulemaking for 

review as required by Executive Orders 

12866 and 13563. VA did submit this 

rulemaking for OMB review, and this 

rulemaking appears on OMB’s 

www.reginfo.gov site. 

One commenter stated that VA failed 

to provide notice of the proposed rule 

on social media. Another commenter 

believed that VA should mail out notice 

of the proposed rule to all veterans. One 

commenter requested a Senate hearing 

on this rulemaking. In issuing this 

rulemaking, VA complied with the 

procedural requirements of the 

Administrative Procedure Act. 5 U.S.C. 

551–559. Section 553(b) requires that a 

proposed rule be published in the 

Federal Register. As previously stated, 

on January 23, 2015, VA published the 

proposed rule in the Federal Register. 

The Administrative Procedure Act does 

not require any agency to provide notice 

of a proposed rule on social media or to 

mail a copy of the proposed rule to the 

public. The Administrative Procedure 

Act also does not require a Senate 

hearing. Therefore, no change to this 

rulemaking is warranted based on these 

comments. 

One commenter suggested further 

outreach and collaboration, and another 

commenter wondered how VA would 

make the public aware of the new 

eligibility requirements. Again, VA 

published the proposed rule in the 

Federal Register and gave a 60-day 

comment period. See 80 FR 3840. VA 

received over 850 comments from a 

wide range of individuals. VA will 

update its website and issue press 

releases to ensure the public is aware of 

this final rule. Therefore, no change to 

this rulemaking is warranted based on 

this comment. 

Several commenters mentioned that 

VA should focus on outreach programs 

to make veterans more aware of VA 

pension instead of focusing on ‘‘taking 

it away.’’ As noted above, VA disagrees 

that this rule focuses on taking away 

veteran’s benefits. Moreover, VA 

publishes benefit information at http:// 

www.benefits.va.gov, which provides 

information regarding all VA benefits 

available to veterans, their dependents, 

and survivors. Information specific to 

VA pension is currently found at http:// 

www.benefits.va.gov/pension. VA is 

constantly attempting to provide 

outreach to veterans, consistent with the 

statutory authority for outreach found at 

38 U.S.C. chapter 63. Inasmuch as this 

final rule does not pertain to chapter 63, 

we make no changes to the rule based 

on the comments pertaining to this 

matter. 

Several commenters seemed to 

believe that VA is amending its pension 

program through an Executive Order. 

VA is amending its regulations through 

the rulemaking process that is governed 

by the Administrative Procedure Act. 

See 5 U.S.C. 551–559. In the preamble 

to the proposed rule and in this 

document, VA addressed Executive 

Orders 12866 and 13563, but these 

orders are not the authority for issuing 

regulations. Therefore, no change to this 

rulemaking is warranted based on these 

comments. 

One commenter wanted to know what 

is being done to make sure claims are 

granted properly now and in the future. 

VA is continuously working with 

regional office personnel to make sure 

claims are processed properly. We make 

no change based on this comment. 

5. Accreditation, Financial Advisors, 

and Related Matters 

A few commenters seemed to think 

that this rulemaking would eliminate 

the involvement of attorneys and 

financial advisors from assisting VA 

claimants in applying for VA benefits. A 

few commenters stated that VA should 

regulate how financial advisors and 

organizations are allowed to assist 

veterans with their claims for VA 

benefits. While these comments pertain 

more to VA’s accreditation program 

than its pension program, it is important 

to note that VA does regulate those who 

assist on veterans’ claims through its 

rules pertaining to accreditation. 38 CFR 


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14.626–14.636. In order to assist ‘‘in the 

preparation, presentation, and 

prosecution of claims for VA benefits,’’ 

an individual must be accredited by VA. 

38 CFR 14.629(b)(1). VA does not 

accredit individuals for the purpose of 

promoting their separate business 

interests, such as marketing financial 

products. Accreditation is granted solely 

for the purpose of assisting VA 

claimants with their claims for VA 

benefits. See 38 CFR 14.626. Those who 

are accredited are held to standards of 

conduct prohibiting fraud, deception, 

and other unlawful or unethical 

conduct. 38 CFR 14.632. While VA 

cannot predict the effect of this final 

rule on the number of financial advisors 

assisting with claims, there is no reason 

to believe that it will impact the number 

of VA accredited representatives 

available to assist with claims. No 

change to this rulemaking is warranted 

based on these comments. 

Several commenters suggested that 

VA should focus on ensuring that VA 

accredited representatives are 

competent and preventing unaccredited 

individuals from assisting VA claimants 

and charging for their services. One 

commenter noted that States have the 

authority to investigate those 

individuals who sell unsuitable 

financial products to consumers. Others 

expressed similar sentiment that VA 

should focus on pension poaching 

organizations, rather than ‘‘penalizing’’ 

claimants. VA takes the accreditation of 

representatives very seriously and, as 

noted above, has implemented 

regulatory provisions governing the 

accreditation program (outside of this 

rulemaking). See 38 CFR 14.626–14.636; 

see, e.g., 73 FR 29852 (2008). VA does 

not recognize an unaccredited 

individual as a claimant’s 

representative. If VA determines that an 

unaccredited individual is assisting 

claimants with applications for VA 

benefits, VA notifies such individual to 

cease the unlawful practice. If VA 

determines that an accredited 

individual is improperly charging a fee 

or violating its standards of conduct, VA 

may suspend or cancel the individual’s 

accreditation. See 38 CFR 14.633. 

If individuals fail to cease an 

unlawful practice, VA will report to 

Federal, State, or local agencies or 

offices that enforce unauthorized 

practice, unfair business practice, or 

consumer or senior fraud laws. Over the 

past year, VA has enhanced its 

coordination with the U.S. Department 

of Justice, the Federal Trade 

Commission, and State Attorney 

General offices to combat ‘‘pension 

poaching’’ and other scams targeting 

veterans and their family members. VA 

coordination with enforcement agencies 

is the best response to unauthorized or 

unlawful practices in this realm. This 

rulemaking does not in any way detract 

from these efforts; therefore, VA is not 

making any changes to this rulemaking 

based on these comments. 

Several commenters stated that this 

rulemaking would make applying for 

pension benefits more difficult. The 

commenters believed the more difficult 

application process would drive 

claimants to seek out advice from 

consultants and estate planning 

attorneys, which would increase abuse. 

To prevent such abuse, one commenter 

recommended allowing VA accredited 

agents and attorneys to charge fees for 

assisting with a claimant’s initial 

application. VA disagrees that this 

rulemaking makes applying for pension 

benefits more difficult. With this 

rulemaking, VA is providing additional 

guidance on the qualifying criteria and 

allowable medical expenses beyond 

what is currently available. Claimants 

have the option to seek assistance from 

VA accredited representatives, and we 

see no reason why VA claimants will 

have a more difficult time finding 

representation. Moreover, VA is bound 

by the statutory prohibition of 

representatives charging fees at the time 

of initial application. 38 U.S.C. 5904(c). 

Therefore, VA does not make any 

changes to this rulemaking based on 

these comments. 

6. Outside the Scope 

Several commenters made statements 

regarding their own claim for benefits. 

These comments are outside the scope 

of this rulemaking, and, therefore, VA 

makes no changes based on these 

comments. One commenter spoke in 

support of equitable relief for claimants 

who encounter unique situations, citing 

an example of a claimant who inherited 

money from a child and lost pension 

entitlement even though the claimant 

used the money to pay the child’s burial 

expenses and distributed the remainder 

to siblings. While we do note that 

equitable relief is available for certain 

cases under 38 U.S.C. 503, this 

comment is outside the scope of this 

rulemaking; therefore, VA makes no 

change to the final rule based on it. 

One commenter asked that VA 

consider providing in its pension award 

letters a break-down of VA pension 

benefits between the portion considered 

to be basic pension and the portion 

considered to be the additional A&A 

allowance for purposes of reporting 

income to State and local agencies. This 

comment is outside the scope of this 

rulemaking, which does not pertain to 

decision award letters; therefore, VA 

makes no change to the final rule based 

on it. 

I. Technical Corrections 

We are making a technical correction 

to § 3.262(t) to include the authority 

citation, which was inadvertently 

omitted from the proposed rule. 

We are making a technical correction 

to § 3.270. The proposed revisions to 

§ 3.270 were stated incorrectly in the 

proposed rule. See 80 FR 3857. Section 

3.270 is a regulation that tells readers 

which sections apply to current-law 

pension and which sections apply to 

VA’s other needs-based benefits. The 

error pertained to a distinction between 

the word ‘‘to’’ and the word ‘‘through.’’ 

For example, the previous heading for 

paragraph (a) was ‘‘Sections 3.250 to 

3.270.’’ This meant § 3.250 and up to 

(but not including) § 3.270 apply to 

VA’s older programs. We erroneously 

proposed to amend the paragraph title 

as ‘‘Sections 3.250 through 3.270 and 

sections 3.278 through 3.279.’’ This was 

an error because § 3.270 describes the 

applicability but does not itself apply to 

any benefit. Similarly, the previous 

heading for paragraph (b) was ‘‘Sections 

3.271 to 3.300.’’ We erroneously 

proposed to amend the heading to 

‘‘Sections 3.271 through 3.300.’’ Section 

3.300, ‘‘Claims based on the effects of 

tobacco products,’’ does not pertain to 

any needs-based benefit. This final rule 

clarifies that §§ 3.250 through 3.263 and 

§§ 3.278 through 3.279 apply to benefit 

programs that were in effect before 

January 1, 1979, and §§ 3.271 through 

3.279 apply to current-law pension. 

We are making a technical correction 

to §§ 3.274(a) and 3.278(c)(4) to insert 

the VA website address where VA will 

publish the net worth limit and the 

privately owned vehicle mileage 

reimbursement rate. The proposed rule 

simply used a placeholder for a to-bedetermined VA website address. 

Moreover, we inadvertently omitted 

headers in proposed §§ 3.274(b)(1), 

3.275(b)(1) and (b)(2); this final rule 

corrects those omissions. 

We are making a technical correction 

to proposed § 3.274(e), which as 

proposed included a heading at 

§ 3.274(e)(3). On review, the information 

contained in proposed § 3.274(e)(3) was 

more appropriate as a note to paragraph 

(e), and we have re-designated it 

accordingly. Therefore, final § 3.274(e) 

does not include the introductory 

language, ‘‘[e]xcept as provided in 

paragraph (e)(3) of this section,’’ 

because final § 3.274 does not contain a 

paragraph (e)(3). Moreover, final 

§ 3.274(f)(3) and (4) have been slightly 

altered, in a non-substantive way, for 

readability. 


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Final § 3.275(b)(1)(ii)(B) and (C) are 

slightly different than proposed in order 

to conform to final § 3.278. Final 

§ 3.275(b)(1)(ii)(B) refers to ‘‘[a] care 

facility other than a nursing home’’ 

instead of ‘‘[a]n assisted living or similar 

residential facility that provides 

custodial care,’’ to accord with the new 

title of § 3.278(d)(3). Final 

§ 3.275(b)(1)(ii)(C) refers to ‘‘[t]he home 

of a family member for health care or 

custodial care’’ instead of ‘‘[t]he home of 

a family member for custodial care’’ to 

accord with the new language of 

§ 3.278(d)(2). 

Proposed § 3.276(b) mistakenly 

referenced § 3.277(b) as VA’s authority 

to obtain additional documentation 

necessary to determine the annual 

income and the value of the corpus of 

the estate. That authority is actually in 

§ 3.277(a), and final § 3.276(b) corrects 

this mistake. We also updated the 

examples in paragraphs (a)(3) and (4) of 

proposed (now final) § 3.276. 

We are making a technical correction 

to § 3.278(b)(1) by changing the 

proposed conjunction between (i) and 

(ii). We are spelling out the acronym 

‘‘aka’’ used in proposed § 3.279(a), and 

making a technical correction to 

§ 3.279(e)(9) to correctly refer to 

subchapter I instead of subchapter 1 as 

the authority for excluding as income 

annuities received under the Retired 

Serviceman’s Family Protection Plan. 

Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(at 44 U.S.C. 3507) requires that VA 

consider the impact of paperwork and 

other information collection burdens 

imposed on the public. Under 44 U.S.C. 

3507(a), an agency may not collect or 

sponsor the collection of information, 

nor may it impose an information 

collection requirement unless it 

displays a currently valid OMB control 

number. See also 5 CFR 1320.8(b)(3)(vi). 

In the proposed rule, we stated that 

proposed 38 CFR 3.276 and 3.278 

constitutes a collection of information 

under the provisions of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501– 

3521). We also noted in the proposed 

rule that VA submitted a copy of the 

proposed rule to OMB for its review of 

the collection of information, and 

requested public comments on the 

collection of information provisions 

contained in 38 CFR 3.276 and 38 CFR 

3.278. 

VA received a comment stating that 

neither the pension application nor 

development forms request information 

regarding living expenses. A claimant’s 

completion of VA Form 21–8049, 

Request for Details of Expenses (OMB 

Control number 2900–0161), has been 

an administrative requirement for 

claims processors to make net worth 

determinations. VA agrees with the 

comment that some of the information 

requested on this form will no longer be 

necessary for net worth determinations. 

Therefore, VA determined the 

information collection from VA Form 

21P–8049, Request for Details of 

Expenses (OMB control number 2900– 

0107), is no longer necessary and VA 

will discontinue use of the form. The 

discontinuance of this form will be 

pursued through a separate 

administrative action. Considering the 

last PRA approval usage and the 

discontinuation of the form, there will 

be an estimated decrease in burden 

hours by 5,700 and an annual 

incremental information burden cost 

savings of $136,002.00. 

Under 38 CFR 3.276, the collections 

of information are currently approved 

by OMB under the assigned OMB 

control numbers 2900–0001, 2900–0002 

and 2900–0004. Specifically, under 38 

CFR 3.276, claimants would be required 

to report to VA whether they have 

transferred assets within the 3 years 

prior to claiming pension or anytime 

thereafter and if so, information about 

those assets. 

Prior to the creation of the Fully 

Developed Claims (FDC) program, all 

initial applications for Veterans 

Compensation and/or Pension claims 

had to be filed using VA Form 21–526 

(OMB Control Number 2900–0001). In 

the administration of the FDC program, 

VA created two new, streamlined forms: 

VA Form 21–526EZ for Veterans 

Compensation claims (now under OMB 

Control Number 2900–0747) and VA 

Form 21P–527EZ for Veterans Pension 

claims (now under OMB Control 

Number 2900–0002). The creation and 

use of those two forms has resulted in 

the obsolescence of VA Form 21–526. 

Therefore, VA is pursuing 

discontinuance of VA Form 21–526. 

For VA Form 21P–527EZ (OMB 

control number 2900–0002), VA 

estimates 839 new claimants/ 

respondents in 2018, which represents 

the Veteran portion of the total caseload 

impacted by provisions under 38 CFR 

3.276. The estimated completion time 

remains 30 minutes. VA therefore 

estimates the total incremental 

information collection burden costs to 

claimants/respondents to be $14,409.28 

(592 burden hour × $24.34 per hour). 

For VA Form 21P–534EZ (OMB 

control number 2900–0004), VA 

estimates 1,617 new claimants/ 

respondents in 2018, which represents 

the survivor portion of the total caseload 

impacted by the provisions under 38 

CFR 3.276. The completion time for VA 

Form 21P–534EZ remains 30 minutes. 

VA therefore estimates the total 

incremental information collection 

burden costs to claimants/respondents 

to be $16,648.56 (684 burden hour × 

$24.34 per hour). 

Under 38 CFR 3.278, the collections 

of information are currently approved 

by OMB under the assigned OMB 

control numbers 2900–0161. 

Specifically, under proposed 38 CFR 

3.278, claimants would be required to 

submit information pertaining to their 

medical expenses. Certain claimants 

would also be required to submit 

evidence that they need custodial care 

or assistance with activities of daily 

living. 

We are adding a parenthetical 

statement after the authority citations in 

the amendatory language of this final 

rule to all of the sections containing 

information collections, so that the 

control numbers are displayed for each 

information collection. 

Regulatory Flexibility Act 

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, 5 U.S.C. 601–612. This final rule 

will directly affect only individuals and 

will not directly affect small entities. 

Therefore, pursuant to 5 U.S.C. 605(b), 

this rulemaking is exempt from the final 

regulatory flexibility analysis 

requirements of section 604. 

Effect of Rulemaking 

Title 38 of the Code of Federal 

Regulations, as revised by this final 

rulemaking, represents VA’s 

implementation of its legal authority on 

this subject. Other than future 

amendments to this regulation or 

governing statutes, no contrary guidance 

or procedures are authorized. All 

existing or subsequent VA guidance 

must be read to conform with this 

rulemaking if possible or, if not 

possible, such guidance is superseded 

by this rulemaking. 

Executive Orders 12866, 13563, and 

13771 

Executive Orders 12866 and 13563 

direct agencies to assess the costs and 

benefits of available regulatory 

alternatives and, when regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, and other advantages; 

distributive impacts; and equity). 

Executive Order 13563 (Improving 

Regulation and Regulatory Review) 


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47268 Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Rules and Regulations 

emphasizes the importance of 

quantifying both costs and benefits, 

reducing costs, harmonizing rules, and 

promoting flexibility. Executive Order 

12866 (Regulatory Planning and 

Review) defines a ‘‘significant 

regulatory action’’ requiring review by 

OMB, unless OMB waives such review, 

as ‘‘any regulatory action that is likely 

to result in a rule that may: (1) Have an 

annual effect on the economy of $100 

million or more or adversely affect in a 

material way the economy, a sector of 

the economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local, or tribal 

governments or communities; (2) Create 

a serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency; (3) 

Materially alter the budgetary impact of 

entitlements, grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof; or (4) Raise novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order.’’ 

The economic, interagency, 

budgetary, legal, and policy 

implications of this regulatory action 

have been examined, and it has been 

determined to be a significant regulatory 

action under Executive Order 12866 

because it is likely to result in a rule that 

may raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in this Executive Order. VA’s 

revised impact analysis can be found as 

a supporting document at http://

www.regulations.gov, usually within 48 

hours after the rulemaking document is 

published. Additionally, a copy of the 

rulemaking and its impact analysis are 

available on VA’s website at http://

www.va.gov/orpm by following the link 

for ‘VA Regulations Published. 

This rule is considered an Executive 

Order 13771 deregulatory action. The 

estimated cost savings of the rule, 

expressed in 2016 dollars and 

discounted back to the 2016 equivalent, 

is $0.0937 million. 

Unfunded Mandates 

The Unfunded Mandates Reform Act 

of 1995 requires, at 2 U.S.C. 1532, that 

agencies prepare an assessment of 

anticipated costs and benefits before 

issuing any rule that may result in the 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

(adjusted annually for inflation) in any 

one year. This final rule will have no 

such effect on State, local, and tribal 

governments, or on the private sector. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance numbers and titles for the 

programs affected by this final rule are 

64.104, Pension for Non-ServiceConnected Disability for Veterans; 

64.105, Pension to Veterans Surviving 

Spouses, and Children; and 64.110, 

Veterans Dependency and Indemnity 

Compensation for Service-Connected 

Death. 

Signing Authority 

The Secretary of Veterans Affairs, or 

designee, approved this document and 

authorized the undersigned to sign and 

submit the document to the Office of the 

Federal Register for publication 

electronically as an official document of 

the Department of Veterans Affairs. 

Jacquelyn Hayes-Byrd, Acting Chief of 

Staff, Department of Veterans Affairs, 

approved this document on June 4, 

2018, for publication. 

Dated: September 9, 2018. 

Michael P. Shores, 

Director, Office of Regulation Policy & 

Management, Office of the Secretary, 

Department of Veterans Affairs. 

List of Subjects in 38 CFR Part 3 

Administrative practice and 

procedure, Claims, Disability benefits, 

Pensions, Veterans. 

For the reasons set forth in the 

preamble, VA amends 38 CFR part 3 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. Amend the table in § 3.261(a) as 

follows: 

■ a. Remove entries (35) through (37) 

and (39) through (42). 

■ b. Redesignate entry (38) as entry (35). 

■ c. Revise newly redesignated entry 

(35). 

■ d. Add entries (36) and (37). 

The revision and additions read as 

follows: 

§ 3.261 Character of income; exclusions 

and estates. 

* * * * * 

(a) * * * 

Income Dependency 

(parents) 

Dependency 

and indemnity 

compensation 

(parents) 

Pension: 

old-law 

(veterans, 

surviving 

spouses 

and children) 

Pension: 

section 306 

(veterans, 

surviving 

spouses and 

children) 

See— 

*******

(35) Income received under Section 6 of the Radiation Exposure Compensation Act (Pub. L. 101–426).Excluded ........ Excluded ........ Included ......... Included ......... § 3.262(t) 

(36) Income received from income tax returns ................... Excluded ........ Excluded ........ Excluded ........ Excluded ........ § 3.262(u) 

(37) Other amounts excluded from income by statute ....... Excluded ........ Excluded ........ Excluded ........ Excluded ........ § 3.262(v) 

§ 3.279 

* * * * * 

■ 3. Amend § 3.262 as follows: 

■ a. Add a sentence to the end of 

paragraph (l) introductory text. 

■ b. Remove paragraphs (s), (u), (v), (x), 

(y), (z), and (aa). 

■ c. Redesignate paragraphs (t) and (w) 

as paragraphs (s) and (t), respectively. 

■ d. Revise newly redesignated 

paragraph (t). 

■ e. Add new paragraphs (u) and (v). 

The additions and revision read as 

follows: 

§ 3.262 Evaluation of income. 

* * * * * 

(l) * * * For the definition of what 

constitutes a medical expense, see 

§ 3.278, Deductible medical expenses. 

* * * * * 

(t) Radiation Exposure Compensation 

Act. For the purposes of parents’ 

dependency and indemnity 

compensation and dependency of 


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parents under § 3.250, there shall be 

excluded from income computation 

payments under Section 6 of the 

Radiation Exposure Compensation Act 

of 1990. 

(Authority: 42 U.S.C. 2210 note) 

(u) Income tax returns. VA will 

exclude from income payments from 

income tax returns. See § 3.279(e)(1). 

(Authority: 26 U.S.C. 6409) 

(v) Statutory exclusions. Other 

amounts excluded from income by 

statute. See § 3.279. VA will exclude 

from income any amount designated by 

statute as not countable as income, 

regardless of whether or not it is listed 

in this section or in § 3.279. 

■ 4. Amend § 3.263 as follows: 

■ a. Remove paragraphs (e), (f), (g), (h), 

and (i). 

■ b. Add new paragraph (e). 

The addition reads as follows: 

§ 3.263 Corpus of estate; net worth. 

* * * * * 

(e) VA will exclude from the corpus 

of estate or net worth any amount 

designated by statute as not countable as 

a resource. See § 3.279. 

* * * * * 

§ 3.270 [Amended] 

■ 5. Amend § 3.270 as follows: 

■ a. In the heading to paragraph (a) by 

removing ‘‘3.250 to 3.270’’ and adding 

in its place ‘‘3.250 through 3.263 and 

3.278 through 3.279.’’ 

■ b. In the note to paragraph (a) by 

removing ‘‘§§ 3.250 to 3.270’’ and 

adding in its place ‘‘§§ 3.250 through 

3.263 and 3.278 through 3.279’’. 

■ c. In the heading to paragraph (b) by 

removing ‘‘3.271 to 3.300’’ and adding 

in its place ‘‘3.271 through 3.279.’’ 

■ 6. Amend § 3.271 by adding paragraph 

(i) to read as follows: 

§ 3.271 Computation of income. 

* * * * * 

(i) Waiver of receipt of income. 

Potential income that is not excludable 

under § 3.272 or § 3.279 but is waived 

by an individual is included as 

countable income of the individual. 

However, if an individual withdraws a 

claim for Social Security benefits, after 

a finding of entitlement to those 

benefits, in order to maintain eligibility 

for unreduced Social Security benefits 

upon reaching a particular age, VA will 

not regard this potential income as 

having been waived and will therefore 

not count it. 

(Authority: 38 U.S.C. 1503(a)) 

■ 7. Amend § 3.272 as follows: 

■ a. Add a sentence to the end of 

paragraph (g) introductory text. 

■ b. Remove paragraphs (k), (o), (p), (r), 

(t), (u), (v), and (w). 

■ c. Add new paragraph (k). 

■ d. Redesignate paragraphs (q), (s), and 

(x) as paragraphs (o), (p), and (q), 

respectively. 

■ e. Revise the authority citation in 

newly redesignated paragraph (q). 

■ f. Add new paragraphs (r), (s), and (t). 

The additions and revision read as 

follows: 

§ 3.272 Exclusions from income. 

* * * * * 

(g) * * * For the definition of what 

constitutes a medical expense, see 

§ 3.278, Deductible medical expenses. 

* * * * * 

(k) Veterans’ benefits from States and 

municipalities. VA will exclude from 

income payments from a State or 

municipality to a veteran of a monetary 

benefit that is paid as a veterans’ benefit 

due to injury or disease. VA will 

exclude up to $5,000 of such benefit in 

any annualization period. 

(Authority: 38 U.S.C. 1503(a)(11)) 

* * * * * 

(q) * * * 

(Authority: 38 U.S.C. 1503(a)(12)) 

(r) Income tax returns. VA will 

exclude from income payments from 

income tax returns. See § 3.279(e)(1). 

(Authority: 26 U.S.C. 6409) 

(s) Reimbursements for loss. VA will 

exclude from income payments 

described in 38 U.S.C. 1503(a)(5). 

(Authority: 38 U.S.C. 1503(a)(5)) 

(t) Statutory exclusions. Other 

amounts excluded from income by 

statute. See § 3.279. VA will exclude 

from income any amount designated by 

statute as not countable as income, 

regardless of whether or not it is listed 

in this section or in § 3.279. 

■ 8. Revise § 3.274 to read as follows: 

§ 3.274 Net worth and VA pension. 

(a) Net worth limit. For purposes of 

entitlement to VA pension, the net 

worth limit effective October 18, 2018 is 

$123,600. This limit will be increased 

by the same percentage as the Social 

Security increase whenever there is a 

cost-of-living increase in benefit 

amounts payable under section 215(i) of 

title II of the Social Security Act (42 

U.S.C. 415(i)). VA will publish the 

current limit on its website at 

www.benefits.va.gov/pension/. 

(b) When a claimant’s or beneficiary’s 

net worth exceeds the limit. Except as 

provided in paragraph (h)(2) of this 

section, VA will deny or discontinue 

pension if a claimant’s or beneficiary’s 

net worth exceeds the net worth limit in 

paragraph (a) of this section. 

(1) Net worth. Net worth means the 

sum of a claimant’s or beneficiary’s 

assets and annual income. 

(2) Asset calculation. VA will 

calculate a claimant’s or beneficiary’s 

assets under this section and § 3.275. 

(3) Annual income calculation. VA 

will calculate a claimant’s or 

beneficiary’s annual income under 

§ 3.271, and will include the annual 

income of dependents as required by 

law. See §§ 3.23(d)(4), 3.23(d)(5), and 

3.24 for more information on annual 

income included when VA calculates a 

claimant’s or beneficiary’s pension 

entitlement rate. In calculating annual 

income for this purpose, VA will 

subtract all applicable deductible 

expenses, to include appropriate 

prospective medical expenses under 

§ 3.272(g). 

(4) Example of net worth calculation. 

For purposes of this example, presume 

the net worth limit is $123,600. A 

claimant’s assets total $117,000 and 

annual income is $9,000. Therefore, 

adding the claimant’s annual income to 

assets produces net worth of $126,000. 

This amount exceeds the net worth 

limit. 

(c) Assets of other individuals 

included as claimant’s or beneficiary’s 

assets—(1) Claimant or beneficiary is a 

veteran. A veteran’s assets include the 

assets of the veteran as well as the assets 

of his or her spouse, if the veteran has 

a spouse. 

(2) Claimant or beneficiary is a 

surviving spouse. A surviving spouse’s 

assets include only the assets of the 

surviving spouse. 

(3) Claimant or beneficiary is a 

surviving child. (i) If a surviving child 

has no custodian or is in the custody of 

an institution, the child’s assets include 

only the assets of the child. 

(ii) If a surviving child has a 

custodian other than an institution, the 

child’s assets include the assets of the 

child as well as the assets of the 

custodian. If the child is in the joint 

custody of his or her natural or adoptive 

parent and a stepparent, the child’s 

assets also include the assets of the 

stepparent. See § 3.57(d) for more 

information on child custody for 

pension purposes. 

(d) How a child’s net worth affects a 

veteran’s or surviving spouse’s pension 

entitlement. VA will not consider a 

child to be a veteran’s or surviving 

spouse’s dependent child for pension 

purposes if the child’s net worth 

exceeds the net worth limit in paragraph 

(a) of this section. 

(1) Dependent child and potential 

dependent child. For the purposes of 

this section— 


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(i) ‘‘Dependent child’’ refers to a child 

for whom a veteran or a surviving 

spouse is entitled to an increased 

maximum annual pension rate. 

(ii) ‘‘Potential dependent child’’ refers 

to a child who is excluded from a 

veteran’s or surviving spouse’s pension 

award solely or partly because of this 

paragraph (d). References in this section 

to ‘‘dependent child’’ include a 

potential dependent child. 

(2) Dependent child net worth. A 

dependent child’s net worth is the sum 

of his or her annual income and the 

value of his or her assets. 

(3) Dependent child asset calculation. 

VA will calculate the value of a 

dependent child’s assets under this 

section and § 3.275. A dependent child’s 

assets include the child’s assets only. 

(4) Dependent child annual income 

calculation. VA will calculate a 

dependent child’s annual income under 

§ 3.271, and will include the annual 

income of the child as well as the 

annual income of the veteran or 

surviving spouse that would be 

included if VA were calculating a 

pension entitlement rate for the veteran 

or surviving spouse. 

(e) When VA calculates net worth. VA 

calculates net worth only when: 

(1) VA has received— 

(i) An original pension claim; 

(ii) A new pension claim after a 

period of non-entitlement; 

(iii) A request to establish a new 

dependent; or 

(iv) Information that a veteran’s, 

surviving spouse’s, or child’s net worth 

has increased or decreased; and 

(2) The claimant or beneficiary meets 

the other factors necessary for pension 

entitlement as provided in § 3.3(a)(3) 

and (b)(4). 

Note to Paragraph (e). If the evidence 

shows that net worth exceeds the net worth 

limit, VA may decide the pension claim 

before determining if the claimant meets 

other entitlement factors. VA will notify the 

claimant of the entitlement factors that have 

not been established. 

(f) How net worth decreases. Net 

worth may decrease in three ways: 

Assets can decrease, annual income can 

decrease, or both assets and annual 

income can decrease. 

(1) How assets decrease. A veteran, 

surviving spouse, or child, or someone 

acting on their behalf, may decrease 

assets by spending them on any item or 

service for which fair market value is 

received unless the item or items 

purchased are themselves part of net 

worth. See § 3.276(a)(4) for the 

definition of ‘‘fair market value.’’ The 

expenses must be those of the veteran, 

surviving spouse, or child, or a relative 

of the veteran, surviving spouse, or 

child. The relative must be a member or 

constructive member of the veteran’s, 

surviving spouse’s, or child’s 

household. 

(2) How annual income decreases. See 

§§ 3.271 through 3.273. 

(3) Example 1. For purposes of this 

example, presume the net worth limit is 

$123,600 and the maximum annual 

pension rate (MAPR) is $12,000. A 

claimant has assets of $115,000 and 

annual income of $9,000. Adding 

annual income to assets produces a net 

worth of $124,000, which exceeds the 

net worth limit. However, the claimant 

is a patient in a nursing home and pays 

annual unreimbursed nursing home fees 

of $29,000. Reasonably predictable 

unreimbursed medical expenses are 

deductible from annual income under 

§ 3.272(g) to the extent that they exceed 

5 percent of the applicable MAPR. VA 

subtracts the projected expenditures 

that exceed 5 percent of the applicable 

MAPR (here, $28,400) from annual 

income, which decreases annual income 

to zero. The claimant’s net worth is now 

$115,000; therefore, net worth is within 

the limit to qualify for VA pension. 

(4) Example 2. For purposes of this 

example, presume the net worth limit is 

$123,600 and the MAPR is $12,000. A 

claimant has assets of $123,000 and 

annual income of $9,500. Adding 

annual income to assets produces a net 

worth of $132,500, which exceeds the 

net worth limit. The claimant pays 

reasonably predictable annual 

unreimbursed medical expenses of 

$9,000. Unreimbursed medical expenses 

are deductible from annual income 

under § 3.272(g) to the extent that they 

exceed 5 percent of the applicable 

MAPR. VA subtracts the projected 

expenditures that exceed 5 percent of 

the applicable MAPR (here, $8,400) 

from annual income, which decreases 

annual income to $1,100. This decreases 

net worth to $124,100, which is still 

over the limit. VA must deny the claim 

for excessive net worth. 

(g) Effective dates of pension 

entitlement or increased entitlement 

after a denial, reduction, or 

discontinuance based on excessive net 

worth—(1) Scope of paragraph. This 

paragraph (g) applies when VA has: 

(i) Discontinued pension or denied 

pension entitlement for a veteran, 

surviving spouse, or surviving child 

based on the veteran’s, surviving 

spouse’s, or surviving child’s excessive 

net worth; or 

(ii) Reduced pension or denied 

increased pension entitlement for a 

veteran or surviving spouse based on a 

dependent child’s excessive net worth. 

(2) Effective date of entitlement or 

increased entitlement. The effective date 

of entitlement or increased entitlement 

is the day net worth ceases to exceed the 

limit. For this effective date to apply, 

the claimant or beneficiary must submit 

a certified statement that net worth has 

decreased and VA must receive the 

certified statement before the pension 

claim has become finally adjudicated 

under § 3.160. This means that VA must 

receive the certified statement within 1 

year after its decision notice to the 

claimant concerning the denial, 

reduction, or discontinuance unless the 

claimant appeals VA’s decision. 

Otherwise, the effective date is the date 

VA receives a new pension claim. In 

accordance with § 3.277(a), VA may 

require the claimant or beneficiary to 

submit additional evidence as the 

individual circumstances may require. 

(h) Reduction or discontinuance of 

beneficiary’s pension entitlement based 

on excessive net worth—(1) Effective 

date of reduction or discontinuance. 

When an increase in a beneficiary’s or 

dependent child’s net worth results in a 

pension reduction or discontinuance 

because net worth exceeds the limit, the 

effective date of reduction or 

discontinuance is the last day of the 

calendar year in which net worth 

exceeds the limit. 

(2) Net worth decreases before the 

effective date. If net worth decreases to 

the limit or below the limit before the 

effective date provided in paragraph 

(h)(1) of this section, VA will not reduce 

or discontinue the pension award on the 

basis of excessive net worth. 

(i) Additional effective-date 

provisions for dependent children—(1) 

Establishing a dependent child on 

veteran’s or surviving spouse’s pension 

award results in increased pension 

entitlement. When establishing a 

dependent child on a veteran’s or 

surviving spouse’s pension award 

results in increased pension entitlement 

for the veteran or surviving spouse, VA 

will apply the effective-date provisions 

in paragraphs (g) and (h) of this section. 

(2) Establishing a dependent child on 

veteran’s or surviving spouse’s pension 

award results in decreased pension 

entitlement. (i) When a dependent 

child’s non-excessive net worth results 

in decreased pension entitlement for the 

veteran or surviving spouse, the 

effective date of the decreased pension 

entitlement rate (i.e., VA action to add 

the child to the award) is the end of the 

year that the child’s net worth 

decreases. 

(ii) When a dependent child’s 

excessive net worth results in increased 

pension entitlement for the veteran or 

surviving spouse, the effective date of 

the increased pension entitlement rate 

(i.e., VA action to remove the child from 


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the award) is the date that VA receives 

a claim for an increased rate based on 

the child’s net worth increase. 

(Authority: 38 U.S.C. 1522, 1543, 5110, 5112) 

■ 9. Revise § 3.275 to read as follows: 

§ 3.275 How VA determines the asset 

amount for pension net worth 

determinations. 

(a) Definitions pertaining to assets— 

(1) Assets. The term assets means the 

fair market value of all property that an 

individual owns, including all real and 

personal property, unless excluded 

under paragraph (b) of this section, less 

the amount of mortgages or other 

encumbrances specific to the mortgaged 

or encumbered property. VA will 

consider the terms of the recorded deed 

or other evidence of title to be proof of 

ownership of a particular asset. See also 

§ 3.276(a)(4), which defines ‘‘fair market 

value.’’ 

(2) Claimant. (i) Except as provided in 

paragraph (a)(2)(ii) of this section, for 

the purposes of this section and § 3.276, 

claimant means a pension beneficiary, a 

dependent spouse, or a dependent or 

potential dependent child as described 

in § 3.274(d), as well as a veteran, 

surviving spouse, or surviving child 

pension applicant. 

(ii) For the purpose of paragraph (b)(1) 

of this section, claimant means a 

pension beneficiary or applicant who is 

a veteran, a surviving spouse, or a 

surviving child. 

(3) Residential lot area. For purposes 

of this section, residential lot area 

means the lot on which a residence sits 

that does not exceed 2 acres (87,120 

square feet), unless the additional 

acreage is not marketable. 

(b) Exclusions from assets. Assets do 

not include the following: 

(1) Primary residence. The value of a 

claimant’s primary residence (singlefamily unit), including the residential 

lot area, in which the claimant has an 

ownership interest. VA recognizes one 

primary residence per claimant. If the 

residence is sold after pension 

entitlement is established, any net 

proceeds from the sale is an asset except 

to the extent the proceeds are used to 

purchase another residence within the 

same calendar year as the year in which 

the sale occurred. 

(i) Personal mortgage not deductible. 

VA will not subtract from a claimant’s 

assets the amount of any mortgages or 

encumbrances on a claimant’s primary 

residence. 

(ii) Claimant not residing in primary 

residence. Although rental income 

counts as annual income as provided in 

§ 3.271(d), VA will not include a 

claimant’s primary residence as an asset 

even if the claimant resides in any of the 

following as defined in § 3.278(b): 

(A) A nursing home or medical foster 

home; 

(B) A care facility other than a nursing 

home; or 

(C) The home of a family member for 

health care or custodial care. 

(2) Personal effects. Value of personal 

effects suitable to and consistent with a 

reasonable mode of life, such as 

appliances and family transportation 

vehicles. 

(3) Radiation Exposure Compensation 

Act payments. Payments made under 

section 6 of the Radiation Exposure 

Compensation Act of 1990. 

(Authority: 42 U.S.C. 2210 (note)) 

(4) Ricky Ray Hemophilia Relief Fund 

payments. Payments made under 

section 103(c) and excluded under 

section 103(h)(2) of the Ricky Ray 

Hemophilia Relief Fund Act of 1998. 

(Authority: 42 U.S.C. 300c–22 (note)) 

(5) Energy Employees Occupational 

Illness Compensation Program 

payments. Payments made under the 

Energy Employees Occupational Illness 

Compensation Program. 

(Authority: 42 U.S.C. 7385e(2)) 

(6) Payments to Aleuts. Payments 

made to certain Aleuts under 50 U.S.C. 

App. 1989c–5. 

(Authority: 50 U.S.C. App. 1989c–5(d)(2)) 

(7) Statutory exclusions. Other 

amounts excluded from assets by 

statute. See § 3.279. VA will exclude 

from assets any amount designated by 

statute as not countable as a resource, 

regardless of whether or not it is listed 

in this section or in § 3.279. 

(Authority: 38 U.S.C. 1522, 1543) 

■ 10. Revise § 3.276 to read as follows: 

§ 3.276 Asset transfers and penalty 

periods. 

(a) Asset transfer definitions. For 

purposes of this section— 

(1) Claimant has the same meaning as 

defined in § 3.275(a)(2)(i). 

(2) Covered asset means an asset 

that— 

(i) Was part of a claimant’s net worth; 

(ii) Was transferred for less than fair 

market value; and 

(iii) If not transferred, would have 

caused or partially caused the 

claimant’s net worth to exceed the net 

worth limit under § 3.274(a). 

(3) Covered asset amount means the 

monetary amount by which a claimant’s 

net worth would have exceeded the 

limit due to the covered asset alone if 

the uncompensated value of the covered 

asset had been included in net worth. 

(i) Example 1. For purposes of this 

example, presume the net worth limit 

under § 3.274(a) is $123,600. A 

claimant’s assets total $115,900 and his 

annual income is zero. However, the 

claimant transferred $30,000 by giving it 

to a friend. If the claimant had not 

transferred the $30,000, his net worth 

would have been $145,900, which 

exceeds the net worth limit. The 

claimant’s covered asset amount is 

$22,300, because this is the amount by 

which the claimant’s net worth would 

have exceeded the limit due to the 

covered asset. 

(ii) Example 2. For purposes of this 

example, presume the net worth limit 

under § 3.274(a) is $123,600. A 

claimant’s annual income is zero and 

her total assets are $125,000, which 

exceeds the net worth limit. In addition, 

the claimant transferred $30,000 by 

giving $20,000 to her married son and 

giving $10,000 to a friend. The 

claimant’s covered asset amount is 

$30,000 because this is the amount by 

which the claimant’s net worth would 

have exceeded the limit due to the 

covered assets alone. 

(4) Fair market value means the price 

at which an asset would change hands 

between a willing buyer and a willing 

seller, neither being under any 

compulsion to buy or to sell and both 

having reasonable knowledge of 

relevant facts. VA will use the best 

available information to determine fair 

market value, such as inspections, 

appraisals, public records, and the 

market value of similar property if 

applicable. 

(5) Transfer for less than fair market 

value means— 

(i) Selling, conveying, gifting, or 

exchanging an asset for an amount less 

than the fair market value of the asset; 

or 

(ii) A voluntary asset transfer to, or 

purchase of, any financial instrument or 

investment that reduces net worth by 

transferring the asset to, or purchasing, 

the instrument or investment unless the 

claimant establishes that he or she has 

the ability to liquidate the entire balance 

of the asset for the claimant’s own 

benefit. If the claimant establishes that 

the asset can be liquidated, the asset is 

included as net worth. Examples of such 

instruments or investments include— 

(A) Annuities. Annuity means a 

financial instrument that provides 

income over a defined period of time for 

an initial payment of principal. 

(B) Trusts. Trust means a legal 

instrument by which an individual (the 

grantor) transfers property to an 

individual or an entity (the trustee), 

who manages the property according to 

the terms of the trust, whether for the 


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grantor’s own benefit or for the benefit 

of another individual. 

(6) Uncompensated value means the 

difference between the fair market value 

of an asset and the amount of 

compensation an individual receives for 

it. In the case of a trust, annuity, or 

other financial instrument or investment 

described in paragraph (a)(5)(ii) of this 

section, uncompensated value means 

the amount of money or the monetary 

value of any other type of asset 

transferred to such a trust, annuity, or 

other financial instrument or 

investment. 

(7) Look-back period means the 36- 

month period immediately preceding 

the date on which VA receives either an 

original pension claim or a new pension 

claim after a period of non-entitlement. 

This definition does not include any 

date before October 18, 2018. 

(8) Penalty period means a period of 

non-entitlement, calculated under 

paragraph (e) of this section, due to 

transfer of a covered asset. 

(b) General statement of policy 

pertaining to pension and covered 

assets. VA pension is a needs-based 

benefit and is not intended to preserve 

the estates of individuals who have the 

means to support themselves. 

Accordingly, a claimant may not create 

pension entitlement by transferring 

covered assets. VA will review the terms 

and conditions of asset transfers made 

during the 36-month look-back period to 

determine whether the transfer 

constituted transfer of a covered asset. 

However, VA will disregard asset 

transfers made before October 18, 2018. 

In accordance with § 3.277(a), for any 

asset transfer, VA may require a 

claimant to provide evidence such as a 

Federal income tax return transcript, the 

terms of a gift, trust, or annuity, or the 

terms of a recorded deed or other 

evidence of title. 

(c) Exception for transfers as a result 

of fraud or unfair business practice. An 

asset transferred as the result of fraud, 

misrepresentation, or unfair business 

practice related to the sale or marketing 

of financial products or services for 

purposes of establishing entitlement to 

VA pension will not be considered a 

covered asset. Evidence supporting this 

exception may include, but is not 

limited to, a complaint 

contemporaneously filed with State, 

local, or Federal authorities reporting 

the incident. 

(d) Exception for transfers to certain 

trusts. VA will not consider as a covered 

asset an asset that a veteran, a veteran’s 

spouse, or a veteran’s surviving spouse 

transfers to a trust established on behalf 

of a child of the veteran if: 

(1) VA rates or has rated the child 

incapable of self-support under § 3.356; 

and 

(2) There is no circumstance under 

which distributions from the trust can 

be used to benefit the veteran, the 

veteran’s spouse, or the veteran’s 

surviving spouse. 

(e) Penalty periods and calculations. 

When a claimant transfers a covered 

asset during the look-back period, VA 

will assess a penalty period not to 

exceed 5 years. VA will calculate the 

length of the penalty period by dividing 

the total covered asset amount by the 

monthly penalty rate described in 

paragraph (e)(1) of this section and 

rounding the quotient down to the 

nearest whole number. The result is the 

number of months for which VA will 

not pay pension. 

(1) Monthly penalty rate. The monthly 

penalty rate is the maximum annual 

pension rate (MAPR) under 38 U.S.C. 

1521(d)(2) for a veteran in need of aid 

and attendance with one dependent that 

is in effect as of the date of the pension 

claim, divided by 12, and rounded 

down to the nearest whole dollar. The 

monthly penalty rate is located on VA’s 

website at www.benefits.va.gov/pension. 

(2) Beginning date of penalty period. 

When a claimant transfers a covered 

asset or assets during the look-back 

period, the penalty period begins on the 

first day of the month that follows the 

date of the transfer. If there was more 

than one transfer, the penalty period 

will begin on the first day of the month 

that follows the date of the last transfer. 

(3) Entitlement upon ending of 

penalty period. VA will consider that 

the claimant, if otherwise qualified, is 

entitled to benefits effective the last day 

of the last month of the penalty period, 

with a payment date as of the first day 

of the following month in accordance 

with § 3.31. 

(4) Example of penalty period 

calculation. VA receives a pension 

claim in November 2018. The claimant’s 

net worth is equal to the net worth limit. 

However, the claimant transferred 

covered assets totaling $10,000 on 

August 20, 2018, and September 23, 

2018. Therefore, the total covered asset 

amount is $10,000, and the penalty 

period begins on October 1, 2018. 

Assume the MAPR for a veteran in need 

of aid and attendance with one 

dependent in effect in November 2018 

is $24,000. The monthly penalty rate is 

$2,000. The penalty period is $10,000/ 

$2,000 per month = 5 months. The fifth 

month of the penalty period is February 

2019. The claimant may be entitled to 

pension effective February 28, 2019, 

with a payment date of March 1, 2019, 

if other entitlement requirements are 

met. 

(5) Penalty period recalculations. VA 

will not recalculate a penalty period 

under this section unless— 

(i) The original calculation is shown 

to be erroneous; or 

(ii) VA receives evidence showing 

that some or all covered assets were 

returned to the claimant before the date 

of claim or within 60 days after the date 

of VA’s notice to the claimant of VA’s 

decision concerning the penalty period. 

If covered assets are returned to the 

claimant, VA will recalculate or 

eliminate the penalty period. For this 

exception to apply, VA must receive the 

evidence not later than 90 days after the 

date of VA’s notice to the claimant of 

VA’s decision concerning the penalty 

period. Once covered assets are 

returned, a claimant may reduce net 

worth at the time of transfer under the 

provisions of § 3.274(f). 

(Authority: 38 U.S.C. 1522, 1543, 1506(1)) 

(The Office of Management and Budget has 

approved the information collection 

requirement in this section under control 

numbers 2900–0002, and 2900–0004.) 

§ 3.277 [Amended] 

■ 11. Amend § 3.277(c)(2) introductory 

text by removing ‘‘shall’’ and adding in 

its place ‘‘may’’. 

■ 12. Add § 3.278 to read as follows: 

§ 3.278 Deductible medical expenses. 

(a) Scope. This section identifies 

medical expenses that VA may deduct 

from countable income for purposes of 

three of its needs-based programs: 

Pension, section 306 pension, and 

parents’ dependency and indemnity 

compensation (DIC). Payments for such 

medical expenses must be 

unreimbursed to be deductible from 

income. 

(b) Definitions. For the purposes of 

this section— 

(1) Health care provider means: 

(i) An individual licensed by a State 

or country to provide health care in the 

State or country in which the individual 

provides the health care. The term 

includes, but is not limited to, a 

physician, physician assistant, 

psychologist, chiropractor, registered 

nurse, licensed vocational nurse, 

licensed practical nurse, and physical or 

occupational therapist; or 

(ii) A nursing assistant or home health 

aide who is supervised by a licensed 

health care provider as defined in 

paragraph (b)(1)(i) of this section. 

(2) Activities of daily living (ADLs) 

mean basic self-care activities and 

consist of bathing or showering, 

dressing, eating, toileting, transferring, 


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and ambulating within the home or 

living area. Transferring means an 

individual’s moving himself or herself 

from one position to another, such as 

getting in and out of bed. 

(3) Instrumental activities of daily 

living (IADLs) mean independent living 

activities, such as shopping, food 

preparation, housekeeping, laundering, 

managing finances, handling 

medications, using the telephone, and 

transportation for non-medical 

purposes. 

(4) Custodial care means regular: 

(i) Assistance with two or more ADLs; 

or 

(ii) Supervision because an individual 

with a physical, mental, developmental, 

or cognitive disorder requires care or 

assistance on a regular basis to protect 

the individual from hazards or dangers 

incident to his or her daily 

environment. 

(5) Nursing home means a facility 

defined in § 3.1(z)(1) or (2). If the facility 

is not located in a State, the facility 

must be licensed in the country in 

which it is located. 

(6) Medical foster home means a 

privately-owned residence, recognized 

and approved by VA under 38 CFR 

17.73(d), that offers a non-institutional 

alternative to nursing home care for 

veterans who are unable to live alone 

safely due to chronic or terminal illness. 

(7) Care facility other than a nursing 

home means a facility in which a 

disabled individual receives health care 

or custodial care under the provisions of 

paragraph (d) of this section. A facility 

must be licensed if facilities of that type 

are required to be licensed in the State 

or country in which the facility is 

located. A facility that is residential 

must be staffed 24 hours per day with 

care providers. The providers do not 

have to be licensed health care 

providers. 

(8) Needs A&A or is housebound 

refers to a disabled individual who 

meets the criteria in § 3.351 for needing 

regular aid and attendance (A&A) or 

being housebound and is a: 

(i) Veteran; 

(ii) Surviving spouse; 

(iii) Parent (for parents’ DIC 

purposes); or 

(iv) Spouse of a living veteran with a 

service-connected disability rated at 

least 30 percent disabling, who is 

receiving pension. 

(c) Medical expenses for VA purposes. 

Generally, medical expenses for VA 

needs-based benefit purposes are 

payments for items or services that are 

medically necessary; that improve a 

disabled individual’s functioning; or 

that prevent, slow, or ease an 

individual’s functional decline. Medical 

expenses may include, but are not 

limited to, the payments specified in 

paragraphs (c)(1) through (7) of this 

section. 

(1) Care by a health care provider. 

Payments to a health care provider for 

services performed within the scope of 

the provider’s professional capacity are 

medical expenses. Cosmetic procedures 

that a health care provider performs to 

improve a congenital or accidental 

deformity or related to treatment for a 

diagnosed medical condition are 

medical expenses. 

(2) Medications, medical supplies, 

medical equipment, and medical food, 

vitamins, and supplements. Payments 

for prescription and non-prescription 

medication procured lawfully under 

Federal law, as well as payments for 

medical supplies or medical equipment, 

are medical expenses. Medically 

necessary food, vitamins, and 

supplements as prescribed or directed 

by a health care provider authorized to 

write prescriptions are medical 

expenses. 

(3) Adaptive equipment. Payments for 

adaptive devices or service animals, 

including veterinary care, used to assist 

a person with an ongoing disability are 

medical expenses. Medical expenses do 

not include non-prescription food, 

boarding, grooming, or other routine 

expenses of owning an animal. 

(4) Transportation expenses. 

Payments for transportation for medical 

purposes, such as the cost of 

transportation to and from a health care 

provider’s office by taxi, bus, or other 

form of public transportation are 

medical expenses. The cost of 

transportation for medical purposes by 

privately owned vehicle (POV), 

including mileage, parking, and tolls, is 

a medical expense. For transportation in 

a POV, VA limits the deductible mileage 

rate to the current POV mileage 

reimbursement rate specified by the 

United States General Services 

Administration (GSA). The current 

amount can be obtained from 

www.gsa.gov or on VA’s website at 

www.benefits.va.gov/pension/. Amounts 

by which transportation expenses set 

forth in this paragraph (c)(4) exceed the 

amounts of other VA or non-VA 

reimbursements for the expense are 

medical expenses. 

(i) Example. In February 2013, a 

veteran drives 60 miles round trip to a 

VA medical center and back. The 

veteran is reimbursed $24.90 from the 

Veterans Health Administration. The 

POV mileage reimbursement rate 

specified by GSA is $0.565 per mile, so 

the transportation expense is $0.565/ 

mile * 60 miles = $33.90. For VA needsbased benefits purposes, the 

unreimbursed amount, here, the 

difference between $33.90 and $24.90, 

is a medical expense. 

(ii) [Reserved] 

(5) Health insurance premiums. 

Payments for health, medical, 

hospitalization, and long-term care 

insurance premiums are medical 

expenses. Premiums for Medicare Parts 

A, B, and D and for long-term care 

insurance are medical expenses. 

(6) Smoking cessation products. 

Payments for items and services 

specifically related to smoking cessation 

are medical expenses. 

(7) Institutional forms of care and inhome care. As provided in paragraph (d) 

of this section. 

(d) Institutional forms of care and inhome care. This paragraph (d) applies 

with respect to claims for a medical 

expense deduction for institutional 

forms of care or in-home care received 

on or after October 18, 2018 that VA has 

not previously granted. 

(1) Hospitals, nursing homes, medical 

foster homes, and inpatient treatment 

centers. Payments to hospitals, nursing 

homes, medical foster homes, and 

inpatient treatment centers (including 

inpatient treatment centers for drug or 

alcohol addiction), including the cost of 

meals and lodging charged by such 

facilities, are medical expenses. 

(2) In-home care. Payments for 

assistance with ADLs and IADLs by an 

in-home attendant are medical expenses 

as long as the attendant provides the 

disabled individual with health care or 

custodial care. Payments must be 

commensurate with the number of 

hours that the provider attends to the 

disabled person. The attendant must be 

a health care provider unless— 

(i) The disabled individual needs 

A&A or is housebound; or 

(ii) A physician, physician assistant, 

certified nurse practitioner, or clinical 

nurse specialist states in writing that, 

due to a physical, mental, 

developmental, or cognitive disorder, 

the individual requires the health care 

or custodial care that the in-home 

attendant provides. 

(3) Care facilities other than nursing 

homes. (i) Care in a facility may be 

provided by the facility, contracted by 

the facility, obtained from a third-party 

provider, or provided by family or 

friends. 

(ii) Payments for health care provided 

by a health care provider are medical 

expenses. 

(iii) The provider does not need to be 

a health care provider, and payments for 

assistance with ADLs and IADLs are 

medical expenses, if the disabled 

individual is receiving health care or 

custodial care in the facility and— 


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47274 Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Rules and Regulations 

(A) The disabled individual needs 

A&A or is housebound; or 

(B) A physician, physician assistant, 

certified nurse practitioner, or clinical 

nurse specialist states in writing that, 

due to a physical, mental, 

developmental, or cognitive disorder, 

the individual needs to be in a protected 

environment. 

(iv) Payments for meals and lodging 

(and other facility expenses not directly 

related to health care or custodial care) 

are medical expenses if: 

(A) The facility provides or contracts 

for health care or custodial care for the 

disabled individual; or 

(B) A physician, physician assistant, 

certified nurse practitioner, or clinical 

nurse specialist states in writing that the 

individual must reside in the facility (or 

a similar facility) to separately contract 

with a third-party provider to receive 

health care or custodial care or to 

receive (paid or unpaid) health care or 

custodial care from family or friends. 

(e) Non-medical expenses for VA 

purposes. Payments for items and 

services listed in paragraphs (e)(1) 

through (4) of this section are not 

medical expenses for VA needs-based 

benefit purposes. The list is not allinclusive. 

(1) Maintenance of general health. 

Payments for items or services that 

benefit or maintain general health, such 

as vacations and dance classes, are not 

medical expenses. 

(2) Cosmetic procedures. Except as 

provided in paragraph (c)(1) of this 

section, cosmetic procedures are not 

medical expenses. 

(3) Meals and lodging. Except as 

provided in paragraph (d) of this 

section, payments for meals and lodging 

are not medical expenses. 

(4) Assistance with IADLs. Except as 

provided in paragraph (d) of this 

section, payments for assistance with 

IADLs are not medical expenses. 

CROSS REFERENCES: For the rules 

governing how medical expenses are 

deducted, see § 3.272(g) (regarding 

pension) and § 3.262(l) (regarding 

section 306 pension and parents’ DIC). 

(Authority: 38 U.S.C. 501(a), 1315(f)(3), 

1503(a)(8), 1506(1)) 

(The Office of Management and Budget has 

approved the information collection 

requirement in this section under control 

numbers 2900–0002, 2900–0004, and 2900– 

0161.) 

■ 13. Add § 3.279 to read as follows: 

§ 3.279 Statutory exclusions from income 

or assets (net worth or corpus of the 

estate). 

This section sets forth payments that 

Federal statutes exclude from income 

for the purpose of determining 

entitlement to any VA-administered 

benefit that is based on financial need. 

Some of the exclusions also apply to 

assets (pension), also known as net 

worth or the corpus of the estate 

(section 306 pension and parents as 

dependents for compensation). VA will 

exclude from income or assets any 

amount designated by statute as not 

countable as income or resources, 

regardless of whether or not it is listed 

in this section. 

Program or payment Income 

Assets 

(corpus of 

the estate) 

Authority 

(a) COMPENSATION OR RESTITUTION PAYMENTS: 

(1) Relocation payments. Payments to individuals displaced as a direct result of programs or projects undertaken by a Federal agency or with Federal financial assistance under the Uniform Relocation Assistance and Real Property Acquisition Policies 

Act of 1970, as amended.

Excluded ........... Included ............. 42 U.S.C. 4636. 

(2) Crime victim compensation. Amounts received as compensation under the Victims 

of Crime Act of 1984 unless the total amount of assistance received from all federally 

funded programs is sufficient to fully compensate the claimant for losses suffered as 

a result of the crime.

Excluded ........... Excluded ........... 42 U.S.C. 10602(c). 

(3) Restitution to individuals of Japanese ancestry. Payments made as restitution under 

Public Law 100–383 to an individual of Japanese ancestry who was interned, evacuated, or relocated during the period of December 7, 1941, through June 30, 1946, 

pursuant to any law, Executive Order, Presidential proclamation, directive, or other official action respecting these individuals.

Excluded ........... Excluded ............ 50 U.S.C. App. 1989b–4(f). 

(4) Victims of Nazi persecution. Payments made to individuals because of their status 

as victims of Nazi persecution.

Excluded ............ Excluded ........... 42 U.S.C. 1437a note. 

(5) Agent Orange settlement payments. Payments made from the Agent Orange Settlement Fund or any other fund established pursuant to the settlement in the In Re 

Agent Orange product liability litigation, M.D.L. No. 381 (E.D.N.Y.).

Excluded ............ Excluded ........... Sec. 1, Public Law 101–201. 

(6) Chapter 18 benefits. Allowances paid under 38 U.S.C. chapter 18 to a veteran’s 

child with a birth defect.

Excluded ........... Excluded ............ 38 U.S.C. 1833(c). 

(7) Flood mitigation activities. Assistance provided under the National Flood Insurance 

Act of 1968, as amended.

Excluded ............ Excluded ........... 42 U.S.C. 4031. 

(b) PAYMENTS TO NATIVE AMERICANS: 

(1) Indian Tribal Judgment Fund distributions. All Indian Tribal Judgment Fund distributions excluded from income and assets while such funds are held in trust. First 

$2,000 per year of income received by individual Indians under the Indian Tribal 

Judgment Funds Use or Distribution Act in satisfaction of a judgment of the United 

States Court of Federal Claims excluded from income.

Excluded ........... Excluded ............ 25 U.S.C. 1407. 

(2) Interests of individual Indians in trust or restricted lands. Interests of individual Indians in trust or restricted lands excluded from assets. First $2,000 per year of income 

received by individual Indians that is derived from interests in trust or restricted lands 

excluded from income.

Excluded ........... Excluded ............ 25 U.S.C. 1408. 

(3) Per Capita Distributions Act. First $2,000 per year of per capita distributions to 

members of a tribe from funds held in trust by the Secretary of the Interior for an Indian tribe. All funds excluded from income and assets while funds are held in trust.

Excluded ............ Excluded ........... 25 U.S.C. 117b, 

25 U.S.C. 1407. 

(4) Submarginal land. Income derived from certain submarginal land of the United 

States that is held in trust for certain Indian tribes.

Excluded ........... Excluded ............ 25 U.S.C. 459e. 

(5) Old Age Assistance Claims Settlement Act. Up to $2,000 per year of per capita distributions under the Old Age Assistance Claims Settlement Act.Excluded ........... Excluded ............ 25 U.S.C. 2307. 

(6) Alaska Native Claims Settlement Act. Any of the following, if received from a Native 

Corporation, under the Alaska Native Claims Settlement Act: 

Excluded ........... Excluded ............ 43 U.S.C. 1626(c). 

(i) Cash, including cash dividends on stocks and bonds, up to a maximum of 

$2,000 per year; 

(ii) Stock, including stock issued as a dividend or distribution; 


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Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Rules and Regulations 47275 

Program or payment Income 

Assets 

(corpus of 

the estate) 

Authority 

(iii) Bonds that are subject to the protection under 43 U.S.C. 1606(h) until voluntarily and expressly sold or pledged by the shareholder after the date of distribution; 

(iv) A partnership interest; 

(v) Land or an interest in land, including land received as a dividend or distribution 

on stock; 

(vi) An interest in a settlement trust. 

(7) Maine Indian Claims Settlement Act. Payments received under the Maine Indian 

Claims Settlement Act of 1980.

Excluded ............ Excluded ........... 25 U.S.C. 1728. 

(8) Cobell Settlement. Payments received under Cobell v. Salazar, Civil Action No. 96– 

1285 (TFH) (D.D.C.).

Excluded for one 

year.

Excluded for one 

year.

Sec. 101, Public Law 111–291. 

(c) WORK–RELATED PAYMENTS: 

(1) Workforce investment. Allowances, earnings, and payments to individuals participating in programs under the Workforce Investment Act of 1998.Excluded ............ Included ............. 29 U.S.C. 3241(a)(2). 

(2) AmeriCorps participants. Allowances, earnings, and payments to AmeriCorps participants under the National and Community Service Act of 1990.Excluded ........... Included ............. 42 U.S.C. 12637(d). 

(3) Volunteer work. Compensation or reimbursement to volunteers involved in programs 

administered by the Corporation for National and Community Service, unless the payments are equal to or greater than the minimum wage. The minimum wage is either 

that under the Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.) or that under 

the law of the State where the volunteers are serving, whichever is greater.

Excluded ............ Excluded ........... 42 U.S.C. 5044(f). 

(d) MISCELLANEOUS PAYMENTS: 

(1) Income tax refunds. Income tax refunds, including the Federal Earned Income Credit and advance payments with respect to a refundable credit.Excluded ............ Excluded for one 

year.

26 U.S.C. 6409. 

(2) Food stamps. Value of the allotment provided to an eligible household under the 

Food Stamp Program.

Excluded ........... Excluded ............ 7 U.S.C. 2017(b). 

(3) Food for children. Value of free or reduced-price for food under the Child Nutrition 

Act of 1966.

Excluded ............ Excluded ........... 42 U.S.C. 1780(b). 

(4) Child care. Value of any child care provided or arranged (or any amount received as 

payment for such care or reimbursement for costs incurred for such care) under the 

Child Care and Development Block Grant Act of 1990.

Excluded ............ Included ............. 42 U.S.C. 9858q. 

(5) Services for housing recipients. Value of services, but not wages, provided to a resident of an eligible housing project under a congregate services program under the 

Cranston-Gonzalez National Affordable Housing Act.

Excluded ........... Included ............. 42 U.S.C. 8011(j)(2). 

(6) Home energy assistance. The amount of any home energy assistance payments or 

allowances provided directly to, or indirectly for the benefit of, an eligible household 

under the Low-Income Home Energy Assistance Act of 1981.

Excluded ............ Excluded ........... 42 U.S.C. 8624(f). 

(7) Programs for older Americans. Payments, other than wages or salaries, received 

from programs funded under the Older Americans Act of 1965, 42 U.S.C. 3001.

Excluded ............ Included ............. 42 U.S.C. 3020a(b). 

(8) Student financial aid. Amounts of student financial assistance received under Title 

IV of the Higher Education Act of 1965, including Federal work-study programs, Bureau of Indian Affairs student assistance programs, or vocational training under the 

Carl D. Perkins Vocational and Technical Education Act of 1998.

Excluded ........... Excluded ............ 20 U.S.C. 1087uu, 2414(a). 

(9) Retired Serviceman’s Family Protection Plan annuities. Annuities received under 

subchapter I of the Retired Serviceman’s Family Protection Plan.

Excluded ............ Included ............. 10 U.S.C. 1441. 

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

■ 14. Amend § 3.503 by adding 

paragraph (c) to read as follows: 

§ 3.503 Children. 

* * * * * 

(c) Medicaid-covered nursing home 

care (§ 3.551(i)). (1) Last day of the 

calendar month in which Medicaid 

payments begin, last day of the month 

following 60 days after issuance of a 

prereduction notice required under 

§ 3.103(b)(2), or the earliest date on 

which payment may be reduced without 

creating an overpayment, whichever 

date is later; or 

(2) If the child or the child’s custodian 

willfully conceals information necessary 

to make the reduction, the last day of 

the month in which that willful 

concealment occurred. 

(Authority: 38 U.S.C. 501, 1832, 5112(b), 

5503(d)) 

■ 15. Amend § 3.551 by revising 

paragraph (i) to read as follows: 

§ 3.551 Reduction because of 

hospitalization. 

* * * * * 

(i) Certain beneficiaries receiving 

Medicaid-covered nursing home care. 

This paragraph (i) applies to a veteran 

without a spouse or child, to a surviving 

spouse without a child, and to a 

surviving child. Effective November 5, 

1990, and terminating on the date 

provided in 38 U.S.C. 5503(d)(7), if such 

a beneficiary is receiving Medicaidcovered nursing home care, no pension 

or survivors pension in excess of $90 

per month will be paid to or for the 

beneficiary for any period after the 

month in which the Medicaid payments 

begin. A beneficiary is not liable for any 

pension paid in excess of the $90 per 

month by reason of the Secretary’s 

inability or failure to reduce payments, 

unless that inability or failure is the 

result of willful concealment, by the 

beneficiary, of information necessary to 

make that reduction. 

(Authority: 38 U.S.C. 5503) 

* * * * * 

§ 3.660 [Amended] 

■ 16. Amend § 3.660(d) by removing 

‘‘§§ 3.263 or 3.274’’ and adding in its 

place ‘‘§ 3.263’’. 

[FR Doc. 2018–19895 Filed 9–17–18; 8:45 am] 

BILLING CODE 8320–01–P 


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