[Federal Register Volume 74, Number 107 (Friday, June 5, 2009)]
[Rules and Regulations]
[Pages 26956-26958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-13212]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 3

RIN 2900-AN25


Severance Pay, Separation Pay, and Special Separation Benefits

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: This document amends the Department of Veterans Affairs (VA) 
adjudication regulations to incorporate relevant statutory provisions 
regarding severance pay, separation pay, and special separation 
benefits. These amendments are necessary to conform the regulation to 
statutory provisions.

DATES: 
    Effective Date: These amendments are effective June 5, 2009.
    Applicability Date: The amendment to 38 CFR 3.700(a)(3) applies to 
members of the Armed Forces separated under 10 U.S.C. chapter 61 on or 
after January 28, 2008. The amendment to 38 CFR 3.700(a)(5) applies to 
payments of special separation benefits made on or after December 5, 
1991.

FOR FURTHER INFORMATION CONTACT: Thomas J. Kniffen, Chief, Regulations 
Staff (211D), Compensation and Pension Service, Veterans Benefits 
Administration, Department of Veterans Affairs, 810 Vermont Avenue, 
NW., Washington, DC 20420, (202) 461-9725.

SUPPLEMENTARY INFORMATION: We are amending 38 CFR 3.700 to implement 
statutory changes.

38 CFR 3.700(a)(3)--Disability Severance Pay

    Section 1212 of title 10, United States Code, which authorizes 
disability severance pay, generally requires that the amount of 
disability severance pay received for a disability be deducted from any 
VA compensation awarded for the same disability. However, the National 
Defense Authorization Act for Fiscal Year 2008, Public Law 110-181, 
Div. A, Title XVI, Subtitle D, section 1646(b), amended 10 U.S.C. 1212 
to provide that no deduction may be made from VA compensation for 
disability severance pay received for disabilities incurred in line of 
duty in a combat zone or incurred during performance of duty in combat-
related operations as designated by the Department of Defense (DoD). 
The DoD designation of whether a disability was incurred in a combat 
zone or incurred during performance of duty in combat-related 
operations will govern only whether a deduction may be made from VA 
compensation paid for the disability for which disability severance pay 
was received. VA will continue to determine whether the disability 
resulted from disease or injury incurred or aggravated in line of duty 
in active service for purposes of determining entitlement to VA 
disability compensation. The amendment applies to members of the Armed 
Forces separated from the Armed Forces under Chapter 61 of title 10, 
United States Code, on or after January 28, 2008.
    Section 3.700(a)(3) is VA's regulation governing offset of 
disability severance pay from VA compensation. Generally, an award of 
compensation will be made subject to recoupment of any disability 
severance pay received for the same disability. We are adding to the 
regulation a new provision specifying that there will be no recoupment 
of disability severance pay for disabilities identified by the DoD as 
being incurred in combat zones or during performance of duty in combat-
related operations.

[[Page 26957]]

    Because of the amendments to 38 U.S.C. 1212 made by the National 
Defense Authorization Act for Fiscal Year 2008, the authority for Sec.  
3.700(a)(3) has changed from section 1212(c) to section 1212(d). We are 
making this change in the authority citation in the regulation.

38 CFR 3.700(a)(5)--Separation Pay and Special Separation Benefits

    In Public Law 102-190, section 661(a)(1), effective December 5, 
1991, Congress added the special separation benefits program to be 
carried out by the DoD. See 10 U.S.C. 1174a.
    To avoid duplication of benefits resulting from the special 
separation benefits program, section 1174a(g) makes the provisions of 
10 U.S.C. 1174(h)(2) applicable to special separation benefits. Section 
1174(h)(2) states that a member who has received separation pay based 
on service in the Armed Forces shall not be deprived, by reason of his 
receipt of such pay, of any disability compensation to which he is 
entitled under the laws administered by VA, but there shall be deducted 
from that disability compensation an amount equal to the total amount 
of separation pay received. In Public Law 104-201, section 653, 
Congress amended section 1174(h)(2) by providing that the amount 
deducted from disability compensation would be the total amount of 
separation pay received less the amount of Federal income tax withheld 
from such pay (such withholding being at the flat withholding rate for 
Federal income tax withholding). This amendment was made applicable to 
payments of separation pay made after September 30, 1996.
    In 1998, Congress enacted Public Law 105-178, section 8208, which 
extended the applicability of the amendment made by Public Law 104-201 
to any payment of special separation benefits under section 1174a made 
during the period beginning on December 5, 1991, and ending on 
September 30, 1996.
    In 2002, VA revised its regulation concerning concurrent benefits, 
38 CFR 3.700, to incorporate the offset requirements, including the 
reduction of the amount of offset by the amount of Federal income tax 
withheld from separation pay or special separation benefits. 67 FR 
60867 (Sept. 27, 2002). However, VA did not specify that the reduction 
for Federal income tax withheld was applicable to payments of special 
separation benefits made on or after December 5, 1991. Nonetheless, 
VA's practice has been to recoup the after-tax amount since December 5, 
1991. We are now amending the regulation to conform to the statute and 
current practice. We are amending Sec.  3.700(a)(5) by creating a new 
Sec.  3.700(a)(5)(iii) that will address special separation benefits, 
and we will remove the special separation benefits references from 
current Sec.  3.700(a)(5)(i).
    We will also add a clarification in Sec.  3.700(a)(5) for both 
separation pay and special separation benefits that the Federal income 
tax withholding amount is at the flat withholding rate for Federal 
income tax withholding, to ensure the regulations accurately reflect 
the statute.

Administrative Procedures Act

    This final rule merely restates statutory provisions. Accordingly, 
there is a basis for dispensing with prior notice and comment and the 
delayed effective date provisions of 5 U.S.C. 553.

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act (44 U.S.C. 3501-3521).

Regulatory Flexibility Act

    The Secretary hereby certifies that this 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 rule would not affect any small entities. Only VA 
beneficiaries could be directly affected. Therefore, pursuant to 5 
U.S.C. 605(b), this rule is exempt from the initial and final 
regulatory flexibility analysis requirements of sections 603 and 604.

Executive Order 12866

    Executive Order 12866 directs agencies to assess all 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, 
and other advantages; distributive impacts; and equity). The Executive 
Order classifies a ``significant regulatory action,'' requiring review 
by the Office of Management and Budget (OMB), 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 final rule have been examined and it has been 
determined not to be a significant regulatory action.

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 year. This rule would have no such effect on State, 
local, and tribal governments, or on the private sector.

Catalog of Federal Domestic Assistance Numbers and Titles

    The Catalog of Federal Domestic Assistance program number and title 
for this rule is 64.109, Veterans Compensation for Service-Connected 
Disability.

List of Subjects in 38 CFR Part 3

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

    Approved: April 29, 2009.
John R. Gingrich,
Chief of Staff, Department of Veterans Affairs.

0
For the reasons set forth in the preamble, 38 CFR part 3 is amended as 
follows:

PART 3--ADJUDICATION

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

0
1. The authority citation for part 3, subpart A continues to read as 
follows:

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


0
2. Amend Sec.  3.700 as follows:
0
a. In paragraph (a)(3), add a sentence at the end of the paragraph and 
revise its authority citation.
0
b. In paragraph (a)(5)(i), remove ``or special separation benefits'' 
and ``under section 1174a'' each place it appears, and add a sentence 
at the end of the paragraph.
0
c. Remove the authority citation at the end of paragraph (a)(5)(ii).
0
d. Add paragraph (a)(5)(iii) and an authority citation.

[[Page 26958]]

    The revision and additions read as follows:


Sec.  3.700  General.

* * * * *
    (a) * * *
    (3) * * * For members of the Armed Forces who separated under 
Chapter 61 of title 10, United States Code, on or after January 28, 
2008, no recoupment of severance pay will be made for disabilities 
incurred in line of duty in a combat zone or incurred during 
performance of duty in combat-related operations as designated by the 
Department of Defense.

(Authority: 10 U.S.C. 1174(h)(2) and 1212(d))

* * * * *
    (5) * * *
    (i) * * * The Federal income tax withholding amount is the flat 
withholding rate for Federal income tax withholding.
* * * * *
    (iii) Where payment of special separation benefits under 10 U.S.C. 
1174a was made on or after December 5, 1991, VA will recoup from 
disability compensation an amount equal to the total amount of special 
separation benefits less the amount of Federal income tax withheld from 
such pay. The Federal income tax withholding amount is the flat 
withholding rate for Federal income tax withholding.

(Authority: 10 U.S.C. 1174 and 1174a)

* * * * *
[FR Doc. E9-13212 Filed 6-4-09; 8:45 am]
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