In fiscal year 2011, VA provided about $ 4.3 billion in pension benefits for about 517,000 recipients. These benefits are available to low-income wartime veterans who are 65 and older, or who are under age 65 but are permanently and totally disabled due to conditions unrelated to their military service. Surviving spouses and dependent children may also qualify for these benefits. Average annual payments in fiscal year 2011 were $9,669 for veterans and $6,209 for survivors. VA provides pension benefits through its Veterans Benefits Administration (VBA), and claims processors assess claims at VBA’s three PMCs. VA also accredits representatives of veterans service organizations, attorneys, and claims agents to assist claimants with the preparation and To become accredited, an submission of VA claims at no charge. individual must meet certain requirements set forth in federal law. To qualify for pension benefits, claimants’ countable income must not exceed annual pension limits that are set by statute. These income limits are also the maximum annual pension payment that a beneficiary may receive and may vary based on whether claimants are veterans or survivors, their family composition, as well as whether they need enhanced benefits, such as aid and attendance or housebound benefits.example, to qualify for pension benefits in 2012 a veteran with no dependents and who is in need of aid and attendance benefits cannot have income that exceeds $20,447. In determining if a claimant’s income is below program thresholds, VA includes recurring sources of income such as Social Security retirement and disability benefits, but not income from public assistance programs such as Supplemental Security Income (SSI). See 38 C.F.R. § 3.275. For claimants who are veterans, VA also assesses the net worth of the veteran’s spouse to determine financial eligibility. determine if claimants’ financial resources are sufficient to pay for their expenses without assistance from VA. VA pension claimants may also be eligible for other means-tested programs, such as Medicaid, a joint federal-state health care financing program that provides coverage for long-term care services for certain individuals who meet specific income and resource thresholds. Each state administers its Medicaid program and establishes specific income and resource eligibility requirements that must fall within federal standards. Similarly, the SSI program provides cash benefits to individuals who are 65 or older, blind, or disabled who have limited income and whose resources are $2,000 or less. We identified over 200 organizations located throughout the country that market their services to help veterans and their surviving spouses qualify for VA pension benefits by transferring or preserving excess assets. These organizations consist primarily of financial planners and attorneys offering products and services such as annuities and the establishment of trusts, to enable potential VA pension claimants with excess assets to meet financial eligibility criteria for VA pension benefits. For example, one organization’s website advertised that it develops financial plans which include various insurance products, and that its specific area of expertise is to help VA pension claimants with hundreds of thousands of dollars in assets obtain approval for these benefits. Under current federal law and regulations, VA pension claimants are allowed to transfer assets and reduce their net worth prior to applying for benefits, so services being marketed and provided by these organizations to qualify for VA pension benefits are legally permissible under program rules. In contrast, for Medicaid—another means tested program—federal law explicitly restricts eligibility for coverage for long term care for certain individuals who transfer assets for less than fair market value prior to applying., As a result, when an individual applies for Medicaid coverage for long-term care, states conduct a look-back—a review to determine if the applicant transferred assets for less than fair market value prior to applying. Individuals who have transferred assets for less than fair market value during the 60 months prior to applying may be denied eligibility for long- term care coverage for a period of time, known as the penalty period. For example, gifting assets would generally be considered a transfer of assets for less than fair market value and result in a penalty period. Also, under the SSI program, claimants who transfer assets for less than fair market value prior to applying may become ineligible for these benefits for up to 36 months. During our investigative calls, all 19 organizations correctly noted that pension claimants can legally transfer assets prior to applying. They indicated it is possible to qualify for VA pension benefits despite having excess assets, and almost all provided information on how to transfer these assets. (See figure 1 for transcript excerpts of calls with organizations on services they provide to qualify for VA pension benefits.) A number of different strategies may be used to transfer pension claimants’ excess assets so that they meet financial eligibility thresholds. Among the 19 organizations our investigative staff contacted, about half advised transferring excess assets into an irrevocable trust with a family member as the trustee to direct funds to pay for the veteran’s expenses. A similar number also advised placing excess assets into some type of annuity. Among these, several advised placing excess assets into an immediate annuity that generates income for the client. In employing this strategy, assets that VA would count when determining financial eligibility for pension benefits are converted into monthly income. This monthly income would fall below program thresholds and enable the claimant to still qualify for the benefits. About one-third of the organizations recommended strategies that included the use of both annuities and trusts. For example, one organization we contacted advised repositioning some excess assets into an irrevocable trust, with the son as the trustee, and placing remaining excess assets into a deferred annuity that would not be completely accessible, since most of the funds could not be withdrawn without a penalty. In addition, several organization representatives we interviewed also told us they may advise using caretaker agreements to enable a client to qualify for VA pension benefits. Organizations told us this strategy generally involves the pension claimant transferring assets to family members as part of a contract, in exchange for caretaker services to be provided by these family members for the remainder of the claimant’s lifetime. Some organization representatives we interviewed told us that transferring assets to qualify for VA pension benefits is advantageous for elderly pension claimants because it enables them to have more income to pay for care expenses and remain out of a nursing home for a longer period of time. For example, representatives from one organization said the use of immediate income annuities allows pension claimants to increase their monthly income that, combined with the VA pension, could help pay for assisted living or in-home care costs. Other financial planners and attorneys said if claimants do not conduct financial or estate planning to qualify for the VA pension and instead spend down their assets prior to applying, the monthly amount of the pension benefit they eventually receive may be insufficient to pay for their long-term care. They said that, as a result, these claimants may decide to seek Medicaid coverage for nursing home care because of their lack of financial resources, when they could have remained in an assisted living facility or at home with the aid of the VA pension. Some of these organizations told us that nursing home care financed by Medicaid is more costly for the government than if the veteran had received the VA pension benefit and obtained care in a lower-cost assisted living facility. Many organizations we identified also conduct presentations on VA pension benefits at assisted living or retirement communities to identify prospective clients. According to attorneys and officials from state attorneys general offices we spoke with, managers of assisted living facilities or retirement communities may have an interest in inviting organization representatives to conduct presentations on VA pension benefits because these benefits allow them to obtain new residents by making the costs more affordable. For example, we obtained documentation indicating that one retirement community paid an organization representative a fee for a new resident he helped the facility obtain. Another community in another state paid organization representatives fees to assist residents in completing the VA pension application. Some products may not be suitable for elderly veterans because they may lose access to funds they may need for future expenses, such as medical care. To help elderly clients become financially eligible for VA pension benefits, some organizations may sell deferred annuities which would make the client unable to access the funds in the annuity during their expected lifetime without facing high withdrawal fees, according to some attorneys we spoke with. An elderly advocacy organization representative we spoke with also noted that elderly individuals are impoverishing themselves by purchasing these products when they may need the transferred assets to pay for their long-term care expenses. As part of our investigative work, one organization provided a financial plan to qualify for VA pension benefits that included both an immediate annuity as well as a deferred annuity for an 86-year-old veteran that would generate payments only after the veteran’s life expectancy. Some organizations that assist in transferring assets to qualify people for VA pension benefits may not consider the implications of these transfers on eligibility for Medicaid coverage for long-term care. Individuals who transfer assets to qualify for the VA pension may become ineligible for Medicaid coverage for long-term care services they may need in the future. For example, asset transfers that may enable someone to qualify for the VA pension program, such as gifts to someone not residing in a claimant’s household, the purchase of deferred annuities, or the establishment of trusts, may result in a delay in Medicaid eligibility if the assets were transferred for less than fair market value during Medicaid’s 60-month look-back period. According to several attorneys we spoke with, some organization representatives are unaware or are indifferent to the adverse effects on Medicaid eligibility of the products and services they market to qualify for the VA pension. As a result, potential pension claimants may be unaware that the purchase of these products and services may subsequently delay their eligibility for Medicaid. In addition to the potential adverse impact of transferring assets, we heard concerns that marketing strategies used by some of these companies may be misleading. According to several attorneys we spoke with, some organization representatives market their services in a way that may lead potential pension claimants and their family members to believe they are veterans advocates working for a nonprofit organization, or are endorsed by VA. As a result, they may fail to realize these representatives are primarily interested in selling financial products.