BVA9505959 DOCKET NO. 93-03 343 ) DATE ) ) On appeal from the decision of the Department of Veterans Affairs Regional Office in Atlanta, Georgia THE ISSUE Entitlement to waiver of recovery of pension benefit overpayment in the amount of $366, to include the issue of whether the overpayment was properly created. REPRESENTATION Appellant represented by: Disabled American Veterans ATTORNEY FOR THE BOARD J. Sherman, Counsel INTRODUCTION The veteran had active service from November 1940 to December 1945. This appeal arises from a July 1992 decision by the Committee on Waivers and Compromises of the Atlanta, Georgia, regional office (RO) that denied the veteran's claim for waiver of recovery of the overpayment at issue. CONTENTIONS OF APPELLANT ON APPEAL The appellant contends, in effect, that the overpayment was created through no fault of his own, and that recovery of the overpayment would be against equity and good conscience in that it would cause him severe financial hardship. DECISION OF THE BOARD The Board, in accordance with the provisions of 38 U.S.C.A. § 7104 (West 1991), has reviewed and considered all of the evidence and material of record in the veteran's claims file. Based on its review of the relevant evidence in this matter, and for the following reasons and bases, it is the decision of the Board that the preponderance of the evidence is against the veteran's claim for waiver of recovery of the overpayment in the amount of $366. FINDINGS OF FACT 1. All relevant evidence necessary for an equitable disposition of the veteran's appeal has been obtained by the RO. 2. An overpayment of pension benefits occurred through failure of the veteran to report income on a timely basis. 3. The VA is not responsible for the creation of an overpayment of pension benefits in the amount of $366, nor is VA at fault. 4. The veteran bears significant fault with respect to creation of the indebtedness by virtue of his failure to notify the RO promptly of the change in his wife's income. 5. Collection of the amount overpaid would not deprive the veteran or his family of basic necessities. 6. Recovery of the overpayment would not defeat the purpose for which pension benefits were awarded. 7. Failure to make restitution would result in unfair gain to the veteran. 8. The veteran did not relinquish a valuable right or incur a legal obligation in reliance on the pension overpayment. CONCLUSIONS OF LAW 1. The overpayment of pension benefits in the amount of $366 was not due to error solely on the part of the VA, and, accordingly, the overpayment was properly created. 38 U.S.C.A. §§ 1521(a), (c), and (j), 5107, 5112(b)(4)(A) (West 1991); 38 C.F.R. §§ 3.252(b) and (c), 3.260(a), 3.500(b) and (c), 3.660(a) (1994). 2. There is no indication of fraud, misrepresentation, or bad faith on the part of the appellant in the creation of the overpayment of $366. 38 U.S.C.A. § 5302(c) (West 1991); 38 C.F.R. § 1.965(b) (1994). 3. Recovery of the $366 in question would not be against the principles of equity and good conscience. 38 U.S.C.A. §§ 5107, 5302(a) (West 1991); 38 C.F.R. §§ 1.962, 1.963(a), 1.965 (1994). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The veteran satisfied the threshold requirement of presenting a well-grounded claim within the meaning of 38 U.S.C.A. § 5107(a). That is, he set forth a claim which was plausible. The Board is also satisfied that all relevant evidence has been properly developed, and that no further assistance is required to comply with the VA's duty to assist. The developments leading up to creation of the overpayment at issue are straightforward and may be set forth briefly. The veteran was awarded non-service connected pension effective February 1, 1990. The veteran was notified of the award of pension by letter dated February 13, 1990. The award letter listed the veteran's countable income as $8,567, and the maximum annual pension rate (MAPR) as $8,864. The veteran's monthly rate of pension effective February 1, 1990, was $24. The letter notified the veteran that his countable income included social security benefits for the veteran of $6,502 and other retirement benefits for the veteran of $2,065. The veteran was notified that the rate of VA pension was directly related to his and his family's income, that adjustments to payments must be made whenever income changed, and that he must notify the RO immediately if he or his family received any income from any source other than those listed in the letter, or if there was any change in the amount of income from any source listed in the letter. He was advised that failure to notify the VA promptly might result in creation of an overpayment. In April 1991, the veteran filed an eligibility verification report (EVR) listing social security benefits for himself and retirement benefits as income. The RO issued an award letter in April 1991 advising the veteran that his monthly rate of pension effective December 1990 was $36, based on countable income of $8,903 and a MAPR of $9,343. The letter again advised the veteran that he must notify the RO of any change in income, and that a failure could result in creation of an overpayment. In March 1992, the veteran filed an EVR in which he listed income earned by his wife in April, May, June, October, November, and December 1991 in the amount of $1,509. The RO adjusted the veteran's pension award in March 1992 to reflect the increase in income. The additional income brought the veteran's countable income to $10,020 from May 1991, which exceeded the MAPR of $9,343. The veteran's monthly pension rate was decreased to zero on May 1, 1991, the month after the veteran's wife began earning income from seasonal employment. An overpayment was created as a result of monthly pension previously paid to the veteran during the months May 1991 to March 1992. In May 1992, the veteran requested waiver of the overpayment, submitting a Financial Status Report showing a combined monthly net income for himself and his wife of $1,258. The combined monthly net income included social security benefits for the veteran and for his wife and retirement income for the veteran. The veteran listed monthly expenses totaling $1,213, which included amounts for rent or mortgage, food, utilities and heat, telephone, insurance, clothing, and medical expenses. Also listed were debt repayments in the amount of $230.. The matter was referred to the Committee on Waivers and Compromises of the Atlanta, Georgia, RO. In July 1992, the Committee denied the request for waiver, finding that the veteran was free of fraud, misrepresentation, and bad faith, and that recovery of the overpayment would not be against equity and good conscience. The veteran filed a Notice of Disagreement (NOD), asserting that he and his wife had monthly income of $1,228 and that collection of the $366 debt by the government would leave them insufficient funds to buy food. The veteran was provided a Statement of the Case in September 1992 and filed a VA Form 1-9, substantive appeal, that same month. As attachments to his substantive appeal, the veteran included a copy of the Financial Status Report previously filed in May 1992 and an undated and unsigned summary of monthly expenses and income. The summary of monthly expenses and income reflects income to the veteran from social security and retirement and to his wife from social security. The combined income is listed as $1,227 per month. Listed monthly expenses total $1,110. Monthly expenses listed include $350 per month for food, as well as amounts for housing, utilities, gasoline, medical care, bills, and tithes. Creation of the Overpayment Under applicable law, a veteran who served in the active military service for 90 days or more during a period of war, who is permanently and totally disabled from non-service-connected disability not the result of the veteran's own willful misconduct, is entitled to pension payable at the rate established by law, reduced by the veteran's annual income and, if the veteran is married and living with his spouse, the annual income of the spouse. 38 U.S.C.A. § 1521(a), (c), and (j) (West 1991); 38 C.F.R. § 3.252(b) and (c) (1994). For pension purposes, payments of any kind from any source will be counted as income during the 12 month annualization period in which received, unless specifically excluded under the provisions of 38 C.F.R. § 3.272 (1994). 38 C.F.R. § 3.271 (1994). The effective date of a discontinuance of an award of pension is determined in accordance with the requirements of 38 C.F.R. §§ 3.500(b) and (c), 3.660(a). When an erroneous award is based solely on administrative error or error in judgment, the effective date of the discontinuance is the date of the last payment. 38 C.F.R. § 3.500(b)(2) (1994). In this case, the annual income attributable to the veteran increased beginning in April 1991 when his wife began seasonal employment. This increase in income was not reported to the RO until the following March. The RO had notified the veteran in February 1990 and in April 1991 that the rate of VA pension was directly related to his and his family's income and that the VA must be notified any time he or his family received any income from a source other than those listed in the notification letter so that the pension award might be adjusted. Both letters listed the income the veteran had reported, which included only his social security and his retirement benefit. The veteran and his wife began receiving additional income in April 1991 and did not notify the RO of the additional income until March 1992. A veteran who is receiving pension must notify the Department of any material change or expected change in income which would affect entitlement to receive, or the rate, of the benefit being paid. The notice must be made when the recipient acquires knowledge that he will begin to receive additional income. 38 C.F.R. § 3.660(a)(1) (1994). The veteran had been notified at least twice of his obligation to report additional income or anticipated income immediately, because it would affect his pension award. The failure of the veteran to notify the RO of the increase in income until nearly a year after his wife began her seasonal employment was not an administrative error or error in judgment on the part of the RO. The maximum annual pension rate for a veteran and spouse, effective December 1990, was $9,343. Veterans Benefits Administration Manual M21-1, Part I, Change 4, Appendix B, April 19, 1991. Based upon the veteran's reported income of $6,838 from social security and $2,065 from retirement, the RO had calculated the veteran's annual income for the period beginning December 1, 1990, to be $8,903. The additional income during 1991 put the veteran's annual income above the maximum annual pension rate established by law, requiring discontinuance of his pension award. Where discontinuance is required because of an increase in income, the discontinuance shall be made effective the end of the month in which the increase in income occurred. 38 C.F.R. § 3.500(c), 3.660(a)(2) (1994). The veteran began receiving additional income in April 1991, and the RO discontinued the award of pension effective May 1, 1991, the month after the increase in income occurred. Clearly, the overpayment was not created solely through the fault of the RO, and retroactive discontinuance was properly accomplished, beginning with the month after the veteran began to receive additional income. Creation of the overpayment was proper under the applicable criteria. No Evidence of Fraud, Misrepresentation, or Bad Faith As noted above, overpayments created by retroactive discontinuance of an award are subject to recovery if recovery is not waived. Waiver of repayment of an indebtedness is precluded if there is any indication of fraud, misrepresentation of a material fact, or bad faith on the part of the person having an interest in obtaining a waiver. 38 U.S.C.A. § 5302(c) (West 1991). In order to determine whether waiver may be granted, it is first necessary to examine the question of whether the overpayment was created as a result of fraud, misrepresentation, or bad faith on the part of the claimant. Ridings v. Brown, 6 Vet.App. 544, 546 (1994), citing 38 C.F.R. § 1.965. In this case, the RO Committee on Waivers and Compromises made a specific finding that the veteran was free of fraud, misrepresentation, and bad faith. The undersigned is in agreement. The fact that an overpayment may have been created was brought to the attention of the RO when the veteran filed an Eligibility Verification Report (EVR) in March 1992 listing his wife's income for April to June and October to December 1991. The veteran reported the income, but failed to report it in a timely manner, that is, as soon as he knew of it. His previous EVR had been filed in April 1991, and it was dated before the veteran's wife began her seasonal employment on April 25, 1991. There is simply no evidence of fraud or misrepresentation of a material fact. Likewise, bad faith refers to "unfair or deceptive dealing by one who seeks to gain thereby at another's expense." 38 C.F.R. § 1.965(b)(2) (1994). Conduct by a claimant undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and with resulting loss to the government is required for a showing of bad faith. Id. There is no evidence in this case of an intention to seek unfair advantage on the part of the veteran. He did report his wife's income with the first EVR that came due after her seasonal employment began. That he failed to report it immediately is indicative at most of failure to take note of the requirement that was clearly set out in the pension award letter, but is not indicative of bad faith in this case. The undersigned therefore concurs with the finding of the Committee on Waivers and Compromises that the veteran was free of fraud, misrepresentation of material fact, and bad faith in the creation of the overpayment. Consideration of Equity and Good Conscience If there is no indication of fraud, misrepresentation, or bad faith, recovery of overpayments of benefits under laws administered by the Secretary of Veterans Affairs (Secretary) is prohibited if the Secretary determines that recovery would be against equity and good conscience. 38 U.S.C.A. § 5302(a) (1994); 38 C.F.R. § 1.962. Recovery of the overpayment shall be waived if it is determined that recovery of the indebtedness would be against equity and good conscience. 38 C.F.R. § 1.963(a) (1994). Consideration of equity and good conscience is intended to reach a result that is not unduly favorable or adverse to either the claimant or the Government. It is intended to achieve a result that is fair. 38 C.F.R. § 1.965(a) (1994). Six non-exclusive elements are set forth in the regulations that must be addressed to determine whether the facts and circumstances in a particular case dictate that collection of an overpayment would be against equity and good conscience. Id. Each of the six elements must be addressed. Ridings, 6 Vet.App. at 546. The first element is "fault of the debtor," defined as "[w]here actions of the debtor contribute to creation of the debt." 38 C.F.R. § 1.965(a)(1). In this case, the debt was created when the veteran failed to report that his wife was earning or expected to earn income during 1991. He did not report the income until some 10 months after his wife began her seasonal employment. The wife's income was sufficient to bring the family income over the maximum annual pension rate for the period, and failure to report it immediately is the reason the overpayment was made. The veteran here is at fault for not following written instructions to immediately report the receipt of additional income. The second element is "balancing of faults." 38 C.F.R. § 1.965(a)(2). This element requires weighing the fault of the debtor against the fault of the Department. In this case, there is no fault of the Department in creation of the overpayment. The Department notified the veteran in 1990 and in 1991 that any increase in family income must be reported immediately because it would have an effect on the amount of pension payable to the veteran. As soon as the RO received the veteran's EVR dated March 1992 showing the additional income for 1991, action was taken to adjust the veteran's pension award, resulting in the termination of entitlement effective May 1, 1991. The RO is not at fault in creation of the overpayment. The third element to be considered is "undue hardship," described as "[w]hether collection would deprive debtor or family of basic necessities." 38 C.F.R. § 1.965(a)(3). In May 1992, the veteran filed a Financial Status Report listing monthly income of $1,258 and monthly expenses of $1,213. The monthly income listed does not include anticipated income from the wife's seasonal employment, which the veteran indicated began on April 28, 1992, and was expected to last about six weeks and to resume for about two months at the end of the year. The monthly expenses include estimates for food, housing, utilities, phone, insurance, clothing, and medical, as well as repayment of a bank loan. All basic necessities of life would appear to be adequately covered by the listed income, which does not include amounts that the veteran and his wife expect to receive from her employment. Another analysis of income and expenses was submitted with the veteran's substantive appeal. It reflected a monthly income (again without taking into account the wife's seasonal employment) of $1,227, and monthly expenses of $1,110. As before, expenses for housing, utilities, food, phone, gas, medicine, tithes, doctor and hospital bills, and insurance were included in the listing of monthly expenses. Although this list differs substantially from the one dated March 1992 in the amounts allocated for various items, such as food and housing, it does cover adequately the basic necessities of life, and an additional amount would appear to be available above the amount necessary to meet obligations. Collection of the debt would not deprive the veteran or his family of basic necessities, and it would not create an undue hardship. The fourth element to be addressed is whether recovery of the overpayment would defeat the purpose for which the benefits were intended. 38 C.F.R. § 1.965(a)(4). The veteran was in receipt of non-service-connected pension benefits. Pension is a needs- based program intended to assure that wartime veterans who are permanently and totally disabled from non-service-connected disability do not have less than the maximum annual pension rate on which to live. The veteran is currently not in receipt of pension because his income exceeds the maximum allowable income. On the veteran's latest listing of income and expenses, his countable income, not including his wife's seasonal employment, was listed as $1,227 per month, which amounts to $14,724 per year. Expenses amounted to $1,110 per month, or $13,320 per year. The monthly difference between income and expenses is $117, and the annual difference is $1,404, still without taking into account his wife's income from employment. In September 1992, when the veteran filed his substantive appeal with the revised list of income and expenses, the maximum annual pension rate was $9,689 for a veteran and spouse. Clearly, collection of $366 would not bring the veteran's income below the maximum annual pension rate and would not defeat the purpose of the pension program. The fifth element to be considered is "unjust enrichment," which means that failure to make restitution would result in unfair gain to the debtor. 38 C.F.R. § 1.965(a)(5). In this case, the veteran was solely responsible for the overpayment and to allow him to retain that money under such circumstances would result in an unfair gain to the veteran. The sixth element to be considered is whether reliance on VA benefits resulted in the veteran relinquishing a valuable right or incurring a legal obligation. 38 C.F.R. § 1.965(a)(6). The veteran has not claimed that he relinquished any right or incurred any legal obligation in reliance upon receipt of VA pension benefits, nor is there any evidence that he did so. Since all elements discussed above are in favor of the conclusion that recovery of the overpayment would not be against equity and good conscience, waiver of recovery of the debt owed by the veteran to the Government, created by pension overpayment in the amount of $366 is not warranted. Moreover, a review of the record does not reflect any other factors which would support the veteran's claim. ORDER An overpayment of pension benefits in the amount of $366 was properly created, and waiver of recovery of $366 is denied. C. W. SYMANSKI Member, Board of Veterans' Appeals The Board of Veterans' Appeals Administrative Procedures Improvement Act, Pub. L. No. 103-271, § 6, 108 Stat. 740, ___ (1994), permits a proceeding instituted before the Board to be assigned to an individual member of the Board for a determination. This proceeding has been assigned to an individual member of the Board. NOTICE OF APPELLATE RIGHTS: Under 38 U.S.C.A. § 7266 (West 1991), a decision of the Board of Veterans' Appeals granting less than the complete benefit, or benefits, sought on appeal is appealable to the United States Court of Veterans Appeals within 120 days from the date of mailing of notice of the decision, provided that a Notice of Disagreement concerning an issue which was before the Board was filed with the agency of original jurisdiction on or after November 18, 1988. Veterans' Judicial Review Act, Pub. L. No. 100-687, § 402 (1988). The date which appears on the face of this decision constitutes the date of mailing and the copy of this decision which you have received is your notice of the action taken on your appeal by the Board of Veterans' Appeals.