BVA9507332 DOCKET NO. 93-13 427 ) DATE ) ) On appeal from the decision of the Department of Veterans Affairs Regional Office in Los Angeles, California THE ISSUE Entitlement to a waiver of recovery of an overpayment of disability pension benefits in the calculated amount of $2,026, to include the issue of the proper creation of the overpayment. ATTORNEY FOR THE BOARD William Harryman, Counsel INTRODUCTION The veteran had active service from August 1969 to November 1970. This case came before the Board of Veterans’ Appeals (Board) on appeal from a decision of the Committee on Waivers and Compromises (Committee) of the Department of Veterans Affairs (VA) Regional Office (RO) in Los Angeles, California, in December 1991 which denied the claimed benefits. The Board notes that the original calculated overpayment amount was $2,026, but that, following receipt of the veteran’s notice of disagreement, the Committee waived recovery of $1,026 of that amount. CONTENTIONS OF APPELLANT ON APPEAL The veteran asserts first that his pension rate should not have been reduced while he was a resident of VA’s domiciliary. He also contends that, after he began working at a VA hospital, he was advised by a VA counseling psychologist not to return his pension checks because "you will need some money to survive on until you receive your first salary check." Accordingly, he requests a waiver of recovery of the overpayment. 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 overpayment for the period from May 1, 1990 through December 31, 1990 was not properly created and, further, that recovery of the properly created overpayment of pension benefits in the amount of $360, created for the period from January 1, 1991 through April 30, 1991, would violate the standard of equity and good conscience. FINDINGS OF FACT 1. The veteran has been determined to be permanently and totally disabled, and he began receiving VA pension benefits, at the maximum rate due to no countable income, effective May 1, 1990. 2. The veteran was notified by VA, at the time he filed his initial application for pension, that pension was an income based program, that he should notify VA immediately of any changes in income, and that failure to properly report income could cause an overpayment which would be subject to recovery. 3. The veteran did not, until May 1991, report that he had begun to receive income in approximately December 1990, based on his return to work in mid-November 1990; his annualized wage income was excessive for the continued receipt of pension benefits. 4. The veteran is partially at fault in the creation of the overpayment of pension benefits, which resulted from the retroactive termination of his award, after it was learned that he had previously unreported income. 5. The Committee calculated that the veteran had been overpaid pension benefits by $2,026, but waived recovery of $1,026 of the debt. However, $1,666 of the calculated overpayment, covering the period from May 1, 1990, through December 31, 1990, was not properly created. 6. Repayment of the remaining $360 overpayment, which was properly created, would deprive the veteran of basic necessities and would defeat the purpose of the VA pension program. CONCLUSIONS OF LAW 1. That portion of the overpayment of pension benefits assessed against the veteran in the amount of $1,666, representing benefits paid during the period from May 1, 1990 through December 31, 1990, was not properly created. 38 U.S.C.A. § 5107 (West 1991); 38 C.F.R. §§ 3.271, 3.273, 3.660 (1994). 2. That portion of the overpayment of pension benefits assessed against the veteran in the amount of $360, representing benefits paid during the period from January 1, 1991 through April 30, 1991, was properly created. 38 U.S.C.A. § 5107 (West 1991); 38 C.F.R. §§ 3.271, 3.273, 3.660 (1994). 3. Recovery of the overpayment of pension benefits in the calculated amount of $360 would violate the standard of equity and good conscience. 38 U.S.C.A. §§ 5107, 5302 (West 1991); 38 C.F.R. §§ 1.963(a), 1.965(a) (1994). REASONS AND BASES FOR FINDINGS AND CONCLUSION At the outset, the Board finds that the veteran has met his burden of submitting evidence sufficient to justify a belief by a fair and impartial individual that his claim is well grounded; that is, the claim is not implausible. See Murphy v. Derwinski, 1 Vet.App. 78, 81 (1990). Additionally, there is no indication that there are additional, pertinent records which should be obtained, prior to the Board’s review. Accordingly, there is no further duty to assist the veteran in developing the claim, as mandated by 38 U.S.C.A. § 5107(a). Factual background On April 16, 1990, the veteran filed a claim for what was construed as a claim for VA pension benefits. At that time, he indicated that he had been admitted to a VA hospital in March 1990 and had then been transferred to a VA domiciliary in April 1990. VA treatment records indicate that the veteran was indeed admitted to a VA hospital facility in March 1990, and transferred to a VA domiciliary in early April 1990. They also show that he was receiving outpatient psychiatric treatment, hoping eventually to obtain a "real" job. In July 1990, the veteran submitted an Income--Net Worth and Employment Statement reflecting that he had not worked since November 1988 and that he had no income. By a rating decision in September 1990, the RO determined that the veteran was permanently and totally disabled due to non-service-connected disabilities, effective from April 16, 1990. His major disability was noted to be schizophrenia, which the RO rated 70 percent disabling. In October 1990 the veteran was advised of his award of pension at the maximum rate based on no income, effective May 1, 1990, with a reduction to the "domiciliary" rate of $90 per month, effective July 1, 1990, that is, after the end of the third full calendar month following the month of admission for such care. He was told at that time to report any change in income to avoid an overpayment. In May 1991, the veteran submitted an Improved Pension Eligibility Verification Report (EVR), noting no income for the period from May 1, 1990, through April 30, 1991. The EVR also shows that, for the period from May 1, 1991, through April 30, 1992, he expected to receive a gross monthly income of $569.60. He also checked a box indicating that his income had changed during the previous 12 months. Apparently on the basis of that EVR, the RO suspended the veteran’s pension payments, effective May 1, 1991, and further proposed to amend the award to reflect suspension of payments effective from May 1, 1990. Retroactive termination of pension was later implemented, effective May 1, 1990, which resulted in the creation of the overpayment in the calculated amount of $2, 026. Also of record is a statement by a VA counseling psychologist, dated in September 1991. The psychologist indicated that he had seen the veteran for a mandatory counseling appointment in November 1990, and had considered the possibility that he might not be able to retain his new job. (See below regarding the veteran’s employment.) He indicated that he had recommended to the veteran that he continue to receive his pension checks, but maintaining them in a separate bank account. "Thus, he would not lose his pension money and, if he was able to keep his position and an overpayment was created, he would be able to repay the money at that time." In October 1991, the veteran filed a Financial Status Report (FSR), indicating that he had $1,187.20 in monthly income, with deductions amounting to $293.56, leaving a monthly net income of $893.64. The veteran also stated on that form that he had been employed by a VA hospital since November 19, 1990. The veteran’s income and deduction figures on that FSR differ slightly from those listed on a VA Earnings and Leave Statement dated in April 1991. Calculations based on the latter form reflect approximate monthly net income of $859.16. On the October 1991 FSR, the veteran listed his monthly expenses as $551 for rent or mortgage payment, $25 for utilities and heat, and $100 for monthly payments on installment debt, totaling $676, and leaving a net monthly balance of $217.64. (As indicated above, an even lower monthly net balance would result from using data from his Earnings statement.) The FSR does not list any expenses for food, clothing, transportation, or insurance. In October 1991, having determined that the veteran was indebted in the amount of $2,026, the RO referred the case to the Committee which, in December 1991, denied the veteran a waiver of recovery of the overpayment. In March 1992, the veteran filed a notice of disagreement, stating that he had been discharged from the VA domiciliary in January 1991. He noted his further contention that all monies paid to him while he was a resident of the domiciliary were due him. He also referred to advice by the VA psychologist to the effect that he should keep his pension checks, since he would "need some money to survive on" until he received his first paycheck. In June 1992, the veteran was advised in the statement of the case that, in view of the VA counselor’s advice, and considering his disabilities, a waiver of recovery of $1,026 of the calculated $2,026 overpayment had been granted, but that recovery of the remaining debt would not violate the standard of equity and good conscience.. Analysis At the outset, the Board notes that inherent in the question of whether to waive recovery of an overpayment of benefits is the matter of whether the overpayment has been properly created. 38 C.F.R. § 3.271 provides that payments of any kind from any source shall be counted as income during the 12-month annualization period in which received unless specifically excluded. 38 C.F.R. § 3.273 provides, in pertinent part, that whenever there is a change in a beneficiary’s annual rate of countable income, the monthly rate of pension payable shall be computed by reducing the beneficiary’s applicable maximum annual pension rate by the beneficiary’s new annual rate of countable income on the effective date of the change in the annual rate of income and dividing the remainder by 12. A VA pension recipient must notify the VA of all circumstances which will affect his or her entitlement to receive, or the rate of, the benefit being paid. Such notice must be furnished when the recipient acquires knowledge that his or her income changed. 38 C.F.R. § 3.660(a)(1) (1994). Where reduction or discontinuance of a running award of improved pension is required because of an increase in income, the reduction or discontinuance shall be made effective the end of the month in which the increase occurred. 38 C.F.R. § 3.660 (a) (2) (1994). Initially, the Board finds that part of the overpayment, for the period from May 1, 1990, to January 1, 1991, was not properly created. There is no indication in the record that the veteran was working or had other countable income between May 1, 1990, and November 19, 1990. The record does not reflect when the veteran received his first paycheck. However, inasmuch as the veteran was working for VA, and affording him the benefit of the doubt on this issue, the Board finds that it is reasonable to conclude that he did not receive his first paycheck until sometime in December 1990. Thus his pension award should not have been terminated, due to receipt of excessive income, until January 1, 1991, thereby entitling him to payment of pension benefits at the rates paid from May 1, 1990, through December 31, 1990. The veteran was paid pension benefits from May 1, 1990, through June 30, 1990, at the rate of $563 per month, the full pension rate, and from July 1, 1990, through April 30, 1991, at the rate of $90 per month, the rate payable for a veteran who is a VA domiciliary resident, totaling $2,026, based on information supplied by him to the RO. Effective May 1, 1991, the RO terminated the veteran’s pension benefits. Considering the fact that the veteran was a resident of a VA facility beginning in March 1990 until sometime in January 1991, and in light of his receipt of no income until December 1990, he should have been entitled to payment at the full pension rate through June 30, 1990, and should thereafter have been entitled to payment at the reduced rate listed above until he began working. 38 C.F.R. § 3.551(e) (1994). In this case, as indicated above, the record reflects that the veteran did not receive any income until December 1990. Since the veteran’s annualized income then exceeded the maximum allowable for payment of pension benefits beginning January 1, 1991, the proper date for termination of payment of those benefits should have been January 1, 1991, not May 1, 1990, as found by the RO. Therefore, the veteran was improperly paid pension benefits, at the rate of $90 per month, only from January 1, 1991, through April 30, 1991. Those payments totaled $360. The Board finds, then, that this is the amount of properly created overpayment of pension benefits in this case. The remainder of the overpayment calculated by the RO, $1,666, was not properly created, and so need not be considered for waiver. The law precludes waiver of recovery of an overpayment or waiver of collection of any indebtedness where any one of the following elements is found to exist: (1) Fraud, (2) misrepresentation, (3) bad faith. 38 U.S.C.A. § 5302 (West 1991). The Board’s review of the record reflects that the Committee has resolved this question in favor of the veteran, finding, in essence, that his actions did not represent the intentional behavior to obtain government benefits to which he was not entitled, which is necessary for a finding of fraud, misrepresentation or bad faith. The Board agrees that the evidence is in equipoise on the question of willful intent and the matter is therefore resolved to that extent in the veteran’s favor. Because it has been determined by the Committee that there was no willful intention on the part of the veteran to commit fraud, misrepresent a material fact, or exercise bad faith in the creation of an overpayment that has been assessed against him, the Board’s review is limited to the issue of whether the evidence establishes that recovery of the indebtedness would be against equity and good conscience, in which case recovery of that overpayment may be waived. 38 U.S.C.A. § 5302; 38 C.F.R. §§ 1.963, 1.965. The following is pertinent to this matter: The standard "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate a need for reasonableness and moderation in the exercise of the Government’s rights. The decision reached should not be unduly favorable or adverse to either side. The phrase "equity and good conscience" means arriving at a fair decision between the obligor and the Government. In making this determination, consideration will be given to the following elements, which are not intended to be all-inclusive: 1. Fault of debtor. Where actions of the debtor contribute to creation of the debt. 2. Balancing of faults. Weighing fault of the debtor against VA fault. 3. Undue hardship. Whether collection would deprive the debtor or family of basic necessities. 4. Defeat the purpose. Whether withholding of benefits or recovery would nullify the objective for which the VA benefits were intended. 5. Unjust enrichment. Failure to make restitution would result in unfair gain to the debtor. 6. Changing position to one’s detriment. Reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation. 38 C.F.R. § 1.965(a). As the Committee found, there is no evidence of any fraud, misrepresentation or bad faith in this case. Therefore, waiver of recovery of any overpayment is not barred by law. Accordingly, the Board must determine whether recovery of the $360 overpayment would violate the standard of equity and good conscience. After consideration of the record, the Board concurs with the Committee that the veteran was at fault in the creation of the overpayment. He had been properly advised that the pension program was income based and that he was under an obligation to accurately and completely report all income and the sources thereof. See 38 C.F.R. § 3.271(a) (1994). Moreover, the record reflects that a VA psychologist also told him that there was a "possibility" that retaining his pension checks might create an overpayment which he would have to repay. In addition, the claims folder is replete with written notification to the veteran of the necessity to report all income. He reported to the RO in July 1990 that he had no income. His rate of pension was based on this amount, and he was fully apprised of this fact by VA. In addition, the veteran has clearly received benefits to which he was not entitled. Failure to make restitution would result in his unfair gain at the expense of the Government. However, the Board also notes that the veteran has been determined to be permanently and totally disabled due to non- service-connected disabilities, mainly schizophrenia which has been rated 70 percent disabling. During a major part of 1990 he was a resident at a VA domiciliary, receiving outpatient treatment, including psychiatric therapy and medication. In addition, he received clearly erroneous advice from a VA psychologist (that he should retain his pension checks, at least temporarily), an individual whom, under the circumstances, he might reasonably have regarded as a VA official. These factors reduce the degree of fault to be assessed against the veteran. VA, on the other hand, can be assessed no fault in the creation of the overpayment. Once the RO learned of the veteran’s income, it took prompt action to suspend payment of the veteran’s pension benefits. Another element of the standard of equity and good conscience which is particularly relevant in this case is whether recovery of the overpayment would cause the veteran undue hardship or deprive him of basic necessities. The Financial Status Report received from the veteran in October 1991 reflects a positive net monthly balance of more than $217. However, the veteran did not include in his calculations any amount for food or clothing. His reported monthly income and expenses are quite modest. Considering these factors, the Board finds that recovery of the overpayment might well deprive the veteran of basic necessities. Moreover, inasmuch as the VA pension program is intended to assist low income veterans who are permanently and totally disabled, recovery of the overpayment would effectively defeat the purpose of the objective of the benefits. The Board also notes the veteran’s contention concerning the propriety of the reduction in his monthly benefit during his residency in VA’s domiciliary. The provisions of 38 C.F.R. § 3.551(e) state that where any veteran having neither spouse nor child is furnished domiciliary or nursing home care by VA, no pension in excess of $90 monthly shall be paid to or for the veteran for any period after the end of the third full calendar month following the month of admission for such care. In this case, the evidence shows that the veteran was transferred to a VA domiciliary in March 1990. The record also reflects that his pension benefit was reduced to the "domiciliary" rate of $90 per month effective from July 1, 1990, after the end of the third full month of his domiciliary care. Therefore, the reduction effected by the RO was proper, and the veteran was paid the appropriate rate during his residence in the VA domiciliary. Accordingly, weighing all the elements contained in 38 C.F.R. § 1.965(a), and affording the veteran the benefit of any existing doubt, the Board concludes that recovery of the $360 overpayment in this case would be against equity and good conscience. ORDER The overpayment of improved pension benefits in the amount of $1,666, created for the period from May 1, 1990, through December 31, 1990, was not properly created. The remaining overpayment, in the calculated amount of $360, created during the period from January 1, 1991, through April 30, 1991, was properly created. Waiver of recovery of the properly created overpayment of disability pension benefits in the amount of $360 is waived. N. R. ROBIN 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.