Citation Nr: 0000735 Decision Date: 01/10/00 Archive Date: 01/19/00 DOCKET NO. 95-29 986 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Winston- Salem, North Carolina THE ISSUE The propriety of the amount of, and entitlement to an earlier effective date for, recoupment of military severance pay. REPRESENTATION Appellant represented by: North Carolina Division of Veterans Affairs ATTORNEY FOR THE BOARD Keith W. Allen, Counsel INTRODUCTION The veteran served on active duty in the military from June 1978 to March 1986. In May 1995, the Department of Veterans Affairs (VA) Regional Office (RO) in Winston-Salem, North Carolina, determined that-effective March 15, 1994-the veteran was entitled to reinstatement of a 30 percent rating for his left knee disability. When notifying him of the decision, the RO also informed him that all of his compensation benefits would be withheld until VA recouped the balance of disability severance pay that he received from the military. He appealed to the Board of Veterans' Appeals (Board)- requesting an earlier effective date for the completion of the recoupment, but also contesting the propriety of the amount of it. He was scheduled to testify at a hearing concerning his claim in January 1996, but he failed to report. He did not thereafter request that his hearing be rescheduled or provide an explanation for his absence, so the Board deemed his request for a hearing withdrawn and proceeded to review the merits of his appeal. See e.g., Bernard v. Brown, 4 Vet. App. 384, 390-94 (1993). In January 1997, after determining that the amount and effective date of the recoupment were "inextricably intertwined," the Board remanded the case to the RO for further development and consideration. See Harris v. Derwinski, 1 Vet. App. 180, 183 (1991). In April 1999, upon completing the development requested, the RO reduced the amount of severance pay to be recouped (from $18, 441.60 to $18, 298.53); refunded the veteran the difference of $143.07; and assigned an earlier effective date of May 1997 (instead of June 1997) when he began receiving compensation benefits from VA. He continued to appeal, and the RO returned his case to the Board for further appellate consideration. In a statement from the veteran, received in October 1999, he, in effect, requested an increased evaluation for his service-connected left knee disability and noted that he had recently undergone surgery on the knee. This matter is referred to the RO for action deemed appropriate. FINDINGS OF FACT 1. In March 1986, the RO granted service connection for a left knee disability and assigned a 30 percent rating, effective from March 4, 1986, the day following the veteran's retirement from the military due to temporary physical disability. 2. Effective August 17, 1987, the veteran was removed from the Temporary Disability Retired List (TDRL) and discharged from the military because of permanent physical disability; he received severance pay from the military; upon learning of this, the RO sent him a letter in December 1987 notifying him that, although his claim for VA disability compensation was granted, his benefits would be withheld (each month) until VA recouped the full amount of the severance pay he received from the military. 3. In May 1989, VA notified him that he would have to undergo a medical examination to assess the status of his left knee disability-to determine whether he was entitled to continue receiving compensation benefits at the 30-percent level; although provided appropriate notice of the date, time, and location of the examination, he did not thereafter respond to the order to undergo that evaluation, so VA discontinued his compensation benefits, effective October 1, 1989, on the basis of abandonment. 4. He contacted VA on March 14, 1994, inquiring about the status of his compensation benefits-insofar as when he would start receiving them free and clear of the deduction of severance pay; the RO subsequently reinstated his compensation benefits at the 30 percent level-after having him examined-and assigned an effective date of March 15, 1994. 5. Because the veteran was not entitled to VA compensation benefits from October 1, 1989 to March 14, 1994, VA had no legal authority to recoup any severance pay during those years that was due and unpaid, which, in turn, moved the completion date for repayment of the severance pay back to May 1997. CONCLUSION OF LAW The criteria for an earlier effective date for the completion of the recoupment of the severance pay, and for a lesser amount of it, is denied. 38 U.S.C.A. §§ 5110, 5304 (West 1991); 38 C.F.R. §§ 3.158, 3.330, 3.400, 3.655, 3.700 (1999). REASONS AND BASES FOR FINDINGS AND CONCLUSION In March 1986, the RO granted service connection for a left knee disability and assigned a 30 percent rating-effective from March 4, 1986-the day following the veteran's retirement from the military due to temporary physical disability. See 38 U.S.C.A. § 5110(b)(1); 38 C.F.R. § 3.400(b)(2)(i). The RO confirmed the 30 percent rating in April 1987 after considering the results of a VA medical examination conducted the previous month to determine the status of the left knee disability. Effective August 17, 1987, the veteran was removed from the Temporary Disability Retired List (TDRL) and discharged from the military because of permanent physical disability. According to an October 1987 letter to the RO from the Chief of the Processing Division, Retired Pay Operations, at the United States Army Finance and Accounting Center in Indianapolis, Indiana, the veteran received severance pay in the amount of $18,441.60. Upon learning of this, the RO sent him a letter in December 1987 notifying him that, although his claim for VA disability compensation was granted, his benefits would be withheld (each month) until VA recouped the full amount of the severance pay he received from the military. In May 1989, the RO sent the veteran another letter informing him that he would have to undergo a VA medical examination to determine whether his left knee disability had improved. The RO also told him that, if he failed to report for the examination-and did not have an adequate reason for not reporting-his benefits might be reduced or even discontinued altogether. The Chief of the Medical Administration Service (MAS)-at the VA outpatient clinic where the examination was to take place-subsequently sent the veteran an additional letter in early June 1989 (to his address of record) notifying him of the date, time, and location of the examination. The Chief of the MAS also apprised the veteran that, if he had moved or was unable to keep his appointment, he should contact the clinic at the telephone number provided. The U.S. Postal Service later returned the letter to VA as undeliverable-placing a notation on the envelope containing the letter of "forwarding order expired." Consequently, the RO sent the veteran a follow-up letter in July 1989, to the same address, reiterating the importance of the examination in determining the current status of his left knee disability (i.e., whether it had improved/worsened), since this, in turn, would give some indication of whether he still was entitled to benefits at the present level. The RO also informed him that he failed to report for the previous examination scheduled and that, as a result, due to the necessity of the examination in determining his continued entitlement to benefits, VA was proposing to stop his disability payments effective October 1, 1989-unless he agreed to report for the examination; or provided compelling reasons why he couldn't (so the examination could be rescheduled for a more convenient date); or indicated he wanted a hearing regarding the matter to present evidence and/or argument showing that payment of his disability benefits should not be terminated. The RO went on to note that he could obtain representation and that, if he did not report for the rescheduled examination, VA would stop his payments without providing any further advance notice. The Postal Service also returned this letter as undeliverable-placing a notation on the envelope containing the letter of "forwarding order expired." The RO subsequently stopped making the disability payments effective October 1, 1989. In December 1990, the RO again attempted to contact the veteran (at his address of record) to notify him that VA had learned that, in some instances, the amount of severance pay reported to VA by the military erroneously may have included accrued leave and other payments that were not subject to recoupment from VA disability compensation. The RO also reiterated that, by law, VA was required to recoup from his disability compensation an amount equal to the amount of severance pay he received from the military. The RO therefore requested that he review this information to determine if he may be affected by the misreporting and, if so, to contact the finance center of his service department so they could recertify to VA the correct amount of his severance pay and VA could, in turn, adjust his recoupment balance. The RO provided the addresses of the finance centers. Just as the earlier letters to the veteran, the Postal Service returned this letter as undeliverable-placing a notation on the envelope containing the letter of "unable to forward" because "no forward order on file." The veteran submitted a statement to the RO on March 14, 1994 (from a new address), inquiring about the status of his disability compensation payments for his left knee. He wanted to know when he would begin receiving his payments- noting that he had not yet received any because VA first had to recoup the severance pay he received from the military. After having him examined in October 1994, and considering the results of the evaluation, the RO issued a decision in May 1995 reinstating the 30 percent rating for the left knee disability effective March 15, 1994. He appealed the decision to the Board-requesting an earlier effective date for the completion of the recoupment, when he would start receiving his VA compensation benefits free and clear of this deduction-but also contesting the propriety of the amount of severance pay recouped. He indicated in statements since submitted, including his August 1995 Substantive Appeal on VA Form 9, that VA advised him-presumably when initially learning of his severance pay-that recoupment of it would be completed in about 5 years, meaning his repayment should have been completed much earlier than indicated by VA, which, in turn, means that he should begin receiving his compensation payments, free and clear of this deduction, much earlier than indicated by VA. The Board remanded the case in January 1997 to have the RO contact the veteran and apprise him of the possible misreporting of the amount of his severance pay that was subject to being recouped by VA from his disability compensation; to have the correct amount recertified to VA by the military and to notify him of this; and to readjudicate his claim on the basis of any adjustments made. After obtaining the information requested, the RO issued a Supplemental Statement of the Case (SSOC) in April 1999 indicating an adjustment (from $18,441.60 to $18,298.53) in the amount of the veteran's severance pay that was subject to being recouped; notifying him of a $143.07 refund representing the difference in these amounts; and assigning an earlier effective date of May 1997 (instead of June 1997) when he began receiving his disability compensation benefits free and clear of this deduction. He is not shown to be entitled to the recoupment of less severance pay than indicated by the RO, nor is he shown to be entitled to an earlier effective date for completion of the recoupment. VA attempted to contact the veteran-at his then current address of record-on three different occasions during 1989 (in May, June, and July) to notify him of the need to undergo a VA compensation examination to assess the status of his left knee disability (i.e., to determine whether it had improved/worsened). Without the benefit of that examination, or any other similarly probative medical evidence, the RO had no means of determining whether he should continue to be rated at the 30-percent level-regardless of the fact that he was not actually receiving any compensation for his disability at that time because VA was in the process of recouping the severance pay he received from the military. Therefore, in light of the "presumption of administrative regularity," VA is presumed to have properly discharged its official duty to mail notice to him of the need for an examination and, subsequently, that his compensation was being discontinued-effective October 1, 1989-because he failed to report for it. See Jones v. West, 12 Vet. App. 98 (1998); YT v. Brown, 9 Vet. App. 195, 199 (1996). Furthermore, there is no clear evidence to the contrary to rebut this presumption-particularly since there is an actual copy on file of the letter from the Chief of the MAS, at the VA outpatient clinic where the examination was to take place, clearly notifying the veteran of the date, time, and location of it-which, again, was sent to his then current address of record. See Ashley v. Derwinski, 2 Vet. App. 62, 64 (1992). It was his responsibility, both in prior communications and in those contemporaneous to the time in question, to notify VA of any change in his address, which he did not do until long after the fact, and VA has to mail notice only to the latest address of record in order for this presumption to attach. See Mindenhall v. Brown, 7 Vet. App. 271, 274 (1994). After discontinuing his compensation benefits at the 30- percent level on October 1, 1989, the veteran did not thereafter (within 1 year) respond to the order to report for an examination to assess the status of his left knee disability, so he thereby abandoned any claim he may have had at that time for continuing to be rated at this level. See 38 C.F.R. §§ 3.158, 3.330, 3.655. That being the case, the effective date for any subsequent reinstatement of compensation benefits to the 30 percent or any other level would have to be the earliest date that it was factually ascertainable that entitlement arose-provided that application was received within one year from such date; otherwise, it cannot be earlier than the date of receipt of the claim for reinstatement. See 38 U.S.C.A. § 5110(a), (b)(2); 38 C.F.R. § 3.400. Here, it was not until March 14, 1994, that the veteran contacted VA inquiring about the status of his compensation benefits-insofar as when he would begin receiving them free and clear of the recoupment deduction of severance pay-and, more importantly, apprising the RO of his new address. When the RO subsequently reinstated his compensation benefits to the 30-percent level, it assigned an effective date retroactive to the date of his inquiry (i.e., the date of his claim), which was appropriate under the governing criteria of sections 5110 and 3.400. Thus, it logically follows that, since he was not entitled to compensation benefits at any point in time from October 1, 1989 to March 14, 1994-because he abandoned his claim by not reporting for the necessary examination or doing anything else that could have preserved his claim-VA could not have recouped any of the severance pay that was due during those years, despite his contentions to the contrary. See 38 U.S.C.A. § 5304; 38 C.F.R. § 3.700. Moreover, this, in turn, means that VA could not resume recouping the severance pay until he reestablished his entitlement to a 30 percent rating, effective in March 1994, which, as a consequence, moved the termination date when the deduction for severance pay would no longer be necessary to a date later than what he may have been told initially by VA. See e.g., Rodriguez v. West, No. 98-7087 (Fed. Cir. Aug. 25, 1999) (a claim for VA compensation benefits, even if informal, must be in writing and must request a determination of entitlement or evidence a belief of entitlement); see also Lalonde v. West, 12 Vet. App. 377 (1999); Brannon v. West, 12 Vet. App. 32 (1998). There was no such claim prior to March 1994. In accordance with the Board's January 1997 Remand, the RO obtained information from the Defense Finance and Accounting Service (DFAS) indicating that the correct amount of severance pay that was subject to being recouped by VA was $18,298.53 (as opposed to the previously reported amount of $18,441.60). However, VA already refunded the difference of $143.07 to the veteran on April 2, 1999, and the law in effect at the time of his retirement from the military required recoupment of the gross amount of severance pay- regardless of the amount of taxes deducted from it, which, according to the DFAS, was $3,659.70. Although the veteran argues that the amount of his net severance pay (that is, after the deduction of taxes) should be used as the amount of recoupment by VA, he has not asserted a legally recognizable basis upon which to establish such entitlement. See Shields v. Brown, 8 Vet. App. 346, 351-352 (1995), citing Sabonis v. Brown, 6 Vet. App. 426, 430 (1994). Also, for the reasons discussed above concerning the abandonment of his claim from 1989 to 1994, and the resulting discontinuance of his compensation benefits, he has not asserted a legally recognizable basis upon which VA could assign an effective date earlier than May 1997 for the completion of the recoupment, when he began receiving his VA benefits free and clear of this deduction. Id. Therefore, his appeal contesting the propriety of the amount of the recoupment and the effective date for the completion of his repayment of the severance pay, must be denied. ORDER The claim contesting the propriety of the amount of, and the effective date for, the recoupment of military severance pay is denied. BARBARA B. COPELAND Member, Board of Veterans' Appeals