Citation Nr: A22004165 Decision Date: 03/10/22 Archive Date: 03/10/22 DOCKET NO. 210715-172365 DATE: March 10, 2022 ORDER Challenges to the Department of Veterans Affairs' (VA) withholding of the Appellant's past-due Dependency and Indemnity Compensation (DIC) benefits (for the purposes of reimbursing the Department of Defense (DoD), Defense Finance and Accounting Services (DFAS), for a portion of her Survivors Benefits Plan (SBP) annuity benefits that: (a) has already been disbursed by DFAS to the Appellant; and (b) was in the amount equal to her past due DIC benefits), are denied. REMANDED Challenges to the propriety of withholding, if any, of the Appellant's recurrent DIC benefits for the purposes of offsetting VA's erroneous disbursements of the Appellant's DIC benefits are remanded. Challenges to the validity of the amount of withholding, if any, of the Appellant's recurrent DIC benefits for the purposes of offsetting VA's erroneous disbursements of the Appellant's DIC benefits are remanded. Claim for a waiver of an overpayment debt, if any, arising from VA's erroneous disbursement of the Appellant's recurrent DIC benefits is remanded. FINDINGS OF FACT 1. The Veteran passed away in June 2005. 2. The Appellant, who is the Veteran's surviving spouse, has been in receipt of SBP benefits (disbursed by DFAS) effective the date following the date of the Veteran's death. 3. The first payment of the Appellant's SBP benefits should have been made or deemed made on July 1, 2005. 4. The Appellant filed a claim for DIC benefits in July 2005. 5. In July 2019, the Board of Veterans' Appeals (Board) granted the Appellant's DIC claim, thus generating a past-due award of her DIC benefits and entitling her to prospective receipt of her recurrent monthly DIC benefits. 6. The first payment of the Appellant's DIC benefits should have been deemed to be payable on August 1, 2005. 7. The monthly amount of the Appellant's SBP benefits has invariably exceeded the monthly amount of her DIC benefits. 8. On August 2, 2019, VA agency of original jurisdiction (AOJ) issued the Appellant a notification letter informing her of the AOJ's compliance with the Board's July 2019 decision and indicated that VA would withhold her past due DIC benefits. 9. VA's withholding of the Appellant's DIC benefits was for the purposes of remitting the withheld funds to DFAS in order to offset the portion of SBP benefits equal, in its amount, to her past-due DIC benefits. CONCLUSIONS OF LAW VA's withholding of the Appellant's past-due DIC benefits for the purposes of VA's remittance to DFAS (as an offset of the portion of her SBP benefits equal, in its amount, to her past-due DIC benefits) was proper. 10 U.S.C. § 1450. REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Veteran had active duty from February 1966 to February 1972, and from March 1981 to March 1995. Regretfully, he passed away in June 2005, and the Appellant is his surviving spouse. These matters are before the Board of Veterans' Appeals (Board) on her appeal from the AOJ's August 2020 decision finding that VA had properly withheld her DIC benefits for the purposes of remitting them to DFAS, albeit: (a) without any elaboration on what amount was withheld and remitted; and (b) upon utilizing a language that prevents the Board from finding, with a sufficient degree of clarity, that only the Appellant's past-due DIC benefits rather than her past-due and recurrent DIC benefits were withheld by VA and remitted to DFAS. The key facts do not appear to be in dispute. In July 2005, i.e., one month after the Veteran's death, the Appellant filed a claim for DIC benefits. Following a lengthy litigation details of which are inapposite to the issues at hand she was awarded DIC benefits upon the Board's issuance of its July 2019 decision and the AOJ's August 2, 2019, compliance with the Board's decision, which yielded a substantial amount of past-due DIC benefits. (According to VA's calculation, this past-due amount was $159,793.84.) VA, however, did not disburse any past-due DIC benefits to the Appellant. Rather, VA withheld these past-due benefits in order to remit them to DFAS, a financial arm of the DoD that had been disbursing SBP benefits to the Appellant during the period that was triggered prior to and, thus, fully overlapped with the period when her past-due DIC benefits have accrued. This was so because the Appellant became entitled to her SBP benefits effective the date following the date of the Veteran's death, but she became entitled to her DIC benefits as of the date of her DIC claim. In other words, the first payment of the Appellant's SBP benefits was made or deemed made on July 1, 2005, while the first payment of her DIC benefits was deemed to be payable on August 1, 2005. While it is self-evident that the overlapping SBP and past-due DIC periods ended simultaneously, i.e., when the Appellant became entitled to recurrent DIC benefits, a brief clarification as to the nature of SBP benefits and their interplay with DIC benefits is warranted. An SBP is a life insurance-like program administered by DoD. The program allows eligible service members and military retirees to have premiums deducted from their military pension in order to provide their spouses with annuity-like disbursements that would be distributed after their deaths. In contrast, DIC is a benefit administered by VA and disbursed monthly to certain surviving beneficiaries, including spouses, of those veterans who passed away due to disabilities that were related, in a specific fashion, to these veterans' service. Therefore, it is common that, following a veteran's death, his/her surviving spouse might be eligible to receive both SBP annuity and DIC monthly benefits. That said, since there is a general policy against redundant benefits, if DIC benefits were awarded retroactively as to a period with regard to which the beneficiary had already received SBP benefits, then (s)he was not entitled to an "overlapping" portion of his/her past SBP benefits. Accordingly, the DoD and VA executed a Memorandum of Understanding (MOU), pursuant to which DFAS was required to promptly reduce SBP benefits upon being notified of any DIC awards (so that, prospectively, DFAS would pay only the portion of SBP benefits that exceeded the DIC awards), while VA was required to recoup and remit to DFAS the DIC amounts equal to DFAS' "overpayments" (that became de facto created by DFAS in retrospect: upon VA's past-due awards of DIC benefits). However, VA's recoupment and remittance scheme has become more complex upon the enactment of the National Defense Authorization Act for Fiscal Year 2020, Pub. L. 116-92 (2019), a sunset provision meant to gradually allow SBP beneficiaries to receive full amounts of their SBP benefits in addition to their DIC benefits. Codified at 10 U.S.C. § 1450(c), this sunset provision clarifies that the process of such an allowance is gradual and should be as follows: If, upon the death of a [veteran, his/her] surviving [beneficiary] is also entitled to [VA's DIC benefits], the surviving [beneficiary] may [still] be paid [his/her SBP] annuity [benefits], but only in the amount calculated as follows: (A) During the period beginning on January 1, 2020, and ending on December 31, 2020, [(s)he might be paid SBP in] the amount [that exceeds his/her DIC benefits]. (B) During the period beginning on January 1, 2021, and ending on December 31, 2021, [(s)he might be paid SBP in] the amount that . . . exceed two-thirds of such [DIC benefits]. (C) During the period beginning on January 1, 2022, and ending on December 31, 2022, [(s)he might be paid SBP in] the amount that . . . exceed one-third of such [DIC benefits]. (D) On and after January 1, 2023, [(s)he might be paid SBP in] full amount. The following example illustrates the sunset effect envisioned by § 1450(c). If a VA's beneficiary's DIC benefits are $15,000 a year, and his/her SBP benefits are $18,000 a years, and both types of benefits became effective January 1, 2019, then: (a) during 2020, (s)he was entitled to $15,000 in DIC benefits and $3,000 ($18,000 $15,000) in SBP benefits; (b) during 2021, (s)he was entitled to $15,000 in DIC benefits and $8,000 ($18,000 ($15,000 / 3 x 2)) in SBP benefits; (c) during 2022, (s)he is entitled to $15,000 in DIC benefits and $13,000 ($18,000 ($15,000 / 3)) in SBP benefits; and (d) in 2023, (s)he would be entitled to $15,000 in DIC benefits and his/her entire $18,000 in SBP benefits. Accordingly, VA would be obligated to withhold from the beneficiary's DIC benefits and remit to DFAS: (a) $15,000 in 2020; (b) $10,000 ($15,000 / 3 x 2) in 2021; (c) $5,000 ($15,000 / 3) in 2022; and (d) nothing in 2023, that is, assuming that the beneficiary continues receiving $15,000 in DIC benefits from VA and $18,000 in SBP from DFAS (i.e., factoring out all cost-of-living adjustments and any other upward adjustments, and the possibility of DFAS' brief laxness in downwardly adjusting the SBP benefits). Notably, at this juncture, § 1450(c) is silent as to how the scheme operated prior to 2020. However, prior to January 2020, § 1450(c) was not a punitive provision in the sense that it did not penalize a beneficiary by taking away his/her entire SBP if the SBP amount was higher than his/her DIC benefits. Rather, § 1450(c) has always been an enabling provision allowing an SBP recipient to de facto remain in receipt of the higher benefits, i.e., if his/her SBP was higher than his/her DIC, then (s)he could still receive her full DIC benefits and, in addition, the portion of his/her SBP annuity that exceeded the amount of his/her DIC benefits. Therefore, prior to January 2020, VA's process of withholding/remittance of DIC benefits to DFAS was substantively identical to the remittance process currently required under § 1450(c)(A). Hence, in the example provided supra, if a DIC beneficiary had been disbursed $18,000 in SBP benefits by DFAS during 2019, but in 2020 it was determined that (s)he was also entitled to DIC past-due benefits in the amount of $15,000 as to 2019, then VA would be required to withhold these $15,000 in DIC funds and remit these withheld funds to DFAS (as an offset for the $15,000 that had been already disbursed and de facto became "overpaid" by DFAS upon VA's grant of DIC benefits), and the beneficiary would end up holding to his/her $3,000 difference between the $18,000 SBP benefits and $15,000 DIC benefits. (Thus, all sample calculations provided by the Board effectively demonstrate how the MOU has been and is operating. However, VA's withholding/recoupment and remittance obligations as well as the MOU itself were rooted in § 1450(c). In other words, the MOU was/is merely a contractual facilitation of the statute.) Correspondingly, if in the last example provided supra DFAS would eventually determine that DFAS had wrongly paid the beneficiary $3,000, i.e., the amount equal the difference between $18,000 SBP benefits and $15,000 DIC benefits, DFAS had to collect these $3,000 on its own, and VA could not act as DFAS' agent for collection as to this $3,000 excess: because nothing in the statute (and, thus, in the MOU) either required or enabled VA to perform such a recoupment. With these principles in mind, the Board now returns to the facts at bar. Here, the record demonstrates that, starting from October 2019 (and then repeatedly, all the way till August 2020), DFAS issued VA notices asserting that DFAS de facto "overpaid" the Appellant $178,848.16 in SBP benefits and demanded remittance of such funds: on the grounds that the Appellant had become entitled to DIC benefits. Since the Appellant does not dispute that she was in receipt of her SBP benefits from DFAS (and the "DFAS Payment Worksheet" associated with the claims file in July 2019 verifies that the Appellant was paid her SBP benefits), and that her monthly SBP benefits have been, thus far, invariably higher that her monthly DIC benefits, VA has properly withheld her past-due DIC benefits for the purposes of remitting them to DFAS. However, the Appellant through her privately-retained representative challenges the propriety of VA's withholding in her de facto Appellant's Brief filed in July 2020 under the title "Third Party Correspondence. There, she stated: This appeal . . . stems from VA's decision to withhold payment of [the Appellant's past-due] DIC award in order to satisfy an alleged debt she owed to [DFAS]. Specifically, VA withheld [the Appellant's past-due] DIC . . . benefit[s] . . . to pay DFAS for [DFAS'] alleged overpayment of SBP. [The Appellant is of opinion that] VA did not provide [the Appellant] proper notice of why it was withholding her payment, how it calculated the amount of overpayment, what legal authority it had to do this, or whether her consent was required by any of the entities involved prior to attempting to collect any debt. Furthermore, VA failed to provide [the Appellant with] the remedies available to her to include disputing the overpayment, seeking waiver of the debt, or arranging an alternate payment plan. Given that the Appellant's representative expressly stated that "VA withheld [the Appellant's past-due] DIC . . . benefit[s] . . . to pay DFAS for [DFAS'] alleged overpayment of SBP," the meaning of the representative's assertion that "VA did not provide [the Appellant with a] notice of why it was withholding her payment" (emphasis suppled), is not immediately apparent to the Board because her Brief itself expressly stated "why." Moreover, since the Appellant's Brief also expressly referred to her past due benefits, the Brief suggests that VA's withholdings might have been limited to her past-due benefits only. Therefore, the foregoing quote from her Brief merely suggests the Appellant's impression that her due process rights were violated by the type of notice issued by VA: because the Appellant wished to have her "overpayment" recouped through means other than a lump-sum withholding from her past-due DIC benefits and, in addition, she hopes to obtain a waiver of her "overpayment debt." The Appellant's procedural due process challenges (including her assertion of the Appellant's preference for another method of recoupment and her desire to seek a waiver of her "overpayment debt") fails to distinguish between an overpayment debt to VA and an overpayment debt to DFAS (as to which VA merely acts as a collection agent for the DoD/DFAS). The former could result only from VA's actual disbursements of VA funds to a person who was not legally entitled to such funds. The latter results from the DoD's actual disbursements of DFAS' funds that become qualified, in retrospect, as a DFAS' overpayment: in light of a person's past receipt of DFAS' funds that were rendered either fully or partially excessive by the person's later receipt of VA benefits. The most common example of the latter is a veteran's receipt of a DoD's severance pay that has to be withheld by VA, in full, from his/her disability compensation benefits and remitted to DFAS before the veteran begins receiving his/her VA benefits. Therefore, while it is true that DoD might grant a general or a specific waiver of what became a DFAS' overpayment, and such a DoD waiver would indeed eliminate VA's duty to withhold VA benefits and remit them to DFAS, VA cannot usurp the powers of DoD and grant a waiver on behalf of DoD. In sync, VA cannot usurp DFAS' powers and allow a debt owed to DFAS to be paid from other sources; rather, the overlapping VA benefits must be the sole source from which the remittance should be made. Simply put, the very operation of laws affecting both DoD and VA supply the "why" VA must withhold and remit VA's funds without offering an alternative mode of repayment or considering a waiver. Correspondingly, had VA erroneously disbursed the Appellant's past-due DIC benefits to her, VA would be required to first pay the same amount to DFAS out of VA's own funds, then issue the Appellant a notice proposing to charge her with an overpayment by VA, then afford her an opportunity to respond, then issue her a final action notice actually charging her with an overpayment by VA, then provide her with a demand letter stating the amount of such a debt and inform her of her right to seek a waiver of this debt, and if such a waiver claim would be filed adjudicate such a claim on the merits (or dismiss it if it was filed untimely). Further, in such a scenario, the Appellant would also be able to negotiate a rate of her recoupment (albeit such a negotiation would qualify as a compromise and, therefore, would not be appealable to the Board). However, since VA had not paid the Appellant her past-due DIC benefits and duly withheld them for the purposes of remitting these funds to DFAS (in light of DFAS' overpayment that retrospectively came about as a result of her entitlement to DIC benefits), the aforesaid procedural safeguards would apply. Rather, a basic notice enabling an appeal would suffice. It follows that VA did not need the Appellant's "consent . . . prior to attempting to collect [the] debt," same as VA had no basis to afford her an opportunity to "seek[ a] waiver of the debt, or arrang[e] an alternate payment plan," even though the Appellant's Brief demonstrates her erroneous belief that she was entitled to such measures. Hence, the Appellant's assertions could be boiled down to a mere statement that she found the language of the AOJ's August 2, 2019, letter informing her of VA's withholding of her past-due DIC benefits insufficient. The Board disagrees. Here, the August 2, 2019, AOJ's letter that began with, "We made a decision on your claim[] for [DIC] benefits." Following a few sentences detailing how to appeal the decision, the AOJ's letter clarified the Appellant's "entitlement amount[s] and payment[s]." A few more sentences below, the AOJ included a table showing that the Appellant's DIC benefits became retroactively payable first in the amount of $993 per month and then kept increasing in their monthly amount to $1,319.04. The AOJ's simultaneous use of the "Amount Paid" column, which had all its rows corresponding to the periods from July 1, 2005, to July 31, 2019, filled with the same entry, i.e., "[$]0.00," demonstrated that the sum of these accruals was withheld and not disbursed to the Appellant. In addition, the table demonstrated that the first disbursement was duly made in August 2019: as a recurrent payment of the Appellant's DIC benefits. Therefore, the table clearly conveyed the fact that the sum of all past-due payments accrued from July 2005 to July 2019, inclusive, was the total amount that VA has withheld. Moreover, immediately below the aforesaid table, the AOJ stated: "We're paying you as a surviving spouse with no dependents." Then, a few more sentences below, the AOJ added: VA has contacted the Defense Finance and Accounting Service regarding your Survivor Benefit Plan (SBP) annuity. You aren't allowed to receive full SBP from [DFAS] and full DIC from VA. The following will provide an explanation of how this works: If your DIC is less than your SBP annuity, [VA will] withhold an amount of money equal to the basic DIC rate. We won't count additional money for dependents . . . . [DFAS] will pay you the difference between your SBP and DIC. If your DIC is greater than your SBP annuity, [VA will] withhold an amount of money equal to the SBP payments received since you became entitled to DIC. (Italics and bold font in original.) In other words, this added language informed the Appellant of VA's withholding of her entire past-due DIC benefits, and the table allowed her to calculate the total without consulting VA's archived tables: because she had no upward adjustment for any dependent, and she should have been aware of the amount of her SBP benefits that had invariably exceeded her DIC benefits. Admittedly, VA's August 2, 2019, letter would have been better had it stated the combined amount of withholding, and the Board is mindful that a mathematical exercise might prove challenging to a pro se litigant, especially if (s)he is of advanced age. However, here, the joint effect of the table and the AOJ's statements sufficiently put the Appellant who has been proceeding with assistance of a privately retained representative, a law firm priding itself in specializing in VA law matters sufficiently on notice. Further, the record demonstrates that the Appellant's representative examined the content of the August 2, 2019, AOJ's letter since ten days after the date of issuance of the August 2, 2019, AOJ's letter the Appellant's representative filed a notice pointing out that the law firm was not served with a copy of the letter, but the law firm's "office has since obtained a copy of the [AOJ's] letter." Accordingly, the representative was available to calculate the combined amount of withholdings that had been made by VA and explain to the Appellant why her entire past-due DIC benefits had to be withheld by VA and remitted to DFAS. Hence, while the AOJ's August 2, 2019, letter was indeed imperfect, the Board try as it may is without a basis to find that the Appellant was prejudiced in any form or fashion by these imperfections, especially since she has timely appealed what she erroneously perceived as the shortcomings on the part of the AOJ. Thus, to the extent that VA withheld the Appellant's past-due DIC benefits, the VA's actions were proper not only substantively but also procedurally. It follows that the Appellant's challenges to VA's: (a) withholding of her past-due DIC benefits; and (b) remittance of these withheld funds to DFAS, are denied. REASONS FOR REMAND Unfortunately, while the Appellant's Brief made it clear that she was challenging VA's withholding of her past-due DIC benefits, the precise contours of the Appellant's challenges cannot be determined at this juncture. This is so because in July 2021 the Board docketed a letter reading, "[t]he Board [has] received your Board Appeal request (VA Form 10182). Based on . . . appeal option you selected . . . , your appeal has been placed on the Direct Review docket." And yet, neither the Appellant's VA Form 10182 nor any arguments that might have been filed jointly with her VA Form 10182 have been associated with the claims file. Accordingly, the Board cannot rule out that VA's withholdings challenged by the Appellant were not limited to her past-due DIC benefits and that her challenges might have also reflected on withholdings, if any, of the Appellant's recurrent DIC benefits. Notably, the first DFAS' demand for remittance of the Appellant's overpayment of SBP benefits was issued in October 2019. Thus, it is not impossible that DFAS also requested VA's withholding and remittance of the Appellant's recurrent DIC benefits for, e.g., August and September 2019: simply because DFAS acted with a minor delay and, therefore, continued erroneously disbursing full SBP benefits to the Appellant during this brief period. However, the figure that DFAS demanded for remittance was $178,848.16. Such an amount suggests that DFAS demand was not based on a minor delay; rather, it was seemingly based on DFAS' miscalculation: because the difference between the Appellant's past-due DIC benefits of $159,793.84 and the amount demanded by DFAS was way too substantial (i.e., $19,054.32 ($178,848.16 $159,793.84)) to arise from a brief delay in DFAS' downward adjustment of the amount of her SBP benefits. The Board acknowledges that the AOJ's email correspondences docketed on November 26, 2019, and December 6, 2019, indicate that VA refused to withhold and remit to DFAS any amount in excess of the Appellant's $159,793.84 past-due DIC benefits and might have informed DFAS that, if DFAS was of opinion that DFAS had overpaid her $19,054.32, then DFAS had to recoup this sum on its own. However, due to the absence of the Appellant's VA Form 10182 in the record and the unfortunate ambiguity of the AOJ's August 2020 notification letter, the Board cannot, at this juncture, rule out that funds in excess of $159,793.84 were withheld by VA and remitted to DFAS. The Board's caution is supported by a confusing language used in the AOJ's August 2020 notification letter, which stated: [The Appellant's DIC] award was withheld until we received information regarding your SBP from DFAS [which was, seemingly, in October 2019]. Based on [VA's] grant of DIC, DFAS determined that [DFAS'] overpayment of . . . SBP [benefits was] in the amount of $178,848.16. This amount exceeds the withheld retroactive funds of $159,793.84 we had withheld for [sic] your Dependency and Indemnity Compensation (DIC) award. Because of this[, VA] . . . paid what [VA] had in withholding [as of an unspecified date] to DFAS. (Italics supplied.) Because the inartful italicized language in the August 2020 notification letter does not offer the Board any certainty as to the amount that VA has withheld, and this language: (a) could be construed as indicating that VA withheld $19,054.32 or any other amount in the Appellant's recurrent DIC benefits; and (b) cannot be sufficiently clarified with any other evidence of record, a remand for an audit is required. The matters are REMANDED for the following action: 1. Conduct a paid and due audit of the Appellant's account to determine the precise amount of her DIC benefits that have been withheld by VA for the purposes of remittance to DFAS as an offset for her SBP benefits. Simultaneously with the foregoing, locate and associate with the electronic claims file the Appellant's VA Form 10182 that gave rise to the Board's July 2021 letter acknowledging her appeal. 2. In the event it is determined, pursuant to Step 1, that the Appellant's DIC benefits withheld by VA for the purposes of remittance to DFAS were limited to her past-due DIC benefits in the amount of $159,793.84, issue the Appellant and her representative an Appeal Notification Letter stating this fact clearly and include a copy of the audit. In such a scenario, no further action is required. (Continued on the next page) 3. In the event it is determined, pursuant to Step 1, that the Appellant's DIC benefits withheld by VA for the purposes of remittance to DFAS were not limited to her past-due DIC benefits in the amount of $159,793.84, and that such withholdings also included any amount withheld from the Appellant's recurrent DIC benefits, issue the Appellant and her representative an Appeal Notification Letter stating this fact clearly and, in addition, specify such an additional amount withheld and the periods of her recurrent DIC benefits affected by such a withholding. Accompany the Appeal Notification Letter with a copy of the audit and a clear explanation as to why such withholdings were made. At a minimum, the explanation should reflect on: (a) DFAS' obligation to promptly downwardly adjust the amount of the Appellant's SBP benefits upon being informed by VA of her DIC benefits; (b) VA's lack of a legal basis to assist DFAS in DFAS' recoupment endeavor as to any overpayment that arises from DFAS' excessive laxness; and (c) the due process bar on VA's recoupment of any overpayment that has been created not by DFAS but by VA (due to VA's erroneous disbursements of VA's funds to the Appellant) without first providing the Appellant with a proposal notice and an opportunity to reply, a final action notice, a demand letter stating the amount of the overpayment debt and information as to her right to seek VA's waiver of the debt, and adjudication of a waiver claim, if filed. Cynthia M. Bruce Veterans Law Judge Board of Veterans' Appeals Attorney for the Board Anna Kapellan, Associate Counsel The Board's decision in this case is binding only with respect to the instant matter decided. This decision is not precedential and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.