M21-1, Part III, Subpart V, Chapter 4, Section C



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4. Creating a Withholding to Offset a Veteran’s Receipt of Drill Pay




Introduction

This topic contains instructions for creating a withholding to offset a Veteran’s receipt of drill pay, including


  • determining the effective date and the amount of the withholding

  • determining the date range for withholding benefits

  • handling advance notice of a Veteran’s receipt of drill pay

  • temporary 100-percent disability ratings in effect on the last day of the fiscal year

  • withholdings that exceed the current rate of payment

  • actions to take if the monthly rate of payment at the end of the fiscal year is $0.00

  • circumstances necessitating revision and reissuance of a notice of proposed adverse action

  • actions to take if a Veteran returns to active duty during a period VA withheld or is withholding benefits, and

  • making the award adjustment in VETSNET Awards.



Change Date

April 20, 2015



a. Determining the Effective Date and the Amount of the Withholding

Except as noted in M21-1, Part III, Subpart v, 4.C.4.e and f, make all award adjustments that are based on a Veteran’s receipt of drill pay from a future date, regardless of the fiscal year during which the Veteran earned the drill pay.
Because the amount of benefits VA is paying the Veteran has likely increased between the time he/she earned drill pay and the date VA adjusts his/her benefits,


  • withhold the Veteran’s benefits at the rate in effect on the last day of the fiscal year (September 30th) in which the Veteran earned the drill pay, and

  • pay the Veteran the difference between this rate and the rate in effect on the date the withholding begins.


Examples: VA may increase a Veteran’s benefits between the end of the fiscal year during which he/she earned drill pay and the date it begins withholding benefits because

  • of cost-of-living allowances (COLAs), and/or

  • the Veteran becomes entitled to additional benefits

  • for a dependent, and/or

  • based on an increased disability rating.


Important: If the Veteran is receiving compensation based on a temporary 100-percent disability rating under 38 CFR 4.29 or 38 CFR 4.30 on the last day of the fiscal year in which he/she earned drill pay, follow the instructions in M21-1, Part III, Subpart v, 4.C.4.d.
References: For examples of the application of instructions contained in this block, see M21-1, Part III, Subpart v, 4.C.7.



b. Determining the Date Range for Withholding Benefits

When determining the date range during which VA must withhold benefits to offset a Veteran’s receipt of drill pay, count each month – including February – as having 30 days.
Examples:

  • If award action is taken in December to withhold compensation based on a Veteran’s receipt of drill pay for 55 days of training,

  • the withholding begins January 1st, and

  • payment at the full rate resumes February 26th.

  • If award action is taken in January to withhold compensation based on a Veteran’s receipt of drill pay for 55 days of training,

  • the withholding begins February 1st, and

  • payment at the full rate resumes March 26th.


Important: The provisions of 38 CFR 3.31 do not apply to the resumption of benefits in the examples above.



c. Handling Advance Notice of a Veteran’s Receipt of Drill Pay

When a Veteran notifies VA in advance that he/she will receive drill pay, VA may not yet know what the Veteran’s rate of payment will be on the last day of the fiscal year during which he/she earns the drill pay. In this case, withhold benefits at the current rate for the number of days of drill pay the Veteran will receive.
If the rate payable at the end of the fiscal year turns out to be different than the amount VA originally withheld, correct the amount of the withholding only if some other reason exists for making a retroactive adjustment covering the period of the withholding.
Important: Do not establish an EP to control for correction of the amount of the withholding at the end of the fiscal year.
Note: If a Veteran who notifies VA in advance that he/she will receive drill pay ultimately attends fewer days of training than he/she initially reported, follow the instructions in M21-1, Part III, Subpart v, 4.C.5.



d. Temporary 100-Percent Disability Ratings in Effect on the Last Day of the Fiscal Year

If a Veteran was receiving VA compensation based on a temporary 100-percent disability rating under 38 CFR 4.29 or 38 CFR 4.30 on the last day of the fiscal year in which he/she earned drill pay,


  • determine what the Veteran’s disability rating is without the 100-percent temporary disability rating, and

  • base the withholding on that disability rating.


Example:

Scenario:

  • A Veteran is 20 percent disabled for a service-connected disorder that required surgery on August 20, 2010.

  • VA determines the Veteran is entitled to a temporary 100-percent rating for two months following surgery.

  • The Veteran submits VA Form 21-8951 in January 2011 showing she earned drill pay during fiscal year 2010.


Result: VA bases its withholding on the 20-percent disability rating instead of the 100-percent disability rating in effect on September 30, 2010.



e. Withholdings That Exceed the Current Rate of Payment

Occasionally, VA is unable to adjust a Veteran’s benefit from a future date to offset his/her receipt of drill pay because


  • the Veteran is no longer receiving benefits, or

  • VA has reduced his/her benefits to a rate that is less than the rate payable at the end of the fiscal year during which the Veteran earned the drill pay.


Example: VA receives VA Form 21-8951 in 2011 showing the Veteran earned drill pay during fiscal year 2009. VA stopped paying the Veteran compensation in 2010 because he returned to active duty. With no running award, VA is unable to adjust the Veteran’s award from a future date.
Follow the steps in the table below when the current rate of payment is less than the monthly amount VA was paying the Veteran at the end of the fiscal year during which he/she earned drill pay.




Step

Action

1

Identify the most recent award line that shows a monthly rate of payment equal to or exceeding the Veteran’s rate of payment at the end of the fiscal year during which he/she earned drill pay.

2

Is the version date of the VA Form 21-8951 earlier than February 2015?


  • If yes, proceed to the next step.

  • If no, proceed to Step 7.


Note: The following sentence was added to versions of VA Form 21-8951 dated February 2015 and later, thereby eliminating the need to provide notice of proposed adverse action before reducing the Veteran’s award: If VA cannot adjust your benefits from a future date, it may make a retroactive adjustment, which may create an overpayment in your account.

3

Send the Veteran notice of VA’s proposal to reduce his/her benefits


  • by the monthly rate of payment in effect at the end of the fiscal year during which the Veteran earned drill pay, and

  • effective the date of the award line identified in Step 1.


Reference: For more information about issuing a notice of proposed adverse action, see M21-1, Part I, Chapter 2.

4

Did the Veteran respond to the notice of proposed adverse action within 65 days of the date of the notice?


  • If yes, proceed to the next step.

  • If no, proceed to Step 7.

5

Did the Veteran request a hearing within 30 days of the date of the notice?


  • If yes, take no further action until after

  • the hearing is held, and

  • a decision is made as to whether or not the proposed award adjustment is still warranted.

  • If no, proceed to the next step.


Reference: For more information about handling requests for a hearing under the circumstances described in this step, see M21-1, Part I, 2.C.3.

6

Did the Veteran provide evidence showing VA should not retroactively adjust his/her award?


  • If yes,

  • notify the Veteran of VA’s decision, and

  • proceed no further.

  • If no, proceed to the next step.

7

  • Retroactively reduce the Veteran’s benefits, effective the date of the award line identified in Step 1, by the Veteran’s rate of payment at the end of the fiscal year during which he/she earned drill pay.

  • Discontinue the reduction as soon as it has been in place for the same number of days the Veteran received drill pay.

8

Notify the Veteran of the action taken.




Important: If VA is unable to adjust a Veteran’s award to offset his/her receipt of drill pay because it discontinued the Veteran’s award based on his/her return to active duty, do not wait until VA resumes the Veteran’s award following his/her discharge to make the necessary offset in benefits.
References:

  • For more information about notifying beneficiaries of the action(s) VA has taken and/or the decision(s) it has made, see M21-1, Part III, Subpart v, 2.B.

  • If a Veteran returns to active duty during a period VA withheld or is withholding benefits due to the Veteran’s receipt of drill pay, follow the instructions in M21-1, Part III, Subpart v, 4.C.4.h.

  • For an example of the application of instructions contained in this block, see M21-1, Part III, Subpart v, 4.C.7.f.



f. Actions to Take if the Monthly Rate of Payment at the End of the Fiscal Year Is $0.00

Follow the instructions in the table below if the monthly rate of payment at the end of the fiscal year in which the Veteran received drill pay is $0.00.




Step

Action

1

Was the Veteran’s monthly rate of payment $0.00 for the entire fiscal year in question?


  • If yes, take no further action. A withholding of benefits under these circumstances is unnecessary.

  • If no, proceed to the next step.

2

Are the dates the Veteran attended drills/training known?


  • If yes, proceed to the next step.

  • If no, proceed to Step 14.

3

Is the Veteran’s current rate of payment less than the rate in effect while he/she was attending drills/training?


  • If yes, proceed to the next step.

  • If no, proceed to Step 12.

4

Identify the most recent award line that shows a monthly rate of payment equal to or exceeding the rate in effect during the period the Veteran attended drills/training.

5

Is the version date of the VA Form 21-8951 earlier than February 2015?


  • If yes, proceed to the next step.

  • If no, proceed to Step 10.


Note: The following sentence was added to versions of VA Form 21-8951 dated February 2015 and later, thereby eliminating the need to provide notice of proposed adverse action before reducing the Veteran’s award: If VA cannot adjust your benefits from a future date, it may make a retroactive adjustment, which may create an overpayment in your account.

6

Send the Veteran notice of VA’s proposal to reduce his/her benefits


  • by the monthly rate of payment in effect during the period the Veteran attended drills/training, and

  • effective the date of the award line identified in Step 4.


Reference: For more information about issuing a notice of proposed adverse action, see M21-1, Part I, Chapter 2.

7

Did the Veteran respond to the notice of proposed adverse action within 65 days of the date of the notice?


  • If yes, proceed to the next step.

  • If no, proceed to Step 10.

8

Did the Veteran request a hearing within 30 days of the date of the notice?


  • If yes, take no further action until after

  • the hearing is held, and

  • a decision is made as to whether or not the proposed award adjustment is still warranted.

  • If no, proceed to the next step.


Reference: For more information about handling requests for a hearing under the circumstances described in this step, see M21-1, Part I, 2.C.3.

9

Did the Veteran provide evidence showing VA should not retroactively adjust his/her award?


  • If yes,

  • notify the Veteran of VA’s decision, and

  • proceed no further.

  • If no, proceed to the next step.

10

  • Reduce the Veteran’s benefits

  • by the monthly rate of payment in effect during the period the Veteran attended drills/training, and

  • effective the date of the award line identified in Step 4.

  • Discontinue the reduction as soon as it has been in place for the same number of days the Veteran received drill pay.


Note: If the monthly rate of payment for any of the days the Veteran attended drills/training was $0.00, do not include those days when determining the length of time benefits must be withheld.

11

Notify the Veteran of the action taken and proceed no further.

12

Withhold benefits from a future date


  • for the same number of days the Veteran attended drills/training, and

  • in an amount equal to monthly rate of payment in effect during the dates he/she attended drills/training.


Note: If the monthly rate of payment for any of the days the Veteran attended drills/training was $0.00, do not include those days when determining the length of time benefits must be withheld.

13

Notify the Veteran of the action taken and proceed no further.

14

Determine what the Veteran’s monthly rate of payment was on the date prior to the date it was reduced to $0.00.

15

Is the Veteran’s current rate of payment less than the rate identified in Step 14?


  • If yes, proceed to the next step.

  • If no, proceed to Step 24.

16

Identify the most recent award line that shows a monthly rate of payment equal to or exceeding the rate identified in Step 14.

17

Is the version date of the VA Form 21-8951 earlier than February 2015?


  • If yes, proceed to the next step.

  • If no, proceed to Step 22.


Note: The following sentence was added to versions of VA Form 21-8951 dated February 2015 and later, thereby eliminating the need to provide notice of proposed adverse action before reducing the Veteran’s award: If VA cannot adjust your benefits from a future date, it may make a retroactive adjustment, which may create an overpayment in your account.

18

Send the Veteran notice of VA’s proposal to reduce his/her benefits


  • by the amount identified in Step 14, and

  • effective the date of the award line identified in Step 16.


Reference: For more information about issuing a notice of proposed adverse action, see M21-1, Part I, Chapter 2.

19

Did the Veteran respond to the notice of proposed adverse action within 65 days of the date of the notice?


  • If yes, proceed to the next step.

  • If no, proceed to Step 22.

20

Did the Veteran request a hearing within 30 days of the date of the notice?


  • If yes, take no further action until after

  • the hearing is held, and

  • a decision is made as to whether or not the proposed award adjustment is still warranted.

  • If no, proceed to the next step.


Reference: For more information about handling requests for a hearing under the circumstances described in this step, see M21-1, Part I, 2.C.3.

21

Did the Veteran provide evidence showing VA should not retroactively adjust his/her award?


  • If yes,

  • notify the Veteran of VA’s decision, and

  • proceed no further.

  • If no, proceed to the next step.

22

  • Reduce the Veteran’s benefits

  • by the amount identified in Step 14, and

  • effective the date of the award line identified in Step 16.

  • Discontinue the reduction as soon as it has been in place for the same number of days the Veteran received drill pay.

23

Notify the Veteran of the action taken and proceed no further.

24

Withhold benefits from a future date


  • for the same number of days the Veteran attended drills/training, and

  • in an amount equal to the monthly rate of payment identified in Step 14.

25

Notify the Veteran of the action taken.



g. Circumstances Necessitating Revision and Reissuance of a Notice of Proposed Adverse Action

Reissue notice of proposed adverse action (with revision of the amount and/or duration of the withholding, as applicable) if, after issuing the initial notice, but before making the corresponding award adjustment,



  • the amount that VA must withhold increases, and/or

  • the number of days VA must withhold benefits increases.


Examples:

  • After issuing notice of proposed adverse action, VA increases the Veteran’s monthly rate of compensation (due to, for example, an increase in her combined disability rating) from an effective date prior to the end of the fiscal year during which the Veteran received drill pay.

  • After issuing notice of proposed adverse action, a Veterans Service Representative (VSR) discovers he misread the number of drill pay days printed on VA Form 21-8951.


Important: Do not withhold benefits from a future date under the circumstances described in this block in an effort to avoid having to resend a revised notice of proposed adverse action.



h. Actions to Take if a Veteran Returns to Active Duty During a Period VA Withheld or Is Withholding Benefits

Follow the instructions in the table below if a Veteran returns to active duty during a period VA withheld or is currently withholding benefits due to the Veteran’s receipt of drill pay.




Step

Action

1

Follow the instructions in M21-1, Part III, Subpart v, 4.C.6 to discontinue the Veteran’s benefits effective the date he/she returned to active duty.

2

Identify the most recent award line (prior to the date VA discontinued the Veteran’s benefits) that shows a monthly rate of payment equal to or exceeding the Veteran’s rate of payment at the end of the fiscal year during which he/she received drill pay.

3

  • Inform the Veteran in a notice of proposed adverse action of the new date from which VA intends to withhold benefits to offset his/her receipt of drill pay.

  • Take the action(s) described in the next step 65 days after issuing the notice of proposed adverse action.

4

Did the Veteran respond to the notice of proposed adverse action by requesting a hearing or submitting evidence showing the proposed adjustment would be improper?


  • If yes, postpone further action until after VA

  • holds the hearing, and/or

  • considers the evidence the Veteran submitted.

  • If no, make the adjustment described in the notice of proposed adverse action.




Important: Do not wait until VA resumes the payment of benefits to the Veteran following his/her discharge to make the offset in benefits necessitated by the Veteran’s receipt of drill pay.
References:

  • For more information issuing a notice of proposed adverse action, see M21-1, Part I, 2.B.

  • For an example of the application of instructions contained in this block, see M21-1, Part III, Subpart v, 4.C.7.g.



i. Making the Award Adjustment in VETSNET Awards

Follow the instructions in the VETSNET Awards Handbook or VBMS-Awards User Guide to adjust a Veteran’s award based on his/her receipt of drill pay. Process the adjustment under EP 290 (or EP 600 if it was necessary to issue notice of proposed adverse action before making the adjustment).
After making the adjustment, delete the diary the Hines ITC established in Stage 3 of the process described in M21-1, Part III, Subpart v, 4.C.1.c.
Notes:

  • Deleting the diary prevents the events described in M21-1, Part III, Subpart v, 4.C.3.d from occurring.

  • In some cases, this diary might not exist because it has expired.


Reference: For information about deleting diaries through

  • Share, see the Share User's Guide

  • VETSNET Awards, see the VETSNET Awards Handbook, or

  • VBMS, see the VBMS-Awards User Guide.



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