Salute to the Past

VA Is Looking for Authority from Congress to Institute a 3 Year Look Back and Penalty for Veterans Pension

April 17, 2015 | by Thomas Day | Photo - Senior Master Sgt. Sandi Michon

A note from the author:

We provide an addendum discussing in detail the proposed rule changes from VA. This is available to those who have purchased our veterans book How to Apply for VA Benefits for Senior Veterans and Their Survivors in the past or it is currently available as an addition to our current veterans books that we offer. The addendum goes into much greater detail on the following subjects:

1. An analysis and comparison of VA's look back and penalty with Senator Wyden's proposed legislation along with recommended revisions that would make the rules more palatable

2. A summary of each of the proposed rule changes to include the actual rule as well as a discussion of the more pertinent comments that have been submitted pertaining to that rule

3. A summary of the more substantial comments submitted to VA over the proposed rules changes

4. An outline of the future steps VA must complete and the time it might take before publishing the final rules in the Federal Register after which the effective date would likely be 60 days thereafter.

The Department of Veterans Affairs, Office of Pension and Fiduciary Service is currently in the process of changing regulations to punish applicants for veterans Pension – a veterans disability income benefit.  Any potential applicant who would move or change the nature of his or her assets up to 3 years (36 months) prior to applying for the benefit would be prohibited from receiving the benefit for up to as long as 10 years.  VA calls this 36 month period of scrutiny a "look back." 

Under the proposed rules, using assets for such things as paying off student loans for grandchildren, paying for grandchildren schooling, gifting money to charities or to religious organizations, gifting money to members of the family, providing personal loans to members of the family, instituting estate planning through the use of trusts, converting an IRA or other retirement account to an immediate annuity or selling off property under an installment contract would likely result in a denial of benefits to any veteran or surviving spouse applying for veterans Pension benefits if the event or events occurred anytime within 36 months of application. 

Regardless of the actual intent for using the asset, anyone engaging in a so-called "transfer of a covered asset" is automatically considered to have "cheated" the system by transferring assets in order to qualify financially for the Pension benefit.  Transfer of a covered asset could be any number of legitimate uses of an asset even if at the time the person engaging in this activity had absolutely no knowledge of or interest in applying for the Pension benefit.  As a result, the Pension benefit will be denied for a certain period of time based on a calculation of the amount of covered asset transferred divided by the maximum monthly Pension rate for that particular applicant – as many as 10 years of penalty!!  The only exception is if the transaction is 100% restored to its previous state or the VA Pension benefit applicant can provide clear and convincing evidence that "he or she transferred the asset as the result of fraud, misrepresentation, or unfair business practice related to the sale or marketing of financial products or services for purposes of establishing entitlement to VA Pension."

The proposed look back and penalty from VA and very similar legislation sponsored by Senator Ron Wyden have little to do with protecting the integrity of the pension benefit and everything to do with trying to get rid of certain individuals who are assisting pension claimants and whom Senator Wyden calls "pension poachers." It seems the entire focus of this look back and penalty is to chase away pension poachers by removing the financial incentive for their helping with veterans claims.

It is unfortunate that VA and Senator Wyden have determined to punish veterans and their survivors in order to achieve their objective of removing the pension poachers. It is a mean-spirited approach. They could have picked a less malignant strategy than punishing veterans and at the same time increasing approval times and costing the VA considerably more money. Here is a quote from Senator Wyden concerning the proposed regulations.

"First, let me say how pleased I am to see the VA draft regulations that build on the Senate Committee on Aging hearing I chaired on the needs-based pension program, also known as "Aid and Attendance.'' Since the issue first came to my attention several years ago, I have been deeply troubled by the growing industry of organizations in America that profit by preying on elderly veterans' and their lifetime savings. As you know so well, these "pension poachers" convince unsuspecting veterans to hide their assets in trusts and annuity products in order to receive benefits for which they would not otherwise be eligible. In essence, the poachers charge veterans exorbitant fees for financial products they don't need in order to receive benefits they don't qualify for."

Many stakeholders, who assist veterans in applying for these benefits, contend that VA does not have congressional authority to establish this 36 month look back and the penalty associated with it.  Just recently, The National Academy of Elder Law Attorneys announced that members of its group were mounting a lawsuit as a result of these proposed changes.

As early as May 2012, VA was counseled by a report from the Government Accountability Office – an investigative arm of Congress – that Pension and Fiduciary Service should not attempt its current rules changes regarding look back and penalty without authority from Congress through proper legislation.  VA ignored this advice and pressed forward anyway.

I believe that the office of Pension and Fiduciary Service under the leadership of David McClenachen is not acting irresponsibly in regards to this rule change for for a 3 year look back and penalty.  I believe it is part of a plan dating back to May 2012 when David McClenachen knew he was going to be appointed as the director of the newly established Office of Pension and Fiduciary Service.  In a phone conversation I had with him in June 2012 – before he was appointed as director of the new agency and while he was still in the Office of General Counsel – he told me of his intent to establish a look back and penalty associated with Pension applications.  This was one of his priorities.  Among other things, he has been working on these rules changes since March 2012.

McClenachen is pressing forward, knowing full well he could be challenged in court, because he is anticipating congressional legislation and approval through a personal crusade for this rule change from Senator Ron Wyden of Oregon.  And it appears that Senator Wyden is willing to accommodate this shared objective with VA.  Even though he has failed to pass the same 36 month look back and penalty legislation 7 times over the last three years, the good Senator is not willing to give up.  He will continue to insert his legislation into larger, more comprehensive veterans bills that have a good chance of passing but where legislators likely don't have a clue as to what they are voting for.

The question we need to ask is whether other members Congress support Senator Wyden's and David McClenachen's personal crusade to punish veteran or surviving spouse applicants who wish to apply for Pension.  In addition, we need to question whether such legislation would scare off a large number of future potential applicants for this benefit even though they might qualify under the new rules.  If the rest of Congress knowingly supports the concept of this proposed legislation, then the language needs to be changed as in its current form the provisions are discriminatory and unnecessarily harsh.

It is clear that McClenachen is anticipating passage of legislation.  The provisions that he has adopted in VA's proposed rules changes are a mirror image of Senator Wyden's bill.  Even though Senator Wyden's provisions contain flaws, it is obvious that McClenachen is anticipating passage or VA would have likely not adopted rules that contain these flaws.  Knowing the backlash that the current proposal would produce, VA likely would propose rules that were less discriminatory and less harsh.

It is also clear to me that Wyden has not given up.  On March 23, 2015, the Senator submitted a comment on the proposed rules changes asking VA for an additional 60 days extension for the public to submit comments.  He provided no reasonable basis for this request other than he thought the public should have more time.  He surely knows that up to this point, at least 95% of the 867 posted comments have been opposed in some way to the proposed rule changes and thus to the spirit of his legislation.  I believe his request is an effort to buy more time to reintroduce his legislation and to get it passed before VA reaches the end of its rules change procedures and formalizes the new rules.

Here is a synopsis of legislative attempts by Congress to enact a 3 year look back and penalty for transferring or altering assets pertaining to Pension applications.  All of these 7 attempts contain the same provision language.

1 . On June 6, 2012, Senator Ron Wyden introduced  S. 3270 – "A Bill to Amend Title 38 United States Code… This bill and all of the 6 subsequent attempts at legislation contained basically the same language.  An almost identical bill – H.R. 6171 – was introduced by Representative Thomas Rooney on July 24, 2012.  Both bills died in committee.

The proposed legislation in these two bills was a direct result of the GAO report entitled "VETERANS' PENSION BENEFITS – Improvements Needed to Ensure Only Qualified Veterans and Survivors Receive Benefits," which recommended a look back and a penalty associated with applications for Pension benefit.  This GAO report was released on May 15, 2012.  Senator Wyden was likely waiting for this report before introducing his legislation a few weeks later.  Senator Wyden was one of 4 senators who originally commissioned the GAO investigation in the previous year.  The senators ordering the audit include the Chairman of the Senate Veterans Affairs committee Patty Murray and the ranking member of the committee Richard Burr.  In addition Herb Kohl, Chairman of the Senate Special Committee on Aging, and also Senator Ron Wyden

2 . On April 17, 2013, Senator Wyden reintroduced a version of his previous bill –S. 748 – which included the same language in his original version and laid out rules that are almost a mirror image to the proposed changes that are being recommended by VA in the Federal Register rules changes announcement.  An almost identical version of this Senate Bill – H.R. 2341 – was introduced into the house by Rep. Thomas Rooney on June 12, 2013.  Both bills died in committee.

3. On May 14, 2013 Senator Bernie Sanders introduced  S. 944 "Veterans Health and Benefits Improvement Act of 2013."  This was a very comprehensive bill covering a variety of veterans issues.  Section 801 of this bill addressed the issue of a look back and a penalty for Pension applications.  The language in this section was a restatement of the language in Senator Wyden's S. 3270 and S. 748.  This bill died in committee.

4. On May 23, 2013 Representative Jeff Miller introduced H.R. 2189 "A Bill to Improve the Processing of Disability Claims by the Departments of Veterans Affairs and Other Purposes."  Like Senator Sander's bill in the Senate, this was large comprehensive legislation addressing many veterans issues.  Section 202 of this bill contained provisions almost identical to those proposed by Senator Wyden in S.748 which represented the expanded rules proposed for a 36 month look back, transfers for less than value, rules pertaining to these transfers, calculation of penalties and a whole bunch of other issues related to these changes.  Representative Miller's bill passed the house on October 28, 2013 but failed to come up for a vote in the Senate and died.

5. 5. On February 4, 2014 Senator Bernie Sanders introduced S. 1982 entitled” Comprehensive Veterans Health and Benefits and Military Retirement Pay Restoration Act of 2014.” This was a very comprehensive legislation covering a variety of veterans issues and went on for 100 pages or more. Section 902 of this bill contained provisions almost identical to the provisions of S. 748. This bill was voted on favorably in the Senate 56-41 on February 27, 2014. However the Republican minority wanted to insert an amendment into the bill to provide sanctions against Iran and the Democratic majority rejected it. Facing a filibuster vote of 60 required votes, the bill died.

I don't have the space in this article, but I have done an analysis of Senator Wyden's proposed legislation comparing it to VA's proposed rule change.  I point out the flaws in the legislation and that they have been adopted in the proposed rule change from VA.  I also suggest how the legislation could be improved if Congress is intent on passing such legislation.

If you are concerned about the language in Senator Wyden's proposal or that it will injure more veteran applicants than intended, you need to let your own state legislative delegation know what is happening.  The best way is to identify when Senator Wyden has actually introduced his provisions and then contact individuals to be aware of what is happening.  You can check all bills before Congress on any given day and zero in on those that are directed towards veterans.  The organization is called and the domain is

A complete analysis of the proposed legislation and its impact as well as a complete analysis of VA's proposed rule changes – including a look back and penalty – are presented in great detail as an addendum to our book (How to Apply for VA Benefits for Recent and Senior Veterans and Their Survivors). I have also read most of of the more profound comments that were submitted in response to VA's proposed rule changes published in January 2015 in the Federal Register. I provide an analysis of those comments in our published addendum as well. I urge you to purchase our upgraded books and will continue to provide you with ongoing coverage of the proposed rules changes in proposed legislation as well as my estimate time needed for the various steps that VA must complete before it can publish final rule changes in the Federal Register and establish an effective date of 60 days thereafter.

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