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Updated Dec 16, 2021

In This Section
This section contains the following topics:
Topic
Topic Name
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1.  General Information on Reducing Pension Under 38 CFR 3.551 and 3.556

Introduction
This topic contains general information on reducing pension awards under 38 CFR 3.551 and 3.556, including

Change Date
November 30, 2020

X.iii.1.D.1.a.  Criteria for Reducing Pension of a Hospitalized Veteran
Generally, the provisions of 38 CFR 3.551 require a reduction of pension payments for a Veteran who
  • has not established dependents for Department of Veterans Affairs (VA) purposes, and
  • is being furnished hospital, domiciliary or nursing home care by VA or at VA expense.
Note:  A therapeutic residence is considered domiciliary care for the purposes of reduction of benefits under 38 CFR 3.551(e).

X.iii.1.D.1.b.   Reducing Current-Law and Section 306 Pension for Inpatient Care at VA Expense
The following table summarizes the criteria for reduction of current-law and Section 306 Pension.
Type of Pension
Reduction for Inpatient Care at VA Expense
Current-law pension if the Veteran
  • is admitted on or after 2/1/1990, to a
  • VA domiciliary or nursing home, or
  • private domiciliary or nursing home at VA expense
  • has no dependents, or
  • has a spouse or child, but is being paid pension as a Veteran with no dependents
Reduce pension to $90 effective the first day of the
  • fourth month after the date of admission to domiciliary or nursing home care, or
  • month following readmission if readmitted within six months of a previous admission requiring reduction.
Exceptions:
  • Pension is not reduced for admission to hospital care.
  • If a Veteran is married but paid as a Veteran with no dependents, the withheld amount may be apportioned to the spouse under 38 CFR 3.454(b)(3).
References:  For more information on the
Section 306 Pension if a Veteran
  • is admitted to a
  • VA hospital, domiciliary, or nursing home, or
  • private hospital, domiciliary, or nursing home at VA expense
  • has no dependents, or
  • has dependents, but receives pension as a Veteran with no dependents
Reduce pension to $50 effective the first day of the
  • third month after admission to hospital, nursing home, or domiciliary care, or
  • month following readmission if admitted within six months of a previous admission requiring reduction.
Exception:  If the Veteran is married but receives pension as a Veteran without dependents, the pension withheld may be apportioned to the Veteran’s spouse under 38 CFR 3.454(b)(1).
References:  For more information on the
Notes:
  • If a Veteran receiving current-law pension is transferred from hospital care to nursing home or domiciliary care, the period of hospital care is not considered as nursing home or domiciliary care.
  • If a Veteran receiving current-law pension is transferred from nursing home or domiciliary care to hospital care, and
    • issued a complete discharge from the hospital, or if hospitalized for more than six months, domiciliary or nursing home care is considered to have stopped effective the date of transfer to the hospital care
    • then back to nursing home or domiciliary care, the entire period is considered nursing home or domiciliary care, or
    • death occurs while hospitalized, the entire period is considered nursing home or domiciliary care.
  • For current-law pension, a Veteran is considered to have a dependent if he or she has a child but does not receive pension for the child because it was determined reasonable that some of the child’s estate be consumed for maintenance under 38 CFR 3.274(b).

X.iii.1.D.1.c.  Benefits Not Subject to Reduction Under 38 CFR 3.551
The provisions of 38 CFR 3.551 prohibit VA from reducing the following pension benefits due to hospitalization at VA expense:
  • current-law pension if the Veteran is an inpatient at a VA hospital or hospitalized at VA expense on or after February 1, 1990 (pension is still reduced due to admission to a VA domiciliary or nursing home)
  • pension for any period during which a Veteran is
    • hospitalized for Hansen’s disease
    • maintained in a State soldiers’ home
    • furnished hospital, domiciliary, or nursing home care in a State home for which the only payment made by VA is the per diem rate pursuant to 38 U.S.C. 1741, or
    • admitted to hospital or nursing home care for rehabilitation after October 16, 1981, as outlined in M21-1, Part X, Subpart iii, 1.D.2.f
  • pension for any period if the Veteran establishes the existence of a dependent
  • current-law pension if the Veteran has a child, but is receiving pension as a Veteran without a dependent because it was determined to be reasonable that a portion of the child’s estate be consumed for the child’s maintenance under 38 CFR 3.274(b), or
  • Medal of Honor Special Pension recipient.
Reference:  For more information on Medal of Honor Special Pension, see M21-1, Part XIII, Subpart i, 6.1.

X.iii.1.D.1.d.  Electing the Greater Benefit of Pension or Compensation
If a Veteran in receipt of pension subject to reduction under 38 CFR 3.551 is also entitled to compensation, he/she may
  • elect to receive either benefit, and
  • change the election to either benefit at any time, under the authority of 38 CFR 3.701(a).
Note:  If Section 306 Pension is reduced under 38 CFR 3.551, review the evidence of record to determine if it might be advantageous for the payee to elect current-law pension.  If so, inform the payee accordingly.
Reference:  For more information about elections between compensation and pension, see M21-1, Part VI, Subpart ii, 1.A.2.a.

X.iii.1.D.1.e.  Screening CAPRI Reports to Determine if Adjustment Is Required
Use the reports discussed in M21-1, Part X, Subpart iii, 1.A.1.e, to identify Veteran pension beneficiaries who
  • are still active patients, or
  • have been discharged at government expense.
Screen each report across the corporate record to determine if an adjustment under 38 CFR 3.551 is required.
Reference:  For more information on using the Compensation and Pension Record Interchange (CAPRI), see the CAPRI Desk Reference Guide.

X.iii.1.D.1.f.  Due Process and Controls for Hospital Adjustments
Notice of proposed adverse action is required prior to any award adjustment.  In order to provide proper notification and establish proper controls,
  • prepare duplicate notices of proposed adverse action, sending
    • one notice to the Veteran’s address of record, and
    • one to the Veteran at the medical facility
  • clear an end product (EP) 135 with date of admission as date of claim, and
  • establish an EP 600 control to mature 65 days from the date the notice of proposed adverse action is sent.
Note:  If proposed adverse action is pending for an aid and attendance (A&A) reduction due to hospitalization and an EP 330 is received for admission to a domiciliary, nursing home, or contract nursing home (CNH) that requires another reduction, reissue due process to include both before taking final action.
References:  For more information on notice of proposed adverse action requirements, see

X.iii.1.D.1.g.  Adjusting Pension Awards for Hospitalization in the Award Processing System
When completing a hospitalization adjustment, utilize the following screens in the award-processing system:
  • use the INSTITUTIONALIZATION screen to record basic information, such as the
    • facility where institutionalized, and
    • inclusive dates of institutionalization, and
  • use the INSTITUTIONALIZATION ADJUSTMENTS screen to identify the type of benefit or type of adjustment involved.
References:  For more information on adjusting awards using

X.iii.1.D.1.h.  Provisions of PL 102-568 for Current-Law Pension
Under Public Law (PL) 102-568, any current-law pension in excess of the $90 per month and withheld due to nursing home care must be deposited in a revolving fund at the VA medical facility furnishing nursing home care.
These funds are made available to help defray the operating expenses of the medical facility.
Reference:  For more information on the authority to apply the withheld funds, see 38 U.S.C. 5503(a)(1)(B).

X.iii.1.D.1.i.  Adjusting Awards Involving Additional Allowance for A&A
For information on adjustments to compensation or pension involving an A&A allowance, see M21-1, Part X, Subpart iii, 1.C.1.a.

X.iii.1.D.1.j.  Adjusting Pension of Incompetent Veterans
The procedures in this section apply equally to cases of competent and incompetent Veterans.  However, for additional actions required for hospitalized incompetent Veterans, see M21-1, Part X, Subpart ii, 6.F.

X.iii.1.D.1.k.  Cases Involving Entitlement to MRP
For adjustment of pension awards for Veterans who are receiving, or eligible to receive, military retired pay (MRP), see M21-1, Part VI, Subpart ii, 4.B.

2.  Reducing Pension Upon the Initial Admission of a Veteran

Introduction
This topic contains information on reducing an award upon the initial admission of a Veteran for treatment or care, including

Change Date
November 30, 2020

X.iii.1.D.2.a.  Establishing a Date of Reduction for an Initial Grant of Pension
When a claim for pension is filed after admission for treatment or care, the date controlling the date of reduction is the date of admission, not the inception date of entitlement to monetary benefits.  The effective date of reduction due to hospitalization is determined independently of the effective date for award of benefits.
References:  For more information about the effective date of

X.iii.1.D.2.b.  Reducing Current-Law Pension:  Admission After January 31, 1990
Use the following table to reduce a Veteran’s current-law pension when he/she is receiving inpatient treatment or care at VA expense after January 31, 1990.
When a Veteran …
Then …
having neither spouse nor child is being furnished domiciliary or nursing home care by VA
under the provisions of 38 CFR 3.551(e), reduce pension to $90 effective the first day of the fourth calendar month following the month of admission.
is furnished hospital care by VA
effective February 1, 1990, the basic pension is no longer reduced. However, special monthly pension for A&A is still reduced under 38 CFR 3.552.

X.iii.1.D.2.c.  How to Consider Care When a Veteran Is Transferred
For current-law pension reductions because of domiciliary or nursing home care, use the table below to determine how to consider treatment or care for reduction purposes when a Veteran is transferred between VA institutions.
Reference:  For more information on current-law pension reductions, see 38 CFR 3.551(e)(4).
If a Veteran …
Then …
  • is furnished hospital care by VA, and
  • is transferred to VA-furnished nursing home or domiciliary care
do not consider the period of hospital care as nursing home or domiciliary care.
  • is transferred from VA-furnished nursing home or domiciliary care to hospital care, and
  • is transferred back to nursing home or domiciliary care
consider the care as continuous nursing home or domiciliary care, provided the period of hospitalization does not exceed six months.
  • is transferred from VA-furnished domiciliary or nursing home care to VA-furnished hospital care, and
  • dies while under VA-furnished hospital care
consider the entire period of VA care as domiciliary or nursing home care.
is transferred from VA-furnished nursing home or domiciliary care to hospital care and is
  • completely discharged from VA care following a period of hospitalization, or
  • hospitalized for a period that exceeds six months
consider any nursing home or domiciliary care as terminated effective the date of transfer to the VA medical center (VAMC).

X.iii.1.D.2.d.  Reducing Section 306 Pension Cases for Hospitalization
When a Veteran in receipt of Section 306 Pension, having neither spouse nor child, has received two full months of VA treatment or care, reduce the award to $50 effective the first day of the third calendar month following admission, per 38 CFR 3.551(c).
Note:  Per 38 CFR 3.551(f), consider treatment of
  • 60 total days as two calendar months of hospitalization, and
  • 90 total days as three calendar months of hospitalization.

X.iii.1.D.2.e.  Applying PL 101-237 to Section 306 Pension Cases
Prior to the enactment of PL 101-237, the procedures used for reducing Section 306 Pension cases were the same as the procedures used for reducing current-law pension cases before February 1, 1990.
VAOPGCPREC 19-1990, dated June 15, 1990, held that the
  • provisions of PL 101-237, which amended 38 U.S.C. 5503(a), apply only to current-law pension recipients
  • provisions of PL 95-588, Section 307, were incorrectly applied to Veterans receiving Section 306 Pension, and
  • laws in effect before January 1, 1979, applied to Section 306 Pension cases.
Apply the regulations in effect before January 1, 1979, to all retroactive, current, and future reductions of Section 306 Pension.  However, if Section 306 Pension was previously adjusted using current-law pension regulations, do not create an overpayment if applying the regulations in effect before January 1, 1979, would result in a lower rate.

X.iii.1.D.2.f.  Requesting Certification When a Veteran Is Admitted to a Nursing Home for Rehabilitation
Upon receipt of a report of nursing home admission for a current-law pension case subject to reduction under 38 CFR 3.551(e), follow the procedures in M21-1, Part X, Subpart iii, 1.A.2.b.  In addition to those procedures
  • request certification of participation in a prescribed rehabilitation program, and
  • ask the VAMC to certify the beginning date of care under the 38 U.S.C. 1718 rehabilitation program.
The VAMC should furnish the appropriate certification of discontinuance of participation in such a rehabilitation program, if discontinuance occurs prior to discharge.
Consider status under the rehabilitation program as continuing until the VAMC reports that the Veteran’s participation in the rehabilitation program has ended.

X.iii.1.D.2.g.  Allowing for an Extension of the Rehabilitation Period
If a VAMC certifies that a current-law pension recipient is participating in a prescribed rehabilitation program under 38 U.S.C. 1718, do not reduce pension due to VA-furnished nursing home care for a period of up to three additional calendar months after the last day of the
  • third month following the month of admission, or
  • month of readmission to the hospital or nursing home.
Note:  Generally, rehabilitation services should not take more than the additional three months.  Under 38 CFR 3.551(h)(2), if the Veteran remains hospitalized or in a nursing home for rehabilitation beyond this time period, the Chief Medical Director or designee must certify that the need for furnishing continued care is to provide the Veteran with a program of rehabilitation designed to restore the Veteran’s ability to function within the Veteran’s family and community.
Reference:  For more information about hospitalization for rehabilitation, see 38 CFR 3.551(h).

X.iii.1.D.2.h.  Application of 38 CFR 3.551(h) When Initial Admission Is for Other Than Rehabilitation
When a current-law pension recipient is admitted to VA-furnished nursing home care for purposes other than rehabilitation, the provisions of 38 CFR 3.551(h) apply if, at a later time during the continuous period of care, the primary purpose of care becomes that of rehabilitation.

X.iii.1.D.2.i.  Considering Readmission After Discharge
After discharge from a rehabilitation program, consider a readmission within six months that is for
  • additional rehabilitation, as an extension of the initial period of rehabilitation, and
  • purposes other than that of further rehabilitation, as an initial admission to the nursing home.

X.iii.1.D.2.j.  Adjusting Pension Awards Based on CNH/VA NHCU Admission
Upon admission to a CNH or VA nursing home care unit (NHCU), review the claim and admission details to determine if a reduction to the $90 rate is needed in accordance with 38 CFR 3.551, and consider authorizing A&A based on qualified nursing home patient status.
Note:  If a claimant is receiving less than the $90 rate per month for pension, a reduction due to admission to a CNH or VA NHCU does not apply.  Continue the present rate.
Follow the table below for action to take upon admission to a CNH or VA NHCU.
If a standard form for A&A is …
Then …
  • received
  • the claimant was not previously rated A&A, and
  • the award was already reduced to the $90 rate
  • change the EP 330 to an EP 120 to grant A&A administratively
  • withhold the A&A rate and continue to pay the $90 rate until discharge, and
  • notify the claimant that once discharged, a determination will be made to grant A&A by rating.
  • received
  • the claimant was previously rated A&A, and
  • the award was already reduced to the $90 rate
  • clear the EP 330, and
  •  add a VBMS note, No adjustment required (date of admission).
  • received
  • the claimant was not previously rated A&A, and
  • the award was not already reduced to the $90 rate
  • change the EP 330 to an EP 120 to grant A&A administratively, and
    • pay the housebound (HB) rate effective the first day of the second calendar month of admission, and
    • notify the claimant that he or she is only entitled to the HB rate until the end of the third calendar month of admission.  Once discharged, a determination will be made to grant A&A by rating.
  • Establish an EP 600 and send a proposed adverse action notice to reduce the award to the $90 rate effective the first day of the fourth calendar month of admission to a VA facility.
Note:  After 65 days reduce the award as proposed to the $90 rate.
Exception:  If the Veteran has dependents, HB is continued until discharge.
  • received
  • the claimant was previously rated A&A, and
  • the award was not already reduced to the $90 rate or HB rate
  • clear the EP 330 and establish an EP 600
  • send the proposed adverse action notice to reduce the award to the HB rate effective the first day of the second calendar month of admission, and
  • reduce to the $90 rate effective the first day of the fourth calendar month of admission.
Note:  After 65 days make both reductions as proposed under the same award.
  • not received
  • the claimant was not previously rated A&A, and
  • the award was already reduced to the $90 rate
Reference:  For more information on requests for applications on prescribed forms, see M21-1, Part II, Subpart iii, 2.G.
  • not received
  • the claimant was not previously rated A&A, and
  • the award was not already reduced to the $90 rate
  • clear the EP 330
  • establish an EP 600, and
  • send the proposed adverse action notice to reduce the award effective the first day of the fourth calendar month of admission.  Solicit for VA Form 21-2680, if not previously rated for A&A.
Note:  If a VA Form 21-2680 is subsequently received for A&A, establish an EP 120 to grant administratively, paying HB rate and reduce award as proposed.
References:  For more information on

3.  Reducing Pension Upon the Readmission of a Veteran

Introduction
This topic contains information on reducing an award when a Veteran is readmitted for treatment or care, including reducing

Change Date
August 3, 2020

X.iii.1.D.3.a.  Reducing Current-Law Pension:  Readmission After January 31, 1990
Use the table below to take appropriate action when
  • a prior period of VA-furnished nursing home or domiciliary care was terminated for any reason, and
  • a notice of readmission of a current-law pension recipient subject to reduction under 38 CFR 3.551(e) is received.
If readmission occurs …
Then …
within the six-month period following termination of a prior period of three full-calendar months of treatment or care by VA in a nursing home or domiciliary
reduce payments to $90 under 38 CFR 3.551(e)(2) effective the first day of the month following the month of readmission.
after six months have elapsed following a prior period of treatment or care by VA in a nursing home or domiciliary
reduce payments effective the first day of the month following the third full month after readmission.
Example:  Reduce the current-law pension of a Veteran readmitted to a VA domiciliary on May 20, 2006, effective September 1, 2006.
after a period of treatment or care by VA of less than three full-calendar months in a nursing home or domiciliary (before reduction action under 38 CFR 3.551(e))
  • consider the readmission an initial admission, regardless of the reason for termination of the prior period of care, and
  • reduce payments effective the first day of the month following the third full month after readmission.

X.iii.1.D.3.b.  Reducing Section 306 Pension Cases
Use the table below to determine the appropriate action in a Section 306 Pension case when a
  • prior period of VA-furnished care was terminated for any reason, and
  • notice of readmission of a Veteran receiving pension subject to reduction under 38 CFR 3.551(c) is received.
If readmission occurs …
Then …
within the six-month period following termination of a prior period of two full-calendar months of care by VA in a hospital, nursing home, or domiciliary
reduce payments to $50 under the provisions of 38 CFR 3.551(c) effective the first of the month following the month of readmission.
after six months have elapsed following a prior period of treatment or care by VA in a hospital, nursing home, or domiciliary
reduce payments effective the first day of the third month following the month of readmission.
after a period of treatment or care by VA of less than two full-calendar months in a hospital, nursing home, or domiciliary (before reduction action under 38 CFR 3.551(c))
consider the readmission an initial admission, regardless of the reason for termination of the prior period of care.

4.  Adjusting Pension for Authorized Absences and Non-Bed Care Status

Introduction
This topic contains information on adjusting an award for authorized absences and non-bed care status, including

Change Date
August 3, 2020

X.iii.1.D.4.a.  Adjusting for Authorized Absences in Section 306 Pension Cases
For the purpose of computing periods of hospitalization for Section 306 Pension cases, under the provisions of 38 CFR 3.551(f), authorized absences
  • of 96 hours or less are included as periods of hospitalization, and
  • in excess of 96 hours are excluded.
Note:  Absences of 96 hours or less are not reported to regional offices.

X.iii.1.D.4.b.  Restoring the Full Rate for Absences of 30 Days or More
Upon receipt of notice showing that an authorized absence of 30 days or more has been granted to a competent Veteran, take action without awaiting expiration of the 30 days, per 38 CFR 3.556(a).
If the award involves Section 306 Pension authorize the full monthly rate, including, if payable, the HB rate or allowance for A&A, effective the date of departure.
Note:  This applies unless it is determined that an apportionment for an estranged spouse should be continued.

X.iii.1.D.4.c.  Reducing Section 306 Pension Upon a Veteran’s Return From an Authorized Absence
Upon receipt of notice that a Veteran has returned to the hospital, reduce either a Section 306 Pension award (if still in order) effective the date of return.
Reference:  For information on adjustment of awards for incompetent Veterans, see M21-1, Part X, Subpart ii, 6.F.5.

X.iii.1.D.4.d.  Adjusting an Award for Absences of Less Than 30 Days
Except as provided in M21-1, Part X, Subpart iii, 1.D.4.e, do not restore the Veteran’s full pension rate if the Veteran has not been discharged from VA-furnished hospitalization and has been absent less than 30 days, counting the day of departure, per 38 CFR 3.556(b).
Note:  Current-law pension is not adjusted for inpatient hospital care at VA expense after January 31, 1990.  It is subject to reduction, however, for nursing home or domiciliary care.
References:  For information on

X.iii.1.D.4.e.  Restoring Full Pension Rates Because of Hardship
As an exception to the requirement outlined in M21-1, Part X, Subpart iii, 1.D.4.d, restore the Veteran’s full pension rate prior to discharge to authorize the full rate covering the cumulative number of days of absences of less than 30 days if the following conditions are met:
  • the Veteran has been receiving treatment or care for more than six months
  • the periods of absence for which adjustment is claimed cumulatively exceed a total of 30 days, and
  • a request for such an adjustment over the signature of the Chief, Medical Administration Sepecialist, has been received stating
    • the inclusive dates of each period of absence, and
    • that the adjustment is necessary to meet the financial needs of the Veteran, per 38 CFR 3.556(c).

5.  Adjusting Pension When a Veteran Has Dependents

Introduction
This topic contains information on adjusting an award when the Veteran has dependents, including

Change Date
August 3, 2020

X.iii.1.D.5.a.  Establishing the Relationship of an Alleged Dependent
If records indicate a Veteran has a dependent that has not been established as a dependent for VA purposes, ask the Veteran to complete and return to VA
References:  For more information about

X.iii.1.D.5.b.  Action to Take Based on Whether Evidence Is Received
Use the table below to determine the appropriate action to take based on whether evidence that constitutes proof of relationship is received.
If the evidence establishing a dependent …
Then …
is received
  • after reduction, and
  • within one year of the date of request
authorize the full rate effective the date of reduction.
is received
  • after reduction, and
  • one year or more than from the date of request
authorize the full-rate effective the date of receipt of such evidence, per 38 CFR 3.551(g).
is not received
reduce the award, as appropriate, under
Notes:
  • In current-law pension cases, authorize the additional amounts payable for dependents.
  • Although an additional amount may not be paid under Section 306 Pension for a dependent who cannot be established on or before December 31, 1978, the existence of such a dependent is controlling for purposes of reduction under 38 CFR 3.551(c).
  • An apportionment may be payable to an unestablished dependent, even if additional pension is not being paid for that dependent.

X.iii.1.D.5.c.  Apportionment to an Estranged Spouse
Per 38 CFR 3.454(b), it is generally appropriate to apportion to an estranged spouse all withheld benefits when
  • the Veteran’s pension under 38 U.S.C. 1521(b) (the rate for a Veteran with no dependents) is reduced because of VA-furnished care
  • a claim for apportionment is received on behalf of an estranged spouse, and
  • there is an affirmative showing of hardship.
When determining an estranged spouse’s entitlement to an apportionment under the provisions of this block, follow the instructions in M21-1, Part VII, Subpart iii, 1.A.2.a.
When adjusting the Veteran’s award to reflect the apportionment,
  • do not make the effective date of the apportionment before the date of claim, and
  • input the difference between the hospitalized rate and the full pension rate into the withholding amount field.
When the Veteran is discharged, review the apportionment based on all the facts and equities to determine if it should be continued, modified or discontinued.  If the apportionment is continued or modified on the basis of establishing dependency of the apportionee, a readmission may not necessitate a reduction under 38 CFR 3.551(c)-(e).
Reference:  For information about selecting a withholding reason and amount if using VETSNET, see the VETSNET Awards User Guide.

X.iii.1.D.5.d.  Loss of a Dependent When the Only Dependent Is a Child
Reduce a Veteran’s award under 38 CFR 3.551 after expiration of the required period of time if the Veteran was receiving additional benefits for a child who
  • was under age 18, or over age 18 and attending an approved course of instruction, and
  • reaches the age of 18 or completes the course of instruction.
Use the table below to determine the appropriate expiration of the required period of time.
If the benefit is …
Then reduce pension effective the first day of the …
Section 306 Pension
third month following the month in which the Veteran is without a dependent.
current-law pension
fourth month following the month in which the Veteran is without a dependent.

X.iii.1.D.5.e.  Unexpected Loss of a Dependent in Section 306 Pension Cases
Follow the steps in this table when a Veteran has an unexpected loss of a dependent in a Section 306 Pension case.
Step
Action
1
Upon the loss of the dependent, apply the provisions of 38 CFR 3.551(b) and (c) on the basis of the Veteran’s factual status as “without a dependent” at the time of admission or at the time of loss of the dependent, whichever is later.
Note:  If a Section 306 Pension recipient entitled to end-of-year protection for loss of a dependent is discharged prior to the end of the calendar year, the Veteran’s pension award will be treated as if the dependent continues to exist to the end of the year.
  • Adjustment for hospitalization will not take effect until the first day of the next year, when the dependent is removed and the reduction for hospitalization is made.
  • If the Veteran is discharged from hospitalization before the end of the year, no hospitalization adjustment will be made.
2
Prepare the award under standard procedures,
  • reducing payment, using a withholding, and
  • showing the reduced rate for a Veteran without a dependent.
3
Make the appropriate change in VETSNET to remove the spouse or child and implement the hospital reduction effective the first day of the following year.
4
Is income now excessive for a Veteran without a dependent?
  • If yes, provide for termination of the award at the end of the year.
  • If no, go to Step 5.
5
If the Veteran is released from hospitalization before either the end of the calendar year of loss, or an earlier scheduled reduction for an only child reaching age 18 or terminating school,
  • consider the Veteran as having this dependent until the end of that year (or earlier scheduled date), and
  • be sure, in protected pension cases, to
    • zero out the hospitalization withholding
    • not reduce the pension to the hospitalized rate, and
    • reflect the existence of a dependent subject to the end-of-year rule.
Note:  For information about selecting a withholding reason and amount if using VETSNET, see the VETSNET Awards User Guide.

X.iii.1.D.5.f.  Acquisition of Dependents During Hospitalization
When a Veteran without dependents is hospitalized and, following admission to the institution, gains a dependent(s), authorize the appropriate payment rate of current-law pension or restore the full December 31, 1978, amount of Section 306 Pension, as appropriate, effective the date that he/she acquired the dependent(s), but not prior to the date of acquisition of such a dependent.
Example:  The effective date would not be prior to the date of marriage or the birth of a child.
Note:  The reduction under 38 CFR 3.551 would be removed effective the date the dependent was acquired.  However, the effective date of payment of additional benefits for the dependent would be controlled by 38 CFR 3.31.

X.iii.1.D.5.g.  Awards to Dependents of Incompetent Veterans
For information on awards to dependents of incompetent Veterans, See M21-1, Part X, Subpart ii, 6.F.3.

6.  Restoring Previous Pension Rate Upon the Discharge of a Veteran

Introduction
This topic contains information on restoring an award when a Veteran is discharged from treatment or care, including restoring awards

Change Date
November 30, 2020

X.iii.1.D.6.a.  Restoring Awards in Section 306 or Current-Law Pension Cases
Upon receipt of a discharge report showing termination of hospitalization, domiciliary, or nursing home care in a Section 306 or current-law pension case,
  • discontinue the withholding effective the date of release, and
  • restore full pension, including A&A, effective the date of release.
Reference:  For more information on proper disposition of EP 330 when restoring pension awards, see M21-1, Part I, Subpart ii, 1.C.1.i.

X.iii.1.D.6.b.  Restoring Awards After CNH/VA NHCU Discharge
Upon discharge from a CNH or VA NHCU, restore full pension effective the date of discharge.
If A&A was granted administratively, continued entitlement to A&A requires a rating decision.  Review the electronic claims folder to see if there is medical evidence of record that would support continued entitlement to A&A.  Such evidence can include VA Form 21-2680, in addition to any VA examination or medical reports and findings by private physicians of record.
Follow the table below for action to take for reconsideration of A&A status.
If there is …
Then …
medical evidence of record demonstrating continued entitlement to A&A
  • change the EP 330 to an EP 120, and
  • send the claim to rating activity.
If the rating decision
  • grants A&A, restore the award to the A&A rate, or
  • discontinues A&A based on evidence of record take the following actions to:
    • restore the award at the A&A rate as of date of discharge, and
    • establish an EP 600 to send proposed adverse action notice.
Follow the table below after 65 days.
If additional medical evidence is …
Then …
received
send the claim to the rating activity for final rating decision
not received
  • remove A&A, and
  • do not create an overpayment.
References: For more information on
previous rating decision granting A&A
  • change the EP 330 to an EP 135, and
  • restore the award at the A&A rate.
no medical evidence of record demonstrating continued entitlement to A&A
  • change EP 330 to an EP 135 to restore award at A&A rate as of date of discharge, and
  • establish an EP 600 to send proposed adverse action notice to discontinue A&A and request claimant submit a VA Form 21-2680 for reconsideration of A&A.
Follow the table below after 65 days.
If VA Form 21-2680 is …
Then …
received
  • establish an EP 120 and send claim to the rating activity, and
  • extend suspense date for EP 600.  Once rated work both EPs (120 and 600) concurrently.
not received
  • remove A&A, and
  • do not create an overpayment.
Reference:  For more information on how the CNH reports of admission/discharges will be generated, see M21-1, Part I, Subpart ii, 1.C.1.g.

X.iii.1.D.6.c.  Restoring Awards to Incompetent Veterans
Do not restore amounts withheld prior to the expiration of six months following a rating of competency, per 38 CFR 3.556(e).
Reference:  For more information on restoring awards after a rating of competency when there is a court-appointed fiduciary, see M21-1, Part X, Subpart ii, 6.D.6.a.