In This Section

This section contains the following topics:

Introduction

This topic contains guidance on considerations for IU decision making, including

• considerations for IU claims
• applicability of the concept of average impairment in earning capacity to IU claims
• factors not affecting IU determinations, and
• considering
  • educational history in IU claims, and
  • occupational history in IU claims.

Change Date

July 29, 2021

VIII.iv.3.C.1.a.  Considerations for IU Claims

When deciding a claim for entitlement to a total evaluation due to individual unemployability (IU), the rating activity must consider

• the economic and non-economic factors affecting a Veteran’s ability to secure and follow a substantially gainful occupation, and
• whether
  • the disability requirements set forth in 38 CFR 4.16(a) are met, or
  • extra-schedular consideration under 38 CFR 4.16(b) is warranted.

When assessing the competence, credibility, and weight of evidence, no single factor has inherently more weight than another in determining the outcome of an IU rating decision once the evidence shows that the Veteran is no longer gainfully employed. 

A decision maker must consider all factors contextually.  Assignment of weight for the different factors is and must remain contingent upon the entire evidentiary picture as found in the individual IU claim. 

Important:  Do not defer a decision as to the schedular degree of disability pending receipt of evidence sufficient to adjudicate the issue of IU.

References:  For more information on

• evaluating evidence, see
  • 38 CFR 4.6, and
  • M21-1, Part V, Subpart ii, 1.A
• separating the impact of service-connected (SC) disabilities from non-service-connected (NSC) disabilities, see M21-1, Part V, Subpart ii, 3.D.2.c
• economic factors associated with IU determinations, see M21-1, Part VIII, Subpart iv, 3.A.2
• non-economic factors associated with IU determinations, see M21-1, Part VIII, Subpart iv, 3.A.3
• the evidence that must be discussed in the IU rating decision, see M21-1, Part VIII, Subpart iv, 3.C.3.c, and
• assigning effective dates for IU decisions, see M21-1, Part V, Subpart ii, 4.A.5.c.

VIII.iv.3.C.1.b. Applicability of the Concept of Average Impairment in Earning Capacity to IU Claims

Do not apply the concept of average impairment in earning capacity set forth in 38 CFR 4.1 to determinations regarding IU.  This concept applies only to determinations of the percentage of disability for schedular evaluations.

VIII.iv.3.C.1.c.  Factors Not Affecting IU Determinations

Determine whether the severity of the SC disabilities precludes the Veteran from securing or following substantially gainful employment. 

The following factors have no bearing on a determination of whether an SC disability renders a Veteran unemployable:

• age
• NSC disabilities
• injuries occurring after military service
• availability of work, or
• voluntary withdrawal from the labor market.

References:  For more information on

• the information to include in the rating decision, see M21-1, Part VIII, Subpart iv, 3.C.3.c, and
• limitation of ability in IU determinations, see M21-1, Part VIII, Subpart iv, 3.A.3.c.

VIII.iv.3.C.1.d.  Considering Educational History in IU Claims 

Education is a non-economic factor that must be considered in an IU determination.  A Veteran’s educational history and/or current student status is not determinative of the outcome of a claim for entitlement to IU.  However, it is a factor that must be weighed in decision making.  In weighing the relevance of education in claims for IU, consider the factors below.

• Educational history and achievement does not necessarily correlate with employability.  However, these factors may indicate the ability to perform certain types of work. 
• Consider the type of educational training relative to the Veteran’s physical and mental limitations.  Particularly, consider whether
  • special accommodations are made in the educational training that may or may not be realistic in a current or future work environment, or
  • the current program of training will impact employability in the future. 
• The fact that a Veteran is participating in a program of rehabilitation does not preclude a finding of IU.
• The fact that a Veteran has completed a program of rehabilitation does not mandate discontinuance of IU unless substantially gainful employment is sustained for a period of 12 months.
• When IU is claimed following a completed program of rehabilitation, pay special attention to evidence of program results that indicate the Veteran’s ability to secure or follow a substantially gainful occupation.

References:  For more information on

• obtaining Veteran Readiness and Employment (VR&E) records in IU claims, see M21-1, Part VIII, Subpart iv, 3.B.4.b, and
• weighing evidence in rating decisions, see M21-1, Part V, Subpart ii, 1.A.

VIII.iv.3.C.1.e.  Considering Occupational History in IU Claims

Occupational history is a non-economic factor that must be considered in an IU determination.  A Veteran’s occupational history is not determinative of the outcome of a claim for IU unless the Veteran is currently gainfully employed. 

In weighing the relevance of occupational history in claims for IU, consider the factors below.

• When a Veteran is currently working or the evidence shows the Veteran is capable of working but unemployed, determine whether the ability to sustain employment is marginal as discussed at M21-1, Part VIII, Subpart iv, 3.A.2.c and d.
• Consider the difference between unemployment and unemployability as discussed at M21-1, Part VIII, Subpart iv, 3.A.1.b.
• Voluntary retirement is not necessarily determinative of the outcome of an IU decision.  The underlying impact of the Veteran’s disabilities on the discontinuation of work is the relevant determination. 
• As noted in M21-1, Part VIII, Subpart iv, 3.B.4.a, Social Security Administration (SSA) decisions are not determinative of the outcome of IU decisions.  However, a Veteran’s application for and/or receipt of SSA disability benefits is a factor to weigh in decision making. 
• IU may be granted on a temporary basis as noted in M21-1, Part VIII, Subpart iv, 3.C.4.d.
• When a Veteran is self-employed, follow the procedures at M21-1, Part VIII, Subpart iv, 3.C.2.a.

Reference:  For more information on weighing evidence in rating decisions, see M21-1, Part V, Subpart ii, 1.A.

Introduction

This topic contains information on evaluating evidence of self-employment or employment with a tightly held corporation, including

• deciding whether self-employed individuals are unemployable due to an SC disability
• definition of a tightly held corporation, and
• evaluating evidence showing income from a tightly held corporation.

Change Date

July 29, 2021

VIII.iv.3.C.2.a.   Deciding Whether Self-Employed Individuals Are Unemployable Due to an SC Disability

When determining entitlement of self-employed individuals to increased compensation based on IU, consider the relationship between the frequency and the type of service performed by the Veteran for the business and the Veteran’s net and gross earnings for the past 12 months. 

Consider facts of the case, such as

• low gross earnings that support a finding of marginal employment, especially when the amount of time lost from work due to an SC disability is taken into account, or
• high gross earnings that indicate the Veteran is capable of engaging in a substantially gainful occupation. 

Notes: 

• Consider low net earnings in conjunction with gross income.  
• The inability to make a profit is not always indicative of the inability to engage in substantially gainful employment.

VIII.iv.3.C.2.b.  Definition:  Tightly Held Corporation

A tightly held corporation (or closely held corporation) is usually a family corporation.  A corporation bearing the Veteran’s name is usually indicative of a tightly held corporation. 

VIII.iv.3.C.2.c.  Evaluating Evidence Showing Income From a Tightly Held Corporation

Since the Veteran may control the amount of wages paid, do not make a finding of marginal employment solely on the basis of low wages received by the Veteran.

Keep in mind that the issue for consideration is whether the frequency and type of service performed by the Veteran equates to substantially gainful employment.  Therefore, consider evidence that the Veteran received, or was entitled to receive, other remuneration from the corporation, such as stock dividends or loans, in lieu of wages.

Note:  If the reported wages appear low for the work performed, request a field examination per M21-1, Part X, Subpart v, 1.E to determine the Veteran’s entitlement to the corporation and corporate earnings.

Introduction

This topic contains information on preparing a rating decision addressing IU, including

• requirement for deciding all IU claims
• addressing disabilities within scope of the IU claim
• information to include in the rating decision
• reasons for denying IU claims
• formally denying IU
• deferring reasonably raised IU claims
• when an IU evaluation is considered moot, and
• granting temporary or permanent 100-percent evaluations with IU.

Change Date

July 24, 2024

VIII.iv.3.C.3.a.  Requirement for Deciding All IU Claims

The Department of Veterans Affairs (VA) must make a decision on IU when the issue is

• explicitly raised by the Veteran, or
• reasonably raised by the evidence of record.

If IU is raised and the Veteran fails to complete and return VA Form 21-8940, Veteran’s Application for Increased Compensation Based on Unemployability, VA must make a decision on the issue of IU in a rating decision based on the available evidence of record and may deny entitlement as described in M21-1, Part VIII, Subpart iv, 3.C.3.e.

VIII.iv.3.C.3.b.  Addressing Disabilities Within Scope of the IU Claim

A claim for IU may not be a freestanding claim and must be associated with the evaluation of a current SC condition or an initial request for service connection (SC) for the underlying disabilities claimed to cause unemployability. 

Refer to the table in M21-1, Part VIII, Subpart iv, 3.B.1.e to determine which issues are considered within scope of the IU claim.  The rating decision must separately address all issues identified as within scope of the IU claim.

Important:  At all times when a VA Form 21-8940 is received, the issue of entitlement to IU must be addressed in a rating decision even when the Veteran fails to list SC disabilities that cause or contribute to unemployability.

VIII.iv.3.C.3.c.  Information to Include in the Rating Decision

Use the table below to determine what information to include in the rating decision.

Important:  A rating decision denying entitlement to IU must discuss all economic and non-economic factors listed in M21-1, Part VIII, Subpart iv, 3.A.2 and 3 that are relevant to the outcome of the Veteran’s claim.  The decision need not, however, discuss non-relevant economic and non-economic factors.

References:  For more information on

• IU, see 38 CFR 4.16, and
• unemployability, see 38 CFR 4.18.

VIII.iv.3.C.3.d.  Reasons for Denying IU Claims

Deny entitlement to IU only if the facts demonstrate that the Veteran

• is not precluded from securing or following substantially gainful employment by reason of an SC disability(ies)
• is gainfully employed, or
• has failed to cooperate with development, such as failing to return a completed VA Form 21-8940 when requested.

References:  For more information on

• information that must be included in the rating decision, see M21-1, Part VIII, Subpart iv, 3.C.3.c, and
• continuing a total evaluation based on IU, see 38 CFR 3.343(c).

VIII.iv.3.C.3.e.  Formally Denying IU

Formally code the rating decision to indicate denial of IU if

• the Veteran specifically claims entitlement to IU, and
• any of the requirements of 38 CFR 4.16 are not met.

Note:  If the Veteran disagrees with the decision, the statement of the case (SOC) should cite the relevant portion of 38 CFR 4.16 as the authority for the denial.

VIII.iv.3.C.3.f.  Deferring Reasonably Raised IU Claims

The criteria for identifying a reasonably raised claim of IU are provided in M21-1, Part VIII, Subpart iv, 3.B.1.f.  When a reasonably raised claim of IU is identified and additional evidence is needed

• rate all other claimed issues that can be decided, and
• show the issue of potential IU entitlement as deferred in the rating decision.

Notes:

• Do not consider an IU claim reasonably raised and send a Veteran VA Form 21-8940 to complete if
  • the schedular requirements of 38 CFR 4.16(a) are met, but
  • there is no evidence of SC unemployability.
• A subsequent formal rating decision will be required to dispose of the issue of entitlement to IU, even when the Veteran fails to return VA Form 21-8940.

Reference:  For more information on development of reasonably raised claims of IU, see M21-1, Part VIII, Subpart iv, 3.B.1.g.

VIII.iv.3.C.3.g. When an IU Evaluation Is Considered Moot

A single SC disability rated 100-percent disabling generally renders an IU evaluation moot, as no additional benefit would typically flow to the Veteran by substituting an IU evaluation for a single SC disability rated 100-percent disabling.

Similarly, a combined evaluation of 100 percent may also render an IU evaluation moot when no additional benefit may be derived. However, when additional benefit may be derived from a grant of entitlement to IU, such as when IU is warranted for a single disability and entitlement to special monthly compensation (SMC) based on housebound status will be an ancillary benefit, then IU is not moot. 

Upon determining that the IU evaluation is moot,  if the issue of IU has been claimed, formally address the issue of mootness as a free text issue in the rating decision.

• For the ISSUE text, use Entitlement to individual unemployability.
• For the DECISION text, use Entitlement to individual unemployability is moot. 
• In the REASONS FOR DECISION, include an explanation of the reasons that cause the issue of entitlement to IU to be moot.  Include the following text:

Entitlement to individual unemployability is moot because your service-connected disabilities are evaluated as 100 percent disabling and no potential entitlement to an earlier effective date for a total disability evaluation based on a grant of individual unemployability is warranted by the evidence of record.

• There will be no record of an IU decision on the rating Codesheet since no decision has been made. 

Important: 

• The IU evaluation is not moot if the effective date of the single schedular 100-percent evaluation is from a later date than that which can be assigned based on entitlement to IU (such as when an effective date for IU may be assigned from the day following discontinuation of last employment).
• The determination that IU is moot is subject to review under 38 CFR 3.2500 given that a claim for IU has been received and a decision has been made.

References:  For more information on

• entitlement to IU when temporary 100-percent evaluations are assigned, see M21-1, Part VIII, Subpart iv, 3.C.3.h, and
• assigning effective dates for IU claims, see M21-1, Part V, Subpart ii, 4.A.5.c.

VIII.iv.3.C.3.h.  Granting Temporary or Permanent 100-Percent Evaluations With IU

In situations in which the Veteran was previously granted entitlement to IU and in a subsequent decision a schedular 100-percent evaluation is granted, whether permanent or temporary, the grant of IU must remain in the record as an active decision.  Do not close out entitlement to IU unless the evidence actually warrants discontinuance as specified in 38 CFR 3.343(c).

Do not stop and re-start IU entitlement due to the grant of the temporary 100-percent evaluation. 

Note:  When entitlement to IU exists and the schedular combined rating is 100 percent, only the greater benefit may be paid.  In some situations, entitlement to IU based on a single disability may result in entitlement to SMC based on housebound status, in which case IU would be the greater benefit as discussed in M21-1, Part VIII, Subpart iv, 3.C.3.g.

References:  For more information on

• the criteria for discontinuing IU on a factual basis, see 38 CFR 3.343(c)
• temporary total disabilityevaluations, see M21-1, Part VIII, Subpart iv, 8.A–D, and
• commissary and exchange privileges associated with permanent and total disability evaluations, see M27-1, Part I, 5.05.g.

Introduction

This topic contains special policies and procedures for IU decisions, including

• considering multiple disabilities in IU claims
• handling claims requiring Compensation Service approval
• considering
• IU for incarcerated Veterans, and
• IU on a temporary basis
• entitlement to SMC at the housebound rate if the IU rating is based on a single disability, and
• determining whether to substitute a single 100-percent schedular evaluation for IU in housebound cases.

Change Date

July 29, 2021

VIII.iv.3.C.4.a.  Considering Multiple Disabilities in IU Claims

Under certain circumstances, multiple disabilities may be considered one disability for the purpose of meeting the requirements of 38 CFR 4.16(a).

As stated in 38 CFR 4.16(a), for the purpose of meeting the requirement of having one 60-percent or one 40-percent disability, the following will be considered as one disability:

• disabilities of one or both upper extremities, or of one or both lower extremities, including the bilateral factor, if applicable
• disabilities resulting from common etiology or a single accident
• disabilities affecting a single body system
• multiple disabilities incurred in combat, or
• multiple disabilities incurred as a former prisoner of war.

Important: 

• In determining whether the Veteran’s SC disabilities meet the schedular requirement as stated in 38 CFR 4.16(a), all SC disabilities will be considered.  This determination is not restricted to only those SC disabilities that cause or contribute to unemployability.
• The common etiology provisions of 38 CFR 4.16(a)(2) apply to disabilities arising from the same type of exposure event during service.  Examples of exposure events include (but are not limited to) disabilities arising from herbicide exposure in Vietnam under 38 CFR 3.309(e) or multiple undiagnosed illnesses granted under 38 CFR 3.317. 
• The common etiology provisions of 38 CFR 4.16(a)(2) apply to a primary SC disability and other disabilities for which SC is established as secondary to or aggravated by the primary disability under 38 CFR 3.310.
• Consider multiple disabilities of the musculoskeletal system as one disability because the multiple disabilities affect a single body system or multiple gunshot wounds as the result of combat service as one disability because the multiple disabilities were incurred in combat.

Example:  A Veteran is SC for diabetes mellitus at 40 percent, right shoulder arthritis at 30 percent, ulcerative colitis at 30 percent, and posttraumatic stress disorder (PTSD) at 30 percent.  The combined disability evaluation is 80 percent.  The evidence demonstrates that all SC disabilities, except for diabetes mellitus, cause or contribute to rendering the Veteran unable to secure or maintain substantially gainful employment.

Result:  IU would be awarded under 38 CFR 4.16(a), as the Veteran meets the schedular requirements of the regulation (combined disability evaluation of at least 70 percent and one disability, diabetes mellitus, rated at least 40 percent). 

Rationale:  The regulation does not require that the 40-percent disability specifically cause or contribute to the unemployability when multiple SC disabilities are present and collectively render the Veteran unemployable.

VIII.iv.3.C.4.b.  Handling Claims Requiring Compensation Service Approval

Submit any claim to Compensation Service for extra-schedular IU consideration if the schedular requirements of 38 CFR 4.16(a) are not met but the evidence of record supports a finding that the Veteran is unemployable by reason of an SC disability(ies).

Reference:  For more information on submitting compensation claims for extra-schedular consideration, see M21-1, Part V, Subpart ii, 3.D.3.

VIII.iv.3.C.4.c. Considering IU for Incarcerated Veterans

An IU rating that would first become effective while a Veteran is incarcerated in a Federal, State, local, or other penal institution or correctional facility for conviction of a felony shall not be assigned during such period of incarceration.

If an IU evaluation is in effect prior to incarceration in excess of 60 days for conviction of a felony, the IU evaluation will be reduced to 10 percent in accordance with 38 CFR 3.665. 

Note:  If a Veteran is sentenced to a mental institution or other institution for care, custody, or treatment as a result of a conviction for a felony, IU may not be awarded even though the facility may not be generally viewed as a correctional institution consistent with a prison or jail-type setting.  When institutionalization is due to a felony conviction, handle the IU determination on par with other types of incarceration. 

References:  For more information on

• the prohibition of assigning IU ratings for incarcerated Veterans, see
  • 38 U.S.C. 5313
  • 38 CFR 3.341(b), and
  • M21-1, Part VI, Subpart iii, 1.A.2.b, and
• considering IU for Veterans sentenced to a
  • mental institution, see Philbrook v. Wilkie, 32 Vet.App. 342 (2020), and
  • privately owned and operated penal institution under contract with a State, see Wanless v. Shineki, 618 F.3d 1333 (2010).

VIII.iv.3.C.4.d. Considering IU on a Temporary Basis

38 CFR 4.16 authorizes VA to assign an IU rating due to a Veteran’s temporary inability to follow a substantially gainful occupation.

Receipt of temporary disability benefits, whether short- or long-term, and/or receipt of accrued leave benefits does not necessarily warrant a certain decision in IU claims.  Rather, the determination of entitlement to IU must be made based on ability or inability to follow a substantially gainful occupation.  Consider the relevance of receipt of temporary disability benefits or accrued leave benefits on a case-by-case basis, taking into account such factors as the

• frequency and duration of periods of incapacity or time lost from work due to disability, and
• Veteran’s
  • employment history and current employment status, and
  • annual income from employment, if any.

Note:  Not every period of inability to work will establish an inability to follow a substantially gainful occupation warranting an IU rating, because it may be possible to secure and retain employment and to earn significant income despite occasional periods of incapacity.

Reference:  For more information on considering the relevance of temporary disability benefits and/or accrued leave benefits in claims for IU, see

• VAOPGCPREC 5-2005, and
• Faust v. West, 13 Vet.App. 342 (2000).

VIII.iv.3.C.4.e. Entitlement to SMC at the Housebound Rate if IU Rating Is Based on a Single Disability

A Veteran in receipt of IU benefits may be entitled to SMC at the housebound rate under 38 U.S.C. 1114(s) if the evidence shows that the

• unemployability is the result of one SC disability, and
• Veteran has
  • additional SC disability(ies) independently rated at least 60-percent disabling, or
  • been determined to be permanently housebound in fact as a result of the SC disability that rendered the Veteran unemployable.

Example:  A Veteran would be entitled to SMC at the housebound rate if

• the total IU evaluation is based on a 70-percent SC rating for PTSD, and
• the Veteran has additional SC evaluations for headaches and a back condition that combine to 60 percent.

Notes: 

• Entitlement to housebound benefits under 38 U.S.C. 1114(s) cannot be established if the IU rating is based on multiple disabilities considered as one disability under 38 CFR 4.16(a).
• Do not put entitlement to SMC at issue, unless benefits will be awarded or the issue has been explicitly claimed by the Veteran.
• For consideration of entitlement to housebound benefits, the single disability upon which the grant of IU is based must satisfy the criteria for a grant of IU independently, with an evaluation of at least 60 percent, as required in 38 CFR 4.16(a) and discussed at M21-1, Part VIII, Subpart iv, 4.A.10.c.

Reference:  For more information on entitlement to housebound benefits when the IU rating is based on a single SC disability, see

• M21-1, Part VIII, Subpart iv, 4.A.10.b and c
• Bradley v. Peake, 22 Vet.App. 280 (2008), and
• Buie v. Shinseki, 24 Vet.App. 242 (2010).

VIII.iv.3.C.4.f. Determining Whether to Substitute a Single 100 Percent Schedular Evaluation for IU in Housebound Cases

VA is obligated to maximize the benefits awarded.  In determining whether to substitute a 100-percent schedular evaluation for IU, consider whether substitution would result in the Veteran no longer being entitled to SMC at the housebound rate.  VA decision makers are to assess whether the Veteran still meets the criteria for IU based on a single disability for the IU.

Further, VA is obligated to maximize a claimant’s benefits by assessing all of a Veteran’s SC disabilities to determine whether any combination of the disabilities establishes entitlement to SMC based on housebound status.  Even when IU has been previously established based on multiple disabilities or when a combined schedular 100-percent evaluation is established, decision makers must assess whether entitlement to IU based on a single disability is warranted such as to maximize benefits by allowing for a grant of entitlement to SMC based on housebound status.

References:  For more information on

• maximizing benefits based on IU and associated SMC entitlement, see
  • Bradley v. Peake, 22 Vet.App. 280 (2008), and
  • Buie v. Shinseki, 24 Vet.App. 242 (2010), and
• maintaining the historical grant of IU on the rating Codesheet when a schedular 100-percent evaluation is assigned, see M21-1, Part VIII, Subpart iv, 3.C.3.h. 

Introduction

This topic contains procedures for handling decision reviews and legacy appeals for IU, including 

• pursuit of subsequent IU claims or reviews
• issues to adjudicate in supplemental IU claims
• development for
  • VA Form 21-8940 during a supplemental IU claim, and
  • employment and VR&E information during a supplemental IU claim
• issues within scope of supplemental IU claims
• handling issues identified on a VA Form 21-8940 received during a supplemental claim
• requesting examinations for supplemental IU claims
• handling mixed submission claims
• incorporating IU denial into a pending legacy appeal
• prohibition against incorporating rated issues into a legacy IU appeal, and
• IU effective dates associated with appellate status.

Change Date

May 15, 2020

VIII.iv.3.C.5.a.  Pursuit of Subsequent IU Claims or Reviews

Because IU is a type of claim for increased compensation, a Veteran may follow the prior adjudication of IU with a(n) 

• initial claim, filed with submission of an applicable claim form such as VA Form 21-8940 or VA Form 21-526EZ, Application for Disability Compensation and Related Compensation Benefits, and/or
• request for decision review, filed with submission of
  • VA Form 20-0995, Decision Review Request:  Supplemental Claim
  • VA Form 20-0996, Decision Review Request:  Higher-Level Review, or
  • VA Form 21-10182, Decision Review Request:  Board Appeal (Notice of Disagreement).

Notes:

• The issue of IU may also be reasonably raised during the adjudication of a subsequent claim.
• A request for higher-level review (HLR) must be received within the applicable timeliness requirements described in 38 CFR 3.2601(d).

References:  For more information on handling

• requests for HLR, see M21-5, Chapter 5
• legacy notices of disagreement, see M21-5, Chapter 7
• claims for increase, see M21-1, Part II, Subpart iii, 2.C, and
• IU in an HLR, see M21-5, Chapter 5, 2.e.

VIII.iv.3.C.5.b.  Issues to Adjudicate in Supplemental IU Claims

Follow the procedures in the table below to determine appropriate actions to take based on receipt of a supplemental claim for IU.

Notes:

• Although there may be no requirement, as shown in the table above, to specifically put into issue all disabilities previously claimed during the initial IU claim or a prior supplemental claim concerning unemployability, any supplemental IU decision must take into consideration the impact of the SC disabilities on employability.
• When a specific supplemental claim is not submitted for an SC disability, but development of the supplemental IU claim results in evidence showing the associated disability warrants a change in evaluation, the issue of evaluation of the disability may be considered within scope of the supplemental IU claim and should be addressed in the decision if not on appeal.  Apply 38 CFR 3.2500(h) for effective date purposes.

References:  For more information on

• supplemental claims, see
  • 38 CFR 3.2501, and
  • M21-1, Part II, Subpart iii, 2.B
• claims for increase, see M21-1, Part II, Subpart iii, 2.C
• within scope determinations, see
  • 38 CFR 3.155(d)(2), and
  • M21-1, Part V, Subpart ii, 3.A.2, and
• notification requirements for
  • a complete application, see M21-1, Part II, Subpart iii, 1.C
  • supplemental claims, see M21-1, Part III, Subpart i, 2.B.1.b, and
  • claims received while another claim is pending, see M21-1, Part III, Subpart i, 2.B.1.c.

VIII.iv.3.C.5.c.  Development for VA Form 21-8940 During a Supplemental IU Claim

Develop for VA Form 21-8940 during a supplemental claim when

• it has not been previously submitted
• the only VA Form(s) 21-8940 of record was submitted with a finally adjudicated claim, or
• when the evidence of record indicates a material change in the Veteran’s employment history has occurred since the last-submitted VA Form 21-8940.

References:  For more information on

• development for VA Form 21-8940 during an initial claim, see M21-1, Part VIII, Subpart iv, 3.B.1.c, and
• the definition of a finally adjudicated claim, see
  • 38 CFR 3.160, and
  • M21-1, Part X, Subpart ii, 1.A.1.c.

VIII.iv.3.C.5.d.  Development for Employment and VR&E Information During a Supplemental IU Claim

Develop for VA Form 21-4192, Request for Employment Information in Connection With Claim for Disability Benefits, or SSA or VR&E records during a supplemental claim when 

• development for this evidence was not completed, as directed in M21-1, Part VIII, Subpart iv, 3.B.4, with a prior initial or supplemental claim, or
• new information concerning the Veteran’s employment, VR&E, or SSA status is received on VA Form 21-8940 or other submitted evidence and requires further verification.

References:  For more information on development for

• VA Form 21-4192, see M21-1, Part VIII, Subpart iv, 3.B.3.a-c
• SSA records, see M21-1, Part VIII, Subpart iv, 3.B.4.a, and
• VR&E records, see M21-1, Part VIII, Subpart iv, 3.B.4.b.

VIII.iv.3.C.5.e.  Issues Within Scope of Supplemental IU Claims

While VA Form 21-8940 is not an independent claim for increased evaluation of the disabilities claimed to be associated with IU, VA procedures dictate that the evaluation of the underlying disabilities be put into issue and addressed in conjunction with the IU claim.

The evaluation of issues newly identified as associated with IU on a VA Form 21-8940 received during the supplemental claim process will be adjudicated as within the scope of the supplemental IU claim.

Exception:  When the Veteran has a pending supplemental claim or request for HLR concerning the evaluation of a disability, the supplemental claim or HLR takes precedence.  Similarly, issues that are on appeal remain on appeal and should not be addressed in the supplemental claim.

Reference:  For more information on the relationship between IU and the underlying, associated disability evaluations, see M21-1, Part VIII, Subpart iv, 3.B.1.e.

VIII.iv.3.C.5.f.  Handling Issues Identified on a VA Form 21-8940 Received During a Supplemental Claim

When VA Form 21-8940 is received during the processing of a supplemental claim, use the table below to determine proper action to take relative to the issues listed on the form.  When the table below indicates that the evaluation of the disability is within scope of the IU claim, the issue must be specifically addressed in the rating decision.

Reference:  For more information on the relationship between IU and the associated SC disability evaluation(s), see

• M21-1 Part VIII, Subpart iv, 3.B.1.e, and
• Rice v. Shinseki, 22 Vet.App. 447 (2009).

VIII.iv.3.C.5.g.  Requesting Examinations for Supplemental IU Claims

Do not routinely re-examine disabilities associated with the supplemental IU claim.  For those disabilities claimed to be associated with IU that are

• in supplemental claim status, follow the procedures in M21-1, Part X, Subpart ii, 2.A.2.g, and
• newly raised and within scope of the supplemental IU claim, follow the procedures in M21-1, Part VIII, Subpart iv, 3.B.2.b.

Reference:  For more information on duty to assist in requesting examinations, see M21-1, Part IV, Subpart i, 1.A.

VIII.iv.3.C.5.h.  Handling Mixed Submission Claims

As discussed in M21-1, Part II, Subpart iii, 1.A.2.c, additional correspondence submitted with a prescribed form may be used to augment the prescribed form.  When VA Form 20-0995 and VA Form 21-8940 are submitted simultaneously and specific procedures do not exist to direct claims development, proceed in the manner most favorable with due consideration for the clearly expressed intent of the claimant.

Example 1:  A Veteran has three SC disabilities, has been denied SC for five separate disabilities, and has never claimed IU nor had it formally considered.  The Veteran now submits VA Form 20-0995 identifying two of the five previously denied issues and VA Form 21-8940 identifying all three SC disabilities.

Analysis:  Accept the initial claim for IU with associated consideration of the evaluation of the three SC disabilities.  Accept a supplemental claim for the two NSC issues.

Example 2:  Same facts as Example 1, except that the Veteran was previously denied entitlement to IU.

Analysis:  If the contention of IU is specified on VA Form 20-0995, then accept the IU as a supplemental claim.  If the IU is not specified on VA Form 20-0995, then proceed in the manner most favorable to the claimant.

Note:  In most cases, accepting VA Form 21-8940 as an initial claim will allow for the most favorable effective date should a grant of entitlement to IU or an increased evaluation be warranted.  Conversely, when the evidence may be accepted as new and relevant evidence associated with a claim for IU denied within the past year, then it may be most favorable to accept a VA Form 21-8940 submitted at the same time as VA Form 20-0995 as a supplemental IU claim to allow for review of the prior decision.

References:  For more information on

• effective dates for claims for increase, see
  • 38 CFR 3.400(o), and
  • M21-1, Part V, Subpart ii, 4.A.5, and
• effective dates for supplemental claims, see
  • 38 CFR 3.2500(h), and
  • M21-1, Part X, Subpart ii, 2.A.3.

VIII.iv.3.C.5.i. Incorporating IU Denial Into a Pending Legacy Appeal

A claim for IU will be encompassed in a pending legacy appeal for an increased evaluation for an SC disability when all of the criteria below are met: 

• a legacy appeal is pending (in the jurisdiction of the regional office (RO) at any stage of the appeals process) for increased evaluation of an SC disability
• the Veteran claims to be unemployable due, at least in part, to the disability on legacy appeal, and
• the rating decision denies the IU claim while the legacy appeal is pending.

After the claim for IU is denied by rating decision under a rating EP, send the appellant an SOC or supplemental statement of the case (SSOC) on all issues on legacy appeal, including IU.  Incorporate the IU into the pending legacy appeal under the pending end product (EP) at whatever stage the legacy appeal is in.

When an SOC was previously issued and the time period for submission of VA Form 9, Appeal to Board of Veterans’ Appeals, has not expired, follow the procedures at M21-5, Chapter 7 to issue an SSOC and extend the time period for submission of VA Form 9.

Reference:  For more information on preparing an SOC and SSOC, see M21-5, Chapter 7.

VIII.iv.3.C.5.j.  Prohibition Against Incorporating Rated Issues Into a Legacy IU Appeal

When a legacy appeal for IU is pending and the Veteran subsequently claims that an SC disability not on legacy appeal causes or contributes to unemployability, do not incorporate the disability claimed to cause or contribute to unemployability into the pending legacy appeal for IU.  

• The disability’s impact on IU should be considered in the legacy IU appeal, but the evaluation of the disability itself should not be incorporated into the legacy appeal and addressed as a specific legacy appeal contention.
• The evaluation of the disability may be specifically appealed by the Veteran using standard legacy appeals procedures.

Notes:

• When the evaluation of the disability was previously incorporated into the legacy appeal under prior procedural guidance and an SOC or SSOC has been issued to address the contention, continue the legacy appeal. 
• When IU is on legacy appeal and VA Form 21-8940 is received in support of the legacy appeal but lists SC issues causing IU that have not been rated in connection with the IU claim as directed at M21-1, Part VIII, Subpart iv, 3.B.1.e, establish an EP 020 to control for rating the issues listed on VA Form 21-8940.  Do not incorporate the issues into the legacy IU appeal unless, after a decision is rendered for the new issue(s), the Veteran submits a specific legacy appeal for the issue(s).

VIII.iv.3.C.5.k.  IU Effective Dates Associated With Appellate Status

When entitlement to IU is raised during the adjudicatory process of the underlying disability or during the administrative appeal of the initial rating for that disability, it is part of the claim for benefits for the underlying disability.

A claim for IU, which has been awarded, remains in appellate status if the IU award is not effective from the date of claim for the underlying disability rating that is on appeal.

• If the IU award is not retroactive to the effective date of the underlying disability rating on appeal, the IU award is only a partial grant.  When the IU award is only a partial grant, the IU remains in appellate status.
• A notice of disagreement (NOD) is not required to place the IU issue in appellate status.

Example:  The Veteran filed a legacy NOD in December 2008 in response to the RO’s assignment of an initial disability evaluation of 30 percent for PTSD.  He asserted in his February 2014 IU application that he was unable to work due to PTSD.  The RO awarded a 70-percent evaluation for PTSD effective December 2015 and later an IU evaluation from February 11, 2016.

• A NOD was not filed concerning the IU award’s effective date; however, the NOD was not required to place IU in appellate status.  IU became part of the underlying PTSD claim, which was on appeal by virtue of the December 2008 NOD, when the Veteran filed an application for IU in February 2014.
• IU remained in appellate status because the IU award was only a partial grant since it was not established as retroactive to the August 2008 original date of claim for SC for PTSD.

References:  For more information on

• the effective date of IU awards and impact on appellate status, see Harper v. Wilkie, 30 Vet.App. 356 (2018)
• interpreting IU as a part of the underlying disability claim, see
  • Rice v. Shinseki, 22 Vet.App. 447 (2009), and
  • M21-1, Part VIII, Subpart iv, 3.B.1.e, and
• the prohibition on assigning an effective date for IU that precedes the effective date of SC for the underlying disability, see Delrio v. Wilkie, 32 Vet.App. 232 (2019).