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Updated Aug 12, 2022

In This Section

 
This section contains the following topics:
 
Topic
Topic Name
1
2
 

 
 1.  Requirements and Procedures for Monitoring Income

 

Introduction

 
This topic contains the requirements and procedures for monitoring income for Veterans in receipt of IU, including

Change Date

  
August 12, 2022

VIII.iv.3.D.1.a.  Monitoring Changes in Employability Status

 
Changes in the employability of Veterans for whom entitlement to individual unemployability (IU) is established are monitored through a yearly Social Security Administration (SSA) wage data match.
Note:  The yearly SSA wage data match identifies family or household income that is in excess of poverty level.
 
References:  For more information on

VIII.iv.3.D.1.b.  Discontinuance of Monitoring for Changes in Employability Status

 
Monitoring changes in employability status is not required when the Veteran
  • has not been identified in the SSA data match as having verified earned income above the poverty line
  • has an IU rating that has been in effect for 20 or more continuous years, or
  • has had an IU rating replaced with a 100-percent schedular evaluation. 
Notes: 
  • Monitoring for changes in employability status is not necessary if a discontinuation of IU would not alter the claimant’s benefit entitlement.  In this situation, development for VA Form 21-4140 may be discontinued.
  • A review of the rating Codesheet, particularly the special monthly compensation (SMC) paragraph text entries, will reflect whether payment of SMC is contingent on a grant of entitlement to IU.  When payment of SMC is contingent on a grant of entitlement to IU, continued monitoring of employability status is required even in spite of the presence of a 100-percent schedular evaluation.
References:  For more information on

VIII.iv.3.D.1.c.  Automated Monitoring for Income of Veterans in Receipt of IU

 
Veterans in receipt of IU are monitored for receipt of earned income by an SSA data match.  The table below describes the automated monitoring process.  When the automated process cannot occur, refer to M21-1, Part VIII, Subpart iv, 3.D.1.d for procedures to follow.
  
Step
Action
1
Upon receipt of wage files from SSA, Hines ITC will run a data match to identify those Veterans receiving IU who are shown to have verified earned income over the poverty line.
2
Hines ITC will automatically generate and send a notice of proposed adverse action letter with an attached VA Form 21-4140 and VA Form 21-4138 to the identified Veterans.
3
Hines ITC will 
  • batch establish an end product (EP) 600 with the claim label Predetermination – Rating Issue to control for the return of VA Form 21-4140 and the due process period
  • set a suspense date for 65 days from the month the due process letter is issued by Hines ITC, and
  • add the special issue Annual Eligibility Report to each claim in the batch process. 
Important:  Claims processors should add this special issue flash if it was not automatically added by Hines ITC.
4
Upon expiration of the suspense date, refer to M21-1, Part VIII, Subpart iv, 3.D.2 for actions to take based on receipt or non-receipt of VA Form 21-4140.
 

VIII.iv.3.D.1.d.  RO Dispatch and Control for Return of VA Form 21-4140

  
Claims identified in the income match that cannot be batch processed by Hines ITC will require manual review and action by the regional office (RO). 
 
Follow the steps in the table below for dispatch and control of VA Form 21-4140 by the RO when Hines ITC cannot perform batch processing.
 
 Step
Action
1
The Office of Field Operations (OFO) sends an annual e-mail to RO leadership of cases in its jurisdiction (based on the Veteran’s address) in which the Veteran 
  • has been identified as being in receipt of income above the poverty threshold, and
  • is in receipt of individual unemployability, but
  • did not receive due process through the batch process.
2
The RO will 
  • establish EP 600 with the claim label Predetermination – Rating Issue
  • ensure the SUPPRESS ACKNOWLEDGEMENT LETTER checkbox is selected so the Hines ITC-generated acknowledgement letter is not automatically sent to the Veteran, and
  • add the special issue Annual Eligibility Report.
3
Provide the Veteran with due process to propose to discontinue entitlement to IU based on receipt of earned income by sending the Veteran notice of proposed adverse action and including VA Form 21-4140 and VA Form 21-4138 using the IU Eligibility Review Due Process letter.
4
Utilizing a suspense date of 65 days, establish tracked items for 
5
Provide an e-mail response to OFO confirming that due process was sent on identified claims. 
 

2.  Handling VA Form 21-4140

 

 
 

Introduction

 

Change Date

  
August 12, 2022

VIII.iv.3.D.2.a.  Handling Failure to Return VA Form 21-4140

 
Follow the steps in the table below for procedures to follow when the Veteran does not return VA Form 21-4140.
 
Step
Action
1
Refer the claims folder to the rating activity.
2
Prepare a rating decision reflecting reduction to the schedular evaluation effective the date indicated in the LAST PAID DATE field on the AWARD INFORMATION tab in Share (see 38 CFR 3.501(f)) or the date specified in the notice of proposed adverse action, whichever is later. 
 
Important:  If entitlement to Dependents’ Educational Assistance (DEA) or SMC was previously established based on the grant of IU, address DEA in the rating if otherwise warranted.
3
Refer the claims folder to the authorization activity to reduce the award.  
  • Notify the Veteran of the reduction and any loss of entitlement to DEA or SMC.
  • Advise the Veteran that if the Department of Veterans Affairs (VA) receives evidence showing continued unemployability within one year of the date of the decision notice, IU will be restored from the date of the reduction.
  • Advise the regional processing office (RPO) of jurisdiction of the loss of entitlement to DEA if a 38 U.S.C. Chapter 35 record exists under the Veteran’s claim number.
 
Reference:  For more information on RPO

VIII.iv.3.D.2.b.  Receipt of VA Form 21-4140 Following Discontinuation of IU

 
If the Veteran provides a completed VA Form 21-4140 after the notification of IU discontinuation is sent, accept VA Form 21-4140 as a prescribed form for a claim for IU, as described in M21-1, Part II, Subpart iii, 1.A.1.a, and revise the prior decision, as warranted, in accordance with the facts found.
 
Reference:  For more information on periodic certification of continued eligibility, see 38 CFR 3.652.  

VIII.iv.3.D.2.c.  Reviewing Responses Received on VA Form 21-4140

  
A VA Form 21-4140 and VA Form 21-4138 are sent only to Veterans identified in the wage data match as having received income. The notice of proposed adverse action sent by Hines ITC asks the Veteran to explain the income and provide documentation of the income source.
 
When a Veteran returns VA Form 21-4140, the income must be explained as requested in the notice of proposed adverse action.
  • Analyze all submitted evidence in accordance with M21-1, Part V, Subpart ii, 1.A to determine whether the evidence continues to show the Veteran is incapable of gainful employment. 
  • The Veteran must submit evidence that documents the source of the reported income for the applicable scenario.  For example, if the income is
    • spousal income and taxes were filed jointly, a Veteran must submit documentation of the income source such as a spouse’s Form W-2, Wage and Tax Statement, or
    • the result of the Veteran’s employment and the Veteran is
      • no longer employed, the Veteran must submit evidence documenting the cessation of employment such as a statement from the former employer providing the date of termination, or
      • currently employed, but employment has not been for a continuous year, the Veteran must submit evidence explaining employment status such as a statement from the employer stating the dates employed.
  • Review VA Form 21-4140 provided by the Veteran to determine if additional clarification is needed.  If a signed VA Form 21-4140 is received but necessary information, such as wage data, is missing or requires clarification, it is permissible to telephone the Veteran to obtain the clarifying information orally and document any contact with the Veteran on VA Form 27-0820.
  • If Veterans fail to check the No box, indicating that they have not worked, but sign the VA Form 21-4140, indicating that they have not been employed by VA or others or self-employed at any time during the previous 12 months, claims folders should still be referred to the rating activity as described in the table below.
  • A phone call to the Veteran cannot be used to substitute for a signature on VA Form 21-4140.
  • Although VA Form 21-4138 is provided to the Veteran and will often prove helpful in explaining the income source
    • a Veteran’s statement, without adequate documentation, is generally not sufficient to verify the source of the income, and
    • submission of VA Form 21-4138 is not required as a part of the Veteran’s response.
Refer to the table below for procedures for handling the response submitted by a Veteran on VA Form 21-4140.
 
If the Veteran …
Then …
  • returns a signed VA Form 21-4140
  • checks the block indicating unemployment has continued for the past 12 months, and
  • does not provide an explanation and documentation detailing the source of the income
consider the response a fraudulent response and follow the procedures in M21-1, Part VIII, Subpart iv, 3.D.2.d.
  • returns a signed VA Form 21-4140
  • checks the block indicating unemployment has continued for the past 12 months, and
  • provides an inadequate explanation and/or insufficient documentation detailing the source of the income with no indication of a return to work
follow the procedures in M21-1, Part VIII, Subpart iv, 3.D.2.d.
follow the procedures in M21-1, Part VIII, Subpart iv, 3.D.2.e.
  • returns a signed VA Form 21-4140
  • checks the block indicating unemployment has continued for the past 12 months, and
  • provides an adequate explanation detailing the source of the income
follow the procedures in M21-1, Part VIII, Subpart iv, 3.D.2.f.
 
 
 
Note:  When a Veteran reports employment that is characterized by temporary interruptions in work status, such as a customary seasonal break that is characteristic of that job or occupation, but is otherwise continuous employment, follow the guidance in 38 CFR 3.343(c)(2). 

VIII.iv.3.D.2.d.  Handling VA Form 21-4140 Returned With No Reported Wages

 
Follow the steps in the table below when a Veteran returns VA Form 21-4140 and does not
  • indicate a return to work, and/or
  • provide a sufficient explanation of wages.
Step
Action
1
Refer the claims folder to the rating activity.
2
Prepare a rating decision 
  • reflecting reduction to the schedular evaluation effective the date indicated in the LAST PAID DATE field on the AWARD INFORMATION tab in Share (see 38 CFR 3.501(f)) or the date specified in the notice of proposed adverse action, whichever is later, and
  • explaining in the rating narrative that the reason for the rating reduction is failure to provide requested evidence.
Important:  If entitlement to DEA or SMC was previously established based on the grant of IU, address DEA in the rating if otherwise warranted.
3
Refer the claims folder to the authorization activity to reduce the award.  
  • Notify the Veteran of the reduction and any loss of entitlement to DEA or SMC.
  • Advise the Veteran that if VA receives evidence showing continued unemployability within one year of the date of the decision notice, IU will be restored from the date of the reduction.
  • Advise the RPO of jurisdiction of the loss of entitlement to DEA if a 38 U.S.C. Chapter 35 record exists under the Veteran’s claim number.
  • Add the corporate flash, Annual IU Eligibility Review-Fraud, to the claim.
 

VIII.iv.3.D.2.e.  Handling VA Form 21-4140 Returned With Reported Veteran Wages

  
Refer to the table below for procedures for handling the Veteran’s report of income and employment information on VA Form 21-4140.  
 
If the Veteran returns VA Form 21-4140 and …
Then …
indicates possible gainful employment for 12 months or more
follow the steps in the table below. 
 
Step
Action
1
Refer the claims folder to the rating activity.
2
The rating activity will review VA Form 21-4140 and all other evidence of record to determine whether discontinuation of entitlement to IU is warranted.  The rating activity must consider whether 
  • the employment is sustained, gainful employment or marginal employment, and/or
  • an examination is necessary to evaluate employment status or employability. 
References:  For more information on
3
The rating activity will complete a rating decision to
  • discontinue entitlement to IU the last day of the month 60 days after notice is provided based on the return to sustained, gainful employment as well as any ancillary issues such as DEA or SMC entitlement, in accordance with 38 CFR 3.105(e) and 38 CFR 3.501(e)(2), or
  • continue entitlement to IU based on the lack of evidence showing that the employment is sustained, gainful employment. 
Important:  The reasons for decision must discuss the evidence relevant to the determination that sustained gainful employment has or has not been shown. 
  
regained employment is reported, but it has not been sustained for 12 months
  • refer the claims folder to the rating activity for a rating decision reflecting confirmed and continued entitlement to IU which will be reviewed if sustained employment is shown, and then
  • refer the claims folder to the authorization activity to notify the Veteran.
Important:  There is no need to establish a review examination to determine if sustained employment is shown.  If continued employment is shown when the next annual data match occurs, entitlement to IU will be reviewed at that time. 
provides wage information but fails to sign the form
  • return VA Form 21-4140 to the Veteran
    • indicating that the form is incomplete using the Form Not Complete letter, and
    • advising the Veteran that a signature is required, and
  • establish a 30 days suspense date.
 Note:  If the form is
  • returned with a signature, follow the most appropriate procedure based on the income reported, or
  • returned without a signature or not returned, follow the procedures in M21-1, Part VIII, Subpart iv, 3.D.2.a.
 
 

VIII.iv.3.D.2.f.  Handling VA Form 21-4140 Returned With Sufficient Explanation of Income 

  
When a Veteran returns VA Form 21-4140 and provides a sufficient explanation of wages, as discussed in M21-1, Part VIII, Subpart iv, 3.D.2.c, complete a rating decision to confirm and continue entitlement to IU and DEA.
 
Note:  A Veteran’s response indicating no employment and/or wages is unacceptable and considered a fraudulent response when the Veteran is the only beneficiary on the record.  However, evidence that sufficiently documents the income is not the Veteran’s earned income, as discussed in M21-1, Part VIII, Subpart iv, 3.D.2.c, is acceptable to support a continued rating of IU. 

VIII.iv.3.D.2.g.  Sufficiency of Notice of Proposed Adverse Action 

  
The notice of proposed adverse action described in M21-1, Part VIII, Subpart iv, 3.D.1.c and d that is sent as a part of the automated income match process is sufficient for discontinuation of IU due to any of the following: