Payment of attorney or agent fees (U. S. Department of Veteran Affairs)

3. Withholding From Claimant’s Past-Due Benefits and Authorizing the Claimant’s Award

Introduction

This topic contains information on withholding a portion of the claimant’s past-due benefits for fees and authorizing the claimant’s award, including when to withhold, make a fee eligibility decision, and send notice when not to withhold for possible payment of fees the period to use for calculating past- due benefits amount used for calculation of past due benefits – reduction or offset cases making a direct-pay fee decision based on past due benefit calculation withholding via VBMS Awards authorizing the award, and handling cases involving Equal Access to Justice Act (EAJA) fees.

Change Date

July 31, 2015

a. When to Withhold, Make a Fee Eligibility Decision, and Send Notice

See the table below for guidance on when to withhold a portion of past due benefits for possible payment of fees and then proceed to making an attorney fee or agent fee eligibility decision and sending notification as provided in M21-1, Part I, 3.C.4.

When...	Then ...
there is a valid direct-pay fee agreement filed with the AOJ (VSC or PMC), and VA awards past-due benefits.	before the claimant’s award is authorized, the AAFC must withhold 20 percent (or less, in accordance with the fee agreement) of the past-due benefits through and including the date of the rating decision, and proceed to make an attorney or agent fee eligibility decision and send notification to both the claimant and the attorney or agent as provided in M21-1, Part I, 3.C.4.

Important: This withholding policy applies even if the attorney or agent is no longer the POA, unless the attorney or agent has waived any entitlement to fees in writing (including but not necessarily limited to submissions by mail, fax, or e-mail), and each time the amount of past due benefits arising from a particular rating decision changes, including when dependency information is received within 1 year of the date of the rating decision, or when the Veteran is subsequently found eligible for concurrent receipt of military retired pay for any time during the past due benefits period. Note: This policy does not relate to whether to award or deny direct payment of fees. References: For information on what constitutes a valid fee agreement, see 38 CFR 14.636(g)(1) and (2), and M21-1, Part I, 3.C.1.f information on the AOJ’s obligation to make a decision regarding eligibility for direct payment of fees, see Cox v. West, 149 F.3d 1360 (Fed. Cir. 1998). information on an attorney or agent’s entitlement to direct payment of fees where the award is made after the attorney or agent no longer represents the claimant, see Scates v. Principi, 282 F.3d 1362 (Fed. Cir. 2002); Lippman v. Shinseki, 23 Vet. App. 243 (2009). a definition of “past-due benefits,” see 38 CFR 14.636(h)(3).

b. When Not to Withhold for Possible Payment of Fees

The AAFC is not to withhold 20 percent or less of past-due benefits if there is no direct-pay fee agreement filed at the AOJ a direct-pay fee agreement was filed at the AOJ, but no NOD has ever been filed in the case because the claim is an original claim, or the agent or attorney has withdrawn the direct-pay fee agreement. Note: If the AOJ does not withhold a portion of the claimant’s past due benefits for fees, but the attorney or agent asserts that withholding was required, a decision is necessary. Use the decision notice, Summary of Case Fee Decision Notice, using the Letter Creator on the Rating Job Aids page of the Compensation Service website.

c. The Period to Use for Calculating Past- Due Benefits

Past-due benefits are calculated from the effective date of the award to the date of the decision awarding benefits, not the date of the notification letter not the last day of the month in which the decision awarding benefits was made. See VAOPGCPREC 18-95 and 38 CFR 14.636(h)(3) regarding definition of past due benefits

d. Amount Used for Calculation of Past Due Benefits – Reduction or Offset Cases

Refer to the table below for how to calculate the amount of past due-benefits for the purpose of withholding amounts for potential direct payment of fees when the award requires a reduction or offset.

When the award requires a reduction or offset due to …	Then calculate past-due benefits based on the …
incarceration an overpayment, or Survivor Benefit Plan payments Reference: For more information on calculating past-due benefits in cases involving incarceration, see Snyder v. Nicholson, 489 F.3d 1213 (Fed Cir. 2007), which overruled some provisions of VAOPGCPREC 12-93.	pre-reduction amount.
military retired pay severance or separation pay, or a judicial award, such as the required offset of benefits payable under 38 U.S.C. 1151 after settlement of a tort claim. Note: 38 CFR 14.636(h)(1)(iii) specifically excludes military pay previously paid from the definition of “cash payment.”	post-reduction amount.

Important: In cases where the Veteran was in receipt of retired pay, and there is not past due benefit, the attorney cannot be paid. In determining the amount used for past due calculations consider any issued Audit Error Worksheet (AEW). If any of the past due benefits were withheld due to the Veteran’s receipt of military retired pay and an AEW is generated showing some or all of those withheld amounts should be released to the Veteran, the amounts to be released are subject to the direct-pay fee agreement. If Defense Finance and Accounting Service (DFAS) later submits an AEW authorizing Concurrent Retirement and Disability Pay (CRDP)/Combat Related Special Compensation (CRSC) concurrent receipt for the issues successfully appealed, this will be considered a past due benefit and the attorney should receive attorney fees from this past due amount.

e. Making a Direct-Pay Fee Decision Based on Past Due Benefit Calculation

The table below provides guidance on making a decision on direct payment of fees based on the past due benefit amount calculation derived from M21-1, Part I, 3.C.3.c.

If, based on the calculation described above, the amount of past due benefits...	Then ...
is $0	deny direct payment of fees send the decision notice No Cash Payment to the Claimant shown in M21-1, Part I, 3.C.11, Exhibit 4, to both the claimant and the attorney, separately addressed to each, and take a 290 end product (EP) credit.
is greater than $0	withhold a portion of past-due benefits and authorize the claimant’s award as provided in this topic.

f. Withholding via VBMS Awards

Follow the steps in the table below to withhold a portion of the past-due benefits via VBMS Awards regardless of whether a running award exists.

Step	Action
1	Generate the award and leave in “pending status.”
2	Print a copy of the award.
3	Send the entire folder to the finance activity with a copy of the award and a memorandum signed by the AAFC containing the following statement: “Please withhold [amount] from the retroactive amount that will be generated by award of [enter date of generate and display (GAD) award] and establish an 18 transaction for this amount. When complete, please return the file to the AAFC [name of AAFC].”
4	Authorize the award per M21-1, Part I, 3.C.3.g, after the finance activity has established the 18 transaction in the corporate record.

g. Authorizing the Award

Follow the steps in the table below to authorize the award once a portion of the past-due benefits has been withheld for possible payment of attorney or agent fees.

Step	Action
1	When the 31J deduction or 18 transaction appears in the corporate record, compare the amount in the corporate record with the amount specified in the AAFC’s memorandum.
2	Is the amount in the corporate record the same as on the memorandum? If yes, go to Step 3. If no, contact the finance activity to learn why the discrepancy exists.
3	Authorize the award. Note: No FISA action is necessary.

Important: In any case involving direct payment of attorney/agent fees from past due amounts awarded to an incompetent claimants pending appointment of a fiduciary see M21-1, Part I.3.C.2.b. Authorization of the remaining balance of past due amounts after fees are withheld is addressed by M21-1, Part III, Subpart v, 9.B.2.

h. Handling Cases Involving EAJA Fees

VA is not authorized to offset Equal Access to Justice Act (EAJA) fees from the 20 percent withheld for attorney fees. EAJA fees are payments that a court has ordered VA to pay for an attorney. They may appear on the Veteran’s electronic record as a payment made jointly to the claimant and the attorney but should never be offset from a direct payment of fees, even when VA fails to withhold fees. Reference: For more information on failure to withhold past-due benefits, see M21-1, Part I, 3.C.7, and VAOPGCPREC 12-97.