Veterans' Pension Benefits:

Improvements Needed to Ensure Only Qualified Veterans and Survivors Receive Benefits

GAO-12-540: Published: May 15, 2012. Publicly Released: Jun 6, 2012.

Multimedia:

  • GAO: Examples of Messages From Companies About Transferring Assets to Qualify for VA Pension BenefitsVIDEO: Examples of Messages From Companies About Transferring Assets to Qualify for VA Pension Benefits
    A GAO investigator phoned multiple companies on behalf of a fictitious father to learn about the services provided by the companies.

Additional Materials:

Contact:

Daniel Bertoni
(202) 512-7215
bertonid@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

The Department of Veterans Affairs’ (VA) pension program design and management do not adequately ensure that only veterans with financial need receive pension benefits. While the pension program is means tested, there is no prohibition on transferring assets prior to applying for benefits. Other means-tested programs, such as Medicaid, conduct a look-back review to determine if an individual has transferred assets at less than fair market value, and if so, may deny benefits for a period of time, known as the penalty period. This control helps ensure that only those in financial need receive benefits. In contrast, VA pension claimants can transfer assets for less than fair market value immediately prior to applying and be approved for benefits. For example, GAO identified a case where a claimant transferred over a million dollars less than 3 months prior to applying and was granted benefits. Also, VA’s process for assessing initial eligibility is inadequate in several key respects. The application form does not ask for some sources of income and assets such as private retirement income, annuities, and trusts. As a result, VA lacks complete information on a claimant’s financial situation. Also, the form does not ask about asset transfers—information VA needs to determine whether these assets should be included when assessing eligibility. In addition, VA does not verify all the information it does request on the form. For example, VA does not routinely request supporting documents, such as bank statements or tax records, unless questions are raised. VA’s fiduciary program, which appoints individuals to manage the financial affairs of beneficiaries who are unable to do so themselves, collects financial information that may affect some pension recipients’ eligibility, but VA pension claims processors do not have access to all this information. Further, guidance on when assets should be included as part of a claimant’s net worth is unclear; and VA claims processors must use their own discretion when assessing eligibility for benefits, which can lead to inconsistent decisions.

GAO identified over 200 organizations that market financial and estate planning services to help pension claimants with excess assets meet financial eligibility requirements for these benefits. These organizations consist primarily of financial planners and attorneys who offer products such as annuities and trusts. GAO judgmentally selected a nongeneralizable sample of 25 organizations, and GAO investigative staff successfully contacted 19 while posing as a veteran’s son seeking information on these services. All 19 said a claimant can qualify for pension benefits by transferring assets before applying, which is permitted under the program. Two organization representatives said they helped pension claimants with substantial assets, including millionaires, obtain VA’s approval for benefits. About half of the organizations advised repositioning assets into a trust, with a family member as the trustee to direct the funds to pay for the veteran’s expenses. About half also advised placing assets into some type of annuity. Some products and services provided, such as deferred annuities, may not be suitable for the elderly because they may not have access to all their funds for their care within their expected lifetime without facing high withdrawal fees. Also, these products and services may result in ineligibility for Medicaid for a period of time. Among the 19 organizations contacted, the majority charged fees, ranging from a few hundred dollars for benefits counseling to $10,000 for establishment of a trust.

Why GAO Did This Study

The VA pension program is intended to provide economic benefits to wartime veterans and survivors with financial need. GAO was asked to examine (1) how the design and management of VA’s pension program ensure that only those with financial need receive pension benefits and (2) what is known about organizations that are marketing financial products and services to enable veterans and survivors to qualify for VA pension benefits. GAO’s study included a review of VA’s policies and procedures, site visits to VA’s three Pension Management Centers, and online research and interviews of organizations that market financial and estate planning services to help veterans and survivors qualify for VA pension benefits.

What GAO Recommends

Congress should consider establishing a look-back and penalty period for pension claimants who transfer assets for less than fair market value prior to applying, similar to other federally supported means-tested programs. VA should (1) request information about asset transfers and other assets and income sources on application forms, (2) verify financial information during the initial claims process, (3) strengthen coordination with VA’s fiduciary program, and (4) provide clearer guidance to claims processors assessing claimants’ eligibility. In its comments on this report, VA concurred with three of GAO’s recommendations and concurred in principle with one, citing concerns about the potential burden on claimants and recipients of verifying reported financial information. VA agreed to study the issue further.

For more information, contact Daniel Bertoni at (202) 512-7215 or bertonid@gao.gov.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Congress considered this matter and introduced two bills that address claimants transferring assets at less than fair market value prior to applying for pension benefits. HR 6171 was introduced in the House on July 24, 2012 and S 3270 was introduced to the Senate on June 6, 2012.

    Matter: To ensure that only those in financial need are granted VA pension benefits, Congress should consider establishing a look-back and penalty period for claimants who transfer assets for less than fair market value prior to applying, similar to other means-tested programs.

Recommendations for Executive Action

  1. Status: Open

    Comments: The agency concurred with this recommendation and has determined that it must amend each VA form claimants use to apply for, or maintain, pension benefits so that each form requests the same information regarding income, net worth, and asset transfers made within the past three years. These amendments include new detailed inquiries on asset transfers and change existing inquiries on income and net worth so that claimants' statements can be verified by data reported in computer matches with the Internal Revenue Service (IRS) and Social Security Administration (SSA). Additionally, the inquiries regarding income and net worth will adopt language that is similar to IRS terminology for income and financial assets so that claimants better understand what income they must report to VA. By relying on information that claimants are already required to submit to the IRS and keep for tax purposes, e.g., wage and dividend information, the Veterans Benefits Administration (VBA) will lessen potential burden on claimants. After careful review of all employee comments and data elements related to the IRS and SSA data matches, VBA has updated the draft pension forms and they are currently ready to be submitted to OMB for approval. VBA anticipates completing this action December 1, 2014. GAO will close this recommendation when these actions have been completed.

    Recommendation: To improve VA's ability to ensure that only veterans and surviving spouses with financial need receive VA pension benefits, the Secretary of Veterans Affairs should direct the Undersecretary for Benefits to modify pension application forms, as well as EVR forms, to include space for claimants or recipients to report asset transfers, and to specify annuities, trusts, or private retirement income. For assets, such as annuities and trusts that are reported, forms should also request related documentation to enable claims processors to determine if claimants or recipients retain ownership and control of these assets.

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Implemented

    Comments: The Veterans Benefit Administration (VBA) determined that verification of a claimant's income and net worth during the initial adjudication process is best achieved by modifying existing computer matching agreements with the IRS and SSA that would allow more frequent matching of data and include a broader scope of data. In June 2013, VBA and VA's Office of Information and Technology successfully completed three rounds of testing for purposes of validating the computer applications used to receive and display IRS and SSA income data. To facilitate the automated exchange of data, VBA and IRS signed a new Interconnection Security Agreement, updating the previous agreement, which was set to expire on June 30, 2013. On July 3, 2013, VBA sent the IRS and SSA records for the first match of live cases. VBA received from SSA and IRS the first sets of return files on July 12, 2013 (SSA) and July 15, 2013 (IRS) and the data exchanges continue. VBA provided training on the draft income verification procedures to two of its three Pension Management Centers (PMCs) in September and November 2013. Official income verification procedures were published on October 30, 2013. VBA completed training at all three PMCS, and implemented these procedures at the PMC in Milwaukee, Wisconsin, in December 2013. The PMCs in St. Paul, Minnesota, and Philadelphia, Pennsylvania, implemented the upfront verification process on April 1, 2014, and April 14, 2014, respectively.

    Recommendation: To improve VA's ability to ensure that only veterans and surviving spouses with financial need receive VA pension benefits, the Secretary of Veterans Affairs should direct the Undersecretary for Benefits to, for all claimants, verify financial information during the initial claims assessment process. This may include requesting supporting documentation such as bank statements and tax returns, or using automated databases that can verify financial information.

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Implemented

    Comments: According to the Veterans Benefit Administration's (VBA) Adjudication Procedures Manual, fiduciary program personnel must immediately provide Pension Management Center (PMC) personnel with information that may establish a basis for adjusting a beneficiary's pension benefit. The process ensures program integrity without requiring PMC personnel to review every field examination report generated by VBA's fiduciary activities. It also allows VBA's fiduciary field examiners to assess the credibility of information they obtain from multiple sources, to include incompetent beneficiaries and their family members and other acquaintances, and determine whether it could affect pension eligibility. VBA has effective procedures in place for coordination between the pension and fiduciary programs regarding benefit adjustments and other benefit matters. In addition, VBA has established a pension-fiduciary workgroup, which meets monthly to discuss methods for improving program coordination. This group is establishing procedures to further facilitate the receipt of income information from fiduciary to pension personnel to strengthen coordination.

    Recommendation: To improve VA's ability to ensure that only veterans and surviving spouses with financial need receive VA pension benefits, the Secretary of Veterans Affairs should direct the Undersecretary for Benefits to strengthen coordination between pension and fiduciary programs to identify pension claimants or recipients who have transferred or unreported assets, such as allowing claims processors access to fiduciary field exam reports for these cases.

    Agency Affected: Department of Veterans Affairs

  4. Status: Open

    Comments: The Veterans Benefit Administration (VBA) drafted a proposed regulation that is under review by the Department, addressing the effect of pre-filing asset transfers on pension eligibility and provides a more consistent set of rules for adjudicating claims. The anticipated date for publishing the proposed pension regulations in the Federal Register for public comment is December 1, 2014. Upon completion of the rulemaking proceeding, VBA will amend its manual provisions consistent with the new regulations. The amended manual will interpret the regulations and provide the procedures required to properly implement them. GAO will close this recommendation when these actions are completed.

    Recommendation: To improve VA's ability to ensure that only veterans and surviving spouses with financial need receive VA pension benefits, the Secretary of Veterans Affairs should direct the Undersecretary for Benefits to revise the VA procedures manual to better define the concept of ownership and control to help claims processors determine when specific types of assets such as annuities and trusts should be counted as part of net worth, and establish a more specific criteria for what is considered a reasonable period of time for pension claimants to use up their financial resources before becoming eligible for pension benefits.

    Agency Affected: Department of Veterans Affairs

 

Explore the full database of GAO's Open Recommendations »

Oct 22, 2014

Jul 29, 2014

Jul 28, 2014

Jul 7, 2014

Jun 16, 2014

May 27, 2014

Apr 21, 2014

Mar 5, 2014

Feb 26, 2014

Looking for more? Browse all our products here