69-010c(Star Print)

2d Session

110-449

--VETERANS' BENEFITS IMPROVEMENT ACT OF 2008

[To accompany S. 3023]

The Committee on Veterans' Affairs (the Committee), to which was referred the bill (S. 3023), to amend title 38, United States Code, to require the Secretary of Veterans Affairs to prescribe regulations relating to the notice to be provided claimants with the Department of Veterans' Affairs regarding the substantiation of claims, having considered the same, unanimously reports favorably thereon with an amendment, and an amendment to the title, and recommends that the bill, as amended, do pass.

INTRODUCTION

On May 15, 2008, Committee Chairman Daniel K. Akaka introduced S. 3023, the proposed `Veterans' Notice Clarification Act of 2008.' S. 3023 would amend title 38, United States Code, to improve notices provided to veterans applying for disability compensation, and for other purposes. The bill was referred to the Committee.

Earlier on January 4, 2007, Senator Thune introduced S. 161, the proposed `Veterans' Disability Compensation Automatic COLA Act.' Later, Senators Snowe and Tester were added as cosponsors. S. 161 would require that, whenever there is an increase in benefit amounts payable under title II (Federal Old-Age, Survivors, and Disability Insurance Benefits) of the Social Security Act, the Secretary of Veterans Affairs shall increase by the same percentage the amounts payable as veterans' disability compensation and dependency and indemnity compensation for surviving spouses and children.

On June 27, 2007, Senator Brown introduced S. 1718, the proposed `Veterans Education Tuition Support Act,' with Senator Salazar as an original cosponsor. Later, Senators Baucus, Boxer, Casey, Domenici, Klobuchar, McCaskill, Menendez, Mikulski, Murray, Sessions, Stabenow, Tester, and Webb were added as cosponsors. S. 1718 would amend the Servicemembers Civil Relief Act (SCRA) to provide protections for servicemembers who are called to active duty while enrolled in institutions of higher education.

On September 25, 2007, Chairman Akaka introduced S. 2090 by request of the United States Court of Appeals for Veterans Claims (CAVC or the Court). S. 2090 would enhance privacy protection and alleviate security concerns regarding the records of the Court.

On September 25, 2007, Chairman Akaka introduced S. 2091 by request of CAVC. S. 2091 would increase the number of judges on the Court from seven to nine.

On December 13, 2007, Senator Kennedy introduced S. 2471, the proposed `USERRA Enforcement Improvement Act of 2007,' with Chairman Akaka and Senator Obama as original cosponsors. Later, Senator Clinton was added as a cosponsor. S. 2471 would amend the current Uniformed Services Employment and Reemployment Rights Act (USERRA) complaint process and modify and expand the reporting requirements with respect to enforcement of USERRA.

On January 23, 2008, Senator Hutchison introduced S. 2550, the proposed `Combat Veterans Debt Elimination Act of 2008,' with Senators Cornyn and Johnson as original cosponsors. Later, Ranking Minority Member Burr and Senators Alexander, Allard, Bayh, Brown, Brownback, Byrd, Cochran, Conrad, Domenici, Ensign, Isakson, McConnell, Murray, Roberts, Sessions, Sununu, and Wicker were added as cosponsors. S. 2550 would prohibit the Secretary of Veterans Affairs from collecting debts owed to the United States by certain members of the Armed Forces or veterans who die as a result of an injury incurred or aggravated on active duty in a war or a combat zone after September 11, 2001.

On February 28, 2008, Ranking Minority Member Burr introduced S. 2674, the proposed `America's Wounded Warriors Act.' Later, Senators Cochran, Domenici, and Isakson were added as cosponsors. Title II of S. 2674 would direct the Department of Veterans Affairs (VA or the Department) to conduct a series of studies on reforming the disability compensation system and then submit to Congress a proposal for a new compensation and transition payment rate structure.

On March 10, 2008, Chairman Akaka introduced S. 2737, the proposed `Veterans' Rating Schedule Review Act.' S. 2737 would authorize CAVC to review whether, and the extent to which, the rating schedule for veterans' disabilities complies with statutory requirements applicable to entitlement to veterans' disability compensation for service-connected disability or death.

On March 13, 2008, Chairman Akaka introduced S. 2768, with Ranking Minority Member Burr, and Senators Baucus, Boxer, Brown, Clinton, Durbin, Kerry, Murray, Obama, Reid, Rockefeller, and Sanders as original cosponsors. Later, Senators Cantwell, Isakson, Schumer, and Smith were added as cosponsors. S. 2768 would provide a temporary increase, during the period beginning on the date of enactment of this Act and ending on December 31, 2011, in the maximum veterans' loan guaranty amount for housing loans guaranteed by VA.

On April 17, 2008, Chairman Akaka introduced S. 2889, the proposed `Veterans Health Care Act of 2008,' by request of VA. Section 7 of S. 2889 would make permanent VA's authority to obtain income information from the Internal Revenue Service and the Social Security Administration.

On April 30, 2008, Senator Vitter introduced S. 2946, with Senator Brownback as an original cosponsor. S. 2946 would allow a stillborn child to be an insurable dependent under Servicemembers' Group Life Insurance (SGLI).

On May 1, 2008, Senator Baucus introduced S. 2951, with Senators Lugar and Tester as original cosponsors. S. 2951 would require reports on VA's progress in addressing causes for variances in compensation payments to veterans for service-connected disabilities.

On May 1, 2008, Chairman Akaka introduced S. 2961. S. 2961 would enhance the refinancing of home loans by veterans.

On May 1, 2008, Senator Boxer introduced S. 2965, with Senator Lieberman as an original cosponsor. S. 2965 would require a report from VA on the inclusion of severe and acute Post Traumatic Stress Disorder among the conditions covered by traumatic injury protection under SGLI.

On May 6, 2008, Senator Casey introduced S. 2981, the proposed `Disabled Veterans Home Ownership Preservation Act of 2008,' with Senator Isakson as an original cosponsor. S. 2981 would amend SCRA to provide a one-year period of protection against mortgage foreclosures for certain disabled or severely injured servicemembers, and for other purposes.

On May 6, 2008, Chairman Akaka introduced S. 2984, the proposed `Veterans' Benefits Enhancement Act of 2008,' by request of VA. S. 2984 would eliminate the reporting requirement for prior training; modify the waiting period before the affirmation of enrollment in a correspondence course; eliminate the change-of-program application; eliminate the wage earning requirement for self-employment on-job training; authorize memorial headstones and markers for deceased remarried surviving spouses of veterans; make permanent VA's authority to contract for medical disability examinations; make modifications to SGLI; permit VA to provide Temporary Residence Assistance Grants to certain servicemembers; and designate a VA Office of Small Business Programs.

On May 7, 2008, the Committee held a hearing on benefits legislation at which testimony was offered by: Mr. Keith Pedigo, Associate Deputy Under Secretary for Policy and Program Management, Department of Veterans Affairs; Mr. Carl Blake, National Legislative Director, Paralyzed Veterans of America; Mr. Richard Paul Cohen, Executive Director, National Organization of Veterans' Advocates; Mr. Eric A. Hilleman, Deputy Director of the National Legislative Service, Veterans of Foreign Wars of the United States; Mr. Ray Kelley, Legislative Director, AMVETS; Mr. Steve Smithson, Deputy Director, Veterans Affairs and Rehabilitation Commission, The American Legion; Mr. Joseph Violante, National Legislative Director, Disabled American Veterans; Mr. Rick Weidman, Governmental Affairs Director, Vietnam Veterans of America; Mr. Herman Gerald Starnes, U.S. Merchant Marine with service in World War II; and Mr. Charles Dana Gibson, U.S. Merchant Marine with service in World War II and maritime historian.

On May 8, 2008, Chairman Akaka introduced S. 3000, the proposed `Native American Veterans Access Act of 2008,' with Senator Inouye as an original cosponsor. S. 3000 would allow tribal governments to apply for veterans' program grants that are currently limited to States and certain U.S. Territories.

On June 5, 2008, Senator Snowe introduced S. 3087, the proposed `Helping Our Veterans to Keep Their Homes Act of 2008.' S. 3087 would extend VA's authority to guaranty adjustable rate mortgages and hybrid adjustable rate mortgages.

COMMITTEE MEETING

After carefully reviewing the testimony from the foregoing hearing, the Committee met in open session on June 26, 2008, to consider, among other legislation, an amended version of S. 3023, consisting of provisions from S. 3023, as introduced, and from the legislation noted above. The Committee voted unanimously to report favorably S. 3023, as amended, to the Senate.

SUMMARY OF S. 3023 AS REPORTED

S. 3023, as reported (the Committee bill), consists of six titles, summarized below.

TITLE I--COMPENSATION AND PENSION MATTERS

Section 101 would require VA to promulgate regulations specifying the content of notices to be provided to claimants for original claims, reopened claims and claims for an increase in benefits. This would apply to notices sent on or after the date the regulations are effective.

Section 102 would authorize the United States Court of Appeals for the Federal Circuit to review VA actions relating to the adoption or revision of the VA disability rating schedule in the same manner as other actions of the Secretary of Veterans Affairs are reviewed.

Section 103 would provide an automatic annual increase in rates of disability compensation and dependency and indemnity compensation.

Section 104 would make a technical correction to the National Defense Authorization Act for Fiscal Year 2008.

Section 105 would require a report describing VA's progress in addressing the causes for any unacceptable variances in compensation payments to veterans for service-connected disabilities.

Section 106 would require a report on studies regarding compensation of veterans for loss of earning capacity, quality of life, and long-term transition payments to veterans undergoing rehabilitation for service-connected disabilities.

TITLE II--HOUSING MATTERS

Section 201 would temporarily increase the maximum loan guaranty amount for certain housing loans guaranteed by VA.

Section 202 would permit regular loans in excess of $144,000 to be refinanced with a loan guaranteed by VA and decrease the equity requirement for veterans who refinance to a loan backed by VA.

Section 203 would provide a four-year extension of two demonstration projects of adjustable rate mortgages.

Section 204 would make members of the Armed Forces with certain service-connected disabilities eligible for specially adapted housing benefits and assistance.

Section 205 would require a report on the impact of housing foreclosures on veterans and the adequacy of protection against foreclosure in existing law.

TITLE III--LABOR AND EDUCATION MATTERS

SUBTITLE A--LABOR AND EMPLOYMENT MATTERS

Section 301 would waive the 24-month limitation on a program of independent living services and assistance for veterans with a severe disability incurred in the Post-9/11 Global Operations period.

Section 302 would reform the USERRA complaint process.

Section 303 would modify and expand the reporting requirements with respect to enforcement of USERRA.

Section 304 would require USERRA training for the executive branch human resources personnel.

Section 305 would require a report on efforts to address the employment needs of Native American veterans living on tribal lands.

Section 306 would require a report on measures that could be taken by VA to assist and encourage veterans in completing vocational rehabilitation.

SUBTITLE B--EDUCATION MATTERS

Section 311 would provide relief for students who discontinue education because of military service.

Section 312 would extend the period of eligibility for Survivors' and Dependents' Educational Assistance of certain spouses of individuals with service-connected disabilities total and permanent in nature.

Section 313 would repeal the requirement that an educational institution providing non-accredited courses notify VA of the credit granted for prior training of certain individuals.

Section 314 would decrease the waiting period before affirmation of enrollment in a correspondence course may be finalized for purposes of receiving educational assistance from VA.

Section 315 would repeal the requirement that an individual notify VA when the individual changes educational programs but remains enrolled at the same educational institution.

Section 316 would exempt on-the-job training programs from the requirement to provide participants with wages if the training program is offered in connection with the purchase of a franchise.

SUBTITLE C--OTHER MATTERS

Section 321 would rename VA's Office of Small and Disadvantaged Business Utilization as the VA Office of Small Business Programs.

TITLE IV--COURT MATTERS

Section 401 would increase the number of active judges on the Court.

Section 402 would provide for the protection of privacy and security concerns in Court records.

Section 403 would modify the rules governing service and payment of retired judges performing recall service for the Court.

Section 404 would require the Court to submit annual reports to Congress on its workload.

TITLE V--INSURANCE MATTERS

Section 501 would require a report on the inclusion of severe and acute Post Traumatic Stress Disorder among the conditions covered by traumatic injury protection coverage under SGLI.

Section 502 would provide for the treatment of stillborn children as insurable dependents under SGLI.

Section 503 would extend SGLI coverage to certain members of the Individual Ready Reserve. It would terminate coverage under SGLI for a servicemember's dependent 120 days after the servicemember separates from service. It would authorize VA to set SGLI premiums for Ready Reservists' spouses based on the age of the spouse. It would create a forfeiture of insurance under the Veterans' Group Life Insurance (VGLI) program for actions such as mutiny or treason.

TITLE VI--OTHER MATTERS

Section 601 would create the authority for suspension or termination of claims of the United States against individuals who died while serving on active duty in the Armed Forces.

Section 602 would provide memorial headstones and markers for deceased remarried surviving spouses of veterans.

Section 603 would provide a three-year extension of authority for VA to carry out income verification using records from the Internal Revenue Service (IRS) and Social Security Administration (SSA).

Section 604 would extend the authority for VA to fund contract medical disability examinations.

BACKGROUND AND DISCUSSION

TITLE I--COMPENSATION AND PENSION MATTERS

Sec. 101. Regulations on contents of notice to be provided claimants with the Department of Veterans Affairs regarding substantiation of claims.

Section 101 of the Committee bill, which is derived from S. 3023 as introduced, would require VA to promulgate regulations relating to the notice provided to claimants seeking VA benefits.

Background. VA's system for adjudicating claims for service-connected disability benefits is intended to be a claimant-friendly and non-adversarial process. Under chapter 51 of title 38, VA has a duty to assist claimants in gathering the necessary information and evidence to fully develop their claims.

A series of CAVC rulings in the 1990s narrowly interpreted the duty to assist concept, culminating in Morton v. West, 12 Vet. App. 477 (1999), which held that VA had no authority to assist. claimants absent verification that the claim was well-grounded. The CVAC found that VA was precluded from assisting a claimant `in any way unless that claimant had first established that his or her claim was well-grounded.' PVA v. Secretary, 345 F.3d 1334, 1338 (Fed. Cir. 2003). As a result of the Morton decision, VA ceased providing any assistance to claimants who did not have a `well-grounded claim' except for the verification of military service and obtaining service medical records.

Congress disagreed with the Court's interpretation of VA's duty to assist and, in 2000, in Public Law 106-475, the Veterans Claims Assistance Act of 2000 (VCAA), clarified and expanded VA's duty to assist claimants. The VCAA reinstated VA's traditional practice of assisting veterans at the beginning of the claims process.

Prior to the enactment of the VCAA, section 5103 of title 38 provided that, if a claimant's application for benefits was incomplete, VA was required to notify the claimant of the evidence necessary to complete the application. Under the changes made by the VCAA, VA is required to inform the claimant of what information and medical or lay evidence is needed to substantiate the claim. The notice must also stipulate what evidence and information is to be obtained by the claimant and what evidence is VA's responsibility. VA is also required to notify the claimant when it is unable to obtain the relevant records.

Since the enactment of the VCAA, various actions, including decisions of the Court and VA's responses to some of those decisions, have led to notices that are not meeting the goal of providing claimants with sufficient, clear information on which they can then act. Instead of simple, straightforward notices that can be easily read and understood by claimants, VA is now routinely providing long, frequently convoluted, overly legalistic notices that do not meet the objective of the VCAA. It is clear to the Committee that there is abundant evidence supporting the need to change the current situation and strong support for doing so.

For example, the Committee notes that there have been cases subsequent to the enactment of VCAA, such as Dingess v. Nicholson, 19 Vet. App. 473 (2006), in which the Court has interpreted the notice requirement to include information concerning so-called `downstream' issues, such as the rating schedule and effective date, before a determination of service-connection is made, a result not contemplated by the original law. In other cases, such as Vazquez-Flores v. Peake, 22 Vet. App. 37 (2008), it appears that VA has misinterpreted the intent of the Court by suggesting that a preadjudication of claims would be required prior to sending a VCAA notice. In VA's motion to stay its original decision, the Court stated, `the Secretary need only identify the assigned DC [diagnostic code] and cross-referenced DCs, review them for specific criteria for which the generic notice is insufficient, and add general notice of the evidence needed to satisfy that criteria.' Vazquez-Flores v. Peake, 22 Vet. App. 91 (2008).

In recent oversight visits to 19 different VA regional offices, a Democratic Committee staff member reviewed 298 individual claim files and found that VCAA letters sent to claimants provide little practical assistance to those veterans. In many of the claims examined, information that would have been helpful in substantiating the claim was missing. However, the files did not indicate that VA had requested the missing information. For example, a veteran filing an original claim, would indicate `See SMRs [Service Medical Records]' rather than providing dates of disability and treatment locations. In a number of files reviewed, the evidence showed that service medical records were missing or incomplete. In cases involving combat, time and location information may be needed in order for VA to determine if the relaxed evidentiary requirements of section 1154 of title 38 should be applied, but review of the files found that such information was neither provided nor requested. The Committee believes that time and location information should be requested in those cases where it is needed for VA to provide effective assistance in locating relevant government records.

With respect to reopened claims or claims for an increase, the VCAA letters are also legalistic and confusing. In over 50 percent of the claims reviewed at regional offices, VA staff agreed that errors involving service-connection or the rating assigned were committed. Where service-connection was an issue, VCAA letters involving reopened claims generally did not inform veterans of the element of the claim for which evidence would be needed to reopen the claim. For example, a VCAA letter to a veteran with a current disability would not state that the evidence needed to reopen the claim was evidence of the relationship between the current disability and military service. As a result, a veteran would submit considerable evidence concerning the extent of the disability but would fail to submit needed evidence of the relationship, or nexus, between the disability and military service.

In testimony before the Committee, on July 9, 2008, Kerry Baker, Associate National Legislative Director of the Disabled American Veterans noted that `the language of section 5103(a) has led to such a procedural quagmire that it is not fulfilling its intended benefit to VA claimants.' During the same hearing, William `Bo' Rollins, Director of Field Services for the Paralyzed Veterans of America stated `Congress should consider amending the [VCAA] law to direct VA to fill in the contours of an adequate VCAA notice letter.'

The Veterans' Disability Benefits Commission (VDBC), in its final report, expressed concerns about VA's efforts to comply with the VCAA, based on its site visits and general study of VA claims adjudication. The VDBC reported receiving numerous complaints that the notice letters they were receiving were too long and overburdened with legal language. The VDBC recognized that the notices are not clear or succinct:

VA should consider amending Veterans Claims Assistance Act letters by including all claim-specific information to be shown on the first page and all other legal requirements would be reflected, either on a separate form or on subsequent pages. In particular, VA should use plain language in stating how the claimant can request an early decision in his or her case.

IBM Global Business Services, with which VA contracted in the Fall of 2007 to conduct an analysis of VA's business processes for adjudicating disability claims and prescribe a short-term action plan and long-term strategic plan for improving the quality and efficiency of the process, also found the current VCAA letter to be `long and complex, containing a great deal of legal language that can be confusing to veterans when trying to understand the process for completing their disability claim.' It recommended that the current VCAA letter be revised to be shorter and more transparent to veterans. According to IBM, `[c]omplex legal language which is required to be in the letter should be translated into layman's terms, or else placed in supplemental pages to the letter, while the main body of the letter is clear and succinct.'

It is clear to the Committee that additional Congressional guidance and a requirement for the promulgation of regulations will aid VA in providing easy-to-read notices that will comply with due process and VA's duty to assist under the VCAA.

Committee Bill. Section 101 of the Committee bill would amend subsection (a) of section 5103 of title 38 to add a new paragraph that would require VA to promulgate regulations specifying the content of VCAA notices provided to claimants. The regulations required by the Committee bill would require that the notice specify for each type of claim for benefits the general information and evidence required to substantiate the claim. For example, if a claim involved benefits and services based upon need, the notice would advise that information concerning income and assets must be submitted. In a claim based upon disability, the notice would reference the need for evidence of disability, including signs or symptoms of a disabling condition. The regulations should also specify different content of the notices depending on the type of claim concerned, whether it be an original claim, a claim for reopening, or a claim for increase in benefits.

The Committee emphasizes that VCAA notices are required only in cases in which additional information or evidence is needed to substantiate the claim. If the information and evidence needed to substantiate the claim is submitted with the application or contained in the claims file, no VCAA notice is required. For example, claims for education, health care, housing, vocational rehabilitation, and burial benefits might contain sufficient information and evidence to substantiate the claim without the necessity of a VCAA notice.

With respect to original claims, the Committee believes that the regulations relating to notice for original claims should specify that the information and evidence referenced in the VCAA notice should be relevant to the basic elements of the claim for benefits or services sought: (1) evidence of current disability or symptoms of disability; (2) evidence relating to a disability, symptoms of disability, one or more incidents or events in service giving rise to or aggravating a disability; and (3) the relationship between the current disability and military service.

The Committee expects that the regulations will require that VCAA notices include a request for clarification of missing or ambiguous information contained in a request for benefits where it may be necessary or helpful to identify evidence that may substantiate the claim. In cases concerning service-connection, such requests might include approximate dates and locations of treatment and if applicable, approximate dates and locations related to combat experiences associated with claimed disabilities.

The Committee is concerned that requiring VA to include in notices relating to original claims information concerning `downstream elements,' such as the rating schedule and effective date, before a determination of service-connection is made, may be misleading and confusing to veterans. Such information may lead a veteran into believing that service-connection has been conceded and the issue on which evidence must be submitted relates to the rating or effective date.

During oversight visits to 19 different VA regional offices, a Democratic Committee staff member has identified some claims for which VA has no duty to assist, because there was no reasonable possibility that such assistance would result in substantiating a claim. These claims included claims for environmental exposure without any indication that any disability is related to the alleged exposure. The regulations may provide that notice in such cases may indicate that no development will be undertaken, unless the veteran indicates a disability that is related to the claimed exposure. Other examples of cases in which the notice may indicate that VA assistance cannot help include claims involving conditions, such as high cholesterol, with no related disability alleged, and male pattern baldness, which is not considered a disability under VA regulations. In such instances, the regulations may provide that the notification will indicate that the claims will not be developed because there is no reasonable possibility that such assistance would result in substantiating the claim.

With respect to claims to reopen a previously denied claim, the Committee believes that different VCAA notice considerations should apply. In recent oversight visits by a Democratic Committee staff member, it was noted that a number of veterans' claims were denied because of a lack of nexus between a claimed disability and military service but with no indication that a medical opinion was acquired, as required by section 5103A of title 38. This error is frequently identified by the Board of Veterans' Appeals in remands of appealed cases. In other cases, the veteran may have filed an ambiguous, potential, or inferred claim that was not clarified before the claim was decided. The Democratic Committee staff member also identified a number of cases in which a veteran seeking to reopen a previously denied claim for service-connection submitted substantial and often duplicative documentation concerning a current disability, apparently unaware that the basis for the denial was a lack of evidence linking the disability to military service.

The Committee does not expect that the regulations would require a full pre-adjudication file review prior to issuing a VCAA letter involving a reopened claim. However, the regulations should require the notice in such cases to appropriately reference the prior decision with respect to what element of the claim requires new and material evidence to reopen the claim and what type of evidence is required. In this regard, the Committee notes the opinion of the Court in Kent v. Nicholson, 20 Vet. App. 1, 9 (2006), in which the Court indicated that `VA must notify a claimant of the evidence and information that is necessary to reopen the claim and VA must notify the claimant of the evidence and information that is necessary to establish his entitlement to the underlying claim for the benefit sought by the claimant.' The Committee expects regulations concerning reopened claims to comply with the Kent standard.

The Committee notes that given the large amount of documentation often contained in claims files, it is not practical, feasible, or efficient to require that every document in an existing claims file be reviewed before a VCAA letter is issued. By focusing the regulation on the decision sought to be reopened with reference to the evidence considered in that decision, the Committee believes that VCAA and Kent compliance would be achieved.

The Committee recognizes that review of the most recent prior decision might also result in a finding of `clear and unmistakable error' (CUE). During Committee oversight visits by a Democratic staff member, some claims were identified with CUE in the original rating decision. For example, several rating decisions for service-connection of asthma acknowledged that the veteran required daily inhalation bronchodilator therapy but rated such a claim at 10 percent rather than 30 percent which the same decision recognized as the correct rating for such a disability. In most of the claims where CUE was found, the veteran had not appealed an erroneous decision and, in a few cases, had attempted to reopen the decision rather than appeal. Such errors were promptly corrected by the regional office during the oversight visits. A review by VA of the decision sought to be reopened in preparation for the VCAA notice should identify clear examples of CUE, leading to a revised decision which would moot the request for reopening.

With respect to claims for an increase in the degree of service-connected disability, the Committee expects that the regulation will require VA to review the most recent rating decision concerning the disability for which an increased rating is claimed and, in the words of the Court in Vazquez-Flores v. Peake, 22 Vet. App. 91, 93 (2008) make `a common-sense assessment whether the criteria for a higher rating under the assigned or a cross-referenced DC [diagnostic code] includes criteria `that would not be satisfied by the claimant demonstrating a noticeable worsening or increase in severity of the disability * * *'.'

The Committee notes that the best evidence upon which to evaluate a claim for an increased rating is a complete and thorough medical examination that should provide sufficient evidence for VA rating staff to determine which rating code is appropriate to the findings and diagnosis made by the examiner. Unless the medical evidence submitted by the veteran requesting an increased rating or the other VA records demonstrate that such an increase is warranted, the Committee believes that the VCAA notice involving a claim for an increase should indicate that a VA medical examination will be ordered. The regulation should also require that the veteran be informed as to the general information and medical or lay evidence needed to establish a claim for extra-schedular consideration.

The Committee believes that, by notifying the veteran that an examination would be scheduled to evaluate the current disability involved in the claim for an increase and the criteria for establishing extra-schedular consideration, the duty to notify would be met. VA would need to comply with the Vazquez-Flores requirement for additional diagnostic codes or other criteria only when a `common-sense assessment', such as the identification of cross-referenced codes, is indicated. In cases where a common-sense assessment requires information concerning additional diagnostic code criteria, the regulations may provide that such criteria be included as an appendix rather than in the body of the VCAA letter.

VCAA letters concerning claims for increased ratings should be based upon the rating code that was assigned in the most recent prior decision and any other cross-referenced rating codes that might provide a basis for an increase in benefits. However, the Committee does not expect that such a requirement should be interpreted to require notice and diagnostic codes for all potential disabilities involving a particular body system or part.

Under the amendment proposed in the Committee bill, VA would be specifically authorized to issue additional or alternative regulations in order to tailor the VCAA notice to the specific elements of the claim for the particular type of benefits or services sought. In cases in which more than one type of claim is filed in the same document, VA would have the flexibility to issue separate VCAA notices on the different types of claims or to provide the information relevant to each type of claim in the same VCAA notice. The Committee intends that, in determining whether to require separate or combined notices, VA will take into account the intent of Congress to promote simple and easy-to-understand VCAA notices.

The amendment proposed in the Committee bill would also require that the regulations contain information concerning the time within which the information and evidence to be provided by the claimant must be submitted in order for benefits to be paid or services rendered under the claim.

This provision is intended to simplify the notices by reducing the amount of extraneous information provided and clarifying the responsibilities of the claimant to provide relevant information and evidence. The regulations required by section 101 would apply to all notices issued on or after the date the regulations are made effective.

The Committee is aware that VA has taken action to revise the VCAA letter. VA Deputy Under Secretary for Benefits, Michael Walcoff, testified at a February 14, 2008, hearing of the House Committee on Veterans' Affairs that the `current VCAA letters are lengthy and contain complex legal language that many claimants find difficult to understand.' At that time, Mr. Walcoff reported that the Veterans Benefits Administration was working closely with VA's Office of the General Counsel to revise and simplify the letters. VA Acting Under Secretary for Benefits, Rear Admiral Patrick Dunne, testified at the Committee's July 9, 2008, hearing that four new VCAA letter templates had been drafted for specific types of claims. Admiral Dunne projected that the revised letters would be available for use by regional offices by November 2008.

The Committee recognizes that VA does not require statutory authority to make the proposed changes to its notices and welcomes the expected introduction of these revised notices in November 2008. However, the Committee believes that, given the history of judicial interpretations of the notice requirement, a statutory basis for the revised VCAA notice regulations should be enacted.

The Committee notes that the regulations required by section 101 of the Committee bill would have prospective effect and does not intend that the required changes would be applied retroactively.

Sec. 102. Judicial review of adoption and revision by the Secretary of Veterans Affairs of the schedule of ratings for disabilities of veterans.

Section 102 of the Committee bill, which is derived from S. 2737, would make actions of the Secretary of Veterans Affairs relating to the adoption or revision of VA's rating schedule for disabilities subject to the same type of review as that applied to other actions of the Secretary.

Background. Until 1988, veterans were generally precluded from obtaining judicial review of decisions made by the then-Veterans Administration. Public Law 100-687, the Veterans' Judicial Review Act, removed that bar by authorizing judicial review of VA decisions in a newly established court, now known as the United States Court of Appeals for Veterans Claims. That law also provided for jurisdiction in the United States Court of Appeals for the Federal Circuit for challenges to certain actions of the Secretary of Veterans Affairs covered by the Administrative Procedure Act. However, that law specifically precluded review of actions relating to the adoption or revision of the schedule of ratings for disabilities adopted under section 1155 of title 38, United States Code. As a result of that prohibition, a regulation found in the rating schedule that is alleged to violate a statutory provision could be insulated from judicial review.

A number of recent reports, including the Institute of Medicine's report `A 21st Century System for Evaluating Veterans for Disability Benefits' and the final report of the Veterans' Disability Benefits Commission `Honoring the Call to Duty: Veterans' Disability Benefits in the 21st Century,' have noted the need to update obsolete sections of VA's rating schedule. Without a change to current law, any changes to the rating schedule regulations would be shielded from judicial review.

S. 2737, the legislation from which section 102 of the Committee bill is derived, would have provided for judicial review of the rating schedule by CAVC. Such review would have been available in order to determine if such regulations were in compliance with provisions in chapter 11 of title 38, the chapter relating to disability compensation.

During the Committee's May 7, 2008, hearing which focused on pending legislation, including S. 2737, the VA witness, Keith Pedigo, Associate Deputy Under Secretary for Policy and Program Management of the Veterans Benefits Administration, expressed concerns that the bill `would essentially expose the rating schedule to judicial review' in every case involving service-connection of a disability or a claim for an increased rating and, as such, could increase litigation in CAVC and result in piecemeal review of the rating schedule.

At that same hearing, several veterans service organizations and the National Organization of Veterans' Advocates testified in support of the bill.

Committee Bill. Section 102 of the Committee bill would amend section 502 of title 38, relating to judicial review of rules and regulations by striking out `(other than an action relating to the adoption or revision of the schedule of ratings for disabilities adopted under section 1155 of this title),' thereby providing for review of actions of the Secretary of Veterans Affairs relating to adoption or revision of the rating schedule by the United States Court of Appeals for the Federal Circuit in the same way as other VA actions are reviewed.

The Committee believes that this approach will avoid the concern about the piecemeal approach raised in VA's testimony and should prevent multiple and possibly conflicting interpretations of the rating schedule in various cases.

The Committee notes that the level and type of review proposed in the Committee bill for the review of the rating schedule would be circumscribed by a number of limitations. For example, under the Rules of the United States Court of Appeals for the Federal Circuit, an action seeking review of a rule or regulation must be filed within 60 days of the effective date of the rule or regulation.

Furthermore, under the standards set forth by the Supreme Court of the United States in Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984), courts must give deference to the Secretary's interpretation of a statute `if the statute is silent or ambiguous with respect to the specific issue.' If Congress explicitly left a gap in the statute for VA to fill, then the Secretary's interpretation is controlling unless `arbitrary, capricious, or manifestly contrary to the statute.' Id. at 843-844. If Congress implicitly delegated authority to VA to fill the gap, the Secretary's interpretation will be upheld if it is a reasonable interpretation of the statute. Id. at 844.

During consideration of this issue, a concern was raised that, under the proposed change allowing for judicial review of actions by the Secretary relating to the adoption or revision of VA's rating schedule, it was possible that challenges might be taken in response to a denial by VA of a request for rulemaking under subsection (e) of section 553 of title 5. While it is correct that such a challenge is available under current law and might be brought in the future, no cases have been identified in which such a challenge has been brought with reference to VA rulemaking since judicial review was instituted in 1988. This lack of such actions may be explained by the daunting burden facing a petitioner in such a case.

The Supreme Court of the United States only recently addressed the reviewability of an agency decision to deny a petition for rulemaking in Massachusetts v. EPA, 549 U.S. 497 (2007). In that case, the Supreme Court found that a refusal `to promulgate rules are * * * susceptible to judicial review, though such review is `extremely limited' and `highly deferential.' The Supreme Court cited two decisions of the United States Court of Appeals for the District of Columbia Circuit in its decision, American Horse Protection Association, Inc. v. Lyng, 812 F.2d 1 (D.C. Cir. 1987), and National Customs Brokers & Forwarders Ass'n v. United States, 883 F.2d 93 (D.C. Cir. 1989). In National Customs Brokers, 883 F. 2d at 103, the circuit court noted that `[i]t is only in the rarest and most compelling of circumstances that [the circuit court] has acted to overturn an agency judgment not to institute rulemaking.' In concluding that the agency had not acted improperly in refusing to promulgate rules suggested by the petitioners, the court found that this was `not such a rare case' because the issues were `economic in nature' and entailed `policy determinations on which agency rulemaking discretion is respected.' Id. Thus, the Committee believes that the general authority that would be provided by this section would likely afford veterans relief under only very limited circumstances in a matter involving a denial on VA's part to engage in rulemaking.

Finally, the Committee notes that as a result of removing the prohibition on review of actions of the Secretary relating to adoption or revision of the rating schedule in current law, the United States Court of Appeals for the Federal Circuit would be authorized to review agency records that underlie challenges to rules and regulations in the same manner as is currently applied to other VA regulations. The Committee expects VA's rulemaking procedures and fact-finding to be sufficiently robust to permit meaningful review of actions relating to the adoption and revision of the rating schedule.

Sec. 103. Automatic annual increase in rates of disability compensation and dependency and indemnity compensation.

Section 103 of the Committee bill, which is derived from S. 161, would require that whenever there is an increase in benefit amounts payable under title II of the Social Security Act, VA would automatically increase the rates of disability compensation and dependency and indemnity compensation, among other rates, by the same percentage and effective on the same date.

Background. The service-connected disability compensation program under chapter 11 of title 38, United States Code, provides monthly cash benefits to veterans who have disabilities incurred or aggravated during active service in the Armed Forces. The amount of compensation paid depends on the nature and severity of a veteran's disability or combination of disabilities and the extent to which the disability impairs earning capacity. Certain veterans with more severe disabilities are also eligible to receive additional compensation on behalf of the veteran's spouse, children, and dependent parents.

Under chapter 13 of title 38, VA pays dependency and indemnity compensation (DIC) to the survivors of servicemembers or veterans who died on or after January 1, 1957, from a disease or injury incurred or aggravated during military service. Survivors eligible for DIC include surviving spouses, unmarried children under the age of 18, children age 18 or older who are permanently incapable of self-support, children between the ages of 18 and 22 who are enrolled in school, and certain needy parents.

Section 415(i) of title 42, provides for an automatic annual cost-of-living adjustment (COLA) for benefits payable under title II of the Social Security Act based on the annual increase in consumer prices. Title II Social Security benefits are indexed to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is published on a monthly basis by the Bureau of Labor Statistics. The annual COLA increase is equivalent to the increase in the CPI-W from the most recent period between the third quarter of one calendar year to the third quarter of the next.

Currently, under section 5312 of title 38, there are several VA benefits which receive automatic increases tied to the annual adjustments in title II Social Security benefits. These include pension benefits for indigent, wartime veterans who are permanently and totally disabled due to a non-service-connected condition, or over the age of 65, as well as their surviving spouses and children, and DIC benefits for the parents of a deceased veteran who are living below a certain income threshold.

However, the majority of disability compensation and DIC benefits paid by VA are not indexed to the CPI-W and do not increase automatically when title II Social Security benefits are increased. Instead, Congress regularly enacts a cost-of-living adjustment on an annual basis to ensure that inflation does not erode the purchasing power of VA benefits. Although Congress in recent years has consistently enacted legislation on time so as to provide benefit recipients with a COLA increase beginning December 1 of each year, veterans service organizations and VA now support making the COLA automatic, rather than relying on annual legislation.

Committee Bill. Section 103 of the Committee bill would amend section 5312 of title 38, so as to add a new subsection (d)(1), which would require VA to increase the amounts of certain VA benefits by the same percentage and effective on the same date as adjustments made to title II Social Security benefits pursuant to section 415(i) of title 42. Proposed new subsection (d)(2) would specify the VA benefits which would be covered by the mandated COLA increase. The benefits covered would be:

1. Basic compensation rates for veterans with service-connected disabilities and the rates payable for certain severe disabilities;

2. The allowance for spouses, children, and dependent parents paid to service-connected disabled veterans rated 30 percent or more disabled;

3. The annual clothing allowance paid to veterans whose compensable disability requires the use of a prosthetic or orthopedic appliance, including a wheelchair, that tends to tear or wear out clothing or which requires the use of a medication prescribed by a physician for a service-connected skin condition if the medication causes irreparable damage to the veteran's outergarments; and

4. Dependency and indemnity compensation paid to:

(a) surviving spouses of veterans whose deaths were service- connected;

(b) surviving spouses for dependent children below the age of 18;

(c) surviving spouses who are so disabled that they need aid and attendance or are permanently housebound;

(d) surviving spouses covered under section 1318 of title 38; and

(e) the children of veterans whose deaths were service-connected if no surviving spouse is entitled to DIC, the child is age 18 through 22 and attending an approved educational institution, or the child is age 18 or over and became permanently incapable of self-support prior to reaching age 18.

The proposed new subsection (d)(3) would require VA to publish any increases under this new authority in the Federal Register.

The effective date of section 103 of the Committee bill would be December 1, 2009.

Sec. 104. Conforming amendment relating to non-deductibility from veterans' disability compensation of disability severance pay for disabilities incurred by members of the Armed Forces in combat zones.

Section 104 of the Committee bill would make a technical correction to eliminate the requirement that severance pay for a disability incurred in a combat zone be deducted from disability compensation from VA.

Background. Section 1212 of title 10, United States Code, stipulates the amount of severance pay available to members of the Armed Forces who separate due to a disability incurred in the line of duty. Section 1646 of the Wounded Warrior Act, title XVI of Public Law 110-181, amended section 1212 to adjust the computation of the amount of such severance pay and to eliminate the requirement that severance pay received by servicemembers for a disability incurred in a combat zone be deducted from VA compensation.

Section 1161 of title 38, United States Code, stipulates that the deduction of disability severance pay from disability compensation shall be made at a monthly rate not in excess of the rate of compensation to which the individual would be entitled based on the individual's disability rating. Section 1161 makes reference to subsection 1212(c) of title 10. However, Public Law 110-181 did not include a conforming amendment to keep section 1161 consistent with the changes made to section 1212.

Committee Bill. Section 104 of the Committee bill would make a conforming amendment, so that section 1161 of title 38 will be consistent with section 1212 of title 10. Section 1646 of the Wounded Warrior Act would be amended by redesignating subsection (c) as subsection (d) and inserting a new subsection (c). The new subsection (c) would amend section 1161 of title 38 by striking `as required by section 1212(c) of title 10' and inserting `to the extent required by section 1212(d) of title 10'. The new subsection (c) would take effect on January 28, 2008, as if it had been included in the Wounded Warrior Act. As a result, the amended section 1161 of title 38 would reflect the change to section 1212 of title 10 eliminating the requirement that severance pay for a disability incurred in a combat zone be deducted from disability compensation from VA.

Sec. 105. Report on progress of the Secretary of Veterans Affairs in addressing causes for variances in compensation payments for veterans for service-connected disabilities.

Section 105 of the Committee bill, which is derived from S. 2951, would require VA to submit a report to Congress describing its progress in addressing the causes for any unacceptable variances in compensation payments to veterans.

Background. In 2004, the Chicago Sun-Times ran a series of articles highlighting evidence of low disability compensation payments for Illinois veterans compared to veterans from other states. In response to Congressional requests, VA's Office of the Inspector General (OIG) conducted an investigation into the differences in average monthly disability compensation payments awarded by the various VA regional offices across the country. OIG concluded that the factors influencing the variations were complex and intertwined, and included differences in claims processing practices, disability examinations, timeliness pressures, staffing levels, and rater experience and training. OIG also concluded that certain conditions such as Post Traumatic Stress Disorder, are inherently prone to subjective rating decisions, leading to inconsistency in the decisions. OIG recommended that VA further pursue the matter by conducting a scientifically sound study of the major factors affecting variances for compensation payments.

VA contracted with the Institute for Defense Analyses (IDA) to perform the recommended study. IDA made its findings public in July 2007. IDA identified several main causes for the variations across states and regional offices. IDA made six recommendations to VA aimed at aspects of the adjudication process it believed were most likely to affect the consistency of claims determinations: standardize initial and on-going training for rating specialists; standardize the hospital evaluation reporting process; increase oversight and review of rating decisions; consider consolidating all or selected parts of the rating process to one location; develop and implement metrics to monitor consistency in adjudication results; and improve and expand data capture and retention.

Then-VA Deputy Under Secretary for Benefits, Ronald R. Aument, testified before the House Veterans' Affairs Subcommittee on Oversight and Investigations on October 16, 2007, regarding VA's efforts to address the IDA recommendations on improving the quality and consistency of the claims process. Mr. Aument stated that VA concurred with the IDA findings and had various initiatives underway to support the IDA recommendations.

Committee Bill. Section 105 of the Committee bill would require VA to submit a report to the Committees on Veterans' Affairs of the Senate and the House of Representatives describing its progress in addressing the causes of unacceptable variances in compensation payments to veterans for service-connected disabilities. The report would be due to the Committees not later than one year after the date of enactment of this section.

The OIG and IDA reports explored the variances among various regional offices, identifying many of the factors that heavily impact the subjective policies, processes, and training methods of individual regional offices. The report called for in this section of the Committee bill would require VA to report to Congress on how it is mitigating the impact of these variables to ensure that the process is as fair and consistent as possible, regardless of where the claim is adjudicated.

The Committee bill would require the report to include three specific elements: (1) a description of the Veterans Benefits Administration's efforts to coordinate with the Veterans Health Administration (VHA) to improve the quality of disability examinations performed by VHA and contract clinicians, including the use of standardized templates; (2) an assessment of the current personnel requirements at each regional office for each type of claims adjudication position; and (3) a description of the differences, if any, in current patterns of submittal rates for claims from various segments of the veterans population, including veterans from rural and highly rural areas, minority veterans, veterans who served in the National Guard or Reserve, and military retirees.

Sec. 106. Report on studies regarding compensation of veterans for loss of earning capacity and quality of life and on long-term transition payments to veterans undergoing rehabilitation for service-connected disabilities.

Section 106 of the Committee bill, which is derived from S. 2674, would require VA to provide Congress with a report regarding the results of a study examining the appropriate compensation to be provided to veterans for loss of earning capacity and loss of quality of life caused by service-connected disabilities and another study examining long-term transition payments to veterans undergoing rehabilitation for service-connected disabilities.

Background. In July 2007, the President's Commission on Care for America's Returning Wounded Warriors recommended that Congress `restructure VA disability payments to include * * * `transition payments.' Those payments would be equal to three months of base pay for veterans with disabilities who are not participating in further rehabilitation and would entail `longer-term payments to cover family living expenses, if they are participating in further rehabilitation or education and training programs.' The Commission further recommended that `VA should commission a six-month study to determine the appropriate level and duration of longer-term transition payments.' In addition, the Commission recommended that `VA should move swiftly to update (and thereafter keep current) its disability rating schedule to reflect current injuries and modern concepts of the impact of disability on quality of life.'

In February 2008, VA entered into a contract to conduct two studies on those issues. One study will examine the appropriate level of disability compensation to be paid to veterans to compensate for loss of earning capacity and loss of quality of life as a result of service-related disabilities. The other study will examine the feasibility and appropriate level of long-term transition payments to veterans who are separated from the Armed Forces due to a disability while those veterans are undergoing a program of rehabilitation. The studies were due to be completed in August 2008.

Committee Bill. Section 106 of the Committee bill would require VA to submit to the Committees on Veterans' Affairs of the Senate and House of Representatives a report including a comprehensive description of the findings and recommendations of those studies; a description of the actions proposed to be taken by VA in light of those findings and recommendations, including a description of any proposed modifications to the VA disability rating schedule or to other regulations or policies; a schedule for the commencement and completion of any actions proposed to be taken; and a description of any legislative action required in order to authorize, facilitate, or enhance any of the proposed actions. That report would be due no later than 210 days after the date of enactment of the Committee bill.

TITLE II--HOUSING MATTERS

Sec. 201. Temporary increase in maximum loan guaranty amount for certain housing loans guaranteed by the Secretary of Veterans Affairs.

Section 201 of the Committee bill, which is derived from S. 2768, would temporarily increase the maximum loan amount guaranteed by VA under the VA home loan guaranty program.

Background. The Servicemen's Readjustment Act of 1944, commonly known as the GI Bill of Rights, was signed into law as Public Law 78-346 by President Franklin D. Roosevelt on June 22, 1944, and, among other things, provided veterans with federally guaranteed home loans with no down payment. As World War II was ending, this landmark legislation made the dream of home ownership a reality for millions of returning veterans. They were able to build new homes and otherwise begin new lives with the assistance of the federal government.

This guaranty may exempt homeowners from having to make a down payment or secure private mortgage insurance, depending on the size of the loan and the amount of the VA guaranty. In general, eligibility is extended to veterans who served on active duty for a minimum of 90 days during wartime or 181 continuous days during peacetime, and have a discharge other than dishonorable. Members of the Guard and Reserve who have never been called to active duty must serve a total of six years in order to be eligible for the benefit. Certain surviving spouses are also eligible for the housing guaranty.

Public Law 108-454 increased VA's maximum guaranty amount to 25 percent of the Freddie Mac conforming loan limit determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for a single family residence, as adjusted for the year involved.

The Economic Stimulus Act of 2008 (Stimulus Act), Public Law 110-185, temporarily reset the maximum limits on home loans that the Federal Housing Administration (FHA) may insure and that Fannie Mae and Freddie Mac may purchase on the secondary market to 125 percent of metropolitan-area median home prices, but did so without reference to the VA home loan program. This had the effect of raising the Fannie Mae, Freddie Mac, and FHA limits to nearly $730,000, in the highest cost areas, while leaving the then-VA limit of $417,000 in place.

On July 30, 2008, the Housing and Economic Recovery Act of 2008 was signed into law as Public Law 110-289. That law provided a temporary increase in the maximum guaranty amount for VA loans originated from July 30, 2008 through December 31, 2008 to the same level as provided in the Stimulus Act.

Committee Bill. Section 201 of the Committee bill, in a freestanding provision, would apply the temporary increase in the maximum guaranty amount until December 31, 2011. This would enable more veterans to utilize their VA benefit to purchase more costly homes.

Sec. 202. Enhancement of refinancing of home loans by veterans.

Section 202 of the Committee bill, which is derived from S. 2961, would increase the maximum guaranty limit for refinance loans and increase the percentage of an existing loan that VA will refinance under the VA home loan program.

Background. Under section 3703(a)(1)(A)(i)(IV) of title 38, United States Code, the maximum VA home loan guaranty limit for most loans in excess of $144,000 is equal to 25 percent of the Freddie Mac conforming loan limit for a single family home. Public Law 110-289 set this value at approximately $182,437 through the end of 2008. This means lenders making loans up to $729,750 will receive at least a 25 percent guaranty, which is typically required to place the loan on the secondary market. Under current law, this does not include regular refinance loans.

Section 3703(a)(1)(B) of title 38 limits to $36,000 the guaranty that can be used for a regular refinance loan. This restriction means a regular refinance over $144,000 will result in a lender not receiving 25 percent backing from VA. In this situation, the lender is less likely to make the loan to the veteran. This situation essentially precludes a veteran from being able to refinance his or her existing FHA or conventional loan into a VA guaranteed loan if the loan is greater than $144,000.

Under section 3710(b)(8) of title 38, VA is also precluded from refinancing a loan if the homeowner does not have at least ten percent equity in his or her home.

Committee Bill. Subsection 202(a) of the Committee bill would raise the guaranty on VA refinance loans to the same level as conventional loans, which is 25 percent of the Freddie Mac conforming loan limit for a single family home.

Subsection 202(b) would decrease equity requirements from 90 percent to 95 percent for refinancing from an FHA loan or conventional loan to a VA-guaranteed loan. This will allow more veterans to use their VA benefit to refinance their mortgages. Many veterans do not have ten percent equity and thus are precluded from refinancing to a VA-guaranteed home loan.

Given the anticipated number of non-VA-guaranteed adjustable mortgages that are approaching the reset time when payments are likely to increase, the Committee believes that it is prudent to facilitate veterans refinancing to VA-guaranteed loans. In light of today's housing and home loan crises, additional refinancing options will help some veterans to bridge financial gaps and allow them to stay in their homes and escape possible foreclosures. These provisions would allow more qualified veterans to refinance their home loans under the VA program.

Sec. 203. Four-year extension of demonstration projects on adjustable rate mortgages.

Section 203 of the Committee bill, which is derived from S. 3087, would extend VA's authority to guaranty adjustable rate mortgages and hybrid adjustable rate mortgages.

Background. Current law, section 3707(a) of title 38, United States Code, authorizes VA, through fiscal year 2008, to guaranty adjustable rate mortgages (ARMs). ARMs are loans with interest rates that change. Lenders generally charge lower initial interest rates for ARMs than for fixed-rate mortgages. An ARM allows a borrower to receive a lower initial interest rate for assuming the risk that the interest rate could go up. Public Law 102-547, the Veterans Home Loan Program Amendments of 1992, initially authorized a three-year test of a VA-guaranteed ARM program modeled after the Federal Housing Administration's ARM program. Section 404 of Public Law 108-454 authorized an extension of the VA program through fiscal year 2008.

Section 3707A(a) of title 38 authorizes VA, through fiscal year 2008, to guarantee so-called `hybrid' adjustable rate mortgages (hybrid ARMs). Hybrid ARMs are loans that carry a fixed rate of interest for an initial period followed by annual interest rate adjustments thereafter. Section 303 of Public Law 107-330 first authorized this demonstration project. Section 405 of Public Law 108-454 authorized an extension through fiscal year 2008.

Since the inception of VA's authority to guaranty ARMs and hybrid ARMs, VA has guaranteed over 230,000 ARMs and hybrid ARMs, 9 percent of VA's home loan guaranty activity.

Committee Bill. Subsection 203(a) of the Committee bill would amend section 3707(a) of title 38 so as to extend VA's ARM program through fiscal year 2012. Subsection 203(b) of the Committee bill would amend section 3707A(a) of title 38 so as to extend VA's demonstration project on hybrid ARMs through fiscal year 2012.

The Committee recognizes that these programs have proven to be an important part of VA's home loan guaranty program and expects to continue to make these loan options available to those eligible for a VA-guaranteed loan.

Sec. 204. Eligibility for specially adapted housing benefits and assistance for members of the Armed Forces with service-connected disabilities.

Section 204 of the Committee bill, which is derived from S. 2984, would authorize VA to provide specially adapted housing assistance under chapter 21 of title 38, United States Code, to active duty servicemembers with severe disabilities incurred or aggravated in the line of duty in the active military, naval, or air service.

Background. Section 2101 of title 38 permits VA to assist veterans who have certain permanent and total service-connected disabilities acquire housing with special features or adapt their existing residences with special features. These special features are those that are deemed appropriate by VA to assist the veteran in living independently with the qualifying service-connected disability. Under current law, veterans with certain severe service-connected disabilities are eligible to receive grants of up to either $10,000 or $50,000, depending on the nature of the disability.

Section 2101 includes authority to grant these benefits to members of the Armed Forces serving on active duty who are similarly disabled as the result of an injury incurred or disease aggravated in the line of duty in the active military, naval, or air service. Eligibility of members of the Armed Forces is subject to the same criteria and conditions as the eligibility of veterans.

However, other sections of chapter 21 of title 38 do not contain language that explicitly makes these provisions applicable to members of the Armed Forces. Most notably, section 2102A, which provides certain assistance to veterans residing temporarily in housing owned by a family member, is not currently available to members of the Armed Forces.

Committee Bill. Section 204 of the Committee bill would eliminate this disparity by providing, in a free-standing provision, explicit authority to VA to provide all specially adapted housing benefits under chapter 21 of title 38 to eligible members of the Armed Forces on active duty.

Sec. 205. Report on impact of mortgage foreclosures on veterans.

Section 205 of the Committee bill, which is derived from S. 2981, would require VA to provide Congress with a report on the impact of the recent mortgage foreclosure crisis on veterans.

Background. The recent troubles in the subprime mortgage industry have led to rising foreclosure rates across the country. The most recent data from RealtyTrac, the largest national database of foreclosures and bank-owned properties, shows that there were 252,363 foreclosures filings on U.S. properties in June 2008, a 53 percent increase over the number of filings in June 2007. That amounts to a foreclosure filing on one of every 501 U.S. households during the month of June 2008. According to data from the Mortgage Bankers Association, the rate of foreclosure starts and the percent of loans in the process of foreclosure were at their highest recorded levels since 1979 during the first quarter of 2008.

The increase in foreclosures is also a matter of concern for veterans, particularly those who have recently separated from the military after deployments in Operation Enduring Freedom and Operation Iraqi Freedom. The Congressional Joint Economic Committee announced on June 12, 2008, that research conducted by Committee staff in cooperation with RealtyTrac found significantly higher foreclosure rates in the areas surrounding the 24 military bases with the highest personnel populations.

Committee Bill. Section 205 of the Committee bill would require that VA investigate and report on the impact of the mortgage foreclosure crisis on veterans and the adequacy of existing mechanisms available to help veterans. Section 205 would require the report to include four specific elements: (1) a general assessment of the income of veterans who have recently separated from the Armed Forces; (2) an assessment of the effects of the length of the disability adjudication process on the capacity of veterans to maintain adequate or suitable housing; (3) a description of the extent to which the provisions of Servicemembers Civil Relief Act (SCRA) currently protect veterans from mortgage foreclosure; and (4) a description and assessment of the adequacy of the VA home loan guaranty program in preventing foreclosure for recently separated veterans. The report would be due to the Committees on Veterans' Affairs of the Senate and the House of Representatives no later than December 31, 2009.

TITLE III--LABOR AND EDUCATION MATTERS

SUBTITLE A--LABOR AND EMPLOYMENT MATTERS

Sec. 301. Waiver of 24-month limitation on program of independent living services and assistance for veterans with a severe disability incurred in the Post-9/11 Global Operations period.

Section 301 of the Committee bill would expand VA's authority to waive the 24-month limit on independent living services that may be provided to veterans of the Post-9/11 Global Operations period.

Background. Under current law, VA may provide services to certain veterans with severe service-connected disabilities to help them achieve maximum independence in daily living. The general rule is that no more than 24-months of these services may be provided to a veteran. However, under section 3105(d) of title 38, United States Code, the period may be extended if `the Secretary determines that a longer period is necessary and likely to result in a substantial increase in a veteran's level of independence in daily living.'

Committee Bill. Section 301 of the Committee bill would amend section 3105(d) of title 38 so as to allow VA, without having to make such a determination, to extend the 24-month cap on independent living services for any veteran who served on active duty during the Post-9/11 Global Operations period and incurred or aggravated a severe disability during that service. In the view of the Committee, this additional flexibility will help ensure that VA is able to provide the appropriate services to veterans with severe disabilities, such as traumatic brain injury (TBI), that may have lengthy, complex, and unpredictable recovery periods.

Sec. 302. Reform of USERRA complaint process.

Section 302 of the Committee bill, which is derived from S. 2471, would create deadlines for the Department of Labor, the Attorney General, and the Office of Special Counsel to provide assistance to servicemembers who believe that their rights under the Uniformed Services Employment and Reemployment Rights Act of 1994 have been violated.

Background. USERRA, chapter 43 of title 38, United States Code, provides reemployment and employment rights to servicemembers, veterans, and those who seek to join a uniformed service. USERRA encourages Americans to serve in the Armed Forces and reduces the disruption that servicemembers face when returning to the civilian workforce. Because the National Guard and Reserves have become an essential part of the military's operational force, it is imperative that employers comply with USERRA and that the statute be rigorously enforced by the federal government. If individuals lack confidence that their USERRA rights will be respected or enforced, they will be far less likely to join or continue to serve in the Armed Forces, especially in the Reserve forces.

Individuals can privately enforce their rights under USERRA by filing a complaint in federal or state court, or, in the case of a complaint against a federal employer, by submitting a complaint to the Merit Systems Protection Board (MSPB). In addition, individuals can request assistance from the federal government by filing a complaint with the Department of Labor's Veterans' Employment and Training Service (DOL VETS), which investigates and attempts to resolve complaints, and, if requested, will refer complaints for litigation. DOL VETS refers complaints against federal agencies to the Office of Special Counsel (OSC) and complaints against private sector employers and state and local governments to the Attorney General. The Special Counsel or Attorney General may represent individuals before the MSPB or in federal court, respectively.

Although the sample size was small and the margin of error high, the Department of Defense's 2006 Status of Forces Survey of Reserve Component Members does suggest that some servicemembers are increasingly dissatisfied with federal enforcement of USERRA and, in particular, the length of time it takes for USERRA claims to be investigated and resolved or referred for litigation. From 2004 to 2006, the percentage of Reserve Component members who responded that they were dissatisfied with how their complaints were handled by DOL VETS increased from 27 to 44 percent. During the same period, the percentage of those who said that the government's response to their complaints was not prompt rose from 32 to 38 percent.

The Government Accountability Office (GAO) has also found significant delays in the handling of USERRA complaints. In its July 2007 report, `Military Personnel, Improved Quality Controls Needed over Servicemembers' Employment Rights Claims at DOL,' GAO found that in the six cases when DOL VETS could not resolve complaints of federal employees, who then sought referrals for litigation, an average of eight months was required for DOL VETS to both investigate and refer those complaints to OSC. Id. at 23. In addition, GAO estimated that the average processing time of all USERRA complaints received by DOL VETS ranged from 53 to 86 days, and concluded that the reporting on the number and percentage of claims it closes within 90, 120, and 365 days, was not reliable. In one case, DOL VETS did not refer the case for litigation until seven years after a complaint was filed.

Committee Bill. Section 302 of the Committee bill would amend a number of sections in chapter 43 of title 38 so as to expedite federal enforcement of USERRA by imposing deadlines on action by DOL VETS, OSC, and the Attorney General to complete the tasks assigned to them under the statute:

Within 5 days of receiving a USERRA complaint, DOL VETS would be required to notify a complainant in writing about his or her rights to receive governmental assistance, including the right to request a referral and the relevant deadlines that the federal agencies must meet.

Within 90 days of receiving the complaint, DOL VETS would be required to complete its assistance and investigation and notify the complainant of the results and his or her rights, including the right to request a referral and the deadlines federal agencies must meet.

Within 48 days after receiving a request for a referral, DOL would be required to refer a complaint to the OSC or the Attorney General.

Within 60 days of receiving a referral, OSC or the Attorney General would be required to determine whether to provide legal representation to the complainant and notify the complainant of that decision in writing.

These deadlines are not intended to adversely affect or diminish any of the rights of an individual to enforce his or her rights under USERRA or the ability of the government to enforce the rights of the servicemember. Nor are the deadlines intended to constitute or create any type of defense that an employer could raise in a judicial or administrative proceeding, or to deprive the MSPB, a federal court, or a state court of jurisdiction over a complaint or action filed under USERRA. Moreover, if the Secretary, the Attorney General, or the Special Counsel is unable to complete a specific task by the relevant deadline, the agency may complete the task within a time period agreed to by the complainant and the agency.

Subsection 302(f) of the Committee bill would clarify that the original intent of Congress was that USERRA would not be subject to a federal or state statute of limitations period and specifically states that there is no time limit for a person to file a complaint with the Secretary of Labor, or for a person or the United States to submit a complaint before the MSPB or to file an action in federal or state court. The application of a federal statute of limitation period under USERRA is inconsistent with the intent of Congress and contrary to the Department of Labor's longstanding `position that no Federal statute of limitations applied to actions under USERRA.' U.S. Department of Labor, `Uniformed Services Employment and Reemployment Rights Act of 1994; Final Rules,' 70 Fed. Reg. 75246, 75287 (Dec. 19, 2005). This section of the Committee bill would implement the Department of Labor's recommendation that Congress `consider amending USERRA to clarify that no statute of limitations may apply to USERRA.' U.S. Department of Labor, 2006 Fiscal Year Annual Report to Congress, at 7 (Feb. 2008) (stating that a least one federal court has applied the four-year residual statute of limitations period in 28 U.S.C. Sec. 1658 to proceedings under USERRA, and citing Rogers v. City of San Antonio, 2003 WL 1566502, *7 (W.D. Tex.), reversed on other grounds, 392 F.3d 758 (5th Cir. 2004)).

Sec. 303. Modification and expansion of reporting requirements with respect to enforcement of USERRA.

Section 303 of the Committee bill, which is derived from S. 2471, would expand the reporting requirements regarding the federal government's enforcement of USERRA and change the date that the Department of Labor's annual USERRA report is due from February 1 to July 1.

Background. Under current law, the Secretary of Labor must file an annual report to Congress that includes the number of cases reviewed by DOL VETS and the Department of Defense Employer Support of the Guard and Reserve (DoD ESGR), the number of cases referred to OSC and the Attorney General, and the number of complaints filed by the Attorney General.

In February 2007, GAO published a report, `Military Personnel: Additional Actions Needed to Improve Oversight of Reserve Employment Issues.' GAO found that `[t]he four agencies * * * responsible for addressing and tracking USERRA claims cannot systematically record and track disability-related employment complaints,' in particular because `they do not record disability-related complaints using consistent and compatible categories to allow information analysis and reporting.' GAO concluded that the failure to consistently track disability-related complaints may result in underreporting of the number of disability-related USERRA complaints, and that the Department of Defense (DOD) `may not be completely aware of the effect that disabilities incurred by reservists while on active duty have on their reemployment, and what additional assistance may be needed to help transition this population back into the workforce.' Moreover, GAO found that this lack of consistency was indicative of a more general problem that USERRA complaints `could not be uniformly categorized in order to reveal trends on the kinds of problems that returning reservists experience because the four USERRA agencies responsible for addressing complaints use different complaint categories to characterize these issues.'

Committee Bill. Section 303 of the Committee bill would amend section 4332 of title 38, United States Code, to expand the federal government's reporting requirements with regard to enforcement of USERRA.

Section 4332 requires the Department of Labor to report the number of complaints the Attorney General files in federal courts, but does not require reporting of the number of cases OSC initiates before the MSPB. Section 303 would eliminate this difference by requiring reporting on the number of cases OSC initiates before the MSPB.

Section 303 of the Committee bill would also require reports of the number of individuals whose cases are reviewed by both DOD ESGR and the DOL VETS so that the agencies responsible for enforcing USERRA can understand how frequently aggrieved servicemembers seek assistance from both DOD ESGR and DOL VETS and what types of cases are more likely to require assistance from both agencies. The Department of Labor would be required to report the number of cases handled by DOD ESGR, DOL VETS, OSC, and the Attorney General that involve a disability-related issue and the number of cases that involve a person with a service-connected disability. In addition, section 303 would require the Department of Labor to ensure that all of the information collection and reporting of USERRA cases is done in a uniform and consistent manner.

Finally, section 303 would require the Department of Labor, OSC, and the Attorney General to issue quarterly reports on their compliance with the new deadlines that would be set by section 302 of the Committee bill, and it would require the Comptroller General to issue a report within two years assessing the reliability of the information in the three agencies' quarterly reports and the extent to which the three agencies are meeting those deadlines.

Sec. 304. Training for executive branch human resources personnel on employment and reemployment rights of members of the uniformed services.

Section 304 of the Committee bill would require human resources personnel employed by Federal executive agencies to receive training regarding USERRA.

Background. USERRA, which is codified in chapter 43 of title 38, United States Code, protects the public and private sector civilian job rights and benefits of veterans and members of the Armed Forces, including National Guard and Reserve members. USERRA also prohibits employer discrimination due to military obligations and provides reemployment rights to returning servicemembers.

In October 2007, the Committee conducted an oversight hearing regarding USERRA. According to testimony provided at that hearing, when Federal executive agencies violate USERRA, it is often due to a lack of knowledge or understanding about the law. In fact, The Honorable Charles Ciccolella, Assistant Secretary for Veterans' Employment and Training, U.S. Department of Labor, testified that `about half the [USERRA] cases that we do in the Federal government is where the Federal hiring manager just doesn't understand the law or the [Office of Personnel Management] regulations that spell out how to implement the law.'

Committee Bill. Section 304 of the Committee bill would amend chapter 43 of title 38 to add a new section 4335, which would require the head of each Federal executive agency to provide training for human resources personnel on the rights, benefits, and obligations of members of the Armed Forces under USERRA and the administration of USERRA by Federal executive agencies. It would require that the training be developed and provided in consultation with the Office of Personnel Management. The training would be provided as often as specified by the Director of the Office of Personnel Management in order to ensure that the human resources personnel are kept fully and currently informed about USERRA.

Sec. 305. Report on the employment needs of Native American veterans living on tribal lands.

Section 305 of the Committee bill, which is derived from S. 3000, would require the Department of Labor, in consultation with the Departments of Veterans Affairs and the Interior, to submit a report assessing the employment needs of Native American (American Indian, Alaska Native, Native Hawaiian, and other Pacific Islander) veterans living on tribal lands, including Indian reservations, Alaska Native villages, and Hawaiian Home Lands.

Background. According to a 2006 VA report entitled `American Indian and Alaska Native Veterans: Lasting Contributions', which relied on data from the 2000 Census, the unemployment rate among American Indian and Alaska Native veterans was approaching twice the unemployment rate among all veterans. For those Native American veterans who return to their native communities, their employment status may be much worse. According to the 2003 American Indian Population and Labor Force Report published by the Bureau of Indian Affairs, on-reservation or near-reservation unemployment was 49 percent. While these statistics indicate a clear employment problem for Native American veterans, especially those residing in Native American communities, the Committee is in need of more information to determine the appropriate steps that need to be taken to address the problem. Additionally, the Committee seeks to learn how existing employment resources for veterans can be leveraged in Native American communities to assist Native American veterans.

Committee Bill. Section 305 of the Committee bill would require the Secretary of Labor, in consultation with the Secretaries of Veterans Affairs and the Interior, to provide a report on the employment needs of Native Americans, including a review of current and prior government-to-government relationships between tribal organizations, as defined in section 3765 of title 38, which the Committee expects would include a discussion of the current and projected activities within DOL VETS. The report would also be required to include recommendations for improving employment and job training opportunities for Native American veterans on tribal land, especially through the utilization of resources for veterans. The report would be due to the Committees on Veterans' Affairs of the Senate and House of Representatives no later than December 1, 2009.

Sec. 306. Report on measures to assist and encourage veterans in completing vocational rehabilitation.

Section 306 of the Committee bill, which is derived from S. 2674, would require VA to conduct a study on factors that may prevent veterans with service-connected disabilities from completing their vocational rehabilitation plans and measures that could be taken to assist and encourage veterans in completing vocational rehabilitation.

Background. In its July 2007 report, the President's Commission on Care for America's Returning Wounded Warriors found that, `of the 65,000 who apply for [VA's Vocational Rehabilitation and Employment program] each year, at most 10,000 of all ages complete the employment track in the program each year.' The Commission also found that `the effectiveness of various vocational rehabilitation programs is not well established, and the VA should undertake an effort to determine which have the greatest long-term success.' In addition, the Commission recommended that `VA should develop financial incentives that would encourage completion' of vocational rehabilitation.

Committee Bill. Section 306 of the Committee bill would require VA to conduct a study that would identify the various factors that may prevent or preclude veterans from successfully completing their vocational rehabilitation plans. It would also require identification of actions that the Secretary may take to address such factors.

In conducting the study, VA would be required to examine the measures utilized in other disability systems in the United States and in other countries to encourage successful completion of vocational rehabilitation; any relevant studies or survey data; the extent to which disability compensation may be used as an incentive to encourage veterans to undergo and complete their vocational rehabilitation programs; the report of the Veterans' Disability Benefits Commission; the report of the President's Commission on Care for America's Returning Wounded Warriors; and any other matters that VA considers appropriate. In addition, VA would address the extent to which bonus payments or other incentives may be used to encourage veterans to complete their vocational rehabilitation plans or otherwise achieve their vocational rehabilitation objectives. VA would be required to consult with veterans and military service organizations and any other organizations or individuals as VA deems appropriate and would be authorized to employ consultants.

Finally, not later than 270 days after beginning the study, VA would be required to submit to the Committees on Veterans' Affairs of the Senate and House of Representatives a report including the findings of the study and any recommendations on actions that should be taken in light of the study.

SUBTITLE B--EDUCATION MATTERS

Sec. 311. Relief for students who discontinue education because of military service.

Section 311 of the Committee bill, which is derived from S. 1718, would amend title VII of the Servicemembers Civil Relief Act (50 U.S.C. App. 591 et seq.), to provide protections for servicemembers who are called to active-duty service while enrolled in institutions of higher education.

Background. Under the law as it was at the time the Committee met to mark up the Committee bill, there was no uniform financial protection for servicemembers who are called to active duty and are required to discontinue a program of education prior to the completion of the academic semester or quarter for which they are enrolled. Colleges and universities were not required to make reasonable accommodations for students who are called to active duty in the Armed Forces, such as tuition reimbursement and requirements for reenrollment. Members of the Armed Forces who return from deployment overseas and attempt to reenroll in a program of education could be overwhelmed with bureaucracy. In addition, the six-percent interest rate cap on all debts of members of the Armed Forces called to active duty guaranteed by the Servicemembers Civil Relief Act had been interpreted by the Secretary of Education not to apply to Federal student loans.

Since the time of the Committee's meeting on June 26, 2008, the Higher Education Opportunity Act was signed on August 14, 2008, and became Public Law 110-315. This new Public Law contains provisions addressing some of the same concerns intended to be addressed by the Committee bill, including reasonable accommodations and the cap on interest rates for Federal student loans. Any future action on the Committee bill will reflect the changes made by Public Law 110-315.

Committee Bill. Section 311 of the Committee bill would require institutions of higher education to refund tuition and fees paid by a servicemember for courses not completed due to performance of military obligations. It would also provide that the interest rate for Federal student loans would be held at no more than six percent during such obligations.

This would assist members of the Armed Forces who return from a deployment to make the transition from military service to civilian life and who wish to re-enter programs of education they were forced to discontinue because of such deployment. It would further provide the service member an opportunity to reenroll at the institution with the same educational and academic status that the service member had when the program was discontinued because of the military service. It would also provide parity with other loan obligations that can are reduced during periods of service.

Some colleges and universities have wide ranging policies currently in place to minimize the academic impact of leaving for active duty service, including suspending the requirement that they reapply for admission and waiving changes to degree requirements. The Committee does not intend that policies and procedures currently in place at colleges and universities would be superseded by the requirements of these new protections.

Sec. 312. Modification of period of eligibility for Survivors' and Dependents' Educational Assistance of certain spouses of individuals with service-connected disabilities total and permanent in nature.

Section 312 of the Committee bill would extend the period within which the spouses of certain severely disabled veterans must use education benefits from VA.

Background. Under the Survivors' and Dependents' Educational Assistance (DEA) program, VA provides up to 45 months of education benefits to certain children or spouses of military personnel. For instance, the spouse of a veteran or servicemember may be eligible for these benefits if the veteran died, or is permanently and totally disabled, as the result of a service-connected disability or if the veteran died from any cause while a permanent and total service-connected disability was in existence.

The spouse generally must use these education benefits within ten years after the date on which the veteran dies or is found to be permanently and totally disabled. However, if the servicemember died while on active duty, the spouse may use the education benefits during the twenty-year period after the servicemember's death. That extended period was meant to recognize the struggles of a surviving spouse in the years following the loss of the servicemember. As this Committee explained: `For spouses with children, especially young children, using DEA benefits within the [ten-year] period may be difficult * * * A host of factors may preclude the use of DEA benefits during the ten-year period following a servicemember's death, such as an extended grieving process, job demands, or simply the lack of an immediate need for education or training.' S. Rep. 108-352, at 10 (2004).

In recent years, it has become clear that the families of those who are severely wounded in service may also face significant challenges in the years following the injuries. For example, the July 2007 report of the President's Commission on Care for America's Returning Wounded Warriors contained these findings regarding the family members of servicemembers who survive devastating injuries, such as TBI: `The Commission has repeatedly heard about dedicated family members whose financial, family, and professional sacrifices allowed them to participate in their loved one's TBI care. Some patients with severe TBI may need family members or others to provide care for an extended period.'

Committee Bill. Section 312 of the Committee bill would extend from ten years to twenty years the time within which the spouses of certain severely injured veterans have to use their DEA benefits. Specifically, the twenty-year period would be available to a spouse of a veteran who becomes permanently and totally disabled within three years after discharge from service, if the spouse remains married to the injured veteran. In the view of the Committee, this extension is necessary to recognize that the extensive time and effort spent caring for a severely injured veteran may preclude a spouse from using DEA benefits during the existing ten-year period.

Sec. 313. Repeal of requirement for report to the Secretary of Veterans Affairs on prior training.

Section 313 of the Committee bill, which is derived from S. 2984, would eliminate the current requirement that educational institutions providing non-accredited courses report to VA any credit that was granted by that institution for an eligible person's prior training.

Background. Under current law, State approving agencies approve, for VA education benefits purposes, the application of educational institutions providing non-accredited courses if the institution and its courses meet certain criteria. Among these is the requirement that the institution maintain a written record of the previous education and training of the eligible person and what credit for that training has been given the individual. The institution must notify both VA and the eligible person regarding the amount of credit the school grants for previous training.

Committee Bill. Section 313 of the Committee bill would amend section 3676(c)(4) of title 38, United States Code, to eliminate the notification requirement as it pertains to VA. VA will maintain oversight, just as it does with accredited courses. VA will review records during compliance visits to assure the institution is evaluating and appropriately reducing program requirements because of credit given for prior training.

Removing the reporting requirement would shorten claims processing time because VA would not have to review each claim for the presence of such notice and, if submitted, have to check with the school and student to assure the requirement has been met. It would also permit more cases to be processed through VA's Electronic Certification Automated Processing (ECAP) program. The ECAP system cannot process claims where proper credit reporting is at issue because those cases require manual development and review by a veteran's claims examiner. The more claims VA can process through the ECAP system, the more timely VA beneficiaries will receive their benefits.

Following up with schools for the written notification burdens the school certifying official and student, as well as VA. Often, the school certifying official, who is responsible for reporting a veteran's enrollment, is not the individual who evaluates credit. The certifying official has no control over how long it takes the school to accomplish the review and granting of prior credit.

Further, several of VA's stakeholders, including the National Association of Veterans' Program Administrators, have recommended that VA review school records to determine granting of prior credit during compliance visits rather than require the school to submit written reports. Eliminating this requirement would streamline the administration of educational assistance benefits, and improve the delivery of benefits to veterans, reservists, and other eligible individuals.

Sec. 314. Modification of waiting period before affirmation of enrollment in a correspondence course.

Section 314 of the Committee bill, which is derived from S. 2984, would reduce from ten to five days the waiting period required prior to the student's affirmation of an enrollment agreement with an educational institution to pursue a program of education exclusively by correspondence.

Background. Under current law, an enrollment agreement signed by a veteran, spouse, or surviving spouse will not be effective unless he or she, after ten days from the date of signing the agreement, submits a written and signed statement to VA affirming the enrollment agreement. In the event the individual at any time notifies the institution of his or her intention not to affirm the agreement, the institution, without imposing any penalty or charging any fee, shall promptly make a refund of all amounts paid.

Committee Bill. Section 314 of the Committee bill would amend section 3686(b) of title 38, United States Code, to reduce the required waiting period from ten to five days. The statutory ten-day period is twice the requirement of the Distance Education and Training Council (DETC) accrediting body standard, which states that institutions will allow a full refund of all tuition expenses paid if a student cancels within five days after enrolling in a course. Reducing the affirmation waiting period to five days would make the statute consistent with the DETC standard and eliminate confusion. It would also permit eligible individuals to begin their programs sooner. Should they decide at any time not to affirm the enrollment agreement, the eligible individuals would still be entitled to a refund of all amounts paid. Finally, this proposal would allow VA to strengthen its partnership with the National Association of State Approving Agencies which has had this issue high on its list of legislative priorities.

Sec. 315. Change of programs of education at the same educational institution.

Section 315 of the bill, which is derived from S. 2984, would eliminate the requirement that an individual must file an application with VA when changing programs of study while enrolled at the same school.

Background. Under current law, a student who desires to initiate a program of education must submit an application to VA in the form prescribed by the Department. If the student decides a different program is more advantageous to his or her needs, that individual may change his or her program of study once. However, additional changes require VA to determine that the change is suitable to the individual's interests and abilities. It is rare for VA to deny a change of program, especially if the student is continuing in an approved program at the same school.

Committee Bill. Section 315 of the Committee bill, would amend section 3691(d) of title 38, United States Code, to eliminate the student application requirement. Under the new procedure, VA would accept the new program enrollment based on the certification of such enrollment from the school without requiring an additional certification from the student. VA would still have oversight of program changes by reviewing school records during compliance visits and would apply only if the individual remains enrolled at the same school. This new procedure should allow VA to increase the number of claims processed using the ECAP program without manual review by a veterans claims examiner--resulting in more timely awards and less of a information collection burden.

Sec. 316. Repeal of certification requirement with respect to applications for approval of self-employment on-job training.

Section 316 of the Committee bill, which is derived from S. 2984, would eliminate the requirement that wages be earned by veterans pursuing self-employment on-job training (OJT) authorized under section 301 of Public Law 108-183.

Background. Section 301 of Public Law 108-183 expanded the chapter 30 Montgomery GI Bill program by authorizing educational assistance benefits for full-time OJT of less than six months needed for obtaining licensure to engage in a self-employment occupation or required for ownership and operation of a franchise. Under current law, all provisions of title 38, United States Code, that apply to VA's other OJT programs (except the requirement that a training program has to be for at least six months) apply to franchise-ownership OJT, including the requirement that the trainee earn wages that are increased on an incremental basis.

Committee Bill. Section 316 of the Committee bill would amend section 3677(b) of title 38, United States Code, to exempt self-employment OJT from the wage-earning requirement. Through contact with the International Franchise Association, VA has determined that OJT for new franchise owners does not involve the payment of wages. Thus, if franchise OJT programs are not exempted from the current title 38 wage requirements, no franchise-ownership OJT program could be approved for VA benefits.

SUBTITLE C--OTHER MATTERS

Sec. 321. Designation of the Office of Small Business Programs of the Department of Veterans Affairs.

Section 321 of the Committee bill, which is derived from S. 2984, would designate VA's office established to support contracting with small businesses as the Office of Small Business Programs.

Background. Section 15(k) of the Small Business Act, codified at section 644(k) of title 15, United States Code, established, in each federal agency having procurement powers, including VA, an office to support contracting with small businesses to be known as the `Office of Small and Disadvantaged Business Utilization.'

Committee Bill. Section 321 of the Committee bill would designate the office established under section 15(k) of the Small Business Act as the Office of Small Business Programs of the Department of Veterans Affairs. The head of the office would be designated as the Director of Small Business Programs.

Designating the office as the Office of Small Business Programs would more clearly represent that office's span of authority. The name would not reflect any change in emphasis or support for disadvantaged small businesses, but rather would clarify that the Office of Small Business Programs has the full range of authority over many other small business programs. The new title would capture the overarching nature of the program, which encompasses the small disadvantaged business, the service-disabled veteran-owned small business, the veteran-owned small business, the qualified historically underutilized business zone small business, the women-owned small business, and the very small business programs.

TITLE IV--COURT MATTERS

Sec. 401. Increase in number of active judges on the United States Court of Appeals for Veterans Claims.

Section 401 of the Committee bill, which is derived from S. 2091, would increase the number of active judges on the United States Court of Appeals for Veterans Claims from seven to nine.

Background. Under current law, section 7253(a) of title 38, the court is limited to seven active judges.

Over recent years, the Court has experienced a dramatic increase in cases filed. For example, in Fiscal Year (FY) 2004 the Court received 2,234 new cases, in FY 2005 that number grew to 3,466, in FY 2006 it was 3,729, and in FY 2007 new appeals filed totaled 4,644. This trend has continued into FY 2008. According to the Court's most recent quarterly report, covering April 1, 2008 to June 30, 2008, the Court received 1,019 cases.

As these statistics and the Court's annual report depict, that increase amounts roughly to a jump from less than 200 cases filed per month to well over 300 cases filed per month. Likewise, the number of cases decided has grown from 1,780 in FY 2004, to an all-time high of 4,877 in FY 2007.

In considering what should be the number of active judges for CAVC, the Committee believes it is appropriate to consider the Judicial Conference's process for recommending additional judgeships for other federal courts. While CAVC is a federal Article I court, and thus not a member of the Judicial Conference, the Court has adopted many of the practices and processes of the Judicial Conference and the Administrative Office of the United States Courts.

The Judicial Conference, in making recommendations to Congress on authorization of judgeships, uses a combination of objective and discretionary criteria. The Conference relies on past trends and current data, and does not consider projected future caseloads because they do not utilize predictors of future filings. It initially reviews the case statistics of a particular court to determine whether the amount of work justifies adding judicial resources and, if so, whether that addition should be permanent or temporary. The Conference uses a formula that assigns varying weight to different types of cases at the trial level, and considers a reasonable caseload of 430 weighted cases per district court judge; it uses 500 weighted filings per three-judge appellate panel as a reasonable workload.

CAVC is an unusual appellate tribunal in that it sits both in panels in some instances, like most other appellate bodies, and also has authority to decide appeals by a single judge. Based on the Judicial Conference's model for district court caseload of 430 filings per judgeship, CAVC's current caseload justifies at least nine judges without even considering that many of the appeals filed will be considered by a panel of judges. Under the Conference's appellate formula of 500 filings per three-judge panel, which equates to a potential requirement for each judge to write a decision in 167 cases, seven full-time judges responsible for over 4,000 appeals per year, or, 571 per judge, greatly exceeds the normal appellate caseload. Thus, the recent trends demonstrate that the Court's workload is large and increasing and supports authorizing more judgeships.

In addition to looking at the Judicial Conference process, the Committee believes that it is important to recognize that CAVC also has a special responsibility as the only national court that reviews veterans' benefits decisions. The impacts of that mandate are significant and they must be studied and weighed when considering the appropriate size of the Court.

Although the Judicial Conference does not consider future projected caseloads when assessing the need for additional judgeships, it does consider the specific nature of a particular court in carrying out its evaluations. With respect to CAVC, there are bellwethers as to the caseload growth trend that cannot be ignored. The Nation is at war and there is no doubt that the number of veterans who are likely to seek benefits will rise as a result. There is great interest within VA in expediting administrative adjudications of the hundreds of thousands of claims that are filed with VA each year, and Congress has increased substantially the resources for VA and the Board of Veterans' Appeals (BVA or the Board) to accelerate administrative determinations. The Board has established a goal of deciding 43,000 cases or more each year, and VA has testified to the growing complexity of the claims filed and the rising number of issues contained within each claim. Because every veteran has an absolute right to appeal an adverse decision of the Board, there is significant pool of potential cases that may reach the Court.

Unlike the Federal District Courts, CAVC does not have a pool of hundreds of senior judges to draw from at will. In the next eight years, it appears likely that only one judge will join the ranks of the retired recall-eligible judges. Conversely, it is certainly possible during that same period that one or more of the six current retired judges may become unavailable for recall service. The Committee believes that it would be irresponsible not to consider these factors in any assessment of the judgeship needs of CAVC.

In response to the increasing caseload, the Court has examined its operational efficiency and taken steps to maximize the use of its available resources. To this end, retired recall-eligible judges have been convened to provide substantial service to the Court, the Court's Central Legal Staff has been trained in and has developed an enhanced alternative dispute resolution program, and the Court's Rules of Practice and Procedure have been amended to require pre-briefing settlement conferences and to streamline the process of preparing the appellate record. Additionally, the Court is in the process of implementing an electronic case filing system, and is considering summary disposition for some appeals. While these steps help in managing the growing numbers of appeals, they are not sufficient.

Committee Bill. The Committee bill would amend section 7253(a) so as to increase the number of active judges on CAVC from seven to nine.

Sec. 402. Protection of privacy and security concerns in court records.

Section 402 of the Committee bill, which is derived from S. 2090, would protect privacy and security concerns in records of CAVC.

Background. Current law, section 7268(a) of title 38, United States Code, provides that `all decisions of the Court of Appeals for Veterans Claims and all briefs, motions, documents, and exhibits received by the Court * * * shall be public records open to the inspection of the public.' Section 7268(b)(1) provides that `[t]he Court may make any provision which is necessary to prevent the disclosure of confidential information, including a provision that any such document or information be placed under seal to be opened only as directed by the Court.'

The Court has developed a process to seal, on its own, cases involving the conditions identified in section 7332(a)(1) of title 38, relating to confidentiality of certain VA medical records. Moreover, motions by appellants to seal case records for good cause are routinely granted. Even where case records remain unsealed, public access to those records presently is limited to on-site review in the reading room of the Court's Public Office. However, with the Court's implementation of the e-filing of records, the present logistical limitation on access to unsealed records will not exist.

E-filing potentially makes sensitive material in court records widely accessible. These records generally include appellants' Social Security information and medical records. As other federal courts implement e-filing, they too are attempting to achieve the balance between maintaining court records public while providing parties with protection from internet data mining and identity theft. The need to reach a balance is urgent.

Committee Bill. The Committee bill would amend section 7268 of title 38, so as to require the Court to prescribe rules, in accordance with section 7264(a) of title 38, to protect privacy and security concerns relating to the filing of documents, and the public availability of such documents, that are retained by CAVC or filed electronically. The Committee bill would require that the rules prescribed by the Court be consistent, to the extent practicable, with rules that address privacy and security issues throughout the Federal courts.

Sec. 403. Recall of retired judges of the United States Court of Appeals for Veterans Claims.

Section 403 of the Committee bill would eliminate the current restrictions on how many days per year a retired judge of CAVC may voluntarily serve in recall status; would modify the retirement pay structure for CAVC judges appointed on or after the date of enactment; and would exempt retired judges from involuntary recall once they have served an aggregate of five years of recall service.

Background. Under current law, retiring CAVC judges make an election whether to be recall-eligible. If a judge chooses to be recall-eligible, the Chief Judge has the authority to involuntarily recall that judge for up to 90 days per calendar year or, with the consent of the judge, to recall the judge for up to 180 days per calendar year. A recall-eligible retired judge receives annual pay equal to the annual salary of an active judge (pay-of-the-office) and that salary level is not impacted by how much recall service is performed during a year.

Committee Bill. Section 403 of the Committee bill would modify the authorities for the recall of retired judges and the retirement pay structure. First, this section would repeal the 180-day limit on how many days per calendar year a recall-eligible retired judge may voluntarily serve in recall status. In addition, for judges appointed on or after the date of enactment, it would create a three-tiered retirement pay structure. Specifically, pay-of-the-office would be reserved for judges who are actively serving, either as a judge of the Court or as a retired judge serving in recall status. When not serving in recall status, a recall-eligible retired judge would receive the rate of pay applicable to that judge as of the date the judge retired, as increased by periodic cost-of-living adjustments. A retired judge who is not recall-eligible would receive the rate of pay applicable to that judge at the time of retirement. Finally, section 403 would exempt current and future recall-eligible retired judges from involuntary recall once they have served an aggregate of five years of recall service.

By removing the cap on voluntary recall service and exempting recall-eligible judges from involuntary recall once they have served a cumulative total of five years of recall service, the Committee intends to provide both the authority and an incentive for recall-eligible judges to serve longer or more frequent periods of recall service. By reserving pay-of-the-office for those retired judges actually performing recall service, there will be an incentive for retired judges to continue offering their expertise in a time of need.

Sec. 404. Annual reports on workload of the United States Court of Appeals for Veterans Claims.

Section 404 of the Committee bill would establish an annual reporting requirement for CAVC. The Court would be required to submit to the Committees on Veterans' Affairs of the Senate and House of Representatives an annual report summarizing the workload of the Court.

Background. The Court's workload has increased dramatically in recent years. Between FY 1998 and FY 2004, approximately 200 cases were filed monthly with the Court. In FY 2005, that number began to increase, reaching an average of 387 cases per month in FY 2007. The FY 2007 total of 4,644 cases exceeded the Court's previous single year high by approximately 900 cases. This dramatic increase has raised concerns that CAVC may not have the resources it needs to keep pace with its workload. However, there is currently a dearth of specific information on the unique characteristics of the Court's workload.

Committee Bill. Section 404 of the Committee bill would require CAVC to report to Congress annually on various details of its workload. The information required to be in the report would include the number of appeals, petitions, and applications for fees under the Equal Access to Justice Act (EAJA) filed with the Court. It would also include the total number of dispositions by the Court as a whole, by the Clerk of the Court, by a single judge, by multi-judge panels, and by the full Court and the number of each type of disposition by the Court, including settlement, affirmation, remand, vacation, dismissal, reversal, grant, and denial. In addition, the required information would include the median time from filing an appeal to disposition by the Court as a whole, by the Clerk of the Court, by a single judge, or by multiple judges; the median time from the filing of a petition to disposition by the Court; the median time from filing an EAJA application to disposition by the Court; and the median time from completion of the briefing requirements by the parties to disposition by the Court. The report would also include the number of oral arguments held by the Court; the number of cases appealed to the United States Court of Appeals for the Federal Circuit; the number and status of appeals, petitions, and EAJA applications pending at the end of the fiscal year; the number of cases pending for more than 18 months at the end of the fiscal year; and a summary of any service performed by recalled retired judges during the fiscal year.

In the view of the Committee, this information would be helpful in monitoring whether the Court has sufficient resources to provide claimants with timely and appropriate service.

TITLE V--INSURANCE MATTERS

Sec. 501. Report on inclusion of severe and acute Post Traumatic Stress Disorder among conditions covered by traumatic injury protection coverage under Servicemembers' Group Life Insurance.

Section 501 of the Committee bill, which is derived from S. 2965, would require VA, in consultation with the Department of Defense, to submit a report to Congress assessing the feasibility of and advisability of including severe and acute Post Traumatic Stress Disorder (PTSD) among the conditions covered by traumatic injury protection coverage under Servicemembers' Group Life Insurance (SGLI).

Background. Section 1032 of Public Law 109-13, the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Tsunami Relief, 2005 established traumatic injury protection coverage under the SGLI program. Traumatic Servicemembers' Group Life Insurance (TSGLI) provides coverage against qualifying losses incurred as a result of a traumatic injury event. In the event of a loss, VA will pay between $25,000 and $100,000 depending on the severity of the qualifying loss. A key factor in analyzing the severity of a particular traumatic injury is the impact it has on the length of hospitalization and rehabilitation for the injured servicemember.

At present, active duty and reserve component servicemembers with any amount of SGLI coverage are automatically covered under TSGLI. A premium (currently $1 monthly) is collected from covered members to meet peacetime program expenses; DOD is required to fund TSGLI program costs associated with the extra hazards of military service.

TSGLI was designed to provide severely injured servicemembers who suffer a loss as a direct result of a traumatic injury with short-term monetary assistance to lessen the economic burden on them and their families, who often incur financial hardships when they relocate to be with the member during long and difficult treatment and rehabilitation periods. Section 1980A(b)(1) of title 38, United States Code, lists some qualifying losses for which injured servicemembers are covered under TSGLI, including, among others, complete loss of vision, complete loss of hearing, amputation of a hand or foot and the inability to carry out the activities of daily living resulting from injury to the brain. PTSD is not currently among the conditions classified as qualifying losses. However, recent research on the severity of the problem suggests the concept should be studied.

In April 2008, the RAND Corporation released a study on post-deployment PTSD, major depression and traumatic brain injury entitled: `Invisible Wounds of War.' Based on the results of a telephone survey of 1,965 previously deployed individuals, the study estimated that approximately 300,000 of the 1.64 million servicemembers who have returned from Iraq and Afghanistan suffer from symptoms of PTSD or major depression. These findings suggest a widespread problem, which, in its most severe and acute manifestations, can have a significant impact on readjustment and earning capacity. RAND estimated that the cost of an invisible wound in terms of lost productivity, treatment, and other impacts over the two-year period immediately following deployment ranges from $5,904 to $25,757 per person. RAND noted that this estimate does not include potential costs associated with homelessness, domestic violence, family strain, and substance abuse.

Committee Bill. Section 501 of the Committee bill would require VA, in consultation with DOD, to submit a report to House and Senate Committees on Veterans' Affairs and Committees on Armed Services assessing the feasibility and advisability of including severe and acute PTSD among the conditions covered by TSGLI. The report would be due to the Committees not later than 180 days after enactment of this bill.

The Committee bill would require VA to specifically consider certain factors in preparation of the assessment: the advisability of providing TSGLI coverage to individuals who suffer from PTSD as a result of military service in a combat zone which renders them unable to carry out the daily activities of living; the unique circumstances of military service in a combat zone; any financial strain incurred by family members of those suffering from severe and acute PTSD; the recovery time, and any particular difficulties of the recovery process, associated with severe and acute PTSD; and other matters as VA considers appropriate.

Sec. 502. Treatment of stillborn children as insurable dependents under Servicemembers' Group Life Insurance.

Section 502 of the Committee bill, which is derived from S. 2946, would allow a stillborn child to be an insurable dependent under SGLI.

Background. In 2001, section 4 of the `Veterans' Survivor Benefits Improvements Act of 2001', Public Law 107-14, established a program of family insurance coverage under SGLI through which an SGLI-insured member's insurable dependents, defined as the member's spouse and children, could also be insured. A member's spouse may be insured in an amount up to $100,000. Coverage of a member's children is automatic and is in the amount of $10,000 for each child. Under current law, stillborn children are not eligible for coverage as insurable dependents under SGLI.

A lawsuit, Warnock v. Office of Servicemembers' Group Life Insurance, No. 1:03-cv-1329-DFH, 2004 U.S. Dist. LEXIS 8533 (S.D. Ind. April 28, 2004), raised the issue as to whether a member's stillborn child is covered as an insurable dependent under SGLI. The plaintiff argued that the stillbirth of his child at 38 weeks gestational age should be covered under SGLI. The Court dismissed the lawsuit for failure to state a claim upon which relief could be granted, ruling that applicable statutes and the SGL