Lorio: DIC and SBP Payments

Lorio v. Collins, Case Number 22-1323, decided March 6, 2025 concerns whether the VA had authority to withhold DIC payments to prevent concurrent receipt of Survivor Benefit Plan (SBP) and DIC benefits. 

Appellant began receiving SBP in 1994, which is a subsidized insurance plan that provides annuity payments to survivors of military retirees, and in 2015 was granted DIC effective 1994.  At the time, a surviving spouse could not receive both SBP and DIC.  However, in 2008 Congress mandated certain notice requirements where recoupment of benefits is proposed subject to the DIC-SBP offset. 

“This Court previously addressed SBP in Roberts v. McDonald, where the Court reviewed a Board determination that VA had properly withheld a portion of retroactive DIC benefits based on receipt of SBP payments. 27 Vet.App. 108 (2014). The Board relied on 38 C.F.R. § 3.658 as the withholding authority but the Secretary conceded that this was incorrect and proffered that VA's DIC withholding authority stemmed from 38 U.S.C. § 5314, 38 C.F.R. §§ 1.911(a), 1.912a(a), and a 2010 memorandum of understanding (MOU)4 between VA and DOD. Roberts, 27 Vet.App. at 110. The Court remanded the appeal, concluding that reliance on inapplicable authority deprived Ms. Roberts of reasonable notice and fair process.” Id. at *3.

“As relevant here, the Court also concluded that section 5314 and §§ 1.911(a) and 1.912a did not appear to apply because they involved overpayment of VA benefits, not DOD benefits. Id. at 112-13. And to the extent that the Secretary relied on a DOD regulation to support VA's authority to withhold benefits, the Court indicated that "the regulation appears to contemplate written authorization from the SBP annuitant before there is a reduction in DIC to satisfy an SBP annuity overpayment." Id. at 113 (citing DOD Financial Management Regulation, vol. 7B, ch. 46, paras. 460402, 460701 (July 2011)). As will be discussed, Roberts has implications for the Court's resolution of Ms. Lorio's case.”  Id. at *3-4.

After being granted DIC, “Ms. Lorio through counsel appealed to the Board, challenging the RO's withholding of retroactive DIC benefits and arguing that VA did not properly provide notice of the SBP overpayment and DIC withholding. In January 2019, the Board remanded the withholding issue, agreeing that Ms. Lorio was not properly notified prior to VA's withholding of DIC benefits. The Board again remanded the issue in October 2019, finding that Ms. Lorio had not been provided proper notice of and an opportunity to dispute the withholding and because the RO failed to comply with prior Board remand directives.”  Id. at *5.

“In her principal brief, Ms. Lorio argued that the Board clearly erred in determining that VA had authority to withhold retroactive DIC benefits and forward those benefits to DOD.   Although she acknowledged that she's not entitled to receive both DIC and SBP benefits for the same period, she argued that, because a statute pertaining to DOD, 10 U.S.C. § 1450(c)(1), prohibits receipt of SBP (rather than DIC), the Secretary of the Army, not the VA Secretary, is responsible for recouping erroneously paid SBP benefits, id. at 11 (citing 10 U.S.C. §§ 1450(c), 1453(a)). Ms. Lorio further asserted that the legal authority identified by the Board—section 5301 of title 38, the Appropriations Clause, and the VA-DOD MOU—did not provide VA with authority to withhold DIC benefits. Ms. Lorio argued that the proper remedy was remand for the Board to provide section 1450(c)(3)-compliant notice to ensure proper accounting of the SBP overpayment, id. at 14-22, noting that the current accounting didn't address whether SBP premium refunds were reimbursed or the varying tax consequences of SBP and DIC payments.”  Id. at *6.

Ultimately, the Court remanded.  It explained:

“In sum, the Court concludes that the Board failed to provide Ms. Lorio adequate notice and fair process prior to rendering its November 2021 decision, and that the matter must be remanded. Upon readjudication, the Board must provide legal authority for the withholding and process undertaken in Ms. Lorio's case, consider in the first instance evidence secured by the Secretary during this appeal, consisting of Ms. Lorio's April 1994 SBP application and Ms. Lauver's declaration, and the parties' competing arguments regarding the import of that evidence. The Board must also independently review Ms. Lauver's accounting with specific attention to any discrepancies identified and address the parties' competing arguments regarding whether the accounting should address the differing tax consequences of SBP and DIC payments.”  Id. at *13.

Decision by Judges Bartley, Meredith, and Jaquith.

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Shorette: The VA Fiduciary Program and Sanctions

Shorette v. McDonough, Case Number 23-7775, resulted in a February 6, 2025 order dismissing the motion for extraordinary relief. 

Without fully detailing the past history of the case, the petitioner was the spouse of a veteran who had served as her husband’s VA fiduciary and was removed by the VA.  From 2008 until 2018 she had served and allocated approximately $3,000 per month toward family expenses for the veteran’s dependents.  However, she was removed after a medical record suggested she was misusing the veteran’s funds.  When a successor fiduciary was appointed, no benefits were allocated for his dependents and family expenses.  Ultimately, the VA found there had been no misuse and funds, but still did not restore the wife as the fiduciary and ignored her appeal.

Ultimately a 2024 order granted much of what the spouse wanted, but this order finalized the rest of the case.  The petitioner had asked for sanctions against the Secretary.  The Court did not sanction the Secretary stating:

“Upon consideration of the foregoing, the Court will exercise restraint and will not impose sanctions. In that regard, although the Secretary's August 8, 2024, response and the P&F analyst's declaration could have been—indeed, should have been—clearer, the Court accepts counsel's representation, as an officer of the Court, that VA did not intentionally provide false information to the Court. Further, given counsel's explanations that VA viewed that information as nuanced and proactively attempted to clarify those nuances at oral argument, the Court concludes that it is not clear and convincing that VA failed to comply with an order of the Court.”

Id. at *6-7.

Judge Bartley wrote a concurrence stating:

“I agree, although reluctantly, that sanctions are not warranted in this matter. I write separately to emphasize that VA's actions regarding Ms. Shorette have been inconsistent with its mission to care for veterans and their families. It goes without saying that VA doesn't err when it investigates misuse-of-funds allegations, but VA went far beyond that here. It refused to reinstate a spouse-fiduciary once misuse allegations were determined to be unfounded and for many years deprived Ms. Shorette of benefit payments that it acknowledges she was entitled to receive. Based on the records before the Court, it is understandable why Ms. Shorette would conclude that VA's actions were punitive and retaliatory in nature—intent on punishing her for challenging their misuse-of-funds determination, for demonstrating that she had not misused funds, for proving that she had appealed her removal as a spouse-fiduciary and the subsequent appointment of a paid fiduciary, for proving that she was entitled to reinstatement as spouse-fiduciary, and for achieving at least some success in petitioning this Court. In conclusion, it is clear that VA's Veterans Benefits Administration Pension and Fiduciary Service requires substantially more thorough oversight to ensure, among other things, that it is not wasting government funds retaliating against the veterans and family members it is sworn to protect and assist.”

Id. at *7.

While the entire VA claims process can be byzantine, the VA’s fiduciary program makes the rest of the VA look like quick and accurate justice.  The fiduciary program is simply the worst process I’ve ever heard of at the VA.  It should reiterate that any veteran who can, should avoid it if possible.  I am also concerned that the Secretary would not level sanctions in this case, if not here—when.

Per Curiam decision by Judges Bartley, Meredith and Laurer.

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