Awards and Offsets for Paired Organs and Extremities Under 38 CFR 3.383

Overview

In This Section

This section contains the following topics:

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1. Prohibition Against Duplication of Benefits

Introduction

This topic contains information on the prohibition against duplication of benefits, including

• offsetting benefits under 38 U.S.C. 1160 due to damage recovery
• when the offset provisions apply
• damage recoveries involving non-service-connected (NSC) organs or extremities, and
• Veteran’s duty to notify the Department of Veterans Affairs (VA) of damages recovered.

Change Date

September 23, 2019

VIII.iv.7.B.1.a. Offsetting Benefits Under 38 U.S.C. 1160 Due to Damage Recovery

If in a case of compensation for paired organs or extremities, the loss or loss of use (L/LOU) of the non-service-connected (NSC) organ or extremity results from circumstances that could give rise to legal liability, the Veteran may seek to recover damages by lawsuit or other means.

If the Veteran does successfully recover damages, the amount of damages received (for the NSC disability only) must be offset against the additional benefit payable under 38 U.S.C. 1160.

Reference: For more information on compensation for paired organs or extremities, see M21-1, Part VIII, Subpart iv, 7.A.

VIII.iv.7.B.1.b. When the Offset Provisions Apply

Offset provisions involving the paired extremities of the hands or feet only have long been in effect, and continue to be in effect, while the offset provisions concerning the remaining paired organs or extremities listed in M21-1, Part VIII, Subpart iv, 7.A.1.b apply only to cases in which compensation was awarded or increased after October 27, 1986.

VIII.iv.7.B.1.c. Damage Recoveries Involving NSC Organs or Extremities

Benefits received under Social Security or workers’ compensation are not subject to recoupment, even though the benefits may have been awarded pursuant to a judicial proceeding.

All other recoveries related to the NSC organ or extremity are subject to offset, regardless of whether the payment to the Veteran is characterized as a

• tort award
• settlement
• compromise, or
• administrative award or judgment.

Rationale: The prohibition against duplication of benefits applies whenever the Veteran receives a sum of money or property to extinguish a legal claim arising from injury to the affected NSC organ or extremity.

VIII.iv.7.B.1.d. Veteran’s Duty to Notify VA of Damages Recovered

If the Veteran is receiving, or files a claim for, compensation for L/LOU of a paired organ due to NSC disability under 38 U.S.C. 1160, the Veteran is required to notify the Department of Veterans Affairs (VA) of any damages recovered, involving the paired organ or extremity, as the result of a

• lawsuit
• compromise
• settlement, or
• other recovery.

The Veteran should report to VA the total amount of money received.

Notes:

• If the Veteran refuses to provide the information required, and evidence essential for adjudication of the issue has been placed under a court seal, solicit the assistance of District Counsel in obtaining such evidence.
• Expenses incident to recovery, such as an attorney’s fees, may not be deducted from the amount to be reported.

2. Preparation of Awards Under 38 CFR 3.383

Introduction

This topic contains information on the preparation of awards under 38 CFR 3.383, including

• action to take when it appears a tort claim may have been filed
• determining the amount to be recouped
• monthly withholding amount for NSC paired organs and extremities
• effective date of the withholding
• how to enter the offset amount
• example of offset retroactive compensation
• providing notice of the award, and
• considering entitlement to Dependents’ Educational Assistance (DEA) for NSC disabilities treated as service-connected (SC) under 38 U.S.C 1160.

Change Date

February 20, 2025

VIII.iv.7.B.2.a. Action to Take When It Appears a Tort Claim May Have Been Filed

Do not defer award action because there is reason to believe a tort claim for damages has been filed against any party (VA or otherwise) based on the injury to the NSC paired organ or extremity.

Do defer award action and initiate development action to ascertain the date damages were received by the Veteran if there is reason to believe that a tort claim for damages has been finalized, but the date the Veteran recovered damages is not known.

VIII.iv.7.B.2.b. Determining the Amount to Be Recouped

The total amount to be recouped is the gross amount of the settlement or judgment.

Attorney’s fees, court costs, and other expenses incident to the claim are not deductible from the total amount awarded.

VIII.iv.7.B.2.c. Monthly Withholding Amount for NSC Paired Organs and Extremities

Withhold only the additional compensation, including amounts for dependents, payable for the NSC paired organ or extremity.

After withholding the additional compensation mentioned above, if the total payment is at a rate less than the combined evaluation of the service-connected (SC) disabilities

• withhold the remaining balance, including amounts for dependents, and
• exclude withholding for NSC disabilities compensable under 38 U.S.C. 1160.

VIII.iv.7.B.2.d. Effective Date of the Withholding

Commence withholding compensation effective the first of the month after the month during which the Veteran received damages as a result of injury to the NSC organ or extremity.

If the Veteran receives payments in installments, start the withholding the first of the month after the month during which the first installment was received.

VIII.iv.7.B.2.e. How to Enter the Offset Amount

When adjusting benefits in the Veterans Benefits Management System - Awards (VBMS-A), enter the following on the DISABILITY PAY tab of the AWARD ADJUSTMENTS screen:

• Tort in the PAYMENT TYPE field
• the offset amount in the ORIGINAL BALANCE field, and
• the effective date of the award adjustment in the AWARD EFFECTIVE DATE field.

Reference: For more information on entering offset amounts in VBMS-A, see the VBMS Awards User Guide.

VIII.iv.7.B.2.f. Example of Offset Retroactive Compensation

Do not offset compensation payable for any period before the month following the date on which the settlement or judgment becomes final.

Example: A judgment for an NSC extremity is final on June 15, 2015. The rating activity later awards special monthly compensation effective March 16, 2015, for the paired extremities under 38 U.S.C. 1160.

Result: Do not offset any portion of the compensation benefits prior to July 1, 2015, the month following the date the judgment became final.

VIII.iv.7.B.2.g. Providing Notice of the Award

Send a locally-generated letter, explaining the basis of the award, and

• telling the Veteran to inform VA immediately if they recover damages from any source because of injury to the NSC organ or extremity, or
• (if offset of the benefit is required) explaining the requirement for recoupment of an amount equal to the gross amount of any damages received.

VIII.iv.7.B.2.h. Considering Entitlement to DEA for NSC Disabilities Treated as SC Under 38 U.S.C 1160

A Veteran may be entitled to Dependents’ Educational Assistance (DEA), as established under 38 CFR 3.807(c), amended effective December 6, 1994, when disabilities are treated as if SC under 38 U.S.C. 1160.

A Veteran is not entitled to the following ancillary benefits unless entitlement is based on SC disabilities for which compensation is payable without regard to the provisions of 38 U.S.C. 1160:

• automobile or adapted equipment, per M21-1, Part XIII, Subpart i, 2.A
• specially adapted housing, per M21-1, Part XIII, Subpart i, 2.B, and
• the Civilian Health and Medical Program of VA, per 38 U.S.C. 1781 and M21-1, Part XIII, Subpart i, 3.H.

Reference: For more information on entitlement to DEA under 38 U.S.C. 1160, see Kimberlin v. Brown, 5 Vet. App. 174 (1993).