. Overview of the Process to Issue a Fee Allocation Notice

3. Making the Fee Eligibility Decision, Deciding Fee Allocation, and Sending Decision Notice

Introduction

This topic contains information on making an agent or attorney fee eligibility decision and sending decision notice, including

• overview of the process to issue a fee allocation notice
• when a fee allocation notice is required
• which parties must be sent a fee allocation notice
• criteria for determining eligibility to direct payment of fees and addressing fee eligibility on the fee allocation notice
• determining fee allocation
• mandatory fee allocation calculator
• generating the fee allocation notice
• required language on the fee allocation notice
• calculating agent or attorney assessments when making the fee decision, and
• when to issue a corrected, newly dated fee allocation notice.

Change Date

June 4, 2026

8.B. 3.a.. Overview of the Process to Issue a Fee Allocation Notice

A Fee Allocation Notice is a VA decision which explains whether the agents or attorneys who represented the claimant on a case are eligible for direct payment of fees and provides one of two default fee allocations.

For the purposes of determining what is part of the case, use the date of retroactive award or the date of claim, whichever is earlier. Any agent or attorney who submitted a valid VA Form 21-22a and provided representation for any length of time from the earlier of the date of retroactive award or the date of claim through the date of the VA decision granting benefits is considered to have represented on the case.

The table below provides an overview of the process for issuing a Fee Allocation Notice. The authorizing AAFC at the station that processes the represented claimant’s VA decision granting a benefit is responsible for following the below steps. Specific guidance on each step of the process is provided in the referenced blocks of each step.

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Reference: For more information on the stages in the process for direct payment of fees, see M21-5, Chapter 8, Section B, 1.a

8.B. 3.b.. When a Fee Allocation Notice is Required

A Fee Allocation Notice is required whenever a VA decision grants a benefit on a case and one or more direct-pay fee agreements have been filed for that case. A Fee Allocation Notice is not required for:

• claims with only denial and/or confirmed and continued decisions,
• cases without any direct pay fee agreements of record, and
• cases where all direct pay fee agreements have been unambiguously waived.

The table below provides guidance when a Fee Allocation Notice is required.

Scroll sideways to see the full table.

Notes:

• AAFCs must issue a Fee Allocation Notice on every claim that meets the requirements of this block, including claims where the only benefits granted would never result in a payment of compensation or pension benefits to the claimant, such as Dependents Educational Assistance and service connection for treatment purposes only under chapter 17(known as non-monetary issues). However, when a claim does grant benefits which could result in a payment of compensation or pension benefits to the claimant, then claims processors are not required to list the non-monetary issues on the Fee Allocation Notice.
• To ensure that agents and attorneys have the opportunity to dispute fee decisions, AAFCs must still draft and send a Fee Allocation Notice when the requirements of this block have been satisfied to representatives whose VA Form 21-22a or fee agreement limits the issues on which they are providing representation. If a granted issue is not within the scope of the agent or attorney's representation, as described in either the VA Form 21-22a or fee agreement, then the Fee Allocation Notice should deny entitlement to direct payment of fees to that agent or attorney based on the limited agreement.

Important: An unambiguous waiver is one that clearly waives fees between the agent/attorney and the Veteran/claimant without any stipulations or conditions. If the waiver has any stipulations or conditions (e.g., an attorney waives fees if they are paid to another attorney at the same firm) do not consider it an unambiguous waiver.

References: For more information on

• determining which agents and attorneys represented on the case, see M21-5, Chapter 8, Section B, 3.a
• addressing fee eligibility and allocation on the Fee Allocation Notice, see M21-5, Chapter 8, Section B, 3.d
• the stages in the process for direct payment of fees, see M21-5, Chapter 8, Section B, 1.a
• making a decision on the basis that the calculated past-due benefits is $0, see M21-5, Chapter 8, Section B, 2.g
• use of EP 290 for fee case, see M21-4, Appendix B, and
• the claim label Attorney Fee Eligib ility Determination, see M21-4, Appendix C.

8.B. 3.c. Which Parties Must be Sent a Fee Allocation Notice

While determining if a Fee Allocation Notice is required (as discussed in M21-5, Chapter 8, Section B, 3.b), AAFC's will be reviewing which agents and attorneys represented on the case. If a Fee Allocation Notice is required, then the notice must be sent to:

• the claimant,
• the claimant's current representative, and
• all agents and attorneys who represented on the case, including any representatives who waived fees or did not submit a direct pay fee agreement.

Only one version of the Fee Allocation Notice will be prepared to explain fee eligibility and allocation. However, the claimant and all agents and attorneys who represented on the case must be sent the notice with their mailing address on the letter. T he claimant's current representative must be CC'd a copy of the claimant's letter, even if they are sent their own notice at their mailing address.

When generating the Fee Allocation Notice, perform a one-time clear of EP 290, Attorney Fee Eligibility Determination. A single EP 290 is cleared regardless of the number of agents or attorneys who will receive a Fee Allocation Notice.

Note: The instructions in this block only apply after you have determined that a Fee Allocation Notice is required. As explained in M21-5, Chapter 8, Section B, 3.b, if there are no valid direct pay fee agreements (or all valid fee agreements have been unambiguously waived), then no Fee Allocation Notice is required at all.

Example 1: Records in the eFolder indicate that three attorneys provided representation on the case. Only one of the three attorneys submitted a direct pay fee agreement, and that attorney has since submitted an unambiguous waiver of all fees.

Analysis 1: A Fee Allocation Notice is not required since two attorneys did not submit a fee agreement, and the third attorney has unambiguously waived their eligibility to fees.

Example 2: Records in the eFolder indicate that three attorneys provided representation on the case. Two of the three attorneys submitted a valid direct pay fee agreement, and one of those attorneys has since submitted an unambiguous waiver of all fees. No waiver of fees has been received from the other attorney with a valid direct pay fee agreement.

Analysis 2: A Fee Allocation Notice is required since there is at least one valid direct pay fee agreement which has not been unambiguously waived. The Fee Allocation Notice must be addressed to the claimant and all three attorneys who provided representation on the case (including the attorney who did not submit a direct pay fee agreement and the attorney who submitted an unambiguous waiver of all fees). The claimant’s current representative must receive a cc’d copy of the claimant’s notice.

References: For more information on

• determining which agents and attorneys represented on the case, see M21-5, Chapter 8, Section B, 3.a
• when a fee allocation notice is required, see M21-5, Chapter 8, Section B, 3.b
• criteria for determining eligibility to direct payment of fees and addressing fee eligibility on the Fee Allocation Notice, see M21-5, Chapter 8, Section B, 3.d
• determining fee allocation, see M21-5, Chapter 8, Section B, 3.e.

8.B. 3.d. Criteria for Determining Eligibility to Direct Payment of Fees and Addressing Fee Eligibility on the Fee Allocation Notice

When a Fee Allocation Notice is required (as discussed in M21-5, Chapter 8, Section B, 3.b), determine eligibility by evaluating whether the facts meet the regulatory criteria from 38 CFR 14.636, as discussed in M21-5, Chapter 8, Section A, 1.

AAFCs should first determine if the claim itself is eligible for direct payment of fees. In situations where the claim itself is not eligible for fees (e.g., no change in payment rate, no qualifying review type, etc.), the Fee Allocation Notice must explain the reason why the claim is not eligible for direct payment of fees. The specific eligibility of the individual agents or attorneys who represented on the case does not need to be addressed when the claim itself is ineligible for direct payment of fees.

In situations where the claim is eligible for direct payment of fees, AAFCs must then determine the eligibility to direct payment of fees of all agents and attorneys who represented on the case. This eligibility determination must be addressed on the Fee Allocation Notice.

An agent or attorney being found eligible to direct payment of fees does not necessarily mean that they will be paid any portion of the fee. See M21-5, Chapter 8, Section B, 3.e for instructions on how fees are allocated.

Decisions that an agent or attorney is ineligible for direct payment of fees must be explicitly explained on the Fee Allocation Notice. Reasons that an individual agent or attorney may not be eligible for direct payment of fees include (but are not limited to):

• no direct payment fee agreement
• submission of an unambiguous waiver of fees
• representative is unaccredited on the date the Fee Allocation Notice is prepared
• representation ended before the initial VA decision on an issue.

AAFCs must carefully review any waivers of fees to determine if they are unambiguous. An unambiguous waiver is one that clearly waives fees between the agent/attorney and the Veteran/claimant without any stipulations or conditions. If the waiver has any stipulations or conditions (e.g., an attorney waives fees only if the fees are paid to another attorney at the same firm) then do not consider it an unambiguous waiver. Any agents or attorneys who submitted a waiver which is not unambiguous should be considered eligible for fees.

Notes:

• For determining which agents and attorneys represented on the case, see M21-5, Chapter 8, Section B, 3.a
• Waiving fees on a single clai m but reserving the right to collect fees on future claims is considered unambiguous as long as there are no other stipulations or conditions.
• Agents or attorneys who submit unambiguous waivers before a Fee Allocation Notice is issued are not eligible for fees. Their ineligibility to direct payment of fees must be addressed on the Fee Allocation Notice.

Important: For fee cases to which the guidance in effect prior to February 19, 2019, is applicable, previously issued guidance can be found in the historical M21-1, Part I, 3.C attachment Historical_M21-1I_3_SecC_4-28-17.docx.

8.B. 3.e. Determining Fee Allocation

If both the claim and at least one agent or attorney is eligible for direct payment of fees, as explained in M21-5, Chapter 8, Section B, 3.d, the AAFC must determine to whom fees will be paid, known as the fee allocation. There are two default fee allocations.

The table below summarizes the two default fee allocations, the criteria for each allocation, and how fees should be released.

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A "continuous agent or attorney" means an agent or attorney who provided representation that continued through the date of the decision awarding benefits. This does not require that an agent or attorney was the representative for the entire lifecycle of the claim. There is no required length of time that the agent or attorney must be the representative, but they must be representing the claimant or appellant on the date of the rating or non-rating decision which awarded benefits. To receive the full fee, a representative must both be the continuous agent or attorney and be eligible for direct payment of fees. The eligibility or ineligibility of other agents or attorneys who represented on the case, as explained in M21-5, Chapter 8, Section B, 3.d, does not affect fee allocation when the continuous agent or attorney is eligible for direct payment of fees.

Notes:

• VA will not honor any request to split fees in a manner except one of the two default fee allocations, or as directed by OGC or the Board of Veterans' Appeals.
• When direct payment of fees is warranted, the fee allocation must be entered as free text in the "What We Decided and Why" section of the letter in VBMS-A. On the Fee Allocation Notice Template, select the appropriate fee allocation drop down option.
• For the purposes of determining who has represented in the case, use the date of retroactive award or the date of claim, whichever is earlier. Any agent or attorney who provided representation during this period is considered to have represented on the case.
• An unambiguous waiver of fees is not considered retroactive unless specifically identified as such by the agent or attorney. If an agent or attorney submits a notice which unambiguously waives fees which were already allocated on a Fee Allocation Notice but before the fees are released, that portion of the fees should be released to the claimant. Do not reallocate fees between other agents/attorneys or issue a new Fee Allocation Notice.

Important: Do not include agents or attorneys who are ineligible for direct payment of fees when splitting the fee.

References: For more information on the required language for allocating fees, see the Fee Allocation Notice Letter Type Guide.

8.B. 3.f. Mandatory Fee Allocation Calculator

In claims where a continuous agent or attorney is not eligible for direct payment of fees, use the Fee Allocation Calculator to determine the

• amount of fee split which should be released to the claimant/appellant,
• amount of fee split which should be returned to appropriations,
• amount of fee split payable to each eligible agent or attorney, and
• amount of assessment applicable to each agent/attorney.

AAFCs must use the Fee Allocation Calculator if at least one agent or attorney is eligible for direct payment of fees but there is no continuous agent or attorney eligible for direct payment of fees. The calculator results worksheet must be uploaded to VBMS.

Note: Use of the Fee Allocation Calculator is not required when:

• fees are allocated to a continuous agent or attorney, or
• no agent or attorney is eligible for direct payment of fees for the case.

Important: Do not include agents or attorneys who are ineligible for direct payment of fees when splitting the fee.

References: For more information on when the claimant/appellant's portion of a fee should be returned to appropriations in partial or complete Rosinski claims, see M21-5, Chapter 8, Section B, 4.d.

8.B. 3.g. Generating the Fee Allocation Notice

The Fee Allocation Notice is usually created using either the "Fee Allocation Notice Letter" section of the Agent/Attorney Fee Tab in VBMS-A or Letters UI in VBMS-Core, depending on the decision being issued.

The Fee Allocation Notice must include:

• a list of which issues were awarded benefits
• non-monetary issues may be left off the notice if the notice includes all monetary issues which were awarded benefits
• denied issues and confirmed and continued issues are not required on the notice, but if VA systems add them automatically they do not need to be removed
• if attorney fees are withheld, the amount of past-due benefits and amount withheld for fees
• either
• a determination that the claim is not eligible for direct payment of attorney fees, or
• eligibility determinations of all agents and attorneys who provided representation on the case,
• the fee allocation (unless the claim is not eligible for direct payment of attorney fees),
• any additional required language (see M21-5, Chapter 8, Section B, 3.h).

Note: The Fee Allocation Notice template letter must be used if either system is not available or a scenario would prohibit the use of VBMS-A fee decision notice functionality.

Important: Send the OGC Fact Sheet, " How to Challenge a Default Fee Allocation," with the fee decision notification. The outdated "How to Challenge a Fee" form was rescinded on April 1, 2025.

References: For more information on

• criteria for determining eligibility to direct payment of fees and addressing fee eligibility on the Fee Allocation Notice, see M21-5, Chapter 8, Section B, 3.d,
• determining fee allocation, see M21-5, Chapter 8, Section B, 3.e,
• the decision and allocation language to use on the Fee Allocation Notice, see the Fee Allocation Notice Letter Type Guide
• providing notice when a fee agreement is submitted by an agent or attorney but there is no VA Form 21-22a of record, see M21-5, Chapter 8, Section A, 3.c, and
• the letter to send when a fee agreement received is unacceptable, see M21-5, Chapter 8, Section A, 3.d.

8.B. 3.h. Required Language on the Fee Allocation Notice

Fees are calculated based on gross award amounts prior to any type of reduction (MRP, drill pay, existing debt, etc.). This sometimes means that the calculated fee amount will exceed either

• the net effect of the award, or
• any remaining amount of the net effect after an existing debt is deducted.

In addition to the fee eligibility decision and fee allocation decision, when either of the above situations occurs, the Fee Allocation Notice must also explain to the parties that VA will be paying some or all of the fees from appropriations and may recover those fees if certain criteria are met. AAFCs must ensure that this required language is on the Fee Allocation Notice by selecting either the All Requirements Met, Calculation with MRP Offset or All Requirements Met, Calculation with Non-MRP Other Offset letter type when generating the notice. Use the MRP Offset version of the letter if any portion of the withholding is due to MRP. Use the Non-MRP Other Offset version if there is no MRP withholding whatsoever.

Note: If the net effect of the award is sufficient to withhold the entire fee amount after any offsets or reductions, then this additional language is not required because VA will not be paying any of the fees.

References: For more information on

• calculation of past-due benefits - reductions, offsets, and overpayment, see M21-5, Chapter 8, Section B, 2.f
• recovery of fees paid by VA in the absence of a non-recurrent payment to the claimant because of offset/reduction, see M21-5, Chapter 8, Section B, 6.e.

8.B. 3.i. Calculating Agent or Attorney Assessments When Making the Fee Decision

38 CFR 14.636(h) provides that VA will charge and collect an assessment out of the fees paid directly to agents or attorneys from past-due benefits. The amount of the assessment is 5 percent of the fees to be paid to the agent(s) or attorney(s), not to exceed $100.

If the claimant is allocated a portion of the fee, this amount is not included when calculating the total assessment because it is not being paid directly to an agent or attorney. No assessment is charged on the claimant's portion of the fee allocation.

In claims without a continuous agent or attorney eligible for direct payment of fees, the total assessment will be split between all agents and attorneys eligible for direct payment of fees. VA will charge the same assessment amount to each agent and attorney, but the assessment may not always divide evenly between all eligible agents and attorneys. Therefore, the total assessment collected may not always equal the total calculated assessment.

Example: An assessment of $100 divided between three attorneys results in $33.33 being charged to each attorney. The total collected assessment is therefore only $99.99.

The actual collection of the assessment amount does not occur until fee amounts are released and this in turn is dependent on whether there is an appeal on theFee Allocation Notice. However, the AAFC must calculate the assessment at the time the fee decision is made. Fee Allocation Notices must inform agents/attorneys that an assessment is being taken pursuant to 38 U.S.C. 5904(a)(6). The exact amount of the assessment is not required to be included in the decision letter.

8.B. 3.j. When to Issue a Corrected, Newly Dated Fee Allocation Notice

The issuance of a newly dated Fee Allocation Notice resets the appeal period and delays the release of fees to all parties. This delay is necessary and unavoidable when a Fee Allocation Notice is materially deficient. A Fee Allocation Notice is considered materially deficient if the notice

• was not sent via package manager to the claimant,
• was not sent via package manager to an agent/attorney who represented on the case,
• was returned as undeliverable from an agent/attorney who represented on the case,
• failed to list all monetary issues which were granted,
• failed to include required language (e.g., MRP offset, non-MRP offset, etc.) if the full amount of the fee was not withheld from the net effect of the award,
• included any inaccurate monetary amount (e.g., amount of past-due benefits, amount payable for fees, net entitlement amount, etc.),
• incorrectly decided eligibility to fees if that incorrect decision changed the allocation of fees, or
• incorrectly decided allocation of fees.

A corrected, newly dated Fee Allocation Notice is required when an AAFC identifies that a Fee Allocation is materially deficient as defined above. The new notice must specifically state in its introduction that

• it is a correction to a previous Fee Allocation Notice,
• the date of the previous notice being corrected, and
• the deficiency with the previous notice that requires issuance of a new notice.

Note: A monetary issue, for the purpose of this block, means a benefit which could result in a payment of compensation or pension benefits to the claimant. Non-monetary issues are any benefit which would never result in a payment of compensation or pension benefits, such as grants for treatment only under Chapter 17 or notification of eligibility to Dependents Educational Assistance. A corrected, newly dated notice is not required to add a non-monetary issue which may have been left off the notice if the notice includes all monetary issues granted.

Important: When OGC or the Board issues a decision regarding fees, do not send a new Fee Allocation Notice unless Board remand instructions require the issuance of a new notice. The Board may either explicitly order that a new notice is sent, or remand instructions may lead to a new notice being required (for example, if the Board remand orders recalculation of fees). Board remand instructions to forward a claim to OGC for reasonableness review do not require a new Fee Allocation Notice.

Reference: For more information on generating a decision notice for a fee decision, see M21-5, Chapter 8, Section B, 3.g.