What this means
m21-5:8.B.6 explains when to consider action for failure to make funds available for fees. In plain terms, the official guidance says VA’s failure to perform finance transactions to make funds available for payment of fees in cases where the award did not result in a non-recurrent payment because of a qualifying offset/reduction, requires corrective action only when the fee issue was pending on or after January 30, 2020 – the date of Rosinski v. It also addresses in cases where the claims processor correctly performed the necessary finance transactions to make funds available, but due to system failure only part of the fee was correctly deducted, procedures found in this block should only be performed for the amount that did not properly withhold.
How this may help with a claim
Use m21-5:8.B.6 to audit how VA handled when to consider action for failure to make funds available for fees. Start with the decision date, the issue being reviewed, and the evidence VA was allowed to consider, then compare the record with this rule: VA’s failure to perform finance transactions to make funds available for payment of fees in cases where the award did not result in a non-recurrent payment because of a qualifying offset/reduction, requires corrective action only when the fee issue was pending on or after January 30, 2020 – the date of Rosinski v. In cases where the claims processor correctly performed the necessary finance transactions to make funds available, but due to system failure only part of the fee was correctly deducted, procedures found in this block should only be performed for the amount that did not properly withhold. Cite the exact document and page when raising a factual or procedural error, and use the review rights in the actual notice for any deadline.
What to review in your file
- Check the file against this official condition: when to consider action for failure to make funds available for fees
- Confirm that the record or notice addresses this source point: corrective action for failure to make funds available for payment of fees when
- Document how this stated step or exception applies: 8.B.6.a. When to Consider Action for Failure to Make Funds Available for Fees
Important limits
m21-5:8.B.6 explains VA guidance for when to consider action for failure to make funds available for fees; it does not guarantee an award or replace the statutes, regulations, binding decisions, and review instructions that control an individual claim. Conditions and exceptions still matter, including this source point: VA’s failure to perform finance transactions to make funds available for payment of fees in cases where the award did not result in a non-recurrent payment because of a qualifying offset/reduction, requires corrective action only when the fee issue was pending on or after January 30, 2020 – the date of Rosinski v. If the AEW results in an award covering a later period than for which fees were previously paid, VA would not be permitted to recoup fees that VA paid from the non-recurrent compensation due to the Veteran because that compensation would constitute future benefits with respect to that particular attorney fee.
Search terms when useful
Phrases that may help when searching your claim file or this library.
- When to Consider Action for Failure to Make Funds Available for Fees
- m21-5:8.B.6
- When Consider Action
- Failure Make Funds
- Corrective Action Failure Make
- when consider action failure
- effect failure make funds
- award result retroactive payment
Original VA guidance
The official VA text of this section
6. Corrective Action for Failure to Make Funds Available For Payment of Fees and Recouping Fee Payments
Introduction
This topic contains information on failure to withhold amounts from past-due benefits or otherwise make funds available for payment of fees, including
- when to consider action for failure to make funds available for fees
- effect of VA failure to make funds available on fee entitlement
- corrective action for failure to make funds available for payment of fees when
- the award did not result in a retroactive payment, and
- a retroactive payment of past-due benefits has been released
- recovery of fees paid by VA in the absence of a non-recurrent payment to the claimant because of an offset/reduction, and
- mandatory AEW fee 04E calculator.
Change Date
April 1, 2025
8.B.6.a. When to Consider Action for Failure to Make Funds Available for Fees
Corrective action is required when:
- substantive and procedural requirements in 38 CFR 14.636(g) have been met,
- contains additional fee terms specified in 38 CFR 14.636(h) to the extent consistent with case law,
- VA failed to perform financial transactions to make funds available for direct payment of fees before an award of past-due benefits was made as required in M21-5, Chapter 8, Section B, 2, and
- the failure is either
- discovered after VA has awarded and released past-due benefits to the claimant, or
- discovered in cases where there the award did not include a non-recurrent payment to the claimant because of an offset or reduction as provided in M21-5, Chapter 8, Section B, 2.e.
Note: VA’s failure to perform finance transactions to make funds available for payment of fees in cases where the award did not result in a non-recurrent payment because of a qualifying offset/reduction, requires corrective action only when the fee issue was pending on or after January 30, 2020 – the date of Rosinski v. Wilkie, 32 Vet. App. 264 (2020). Prior to that date, VA’s interpretation of 38 CFR 14.636(h) was that, with certain exceptions, a fee agreement would only be honored and fees could only be paid under the direct fee pay program if the past-due benefits awarded resulted in a non-recurrent payment to the claimant from which owed fee amounts could be withheld.
An assertion or discovery after January 30, 2020, that VA failed to perform finance transactions to make funds available for payment of fees in a fee case falling under the Rosinski holding, but finally decided prior to the date of that holding, requires no corrective action.
References: For more information on
- guidance on withholding, paying fees and corrective action for failure to withhold prior to the January 30, 2020, decision in Rosinski, see the historical M21-1, Part I, 3.C attachment Historical_M21-1I_3_SecC_1-24-20.docx, and
- guidance on entitlement criteria applicable prior to February 19, 2019, see the historical M21-1, Part I, 3.C attachment Historical_M21-1I_3_SecC_4-28-17.docx.
8.B.6.b. Effect of VA Failure to Make Funds Available on Fee Entitlement
VA’s failure to perform financial transactions to make funds available for possible direct payment of fees does not relieve VA of its obligation to pay an agent or attorney the fees due.
8.B.6.c. Corrective Action for Failure to Make Funds Available for Payment of Fees when the Award did not Result in a Retroactive Payment
When VA has failed to perform financial transactions to make funds available for direct payment of fees and it was asserted or discovered after an award was completed that did not result in a retroactive payment to the claimant due to qualifying reduction/offset, follow the chart below to take corrective action (Complete Rosinski):
Scroll sideways to see the full table.
| Stage | Who Is Responsible | Description |
|---|---|---|
| 1 | AAFC (Initial Reviewer) | Calculates the appropriate amount of fees as specified in M21-5, Chapter 8, Section B, 2 establishes an EP 400 “Attorney Fee Memo” with the date of claim as the date of the award action that failed to withhold fees adds “Attorney Fee” tracked item with a 3-day suspense, and routes the calculator to the AAFC authorizer for review. |
| 2 | AAFC (Authorizer) | Verifies the accuracy of the calculator. If correct, the processing moves on to Stage 3. If incorrect, uses the deferral functionality in VBMS to return for correction. |
| 3 | AAFC (Authorizer) | Uploads the calculator to the eFolder closes “Attorney Fee” tracked item for the calculator review, and reviews the eFolder to determine if past due benefits were released based on the processing of an AEW. If the past due benefits were NOT released, move to Stage 4. If the past due benefits WERE released, follow the guidance in M21-5, Chapter 8, Section B, 6.d to notify the claimant of the failure to withhold and establish a debt. |
| 4 | AAFC (Authorizer) | Determines allocation of fees if there is no continuous agent or attorney eligible for direct payment of fees, prepares the fee allocation calculator and uploads it to the eFolder Adds “Attorney Fee” tracked item with a 65-day suspense sends either the All Requirements Met, Calculation with MRP Offset or All Requirements Met, Calculation with Non-MRP Other Offset Fee Allocation Notice, whichever is applicable, to the agent/attorney and claimant and all agents and attorneys who represented on the case, and performs a one-time clear of EP 290, with the date of claim as the date the fee decision notice is generated. |
| 5 | AAFC (Authorizer) | After expiration of the 65-day suspense: reviews the eFolder to confirm that the past due benefits are still being withheld due to a reduction/offset requests that the finance activity initiates the required transactions by completing and sending a Fee Release Memorandum selecting the action box labeled “No Fee Withheld” closes “Attorney Fee” tracked item, and establishes “Attorney Fee Release” tracked item with a 10-day suspense. |
| 6 | finance activity | Releases funds and uploads verification to the eFolder. |
| 7 | AAFC (Authorizer) | Closes “Attorney Fee Release” tracked item and clears EP 400. |
References: For more information on
- calculating the amount that should have been made available for payment of fees, see M21-5, Chapter 8, Section B, 2
- guidance on withholding, paying fees and corrective action for failure to withhold prior to the January 30, 2020, decision in Rosinski, see the historical M21-1, Part I, 3.C attachment Historical_M21-1I_3_SecC_1-24-20.docx
- guidance on entitlement criteria applicable prior to February 19, 2019, see the historical M21-1, Part I, 3.C attachment Historical_M21-1I_3_SecC_4-28-17.docx, and
- the Letter Creator tool, see the Letter Creator User Guide.
8.B.6.d. Corrective Action for Failure to Make Funds Available for Payment of Fees when a Retroactive Payment of Past-Due Benefits has been Released
When VA has failed to perform financial transactions to make funds available for direct payment of fees and it was asserted or discovered after a claimant has already received a retroactive payment of past-due benefits, follow the chart below to take corrective action (Non- Rosinski /Partial Rosinski):
Scroll sideways to see the full table.
| Stage | Who Is Responsible | Description |
|---|---|---|
| 1 | AAFC (Initial Reviewer) | Calculates the appropriate amount of fees as specified in M21-5, Chapter 8, Section B, 2 establishes an EP 400 “Attorney Fee Memo” with the date of claim as the date of the award action that failed to withhold fees adds “Attorney Fee” tracked item with a 3-day suspense, and routes the calculator to the AAFC authorizer for review. |
| 2 | AAFC (Authorizer) | Verifies the accuracy of the calculator. If correct, the processing moves on to Stage 3. If incorrect, uses the deferral functionality in VBMS to return for correction. |
| 3 | AAFC (Authorizer) | Digitally signs and uploads the calculator to the eFolder determines allocation of fees if there is no continuous agent or attorney eligible for direct payment of fees, prepares the fee allocation calculator and uploads it to the eFolder closes “Attorney Fee” tracked item for the calculator review, and clears EP 400 contacts the claimant via telephone to explain the failure to withhold situation documents the contact on VA Form 27-0820, Report of General Information, and uploads to the eFolder. sends the claimant and all agents/attorneys who represented on the case the All Requirements Met, Fees Not Withheld Fee Allocation Notice, and performs a one-time clear of EP 290, with the date of claim as the date the fee decision notice is generated. At the same time the Fee Allocation Notice is sent: sends the Debt to Veteran for Failure to Withhold Attorney Fee Letter only to the claimant and current representative (if any) establishes an EP 600, in accordance with the note below, and adds corresponding “Attorney Fee” tracked item with a 65-day suspense. |
| 4 | AAFC (Authorizer) | When the 65-day suspense has expired: prepares, uploads to the eFolder, and sends the Fee Release Memorandum to communicate to finance activity to initiate the required transaction to pay the agent/attorney and establish a debt on the claimant establishes "Attorney Fee Release" tracked item with a 10-day suspense, and then closes “Attorney Fee” tracked item. |
| 5 | finance activity | Releases funds, establishes a debt, and uploads verification to the eFolder. |
| 6 | AAFC (Authorizer) | Sends the Fee Recoupment Procedures – Final Notice letter only to the claimant and current representative (if any) and closes “Attorney Fee Release” tracked item and clear the EP 600. |
Note: In cases where the claims processor correctly performed the necessary finance transactions to make funds available, but due to system failure only part of the fee was correctly deducted, procedures found in this block should only be performed for the amount that did not properly withhold. A review of the initial fee decision and audit should be completed, and if accurate and uncontested by either party, the amount that did properly deduct, should be released following the initial 65-day appeal period.
Important: The AAFC must select the appropriate EP 600 based on the claim type for which the failure to process agent/attorney fees was based upon:
- EP 600 - Attorney Fee Predetermination Notice - Rating: non-DROC related compensation rating workload.
- EP 600 - Attorney Fee Predetermination Notice - NR: non-DROC related compensation non-rating workload.
- EP 600 - DROC - Attorney Fee Predetermination Notice: all DROC related workload.
- EP 600 - PMC - Atty Fee Predetermination Notice - Rating: non-DROC related PMC rating workload (Pension, DIC, Month of Death, and Burial Benefits).
- EP 600 - PMC - Attorney Fee Predetermination Notice - NR: non-DROC related PMC non-rating workload (Pension, DIC, Month of Death, and Burial Benefits).
Following the 65-day appeal period, end products with the above claim labels are routed by the National Work Queue (NWQ) to all stations based on available capacity and the identified work group (Rating, Non-Rating, DROC, Pension, etc.) identified by the selected claim label.
References: For more information on
- calculating the amount that should have been made available for payment of fees, see M21-5, Chapter 8, Section B, 2
- guidance on withholding, paying fees and corrective action for failure to withhold prior to the January 30, 2020, decision in Rosinski, see the historical M21-1, Part I, 3.C attachment Historical_M21-1I_3_SecC_1-24-20.docx
- guidance on entitlement criteria applicable prior to February 19, 2019, see the historical M21-1, Part I, 3.C attachment Historical_M21-1I_3_SecC_4-28-17.docx, and
- the Letter Creator tool, see the Letter Creator User Guide.
8.B.6.e. Recovery of Fees Paid by VA In the Absence of a Non-Recurrent Payment to the Claimant Because of Offset/ Reduction
When VA pays fees to an agent or attorney based on an award that did not result in a non-recurring payment to the claimant, VA cannot recover the fees by creating a debt against future benefits paid to the claimant.
However, VA may recoup the agent/attorney fees previously paid in such circumstances by reducing the retroactive payment from a subsequent award of benefits to the claimant if that award covers the same past-due benefits period as the prior award for which agent/attorney fees were paid.
Example: An award of past-due benefits did not result in a retroactive payment to a military retiree because of the Veteran’s receipt of MRP. Fees of 20 percent of the pre-reduction amount of the award are paid and released by finance from VA appropriation funds to the attorney. An AEW is subsequently generated, authorizing Concurrent Retirement and Disability Pay (or Combat Related Special Compensation). The Veteran is now entitled to a retroactive payment for the same past-due benefits period covered by the prior award. VA must reduce the Veteran’s non-recurrent compensation payment in the amount of attorney fees that VA previously paid.
If the AEW results in an award covering a later period than for which fees were previously paid, VA would not be permitted to recoup fees that VA paid from the non-recurrent compensation due to the Veteran because that compensation would constitute future benefits with respect to that particular attorney fee.
Note: All Benefit Eligibility Support Team (BEST) AAFCs processing AEWs that involve fees that will be or were paid from VA funds must establish a collectible receivable (04E transaction) prior to the authorization of the AEW award, regardless if the AEW was generated prior to or after the release of fees. BEST AAFCs will determine the amount of the collectible receivable (04E) by using the AEW Fee 04E Calculator to analyze the net effect of the award that granted and withheld benefits (ex. award processing a higher-level review grant with military retired pay withholdings), the fee deduction, and the amount returned to appropriations on fee release memorandum (if applicable). The collectible receivable established (04E) will send the funds directly to appropriations (VA funds).
The AAFC should send a memorandum with the below language to finance prior to promulgation of the award.
“Please process an 04E transaction for [amount of fee] to recoup from the claimant the agent/attorney fees paid/to be paid via VA funds related to award action dated [enter date of associated award with insufficient funds]. When complete, please notify the AAFC [name of employee who submitted the request].”
References: For more information on
- processing AEWs, see M21-1, Part VI, Subpart ii, 4.E,
- why collectible receivable (04E) amounts are affected by fee release memoranda which return funds to appropriations, see M21-5, Chapter 8, Section B, 4.d.
8.B.6.f Mandatory AEW Fee 04E Calculator
All BEST AAFCs processing AEW awards where the previous award (from which MRP was withheld) was eligible for direct payment of attorney fees must prepare an AEW Fee 04E Calculator to determine if a 04E transaction is required to recover fees paid by VA, regardless of the amount of the net effect on the previous award.
The worksheet of calculator results must be uploaded to VBMS.
Note: Use of the AEW Fee 04E Calculator is not required when the previous award was not eligible for direct payment of fees.