e. Definition: Marginal Employment

2006 =

$ 10,294

http://www.census.gov/hhes/www/poverty/threshld/thresh06.html

2007: 10,787

http://www.census.gov/hhes/www/poverty/threshld/thresh07.html

Marginal employment exists

· when a veteran's earned annual income does not exceed the amount established by the U.S. Department of Commerce, U.S. Census Bureau, as the poverty threshold for one person, and/or

· on a facts-found basis, and includes, but is not limited to, employment in a protected environment, such as a family business or sheltered workshop, when earned annual income exceeds the poverty threshold.

Note: The U.S. Census Bureau revises the poverty thresholds annually. When the revised amounts are published, Veterans Benefits Administration (VBA) publishes notices in the Federal Register and revises M21-1MR, Part IV, Subpart ii, 2.F.32.b.

Important: Do not consider marginal employment as substantially gainful employment.

Reference: For more information on the poverty threshold, see M21-1MR, Part IV, Subpart ii, 2.F.32.

In this Section

This section contains the following topics:

Topic

Topic Name

See Page

24

General Information on IU Claims

2-F-2

25

Evaluating Evidence to Establish Entitlement to IU

2-F-4

26

Evaluating Evidence of Self-Employment or Employment With a Tightly Held Corporation

2-F-8

27

Preparing a Rating Decision Addressing the Issue of IU

2-F-10

28

Special Considerations in IU Claims

2-F-15

29

Exhibit 1: Rating Decision Addressing the Veteran's Failure to Complete a Field Examination

2-F-21

30

Exhibit 2: Rating Decision Addressing the Veteran's Failure to Respond to a Notice of Proposed Adverse Action After Failure to Complete a Field Examination

2-F-22

31

Exhibit 3: Rating Decision Addressing the Subsequent Receipt of Evidence That Restores IU After Failure to Complete a Field Examination

2-F-23

32

Exhibit 4: Poverty Threshold Information

2-F-24

Introduction

This topic contains general information on individual unemployability (IU), including

· establishing entitlement to increased compensation based on IU

· considering a 100-percent evaluation

· understanding unemployability vs. unemployed and unemployable, and

· the definition of substantially gainful employment.

Change Date

December 13, 2005

a. Establishing Entitlement to Increased Compensation Based on IU

To establish entitlement to compensation as if 100 percent disabled based on individual unemployability (IU), a veteran must be unable to secure or retain employment by reason of service-connected disability. The veteran must be unemployable in fact by reason of SC disability and either

· meet the schedular requirements of 38 CFR 4.16, or

· have an extra-schedular evaluation approved by the Compensation and Pension (C&P) Service (211B).

Notes:

· IU is also referred to as total disability based on individual unemployability (TDIU).

· IU must be established on a factual basis.

b. Considering a 100 Percent Evaluation

Decide whether the veteran meets the requirements for a schedular 100-percent evaluation before considering the issue of IU.

Note: If a 100 percent SC evaluation is awarded, any pending claim for a total disability evaluation based on IU is moot.

c. Understanding Unemployability vs. Unemployed and Unemployable

The term unemployability is not synonymous with the terms unemployed and unemployable for the purpose of determining entitlement to increased compensation. A veteran may be unemployed or unemployable for a variety of reasons.

A determination as to entitlement to a total evaluation based on unemployability is appropriate only when a veteran's unemployability is a result of SC disabilities.

d. Definition: Substantially Gainful Employment

Substantially gainful employment is defined as employment at which non-disabled individuals earn their livelihood with earnings comparable to the particular occupation in the community where the veteran resides.

Introduction

This topic contains information on evaluating evidence to establish entitlement to increased compensation based on IU, including

· general evidence requirements

· medical evidence requirements

· handling incomplete medical evidence

· employment history requirements

· requesting employment information from employers

· when to obtain

- Social Security Administration (SSA) reports, and

- vocational rehabilitation records

· identifying inferred claims of IU, and

· processing inferred claims of IU.

Change Date

December 13, 2005

a. General Evidence Requirements

A completed VA Form 21-8940, Veteran's Application for Increased Compensation Based on Unemployability, is required for a grant of IU. Use the information supplied by the veteran on this form as the basis for development of evidence to support the claim when rating claims for IU.

The evidence should be sufficient to evaluate both the veteran's

· current degree of disability, and

· employment status.

b. Medical Evidence Requirements

A claim for IU must contain sufficient medical evidence to support a current evaluation of the extent of all the veteran's disabilities.

The evidence should reflect the veteran's condition within the past 12 months and include, but need not be limited to,

· the results of VA examination(s)

· hospital reports, and/or

· outpatient treatment records.

c. Handling Incomplete Medical Evidence

If the medical evidence of record is incomplete or inconsistent, schedule a medical examination.

Request special tests only when required for proper evaluation of the degree of severity of relevant disabilities.

Reference: For more information on scheduling examinations, see M21-1MR, Part III, Subpart iv, 3.B.

d. Employment History Requirements

VA Form 21-8940 requires the veteran to furnish an employment history for the

· five-year period preceding the date on which the veteran claims to have become too disabled to work, and

· entire time after the date on which the veteran claims to have become too disabled to work.

Important: VA Form 21-8940 must contain the veteran's work history.

e. Requesting Employment Information From Employers

Request each employer for whom the veteran worked during the 12-month period prior to the date the veteran last worked complete and return VA Form 21-4192, Request for Employment Information in Connection with Claim for Disability Benefits.

Note: If the information on VA Form 21-4192 only states that the veteran retired, then request additional information as to whether the veteran's retirement was by reason of disability. If so, ask the employer to identify the nature of the disability for which the veteran was retired.

f. When to Obtain SSA Reports

Obtain and consider complete copies of the Social Security Administration (SSA) reports, if available, when

· evidence of record is insufficient to award increased compensation based on IU, and

· the record shows that the veteran is receiving Social Security (SS) benefits because of disability.

Note: Decisions by SSA regarding a veteran's unemployability are not controlling for VA determinations (and vice versa).

References: For more information on

· requesting information from SSA, see M21-1MR, Part III, Subpart iii, 3.A, and

· the effect of SSA decisions regarding unemployability on VA determinations, see Murincsak v. Derwinski, 2 Vet. App. 363 (1992).

g. When to Obtain Vocational Rehabilitation Records

Obtain and consider vocational rehabilitation records in IU claims whenever there is an indication that

· training was not found to be medically feasible, or

· a veteran's attempt to be trained was unsuccessful.

h. Identifying Inferred Claims of IU

The Rating Veterans Service Representative (RVSR) is responsible for identifying claims with potential entitlement to increased compensation based on IU even when no specific claim for the benefit has been made.

A claim of IU is reasonably raised or inferred when

· the evidence shows that a veteran's schedular rating meets the minimum criteria found in 38 CFR 4.16(a), and

· evidence in the claimant's file or under Department of Veterans Affairs (VA) control shows the veteran might be unemployable as a result of SC disability.

Reference: For more information on inferring a claim of IU, see

· Norris v. West, 12 Vet. App. 413 (1999), and

· VAOPGCPREC 6-99.

i. Processing Inferred Claims of IU

When an inferred claim of IU is identified, VA will

· send the veteran VA Form 21-8940 for completion

· take the existing end product (EP) credit by award action or PCLR, if no other issues remain pending, and

· establish a new EP 021, using the date VA Form 21-8940 is sent to the veteran as the date the claim.

Notes:

· A veteran should not be sent VA Form 21-8940 to complete if

- the schedular requirements of 38 CFR 4.16 are met, but

- there is no evidence of SC unemployability.

· If a rating decision is prepared in connection with other issues, show entitlement to IU as "deferred." A subsequent formal rating decision will always be required to dispose of the issue of entitlement to a total evaluation based on IU.

Introduction

This topic contains information on evaluating evidence of self-employment or employment with a tightly held corporation. It includes information on

· developing claims involving self-employed individuals

· deciding whether self-employed individuals are unemployable due to a SC disability

· the definition of a tightly held corporation, and

· evaluating evidence showing income from a tightly held corporation.

Change Date

December 13, 2005

a. Developing Claims Involving Self-Employed Individuals

Development to produce the evidence necessary to establish the degree to which SC disability has impaired the veteran's ability to engage in self-employment must generally be more extensive than development in cases in which the veteran worked for others.

Request that the veteran furnish a statement regarding the

· types of work performed

· number of hours worked per week, and

· amount of time lost in the previous 12 months due to SC disabilities.

b. Deciding Whether Self-Employed Individuals Are Unemployable Due To SC Disability

When determining entitlement of self-employed individuals to increased compensation based on IU, consider the relationship between the frequency and the type of service performed by the veteran for his/her business and the veteran's net and gross earnings for the past 12 months.

Consider facts of the case, such as

· low gross earnings that support a finding of marginal employment, especially when the amount of time lost from work due to SC disablement is taken into account, or

· high gross earnings that indicate the veteran is capable of engaging in a substantially gainful occupation.

Notes:

· Consider low net earnings in conjunction with gross income.

· The inability to make a profit is not always indicative of the inability to engage in substantially gainful employment.

c. Definition: Tightly Held Corporation

A tightly held corporation (or closely held corporation) is usually a family corporation. A corporation bearing the veteran's name is usually indicative of a tightly held corporation.

d. Evaluating Evidence Showing Income From a Tightly Held Corporation

Since the veteran may control the amount of wages paid to himself/herself, do not make a finding of marginal employment solely on the basis of low wages.

Keep in mind that the issue for consideration is whether the frequency and type of service performed by the veteran equates to substantially gainful employment. Therefore, consider evidence that the veteran received, or was entitled to receive, other remuneration from the corporation, such as stock dividends or loans, in lieu of wages.

Note: If the reported wages appear low for the work performed, request a field examination per M21-1MR, Part III, Subpart vi, 8.7 (TBD) or M21-1, Part III, Chapter 8 to determine the veteran's entitlement to the corporation and corporate earnings.

Introduction

This topic contains information on preparing a rating decision addressing the issue of IU, including

· considerations when deciding an IU claim

· applying the concept of average impairment

· considering multiple disabilities

· determining the effect of SC disabilities on employability

· the definition of marginal employment

· reasons for denying IU claims

· formally denying IU, and

· the information to include in the rating decision.

Change Date

December 13, 2005

a. Considerations When Rating an IU Claim

When deciding an IU claim, the rating activity must take into account

· the veteran's current physical and mental condition

· the veteran's employment status, including

- the nature of employment, and

- the reason employment was terminated, and

· whether

- the disability requirements set forth in 38 CFR 4.16 are met, or

- extra-schedular consideration under 38 CFR 3.321(b)(1) is warranted.

Important: Do not defer a decision as to the schedular degree of disability pending receipt of evidence sufficient to adjudicate the issue of IU.

b. Applying the Concept of Average Impairment in Earning Capacity

Apply the concept of average impairment in earning capacity to determinations of the percentage of disability.

Do not apply the concept of average impairment in earning capacity to determinations regarding IU.

c. Considering Multiple Disabilities

Under certain circumstances, multiple disabilities may be considered one disability for the purpose of meeting the requirements of 38 CFR 4.16.

Example: Consider multiple disabilities incurred while a prisoner of war (POW) and disabilities incurred in action prior to, or subsequent to, former POW status, as one disability.

Rationale: POW status is a continuation of action against the enemy.

Reference: For more information on rating claims involving former POWs, see M21-1MR, Part IV, Subpart ii, 2.E.

d. Determining the Effect of SC Disabilities on Employability

Determine whether the severity of the SC conditions precludes the veteran from obtaining or retaining substantially gainful employment.

Identify and isolate the effects of extraneous factors, such as

· age

· nonservice-connected (NSC) disabilities

· injuries occurring after military service

· availability of work, or

· voluntary withdrawal from the labor market.

Notes: Include sufficient information in the Reasons for Decision section of the rating decision to

· explain the reasoning behind the decision, either favorable or unfavorable, and

· justify the conclusion.

e. Definition: Marginal Employment

2006 =

$ 10,294

http://www.census.gov/hhe...ty/threshld/thresh06.html

2007: 10,787

http://www.census.gov/hhe...ty/threshld/thresh07.html

Marginal employment exists

· when a veteran's earned annual income does not exceed the amount established by the U.S. Department of Commerce, U.S. Census Bureau, as the poverty threshold for one person, and/or

· on a facts-found basis, and includes, but is not limited to, employment in a protected environment, such as a family business or sheltered workshop, when earned annual income exceeds the poverty threshold.

Note: The U.S. Census Bureau revises the poverty thresholds annually. When the revised amounts are published, Veterans Benefits Administration (VBA) publishes notices in the Federal Register and revises M21-1MR, Part IV, Subpart ii, 2.F.32.b.

Important: Do not consider marginal employment as substantially gainful employment.

Reference: For more information on the poverty threshold, see M21-1MR, Part IV, Subpart ii, 2.F.32.

f. Reasons for Denying IU Claims

Deny IU claims or reduce compensation that is based on a finding of IU only if the facts demonstrate that the veteran

· is not precluded from obtaining employment by reason of SC disability, or

· has in fact obtained gainful employment.

Note: The fact that a veteran is either participating in a program of rehabilitation or has completed such a program and is rehabilitated does not preclude a finding of IU.

g. Formally Denying IU

Formally code the rating decision to indicate denial of IU if

· the veteran specifically claims entitlement to IU, and

· any of the requirements for 38 CFR 4.16 are not met.

Note: If the veteran disagrees with the decision, the statement of the case (SOC) should cite the relevant portion of 38 CFR 4.16 as the authority of the denial.

h. Information to Include in the Rating Decision

Use the information below to determine what information to include in the rating decision.

If …

Then …

schedular requirements of 38 CFR 4.16 are met, but IU is denied

provide an explanation of all pertinent subsidiary determinations.

the veteran is considered employable

explain the facts that are pertinent to that conclusion.

schedular requirements of 38 CFR 4.16 are not met

note the absence of a basis for submission of the case to Central Office (CO) (213B) for consideration of an extra-schedular rating, if applicable.

Reference: For more information on extra-schedular submission, see

· 38 CFR 3.321(b)(1)

· 38 CFR 4.16(b), and

· M21-1MR, Part IV, Subpart ii, 2.F.28.a.

a veteran is considered unemployable due to NSC factors

include

· an explanation of the reasons for this decision, and

· the reasoning for finding that SC disabilities alone do not render the veteran unemployable.

h. Information to Include in the Rating Decision (continued)

If …

Then …

IU is established

include an explanation or analysis of how impairment from SC disability supports the decision.

Important A conclusory statement alone that the criteria for a total evaluation based on IU are met does not satisfy the requirement to state the basis for the decision.

permanency of the total disability IU evaluation is established

dispose of the issue of Dependents' Educational Assistance (DEA) under 38 U.S.C. Chapter 35, regardless of whether or not there appear to be any potential dependents.

Note: The rating conclusion must include the statement, "Basic eligibility under 38 U.S.C. Chapter 35 is established from [date]."

References: For more information on

· IU, see 38 CFR 4.16, and

· unemployability, see 38 CFR 4.18.

Introduction

This topic contains information on special considerations in IU claims, including

· handling claims requiring CO approval

· monitoring changes in employability status

· when monitoring changes in employability status is not required

· dispatch and control for the return of VA Form 21-4140, Employment Questionnaire

· the action to take if VA Form 21-4140

- cannot be issued by Hines Information Technology Center (ITC)

- shows continued unemployability

- indicates the veteran may be employed, or

- is not returned, and

· failure of the veteran to participate in a required field examination.

Change Date

September 29, 2006

a. Handling Claims Requiring CO Approval

Submit any claim to CO (211B) for extra-schedular consideration if the schedular requirements of 38 CFR 4.16 are not met but the evidence of record supports a finding that the veteran is unemployable by reason of SC disability.

The memorandum prepared to transmit claims folders to CO for review must provide the following:

· a clear and succinct statement of the facts of the case, including medical and lay evidence of symptoms

· a discussion of relevant laws and regulations, and

· a statement of the issues to be resolved, as well as the recommended evaluation(s).

b. Monitoring Changes in Employability Status

Changes in the employability of veterans for whom IU is established is monitored through the

· annual release of VA Form 21-4140, Employment Questionnaire, via the Benefits Delivery Network (BDN), and

· Income Verification Match (IVM).

References: For more information on

· dispatch and control for the return of VA Form 21-4140, see M21-1MR, Part IV, Subpart ii, 2.F.28.d, and

· the IVM as it relates to awards based on IU, see M21-1MR, Part X, 9.12.

c. When Monitoring Changes in Employability Status Is Not Required

Monitoring changes in employability status is not required when the veteran

· is 69 years of age or older

· has been rated totally disabled due to unemployability for a period of 20 continuous years, which protects the evaluation from future reduction under 38 CFR 3.951(b), or

· is assigned a 100-percent schedular evaluation.

d. Dispatch and Control for Return of VA Form 21-4140

The table below shows the steps involved in the dispatch and control for return of VA Form 21-4140.

Step

Action

1

BDN generates a future diary under reason code 02, "Individual Unemployability Review," whenever a rating decision granting a total evaluation based on individual unemployability is processed.

2

Hines Information Technology Center (ITC) issues VA Form 21-4140 annually upon maturation of the future diary established under reason code 02.

Note: To control the release of the last VA Form 21-4140, BDN generates a master record diary under reason code 32, "Expiration of Employability Control," 19 years from the effective date of the grant of total benefits, or at age 69, whichever is earlier.

d. Dispatch and Control for Return of VA Form 21-4140 (continued)

Step

Action

3

BDN establishes a future diary 34 to control for the return of VA Form 4140 two months from the month it is issued from Hines ITC.

Note: If the future diary 34 is not cleared timely, BDN issues VA Form 21-6560, Notice of Benefit Transaction (Hines), message code 631, "Diaried Action Due, reason code 02."

e. Action to Take When Hines ITC Cannot Issue VA Form 21-4140

When Hines ITC cannot issue VA Form 21-4140, BDN generates a VA Form 20-8270, C&P Master Record - Audit Writeout (Hines), with message code 631 or 882, "Employability Letter Not Sent."

Upon receipt of the writeout, immediately send the veteran VA Form 21-4140-1, Employment Questionnaire.

To control for the return of VA Form 21-4140-1, Hines ITC establishes a future diary under reason code 34 for four months from the month in which VA Form 20-8270 was issued.

Note: As a local option, a regional office (RO) may establish a future diary under end product (EP) 310 upon receipt of a writeout with either message code 631 or 882.

f. Action to Take if VA Form 21-4140 or VA Form 21-4140-1 Shows Continued Unemployability

When reviewing the completed VA Form 21-4140 or VA Form 21-4140-1, if the veteran has checked "NO," indicating he or she has not been employed in the past 12 months (block 3) and signed the form, the Triage Team should

· file the completed questionnaire in the claims folder, and

· clear

- EP 692, using the PCLR command, and

- the future diary established under reason code 34, using the DIAR command.

Note: Do not refer the claims folder to the rating activity.

g. Action to Take if VA Form 21-4140 or VA Form 21-4140-1 Indicates the Veteran May Be Employed

When reviewing the completed VA Form 21-4140 or VA Form 21-4140-1, if the veteran has checked "YES" for block 3, or indicated employment during the past 12 months in "Section I - Employment Certification," the Triage Team will

· clear the future diary established under reason code 34

· establish a control under EP 310, and

· refer the claims folder to the rating activity.

h. Action to Take if VA Form 21-4140 Is Not Returned

The table below shows the action to take if VA Form 21-4140 is not returned.

Step

Action

1

The authorization activity

· establishes EP 310 control, and

· refers the claims folder to the rating activity.

2

The rating activity prepares a rating decision proposing to reduce the veteran to the appropriate schedular evaluation for failure to return VA Form 21-4140.

3

The authorization activity

· notifies the veteran of the proposed reduction, to include the date the proposed action will be effective, provides due process rights, and asks the veteran to promptly return the VA Form 21-4140, and

· establishes an EP 600, concurrent with the EP 310, to control the claim during the due process period.

Note: The effective date will be no earlier than the first day of the month following the end of the 60-day predetermination period. Be sure to properly notify the veteran's designated representative of the proposal.

h. Action to Take if VA Form 21-4140 Is Not Returned (continued)

Step

Action

4

i. Failure to Cooperate With a Required Field Examination

Follow the steps in the table below when the veteran fails to participate in a required field examination.

Step

Action

1

Prepare a rating decision proposing a reduced evaluation using the format in M21-1MR, Part IV, Subpart ii, 2.F.29.

2

Use the table below to determine the action to take upon receipt of the veteran's response to the notice of proposed adverse action.

If the veteran …

Then …

fails to respond to the notice of proposed adverse action

prepare a rating decision to reduce the current evaluation using the format in M21-1MR, Part IV, Subpart ii, 2.F.30.

is willing to participate in the field examination prior to reduction to the schedular evaluation

· defer the rating action to reduce the evaluation

· reschedule the examination, and

· inform the veteran that

- further failure to cooperate will be cause for a reduction to the schedular evaluation, and

- the total evaluation based on IU would not be restored until the field examination had been completed and the report reviewed.

sends evidence which warrants continuation of a total rating based on continued unemployability

prepare a rating decision using the format in M21-1MR, Part IV, Subpart ii, 2.F.31.

Change Date

March 14, 2006

a. Rating Decision: Failure to Complete a Field Examination

An example of a rating decision addressing a veteran's failure to complete a field examination is below.

DECISION: A reduction to the schedular evaluation shown below is proposed because of the veteran's failure to cooperate with a required field examination.

EVIDENCE: Notice of Failure to Cooperate with field examiner.

REASONS FOR DECISION: A total disability rating has been in effect because of unemployability. Notice has been received that the veteran refused to cooperate in completing a required field examination.

JURISDICTION: Field Examiner Notification

SUBJECT TO COMPENSATION (1.SC)

COMBINED EVALUATION FOR COMPENSATION:

Individual Unemployability from

NOT SERVICE CONNECTED/NOT SUBJECT TO COMPENSATION (8.NSC)

Change Date

March 14, 2006

a. Rating Decision: Failure to Respond to a Notice of Proposed Adverse Action

An example of a rating decision addressing a veteran's failure to respond to a notice of proposed adverse action after failure to complete a field examination is below.

DECISION: Reduction to the schedular evaluation is in order because of the veteran's failure to cooperate in the completion of a required field examination.

EVIDENCE: Notice of Failure to Cooperate with field examiner.

REASONS FOR DECISION: A total disability rating has been in effect because of unemployability. Notice has been received that the veteran failed to cooperate with a required field examination and the veteran failed to respond to the notice of proposed adverse action sent .

JURISDICTION: Field Examiner Notification

SUBJECT TO COMPENSATION (1.SC)

from

from

from

from

from

COMBINED EVALUATION FOR COMPENSATION:

Individual Unemployability from to

NOT SERVICE CONNECTED/NOT SUBJECT TO COMPENSATION (8.NSC)

Change Date

March 14, 2006

a. Rating Decision: Subsequent Receipt of Evidence That Restores IU

An example of a rating decision addressing the subsequent receipt of evidence that restores IU after failure to complete a field examination is below.

DECISION: The total rating based on unemployability is restored.

ISSUE: Total Disability Because of Unemployability

EVIDENCE: Report of Field Examination 12/11/95

REASONS FOR DECISION: Veteran's total disability rating because of unemployability was reduced to the schedular evaluation because of the lack of cooperation in completing a required field examination. Sufficient evidence, including completion of the field examination, has been received establishing continuing unemployability.

JURISDICTION: Completion of Field Examination

SUBJECT TO COMPENSATION (1.SC)

from

from

from

from

from

COMBINED EVALUATION FOR COMPENSATION

Individual Unemployability from

NOT SERVICE CONNECTED/NOT SUBJECT TO COMPENSATION (8.NSC)

Introduction

This topic contains information on the poverty threshold, including information on

· marginal employment based on income below the poverty level, and

· the poverty threshold for one person.

Change Date

March 14, 2006

a. Marginal Employment Based on Income Below the Poverty Level

38 CFR 4.16(a) provides that marginal employment is generally deemed to exist when a veteran's earned income does not exceed the amount established by the U.S. Census Bureau as the poverty level for one person.

Note: When revised poverty threshold amounts are published by the U.S. Census Bureau, VBA publishes notices in the Federal Register and subsequently revises this topic.

Reference: For more information on the U.S. Census Bureau's poverty thresholds, see http://www.census.gov/hhes/www/poverty/threshld.html

b. Poverty Threshold for One Person

The table below lists the poverty threshold for one person by year.

Calendar Year

Amount

1989

$6,310

1990

$6,652

1991

$6,932

1992

$7,143

1993

$7,363

1994

$7,547

1995

$7,763

1996

$7,995

1997

$8,183

1998

$8,316

1999

$8,501

2000

$8,794

2001

$9,039

2002

$9,183

2003

$9,393

2004

$9,645