Section 703: This section would provide that monthly pension payments be rounded down to the next lower dollar. This provision would take effect on July 1, 1983.

Nearly 1,700,000 pension cases would be affected by this provision, but the loss to any individual would be less than $1 per month. In those cases where benefits are apportioned to dependents not living with the primary beneficiary, it was assumed that each check would be rounded down. The savings from this amendment would decrease in the outyears, because the total number of pension cases is projected to decline gradually.

A provision similar to section 703 was contained in S. 2378, as introduced in the Senate on April 15, 1982, at the request of the President. Unlike section 703, the provision in S. 2378 stated an effective date of July 1, 1982. The only differences between the VA estimate of S. 2378, the CBO estimate of S. 2378, and the CBO estimate of section 703 result from differences in effective dates.

Section 704: This section would amend the definition of a child, for pension purposes, to include children under the age of 19 who are attending secondary school but to exclude post-secondary school students age 18 or older. This provision would be phased in, beginning in fiscal year 1983, in a similar manner to the amendment to the Social Security Act contained in section 2210 of the Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35).

The above figures reflect a VA estimate that this provision would affect approximately 99,200 dependent children of veteran and widowed pensioners. The average amount of benefits lost per child is estimated to be approximately $250 when the phase-in is completed. After fiscal year 1986, the savings from this provision would be expected to decline, because the total number of pension children is projected to decrease.

A provision substantively identical to section 704 was contained in S. 2378, as introduced in the Senate on April 15, 1982. This bill was introduced at the request of the President. The VA and the CBO estimates of this provision are identical and are the same as the estimate shown above.

Section 705: This section would make certain minor adjustments to the monthly benefit rates of disability compensation and dependency and indemnity compensation (DIC). These provisions would take effect January 1, 1983.

The changes made by this section would affect approximately 2.3 million disability compensation cases and 0.2 million DIC cases. The average reduction in benefit rates would be about $1 a month.

Section 706: This section would require the collection of a funding fee of onehalf of one percent of the original loan principal on loans guaranteed, insured, or made to veterans under the authority of chapter 37, title 38, U.S.C. Loans made to service-disabled veterans would be exempt from the fee. This provision would be effective for all loans closed on or after October 1, 1982.

According to Veterans Administration (VA) information, approximately 330,000 loans to veterans are guaranteed each year. Because data are not available on the number of loans made to service-disabled veterans, this estimate assumes that such veterans apply for loans at the same rate as all other veterans. It is estimated that approximately 5 percent of loan guarantees are made to service-disabled veterans.

The average value of VA-insured loans is estimated to be about $57,000 in fiscal year 1983. This loan value would result in an average funding fee of $285. The total amount of the fees would increase in the outyears as increases in the cost of housing cause the average funding fee to rise and as anticipated decreases in mortgage interest rates result in growth in the volume of loans.

A similar provision to section 706 was contained in S. 2379, as introduced in the Senate on April 15, 1982. This bill was introduced at the request of the President and would have required the user fee to be collected on all loans made to veterans, regardless of disability. The VA and the CBO estimates of S. 2379 were identical. The savings estimates, as shown below, were approximately 5 percent higher than the estimate of section 706.

6. ESTIMATE COMPARISON:

Where applicable, VA estimates are discussed by section under "Basis for Estimate."

7. PREVIOUS CBO ESTIMATE:

8.

Where applicable, previous CBO estimates are discussed by section under "Basis for Estimate."

ESTIMATE PREPARED BY: K.W. Shepherd (226-2820)

9. ESTIMATE APPROVED BY:

C9 Mucke

James L. Blum
Assistant Director

for Budget Analysis

SECTION-BY-SECTION ANALYSIS OF COMMITTEE RESOLUTION

Compensation and Pension Amendments

Section 701

Would add to present chapter 51 of title 38 a new section 3011 pertaining to the commencement of the period of payment for a new or increased award of compensation, dependency and indemnity compensation or pension. It would not change the effective date of such an award or increase, for purposes of other laws administered by the Veterans' Administration. This provision will be codified in subchapter II of chapter 51 of title 38, relating to effective dates, rather than in subchapter III, relating to payment of benefits, because it will operate in direct limitation of the effective dates provided in section 3010 and should be read in conjunction therewith. Cost savings associated with this section, according to CBO estimates, would be, in both budget authority and outlays, $28.8 million in fiscal year 1983, $30.7 million in fiscal year 1984, and $32.4 million in fiscal year 1985.

Subsection (a) of section 701 would add a new section 3011, relating to the commencement of the period of payment based on an award, as follows:

Subsection (a) of new section 3011: Would provide that notwithstanding other provisions of law, including section 3010 of title 38, relating to effective dates of awards and increases in awards of compensation, dependency and indemnity compensation, or pension, payment of monetary benefits in connection with such an award or increased award shall not commence until the first day of the first full calendar month following the month in which the award otherwise became effective.

Clause (1) of subsection (b) of new section 3011: Would provide that during the period between the effective date of the award as provided under existing law and the commencement of the period of payment as provided under new section 3011(a), it shall be deemed that payment began on the effective date, to the extent that the commencement of payment is relevant to other rights that the individual affected may have under title 38, such as eligibility for certain health-care priorities under section 612, protection of service-connection or disability ratings under sections 359 and 110, and eligibility for other benefits such as vocational rehabilitation under chapter 31 and automobile adaptive assistance under chapter 39.

Clause (2) of subsection (b) of new section 3011: Would provide that when an individual who is in receipt of retired or retirement pay for service in the Armed Forces files a waiver of such pay under section 3105 of title 38 in order to become eligible to receive compensation or pension from the Veterans' Administration, the waiver shall not become effective and payment shall not commence until the first day of the month following the month in which the waiver is filed. Thus, in the case of the filing of such a waiver, unlike in the cases of awards or increased awards, the effective date and the date of commencement of payment are merged into one date. This provision is intended in no way to diminish the individual's right to receive retired

or retirment pay between the date of the filing of the waiver and the effective date of the waiver.

Subsection (c) of new section 3011: Would provide that in cases where a veteran dies and the surviving spouse becomes entitled to death benefits under chapter 11, 13, or 15 of title 38, the date of commencement of payment shall not be delayed unless the monthly amount of dependency and indemnity compensation or pension payable to the surviving spouse is greater than the amount of compensation or pension that the veteran would have received for the month in which the veteran's death occurred.

Subsection (b) of section 701 would amend the table of sections at the beginning of chapter 51 to reflect the insertion of new section 3011.

Section 702

would amend clause (2) of subsection (b) of present section 3012 of title 38, relating to effective dates of reductions and discontinuances, to provide that the effective date of a reduction or discontinuance of compensation, dependency and indemnity compensation, or pension by reason of marriage, annulment, divorce, or death shall be the last day of the month in which such change in dependency status occurs. Under present law, the effective date of such a change in dependency status is the last day of the calendar year in which such change occurs. Cost savings associated with this section, according to CBO estimates, would be $3.2 million in budget authority and $2.9 million in outlays in fiscal year 1983, $3.5 million in budget authority and $3.2 million in outlays in fiscal year 1984, and $3.9 million in budget authority and $3.5 million in outlays in fiscal year 1985.

Section 703

Would provide that, in computing the amount of monthly Veterans' Administration pension benefits checks, amounts of $0.99 or less shall be rounded downward to the next lower dollar. This provision would not become effective until July 1, 1983, so as not to cause a reduction in the cost-of-living increase for Veterans' Administration pension that went into effect on July 1, 1982. This effective date will result in spending reductions during the final quarter of fiscal year 1982, according to CBO estimates, of $3.6 million in budget authority and $2.7 million in outlays, and would cause subsequent reductions, in both budget authority and outlays, of $10.4 million in fiscal year 1984, and $10.1 million in fiscal year 1985.

Section 703 would add the following new subsection at the end of present section 3020:

Would

Clause (1) of new subsection (f) of section 3020: provide that the amounts of monthly payments of VA pension benefits, other than protected pension payable under section 306(b) of the Veterans' and Survivors' Pension Improvement Act of 1978, Public Law 95-588, shall be computed only in accordance with this subsection.