Improper Processing of Automated Pension Reductions Based on Social Security Cost of Living Adjustments

Social Security payments may increase annually based on changes to the cost of living. When this happens, the Veterans Benefits Administration (VBA) reduces pensions for veterans and other beneficiaries because they are receiving more income from another source. The OIG received two allegations in 2020 that the automated letters sent to beneficiaries failed to provide proper notification before pensions were reduced or discontinued. The review team found that pensions were not reduced in accordance with policies to include specific information in the notification letters and to consider evidence that the pension should not be reduced. The letters did not include the current and proposed pension amount, but only indicated that the pension would be reduced or terminated. They also did not provide information to help beneficiaries determine what evidence they could submit to show that the pension should not be reduced, as required by VBA procedures. In addition, pensions were reduced without accounting for evidence that the reduction should not be made. This includes evidence that the beneficiaries submitted within 60 days, as well as increases in supplementary medical insurance premiums. The team determined that the monetary impact on each beneficiary was limited. However, inadequate processing of pension reductions could result in improper benefit payments, unnecessary debts, and undue stress for beneficiaries. The OIG recommended that the under secretary for benefits update VBA’s Adjudication Procedures Manual to ensure automated notices align with VA regulations, and amend the automated notices, which require material facts and detailed reasons. The OIG also recommended a review of pension reductions with cost of living adjustments that were automatically completed in fiscal year 2020 to ensure regulations and procedures were followed. This includes consideration of supplementary medical insurance premiums and all evidence submitted by the beneficiary.