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Department of Veterans Affairs M21-1, Part III, Subpart vVeterans Benefits Administration January 23, 2017Washington, DC 20420

Key Changes

Changes Included in This Revision

The table below describes the changes included in this revision of Veterans Benefits Manual M21-1, Part III, Subpart v, Chapter 10, Section A “800 Series Work Items.”

Notes:The term “regional office” (RO) also includes pension management center (PMC), where appropriate. Unless otherwise noted, the term “claims folder” refers to the official,

numbered, Department of Veterans Affairs (VA) repository – whether paper or electronic – for all documentation relating to claims that a Veteran and/or his/her survivors file with VA.

Reason(s) for Notable Change CitationCreated new section for post award audits related pension and Parent’s Dependency and Indemnity Compensation

M21-1, Part X, Chapter 9, Section E (X.9.E)

Rescissions None

Authority By Direction of the Under Secretary for Benefits

Signature

Cheryl J. Rawls, DirectorPension and Fiduciary Service

Distribution LOCAL REPRODUCTION AUTHORIZED

Section E. Federal Tax Information (FTI) Match: Post Award Audit (PAA) for Pension and Parent’s Dependency and

Indemnity Compensation (DIC) Beneficiaries

Overview

In This Section This section contains the following topics:

Topic Topic Name1 Operational Performance and Establishing Controls2 Notification and Verification Requests3 Final Action for Post Award Audit (PAA)4 PAA Worksheet5 Omnibus Budget Reconciliation Act (OBRA) and Reporting

Requirements

1. Operational Performance and Establishing Controls

Introduction This topic contains general information on operational performance and establishing controls, including

overview of the match Office of Performance Analysis & Integrity (OPA&I) filtering of matches Hines Information Technology Center (ITC) filtering of matches post award audit (PAA) worksheet PAA end product (EP) claims jurisdiction for PAA, and periodic release dates for PAA.

Change Date January 23, 2017

a. Overview of the Match

The table below provides an overview of the match.

Step Action1 The Office of Performance Analysis & Integrity (OPA&I) selects

beneficiary files for the data match and sends the file to Hines Information Technology Center (ITC).

Reference: For more information on OPA&I selection, see M21-1, Part X, 9.E.1.b.

2 Hines ITC sends the file to the Social Security Administration (SSA) and Internal Revenue Service (IRS).

3 The SSA and IRS run this file against their files.4 Files are then returned from both the SSA and IRS.5 Hines ITC combines the SSA and IRS files and matches the

combined file against the corporate record.6 Hines ITC performs a filter to exclude those cases where

development based on income or net worth is not required.

Reference: For more information on Hines ITC filtering of matches, see M21-1, Part X, 9.E.1.c.

7 For cases not filtered, Hines ITC establishes the appropriate end product (EP) for the pension

management center (PMC) mails the appropriate letter(s) to the beneficiary, and uploads the letter(s) to the secured Virtual VA folder.

References: For more information on the PAA EP, see M21-1, Part X, 9.E.1.e, and

automatic generation of compressed letter , see M21-1, Part X, 9.E.2. d.

b. OPA&I Filtering of Matches

OPA&I selects eligible beneficiary records to send to Hines ITC. Prior to selecting records, OPA&I will automatically exclude records in which the beneficiary

has a pending Federal tax information (FTI) eligible EP during the PAA match

has had an FTI eligible EP claim established within two years from the date OPA&I selects records for a PAA match

is receiving a payment of $90 due to Medicaid status as of the date of the PAA selection

is greater than 90 years old as of the date of selection has a missing cost of living adjustment (COLA) line for the tax year of the

requested match, or is deceased.

Note: The first two bullets apply to EP series 180s and 190s only.

Reference: For more information on FTI eligible EP claims, see the Upfront Verification User Guide.

c. Hines ITC Filtering of Matches

Prior to releasing PAAs to the PMCs, Hines ITC will exclude the matches in which

the beneficiary is deceased the medical expenses of record exceed the higher of either the total income of record in Corporate, or total countable FTI

the benefit was discontinued for the full calendar year matched the total income of record for the year matched in Corporate is greater than

the total countable FTI the total income in Corporate for the matched year is $0 and the total

countable FTI is $0 the total countable FTI exceeds the income in Corporate, for the same year,

by $100 or less, or the following three statements are true value listed in the NET WORTH field in Corporate is $0 the total income reported on 1099-INT, Statement for Recipients of

Interest Income, is less than or equal to $100.00, and the medical expenses of record exceed the greater of income in Corporate

or total countable FTI.

Exception: Hines ITC will not exclude those cases identified for a substantial net worth discrepancy in which medical expenses exceed the greater income.

http://vbaw.vba.va.gov/PENSIONANDFIDUCIARY/pension/docs/FTI_GUI_User_Guide_August_2016.pdf

http://vbaw.vba.va.gov/PENSIONANDFIDUCIARY/pension/docs/FTI_GUI_User_Guide_August_2016.pdf

d. PAA Worksheets

Hines ITC will produce worksheets and upload them with the secured category description of IRS/SSA – Verification within the secured Virtual VA eFolder for all matched cases, including those that were filtered by Hines ITC.

Note: The worksheets associated with the matches filtered by Hines ITC require no further action.

Reference: For more information pertaining to the data shown on the worksheets, see M21-1, Part X, 9.E.4.

e. PAA EP For those matches not excluded, Hines ITC automatically establishes an EP 154 with the claim label,

Post Award Audit for those beneficiaries without a fiduciary, or Post Award Audit – Fid Review for those beneficiaries with a fiduciary.

Notes: The suspense date is automatically set for 65 days. If at any time while the EP 154 is pending the beneficiary obtains a

fiduciary, update the claim label to Post Award Audit – Fid Review.

Important: Only one EP 154 is allowed per beneficiary record. If an EP 154 is pending

and the beneficiary is selected for a subsequent PAA match, cancel the newest EP(s) and adjudicate the award using the earliest established EP 154.

Leave the EP pending until final action is taken.

Example: An EP 154 is established on 12/16/2016 due to a PAA. A review of the record shows that a second EP 154, established 10/05/2012, is due to an income verification match. Clear the EP that was established 12/16/2016 and work the PAA and the IVM under the EP established 10/05/2012.

Reference: For more information on when a fiduciary may verify FTI, see M21-1, Part X, 9.B.4.

f. Claim Jurisdiction for PAA

Jurisdiction is determined based on the beneficiary’s address of record in Corporate and established at the appropriate PMC.

Exception: If the beneficiary has a fiduciary, then jurisdiction is based on the beneficiary’s address of record in the Beneficiary and Fiduciary Field System (BFFS).

g. Periodic Release Dates

PAAs will be established on a periodic basis throughout the fiscal year to allow for an equitable distribution throughout the year. PAAs will be created

for PAA and released to the PMCs in

first quarter third quarter, and fourth quarter.

2. Notification and Verification Requests

Introduction This topic contains information on the notification and verification letters, including

independent verification due process compression letter automated beneficiary letter generation effective date of proposed action for the compressed letter, and attachments mailed with beneficiary letter.


a. Independent Verification

The terms of the computer matching agreement require VA to make reasonable efforts to independently verify FTI received from the source agencies, IRS and SSA. For independent verification, VA will only send letters to the recipient of the identified income.

b. Due Process Due process procedures require VA to give the beneficiary 60 days to submit evidence to show why a reduction or discontinuance should not be made.

References: For more information on due process, see M21-1, Part I, 2.A, and 38 CFR 3.103 .

c. Compression Letter

Beginning in fiscal year (FY) 2016, the matching agreements with IRS (unearned income) and SSA (earned income) allow for compression of independent verification and due process. This is different from the income verification matches (IVMs) in which two separate steps were required. The compressed letter allows VA to reduce the time it takes to process the match.

Reference: For more information on how to process IVMs, see M21-1, Part X, 9.F.

d. Automatic Generation of Compressed Letter

Hines ITC will automatically issue a compressed letter to the beneficiary at the time the EP is automatically established. The letter provides the beneficiary of the identified income 60 days to respond.

Notes: All letters are identified with a notation, CONTAINS FTI. Depending on the number of pages of the letter and attachments, automated

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letters are mailed in either a blue envelope, or a manila envelope.

References: For information on identifying undeliverable mail containing FTI, see M21-1, Part III, Subpart

ii, 1.E.2.d, and safeguarding FTI, see M21-1, Part X, 9.B.

e. Effective Date of Proposed Action for the Compressed Letter

For the purposes of the compressed letter, VA

will presume that the FTI was received in January of the tax year matched and propose to adjust effective February 1, and

will propose the most adverse action to stop the benefit effective February 1 of the tax year matched unless evidence is received to the contrary.

Important: Although the most adverse action is proposed, claims processors must take the most appropriate action based on the evidence of record.

Reference: For examples on final award actions, see M21-1, Part X, 9.E.3.d and e.

f. Attachments Mailed with Beneficiary Letter

VA forms will be attached to the beneficiary letter based on the IRS Source and IRS Income Type identified. The chart below indicates the VA Forms mailed to the beneficiary.

If the match identifies FTI related to the IRS Source…

Then Hines ITC …

beneficiary's share of income, credits, deductions, etc.

mails a VA Form 21P-8049, Request for Details of Expenses

changes in corporate control and capital structure

mails a VA Form 21P-8049.

distributions from pensions, annuities, retirement or profit-sharing plans, individual retirement arrangements (IRAs), insurance contracts, etc.


partner’s share of income, credits, deductions, etc.

mails a VA Form 21P-4165, Pension

Claim Questionnaire for Farm Income, and

VA Form 21P-8049.shareholder's share of undistributed taxable income, credits, deductions, etc.


statement for recipients of certain government payments

VA Form 21P-4165 if the income type is agricultural subsidies.

Note: A VA Form is not mailed when the income type is unemployment compensation.

statement for recipients of dividends and distributions


statement for recipients of miscellaneous income

mails a VA Form 21P-4165, VA Form 21P-4185, Report of Income From Property or Business; or VA Form 21P-8049 depending on the income type.

The chart below indicates what form or forms is mailed based on the income type.

If the income type is …

Hines ITC mails a …

medical payments, or

other income

VA Form 21P-4185, and

VA Form 21P-8049.

rents VA Form 21P-4165

VA Form 21P-4185, and

VA Form 21P-8049.

royalties VA Form 21P-4165, and

VA Form 21P-8049.

substitute payments for dividends

VA Form 21P-8049.

statement for recipients of proceeds from real estate brokers and barters exchange transactions


statement for recipients of proceeds from real estate transactions


Exception: Beneficiaries of Parent’s DIC will not receive VA Form 21 -8049.

3. Final Action for PAA

Introduction This topic contains information on final action of the award

when to take final action additional development finalizing the PAA claim, and examples of final award actions.


a. When to Take Final Action

Do not take final action until a reasonable income verification process is completed. In most cases, the verification process is considered completed when the compressed letter is sent to the beneficiary and the 60-day response period has expired.

Note: In all cases, final action may be taken prior to the expiration of the 60-day due process period if the beneficiary waives the due process rights.

Reference: For an example of when further development may be required, see M21-1, Part X, 9.E.3.d.

b. Additional Development

In some instances, further development may be required. The EP must be left pending until the issue is finalized.

If further development is required, but evidence received from the beneficiary could be used to adjust the benefit, take interim action while resolving the discrepancy. The effective date of the interim action should be based on the evidence of record.

Reference: For an example of when further development may be required, see M21-1, X.9.E.3.d.

c. Finalizing the PAA Claim

Once the verification and due process period are completefor PAA, take final action based on the table below.

If the beneficiary … Then… verifies the matched amount verifies more income than the

match amount, or verifies less income than the

matched amount with substantiating evidence

finalize the award based on the beneficiary verified amount.

verifies less income than the finalize the award based on the PAA

matched amount without substantiating evidence, and

reported income would result in the reduction or discontinuance of benefits, or

worksheet

Note: In the decision notice, give the beneficiary the opportunity to provide evidence to support his or her claim of less income. Beneficiaries should also be provided a VA Form 21-8416, Medical Expense Report, and given the opportunity to submit unreimbursed medical expenses that they paid to reduce an overpayment.

Reference: For further information on time limits to submit amended income information to reduce an overpayment, see M21-1, Part V, Subpart iii.1.H.1.g.

the beneficiary does not respond

Note: Although the most adverse action is proposed, claims processors must take the most appropriate action based on the evidence of record.

d. Example 1 of Final Award Action

Scenario: The Veteran’s income for VA purposes (IVAP) is $0. The PAA discovered income of $1,000 in wages (considered recurring income) and $2,000 in gambling winnings (considered nonrecurring income). Veteran states as related to the wages, he’s a victim of identity theft. He provided no evidence pertaining to the identity theft and he did not dispute the gambling winnings.

Result: Take interim action to count the gambling winnings, removing the gambling winnings after it has been counted for 12 months. In the decision notice, advise the Veteran that additional evidence is required in order for VA not

to count the wages provide the examples of proof of identity theft contained in M21-1, Part X,

9.F.11.e inform the Veteran that if evidence is not received regarding proof of

identity theft, the final action will be taken to count the wages, and give the Veteran 30 days to respond.

After the 30 days has expired, If the Veteran does not respond or provides insufficient evidence of identity

theft, count the wages on the Veteran’s awards as recurring income, finalize the award, and provide decision notification to the Veteran.

If the Veteran does respond with sufficient evidence, do not count the wages, clear the EP, and provide decision notification to the Veteran.

e. Example 2 of Final Award Action

Example: The Veteran’s IVAP is $3,000 due to the retirement income he reported when he applied for pension in 2012. The compressed letter was mailed to the Veteran advising him of the income identified from the PAA for tax year 2015. The PAA showed the following income. The Veteran did not respond to the letter.

Income Source Income Type Income Income Classification

Distributions from Medical Savings Accounts

Gross Benefits $2,000 Recurring


Earnings on Distributive Excess Contribution

$200 This amount is included in gross benefits. Do not count twice. Subtract excess contributions from gross benefits after 12 months.

Result: Continue counting the retirement income. Adjust the Veteran’s award beginning February 1, by including the $2,000 Gross Benefits from the Distributions from Medical Savings Accounts. After 12 months, remove $200 from the $2000 which was received from Earnings on Distributive Excess Contribution. Finalize the award and provide decision notice to the Veteran.

4. PAA Worksheet

Introduction This topic contains information on the PAA worksheet, including

PAA worksheet data PAA worksheet data definitions determining income classification sample PAA worksheet (page one) sample PAA worksheet (second page or additional pages).


a. PAA Worksheet Data

PAA Worksheets will have two or more pages.

Page one will contain the following applicable tax year month and year of match date letter mailed or the Hines ITC filter reason and date Veteran’s claims information, and income recipient information.

Page two, and all additional pages, will contain the income listed in the following order wages recurring income nonrecurring income unknown income, and not income for VBA purposes.

References: For information on Hines ITC filter reasons, see M21-1, Part X, Chapter 9, E.1.c. an example of a PAA worksheet, see M21-1, Part X, 9.E.4.d and e.

b. PAA Worksheet Data Definitions

The chart below explains the data received on the PAA worksheet. Review the income, as reported by IRS, for income, and net worth.

The field titled… Contains…DATE LETTER MAILED the date the beneficiary letter was

mailed by Hines ITC.

Note: This field will be blank if the PAA was excluded by Hines ITC.

PAA WAS AUTOMATICALLY the date the automatic filter was

FILTERED DATE completed by Hines ITC to exclude the match.

REASON the automatic filter reasons for exclusion of the match, provided by Hines ITC. The following are the filter reasons:

beneficiary reported deceased terminated for full calendar year

of match current medical expenses reduce

countable income to zero income of record for matched

year, is greater than income reported by IRS/SSA

income on award equals zero and FTI equals zero, or

discrepant income is within threshold.

Reference: For the full description of Hines ITC filtering reasons, see M21-1, Part X.9.E.1.c.

C-FILE NUMBER the file number of the pension or Parent’s DIC award.

SSN the Veteran’s Social Security number (SSN).

STUB the Veteran’s stub name as it is shown in the corporate record.

ENTITLEMENT CODE one of the following: Veterans pension Survivors pension, or Parent’s DIC.

INCOME RECIPIENT’S NAME the name of the beneficiary, or survivor.

INCOME RECIPIENT’S SSN the SSN of the beneficiary, or survivor.

INCOME RECIPIENT’S ADDRESS the address of the Veteran, or survivor.

PAYER NAME AND ADDRESS the name and address of the individual, business, or entity that paid the income.

ACCOUNT NUMBER the account number associated with the income paid, if applicable.

GROSS INCOME the gross amount of income, as provided by the payer of the income.

IRS SOURCE the IRS Form name on which the income was reported.

Example: Statement for Recipients of Certain Government Payments.

IRS INCOME TYPE the specific type of gross income as reported to IRS on the applicable IRS Form.

Example: The IRS provides VA from the IRS Form 1099-G, Statement for Recipients of Certain Government Payments, the following income information: box one, unemployment

compensation, and box seven, agriculture payments.

If FTI is received documenting an individual received income reported on IRS Form1099-G, the field on the PAA worksheet, IRS INCOME TYPE, will display unemployment compensation, oragriculture subsidies.

INDICATOR 1 supplemental information provided by the income payer on the IRS Form. Indicator 1 will be provided when the gross income reported to IRS is received on the following forms:

1099-CAP 1099-MSA, Distributions from

Medical Savings Accounts 1099-Q, Qualified Tuition

Program Payments, or 1099-R.

Note: In most cases, interpretation of the information is not required, as Hines ITC will provide the income classification on the PAA worksheet.

INDICATOR 2 supplemental information provided by the income payer on the IRS Form. It is only available on the IRS Form 1099-R.

Note: In most cases, interpretation of the information is not required, as Hines ITC will provide the income classification on the PAA worksheet.

COUNT AS the VBA income classification.

Reference: For more information on determining how long the income should be counted on the award, see M21-1, Part X, Chapter 9, E.4.c.

c. Deter-mining Income Class-ification

Claims processors must consider how long the FTI should be counted when determining the final award. Review the PAA worksheet and see the table below to determine how long the income should be counted.

Step Action1 Review the COUNT AS field for each income amount received to

determine action taken during this step.

If the COUNT AS field states…

Then ...

Income from SSA, or Recurring Income

count on an open-ended basis from the first day of the month after the month during which the income is first received.

Do not proceed to the next step.

Note: If there is no evidence to show otherwise, presume that the income was received in January of the tax year shown on the PAA worksheet.

Nonrecurring Income count this income from the first day of the month after the month during which the income is first received. Remove the income after 12 months.


Note: If there is no evidence to show the date in which the income is received, presume

that the income was received in January of the tax year shown on the PAA worksheet.

Reference: For more information regarding the effect nonrecurring income has on pension payments, see M21-1, Part V, Subpart iii.1.A.6.e.

Nonrecurring Income *(noted with an asterisk)

review the evidence of record to determine if the income can be excluded under 38 CFR 3.272(e).

If the income can …

Then ...

be excluded do not count the income.

not be excluded

count this income from the first day of the month after the month during which the income is first received. Remove the income after 12 months.


Note: If there is no evidence to show the date in which the income is received,

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presume that the income was received in January of the tax year shown on the PAA worksheet.

In the final letter to the beneficiary, provide notice of the following:

Evidence shows you received the following income which may profit from the sale of property:

[insert income]

If you did not receive this income through the course of business, the income can be excluded. profit due to the To have the income excluded, provide us the amount of income and evidence showing the income was not received due to profit

from a business, such as a letter from the income payer.

Reference: For more information regarding the effect nonrecurring income has on pension payments, see M21-1, Part V, Subpart iii, 1.A.6.e.

Not Income for VBA purposes do not count this as income.


This amount is included in gross benefits. Do not count twice. Subtract excess contributions from gross benefits after 12 months

do not count this as income.

Review the table for appropriate action to take.

Step Action1 Review the Income

Source on the PAA worksheet and locate the two incomes received from Distributions from Medical Savings Accounts. The income types should differ and will be gross benefits, and earnings on

distributive excess Contributions.

2 Review the income classification for the income type, gross benefits. Is the income classification

nonrecurring?

If yes, do not proceed to the next step. No action is necessary.

If no, proceed to Step 3.

3 Count the full amount of the income type, gross benefits, for 12 months.

4 After 12 months, reduce gross benefits amount by the amount of the income type, earnings on distributive excess. contributions.

Reference: For an example, see M21-1, Part X, 9.E.3.e.

Unknown, or blank/empty

proceed to Step 2.

any other language send an encrypted message to the Pension Policy and Procedures mailbox. In the email, include the claim number claimant name, and PAA worksheet field

information including the PAYER NAME GROSS INCOME IRS SOURCE IRS INCOME TYPE INDICATOR 1, and INDICATOR 2.


Wait for further instructions from Pension and Fiduciary (P&F) Service.

2 Review the IRS SOURCE field to determine action taken during

mailto:[email protected]


this step.

If the IRS SOURCE field states…

Then ...

Changes in Corporate Control and Capital Structure

review the evidence of record to determine if the income can be excluded under 38 CFR 3.272(e).

If the income can …

Then . . .

be excluded

do not count the income.

not be excluded



Note: If there is no evidence to show the date inwhich the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet.

In the final letter to the beneficiary, provide notice of the following:



Evidence shows you received the following income which may profit from the sale of property:

[insert income]

If you did not receive this income through the course of business, the income can be excluded. To have the income excluded, provide a statement regarding the income that should be included and evidence showing the income was not received due to profit from a business. The evidence can in the form of a statement from the income payer.

Reference: For more information regarding the effect nonrecurring income has on pension payments, see M21-1, Part V, Subpart iii,

1.A.6.e.Distributions from Pensions, Annuities, Retirement or Profit-sharing Plans, IRAs, Insurance Contracts, Etc.

proceed to Step 3.

Note: Steps 3 through 5 pertain to Distributions from Pensions, Annuities, Retirement or Profit-sharing Plans, IRAs, Insurance Contracts, Etc.


proceed to Step 6.

Note: Step 6 only pertains to Distributions from Medical Savings Accounts.

Qualified Tuition Program Payments

count this income from the first day of the month after the month during which the income is first received. Do not remove from the award unless there is evidence to show that the income stopped.


Note: If there is no evidence to show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet.

3 Review the IRS INCOME TYPE field to determine action taken during this step.

Note: This step is only when the IRS SOURCE field is Distributions from Pensions, Annuities, Retirement or Profit-sharing Plans, IRAs, Insurance Contracts, Etc.

If the IRS INCOME TYPE field states…

Then …

Gross distributions proceed to Step 4. Other income, or Unrealized appreciation



4 Review the INDICATOR 1 field.

Note: This step is only when the IRS SOURCE field is

Distributions from Pensions, Annuities, Retirement or Profit-sharing Plans, IRAs, Insurance Contracts, Etc.

If the INDICATOR 1 field displays …

Then …

a number 1, or Total Distribution



Notes: If there is no evidence to

show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet.

A number 1 or total distribution indicates the payer of income checked box 2b of 1099-R. A total distribution is one or more distributions,

within the applicable tax year, in which the entire balance of the account is distributed, or

a final payment made on a periodic or installment payment.


a number 0 Information Not Provided, or Not Checked

proceed to Step 5.

any other language send an encrypted message to the Pension Policy and Procedures mailbox.



In the email, include the claim number claimant name, and PAA worksheet field

information including the PAYER NAME GROSS INCOME IRS SOURCE IRS INCOME TYPE INDICATOR 1, and INDICATOR 2.


Wait for further instructions from P&F Service.


Note: This step is only when the IRS SOURCE field is Distributions from Pensions, Annuities, Retirement or Profit-sharing Plans, IRAs, Insurance Contracts, Etc.

If the INDICATOR 2 field is …

Then …

1—Early distribution, no known exception.

1—Early distribution, no known exception, B—Designated Roth account distribution

1—Early distribution, no known exception, D—Annuity payments from nonqualified annuities and distributions from life insurance contracts

2—Early Early distribution, exception applies

2—Early distribution, exception applies, B—Designated Roth account distribution.

2—Early distribution, exception applies, D—Annuity payments from nonqualified annuities and distributions from life insurance contracts




3—Disability, D—Annuity payments from nonqualified annuities and distributions from life insurance contracts

4—Death, D—Annuity payments from nonqualified annuities and distributions from life insurance contracts

7—Normal distribution, B—Designated Roth account distribution

7—Normal distribution, D—Annuity payments from nonqualified annuities and distributions from life insurance contracts

Annuity payments from nonqualified annuities and distributions from life insurance contracts

B—Designated Roth account distribution, U—Dividends distributed from an ESOP under section 404(k)

Charitable gift annuity Disability Dividends distributed from

an ESOP under section 404(k)

Designated Roth account distribution

Early distribution from a Roth IRA

Early distribution from a SIMPLE IRA in the first 2 years, no known exception

Normal distribution Qualified distribution from a

Roth IRA Roth IRA distribution,

exception applies RRB-Supplemental RRB1—Tier 1 RRB1—Tier 2, or RRB1—Vested dual benefits 1—Early distribution, no

known exception, 8—Excess contributions plus earnings/excess deferrals

count this income from the first day of the month after the month during which the income is first received.

(and/or earnings) taxable 1—Early distribution, no

known exception, K—Distribution of IRA assets not having a readily available FMV

1—Early distribution, no known exception, L—Loans treated as deemed distributions under section 72(p)

1—Early distribution, no known exception, P—Excess contributions plus earnings/excess deferrals taxable

2—Early distribution, exception applies, 8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable

2—Early distribution, exception applies, K—Distribution of IRA assets not having a readily available FMV

2—Early distribution, exception applies, P—Excess contributions plus earnings/excess deferrals taxable

4—Death, 8-Excess contributions plus earnings/excess deferrals (and/or earnings) taxable

4—Death, A—May be eligible for 10-year tax option

4—Death, B—Designated Roth account distribution

4—Death, G—Direct rollover and direct payment

4—Death, H—Direct rollover of a designated Roth account distribution to a Roth IRA.

4—Death, K—Distribution of IRA assets not having a readily available FMV

Remove the income after 12 months.




4—Death, P—Excess contributions plus earnings/excess deferrals taxable

7—Normal distribution, A—May be eligible for 10-year tax option

7—Normal distribution, K—Distribution of IRA assets not having a readily available FMV

8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable, B—Designated Roth account distribution

8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable, J—Early distribution from a Roth IRA

8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable, K—Distribution of IRA assets not having a readily available FMV

B—Designated Roth account distribution, L—Loans treated as deemed distributions under section 72(p)

B—Designated Roth account distribution, P—Excess contributions plus earnings/excess deferrals taxable

Death Distribution of IRA assets

not having a readily available FMV

Excess contributions plus earnings/excess deferrals taxable

Excess contributions plus earnings / excess deferrals (and/or earnings) taxable

J—Early distribution from a Roth IRA, P—Excess

contributions plus earnings/excess deferrals taxable

Loans treated as deemed distributions under section 72(p)

May be eligible for 10-year tax option, or

Prohibited transaction. 4—Death, L—Loans treated

as deemed distributions under section 72(p)

6—Section 1035 exchange, W—Charges or payments for purchasing qualified long-term care insurance contracts under combined arrangements

B—Designated Roth account distribution, G—Direct rollover and direct payment

Cost of current life insurance protection

Direct rollover and direct payment

Direct rollover of a designated Roth account distribution to a Roth IRA

Distributions under Employee Plans Compliance Resolution System (EPCRS)

G—Direct rollover and direct payment, K—Distribution of IRA assets not having a readily available FMV

Recharacterized IRA contribution made for 2014

Recharacterized IRA contribution made, or

Section 1035 exchange.



any other language send an encrypted message to the Pension Policy and Procedures mailbox.In the email, include the claim number claimant name, and PAA worksheet field

information including the



PAYER NAME GROSS INCOME IRS SOURCE IRS INCOME TYPE INDICATOR 1, and INDICATOR 2.

Do not proceed to Step 6.

Wait for further instructions from P&F Service.


Note: This step pertains only when the IRS SOURCE field is Distributions from Medical Savings Accounts.

If the INDICATOR 1 field is (or displays)…

Then …

empty (or blank) Disability Normal Distribution, orNot Set




Death Distribution to a Non-

Spousal Beneficiary, or Prohibited Transaction



Note: If there is no evidence to show the date in which the income is received, presume

that the income was received in January of the tax year shown on the PAA worksheet.


Excess Contributions do not count this as income.

d. Sample PAA Worksheet (Page One)

e. Sample PAA Worksheet (Second Page or Additional Pages)

5. Omnibus Budget Reconciliation Act (OBRA) and Reporting Requirements


a. OBRA and Reporting Requirements

The Omnibus Budget Reconciliation Act (OBRA) of 1990 requires that VA pay the cost of administering the FTI match from compensation and pension funds rather than from the general operating expenses account. To do so, Regional Offices must identify PAAs and report information related to overpayments and savings. This process is identical to the IVM.

Reference: For more information on reporting requirements, see M21-1, Part X, Chapter 9, F.14.

department of veterans affairsm21-1, part iii, …€¦ · web view2017/01/23 · box one,...

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