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  • Can a 100 percent Disabled Veteran Work and Earn an Income?

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    You’ve just been rated 100% disabled by the Veterans Affairs. After the excitement of finally having the rating you deserve wears off, you start asking questions. One of the first questions that you might ask is this: It’s a legitimate question – rare is the Veteran that finds themselves sitting on the couch eating bon-bons … Continue reading

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VA_Training_Letter_07-01.pdfTraining Letter 07-01

Training Letter 07-01

Total Disability Ratings Based on Individual Unemployability (IU)


Training Letter 07-01

Total Disability Ratings Based on Individual Unemployability (IU)

Benefits granted under the VA rating schedule are intended to compensate veterans for the average impairment in earning capacity that results from service-connected disease or injury. IU is a special additional benefit to address the truly unique disability picture of a veteran who is unemployable due to service-connected disability, but for whom the application of the rating schedule does not fully reflect the veteran's level of impairment. An award of IU allows the veteran to receive compensation at a rate equivalent to that of a 100 percent schedular award. However, this benefit is not intended, by regulation or policy, to be a quasi-automatic benefit granted whenever a veteran has met a qualifying schedular evaluation or reached an advanced age.

When raised as an issue, IU is appropriate only in exceptional cases. First determine if the veteran's disability(ies) warrant a 100 percent schedular evaluation before considering whether to assign a total disability rating under either 38 CFR 4.16 or 3.321.

1. General Requirements for Entitlement to IU

Entitlement to IU requires that the veteran meet certain initial criteria listed at 38 CFR 4.16 as well as continuing criteria as explained below. The IU benefit continues only as long as the veteran remains unemployable. VA monitors the employment status of IU beneficiaries and requires that they submit an annual certification of unemployability.

Consideration for IU requires that:

o The veteran has service-connected disability(ies) as described in 38 CFR 4.16(a) or 4.16(b), and

· The evidence shows unemployability due to a service-connected disability.

1.a. Schedular Requirements

The qualifying schedular evaluations are provided at § 4.16(a). The veteran must be service connected for a single disability evaluated at least 60 percent disabling or service connected for multiple disabilities evaluated at least 70 percent disabling, with one of the multiple disabilities rated at least 40 percent disabling. This section also provides a list of circumstances where the requirement for a single 60 or 40 percent disability may be met by a combination of disabilities that can be considered a single disability (such as those arising from common etiology or a single accident, or those affecting a single body system, etc.).

Careful consideration must also be given to the cause of the veteran's unemployability.

Unemployability must result from one or more service-connected disabilities. Disabilities for which service connection has not been granted do not qualify for consideration as a source of unemployability.

If the veteran does not meet the requirements of 38 CFR 4.16(a) but there is evidence of unemployability due to a service-connected disability, then the case should be submitted to the Director of Compensation and Pension Service for a determination of eligibility, as provided at 38 CFR 3.321(b) and 4.16(b).

1.b. Unemployability

Unemployability means the inability of a veteran to secure or follow a substantially gainful occupation. A finding of unemployability cannot be made if the evidence shows that the veteran is engaged in, or is capable of being engaged in, a substantially gainful occupation. However, a finding could be made if the evidence shows marginal employment. Marginal employment is defined in terms of a veteran's earned annual income. This income should generally not exceed the government's established poverty threshold for one person. Exceeding this threshold may indicate a substantially gainful occupation, as noted by the Court of Appeals for Veteran's Claims (CAVC) in Faust v. West, 13 Vet.App. 342 (2000), where a substantially gainful occupation was defined as "one that provides annual income that exceeds the poverty threshold for one person."

In addition to the income criterion, evidence showing that employment is marginal rather than substantially gainful may also exist on a "facts found" basis. Examples of this marginal status include employment in the protected environment of a family business or sheltered workshop. Such fact-based marginal employment is consistent with a finding of unemployability.

1.c. Age Factor

It is clear from 38 CFR 4.19 that consideration of a veteran's age is appropriate when evaluating disabilities for pension claims, but not for awarding IU benefits. The regulation states that unemployability associated with advancing age may not be used as a basis for a total disability rating in service-connected claims. This provision is echoed at 38 CFR 3.341, which states that the service-connected disability must be sufficient to produce unemployability without regard to advancing age.

Advancing age in this context may relate to voluntary retirement or removal from the work force based on tenure or longevity rather than disability. Voluntary retirement does not necessarily show unemployability and should not be used as the only evidence of unemployability. Therefore, when evaluating a claim for IU received from a retired veteran of advanced age, careful consideration must be given to distinguishing a worsened disability that would have caused unemployability from unemployment due to retirement. When an IU claim is received from a veteran of advanced age, the rating should discuss the factor of age and provide an explanation of how the available evidence was evaluated to arrive at the decision to grant or deny IU.

2. Claims for IU

Claims for IU are generally submitted by the veteran but may also be reasonably raised by the evidence of record, including statements or evidence submitted by the veteran indicating unemployability. IU claims filed by the veteran can be considered as claims for an increased evaluation when associated with evidence of a worsened service-connected condition. Claims for an increased evaluation, even without a specific IU claim from the veteran, may give rise to a claim for IU that must be considered.

2.a. Reasonably Raised or Informal Claims

In Norris v. West, 12 Vet.App. 413 (1999), the Court held that where the rating activity is considering a claim for increased evaluation from a veteran who meets the qualifying schedular disability percentage requirements and there is evidence in the claims folder, or under VA control, which shows unemployability due to service-connected disability, then a rating for the claimed increase must also include a rating of a reasonably raised claim for IU. Thus, under the proper circumstances, a claim for IU exists, even though the veteran did not specifically make the claim.

The issue of a reasonably raised claim for IU was also addressed in the Federal Circuit case of Roberson v. Principi, 251 F.3d 1378 (Fed. Cir. 2001). In that case, the Court held that once a veteran submits evidence of a medical disability, makes a claim for the highest possible rating, and submits evidence of unemployability, the requirement of 38 CFR 3.155(a) that a claimant must "identify the benefit sought" is met. In such cases, VA must consider total disability based upon IU. The Court noted that, under these circumstances, the IU benefit being sought has been identified in conformity with the informal claim requirements of § 3.155(a). (See also, Servello v. Derwinski, 3 Vet.App. 196, 199 (1992) (veteran must provide evidence of entitlement to IU rating by virtue of unemployability)). The Court further stated that VA is obligated to develop a claim "to its optimum," which means considering all potential claims raised by the evidence and applying all relevant laws and regulations, regardless of whether the claim is specifically labeled as a claim for IU. Under circumstances where these conditions apply, but where the veteran does not meet the schedular requirements of § 4.16(a), the case should be referred for extra-schedular consideration as specified at § 4.16(b).

When the veteran has already been awarded a 100 percent total evaluation for one disability, an award of IU for a separate disability or disabilities should not be considered. The VA Office of General Counsel held in VAOPGCPREC 6-99, that when a schedular total disability grant has already been made, no additional monetary benefit would be available to a veteran based on unemployability and any such claim would be moot.

2.b. Claim for IU Defined

A formal claim for IU on VA Form 21-8940.

Any written communication indicating that the veteran is unable to work because of his or her service-connected disability(ies).

To raise an informal IU claim, the veteran must claim an increased evaluation for his or her service-connected disability(ies), submit medical evidence or be shown on VA examination to meet the requirements of § 4.16, and claim the inability to work due to his or her service-connected disability.

Although a claimant who seeks an increased rating is presumed to be seeking the highest rating possible, a claim for IU cannot reasonably be raised unless the veteran claims to be unable to maintain substantially gainful employment due to service-connected disability.

3. IU Claim Development

3.a. VA Forms 21-8940 and 21-4192

Claims for IU require that a VA Form (VAF) 21-8940, Veteran's Application for Increased Evaluation Based on Unemployability, be completed and submitted to the VA regional office by the veteran. If an IU claim has been reasonably raised by the evidence of record, a VAF 21-8940 must be sent to the veteran for completion and return before an award can be considered. The VAF 21-8940 requires that the veteran list all employment for the five years prior to becoming too disabled to work and provide an accounting of current income. If the VAF 21-8940 is not returned by the veteran within 60 days, a formal rating decision will be made on the basis of the evidence of record, which considers, among other factors, that necessary evidence was not furnished by the claimant. If the VAF 21-8940 is returned after the rating decision is issued, but within one year of the date sent, the claim should be re-rated. See also section 4.d., Effective Dates for Reasonably Raised IU Claims.

Once the regional office receives VAF 21-8940 and former employers are identified, then VAF 21-4192, Request for Employment Information in Connection with Claim for Disability Benefit, will be forwarded to the former employers listed on the form. The VAF 21-4192 requests that the employer provide information about the veteran's job duties, on-the-job concessions, date of and reason for job termination, etc. Information given on both VAF 21-8940 and VAF 21-4192 is essential to a fair evaluation of the IU claim. However, IU benefits should not be denied solely because an employer failed to respond to VAF 21-4192.

3.b. Medical Evidence

The available medical evidence must show that a service-connected physical or mental condition is currently so severe and disabling that it prevents the veteran from securing or following a substantially gainful occupation. Any relevant medical evidence must be obtained from both VA and private sources as part of the development and evaluation process. These documents may contain descriptions of physical limitations caused by a service-connected disability or may contain opinions by medical professionals regarding the veteran's ability or inability to engage in work-related activity. If the evidence obtained is incomplete or inconsistent and does not provide a basis for assessing unemployability, then a VA examination should be scheduled, as provided under 38 CFR 3.326 and 3.159©(4). The medical examiner should be requested to provide an opinion regarding the effect of the service-connected disabilities on the veteran's ability to engage in substantially gainful employment. Further, because it is preferable to rate a veteran as 100 percent disabled on a schedular basis as opposed to awarding IU, order an examination for each service-connected condition that is not at the maximum schedular evaluation.

3.c. Vocational Rehabilitation and Employment Service (VR&E) Records

When the veteran's claims folder indicates that he or she has been seen by VR&E Service, any records related to this contact must be obtained and evaluated. The records may document the veteran's participation in a training program or may show that training was not feasible or was unsuccessful. The VR&E records provide important evidence for evaluating current unemployability. VA recognizes the importance of fostering a return-to-work attitude among veterans awarded IU and has implemented the use of a "motivational letter" encouraging new IU recipients to contact VR&E for assistance in returning to work.

3.d. Social Security Administration (SSA) Records

When the claims folder indicates that the veteran has been examined or awarded disability benefits by SSA, any relevant records must be obtained and evaluated. The CAVC held in Murincsak v. Derwinski, 2 Vet.App. 362 (1992), that VA's duty to assist includes requesting both the SSA decision granting or denying benefits and any supporting medical records. Although VA is not obligated to follow a determination made by SSA, these records may be relevant to the issue of the level of impairment of the veteran's service-connected disability. However, remember that SSA benefits may be awarded for any disability, whereas IU benefits must be based on service-connected disability. Therefore, careful attention must be paid to determining what disability resulted in a SSA benefit award and whether that disability is one for which service connection has been granted.

4. Rating Considerations

Rating decisions granting or denying entitlement to IU must provide enough explanation so that the claimant and representative can understand the reasons and bases for the decision. As with any decision, the rating must list the evidence considered, a clear explanation of the basis of the decision, and an explanation of the effective date of entitlement.

4.a. Date of Claim

A veteran's initial claim for IU may be received from any source indicating the benefit being sought, including a VAF 21-4138, Statement in Support of Claim. If the veteran files an informal claim, the regional office must send the veteran a VAF 21-8940 with instructions to complete and return it within one year in order to preserve date of receipt of the earlier communication as the date of claim. If the VAF 21-8940 is received after the one-year period has expired, the date of claim will be the date of receipt of the VAF 21-8940 as provided in § 3.159(b)(1).

If the veteran submits a VAF 21-8940 as the initial IU claim, receipt of this form will represent a claim for IU and will establish the date of claim.

4.b. Effective Dates for IU Awards - Application of 38 CFR 3.400(o)(2)

When an IU claim is associated with a veteran's worsened service-connected disability, it is considered a claim for increase and the effective date of entitlement must be in accordance with § 3.400(o)(2). That section specifies that the effective date for an increase will be the earliest date that it is "factually ascertainable" that an increase occurred, provided this date is within one year preceding receipt of the claim. Otherwise, the effective date is the date of receipt of the claim.

Claims for an increased rating are considered claims for IU if any of the following conditions apply:

o The IU claim is submitted on VAF 21-8940, or

o In addition to a formal or informal claim for an increased rating, the veteran alleges that he or she is unemployable or VA receives evidence of unemployability, or

o In the course of developing a claim for an increased rating, VA obtains evidence of unemployability and VA grants the veteran a rating that makes the veteran eligible for IU.

When a veteran claims entitlement to IU without claiming increased disability, but increased disability is shown on VA examination or other medical evidence, the effective date of both grants is controlled by 38 CFR 3.400(o)(2).

4.c. Application of 38 CFR 3.400(o)

There are cases, however, where a claim for IU is not associated with a claim for increased disability. In these situations, the effective date is governed by § 3.400(o), which provides that the effective date will be the date of receipt of claim or the date entitlement arose, whichever is later. A case such as this might occur where a veteran has been unemployable due to service-connected disability meeting the schedular requirements for IU, but has never applied for IU. When the veteran files a claim for IU, and there is no associated worsened disability, it is not a claim for an increased disability. Therefore, the date of claim would generally be the effective date, unless evidence indicated a date of entitlement later than the date of claim.

4.d. Effective Dates for Reasonably Raised IU Claims

Reasonably raised claims for IU may arise in a veteran's original claim or claim for an increased rating. In original claims, IU must be considered when there is evidence of unemployability due to the claimed service-connected disability or disabilities. In claims for an increased evaluation, the CAVC holding in Norris requires that VA must consider a claim for IU when a veteran:

o has submitted a claim for an increased evaluation, and

o meets the minimum schedular requirements for IU, and

o there is evidence of unemployability resulting from service-connected disability.

In addition, if VA receives, or is in possession of, evidence showing a worsened service-connected disability based on a report of medical examination or hospitalization, that evidence may establish an informal claim for increased evaluation, as provided in 38 CFR 3.157. In that event, if the schedular requirements for IU are met, evaluation of the informal claim for increase must also include an evaluation of a reasonably raised claim for IU.

When a claim for IU is reasonably raised, VAF 21-8940 must be sent to the veteran for completion and return. Because this type of IU claim arises when there is an associated claim for increase, the effective date of a grant of IU is governed by § 3.400(o)(2). This means that evidence of a factually ascertainable date of unemployability within the year preceding the date of claim may establish the effective date. In many cases, this may be the same date as that for the increase.

If the reasonably raised IU claim is received at the same time as other claims from the veteran and a rating decision is issued on the other claims, defer the IU claim and send the veteran VAF 21-8940. When the form is returned, it can be evaluated along with other evidence and a decision can be made regarding IU.

If the form is not returned within 60 days of mailing, issue a formal rating decision based on the evidence of record. If the VAF 21-8940 is returned after the rating decision is promulgated but within one year of the date the VAF 21-8940 was requested, re-rate the claim using the date of mailing of the form to the veteran as the date of claim. If IU is granted, the effective date of the award would be the date of receipt of the informal claim. If the form is not returned within one year of the date sent, benefits cannot be paid prior to date of receipt of the VAF 21-8940.

4.e. Chapter 35 Benefits: Survivors' and Dependents' Educational Assistance

38 U.S.C. Chapter 35 and regulations at 38 CFR 3.807 establish that educational benefits are available for dependents of a veteran who has been awarded a permanent and total service-connected disability. Although the disabling conditions that lead to an award of IU are considered to be total based on unemployability, they are not always permanent. Unemployability may be temporary: for example, where the veteran undergoes VR&E training and is subsequently able to engage in a substantially gainful occupation. The VA Office of General Counsel has acknowledged that an IU award may be temporary. In VAOPGPREC 5-05, it was determined that § 4.16(b) "permits the award of a total disability rating based on temporary (i.e., non-permanent) inability to follow a substantially gainful occupation." Because IU is acknowledged as a benefit that is not necessarily permanent, careful consideration must be given to granting the Chapter 35 educational benefit in association with the IU award. Substantial evidence must show that the veteran's unemployability status is permanent before the Chapter 35 grant is appropriate.

5. Continuing Requirements for IU Award

5.a. VA Form 21-4140

After the initial IU award has been made, the veteran must submit a VAF 21-4140, Employment Questionnaire, on a yearly basis to certify continuing unemployability. The VAF 21-4140 is required unless the veteran is 70 years of age or older, has been in receipt of IU for a period of 20 or more consecutive years (as provided at 38 CFR 3.951(b)), or has been granted a 100 percent schedular evaluation. The form is sent out annually to the veteran from the Hines Information Technology Center and must be returned to the regional office. It requests that the veteran report any employment for the past 12 months or certify that no employment has occurred during this period. The VAF 21-4140 includes a statement that it must be returned within 60 days or the veteran's benefits may be reduced. Completion of this form has a major impact on IU benefits in one of three ways, as described below.

VAF 21-4140 returned with no change

If VAF 21-4140 is returned in a timely manner and shows no employment, then IU benefits will continue uninterrupted.

VAF 21-4140 returned showing employment

If VAF 21-4140 is returned in a timely manner and shows that the veteran has engaged in employment, VA must determine if the employment is marginal or substantially gainful employment. If the employment is marginal, then IU benefits will continue uninterrupted. If the employment is substantially gainful, then VA must consider discontinuing the IU benefit. VA regulations at 38 CFR 3.343©(1) and (2) provide that actual employability must be shown by clear and convincing evidence before the benefit is discontinued. Neither vocational rehabilitation activities nor other therapeutic or rehabilitative pursuits will be considered evidence of renewed employability unless the veteran's medical condition shows marked improvement. Additionally, if the evidence shows that the veteran actually is engaged in a substantially gainful occupation, IU cannot be discontinued unless the veteran maintains the gainful occupation for a period of 12 consecutive months.

Once this period of sustained employment has been maintained, the veteran must be provided with due process before the benefit is actually discontinued, as stated at 38 CFR 3.105(e) and 3.501(e)(2). This consists of providing the veteran with a rating which:

o Proposes to discontinue the IU benefit

o Explains the reason for the discontinuance

o States the effective date of the discontinuance, and

o States that the veteran has 60 days to respond with evidence showing why the discontinuance should not take place.

If the veteran responds with evidence, it must be evaluated. If the evidence is insufficient or the veteran does not respond, then the regional office will discontinue the IU benefit and provide the veteran with a final rating decision explaining the decision. The effective date of the discontinuance will be the last day of the month following an additional period of 60 days, which begins from the date the veteran is notified of the final rating decision.

VAF 21-4140 not returned

If VAF 21-4140 is not returned within the 60 days specified on the form, then the regional office must initiate action to discontinue the IU benefit pursuant to 38 CFR 3.652(a). Due process must be provided with a rating decision that proposes to discontinue the IU benefit for failure to return the VAF 21-4140. If a response is not received within 60 days, then the IU benefit will be discontinued and a rating decision will be sent to the veteran providing notice of the discontinuance. The effective date of discontinuance will be the date specified in the rating decision which proposed discontinuance, as described above, or the day following the date of last payment of the IU benefit, as specified at § 3.501(f), whichever is later. The veteran must also be notified that if the form is returned within one year and shows continued unemployability, then the IU benefit may be restored from the date of discontinuance.

5.b. Income Verification Match (IVM) and Field Examinations

The IVM is a method of comparing an IU recipient's earned income, as reported to VA by other federal agencies, with the earned income limits that define marginal employment. If income reports show significant earned income above the poverty threshold, the regional office must undertake development to determine if the veteran is still unemployable.

Another method of monitoring unemployability status among IU recipients is through the VA Fiduciary Activity. This service conducts field examinations when it has been notified that an IU recipient might be pursuing a substantially gainful occupation. If the field examiner finds evidence of employment or if the veteran is unwilling to cooperate with the examiner, then the examiner will forward this information to the Rating Activity. A decision must then be made as to whether the IU benefit will be discontinued. This determination must take into account the regulatory requirements listed above, including: (1) whether there is actual employability by clear and convincing evidence and (2) whether there has been substantially gainful employment for 12 continuous months. If termination of the IU benefit is appropriate, a rating decision proposing discontinuance must be completed, with notice to the veteran that he or she has 60 days in which to contest the discontinuance. If no evidence or insufficient evidence is received within this period, then a final rating decision must be promulgated with notice to the veteran that the IU benefit will be discontinued on the last day of the month in which the additional 60-day due process period expires. This 60-day period will begin from the date of the notice of the final rating decision, as provided in § 3.105(e).


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