VA Pension Program Design and Management Do Not Ensure Only Those with Financial Need Receive Benefits

		Program Allows Claimants to Transfer Assets Prior to Applying, Unlike Other Means-Tested Programs

We found several potential vulnerabilities in the VA pension program’s  design, as well as in VA’s policies and procedures, that hinder the  department’s ability to ensure that only those in financial need receive  benefits. For example, we  identified a case involving a pension recipient who transferred over a  million dollars in assets into an irrevocable trust less than 3 months prior  to applying for these benefits. In contrast, for Medicaid—another means tested program—federal law  explicitly restricts eligibility for coverage for long term care for certain  individuals who transfer assets for less than fair market value prior to  applying., As a result, when an individual applies for Medicaid  coverage for long-term care, states conduct a look-back—a review to  determine if the applicant transferred assets for less than fair market  value prior to applying. While the instructions on  the pension application forms ask claimants to report all income sources  and assets they own, the forms do not provide spaces for claimants to  report some types of income and assets. However, VA still needs to know about any asset  transfers when assessing a claimant’s financial eligibility because,  consistent with VA’s regulations, the department must determine whether  the claimant retains ownership and control of the transferred asset and if  this asset should be counted as part of the claimant’s net worth. Unclear Guidance on Assessing Financial Eligibility May Lead to Inconsistent Decisions

VA’s guidance to claims processors on assessing financial eligibility for  VA pension benefits is unclear about when certain assets should be  counted as part of an applicant’s net worth. VA’s procedures  manual states that pension claims should be denied if a claimant’s  financial resources are sufficient enough to pay for their living expenses  for a “reasonable period of time,” but it does not define this term. As a  result, claims processors must use their own discretion to determine what  period of time is reasonable for claimants to use their assets before  needing the assistance of the VA pension. Many Organizations Help VA Pension Claimants Transfer Assets to Qualify for Benefits

		Over 200 Organizations Market Services to Help Qualify Veterans and Surviving Spouses for VA Pension Benefits

We identified over 200 organizations located throughout the country that  market their services to help veterans and surviving spouses qualify for VA  pension benefits by transferring or preserving excess assets.organizations consist primarily of financial planners and attorneys offering  products and services such as annuities and the establishment of trusts, to  enable potential VA pension claimants with excess assets to meet financial  eligibility criteria for VA pension benefits. Among the  19 organizations our investigative staff contacted, about half advised  transferring excess assets into an irrevocable trust with a family member as  the trustee to direct funds to pay for the veteran’s expenses. About half  also advised placing excess assets into some type of annuity. Some Products and Services May Adversely Affect Claimants

Some products may not be suitable for elderly veterans because they  may lose access to funds they may need for future expenses, such as  medical care. Among organizations that did charge for  services, fees ranged from a few hundred dollars for benefits counseling  to up to $10,000 for the establishment of a trust. In particular, claims processors’ reliance on unverified  self-reported information when assessing eligibility means that VA cannot  be assured that it is obtaining all relevant financial information from  claimants, including information on asset transfers, trusts, annuities, and  other forms of retirement income. Matter for Congressional Consideration

To ensure that only those in financial need are granted VA pension  benefits, Congress should consider establishing a look-back and penalty  period for claimants who transfer assets for less than fair market value  prior to applying, similar to other means-tested programs. 2. This may include requesting supporting  documentation such as bank statements and tax returns, or using  automated databases that can verify financial information. 3. 4. III), VA generally agreed  with our conclusions, concurred with three of our recommendations, and  concurred in principle with one other recommendation. VA concurred in principle with our second recommendation that the  department verify financial information during the initial claims process. VA said it expects to complete an  analysis by November 1, 2012 of whether financial information can be  verified without placing undue burdens on claimants and recipients. Appendix I: Objectives, Scope, and Methodology

The objectives of our review were to examine (1) how the design and  management of the Department of Veterans Affairs’ (VA) pension  program ensure that only those with financial need receive pension  benefits and (2) what is known about organizations that are marketing  financial products and services to veterans and survivors to enable them  to qualify for VA pension benefits. GAO INVESTIGATOR: There’s no fee for you, at all? COMPANY REPRESENTATIVE: Hang on a second. This is . So that’s  not the issue. VA’s Fiduciary Program: VA Plans to Improve Program Compliance and  Policies, but Sustained Management Attention is Needed.
Why GAO Did This Study

The VA pension program is intended to provide economic benefits to wartime veterans and survivors with financial need. GAO was asked to examine (1) how the design and management of VAs pension program ensure that only those with financial need receive pension benefits and (2) what is known about organizations that are marketing financial products and services to enable veterans and survivors to qualify for VA pension benefits. GAOs study included a review of VAs policies and procedures, site visits to VAs three Pension Management Centers, and online research and interviews of organizations that market financial and estate planning services to help veterans and survivors qualify for VA pension benefits.

What GAO Found

The Department of Veterans Affairs (VA) pension program design and management do not adequately ensure that only veterans with financial need receive pension benefits. While the pension program is means tested, there is no prohibition on transferring assets prior to applying for benefits. Other means-tested programs, such as Medicaid, conduct a look-back review to determine if an individual has transferred assets at less than fair market value, and if so, may deny benefits for a period of time, known as the penalty period. This control helps ensure that only those in financial need receive benefits. In contrast, VA pension claimants can transfer assets for less than fair market value immediately prior to applying and be approved for benefits. For example, GAO identified a case where a claimant transferred over a million dollars less than 3 months prior to applying and was granted benefits. Also, VAs process for assessing initial eligibility is inadequate in several key respects. The application form does not ask for some sources of income and assets such as private retirement income, annuities, and trusts. As a result, VA lacks complete information on a claimants financial situation. Also, the form does not ask about asset transfersinformation VA needs to determine whether these assets should be included when assessing eligibility. In addition, VA does not verify all the information it does request on the form. For example, VA does not routinely request supporting documents, such as bank statements or tax records, unless questions are raised. VAs fiduciary program, which appoints individuals to manage the financial affairs of beneficiaries who are unable to do so themselves, collects financial information that may affect some pension recipients eligibility, but VA pension claims processors do not have access to all this information. Further, guidance on when assets should be included as part of a claimants net worth is unclear; and VA claims processors must use their own discretion when assessing eligibility for benefits, which can lead to inconsistent decisions.
GAO identified over 200 organizations that market financial and estate planning services to help pension claimants with excess assets meet financial eligibility requirements for these benefits. These organizations consist primarily of financial planners and attorneys who offer products such as annuities and trusts. GAO judgmentally selected a nongeneralizable sample of 25 organizations, and GAO investigative staff successfully contacted 19 while posing as a veterans son seeking information on these services. All 19 said a claimant can qualify for pension benefits by transferring assets before applying, which is permitted under the program. Two organization representatives said they helped pension claimants with substantial assets, including millionaires, obtain VAs approval for benefits. About half of the organizations advised repositioning assets into a trust, with a family member as the trustee to direct the funds to pay for the veterans expenses. About half also advised placing assets into some type of annuity. Some products and services provided, such as deferred annuities, may not be suitable for the elderly because they may not have access to all their funds for their care within their expected lifetime without facing high withdrawal fees. Also, these products and services may result in ineligibility for Medicaid for a period of time. Among the 19 organizations contacted, the majority charged fees, ranging from a few hundred dollars for benefits counseling to $10,000 for establishment of a trust.

What GAO Recommends

Congress should consider establishing a look-back and penalty period for pension claimants who transfer assets for less than fair market value prior to applying, similar to other federally supported means-tested programs. VA should (1) request information about asset transfers and other assets and income sources on application forms, (2) verify financial information during the initial claims process, (3) strengthen coordination with VAs fiduciary program, and (4) provide clearer guidance to claims processors assessing claimants eligibility. In its comments on this report, VA concurred with three of GAOs recommendations and concurred in principle with one, citing concerns about the potential burden on claimants and recipients of verifying reported financial information. VA agreed to study the issue further.