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Federal Judge Allows Retroactive Benefit Reduction for Incarcerated Veteran

by David M. Reutter

On January 20, 2022, the U.S. Court of Appeals for the Federal Circuit held that the Department of Veterans Affairs (VA) may make a post-incarceration decision to reduce benefits retroactively for a veteran imprisoned over the statutory minimum period, which is currently 60 days.

Before the Court was the appeal of Randolph S. Gurley, who served in the U.S. Army between 1972 and 1974 and the Army National Guard between 1975 and 1982. Since 1997, VA has paid him service-connected-disability compensation benefits at 100% disability level based on “his individual unemployability,” the Court noted.

In 2011, Gurley was convicted of a felony and incarcerated from September 9 of that year to March 1, 2012. However, VA did not learn of Gurley’s incarceration until six days after his release. Pointing to 38 U.S.C.  § 5313, the agency noted that any veteran convicted of a felony “shall not be paid compensation [including disability compensation] … in an amount that exceeds” specified rates “for the period beginning” on the 61st day of incarceration “and ending on the day” the incarceration ends.

So VA had overpaid Gurley’s benefits for every day of his incarceration after the first 60, running up a total by his release of $10,461. The agency said it would reduce his payments to retroactively recover the overpayment. For Gurley, that meant his disability level would be reduced from 100% to 10%.

As if re-entry after incarceration weren’t difficult enough, a man whose disability had left him unemployable for 15 years would also lose 90% of the supplemental income on which he relied.

Gurley requested a waiver of recovery of the overpayment from VA, which was denied. He then appealed the debt determination to the Board of Veterans Appeals, but it said VA had properly established and calculated an overpayment under the relevant statute.

Gurley then appealed to the Court of Appeals for Veterans Claims. It affirmed the earlier decisions, concluding that retroactive benefit application was proper under § 5313, as was recoupment of the overpayment.

Aided by attorney Kenneth M. Carpenter of Carpenter Chartered in Topeka, Gurley sought review in the Federal Circuit Court of Appeals, arguing that §5313 permitted VA to act only during the period of incarceration. The Federal Circuit disagreed.

The Court noted that §5313 says that a veteran convicted of a felony shall not be paid “for” the period of incarceration, not that VA must also make its determination then. Moreover, the Court said, Gurley failed to point to any other statutory provision that bars retroactive benefit reductions generally or in his situation. In fact, the Court said, the reason retroactive reduction is allowed is because of a situation like his, in which “VA might not have the contemporaneous knowledge of a particular veteran’s incarceration needed to take the initiative of reducing by the 61st day.”

Citing Milder v. McDonald, 805 F.3d 1342 (Fed. Cir. 2015), the Court said that “Congress did not see the wisdom in providing substantial benefits to disabled veterans when at the same time the taxpayers of this country are spending thousands of dollars to maintain these same individuals in penal institutions.” Thus the earlier decisions were affirmed. See: Gurley v. McDonough, 23 F.4th 1353 (Fed. Cir. 2022).

Left unaddressed by the Court was how Gurley was supposed to maintain a home while incarcerated to which he could return when released. However, it did note that under 38 U.S.C. § 5313(b) and § 5307, dependent family members may seek recovery from the VA of a portion of the amount of reduction in the veteran’s benefit. 

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Related legal case

Gurley v. McDonough