Part X, Subpart ii, Chapter 4, Section BAuthorization for Reductions in Disability Evaluations Under 38 CFR 3.105(e)

Revised August 19, 2021

X.ii.4.B.1.a#Role of the Rating Activity

The rating activity

• decides whether a reduction in the evaluation of a service-connected (SC) disability under 38 CFR 3.105(e) is in order, and
• dictates (via a rating decision) the type of award adjustment, if any, the authorization activity must make.

Reference: For more information on rating procedures for

• proposed reductions, see M21-1, Part X, Subpart ii, 3.D
• reductions due to a clear and unmistakable error (CUE), see M21-1, Part X, Subpart ii, 5.C, and
• reductions due to improvement, see M21-1, Part X, Subpart ii, 4.A.

X.ii.4.B.1.b#Application of 38 CFR 3.105(e)

38 CFR 3.105(e) and the information in this topic apply only when a reduction or discontinuance of a running award of disability compensation is necessary as a result of

• a reduction in the evaluation of an SC disability, or
• loss of entitlement to a total disability rating based on individual unemployability.

Example: If the rating activity increases the evaluation of one or more SC disabilities or grants service connection (SC) for a new disability, but the combined disability evaluation decreases because of a reduction in the evaluation of another disability, then

• award the increase from the applicable effective date, and
• apply the provisions of 38 CFR 3.105(e) to propose reduction of the combined disability evaluation.

Reference: For more information on notification requirements for reduced disability evaluations, see Stelzel v. Mansfield, 508 F.3d 1345 (2007).

X.ii.4.B.1.c#Initial Rating Activity Action Proposing a Reduction in a Disability Evaluation

The rating activity prepares a rating decision proposing changes in the evaluation(s) assigned to SC disabilities that will result in a reduction or discontinuance of benefits. This rating decision

• cites all the material facts and justification for the proposed action, and
• provides the beneficiary with the proposed
  • evaluation(s) of the disability(ies) in question, and
  • combined evaluation, if applicable.

X.ii.4.B.1.d#When 38 CFR 3.105(e) Does Not Apply

Use the table below to determine when 38 CFR 3.105(e) does not apply. — If … — Then … the award is suspended

• reduce or discontinue the award in accordance with facts found, but not earlier than the date of suspension, and

• notify the Veteran of the change in the evaluation of the SC disability(ies).

• the evaluation of one or more SC disabilities is decreased, but

• the combined disability evaluation remains the same

• take no further award action, and

• notify the Veteran of the change in the evaluation of the SC disability(ies).

• the evaluation of one or more SC disabilities is decreased, but

• the combined disability evaluation is increased because of an offsetting increase in the evaluation of another SC disability

• award the increase from the appropriate effective date, and

• notify the Veteran of the change in the evaluation of the SC disability(ies).

the evaluation of an SC disability is decreased as part of a staged rating

• reduce the award in accordance with facts found, and
• notify the Veteran of the change in the evaluation of the SC disability(ies) in the staged rating.

Note: Tatum v. Shinseki, Vet.App 139, 141 (2010), held that notice under 38 CFR 3.105(e) is only required when there is a reduction in compensation payments currently being made. Important: In cases in which the rating schedule provides for a period of convalescence, the reduction may not take effect prior to the end of that period. Example: A malignant neoplasm of the genitourinary system evaluated under 38 CFR 4.115b, diagnostic code 7528, must be evaluated as 100-percent disabling for a minimum of six months from the time treatment for the malignancy ceases.
Reference: For more information on circumstances under which 38 CFR 3.105(e) does not apply to a change in a disability evaluation, see VAOPGCPREC 71-1991.

1. Authorization Procedures for Reductions in Disability Evaluations Under 38 CFR 3.105(e)

Introduction — This topic contains information on reductions in disability evaluations, including

• initial notification of the proposed adverse action
• action to take
  • if a Veteran expresses disagreement before VA makes a final decision, and
  • after a Veteran responds or fails to respond to a notice of proposed adverse action
• withdrawing a proposal to reduce a disability evaluation under 38 CFR 3.105(e)
• action to take on final rating decisions prepared under 38 CFR 3.105(e)
• providing notification of a final rating decision
• handling evidence received after preparation of a final rating decision but prior to the effective date of reduction, and
• military retired pay (MRP) adjustment following a reduction in disability compensation.

Revised April 28, 2025

X.ii.4.B.2.a#Initial Notification of the Proposed Adverse Action

Send a notice of proposed adverse action with a rating decision that proposes a reduction in a disability evaluation under 38 CFR 3.105(e) to the Veteran’s current address of record. The notice must

• meet the requirements set forth in M21-1, Part X, Subpart ii, 3.A, and
• inform the Veteran of the proposed date of the reduction, which is the last day of the month, 60 days after the date the Department of Veterans Affairs (VA) will notify the Veteran of the final rating decision.

Important: If the Veteran meets basic eligibility criteria for pension, and the evidence of record suggests pension would be the greater or the only disability benefit to which the Veteran is entitled if VA takes the proposed action,

• attach VA Form 21P-527EZ, Application for Veterans Pension, to the notice of proposed adverse action, and
• explain to the Veteran why the form should be completed and returned.

Notes:

• The system claims processors use to adjust awards requires entry of the first day of the month following a 60-day period that begins on the date VA notifies the Veteran of the final rating decision as the effective date of an award adjustment under 38 CFR 3.105(e).
• There is no requirement to include language about minimizing an overpayment since no overpayment will be created by the proposed award adjustment. However, when system-generated letters automatically include the language about minimizing an overpayment, the letter does not need to be revised to remove it.

Reference: For more information on establishing entitlement to pension, see M21-1, Part IX, Subpart i, 2.

X.ii.4.B.2.b#Action to Take if a Veteran Expresses Disagreement Before VA Makes a Final Decision

Follow the instructions in M21-1, Part X, Subpart ii, 3.B.2.b, if a Veteran expresses disagreement with or requests decision review of a proposed action before VA makes a final decision.

X.ii.4.B.2.c#Action to Take After a Veteran Responds or Fails to Respond to a Notice of Proposed Adverse Action

Use the table below to determine the action to take after a Veteran

• responds to the notice of proposed adverse action referenced in M21-1, Part X, Subpart ii, 4.B.2.a, or
• fails to respond to the notice of proposed action within 65 days of the date VA sent it.

X.ii.4.B.2.d#Withdrawing a Proposal to Reduce a Disability Evaluation Under 38 CFR 3.105(e)

To withdraw a proposal to reduce a disability evaluation under 38 CFR 3.105(e), the rating activity must prepare a rating decision that confirms and continues the current disability evaluation.

X.ii.4.B.2.e#Action to Take on Final Rating Decisions Prepared Under 38 CFR 3.105(e)

Promulgate final rating decisions prepared under 38 CFR 3.105(e) by

• ensuring rating decision data is correctly reflected in the award application, and
• making any necessary award adjustments.

References: For more information on

• final actions related to adverse action proposals, see M21-1, Part X, Subpart ii, 3.B.4, and
• promulgating rating decisions in the Veterans Benefits Management System – Awards (VBMS-A), see the VBMS Awards User Guide.

X.ii.4.B.2.f#Providing Notification of a Final Rating Decision

After promulgating a final rating decision,

• follow the instructions in M21-1, Part VI, Subpart i, 1.B, for preparing and sending a decision notice to the Veteran, even if the proposed action is not taken, and
• send a copy of the decision notice to the Veterans Readiness and Employment activity for appropriate action if evidence of record indicates the Veteran is receiving training under 38 U.S.C. Chapter 31.

X.ii.4.B.2.g#Handling Evidence Received After Preparation of a Final Rating Decision but Prior to the Effective Date of Reduction

Use the table below to determine what steps to take if VA receives evidence after making a final rating decision under 38 CFR 3.105(e) but prior to the effective date of a corresponding reduction in benefits.

References : For more information on

• new rating decisions based on new evidence, see M21-1, Part X, Subpart ii, 3.D.1.f, and

• procedures to follow when corrected notice of proposed adverse action is required, see M21-1, Part X, Subpart ii, 3.A.3.e.

X.ii.4.B.2.h#MRP Adjustment Following a Reduction in Disability Compensation

When VA reduces a Veteran’s disability compensation to reflect a reduced disability evaluation, the Veteran’s retired pay center receives notification (via a computerized data exchange) of the reduction and makes corresponding changes to the Veteran’s military retired pay (MRP) if the Veteran waived all or a portion of the MRP to receive disability compensation.