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108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-683
======================================================================
 
       SERVICEMEMBERS AND VETERANS LEGAL PROTECTIONS ACT OF 2004

                                _______
                                

 September 13, 2004.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

   Mr. Smith of New Jersey, from the Committee on Veterans' Affairs, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 4658]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Veterans' Affairs, to whom was referred the 
bill (H.R. 4658) to amend the Servicemembers Civil Relief Act 
to make certain improvements and technical corrections to that 
Act, having considered the same, reports favorably thereon with 
amendments and recommends that the bill as amended do pass.

  The amendments are as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Servicemembers and 
Veterans Legal Protections Act of 2004''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

        TITLE I--IMPROVEMENTS TO SERVICEMEMBERS CIVIL RELIEF ACT

Sec. 101. Clarification of meaning of ``judgment'' as used in the Act.
Sec. 102. Requirements relating to waiver of rights under the Act.
Sec. 103. Right of servicemember plaintiffs to request stay of civil 
proceedings.
Sec. 104. Termination of leases.
Sec. 105. Prevention of double taxation of certain servicemembers.

              TITLE II--EMPLOYMENT AND REEMPLOYMENT RIGHTS

             Subtitle A--Extension of Health Care Coverage

Sec. 201. Two-year period of continuation of employer-sponsored health 
care coverage.
Sec. 202. Reinstatement of reporting requirements.

                       Subtitle B--Other Matters

Sec. 211. Requirement for employers to provide notice of rights and 
duties under USERRA.
Sec. 212. Demonstration project for referral of USERRA claims against 
Federal agencies to the Office of Special Counsel.

               TITLE III--MATTERS RELATING TO FIDUCIARIES

Sec. 301. Definition of fiduciary.
Sec. 302. Inquiry, investigations, and qualification of fiduciaries.
Sec. 303. Misuse of benefits by fiduciaries.
Sec. 304. Additional protections for beneficiaries with fiduciaries.
Sec. 305. Annual report.
Sec. 306. Annual adjustment in benefits thresholds.
Sec. 307. Effective dates.

                        TITLE IV--OTHER MATTERS

Sec. 401. Inventory of medical waste management activities at 
Department health-care facilities.
Sec. 402. Care for newborn children of veterans receiving maternity 
care.
Sec. 403. Technical amendments to education program provisions.

        TITLE I--IMPROVEMENTS TO SERVICEMEMBERS CIVIL RELIEF ACT

SEC. 101. CLARIFICATION OF MEANING OF ``JUDGMENT'' AS USED IN THE ACT.

  Section 101 of the Servicemembers Civil Relief Act (50 U.S.C. App. 
511) is amended by adding at the end the following new paragraph:
          ``(9) Judgment.--The term `judgment' means any judgment, 
        decree, order, or ruling, final or temporary.''.

SEC. 102. REQUIREMENTS RELATING TO WAIVER OF RIGHTS UNDER THE ACT.

  Section 107 of the Servicemembers Civil Relief Act (50 U.S.C. App. 
517) is amended--
          (1) In subsection (a), by inserting after the first sentence 
        the following new sentence: ``Any such waiver that applies to 
        an action listed in subsection (b) of this section is effective 
        only if it is in writing and is executed as an instrument 
        separate from the obligation or liability to which it 
        applies.'';
          (2) by redesignating subsection (c) as subsection (d); and
          (3) by inserting after subsection (b) the following new 
        subsection (c):
  ``(c) Prominent Display of Certain Contract Rights Waivers.--Any 
waiver in writing of a right or protection provided by this Act that 
applies to a contract, lease, or similar legal instrument must be in at 
least 12 point type.''.

SEC. 103. RIGHT OF SERVICEMEMBER PLAINTIFFS TO REQUEST STAY OF CIVIL 
                    PROCEEDINGS.

  Section 202(a) of the Servicemembers Civil Relief Act (50 U.S.C. App. 
522(a)) is amended by inserting ``plaintiff or'' before ``defendant''.

SEC. 104. TERMINATION OF LEASES.

  (a) Joint Leases.--Subsection (a) of section 305 of the 
Servicemembers Civil Relief Act (50 U.S.C. App. 535) is amended to read 
as follows:
  ``(a) Termination by Lessee.--
          ``(1) In general.--The lessee on a lease described in 
        subsection (b) may, at the lessee's option, terminate the lease 
        at any time after--
                  ``(A) the lessee's entry into military service; or
                  ``(B) the date of the lessee's military orders 
                described in paragraph (1)(B) or (2)(B) of subsection 
                (b), as the case may be.
          ``(2) Joint leases.--A lessee's termination of a lease 
        pursuant to this subsection shall terminate any obligation a 
        dependent of the lessee may have under the lease.''
  (b) Motor Vehicles Leases.--
          (1) Applicability to pcs orders from states outside conus.--
        Subparagraph (B) of subsection (b)(2) of such section is 
        amended by striking ``military orders for'' and all that 
        follows through ``or to deploy'' and inserting ``military 
        orders--
                          ``(i) for a change of permanent station--
                                  ``(I) from a location in the 
                                continental United States to a location 
                                outside the continental United States; 
                                or
                                  ``(II) from a location in a State 
                                outside the continental United States 
                                to any location outside that State; or
                          ``(ii) to deploy''.
          (2) Definitions.--Such section is further amended by adding 
        at the end the following new subsection:
  ``(i) Definitions.--
          ``(1) Military orders.--The term `military orders', with 
        respect to a servicemember, means official military orders, or 
        any notification, certification, or verification from the 
        servicemember's commanding officer, with respect to the 
        servicemember's current or future military duty status.
          ``(2) Conus.--The term `continental United States' means the 
        48 contiguous States and the District of Columbia.''.
  (c) Coverage of Individual Deployments.--Subsection (b) of such 
section is further amended in paragraph (1)(B) and paragraph (2)(B)(ii) 
(as designated by subsection (b) of this section) by inserting ``, or 
as an individual in support of a military operation,'' after ``deploy 
with a military unit''.

SEC. 105. PREVENTION OF DOUBLE TAXATION OF CERTAIN SERVICEMEMBERS.

  Section 511(c) of the Servicemembers Civil Relief Act (50 U.S.C. App. 
571(c)) is amended by adding at the end the following new paragraph:
          ``(5) Use, excise, or similar taxes.--A tax jurisdiction may 
        not impose a use, excise, or similar tax on the personal 
        property of a nonresident servicemember when the laws of the 
        tax jurisdiction fail to provide a credit against such taxes 
        for sales, use, excise, or similar taxes previously paid on the 
        same property to another tax jurisdiction.''.

              TITLE II--EMPLOYMENT AND REEMPLOYMENT RIGHTS

             Subtitle A--Extension of Health Care Coverage

SEC. 201. TWO-YEAR PERIOD OF CONTINUATION OF EMPLOYER-SPONSORED HEALTH 
                    CARE COVERAGE.

  (a) Improvement in Period of Coverage.--Subsection (a)(1)(A) of 
section 4317 of title 38, United States Code, is amended by striking 
``18-month period'' and inserting ``24-month period''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to elections made under such section 4317 on or after the date of the 
enactment of this Act.

SEC. 202. REINSTATEMENT OF REPORTING REQUIREMENTS.

  Section 4332 of title 38, United States Code, is amended in the 
matter preceding paragraph (1) by striking ``no later than February 1, 
1996, and annually thereafter through 2000'' and inserting ``no later 
than February 1, 2005, and annually thereafter''.

                       Subtitle B--Other Matters

SEC. 211. REQUIREMENT FOR EMPLOYERS TO PROVIDE NOTICE OF RIGHTS AND 
                    DUTIES UNDER USERRA.

  (a) Notice.--Chapter 43 of title 38, United States Code, is amended 
by adding at the end the following new section:

``Sec. 4334. Notice of rights and duties

  ``(a) Requirement to Provide Notice.--Each employer shall provide to 
persons entitled to rights and benefits under this chapter a notice of 
the rights, benefits, and obligations of such persons and such 
employers under this chapter. The requirement for the provision of 
notice under this section may be met by the posting of the notice where 
employers customarily place notices for employees.
  ``(b) Content of Notice.--The Secretary shall provide to employers 
the text of the notice to be provided under this section.''.
  (b) Clerical Amendment.--The table of sections at the beginning of 
such chapter is amended by adding at the end the following new item:

``4334. Notice of rights and duties.''.
  (c) Implementation.--(1) Not later than the date that is 90 days 
after the date of the enactment of this Act, the Secretary of Labor 
shall make available to employers the notice required under section 
4334 of title 38, United States Code, as added by subsection (a).
  (2) The amendments made by this section shall apply to employers 
under chapter 43 of such title on and after the first date referred to 
in paragraph (1).

SEC. 212. DEMONSTRATION PROJECT FOR REFERRAL OF USERRA CLAIMS AGAINST 
                    FEDERAL AGENCIES TO THE OFFICE OF SPECIAL COUNSEL.

  (a) Establishment of Project.--The Secretary of Labor and the Office 
of Special Counsel shall carry out a demonstration project under which 
certain claims against Federal executive agencies under the Uniformed 
Services Employment and Reemployment Rights Act under chapter 43 of 
title 38, United States Code, are referred to, or otherwise received 
by, the Office of Special Counsel for assistance, including 
investigation and resolution of the claim as well as enforcement of 
rights with respect to the claim.
  (b) Referral of All Prohibited Personnel Action Claims to the Office 
of Special Counsel.--(1) Under the demonstration project, the Office of 
Special Counsel shall receive and investigate all claims under the 
Uniformed Services Employment and Reemployment Rights Act with respect 
to Federal executive agencies in cases where the Office of Special 
Counsel has jurisdiction over related claims pursuant to section 1212 
of title 5, United States Code.
  (2) For purposes of paragraph (1), a related claim is a claim 
involving the same Federal executive agency and the same or similar 
factual allegations or legal issues as those being pursued under a 
claim under the Uniformed Services Employment and Reemployment Rights 
Act.
  (c) Referral of Other Claims Against Federal Executive Agencies.--(1) 
Under the demonstration project, the Secretary--
          (A) shall refer to the Office of Special Counsel all claims 
        described in paragraph (2) made during the period of the 
        demonstration project; and
          (B) may refer any claim described in paragraph (2) filed 
        before the demonstration project that is pending before the 
        Secretary at the beginning of the demonstration project.
  (2) A claim referred to in paragraph (1) is a claim under chapter 43 
of title 38, United States Code, against a Federal executive agency by 
a claimant with a social security account number with an odd number as 
its terminal digit, or, in the case of a claim that does not contain a 
social security account number, a case number assigned to the claim 
with an odd number as its terminal digit.
  (d) Administration of Demonstration Project.--(1) The Office of 
Special Counsel shall administer the demonstration project. The 
Secretary shall cooperate with the Office of Special Counsel in 
carrying out the demonstration project.
  (2) In the case of any claim referred, or otherwise received by, to 
the Office of Special Counsel under the demonstration project, any 
reference to the ``Secretary'' in sections 4321, 4322, and 4326 of 
title 38, United States Code, is deemed a reference to the ``Office of 
Special Counsel''.
  (3) In the case of any claim referred to, or otherwise received by, 
the Office of Special Counsel under the demonstration project, the 
Office of Special Counsel shall retain administrative jurisdiction over 
the claim.
  (e) Period of Project.--The demonstration project shall be carried 
out during the period beginning on the date that is 60 days after the 
date of the enactment of this Act, and ending on September 30, 2007.
  (f) Evaluations and Report.--(1) The Comptroller General of the 
United States shall conduct periodic evaluations of the demonstration 
project under this section.
  (2) Not later than April 1, 2007, the Comptroller General shall 
submit to Congress a report on the evaluations conducted under 
paragraph (1). The report shall include the following information and 
recommendations:
          (A) A description of the operation and results of the 
        demonstration program, including--
                  (i) the number of claims described in subsection (c) 
                referred to, or otherwise received by, the Office of 
                Special Counsel and the number of such claims referred 
                to the Secretary of Labor, and
                  (ii) for each Federal executive agency, the number of 
                claims resolved, the type of corrective action 
                obtained, the period of time for final resolution of 
                the claim, and the results obtained.
          (B) An assessment of whether referral to the Office of 
        Special Counsel of claims under the demonstration project--
                  (i) improved services to servicemembers and veterans; 
                or
                  (ii) significantly reduced or eliminated duplication 
                of effort and unintended delays in resolving 
                meritorious claims of those servicemembers and 
                veterans.
          (C) An assessment of the feasibility and advisability of 
        referring all claims under chapter 43 of title 38, United 
        States Code, against Federal executive agencies to the Office 
        of Special Counsel for investigation and resolution.
          (D) Such other recommendations for administrative action or 
        legislation as the Comptroller General determines appropriate.
  (g) Definitions.--In this section:
          (1) The term ``Office of Special Counsel'' means the Office 
        of Special Counsel established by section 1211 of title 5, 
        United States Code.
          (2) The term ``Secretary'' means the Secretary of Labor.
          (3) The term ``Federal executive agency'' has the meaning 
        given that term in section 4303(5) of title 38, United States 
        Code.

               TITLE III--MATTERS RELATING TO FIDUCIARIES

SEC. 301. DEFINITION OF FIDUCIARY.

  (a) In General.--(1) Chapter 55 of title 38, United States Code, is 
amended by adding at the end the following new section:

``Sec. 5506. Definition of `fiduciary'

  ``For purposes of this chapter and chapter 61 of this title, the term 
`fiduciary' means--
          ``(1) a person who is a guardian, curator, conservator, 
        committee, or person legally vested with the responsibility or 
        care of a claimant (or a claimant's estate) or of a beneficiary 
        (or a beneficiary's estate); or
          ``(2) any other person having been appointed in a 
        representative capacity to receive money paid under any of the 
        laws administered by the Secretary for the use and benefit of a 
        minor, incompetent, or other beneficiary.''.
  (2) The table of sections at the beginning of such chapter is amended 
by adding at the end the following new item:

``5506. Definition of `fiduciary'.''.
  (b) Conforming Amendments to Section 5502.--Section 5502 of such 
title is amended--
          (1) in subsection (a)--
                  (A) in paragraph (1), by striking ``other person'' 
                and inserting ``other fiduciary''; and
                  (B) in the second sentence of paragraph (2), by 
                inserting ``for benefits under this title'' after ``in 
                connection with rendering fiduciary services'';
          (2) in subsection (b), by striking ``guardian, curator, 
        conservator, or other person'' each place it appears and 
        inserting ``fiduciary''; and
          (3) in subsection (d), by striking ``guardian, curator, or 
        conservator'' and inserting ``fiduciary''.
  (c) Conforming Amendment to Section 6101.--Section 6101(a) of such 
title is amended by striking ``guardian, curator,'' and all that 
follows through ``beneficiary,'' and inserting ``fiduciary (as defined 
in section 5506 of this title) for the benefit of a minor, incompetent, 
or other beneficiary under laws administered by the Secretary,''.

SEC. 302. INQUIRY, INVESTIGATIONS, AND QUALIFICATION OF FIDUCIARIES.

  (a) In General.--Chapter 55 of title 38, United States Code, as 
amended by section 301(a)(1), is further amended by adding at the end 
the following new section:

``Sec. 5507. Inquiry, investigations, and qualification of fiduciaries

  ``(a) Any certification of a person for payment of benefits of a 
beneficiary to that person as such beneficiary's fiduciary under 
section 5502 of this title shall be made on the basis of--
          ``(1) an inquiry or investigation by the Secretary of the 
        fitness of that person to serve as fiduciary for that 
        beneficiary, such inquiry or investigation--
                  ``(A) to be conducted in advance of such 
                certification;
                  ``(B) to the extent practicable, to include a face-
                to-face interview with such person; and
                  ``(C) to the extent practicable, to include a copy of 
                a credit report for such person issued within one year 
                of the date of the proposed appointment;
          ``(2) adequate evidence that certification of that person as 
        fiduciary for that beneficiary is in the interest of such 
        beneficiary (as determined by the Secretary under regulations); 
        and
          ``(3) the furnishing of any bond that may be required by the 
        Secretary.
  ``(b) As part of any inquiry or investigation of any person under 
subsection (a), the Secretary shall request information concerning 
whether that person has been convicted of any offense under Federal or 
State law which resulted in imprisonment for more than one year. If 
that person has been convicted of such an offense, the Secretary may 
certify the person as a fiduciary only if the Secretary makes a 
specific finding that the person has been rehabilitated and is an 
appropriate person to act as fiduciary for the beneficiary concerned 
under the circumstances.
  ``(c)(1) In the case of a proposed fiduciary described in paragraph 
(2), the Secretary, in conducting an inquiry or investigation under 
subsection (a)(1), may carry out such inquiry or investigation on an 
expedited basis that may include waiver of any specific requirement 
relating to such inquiry or investigation, including the otherwise 
applicable provisions of subparagraphs (A), (B), and (C) of such 
subsection. Any such inquiry or investigation carried out on such an 
expedited basis shall be carried out under regulations prescribed for 
purposes of this section.
  ``(2) Paragraph (1) applies with respect to a proposed fiduciary who 
is--
          ``(A) the parent (natural, adopted, or stepparent) of a 
        beneficiary who is a minor;
          ``(B) the spouse or parent of an incompetent beneficiary;
          ``(C) a person who has been appointed a fiduciary of the 
        beneficiary by a court of competent jurisdiction; or
          ``(D) being appointed to manage an estate where the annual 
        amount of veterans benefits to be managed by the proposed 
        fiduciary does not exceed $3600, as adjusted pursuant to 
        section 5312 of this title.
  ``(d) Temporary Fiduciaries.--When in the opinion of the Secretary, a 
temporary fiduciary is needed in order to protect the assets of the 
beneficiary while a determination of incompetency is being made or 
appealed or a fiduciary is appealing a determination of misuse, the 
Secretary may appoint one or more temporary fiduciaries for a period 
not to exceed 120 days. If a final decision has not been made within 
120 days, the Secretary may not continue the appointment of the 
fiduciary without obtaining a court order for appointment of a 
guardian, conservator, or other fiduciary under the authority provided 
in section 5502(b) of this title.''.
  (b) Clerical Amendment.--The table of sections at the beginning of 
such chapter is amended by adding after the item added by section 
301(a)(2) the following new item:

``5507. Inquiry, investigations, and qualification of fiduciaries.''.

SEC. 303. MISUSE OF BENEFITS BY FIDUCIARIES.

  (a) Protection of Veterans Benefits When Administered by 
Fiduciaries.--(1) Chapter 61 of title 38, United States Code, is 
amended by adding at the end the following new sections:

``Sec. 6106. Misuse of benefits by fiduciaries

  ``(a) Fee Forfeiture in Case of Benefit Misuse by Fiduciaries.--A 
fiduciary may not collect a fee from a beneficiary for any month with 
respect to which the Secretary or a court of competent jurisdiction has 
determined that the fiduciary misused all or part of the individual's 
benefit, and any amount so collected by the fiduciary as a fee for such 
month shall be treated as a misused part of the individual's benefit.
  ``(b) Liability of Fiduciaries for Misused Benefits.--(1) If the 
Secretary or a court of competent jurisdiction determines that a 
fiduciary that is not a Federal, State, or local government agency has 
misused all or part of a beneficiary's benefit that was paid to such 
fiduciary, the fiduciary shall be liable for the amount misused, and 
such amount (to the extent not repaid by the fiduciary) shall be 
treated as an erroneous payment of benefits under this title to the 
fiduciary for purposes of laws pertaining to the recovery of 
overpayments. The amount of such overpayment shall constitute a 
liability of such fiduciary to the United States and may be recovered 
in the same manner as any other debt due the United States. Subject to 
paragraph (2), upon recovering all or any part of such amount, the 
Secretary shall pay an amount equal to the recovered amount to such 
beneficiary or such beneficiary's successor fiduciary.
  ``(2) The total of the amounts paid to a beneficiary (or a 
beneficiary's successor fiduciary) under paragraph (1) and under 
section 6107 of this title may not exceed the total benefit amount 
misused by the fiduciary with respect to that beneficiary.
  ``(c) Misuse of Benefits Defined.--For purposes of this chapter, 
misuse of benefits by a fiduciary occurs in any case in which the 
fiduciary receives payment, under any of laws administered by the 
Secretary, for the use and benefit of a beneficiary and uses such 
payment, or any part thereof, for a use other than for the use and 
benefit of such beneficiary or that beneficiary's dependents. Retention 
by a fiduciary of an amount of a benefit payment as a fiduciary fee or 
commission, or as attorney's fees (including expenses) and court costs, 
if authorized by the Secretary or a court of competent jurisdiction, 
shall be considered to be for the use or benefit of such beneficiary.
  ``(d) Regulations.--The Secretary may prescribe by regulation the 
meaning of the term `use and benefit' for purposes of this section.
  ``(e) Finality of Determinations.--A determination by the Secretary 
that a fiduciary has misused benefits is a decision of the Secretary 
for purposes of section 511(a) of this title.

``Sec. 6107. Reissuance of benefits

  ``(a) Negligent Failure by Secretary.--(1) In any case in which the 
negligent failure of the Secretary to investigate or monitor a 
fiduciary results in misuse of benefits by the fiduciary, the Secretary 
shall pay to the beneficiary or the beneficiary's successor fiduciary 
an amount equal to the amount of benefits that were so misused.
  ``(2) There shall be considered to have been a negligent failure by 
the Secretary to investigate and monitor a fiduciary in the following 
cases:
          ``(A) A case in which the Secretary failed to timely review a 
        fiduciary's accounting.
          ``(B) A case in which the Secretary was notified of 
        allegations of misuse, but failed to act in a timely manner to 
        terminate the fiduciary.
          ``(C) In any other case in which actual negligence is shown.
  ``(b) Reissuance of Misused Benefits in Other Cases.--(1) In any case 
in which a fiduciary described in paragraph (2) misuses all or part of 
an individual's benefit paid to such fiduciary, the Secretary shall pay 
to the beneficiary or the beneficiary's successor fiduciary an amount 
equal to the amount of such benefit so misused.
  ``(2) Paragraph (1) applies to a fiduciary that--
          ``(A) is not an individual; or
          ``(B) is an individual who, for any month during a period 
        when misuse occurs, serves 10 or more individuals who are 
        beneficiaries under this title.
  ``(c) Recoupment of Amounts Reissued.--In any case in which the 
Secretary reissues a benefit payment (in whole or in part) under 
subsection (a) or (b), the Secretary shall make a good faith effort to 
obtain recoupment from the fiduciary to whom the payment was originally 
made.''.
  (b) Clerical Amendment.--The table of sections at the beginning of 
such chapter is amended by adding at the end the following new items:

``6106. Misuse of benefits by fiduciaries.
``6107. Reissuance of benefits.''.

SEC. 304. ADDITIONAL PROTECTIONS FOR BENEFICIARIES WITH FIDUCIARIES.

  (a) Onsite Reviews and Required Accountings.--(1) Chapter 55 of title 
38, United States Code, as amended by section 302(a), is further 
amended by adding at the end the following new sections:

``Sec. 5508. Periodic onsite reviews of institutional fiduciaries

  ``In addition to such other reviews of fiduciaries as the Secretary 
may otherwise conduct, the Secretary shall provide for the periodic 
onsite review of any person or agency located in the United States that 
receives the benefits payable under laws administered by the Secretary 
to another individual pursuant to the appointment of such person or 
agency as a fiduciary under section 5502(a)(1) of this title in any 
case in which the fiduciary is serving in that capacity with respect to 
more than 20 beneficiaries and the total annual amount of such benefits 
exceeds $50,000, as adjusted pursuant to section 5312 of this title.

``Sec. 5509. Authority to redirect delivery of benefit payments when a 
                    fiduciary fails to provide required accounting

  ``(a) Required Reports and Accountings.--The Secretary may require a 
fiduciary to file a report or accounting pursuant to regulations 
prescribed by the Secretary.
  ``(b) Actions Upon Failure to File.--In any case in which a fiduciary 
fails to submit a report or accounting required by the Secretary under 
subsection (a), the Secretary may, after furnishing notice to such 
fiduciary and the beneficiary entitled to such payment of benefits, 
require that such fiduciary appear in person at a regional office of 
the Department serving the area in which the beneficiary resides in 
order to receive such payments.''.
  (2) The table of sections at the beginning of such chapter is amended 
by adding after the item added by section 302(b) the following new 
items:

``5508. Periodic onsite reviews of institutional fiduciaries.
``5509. Authority to redirect delivery of benefit payments when a 
fiduciary fails to provide required accounting.''.
  (b) Civil Monetary Penalties; Judicial Orders of Restitution.--(1) 
Chapter 61 of title 38, United States Code, as amended by section 
303(a), is further amended by adding at the end the following new 
sections:

``Sec. 6108. Civil monetary penalties

  ``(a) Penalty for Conversion.--Any person (including an organization, 
agency, or other entity) who, having received, while acting in the 
capacity of a fiduciary pursuant to section 5502 of this title, a 
payment under a law administered by the Secretary for the use and 
benefit of another individual, converts such payment, or any part 
thereof, to a use that such person knows or should know is other than 
for the use and benefit of such other individual shall be subject to, 
in addition to any other penalty that may be prescribed by law, a civil 
monetary penalty assessed by the Secretary of not more than $5,000 for 
each such conversion.
  ``(b) Penalty in Lieu of Damages.--Any person who makes a conversion 
of a payment described in subsection (a) and is subject to a civil 
monetary penalty under that subsection by reason of such conversion 
shall also be subject to an assessment by the Secretary, in lieu of 
damages sustained by the United States resulting from the conversion, 
of not more than twice the amount of any payments so converted.
  ``(c) Costs of Recovery.--From amounts collected under this section, 
the amount necessary to recoup the Department's costs of such 
collection shall be credited to appropriations currently available for 
the same purpose as the appropriation that incurred those costs, to 
remain available until expended.

``Sec. 6109. Authority for judicial orders of restitution

  ``(a) Any Federal court, when sentencing a defendant convicted of an 
offense arising from the misuse of benefits under this title, may 
order, in addition to or in lieu of any other penalty authorized by 
law, that the defendant make restitution to the Department.
  ``(b) Sections 3612, 3663, and 3664 of title 18 shall apply with 
respect to the issuance and enforcement of orders of restitution under 
subsection (a). In so applying those sections, the Department shall be 
considered the victim.
  ``(c) If the court does not order restitution, or orders only partial 
restitution, under subsection (a), the court shall state on the record 
the reasons therefor.
  ``(d)(1) Except as provided in paragraph (2), amounts received or 
recovered by the Secretary pursuant to an order of restitution under 
subsection (a), to the extent and in the amounts provided in advance in 
appropriations Acts, shall be available to defray expenses incurred by 
the Office of the Inspector General for the investigation of 
fiduciaries under this title.
  ``(2) Paragraph (1) shall not apply with respect to amounts received 
in connection with misuse by a fiduciary of funds paid as benefits 
under laws administered by the Secretary. Such amounts shall be paid to 
the individual whose benefits were misused unless the Secretary has 
previously reissued the misused benefits, in which case the amounts 
shall be treated in the same manner as overpayments recouped by the 
Secretary and shall be deposited to the credit of the applicable 
revolving fund, trust fund, or appropriation.''.
  (2) The table of sections at the beginning of such chapter is amended 
by adding after the item added by section 303(b) the following new 
items:

``6108. Civil monetary penalties.
``6109. Authority for judicial orders of restitution.''.

SEC. 305. ANNUAL REPORT.

  (a) In General.--Chapter 55 of title 38, United States Code, as 
amended by section 304(a)(1), is further amended by adding at the end 
the following new section:

``Sec. 5510. Annual report

  ``The Secretary shall include in the Annual Benefits Report of the 
Veterans Benefits Administration or the Secretary's Annual Performance 
and Accountability Report information concerning fiduciaries who have 
been appointed to receive payments for beneficiaries of the Department. 
As part of such information, the Secretary shall separately set forth 
the following:
          ``(1) The number of beneficiaries in each category (veteran, 
        surviving spouse, child, adult disabled child, or parent).
          ``(2) The types of benefit being paid (compensation, pension, 
        dependency and indemnity compensation, death pension or 
        benefits payable to a disabled child under chapter 18 of this 
        title).
          ``(3) The total annual amounts and average annual amounts of 
        benefits paid to fiduciaries for each category and type of 
        benefit.
          ``(4) The number of fiduciaries who are the (spouse, parent, 
        legal custodian, court-appointed fiduciary, institutional 
        fiduciary, custodian in fact, and supervised direct payment).
          ``(5) The number of cases in which the fiduciary was changed 
        by the Secretary because of a finding that benefits had been 
        misused.
          ``(6) How such cases of misuse of benefits were addressed by 
        the Secretary.
          ``(7) The final disposition of such cases of misuse of 
        benefits, including the number and dollar amount of any civil 
        or criminal penalties imposed.
          ``(8) Such other information as the Secretary considers 
        appropriate.''.
  (b) Clerical Amendment.--The table of sections at the beginning of 
such chapter is amended by adding after the items added by the 
amendment made by section 304(a)(2) the following new item:

``5510. Annual report.''.

SEC. 306. ANNUAL ADJUSTMENT IN BENEFITS THRESHOLDS.

  Section 5312(b)(1) of title 38, United States Code, is amended by 
inserting ``and the annual benefit amount limitations under sections 
5507(c)(2)(D) and 5508 of this title,'' after ``(d)(3) of such 
section,''.

SEC. 307. EFFECTIVE DATES.

  (a) In General.--Except as otherwise provided, this title and the 
amendments made by this title shall take effect on the first day of the 
seventh month beginning after the date of the enactment of this Act.
  (b) Special Rules.--(1) Section 5510 of title 38, United States Code, 
as added by section 305(a), shall take effect on the date of the 
enactment of this Act.
  (2) Sections 6106 and 6107 of title 38, United States Code, as added 
by section 303(a), shall apply with respect to any determinations by 
the Secretary of Veterans Affairs made after the date of the enactment 
of this Act of misuse of funds by a fiduciary.

                        TITLE IV--OTHER MATTERS

SEC. 401. INVENTORY OF MEDICAL WASTE MANAGEMENT ACTIVITIES AT 
                    DEPARTMENT HEALTH-CARE FACILITIES.

  (a) Inventory.-- The Secretary of Veterans Affairs shall establish 
and maintain a national inventory of medical waste management 
activities in the health-care facilities of the Department of Veterans 
Affairs. The inventory shall include the following:
          (1) A statement of the current national policy of the 
        Department on managing and disposing of medical waste, 
        including regulated medical waste in all its forms.
          (2) A description of the program of each geographic service 
        area of the Department to manage and dispose of medical waste, 
        including general medical waste and regulated medical waste, 
        with a description of the primary methods used in those 
        programs and the associated costs of those programs, with cost 
        information shown separately for in-house costs (including 
        full-time equivalent employees) and contract costs.
  (b) Report.--Not later than April 15, 2005, the Secretary of Veterans 
Affairs shall submit to the Committees on Veterans' Affairs of the 
Senate and House of Representatives a report on medical waste 
management activities in the facilities of the Department of Veterans 
Affairs. The report shall include the following:
          (1) The inventory established under subsection (a), including 
        all the matters specified in that subsection.
          (2) A listing of each violation of medical waste management 
        and disposal regulations reported at any health-care facility 
        of the Department over the preceding five years by any State or 
        Federal agency, along with an explanation of any remedial or 
        other action taken by the Secretary in response to each such 
        reported violation.
          (3) A description of any plans to modernize, consolidate, or 
        otherwise improve the management of medical waste and disposal 
        programs at health-care facilities of the Department, including 
        the projected costs associated with such plans and any barriers 
        to achieving goals associated with such plans.
          (4) An assessment or evaluation of the available methods of 
        disposing of medical waste and identification of which of those 
        methods are more desirable from an environmental perspective in 
        that they would be least likely to result in contamination of 
        air or water or otherwise cause future cleanup problems.

SEC. 402. CARE FOR NEWBORN CHILDREN OF VETERANS RECEIVING MATERNITY 
                    CARE.

  (a) Authority to Provide Newborn Infant Care.--Subchapter VIII of 
chapter 17 of title 38, United States Code, is amended by adding at the 
end the following new section:

``Sec. 1786. Care for newborn children of veterans receiving maternity 
                    care

  ``(a) Authority.--Subject to subsections (b) and (c), when a female 
veteran who is enrolled in the health-care system established under 
section 1705 of this title is receiving maternity care from the 
Department delivers of a child in a Department facility or in a non-
Department facility under a Department contract the Secretary may 
furnish care to the neonate.
  ``(b) Care in a Department Facility.--In a case in which a neonate 
covered by subsection (a) is born in a Department facility, care 
furnished for the neonate at that facility shall be furnished without 
charge to the veteran who delivered of that neonate.
  ``(c) Care in a Non-Department Facility.--In a case in which a 
neonate covered by subsection (a) is born in a non-Department facility 
or is provided care in a non-Department facility following birth in a 
Department facility and transfer from that facility, the Secretary may 
provide for the payment of the cost of care and services for the 
neonate in the same manner, and subject to the same limitations, as if 
such care and services were emergency treatment furnished the veteran 
subject to section 1725 of this title, except that--
          ``(1) the services for which the Secretary may make payment 
        shall be limited to those items and services for which payment 
        may be made under the medicare program under title XVIII of the 
        Social Security Act for post-natal care furnished to a neonate; 
        and
          ``(2) the rate of payment for such services may not exceed 
        the payment rates applicable to those items and services under 
        the medicare program under such title.''.
  (b) Clerical Amendment.--The table of sections at the beginning of 
such chapter is amended by inserting after the item relating to section 
1784 the following new item:

``1786. Care for newborn children of veterans receiving maternity 
care.''.

SEC. 403. TECHNICAL AMENDMENTS TO EDUCATION PROGRAM PROVISIONS.

  (a) Inapplicability of Wage Requirements for On-Job Training Programs 
Leading to Self-employment.--(1) Section 3677(b) is amended by adding 
at the end the following new paragraph:
  ``(3) Notwithstanding paragraph (1)(A) and subsection (c)(8), no 
wages shall be required to be paid an eligible person or veteran by a 
training establishment described in section 3452(e)(2) of this 
title.''.
  (2) Section 3452(e), as amended by section 301 of the Veterans 
Benefits Act of 2003 (Public Law 108-183; 117 Stat. 2658), is amended 
by striking ``An'' in paragraph (2) and inserting ``For the period 
beginning on October 1, 2005, and ending on September 30, 2010, an''.
  (b) Effective Date.--The amendments made by subsection (a) shall take 
effect as if included in the enactment of section 301 of the Veterans 
Benefits Act of 2003 (Public Law 108-183; 117 Stat. 2658).

  Amend the title so as to read:

      A bill to amend the Servicemembers Civil Relief Act to make 
certain improvements and technical corrections to that Act, otherwise 
to improve legal protections provided to reserve component members 
called to active duty, and for other purposes.

                              Introduction

    The reported bill reflects the Committee's consideration of 
four bills introduced during the 108th Congress: H.R. 4658, 
H.R. 4659, H.R. 4477, and H.R. 4032, and testimony received 
from the Office of Special Counsel on June 23, 2004.
    On June 16, 2004, the Subcommittee on Benefits held a 
hearing on H.R. 4032, the Veterans Fiduciary Act of 2004, 
introduced on March 25, 2004, by Honorable Susan A. Davis, 
Honorable Michael H. Michaud, Honorable Lane Evans, Honorable 
Bob Filner, Honorable Corrine Brown, Honorable Ciro D. 
Rodriguez, Honorable Darlene Hooley, Honorable Ted Strickland, 
Honorable Raul M. Grijalva, Honorable Barney Frank, Honorable 
Timothy H. Bishop, Honorable Tim Holden, Honorable Kevin Brady, 
Honorable Grace F. Napolitano, and Honorable Ben Chandler.
    On June 23, 2004, the full Committee held a hearing on 
legislation, including H.R. 4477, and two draft bills. H.R. 
4477, the Patriot Employer Act of 2004, was introduced on June 
2, 2004, by Honorable James P. McGovern, Honorable Jeb Bradley 
and Honorable Lane Evans. The first draft bill was a proposed 
extension of the maximum period of employer-sponsored health 
care coverage that a Reservist or National Guardsmember may 
voluntarily elect to continue under the Uniformed Services 
Employment and Reemployments Rights Act (USERRA), and was 
subsequently introduced as H.R. 4659 on June 23, 2004, by the 
Chairman and Ranking Member of the Subcommittee on Benefits, 
Honorable Henry E. Brown, Jr., and Honorable Michael H. 
Michaud, and the Chairman of the Committee, Honorable 
Christopher H. Smith. The second draft bill was a proposed 
amendment to the Servicemembers Civil Relief Act (SCRA) to make 
certain improvements and technical corrections to the Act, and 
was subsequently introduced as H.R. 4658 on June 23, 2004, by 
the Chairman and Ranking Member of the Committee, Honorable 
Christopher H. Smith and Honorable Lane Evans.
    On July 21, 2004, the full Committee met and ordered H.R. 
4658, as amended, reported favorably to the House by unanimous 
voice vote.

                      Summary of the Reported Bill

    H.R. 4658, as amended, would:

        Title I--Improvements to Servicemembers Civil Relief Act

    1. LDefine in the general provisions of the Servicemembers 
Civil Relief Act (SCRA) that the term ``judgment'' would mean 
``any judgment, decree, order or ruling, final or temporary.''

    2. LClarify that waivers by servicemembers of rights and 
protections under SCRA which must be in writing, must also be 
executed in a separate instrument; and require that certain 
written waivers must be in at least 12 point type.

    3. LProvide that plaintiffs as well as defendants may 
request stays of civil proceedings under SCRA.

    4. LClarify that dependents as well as servicemembers are 
covered by SCRA's residential and motor vehicle lease 
termination provisions on joint leases.

    5. LProvide that SCRA's lease termination provisions also 
apply when the servicemember has permanent change of station 
orders from a State outside the continental United States to 
any location outside that State.

    6. LDefine for the purposes of SCRA's lease termination 
provisions that the term ``military orders'' would mean, with 
respect to a servicemember, ``official military orders, or any 
notification, certification, or verification from the 
servicemember's commanding officer, with respect to the 
servicemember's current or future military duty status.''

    7. LDefine for the purposes of SCRA's lease termination 
provisions that the term ``continental United States'' would 
mean ``the 48 contiguous States and the District of Columbia.''

    8. LClarify that SCRA's lease termination provisions cover 
individual deployments, as well as military unit deployments.

    9. LProhibit double taxation of servicemembers when the 
laws of a tax jurisdiction do not provide a credit against use, 
excise or similar taxes the servicemember previously paid to 
another tax jurisdiction.

              Title II--Employment and Reemployment Rights

    1. LIncrease from 18 months to 24 months the maximum period 
of employer-sponsored health coverage that an employee covered 
by USERRA may elect to continue, beginning with the date the 
absence from the position of employment begins; and provide 
that the effective date of the increased coverage would be the 
date of enactment.

    2. LReinstate the requirement for comprehensive annual 
reports from the Secretary of Labor to Congress on the 
disposition of cases filed under USERRA; such reports would 
begin no later than February 1, 2005.

    3. LRequire employers to provide notice to employees of the 
rights, benefits and obligations of employers and employees 
that apply under USERRA, and require the Department of Labor to 
make available to employers the text of the notice, to be 
provided within 90 days after date of enactment.

    4. LEstablish a demonstration project for the referral of 
complaints by federal executive branch employees under USERRA 
to the Office of Special Counsel for investigation and 
resolution, and require the Secretary of Labor and the Office 
of Special Counsel to carry out the demonstration project.

    5. LAllow the Office of Special Counsel for the 
demonstration project to receive and investigate all cases 
involving both complaints of prohibited personnel actions and 
complaints under USERRA.

    6. LDefine a complaint for purposes of the demonstration 
project as one filed under chapter 43 of title 38, United 
States Code, against a Federal executive agency by a claimant 
with a social security number with an odd number as its 
terminal digit, or a case number assigned to the claim with an 
odd number as its terminal digit.

    7. LAllow the Secretary of Labor to refer to the Office of 
Special Counsel certain pending complaints filed before the 
beginning of the demonstration project.

    8. LRequire the demonstration project to be carried out 
during the period beginning 60 days after the date of 
enactment, and ending on September 30, 2007.

    9. LRequire the Comptroller General of the United States to 
conduct periodic evaluations of the demonstration project; 
require a report to Congress no later than April 1, 2007, on 
the periodic evaluations; and require the report to address 
certain other matters pertaining to the demonstration project.

               Title III--Matters Relating to Fiduciaries

    1.  LFor purposes of payment of VA benefits, define a 
fiduciary as a guardian, curator, conservator, committee or 
person legally vested with the responsibility or care of a 
claimant (or the claimant's estate) or of a beneficiary (or the 
beneficiary's estate), or any other person appointed in a 
representative capacity to receive money paid by VA.

    2.  LRequire VA, prior to certification, to conduct an 
inquiry or investigation as to the fitness of a fiduciary. Such 
inquiry or investigation would include, to the extent 
practicable, a face-to-face interview, a copy of a credit 
report within one year of appointment, and the furnishing of 
any bond that may be required by the Secretary.

    3.  LRequire the Secretary, as a part of the inquiry or 
investigation, to request information about whether the 
potential fiduciary has been convicted of any offense under 
Federal or State law.

    4.  LPermit a less rigorous inquiry or investigation of the 
parent of a minor beneficiary, spouse or parent of an 
incompetent beneficiary, the person appointed by a court of 
competent jurisdiction, or the person appointed to manage an 
estate where the annual amount of veterans benefits to be 
managed does not exceed $3,600.

    5.  LGive the Secretary the authority to appoint a 
temporary fiduciary, for a period not to exceed 120 days, if 
needed to protect the assets of the beneficiary when a 
determination of incompetence is being made or appealed, or a 
fiduciary is appealing a determination of misuse.

    6.  LProhibit the Secretary from continuing the temporary 
fiduciary beyond 120 days if a final decision has not been made 
on the competence of the beneficiary or fiduciary, unless the 
Secretary has obtained a court order for a guardian.

    7.  LProhibit a fiduciary from collecting a fee from the 
beneficiary for any month when the Secretary or a court has 
determined the fiduciary has misused some or all of the 
veteran's benefits.

    8.  LRequire that any fiduciary, except a Federal, State, 
or local government agency, shall be liable for any amount 
misused, and that such amount shall be treated as an erroneous 
payment to the fiduciary for purposes of law pertaining to the 
recovery of overpayments.

    9.  LRequire the Secretary to repay misused benefits if the 
misuse is due to the Secretary's failure to investigate or 
monitor a fiduciary, when the fiduciary is (1) not an 
individual or (2) is an individual who, for any month during a 
period when misuse occurs, serves 10 or more individuals who 
are beneficiaries.

    10. LRequire the Secretary to conduct periodic on-site 
reviews of any person or agency located in the United States 
that serves as a fiduciary to more than 20 beneficiaries and 
the total annual amount of benefits exceeds $50,000.

    11. LPermit a fiduciary who converts a payment for some use 
other than for the beneficiary to be subject to a civil 
monetary penalty, and an assessment by the Secretary in lieu of 
damages sustained by the United States, of not more than twice 
the amount converted.

    12. LPermit that amounts received or recovered from a 
fiduciary, to the extent and in the amounts provided in advance 
appropriations, shall be available to defray expenses incurred 
by the Office of the Inspector General for the inquiry or 
investigation of fiduciaries.

    13. LRequire the Secretary to include in an annual report 
information on the fiduciary program, to include the number of 
beneficiaries, the types of benefits being paid, and the number 
of cases in which the fiduciary was changed by the Secretary 
because of a finding that benefits had been misused.

                        Title IV--Other Matters

    1. LRequire the Secretary to establish and maintain an 
inventory of medical waste management activities in VA 
facilities.

    2. LRequire the Secretary to submit by April 15, 2005, a 
report to the Committees on Veterans' Affairs of the Senate and 
the House of Representatives on VA's medical waste management 
activities, including inventory, regulatory violations, and 
plans for management improvements.

    3. LAuthorize VA to provide post-natal care to newborns of 
enrolled female veterans receiving maternity care who are 
without other health insurance coverage. VA's payment would be 
the amount Medicare would pay for services related to 
delivering the child of a Medicare beneficiary.

    4. LMake a technical correction to section 301 of P.L. 108-
183, which expanded the Montgomery GI Bill program to authorize 
educational assistance for on-job training in certain self-
employment programs, by clarifying that the veteran or 
dependent in on-job training for certain self-employment 
programs beginning on October 1, 2005, and ending on September 
30, 2010 need not receive a training wage from the employer in 
order to receive the VA benefit for that period.


                       Background and Discussion

        Title I--IMPROVEMENTS TO SERVICEMEMBERS CIVIL RELIEF ACT

    Clarification of meaning of ``judgment'' as used in the 
Act.--Section 101 of the bill would clarify the meaning of the 
term ``judgment'' as used in the Servicemembers Civil Relief 
Act (SCRA). The term ``judgment'' appears in sections 103, 201, 
202, 204 and 601 of the SCRA, but it is not included in section 
101, which contains the statute's definitions. The Committee 
intends that the term be broadly construed and not be 
interpreted as limited to final judgments in cases. The term 
``judgment'' would mean ``. . . any judgment, decree, order, or 
ruling, final or temporary.''

    Requirements relating to waiver of rights under the Act.--
Section 102 of the bill would require that waivers in writing 
under section 107 of the SCRA must also be executed in a 
separate instrument. This requirement would make the waiver 
provisions of section 107 consistent with the waiver provisions 
of section 103(d)(1) of the SCRA, which for waivers by certain 
persons primarily or secondarily liable on an obligation or 
liability, already requires a separate waiver instrument. While 
agreements by servicemembers and other persons to waive rights 
and protections under the SCRA would remain legal, the 
Committee believes that when written waivers are required under 
the SCRA, servicemembers should have the additional protection 
of a separate waiver instrument. This would prevent an 
effective waiver from being placed, for example, in a lengthy 
unrelated text. Additionally, section 102 of the bill would 
require the prominent display of waivers in 12 point type. This 
would prevent an effective waiver from being placed, for 
example, in fine print at the bottom of a page.

    Right of servicemember plaintiffs to request stay of civil 
proceedings.--Section 103 of the bill would allow 
servicemembers who are plaintiffs in a legal action to request 
a stay of a civil proceeding under section 202 of the SCRA. The 
predecessor statute, the Soldiers' and Sailors' Civil Relief 
Act, expressly covered plaintiffs for the purpose of stay 
requests, and the SCRA should similarly cover plaintiffs.

    Termination of leases.--Section 104 of the bill would 
clarify that under section 305 of the SCRA, when a 
servicemember terminates a residential or motor vehicle lease 
entered into jointly with a dependent, the obligations of both 
the servicemember and the dependent are terminated. The 
Committee's belief that this clarification is necessary based 
on sworn testimony at a full committee hearing on June 23, 
2004, that some servicemembers and their dependents in the Fort 
Hood, Texas, area have experienced refusals by certain property 
management companies to release dependents from joint leases. 
The large scale deployments of soldiers and unit relocations 
from Fort Hood as part of the war against terrorism have 
created unusual pressures on providers of rental housing in 
that local area, and the Committee is concerned about the 
potential for similar occurrences in other places with 
significant military populations.
    The intent of Congress on this matter did not change with 
enactment of the SCRA, which updated and strengthened the 
Soldiers' and Sailors' Civil Relief Act. The overall purpose of 
the statute is to provide various legal rights and protections 
for servicemembers and their dependents. All along, the intent 
of Congress has been that, when the servicemember properly 
terminates such a lease, it is terminated with respect to all 
of the parties to the lease. An interpretation of section 305 
that would as a practical matter provide no relief by leaving 
the servicemember's dependent bound by a joint lease is clearly 
inconsistent with the section's purpose. However, this 
clarification, with its more specific language, is intended to 
preclude future disputes about the application to dependents of 
section 305.
    Section 104 of the bill would also modify the language of 
section 305 of the SCRA to allow motor vehicle lease 
terminations for any permanent change of station move from a 
state outside of the continental United States to any other 
location outside that state. The term ``continental United 
States'' would be defined as meaning the ``48 contiguous states 
and the District of Columbia.'' The term ``State'' is currently 
defined in section 101(6)(A) of the SCRA to include ``a 
commonwealth, territory, or possession of the United States.'' 
Section 104 would assure that a servicemember who receives a 
permanent change of station order to move from a state outside 
the continental United States to another location outside that 
state is accorded the same protections as a servicemember who 
receives a permanent change of station order to move from a 
state within the continental United States to a location 
outside of the continental United States.
    Section 104 of the bill would also amend section 305 to 
broaden the definition of the term ``military orders'' to mean 
``official military orders, or any notification, certification, 
or verification from the servicemember's commanding officer, 
with respect to the servicemember's current or future military 
duty status.'' The amended definition would allow 
servicemembers who must deploy on short notice, who experience 
delays in receiving orders, or who for other valid reasons are 
without formal ``military orders,'' to provide a suitable 
termination notice to lessors.
    Section 305 of SCRA would further be amended to include 
individual as well as unit deployments. Some servicemembers 
receive individual orders to fill unit vacancies, and this 
section would allow lease termination for servicemembers who 
receive orders to deploy ``as an individual in support of a 
military operation.''

    Prevention of double taxation of certain servicemembers.--
Section 105 of the bill would not allow a tax jurisdiction to 
impose a use, excise, or similar tax on the personal property 
of a servicemember who is not a resident, if the tax 
jurisdiction's laws do not provide a credit against such taxes 
previously paid on the same personal property in another tax 
jurisdiction. With this section, the Committee would extend the 
long-standing policy of Congress against double taxation of 
servicemembers expressed in title V of the SCRA to use, excise, 
or other similar taxes.

              Title II--EMPLOYMENT AND REEMPLOYMENT RIGHTS

             SUBTITLE A--EXTENSION OF HEALTH CARE COVERAGE

    Two-year period of continuation of employer-sponsored 
health care coverage.--Section 201 of the bill would increase 
from 18 months to 24 months the maximum period of employer-
sponsored health coverage that an employee covered by USERRA 
may elect to continue. The coverage would become effective for 
elections made on or after the date of enactment.
    Section 4317 of title 38, United States Code, allows 
servicemembers covered under USERRA to elect to continue 
employer-sponsored health coverage for up to 18 months while on 
active duty, provided the servicemember pays up to 102 percent 
of the premiums. A growing number of Guard and Reserve members 
are on active duty for longer than 18 months. This change would 
bring eligibility for continued health care coverage in line 
with the period of time which a member of the Guard or Reserve 
may be involuntarily called to active duty.

    Reinstatement of reporting requirements.--Section 202 of 
the bill would reinstate a requirement that the Secretary of 
Labor, in consultation with the Office of Special Counsel and 
the U.S. Attorney General, provide annual reports to Congress 
on the disposition of cases filed under USERRA, effective 
February 1, 2005. The previous reporting requirement expired on 
February 1, 1996. With greater reliance on the National Guard 
and Reserve components of the Armed Forces for national defense 
during the war against terrorism, annual reports are necessary 
to evaluate USERRA's effectiveness.

                       SUBTITLE B--OTHER MATTERS

    Requirement for employers to provide notice of rights and 
duties under USERRA.--Section 211 of the bill is derived from 
H.R. 4477 and would require employers to provide notice to 
employees of the rights, benefits and obligations under USERRA. 
Section 211 would also require the Department of Labor to make 
available to employers, within 90 days after the date of 
enactment of this provision, the text of the notice.
    Since fiscal year 2002, the number of USERRA complaints 
filed with the Department of Labor has increased each year by 
approximately 10 percent. According to testimony received by 
the Committee, many problems emerge because employers and 
employees do not know the legal rights and duties associated 
with USERRA. This section is intended to raise awareness among 
employers and employees, as well as reduce workplace conflicts 
related to USERRA issues. The Committee believes that this 
provision would decrease inadvertent violations of the law by 
providing timely and accurate information to both employers and 
employees.

    Demonstration project for referral of USERRA claims against 
Federal agencies to the Office of Special Counsel.--Section 212 
of the bill would require the Secretary of Labor and the Office 
of Special Counsel (OSC) to carry out a three-year 
demonstration project on enforcement of USERRA rights for 
federal executive branch employees. OSC currently does not 
initially investigate USERRA claims made by Federal executive 
branch employees. The Department of Labor performs the initial 
investigation, resolves certain cases and then refers the 
remaining cases it finds to be meritorious to the OSC for 
formal enforcement. The demonstration project would allow the 
OSC to handle cases from beginning to end, including 
investigation, settlement and litigation, to determine whether 
that approach would be more effective.
    Approximately half of the cases filed after the beginning 
of the demonstration project would be sent by the Department of 
Labor to the OSC, using a random selection process based on the 
last digit of the claimant's social security number or case 
number, if a social security number is not available. The 
Comptroller General of the United States would be required to 
conduct periodic evaluations of the demonstration project and 
to submit a report to Congress on the evaluations. The 
Comptroller would also be required to provide an assessment of 
the feasibility and advisability of referring all USERRA claims 
against federal executive agencies to OSC for investigation and 
resolution.

               Title III--MATTERS RELATING TO FIDUCIARIES

    When VA monetary benefits are payable to an individual who 
is incapable of managing his or her own affairs, the Secretary 
of Veterans Affairs has the authority to appoint a third party 
payee as a fiduciary. The fiduciary may be a relative, friend, 
guardian, conservator, curator, person with temporary custody 
of the beneficiary (``custodian-in-fact''), or other federal 
fiduciary appointed by VA.
    Section 5502 of title 38, United States Code, permits a 
fiduciary to be appointed ``regardless of any legal disability 
on the part of the beneficiary.'' Nonetheless, VA has issued 
regulations authorizing the appointment of a fiduciary only 
when a beneficiary is mentally ill, incompetent, or under a 
legal disability. 38 C.F.R. Sec. 13.55. According to VA, there 
are currently about 100,000 VA beneficiaries who have payments 
made to a fiduciary; approximately 65,000 of these are 
veterans, 32,000 are other adults such as surviving spouses and 
adult disabled children, and 3,000 are minor children.
    At a July 2003 oversight hearing, the Subcommittee on 
Benefits learned that under current law, VA is not required to 
reissue benefits to a veteran if the fiduciary has 
misappropriated some or all of the beneficiary's funds. Title 
III of the bill would strengthen the protections afforded to 
incompetent veterans and other beneficiaries who receive VA 
benefits, as well as require additional oversight of the 
fiduciaries.

    Definition of fiduciary.--Section 301 of the bill would 
define, for the purposes of chapters 55 and 61 of title 38, 
United States Code, the term fiduciary as (1) a person who is a 
guardian, curator, conservator, committee, or person legally 
vested with the responsibility or care of a claimant (or a 
claimant's estate) or of a beneficiary (or a beneficiary's 
estate); or (2) any other person having been appointed in a 
representative capacity to receive money paid under any of the 
laws administered by the Secretary for the use and benefit of a 
minor, incompetent, or other beneficiary. Under current law, a 
fiduciary for VA purposes is not defined.

    Inquiry, investigations, and qualification of 
fiduciaries.--Section 302 of the bill would require VA to 
certify, following an inquiry or investigation, the fitness of 
a fiduciary. Such inquiry or investigation would be conducted 
through, to the extent practicable, a face-to-face interview, 
review of a credit report for the proposed fiduciary issued 
within one year of appointment, and the furnishing of any bond 
that may be required by the Secretary. Additionally, the 
Secretary would be required to request information on whether 
that person has been convicted of any offense under Federal or 
State law; if so, the Secretary may certify the person as a 
fiduciary only if the Secretary makes a specific finding of 
rehabilitation and finds that the potential fiduciary is an 
appropriate person to act as the fiduciary for the beneficiary. 
This provision is not intended to require an extensive criminal 
background check of the proposed fiduciary. VA would be 
required to have a proposed fiduciary attest as to whether or 
not he/she had been imprisoned for more than one year. The 
Committee expects that if the proposed fiduciary had been so 
imprisoned, the Secretary would make further inquiry concerning 
the nature of the offense, the length of time since the offense 
occurred, and other indications of rehabilitation in order to 
determine if the proposed fiduciary is an appropriate person to 
serve as a fiduciary for a beneficiary.
    In the case of a parent (natural, adopted, or step) of a 
minor beneficiary, spouse or parent of an incompetent 
beneficiary, a person who has been appointed by a court of 
competent jurisdiction, or appointed to manage an estate where 
the annual amount of veterans benefits to be managed does not 
exceed $3,600 (adjusted for annual cost-of-living increases), 
the Secretary may certify the potential fiduciary on an 
expedited basis. In such cases, the Secretary would be 
authorized to waive the requirements for a face-to-face 
interview, credit report check, or other requirements for 
appointment.
    If needed to protect the assets of the beneficiary while a 
determination of incompetence is being made or appealed, or a 
fiduciary is appealing a determination of misusing a veteran's 
benefits, the Secretary would have the authority to appoint a 
temporary fiduciary, not to exceed 120 days. If a final 
decision has not been made within the allotted time frame, the 
Secretary would not be able to continue the temporary 
appointment without obtaining an order from a court of 
competent jurisdiction, such as a state Probate or Family 
Court, for the appointment of a guardian, conservator, or 
similar legal fiduciary. The Committee intends that the 
Secretary have the authority to act promptly to protect the 
beneficiary's interest in those unusual cases where the 
appointment of a custodian-in-fact is not available or while an 
appeal of a proposed finding of incompetency or change of 
fiduciary is pending.

    Misuse of benefits by fiduciaries.--Section 303 of the bill 
would protect a veteran's benefits when administered by a 
fiduciary. If the Secretary or a court has determined the 
fiduciary has misused some or all of the veterans' benefits, he 
or she would be prohibited from collecting a fee from a 
beneficiary for any month during which the misuse had occurred, 
and any fee collected would be treated as a misused benefit.
    Any fiduciary, except a Federal, State, or local government 
agency, would be personally liable for the amount misused, and 
that amount would be treated as an erroneous payment to the 
fiduciary for purposes of laws pertaining to the recovery of 
overpayments. The misappropriated amount would be subject to 
recovery in the same manner as any other debt due the United 
States. The Committee expects the Secretary to vigorously use 
the tools available for the collection of debts owed to the 
United States in collecting misused benefits. In the event that 
any misused benefits are collected, the Secretary would be 
required to repay to the beneficiary or the beneficiary's 
successor fiduciary, an amount equal to the recovered amount of 
misused benefits, unless the benefits had already been 
reissued.
    In the event the misused benefits are due to the 
Secretary's failure to investigate or monitor the fiduciary, 
the Secretary would be liable to repay all the benefits without 
first having to collect them from the fiduciary. Failure to 
adequately monitor a fiduciary would include the Secretary's 
failing to review, in a timely manner, a fiduciary's 
accounting; failing to act in a timely manner when notified of 
allegations of misuse; and any other case when actual 
negligence is shown. In addition, the Secretary would be 
required to reissue benefits when the misuse involves a 
fiduciary who is (1) not an individual, i.e. an agency, or (2) 
is an individual who, for any month during a period when misuse 
occurs, serves 10 or more individuals who are beneficiaries 
under title 38, United States Code. If the Secretary reissues a 
benefit payment, a good faith effort would be required to 
recoup the funds from the fiduciary to which the original 
payment was made.

    Additional protections for beneficiaries with 
fiduciaries.--Section 304 of the bill would require the 
Secretary to conduct periodic onsite reviews of any person or 
agency located in the United States that serves as a fiduciary 
to more than 20 beneficiaries and the total annual amount of 
benefits exceeds $50,000 (to be adjusted annually to reflect 
cost-of-living adjustments). As part of the review, the 
Secretary would be able to require the fiduciary to submit a 
report or accounting of dispersement of benefits, and a 
fiduciary who fails to submit the report could be required to 
appear in person at a VA regional office in order to receive 
such payments.
    In the event a fiduciary converts a payment for some use 
other than for the use and benefit of the beneficiary, he or 
she would be subject to, in addition to any other penalty that 
may be prescribed by law, a civil monetary penalty assessed by 
the Secretary of not more than $5,000 per conversion. Such 
person would also be subject to an assessment by the Secretary 
of not more than twice the amount of any payments converted. 
Additionally, any federal court, when sentencing a defendant 
convicted of an offense arising from the misuse of benefits, 
could order, in addition to or in lieu of any other penalty 
authorized by law, that the defendant make restitution to the 
Department (the court would be required to state on the record 
the reasons for not ordering restitution, or only partial 
restitution). Any amounts received or recovered, other than 
those which would represent the amounts attributed to misuse, 
would be available to defray the expenses incurred by the VA's 
Office of Inspector General for the inquiry or investigation of 
fiduciaries. Recoveries of misused benefits would be made to 
the beneficiary or the beneficiary's successor fiduciary unless 
benefits had previously been reissued. Recovery of benefits 
which have previously been reissued would be credited to the 
applicable Department account in the same manner as is done for 
recovered overpayments of benefits.

    Annual report.--Section 305 of the bill would require the 
Secretary to include in one of VA's annual reports information 
concerning fiduciaries who have been appointed to receive 
benefits, to include: the number of beneficiaries in each 
category (veteran, surviving spouse, child, adult disabled 
child, parent); types of benefits being paid (compensation, 
pension, dependency and indemnity compensation, death pension); 
the number of fiduciaries who are the spouse, parent, legal 
custodian, court-appointed, institutional, custodian-in-fact, 
and supervised direct payment; the number of cases in which the 
fiduciary was changed by the Secretary because of a finding 
that benefits had been misused; and how such cases of misuse of 
benefits were addressed by the Secretary.

                        Title IV--OTHER MATTERS

    Inventory of medical waste management activities at 
Department health-care facilities.--Section 401 of the bill 
would require VA to establish and maintain an inventory of 
medical waste management activities in VA facilities. Not later 
than April 15, 2005, VA would be required to submit a report to 
the Committees on Veterans' Affairs of the Senate and the House 
of Representatives on its inventory, regulatory compliance, and 
any violations of record, along with plans for management 
improvements.
    Under current law, VA is subject to comply with a variety 
of Federal, state and local laws and regulations relating to 
the collecting, handling and disposing of medical waste. 
Failure to adhere to the laws and regulations could jeopardize 
the health and safety of patients, employees, and the public, 
as well as subject VA to civil or criminal liabilities. This 
section would provide a means for Congress to evaluate the 
effectiveness of VA's medical waste management policies, to 
determine whether additional procedures are needed to reduce 
environmental and heath risks, and to assess the costs of waste 
disposal.

    Care for newborn children of veterans receiving maternity 
care.--Section 402 of the bill would authorize VA to provide 
post-natal care to the neonate of an eligible female veteran 
who is receiving maternity and delivery care from VA, and who 
has no other health insurance coverage. The medical community 
generally accepts the definition of a neonate as a newborn from 
one to 30 days of age. The Committee expects that VA would 
follow this definition. This authority would be consistent with 
typical insurance coverage of pregnancy and delivery in 
community facilities.
    Under current law, VA is authorized to provide maternity 
and delivery care to eligible female veterans, but does not 
have the authority to cover the cost of care of the veteran's 
newborn child. VA is only authorized to provide medical care to 
children of certain service-connected veterans in a very 
limited number of circumstances, such as benefits for children 
of Korea and Vietnam veterans who were born with spina bifida.
    This section would provide for continuity of care to the 
enrolled female veteran as part of a basic health benefit, and 
would reduce administrative difficulties associated with 
payment for these services at private hospitals. According to 
VA, its options for contracting for maternity and delivery care 
are greatly impeded because it cannot easily negotiate care for 
the mother while excluding care for the newborn.

    Technical amendments to education program provisions.--
Section 403 of the bill would make a technical correction to 
section 301 of Public Law 108-183, which authorized certain 
self-employment and on-job-training programs (franchises) for 
less than six months under the Montgomery GI Bill (MGIB). VA 
was unable to implement the provision because of a statutory 
requirement that participants receive a training wage while 
enrolled in on-job training. This section would waive the 
training wage requirement for programs of less than six months 
beginning October 1, 2005, and ending on September 30, 2010. VA 
would be required to review and approve all such programs 
before any MGIB educational assistance benefits could be paid.

                      Section-By-Section Analysis

    Section 1 of the bill would provide that this Act may be 
cited as the ``Servicemembers and Veterans Legal Protections 
Act of 2004''.

    Section 101 would amend section 101 of the Servicemembers 
Civil Relief Act (SCRA) (50 U.S.C. App. 511) by adding a new 
paragraph (a) to the definitions. This new paragraph would 
define the term judgment to mean ``any judgment, decree, order 
or ruling, final or temporary.''

    Section 102 would amend section 107 of SCRA (50 U.S.C. App. 
517) to require that written waivers of certain SCRA rights and 
protections must also be executed in a separate instrument, and 
add a subsection (c) to require that certain written waivers 
must be in at least 12 point type.

    Section 103 would amend section 202(a) of SCRA (50 U.S.C. 
App. 522(a)) by inserting the words ``plaintiff or'' before 
``defendant'', to provide that plaintiffs as well as defendants 
under SCRA may request stays of civil proceedings.

    Section 104(a) would amend subsection(a) of section 305 of 
SCRA (50 U.S.C. App. 535) to clarify that dependents as well as 
servicemembers are covered by section 305's residential and 
motor vehicle lease termination provisions.

    Section 104(b)(1) would amend section 305 of SCRA (50 
U.S.C. App. 535) to provide that the SCRA's lease termination 
provisions also apply when a servicemember has permanent change 
of station orders from a State outside the continental United 
States to any location outside that State.

    Section 104(b)(2) would amend section 305 of SCRA (50 U.S.C 
App. 535) to define the term ``military orders'' with respect 
to a servicemember, as ``official military orders, or any 
notification, certification, or verification from the 
servicemember's commanding officer, with respect to the 
servicemember's current or future military duty status.'' It 
would also define the term ``continental United States'' for 
purposes of the SCRA lease termination provisions as ``the 48 
contiguous States and the District of Columbia.''

    Section 104(c) would amend section 305 of SCRA (50 U.S.C. 
App. 535) to clarify that individual deployments are covered 
under the protections of the SCRA, as well as military unit 
deployments.

    Section 105 would add a new paragraph (5) to section 511(c) 
of SCRA (50 U.S.C. App. 571(c)) to prohibit a tax jurisdiction 
from imposing a use, excise or similar tax on the personal 
property of a nonresident servicemember when the laws of the 
tax jurisdiction fail to provide a credit against such taxes 
for sales, use, excise or similar taxes previously paid on the 
same property to another tax jurisdiction.

    Section 201(a) would amend section 4317(a)(1)(A) of title 
38, United States Code, by striking ``18-month period'' and 
inserting ``24-month period'' as the maximum period for health 
coverage a person may elect to continue employer-sponsored 
health insurance when the employee is absent from employment by 
reason of service in the uniformed services.

    Section 201(b) would make the change to section 
4317(a)(1)(A) effective for elections made on or after date of 
enactment of this Act.

    Section 202 would amend section 4332 of title 38, United 
States Code, by striking ``no later than February 1, 1996, and 
annually thereafter through 2000'' and inserting ``no later 
than February 1, 2005, and annually thereafter'' for the 
requirement that the Secretary of Labor, in consultation with 
the Office of Special Counsel and the U.S. Attorney General, 
provide annual reports to Congress on the disposition of cases 
filed under USERRA.
    Section 211(a) would amend chapter 43 of title 38, United 
States Code, by adding a new section 4334 entitled: ``Notice of 
rights and duties.''

    Section 4334(a) would require each employer to provide to 
persons entitled to rights and benefits under chapter 43 of 
title 38, United States Code, a notice of the rights, benefits, 
and obligations of such persons and such employers under this 
chapter; this subsection would also provide that the 
requirement for this notice could be met by posting of the 
notice where employers customarily place notices for employees.

    Section 4334(b) would require the Secretary of Labor to 
provide to employers the text of the notice required under this 
section.

    Section 211(c)(1) would require the Secretary of Labor to 
make available to employers the notice required under section 
4334(a) of title 38, United States Code, not later than 90 days 
after date of enactment of this Act.

    Section 211(c)(2) would require that the amendments made by 
section 211 shall apply to employers under chapter 43 of title 
38, United States Code, on and after the first date referred to 
in section 211(c)(1).

    Section 212(a) would require the Secretary of Labor and the 
Office of Special Counsel to carry out a demonstration project 
under which certain claims against Federal executive agencies 
under USERRA, under chapter 43 of title 38, United States Code, 
are referred to, or otherwise received by, the Office of 
Special Counsel for assistance, including investigation and 
resolution of the claim as well as enforcement of rights with 
respect to the claim.

    Section 212(b)(1) would allow the Office of Special 
Counsel, for purposes of the demonstration project, to receive 
and investigate all claims under USERRA with respect to Federal 
executive agencies in cases where the Office of Special Counsel 
has jurisdiction over the related claims under section 1212 of 
title 5, United States Code.

    Section 212(b)(2) would define a related claim, for 
purposes of the demonstration project, as a claim involving the 
same Federal executive agency and the same or similar factual 
allegations or legal issues as those being pursued under a 
claim under USERRA.

    Section 212(c)(1)(A) and (B) would allow the Secretary of 
Labor to refer to the Office of Special Counsel pending related 
claims filed before and during the demonstration project.

    Section 212(c)(2) would define a claim, under chapter 43 of 
title 38, United States Code, as a claim against a Federal 
executive agency by a claimant with a social security account 
number with an odd number as its terminal digit, or in the case 
of a claim that does not contain a social security account 
number, a case number assigned to the claim with an odd number 
as its terminal digit.

    Section 212(d) would require the Office of Special Counsel 
to administer the demonstration project and require the 
Secretary of Labor to cooperate with the Office of Special 
Counsel in carrying out the demonstration project.

    Section 212(d)(2) would allow for any reference to the 
``Secretary'' in sections 4321, 4322, and 4326 of title 38, 
United States Code, to be deemed a reference to the ``Office of 
Special Counsel''.

    Section 212(d)(3) would allow the Office of Special Counsel 
to retain administrative jurisdiction over a claim referred to, 
or otherwise received under the demonstration project.

    Section 212(e) would require the demonstration project to 
be carried out during the period beginning 60 days after the 
date of enactment of the Act, and ending on September 30, 2007.

    Section 212(f) would require the Comptroller General of the 
United States to conduct periodic evaluations of the 
demonstration project.

    Section 212(f)(2) would require the Comptroller General to 
submit a report to Congress on the evaluations no later than 
April 1, 2007, and require the report to include: (A) a 
description of the operations and results of the demonstration 
project; (B) an assessment of the referral of claims to the 
Office of Special Counsel under the demonstration project; (C) 
an assessment of the feasibility and advisability of referring 
all claims filed under chapter 43 of title 38, United States 
Code, against Federal executive agencies to the Office of 
Special Counsel for investigation and resolution; and (D) 
recommendations for administrative action or legislation as the 
Comptroller General deems appropriate.

    Section 212(g)(1) would define the term ``Office of Special 
Counsel'' as the Office of Special Counsel established by 
section 1211 of title 5, United States Code.

    Section 212(g)(2) would define the term ``Secretary'' as 
the Secretary of Labor.

    Section 212(g)(3) would allow for the term ``Federal 
executive agency'' to have the same meaning as the term in 
section 4303(5) of title 38, United States Code.

    Section 301(a) would amend chapter 55 of title 38, United 
States Code, by adding a new section 5506 to define `fiduciary' 
as (1) a person who is a guardian, curator, conservator, 
committee, or person legally vested with the responsibility or 
care of a claimant (or a claimant's estate) or of a beneficiary 
(or a beneficiary's estate; or (2) any other person having been 
appointed in a representative capacity to receive money paid 
under any of the laws administered by the Secretary for the use 
and benefit of a minor, incompetent, or other beneficiary.

    Section 302(a) would amend chapter 55 of title 38, United 
States Code, as amended by section 301(a)(1), by adding at the 
end a new section 5507 entitled ``Inquiry, investigations and 
qualifications of fiduciaries.''

    Section 5507(a) would require certification of a person for 
payment of benefits of a beneficiary to that person as such 
beneficiary's fiduciary under section 5502 of title 38, United 
States Code, on the basis of (1) an inquiry or investigation by 
the Secretary of the fitness of that person to serve as 
fiduciary for that beneficiary (A) to be conducted in advance 
of such certification; (B) to the extent practicable, to 
include a face-to-face interview with such person; and (C) to 
the extent practicable, to include a copy of a credit report 
for such person issued within one year of the date of the 
proposed appointment; (2) adequate evidence that certification 
of that person as fiduciary for that beneficiary is in the 
interest of such beneficiary (as determined by the Secretary 
under regulations); and (3) the furnishing of any bond that may 
be required by the Secretary.

    Section 5507(b) would require that as part of any inquiry 
or investigation of any person under subsection (a), the 
Secretary would request information concerning whether that 
person has been convicted of any offense under Federal or State 
law which resulted in imprisonment for more than one year. If 
that person has been convicted of such an offense, the 
Secretary may certify the person as a fiduciary only if the 
Secretary makes a specific finding that the person has been 
rehabilitated and is an appropriate person to act as fiduciary 
for the beneficiary concerned under the circumstances.

    Section 5507(c)(1) would authorize the Secretary, in 
conducting an inquiry or investigation under subsection (a)(1), 
on an expedited basis that may include waiver of any specific 
requirement relating to such inquiry or investigation, 
including the otherwise applicable provisions of subparagraphs 
(A), (B), and (C) of such subsection. Any such inquiry or 
investigation carried out on such an expedited basis would be 
carried out under regulations prescribed for purposes of this 
section.

    Section 5507(c)(2) would permit expedited waiver authority 
of subsection (c)(1) with respect to a proposed fiduciary who 
is (A) the parent (natural, adopted, or step-parent) of a 
beneficiary who is a minor; (B) the spouse or parent of an 
incompetent beneficiary; (C) a person who has been appointed a 
fiduciary of the beneficiary by a court of competent 
jurisdiction; or (D) being appointed to manage an estate where 
the annual amount of veterans benefits to be managed by the 
proposed fiduciary does not exceed $3600, as adjusted pursuant 
to section 5312 of title 38, United States Code.

    Section 5507(d) would authorize the Secretary to appoint 
one or more temporary fiduciaries, for a period not to exceed 
120 days, when needed in order to protect the assets of the 
beneficiary while a determination of incompetency is being made 
or appealed or a fiduciary is appealing a determination of 
misuse. If a final decision has not been made within 120 days, 
the Secretary could not continue the appointment of the 
fiduciary without obtaining a court order for appointment of a 
guardian, conservator, or other fiduciary under the authority 
provided in section 5502(b) of title 38, United States Code.

    Section 303(a) would amend chapter 61 of title 38, United 
States Code, by adding two new sections: 6106 entitled ``Misuse 
of benefits by fiduciaries''; and section 6107 ``Reissuance of 
benefits.''

    Section 6106(a) would prohibit a fiduciary from collecting 
a fee from a beneficiary for any month with respect to which 
the Secretary or a court of competent jurisdiction has 
determined that the fiduciary misused all or part of the 
individual's benefit, and any amount so collected by the 
fiduciary as a fee for such month would be treated as a misused 
part of the individual's benefit.

    Section 6106(b)(1) would provide that if the Secretary or a 
court of competent jurisdiction determines that a fiduciary 
that is not a Federal, State, or local government agency has 
misused all or part of a beneficiary's benefit that was paid to 
such fiduciary, the fiduciary would be liable for the amount 
misused. Such amount (to the extent not repaid by the 
fiduciary) would be treated as an erroneous payment of benefits 
under title 38, United States Code, to the fiduciary for 
purposes of laws pertaining to the recovery of overpayments. 
The amount of such overpayment would constitute a liability of 
such fiduciary to the United States and could be recovered in 
the same amount as any other debt due the United States. 
Subject to paragraph (2), upon recovering all or any part of 
such amount, the Secretary would pay an amount equal to the 
recovered amount to such beneficiary or such beneficiary's 
successor fiduciary.

    Section 6106(b)(2) would specify that the total of the 
amounts paid to a beneficiary (or a beneficiary's successor 
fiduciary) under paragraph (1) and under section 6107 of title 
38, United States Code, could not exceed the total benefit 
amount misused by the fiduciary with respect to that 
beneficiary.

    Section 6106(c) would specify that, for purposes of this 
chapter, misuse of benefits by a fiduciary occurs in any case 
in which the fiduciary receives payment, under any laws 
administered by the Secretary, for the use and benefit of a 
beneficiary and uses such payment, or any part thereof, for a 
use other than for the use and benefit of such beneficiary or 
that beneficiary's dependents. Retention by a fiduciary of an 
amount of a benefit payment as a fiduciary fee or commission, 
or as attorney's fees (including expenses) and court costs, if 
authorized by the Secretary or a court of competent 
jurisdiction, would be considered to be for the use or benefit 
of such beneficiary.

    Section 6106(d) would authorize the Secretary to prescribe 
by regulation the meaning of the term ``use and benefit'' for 
purposes of this section.

    Section 6106(e) would clarify that a determination by the 
Secretary that a fiduciary has misused benefits is a decision 
of the Secretary for purposes of section 511(a) of title 38, 
United States Code.

    Section 6107(a)(1) would require the Secretary to pay to a 
beneficiary or the beneficiary's successor fiduciary an amount 
equal to the amount of benefits that were misused in any case 
in which the negligent failure of the Secretary to investigate 
or monitor a fiduciary results in misuse of benefits by the 
fiduciary.

    Section 6107(a)(2) would state that there shall be 
considered to have been a negligent failure by the Secretary to 
investigate or monitor a fiduciary in the following cases: (A) 
a case in which the Secretary failed to timely review a 
fiduciary's accounting; (B) a case in which the Secretary was 
notified of allegations of misuse, but failed to act in a 
timely manner to terminate the fiduciary; (C) in any other case 
in which actual negligence is shown.

    6107(b)(1) would require the Secretary to pay to the 
beneficiary or the beneficiary's successor fiduciary an amount 
equal to the amount of such benefit so misused in any case in 
which a fiduciary described in paragraph (2) misuses all or 
part of an individual's benefits paid to such fiduciary.

    Section 6107(b)(2) would specify that paragraph (b)(2) 
applies to a fiduciary that (A) is not an individual; or (B) is 
an individual who, for any month during a period when misuse 
occurs, serves 10 or more individuals who are beneficiaries 
under title 38, United States Code.

    6107(c) would specify that in any case in which the 
Secretary reissues a benefit payment (in whole or in part) 
under subsection (a) or (b) of section 6107, the Secretary 
would make a good faith effort to obtain recoupment from the 
fiduciary to whom the payment was originally made.

    Section 304(a) would amend chapter 55 of title 38, United 
States Code, as amended by section 302(a), by adding the 
following new sections: section 5508 entitled ``Periodic onsite 
reviews of institutional fiduciaries''; and section 5509 
entitled ``Authority to redirect delivery of benefit payments 
when a fiduciary fails to provide required accounting.''

    Section 5508 would require the Secretary, in addition to 
such other reviews of fiduciaries as the Secretary may 
otherwise conduct, to provide for periodic onsite review of any 
person or agency located in the United States that receives the 
benefits payable under laws administered by the Secretary 
pursuant to the appointment as a fiduciary under section 
5502(a)(1) of title 38, United States Code. This section would 
apply in any case in which the fiduciary is serving more than 
20 beneficiaries and the total annual amount of such benefits 
exceeds $50,000, as adjusted pursuant to section 5312 of title 
38, United States Code.

    Section 5509(a) would permit the Secretary to require a 
fiduciary to file a report or accounting pursuant to 
regulations prescribed by the Secretary.

    Section 5509(b) would permit the Secretary, in any case in 
which a fiduciary fails to submit a report or accounting 
required by the Secretary under subsection (a) after notices to 
do so, to require that such fiduciary appear in person at a 
regional office of the Department serving the area in which the 
beneficiary resides in order to receive such payments.

    Section 304(b) would amend chapter 61 of title 38, United 
States Code, as amended by section 303(a), by adding the 
following new sections: 6108 (a) through (c): Civil monetary 
penalties; and 6109 (a) through (d): Authority for judicial 
orders of restitution.

    Section 6108(a) would provide that any person (including an 
organization, agency, or other entity) who, having received, 
while acting in the capacity of a fiduciary pursuant to section 
5502 of title 38, United States Code, a payment under a law 
administered by the Secretary for the use and benefit of 
another individual, converts such payment, or any part thereof, 
to a use that such person knows or should know is other than 
for the use and benefit of such other individual shall be 
subject to, in addition to any other penalty that may be 
prescribed by law, a civil monetary penalty assessed by the 
Secretary of not more than $5,000 for each such conversion.

    Section 6108(b) would provide that any person who makes a 
conversion of a payment described in subsection (a) and is 
subject to a civil monetary penalty under that subsection by 
reason of such conversion would also be subject to an 
assessment by the Secretary, in lieu of damages sustained by 
the United States resulting from the conversion, of not more 
than twice the amount of any payments so converted.

    Section 6108(c) would require that from amounts collected 
under this section, the amount necessary to recoup the 
Department's costs of such collection be credited to 
appropriations currently available for the same purpose as the 
appropriation that incurred those costs, to remain available 
until expended.

    Section 6109(a) would permit any Federal court, when 
sentencing a defendant convicted of an offense arising from the 
misuse of benefits under title 38, United States Code, to 
order, in addition to or in lieu of any other penalty 
authorized by law, that the defendant make restitution to the 
Department.

    Section 6109(b) would require that sections 3612, 3663, and 
3664 of title 18, United States Code, pertaining to the 
issuance and enforcement of orders of restitution apply under 
subsection (a). Also, the section would provide that the 
Department is considered the victim.

    Section 6109(c) would require the court to state on the 
record the reasons for not ordering restitution, or only 
partial restitution.

    Section 6109(d)(1) would require that except as provided in 
paragraph (2), amounts received or recovered by the Secretary 
pursuant to an order of restitution under subsection (a), to 
the extent and in the amounts provided in advance in 
appropriations Acts, be available to defray expenses incurred 
by the Office of the Inspector General for the investigation of 
fiduciaries under title 38, United States Code.

    Section 6109(d)(2) would specify that paragraph (1) would 
not apply where the restitution represents the amounts of 
benefits misused by a fiduciary. Such restitution would be 
repaid to the beneficiary or the beneficiary's successor 
fiduciary unless such amounts had previously been repaid to the 
beneficiary, in which case such amounts would be treated in the 
same manner as overpayments recouped by the Secretary and would 
be deposited to the credit of the applicable revolving fund, 
trust fun, or appropriation.

    Section 305(a) would amend chapter 55 of title 38, United 
States Code, by adding a new section 5510 entitled ``Annual 
report.''

    Section 5510 would require the Secretary to include in the 
Annual Benefits Report of the Veterans Benefits Administration 
or the Secretary's Annual Performance and Accountability Report 
information concerning fiduciaries who have been appointed to 
receive payments for beneficiaries of the Department. As part 
of such information, the Secretary would be required to 
separately set forth the following: (1) the number of 
beneficiaries in each category (veteran, surviving spouse, 
child, adult disabled child, or parent); (2) the types of 
benefit being paid (compensation, pension, dependency and 
indemnity compensation, death pension or benefits payable to a 
disabled child under chapter 18 of title 38, United States 
Code); (3) the total annual amounts and average annual amounts 
of benefits paid to fiduciaries for each category and type of 
benefit; (4) the number of fiduciaries who are the spouse, 
parent, legal custodian, court-appointed fiduciary, 
institutional fiduciary, custodian-in-fact, and supervised 
direct payment; (5) the number of cases in which the fiduciary 
was changed by the Secretary because of a finding that benefits 
had been misused; (6) how such cases of misuse of benefits were 
addressed by the Secretary; (7) the final disposition of such 
cases of misuse of benefits, including the number and dollar 
amount of any civil or criminal penalties imposed; and (8) such 
other information as the Secretary considers appropriate.

    Section 306 would amend section 5312(b)(1) of title 38, 
United States Code, to provide that the annual benefit amount 
adjustments made under that section would also apply to the 
amounts provided under sections 5507(c)(2)(D) and 5508 of title 
38, United States Code.

    Section 307 would provide that except as otherwise 
provided, this title and the amendments made by this title 
would take effect on the first day of the seventh month 
beginning after the date of enactment of this Act.

    Section 401(a) would require the Secretary of Veterans 
Affairs to establish and maintain a national inventory of 
medical waste management activities in the health-care 
facilities of the Department of Veterans Affairs. The inventory 
would include the following: (1) a statement of the current 
national policy of the Department on managing and disposing of 
medical waste, including regulated medical waste in all its 
forms; and (2) a description of the program of each geographic 
service area of the Department to manage and dispose of medical 
waste, including general medical waste and regulated medical 
waste, with a description of the primary methods used in those 
programs and the associated costs of those programs, with cost 
information shown separately for in-house costs (including 
full-time equivalent employees) and contract costs.

    Section 401(b) would require the Secretary of Veterans 
Affairs to submit a report, not later than April 15, 2005, to 
the Committees on Veterans' Affairs of the Senate and House of 
Representatives on medical waste management activities in the 
facilities of the Department of Veterans Affairs. The report 
would include the following: (1) the inventory established 
under subsection (a), including all the matters specified in 
that subsection; (2) a listing of each violation of medical 
waste management and disposal regulations reported at any 
health-care facility of the Department over the preceding five 
years by any State or Federal agency, along with an explanation 
of any remedial or other action taken by the Secretary in 
response to each such reported violation; (3) a description of 
any plans to modernize, consolidate, or otherwise improve the 
management of medical waste and disposal programs at health-
care facilities of the Department, including the projected 
costs associated with such plans and any barriers to achieving 
goals associated with such plans; and (4) an assessment or 
evaluation of the available methods of disposing of medical 
waste and identification of which of those methods are more 
desirable from an environmental perspective in that they would 
be least likely to result in contamination of air or water or 
otherwise cause future cleanup problems.

    Section 402(a) would amend subchapter VIII of chapter 17 of 
title 38, United States Code, by adding a new section 1785 
entitled ``Care for newborn children of veterans receiving 
maternity care.''

    Section 1785(a) would authorize the Secretary to furnish 
care to a newborn child when a female veteran who is enrolled 
in the health-care system established under section 1705 of 
title 38, United States Code, is receiving maternity care from 
the Department and delivers the child in a Department facility 
or in a non-Department facility under a Department contract.

    Section 1785(b) would require that in a case in which a 
neonate covered by subsection (a) of section 1785 is born in a 
Department facility, care furnished for the neonate at that 
facility would be furnished without charge to the veteran who 
delivered the neonate.

    Section 1785(c) would require that in a case in which a 
neonate covered by subsection (a) of section 1785 is born in a 
non-Department facility or is provided care in a non-Department 
facility following birth in a Department facility and transfer 
from that facility, the Secretary may provide for the payment 
of the cost of care and services for the neonate in the same 
manner, and subject to the same limitations, as if such care 
and services were emergency treatment furnished the veteran 
subject to section 1725 of title 38, United States Code, except 
that (1) the services for which the Secretary may make payment 
would be limited to those items and services for which payment 
may be made under the Medicare program under title XVIII of the 
Social Security Act for post-natal care furnished to a neonate; 
and (2) the rate of payment for such services may not exceed 
the payment rates applicable to those items and services under 
the Medicare program. Payments may be made under section 1725 
only if there is no other source of payment for the services 
and the veteran is personally liable for payment for the health 
care provided.

    Section 403(a)(1) would amend section 3677(b) of title 38, 
United States Code, pertaining to the approval of on the job 
training benefits, by adding a new paragraph (3).

    Section 3677(b)(3) would clarify that notwithstanding 
paragraph (1)(A) and subsection (c)(8), wages are not required 
to be paid to an eligible person or veteran by a training 
establishment described in section 3452(e)(2) of title 38, 
United States Code. Section 3452(e)(2) defines a training 
establishment as ``an establishment providing self-employment 
on-job training consisting of full-time training for a period 
of less than six months that is needed or accepted for purposes 
of obtaining licensure to engage in a self-employment 
occupation or required for ownership and operation of a 
franchise that is the objective of the training.''

    Section 403(a)(2) would authorize certain self-employment 
training benefits for the five-year period beginning on October 
1, 2005 and ending on September 30, 2010.

    Section 403(b) would require that the amendments made by 
section 403(a) would take effect as if included in the 
enactment of section 301 of the Veterans Benefits Act of 2003 
(Public Law 108-183; 117 Stat. 2658).

                    Performance Goals and Objectives

    The reported bill would make improvements to laws providing 
rights and benefits to veterans and servicemembers. These laws 
are variously administered by the Secretary of Veterans 
Affairs, the Secretary of Defense, the Secretary of Labor, and 
the U.S. Special Counsel. The performance plans and goals for 
the Departments of Veterans Affairs, Defense and Labor, and the 
Office of Special Counsel are established in annual performance 
plans, and are subject to the regular oversight of the 
Committee, as well as evaluation by the U.S. Government 
Accountability Office.

             Statements of the Views of the Administration


   STATEMENT OF THE HONORABLE SCOTT J. BLOCH, SPECIAL COUNSEL, UNITED 
 STATES OFFICE OF SPECIAL COUNSEL, JUNE 23, 2004, BEFORE THE VETERANS' 
    AFFAIRS COMMITTEE, U.S. HOUSE OF REPRESENTATIVES, CONCERNING THE 
   UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT (USERRA)

    Introduction

    Mr. Chairman, and distinguished members of the Committee, I am 
honored to speak with you today about the vital role played by the 
Office of Special Counsel (OSC) in enforcing the Uniformed Services 
Employment and Reemployment Rights Act (USERRA) and to assure you that 
OSC is dedicated to enforce the law expeditiously and decisively so 
that no one's reemployment rights are denied and no one suffers 
invidious discrimination because of military service.
    The country is in the midst of an historic and unprecedented 
mobilization and forthcoming demobilization of National Guard and 
Reserve forces. As of June 9, 2004, there were more than 168,000 
members of the Air and Army National Guard and Reserve Forces on active 
duty to fight the global war on terrorism. Those brave and talented 
servicemen and women have temporarily left their civilian vocations and 
joined career servicemen, such as my 20-year old son, Marine Lance 
Corporal Michael Bloch, serving in the First Battalion 7th Marine 
Regiment, who has been stationed in Iraq once and is soon to be 
deployed again to Iraq.
    The Federal government is the country's largest employer of 
guardsmen and reservists. Indeed, my Deputy and several other OSC 
employees are members of the National Guard or Reserve.
    God willing, each of the thousands of guardsmen and reservists who 
are proudly and valiantly defending our freedom will return safely home 
to their families, friends, and civilian jobs and careers.
    In light of their dedication and service to our country, I am truly 
honored to be among those public servants asked to provide you with 
information about the important law that was enacted to protect their 
employment and reemployment rights.
    Moreover, I am grateful to be here because today's hearing provides 
a timely occasion and an appropriate forum to dispel any false 
impression regarding my agency's commitment to protecting the 
employment rights of those brave military service members who have 
served, are currently serving, and who will serve in the uniformed 
services.
    Before becoming Special Counsel on January 5, 2004, there had been 
criticism of OSC's enforcement of USERRA. I examined therefore that 
critical commentary in light of OSC's past policies and practices. I 
concluded that some of the criticism was born of a lack of prompt 
action on USERRA cases.
    Mr. Chairman and Committee members, be assured that regardless of 
what occurred or did not occur prior to my taking office, OSC, under my 
leadership, is steadfastly committed to enforcing USERRA. As you know, 
the statute states that it is the sense of the Congress that the 
Federal government should be a model employer in fulfilling its 
statutory obligations under USERRA. I assure you that as head of the 
independent agency with authority to prosecute violations of USERRA, I 
share completely in Congress' sense. Indeed, I have given USERRA 
matters a new found priority so that it now receives the attention it 
justly deserves.

    OSC's Role in Enforcing USERRA

    Pursuant to Section 4324 of Title 38, OSC is authorized to act as 
the attorney for an aggrieved person and initiate legal action against 
the involved Federal employer before the U.S. Merit Systems Protection 
Board (MSPB). The OSC is the Federal sector's ``special prosecutor'' of 
meritorious USERRA cases. As special prosecutor, OSC seeks to obtain 
full corrective action on behalf of claimants either via litigation 
against, or full corrective action settlements with, the involved 
Federal employer.
    Under USERRA, a person who has sought relief through the U.S. 
Department of Labor (DOL), Veterans' Employment and Training Service 
(VETS), may request that OSC review his or her USERRA claim to 
determine whether it has merit and, if so, represent the person in 
USERRA litigation before the MSPB.
    When such a request is made, OSC receives from the DOL's Regional 
Solicitor (RSOL) the VETS investigative file and the RSOL's legal 
analysis of the claim. As special prosecutor, OSC objectively reviews 
the facts and laws applicable to each claim. Where the Office of 
Special Counsel is satisfied that a claimant is entitled to relief, 
then we may exercise our prosecutorial authority and represent the 
claimant before the MSPB and, if required, on appeal to the U.S. Court 
of Appeals for the Federal Circuit.
    From fiscal years 2000 through 2003, OSC has received more than 50 
referrals from VETS. During that time, full corrective action was 
successfully negotiated on every USERRA claim that OSC determined had 
merit.
    Prior to today, OSC had never filed a USERRA action before the 
MSPB. Mr. Chairman, unfortunately I had to instruct my staff to file a 
case this morning with MSPB because an Agency was not willing to 
provide adequate relief for a service member. I assure you that under 
my leadership there will be no hesitation to commence litigation 
against a Federal agency where the evidence shows that such agency has 
failed to comply with any provision of USERRA.

Improving the Process

    As mentioned, I have carefully examined USERRA's referral process 
since becoming Special Counsel. I have determined that the process 
creates unnecessary inefficiency.
    For example, it is unclear whether OSC has the authority under 
USERRA to investigate claims or pursue disciplinary action against 
offending supervisors as we do in other federal employment violations 
we enforce. Instead, the investigative function is performed by VETS. 
Hence, if deemed necessary during our review of a USERRA claim, OSC 
will request that the involved Federal agency voluntarily provide 
additional information. Additionally, pursuant to the February 7, 2001, 
Memorandum of Understanding (MOU) between OSC and VETS, OSC may request 
VETS investigative assistance. Indeed, pursuant to that MOU, VETS 
recently assisted OSC in obtaining additional relevant evidence that is 
important to our current review of a particular case.
    While those methods are adequate for OSC to collect additional 
evidence, the bifurcation of the investigative and prosecutorial steps 
is not as efficient as OSC's authority to investigate and prosecute 
allegations of prohibited personnel practices under Title 5.
    I agree with British Prime Minister William Ewart Gladstone that 
``justice delayed is justice denied.''
    Already, I have made changes to reduce inefficiency by eliminating 
duplication and delay. First, through our experience in investigating 
and analyzing prohibited personnel practices such as whistleblower 
reprisal cases, we have learned that the closer our attorneys are 
involved in the investigation, the more efficiently we resolve cases. 
For example, the merger of investigative and analytical functions 
lessens the chances of ``over-investigating'' cases that are without 
merit and increases the chances of identifying cases warranting 
prosecution. As to the latter, the sooner we find meritorious claims, 
the sooner OSC can move toward obtaining corrective action on behalf of 
the aggrieved person.
    Thus, at my urging and with my approval, OSC and DOL are drafting 
amendments to our MOU concerning the referral process. The changes 
under consideration aim to have OSC's investigative and legal expertise 
involved at a much earlier stage than under the current referral 
process. In particular, we have asked VETS to identify, as soon as 
practical, difficult cases that would benefit from OSC's early 
involvement. By alerting our office to such cases, there will be a 
reduction in duplication of effort.
    I appreciate Department of Labor Solicitor Howard Radzely and his 
staff for working closely with OSC in bringing about this change, and I 
have already seen the benefits of having OSC's enforcement role 
triggered sooner. In fact, soon after this idea was presented, an RSOL 
invited OSC's involvement in a USERRA matter prior to referring the 
matter to us. The OSC contacted the agency and we obtained an extension 
of the agency-set deadline for the claimant to accept a settlement 
offer that DOL had procured. The OSC thereafter obtained additional 
information from the agency and, along with the information obtained by 
VETS, was able to guide the claimant to a successful resolution of his 
USERRA claim. But for DOL's cooperation in allowing OSC to be involved 
earlier than usual, the settlement offer would have expired, and the 
claimant may not have secured a favorable resolution.
    Moreover, OSC has changed the manner in which USERRA referrals are 
handled internally. Since becoming Special Counsel, I have established 
a Special Project Unit (SPU). SPU's overriding function is to maximize 
OSC's efficiency in fulfilling its many crucial missions. The SPU can 
be likened to a SWAT team that can be quickly deployed to address any 
deficiency in OSC's ability to fulfill its various missions. When such 
an issue arises, OSC personnel having particular expertise in the given 
area are detailed to SPU. For example, SPU is examining new ways to 
eliminate permanently OSC's chronic backlogs.
    Experienced attorneys with specialized knowledge of USERRA have 
been detailed to SPU and, at my direction, all USERRA referrals are 
assigned to SPU. By assigning all USERRA referrals to SPU, the matters 
receive priority attention and consideration. Additionally, OSC is 
prepared to detail additional attorneys and investigators to SPU to 
handle any surge in USERRA referrals as the result of the record number 
of guardsmen and reservists being demobilized and returning to the 
Federal workforce.
    In summary, OSC has taken steps to speed up the referral process 
such that meritorious USERRA claims can be more quickly identified and 
prosecuted. I further pledge to devote whatever additional resources 
are needed to ensure that the law is vigorously enforced.

Educating the Public

    I sense another problem affecting the referral process: lack of 
awareness among the Federal workforce about OSC's role in enforcing 
USERRA. Regardless of the merit of a USERRA claim, a person has the 
right to ask that his or her unresolved claim be referred to OSC. Yet, 
in fiscal year 2003, OSC received only seven USERRA referrals while the 
total number of Federal sector complaints is in the hundreds.
    That low number of referrals may be the result of either: a) people 
knowingly choosing to bypass OSC as an avenue of redress, or b) people 
lacking accurate information about how OSC can protect their employment 
and reemployment rights. As to the latter, we want the public to know 
that OSC is here to assist persons who have had their reemployment 
rights violated and who have suffered discrimination because of their 
military service. We have already taken steps to send that message.
    First, I have changed OSC's prohibited personnel practice outreach 
program so that it now includes information about OSC's role in 
enforcing USERRA. Now, each time OSC visits a Federal agency to provide 
prohibited personnel practice training, Federal employees will be 
informed of OSC's role in protecting the employment and reemployment 
rights of guardsman and reservists.
    Second, we have also been working closely with the Department of 
Defense's Employer Support for the Guard and Reserve (ESGR) to ensure 
that accurate information about OSC is being disseminated more broadly. 
I extend my appreciation to ESGR for helping get the word out about 
OSC's vital role under USERRA.
    Finally, OSC's USERRA Coordinator--a GS-15 Supervisory Attorney 
with USERRA expertise--maintains OSC's telephonic and electronic USERRA 
``hotlines'' and regularly provides information and assistance to 
persons and employers about their respective rights and 
responsibilities under USERRA.
    We are encouraged that these efforts will lead to a greater public 
awareness of our role, and we will continue to look for additional ways 
to get out the message that OSC will aggressively enforce the law and 
protect veterans, reservists, and guardsmen.
    As for the seeming reluctance of persons to seek OSC's assistance, 
allow me to make the most of my appearance here today by setting the 
record straight:
    I say to the brave guardsmen and reservist risking their lives for 
our freedom, I am completely and passionately committed to the 
protection of your employment and reemployment rights. Your sacrifices 
merit no less than OSC's 100% commitment to enforcing USERRA.
    I state emphatically before this committee to the heads of every 
Federal agency that one USERRA complaint is one too many. As Special 
Counsel, I:

    1)  will not tolerate discrimination against persons because of 
their service in the uniformed services;
    2)  will not permit anything less than the prompt reemployment of 
persons upon their return from military service; and
    3)  will prosecute aggressively the failure to comply with any 
provision of USERRA, and I will not hesitate to file an action before 
MSPB if necessary.

    With that in mind, I challenge every Federal agency to be a model 
employer under USERRA by protecting fully, vigilantly, and 
enthusiastically the employment and reemployment rights of its 
employees and applicants for employment. It is an ambitious goal, but 
one that is within reach--and it is the right thing to do.
    Indeed, it is a goal that Federal agencies must strive to attain; 
and, to every Federal agency trying to do so, OSC pledges its 
assistance. As for complacent agencies, be advised that OSC shall not 
waiver from its commitment to enforce USERRA aggressively, diligently, 
and zealously.

Conclusion

    Mr. Chairman and members of the Committee, regardless of what may 
have been the past policy, under my leadership; OSC takes its role as 
the sole prosecutorial enforcer of USERRA seriously. As you can see, we 
have already moved away from past practice and have given USERRA cases 
the priority they deserve.

        Shakespeare wrote:

        There is a tide in the affairs of men, which taken at the 
        flood, leads on to fortune. Omitted, all the voyage of their 
        life is bound in shallows and in miseries. On such a full sea 
        are we now afloat. And we must take the current when it serves, 
        or lose our ventures.

    As the Federal government is facing an historic and unprecedented 
number of guardsmen and reservist returning to their federal careers, 
OSC will soon be afloat upon a full sea.
    Consequently, we are properly focused, and newly invigorated to 
fulfill our vital role under USERRA. We will navigate the current with 
unwavering commitment to enforce USERRA law expeditiously and 
decisively. We will welcome any legislative changes that enhance our 
ability to enforce this important law.
    Mr. Chairman and members of the Committee, I thank you for the 
opportunity to testify today.

                              ----------                              


  STATEMENT OF THE HONORABLE DAN G. BLAIR, DEPUTY DIRECTOR, OFFICE OF 
PERSONNEL MANAGEMENT, BEFORE THE COMMITTEE ON VETERANS' AFFAIRS, UNITED 
                     STATES HOUSE OF REPRESENTATIVES

    Good morning Mr. Chairman and members of the Committee. I 
appreciate the opportunity to appear before you today to discuss the 
proposed legislation expanding health insurance coverage for our 
deployed service members and the public sector's obligation to veterans 
under the Uniformed Services Employment and Reemployment Rights Act 
(USERRA).
    President George W. Bush and Office of Personnel Management (OPM) 
Director, Kay Coles James, are dedicated to ensuring veterans receive 
the rights and benefits to which they are entitled under all veterans' 
employment laws, including USERRA. In truth, Director James has both a 
professional and a personal interest in veterans' rights issues. Her 
son-in-law recently returned from active duty in the Naval Reserves. So 
you know her dedication is genuine.
    The Federal Government is the Nation's leader in employing 
veterans. Approximately one out of every four Federal employees is a 
veteran. The number of veterans in the Federal workforce is roughly 
450,000. What's more, the Federal Government employs more reservists 
and National Guard members than any other employer--about 120,000 in 
total, of whom nearly 65,000 are military technicians whose civilian 
Federal employment requires National Guard or Reserve membership.
    Today, over 15,000 Federal employees are serving on active duty 
with the Guard and Reserve. These veterans left their employment and 
placed their careers on hold to go fight in far-off lands . . . for us. 
These brave men and women were not forced to serve--it was by choice. 
They volunteered! These veterans deserve more than our thanks. When 
they leave the uniformed service, they deserve to know their right to 
return to public sector employment is protected.
    As the leader in veterans' employment, the Director takes OPM's 
obligation to reemploy these men and women under USERRA very seriously. 
Again, it is not just the law . . . it is the right thing to do. We 
administer veterans' entitlements under the United States Code, in both 
title 5, including veterans' preference in employment and reduction in 
force, as well as title 38, which covers USERRA reemployment rights. 
(Title 38 also governs veterans' entitlement to benefits administered 
by the Department of Veterans Affairs (VA)).

                       Health Benefits Extension

    First, I will speak to the proposed legislation to expand health 
benefit premium payments for reservists called up for active military 
service.
    OPM is the Government's chief personnel office, which includes 
responsibility for administering the Federal Employees Health Benefits 
(FEHB) Program for Federal employees and annuitants. OPM is committed 
to finding ways to provide health benefits for our called-up employee 
reservists who bravely commit themselves to defending our Country.
    Before 1994, Federal law allowed employee reservists to continue 
their FEHB enrollment for up to 365 days while on military duty. USERRA 
extended the 12 month period to 18 months by amending section 8906 of 
title 5 to provide up to 6 months additional coverage for reservists 
called to active duty. USERRA also empowered agencies to pay both the 
enrollee share and the Government share of the FEHB premium for called-
up reservists for up to the entire 18 months.
    On May 13, 2002, OPM Director James issued a Memorandum for Heads 
of Executive Departments and Agencies stating that OPM strongly 
encourages agencies to assist employees called-up to active duty by 
paying both shares of the FEHB premium. Director James specifically 
asked agencies to pay both shares of the premium in support of these 
reservists supporting Operation Iraqi Freedom, the September 11 
terrorist attacks, Kosovo, other ongoing operations and future 
operations under title 10 of the United States Code.
    Last year, we asked agencies how much of the FEHB premium they pay 
for these reservists. I am pleased to report most agencies pay both 
shares. Of the 114 agencies surveyed, 96 pay the full premium. We have 
learned the Postal Service recently indicated they will pay both shares 
of the premium, retroactive to 2003.
    OPM will continue to support our called-up employees in every way 
possible. If the extension of FEHB coverage to 24 months becomes law, 
we will again strongly encourage agencies to pay both shares of the 
health benefits premium for the entire 24-month period. Based on the 
number of reservists now called to active duty and assuming up to 20 
percent are extended to 24 months we estimate the cost to the agencies 
of the additional premium to be $9.6 million.

                       USERRA Reemployment Rights

    Now, I would like to discuss reemployment rights under USERRA as it 
applies to the public sector.
    Basically, USERRA:

      Prohibits discrimination against persons because of their 
service in the Armed Forces Reserve, the National Guard, or other 
uniformed services;
      Prohibits an employer from denying any employment benefit 
based on an individual's membership or application for membership, or 
performance of, application for, or obligation for service in the 
uniformed services;
      Applies to all executive branch agencies, including the 
U.S. Postal Service; and
      Provides the right of called-up Reservists and National 
Guard members, as well as individuals who left their jobs to enlist in 
the Armed Forces, to be reemployed in their jobs when their military 
service obligation is over.

    OPM is responsible for, and may order the placement of, a returning 
military service member in a different agency if it is impossible or 
unreasonable for the original agency to reemploy the returning veteran, 
if, for instance, the original agency was abolished.
    Any Federal employee, permanent or temporary, who performs duty 
with a uniformed service whether voluntary or involuntary, is entitled 
to be restored to the position he or she would have attained had the 
employee not entered the uniformed service, provided the employee:

      Gave the agency advance notice of departure, except where 
prevented by military circumstances;
      Was released from uniformed service under honorable 
conditions;
      Served not more than a cumulative total of 5 years, with 
certain exceptions; and
      Applies for restoration within statutory time limits.

    Pursuant to OPM's regulations in part 353 of title 5 of the Code of 
Federal Regulations, agencies must tell their employees who enter the 
uniformed service about their entitlements, obligations, benefits, and 
appeal rights. Also, we note that under the proposed H.R. 4477, all 
public and private employers with employees having USERRA rights, would 
be required to post a notice, with text to be provided by the Secretary 
of Labor, of those rights and benefits.
    Those employees completing their military service obligation must 
apply for reemployment within specific timeframes, depending on how 
long they served. Agencies must reemploy these employees as soon as 
possible after receiving the reemployment application but no later than 
30 days after receipt.
    Generally, returning employees must be treated as if their 
employment had not been interrupted by military service. They must be 
reemployed in the position for which they would have been qualified. If 
they are not qualified for that position and cannot become qualified 
through reasonable employer efforts, the employee is entitled to be 
placed in the position he or she left.
    Employees reemployed under USERRA are treated like they never left 
for most purposes including seniority, pay increases, retirement (a 
deposit to the retirement fund is usually required to cover the 
military service period), and leave rate accrual. Reemployed veterans 
are protected from not-for-cause separations (for example, by reduction 
in force) for 1 year after their return for those who served more than 
180 days and 6 months for those who served more than 30 days but less 
than 180 days.
    Applicants or employees who believe that an agency has not complied 
with the law or with OPM regulations governing USERRA restoration 
rights may file a complaint with the Department of Labor's local 
Veterans' Employment and Training Service (VETS) or, if VETS is 
unsuccessful in resolving the complaint, appeal to the Merit Systems 
Protection Board.

                        OPM Actions for Veterans

    Director James has directed OPM to take a number of steps to 
guarantee that the rights and entitlements of our veterans are not 
compromised as they return to their Federal jobs. We provide guidance 
to Federal agencies and departments as well as directly to veterans.

      On September 14, 2001, 3 days after the tragedy of 
September 11, we published extensive guidance to agencies on the rights 
and benefits of employees called to active duty.
      On October 29, 2001, we published a set of Frequently 
Asked Questions on military leave.
      We update ``VetGuide'' on OPM's Web site to ensure it 
remains the most comprehensive site for veterans' information.

    As a part of our general oversight authority, which we execute 
through Human Resource Operations audits and Delegated Examining Unit 
(DEU) audits, OPM ensures that veterans are protected against 
discrimination. Each year, we conduct approximately 20 operations 
audits and 125 DEU audits Governmentwide. We notify agencies of our 
coverage of veterans' issues and programs before each review and 
discuss key OPM initiatives.
    Through the newly created OPM Veteran Invitational Program (VIP), 
we are providing veterans with timely, accurate, and useful information 
to inform them of their rights and employment opportunities with the 
Federal Government. The VIP provides assistance to military personnel 
who are transitioning to civilian life through various informational 
tools and publications. In this regard, OPM works with Transition 
Assistance Program offices on military bases to recruit and assist 
veterans. We distribute posters, pamphlets, and wallet size information 
cards as well as inform veterans through an accessible Web link. OPM 
has also produced the DVD ``What Veterans Need to Know About Veterans' 
Preference,'' a comprehensive 40-minute video seminar of veterans' 
preference rights and eligibilities.
    In addition to the VIP, Director James and the OPM Team:

      Have developed outreach material to distribute at 
military bases' Transition Assistance Programs (TAP); Veterans Affairs 
Regional Offices; Veterans Service Organizations at the national, State 
and local levels; the U.S. Department of Labor's Veterans Employment 
and Training Service; and at recruitment fairs, including our recent 
Nationwide Working for America Recruitment Fairs.
      Have improved our USAJOBS Web site to make it more 
veteran-friendly by adding several veterans' links and additional 
veterans' employment information.
      Continue to explain veterans' rights at national 
conventions, conferences, workshops, and service officer training 
sponsored by the Veterans Service Organizations (VSOs). Also, we have 
reestablished quarterly meetings with VSO representatives for updates 
on issues of interest and provide an opportunity for them to share 
their concerns with OPM. I personally chair these meetings in which we 
invite leading experts on veterans' employment issues to share 
information.
      Actively participate as a member of the National 
Committee for Employer Support of the Guard and Reserve (ESGR), which 
is a Department of Defense-sponsored organization that seeks to 
minimize issues and misunderstandings that may arise between Reservists 
serving on active duty and their employers.
      Are actively involved with and a member of the National 
Task Force on Disability (assisting with the employment of Disabled 
Veterans) and the President's National Hire Veterans Committee, on 
which I personally serve.
      Work with the Department of Labor and the Department of 
Veterans Affairs to facilitate the employment of veterans, and share 
program information with the human resources community and others.
      Have staffed booths during the recent series of OPM-
sponsored nationwide recruitment fairs to provide information 
concerning the VIP and other veterans' employment benefits and 
protections, such as that offered under USERRA. We also conducted 
workshops at each fair to provide veterans with information on 
employment preference, special appointment authorities, and complaint 
procedures.

    OPM has been at the forefront of efforts to preserve and protect 
veterans' rights in Federal employment. We share the view held by 
Veterans Service Organizations that our Nation owes a debt of gratitude 
to its veterans. Veterans' preference laws provide a measure of 
compensation for those brave young men and women who left their 
families and homes to answer our Nation's call to arms.
    Recently, Director James convened a meeting of the Chief Human 
Capital Officers Council and the leaders of America's Veterans Service 
Organizations at Walter Reed Army Medical Center. She took advantage of 
this opportunity to remind attendees that there are no longer any 
excuses for not using the many hiring authorities available to Federal 
agencies to bring veterans into the Federal service.
    At a recent visit to Walter Reed, Director James stated that OPM 
will continue ``aggressive'' audits to ensure veterans' preference law 
is upheld. The day-long event included a personal message of thanks 
from Director James on behalf of the nation's 1.8 million civil 
servants, as well as training seminars and informational workshops for 
the soldiers conducted by OPM experts. OPM staff offered seminars 
including one which explained veterans' preference, appointing 
authorities, basis of preference, and veterans' preference types and 
benefits. Other seminars and workshops covered navigation of the 
USAJOBS.opm.gov Web site, resume writing, interviewing skills, and the 
Federal application process. Staff also met one-on-one with military 
personnel about the opportunities and benefits within the Government 
and the processes for obtaining a Federal job.
    OPM recently hosted a special Veteran Employment Symposium on 
veterans' preference and recruitment. The all-day event, attended by 
agency human capital leaders, human resources specialists, and program 
managers, focused on advancing existing policies and strategies to 
recruit veterans into the Federal workforce, and to reiterate that 
veterans' preference is the law and not a courtesy. As Director James 
told the audience of over 250 attendees:

        Today's veteran brings the same level of dedication to the job 
        as previous generations of veterans, but in addition they bring 
        many of the high-tech skills needed in the current Federal work 
        force. The Federal Government has a responsibility to help 
        these men and women as they transition back to civilian life. 
        As members of the best trained and volunteer military in the 
        world, veterans have demonstrated an appreciation and 
        competence for excellence and teamwork, and I cannot think of a 
        better source of talent for the Federal Government than those 
        who have completed their service in uniform.

    And just yesterday, as part of our VIP, OPM staff conducted an 
outreach effort at the Department of Veterans Affairs Hampton 
Rehabilitation Medical Center in Hampton, Virginia. OPM experts 
provided employment information to veterans seeking careers in the 
Federal civil service, including training on maximizing our 
USAJOBS.opm.gov website in Federal job searches and writing resumes.

                               Conclusion

    The Federal human resources community understands our veterans are 
a valued resource who have earned, through their very life's blood, 
hiring preference and reemployment rights we should be so very honored 
to provide. We must never forget disabled veterans have paid a very 
personal price for our freedom. Veterans are assets to any 
organization. They bring strength, courage and commitment in a way that 
cannot be fully imagined by those who have never stood in harm's way 
for the cause of their country.
    I would be glad to answer questions you might have.

                              ----------                              


STATEMENT OF THE HONORABLE DAVID C. IGLESIAS, UNITED STATES ATTORNEY FOR 
  THE DISTRICT OF NEW MEXICO, DEPARTMENT OF JUSTICE, BEFORE THE HOUSE 
   VETERANS AFFAIRS COMMITTEE, UNITED STATES HOUSE OF REPRESENTATIVES

CONCERNING THE UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT

                              JUNE 23, 2004

    Mr. Chairman and Members of the Committee:

    I appreciate the opportunity to appear before you today to discuss 
the Department of Justice's (``DOJ's'') representation of service 
members pursuant to the Uniformed Services Employment and Reemployment 
Rights Act of 1994 (``USERRA''). USERRA provides the fundamental right 
to reinstatement to civilian employment (under specified conditions) 
following non-career military service. USERRA also includes a broad 
anti-discrimination provision, prohibiting discrimination or acts of 
reprisal against an employee or prospective employee based upon past, 
current, or future military obligations. The Committee's interest in 
this important area is especially timely in light of the large number 
of Reserve and National Guard members serving on active duty in the 
Persian Gulf and elsewhere.
    In this statement, we address first the procedures we follow in 
handling USERRA claims. Next, we provide pertinent data on the number 
and disposition of claims we received during FY 2002, FY 2003, and the 
first half of FY 2004. Finally, we identify the steps the Department of 
Justice has taken recently to provide guidance to our attorneys 
handling USERRA cases and to publicize to employers their obligations 
under the law.

    I. Procedures

    Members of the uniformed services alleging a violation of USERRA 
may obtain representation by DOJ, provided that the member first 
submits a complaint to the Department of Labor's (``DOL's'') Veterans 
Employment and Training Service (``VETS'') and VETS is unable to 
successfully resolve it.
    Where DOL is unable to resolve a complaint and the service member 
requests referral of his or her claim for consideration of 
representation, DOL, through its Regional Solicitors (``RSOL''), refers 
the claim to DOJ's Civil Division. Each referral includes the VETS 
investigative file, a memorandum prepared by VETS, and a letter or 
memorandum to DOJ from the RSOL analyzing the merits of the claim based 
upon the facts and the law and providing a recommendation as to whether 
DOJ should or should not represent the claimant.
    DOJ's Civil Division serves as the gateway for DOL's USERRA 
referrals. Based upon its review of the investigative file, the VETS 
memorandum, the RSOL's memorandum, and its own analysis, the Civil 
Division either forwards the case to a United States Attorney's Office 
(``USAO'') for appropriate action or declines representation and 
returns the matter to the RSOL because the claim lacks merit. When we 
return a claim, DOL informs the service member of our decision against 
representation and reminds the claimant that he or she remains free to 
pursue the claim through private counsel. Our determination not to 
provide representation nearly always accords with DOL's conclusion that 
the claim lacks merit.
    When the Civil Division refers a claim to a USAO, the United States 
Attorney assigns the matter to an Assistant United States Attorney 
(``AUSA''), who reviews the investigative file and the VETS and RSOL 
memoranda and then interviews the claimant and potential witnesses. The 
AUSA may recommend that the United States Attorney decline to represent 
the service member because further review and investigation 
demonstrates that the claim lacks merit. If the AUSA determines that 
the claim is meritorious, and the United States Attorney agrees, the 
USAO represents the service member. Where representation is provided, 
the AUSA will typically contact the employer and attempt to resolve the 
matter without litigation. If this proves impossible, the AUSA will 
file a complaint against the employer in Federal district court.
    Once suit is filed, a USERRA case proceeds much like any other 
litigation. After the complaint is filed, discovery may be undertaken, 
dispositive motions may be filed, and a trial and subsequent appeal may 
occur. Alternatively, a settlement may be negotiated at any stage of 
the litigation.
    One type of case is somewhat unusual: a suit against a State. 
Recent case law curtailed employee suits against State governments 
based upon Federal law because of the immunity provisions of the 
Eleventh Amendment to the Constitution. E.g., Velasquez v. Frapwell, 
160 F.3d 389 (7th Cir. 1998) (affirming dismissal of USERRA claim 
brought by employee against State employer as barred by Eleventh 
Amendment), vacated in part, 165 F.3d 593 (7th Cir. 1999). In response, 
Congress amended USERRA in 1998, to allow DOJ to sue States in the name 
of the United States on behalf of State employees. (Alternatively, 
USERRA allows a service member represented by private counsel to sue in 
his or her own name in State court, in accordance with the laws of the 
State.) As set forth below, DOL referrals involving claims against 
States represent a relatively small percentage of total referrals in 
recent years, and in many of those cases DOL recommended against 
representation.

    II. Statistics

    FY 2002 and 2003.

    The number of USERRA claims DOL referred to DOJ annually has 
increased approximately 20 percent since September 11, 2001. During FY 
2002, DOJ received 52 cases; 14 were referred to USAOs and 38 were 
returned to DOL because the facts were insufficient for action. During 
FY 2003, DOJ received 53 cases; 12 were referred to USAOs and 41 were 
returned to DOL due to a lack of merit. By way of comparison, during FY 
2001 and 2000, DOJ received 45 and 43 cases, respectively.
    Of the 105 cases DOJ received during FY 2002 and 2003, 16 (or 
approximately 15 percent) involved claims against States. We declined 
representation in 12 of the 16 cases because we agreed with DOL's 
conclusion that the claims lacked merit. Of the 4 claims against States 
referred to USAOs, DOJ agreed to represent 3 of the claimants and has 
since settled 2 of those 3 claims without litigation. The fourth case 
was returned to DOL by agreement between DOL and the USAO.
    Of the 26 cases the Civil Division referred to USAOs during FY 2002 
and 2003 (including the 4 involving States), the USAOs agreed to 
represent the claimants in 12 cases and declined representation in 11 
cases. 2 cases are under review at the USAOs and no representation 
decisions have yet been made. The remaining case was returned to DOL by 
agreement. In the 12 cases where representation was provided, the USAOs 
settled 4 of the claims without litigation and 4 after filing suit; 3 
cases are pending and 1 was closed due to the claimant's failure to 
cooperate with the USAO. In the 11 cases where representation was 
declined, 7 declinations were due to a lack of merit, 3 due to the 
claimant's failure to cooperate, and 1 due to mootness. A summary of 
the status or disposition of the 26 cases referred to USAOs during FY 
2002 and 2003 is attached. Attachment A.
    First Half of FY 2004. During the first six months of FY 2004, DOJ 
received 31 USERRA claims (12 of the 31 claims presented a similar 
legal issue and they were referred as a group). The Civil Division 
referred 5 claims to USAOs and declined representation in 26 because 
they lacked merit (the 26 declinations included the 12 claims referred 
as a group). Of the 5 cases referred to USAOs, the USAOs declined 
representation in 3 and the remaining 2 are presently under review. 14 
of the 31 FY 2004 referrals--almost 50 percent--involved claims against 
States. The percentage is skewed because the 12 referred as a group 
were against States. Of the 14 claims against States, the Civil 
Division declined representation in 13 and a USAO declined 1.
    One factor which may affect the number of referrals to DOJ is 
USERRA's new provision permitting the district court to award (in 
addition to other relief) attorney fees, expert witness fees, and other 
litigation expenses to a service member who prevails in the litigation 
and is represented by private counsel. This may provide greater 
incentives for the private bar to provide representation and also 
motivate private employers to comply voluntarily to avoid additional 
costs. On the other hand, members incur no cost when being represented 
by the Department of Justice. The fee provisions may encourage 
litigation that could otherwise be avoided. Claimants may choose to 
retain private counsel and institute lawsuits, rather than seek the 
assistance of DOL, which historically has had a high rate of success in 
resolving these disputes amicably and obtaining employers' voluntary 
compliance with the law.

    III. DOJ's Recent Proactive Efforts

    DOJ recognizes the important role it plays in enforcing USERRA. We 
are committed to working closely with DOL in these matters and to 
representing vigorously USERRA claimants with meritorious claims. In 
addition to promptly processing USERRA referrals, the Civil Division 
and the United States Attorneys have taken the following recent steps 
in this area:

      The most recent edition of DOJ's Federal Civil Practice 
Manual (February 2003) includes a new chapter on USERRA.
      In April 2003, because of the mobilization of Reserve and 
National Guard members, the Military Issues Working Group of the 
Attorney General's Advisory Committee sent to all United States 
Attorneys a memorandum on USERRA to highlight the importance of USERRA 
cases and provide guidance in handling such claims.
      In June 2003, in a collaborative effort, lawyers from DOJ 
(both the Civil Division and the United States Attorneys) and DOL 
presented a Justice Television Network program entitled ``A Practical 
Legal Guide to USERRA for AUSAs.'' The program was broadcast to United 
States Attorneys' offices nationwide from our National Advocacy Center.
      In September 2003, a Civil Division lawyer participated 
in the ``USERRA Compliance Assistance'' program at DOL headquarters The 
program was held for DOD and DOL employees, as well as private 
employers interested in learning about USERRA.
      Several United States Attorneys have conducted press 
conferences, lectured at Chamber of Commerce meetings, written articles 
and, in general, got the word out to the business community and the 
Guard and Reserve communities that DOJ is taking this issue very 
seriously.


    Summary of Status or Disposition, By Category, of 26 USERRA Cases
                  Referred to USAOs during FY 2002-2003
                           As of June 9, 2004

                                Category
----------------------------------------------------------------------------------------------------------------------
                   Representation granted              ..............................
                         a) settled without            4.............................
                    litigation
                         b) settled after filing       4.............................
                    complaint
                         c) pending (pre-filing)       3.............................
                         d) closed due to failure to   1.............................
                    cooperate

                                                       12............................
                      Total:

                   Representation declined             ..............................
                         a) due to lack of merit       7.............................
                         b) due to failure to          3.............................
                    cooperate
                         c) due to mootness            1.............................

                                                       11............................
                      Total:


                    Under review (no representation decision made)

                      Returned to DOL by agreement

                       ----------------------------------------------------------------           

                                                               Total Cases: 26

                              ----------                              


    STATEMENT OF CHARLES CICCOLELLA, DEPUTY ASSISTANT SECRETARY FOR 
VETERANS' EMPLOYMENT AND TRAINING, U.S. DEPARTMENT OF LABOR, BEFORE THE 
  UNITED STATES HOUSE OF REPRESENTATIVES COMMITTEE ON VETERANS' AFFAIRS

                              JUNE 23, 2004

    Chairman Smith, Ranking Member Evans, and other distinguished 
members of the House Veterans' Affairs Committee, the Department of 
Labor is pleased to have this opportunity to provide comments on 
compliance with the Uniformed Services Employment and Reemployment 
Rights Act (USERRA). As you know, USERRA has been very much in the news 
for nearly three years now. Within days after the attacks of September 
11, 2001, the President authorized a partial mobilization, under which 
up to one million members of the Ready Reserve could be activated for 
up to 24 months. Since this historic mobilization began, over 385,854 
of these citizen-soldiers have been called, of whom 156,667 currently 
remain on active duty. This includes 76 employees of the Department of 
Labor, 16 of whom currently remain on active duty.
    USERRA is particularly important now as it provides reemployment 
rights to those men and women called from civilian jobs to serve in the 
nation's defense. In addition, the law prohibits employer 
discrimination against veterans and reservists because of their 
military service or obligations.

                                HISTORY

    USERRA's roots go back to 1940, when the Congress was considering 
the nation's first peacetime draft. At the same time, the lawmakers 
resolved to provide newly inducted service members the right to return 
to their pre-service employers. To achieve this, what came to be 
popularly known as the Veterans' Reemployment Rights (VRR) law was 
enacted.
    By the early 1990s, the VRR law had become a complex and often 
difficult patchwork of legislative amendments and court decisions. It 
was severely tested by the mobilization and subsequent return of some 
265,000 Guard and Reserve members from Operation Desert Shield/Desert 
Storm in 1991. USERRA revised and restructured the VRR law, continuing 
or clarifying most of its provisions. It also made some substantive 
changes.
    The legislative history of USERRA makes it clear that pre-USERRA 
case law developed under the VRR remains useful in interpreting the 
statute, to the extent it is consistent with USERRA. For example, in 
fulfilling our obligations to administer and help enforce USERRA, we 
are ever mindful of the two principles laid down by the United States 
Supreme Court in its first reemployment rights case, Fishgold v. 
Sullivan Drydock. Those principles are as valid today as they were in 
1946--first, that the law is to be construed liberally to the benefit 
of those it protects; and second, that upon completion of service, the 
returning servicemember is to be reemployed in the position he or she 
would have occupied had employment continued during the period of 
service--this is known as the ``escalator principle.''
    USERRA is experiencing its greatest test due to the current war, as 
well as Operations Noble Eagle and Enduring Freedom. The Department of 
Labor believes that USERRA has worked extremely well in the face of its 
current challenges. I would like to turn now to our USERRA experiences 
and activities since September 11, 2001.

                              CURRENT DATA

    Since USERRA was enacted in October 1994, the Veterans' Employment 
and Training Service (VETS) has reported periodically to this Committee 
on our activities related to the administration and enforcement of the 
statute. For Fiscal Years 1995 through 2001, which ended September 30, 
2001, we reported a steady decline in the number of USERRA cases opened 
year-by-year. We opened nearly 1,400 cases in FY 1995, but by FY 2001 
the number had declined to 895. In the wake of the mobilization that 
began in September 2001, this trend has reversed.
    I should say here that while we have experienced an increase in 
cases opened, it is not proportional to the enormous number of men and 
women who have been called to duty. The nation's employer community is 
overwhelmingly supportive of employees who have been activated under 
the ongoing mobilization.
    During FY 2002, we opened 1,195 new USERRA cases, an increase of 
less than 35 percent over the previous fiscal year. For FY 2003, the 
number of cases opened increased again, but at a lower rate. For that 
year, we opened 1,315 new USERRA cases, an increase of 10 percent over 
the previous year. As of mid-June, we had opened 979 new cases for FY 
2004, which, on an annualized basis, would yield a further increase of 
about 10 percent over FY 2003.
    I can report with pride that the VETS' staff has been up to the 
challenge of dealing with the increased USERRA caseload. Despite the 
increase of USERRA claims filed, our case handling statistics have 
remained generally consistent with prior years. As of mid-June, we have 
closed 954 cases during FY 2004. We closed 86 percent of these cases 
within 90 days after opening and 93 percent within 120 days. Of the 
cases closed, slightly more than one-third of the claims filed were 
found to be without merit or the claimants were found to be not 
eligible for USERRA protection, and about another 25 percent were 
closed because the claimant withdrew or did not pursue the complaint. 
One-third of the claims were successfully resolved in favor of the 
claimant, either because the claim was granted, or a mutually agreeable 
settlement was achieved. About 7 percent of cases closed were referred 
for further legal action. Of those cases, about nine in ten were 
referred to the Department of Justice because they involved a non-
Federal employer, and the remaining cases were referred to the Office 
of Special Counsel because they involve Federal executive agencies.
    The percentage of USERRA complaints that are filed against 
governmental employers has remained fairly consistent in recent years. 
Since FY 2001, 30 to 35 percent of cases opened each year have involved 
public employers. Federal cases have made up 10 to 14 percent of the 
total, while State or local governments have accounted for around 20 
percent.
    With respect to the types of issues arising under USERRA, we have 
found that two issues have recurred with the greatest frequency. Those 
issues involve discrimination of employees, due to their status as 
either current or former members of the armed forces, and reinstatement 
of demobilized service members seeking to return to their civilian 
employment. Here, the term ``reinstatement'' refers not only to those 
employees who were not reemployed in their former positions, but may 
also include cases in which the employees were improperly reinstated in 
positions that were not commensurate with the status or pay grade to 
which they would otherwise be entitled. Thus far, in fiscal year 2004, 
discrimination accounts for thirty-one percent of issues raised in 
USERRA cases, and reinstatement accounts for twenty-three percent of 
the issues raised in those cases.

                     COMPLIANCE ASSISTANCE EFFORTS

    While our staff has been extremely effective at resolving 
complaints, a major focus for the Department remains the resolution of 
problems before complaints arise. Secretary Chao has made compliance 
assistance a priority with respect to all the laws administered and 
enforced by the Department, including USERRA.
    Since September 2001, VETS' staff nationwide have responded to more 
than 23,000 requests for USERRA information from employers, members of 
Congress, Guard and Reserve component members, the media and the 
general public. In addition, we have delivered USERRA briefings and 
presentations to more than 147,000 people nationwide. Most of these 
briefings were for members of mobilized Guard and Reserve units, but we 
have also reached many employers and employer groups. Just a few 
examples--Web casts for the U.S. Chamber of Commerce, the Society for 
Human Resource Management, the H.R. Policy Association (formerly known 
as the Labor Policy Association) and others; two appearances as a 
featured guest on the national FEDtalk radio broadcast; an appearance 
on a television broadcast to all the offices of the United States 
Attorneys and a nationwide network of National Guard units; a 
television broadcast co-presented by the Department of Veterans Affairs 
that addressed USERRA entitlements for disabled veterans; and an 
interactive conference call with employer members of the Equal 
Employment Advisory Council.
    In fulfilling our statutory obligations to provide help and 
educational outreach, we have received tremendous support and 
assistance from colleagues both inside and outside the Department of 
Labor. The Department's Office of the Solicitor has provided support in 
all areas, particularly by participating in briefings and helping us 
respond to technical questions. They also helped draft proposed USERRA 
regulations, which I am pleased to report are in the final stages of 
review and I expect the regulations to be available for public comment 
in September 2004.
    Additionally, we have received numerous briefings and invaluable 
technical assistance support from the Employee Benefits Security 
Administration. The Employment Standards Administration has helped us 
develop interpretations of the relationships between USERRA and other 
laws, such as the Family and Medical Leave Act and the Fair Labor 
Standards Act. Our web site's resource guide for the general public was 
revised in March 2003 to update and clarify VETS position on pension 
issues. And, VETS participates in DOL's Internet based Employment Laws 
Assistance for Workers and Small Businesses (elaws) Advisor program, 
whereby the Department provides interactive Advisors for USERRA and 
other laws. The e-VETS Resource Advisor, a portal site to numerous web 
sites with information and resources helpful to veterans, has been 
released and is available through the VETS homepage as well as through 
the elaws Advisor program on the DOL web site.
    In July 2002, a joint memorandum was issued on the ``Protection of 
Uniformed Service Members' Rights to Family and Medical Leave.'' The 
memorandum was signed by the Solicitor of Labor, the Assistant 
Secretary for VETS, and the Administrator of the Wage and Hour 
Division. The memorandum is posted on the VETS' web site.
    Outside of the Department, I would like to mention the 
extraordinary efforts by our colleagues at the National Committee for 
Employer Support of the Guard and Reserve (ESGR) headed by General 
Bobby Hollingsworth, its Executive Director. Their small national staff 
and more than 4,000 volunteers nationwide perform prodigious service in 
promoting understanding between employers and their reservist-employees 
and in helping to informally resolve disputes when they arise. We would 
be hard pressed to do what we do without ESGR. Additionally, the Office 
of Personnel Management (OPM) remains a steadfast partner in helping to 
distribute information to federal agencies on the employment rights of 
the Reserve and National Guard. The Federal Government is the largest 
single employer of members of the Armed Forces Reserves, and we are 
proud of their dedication and commitment. You may be interested to know 
that Federal agencies have the authority to pay both the employee and 
government health benefit contributions for up to 18 months when 
employees are called to active duty. OPM took the lead in promulgating 
guidance and encouraging Federal agencies to pay the employees' portion 
of the health benefit premiums. Finally, the Department of Justice and 
the Office of Special Counsel provide valuable assistance with respect 
to referred cases and providing technical assistance and outreach on 
USERRA.

                              LEGISLATION

    I am also pleased to present the Department's views on two 
introduced bills and a draft bill, which pertain primarily to 
protecting the employment rights of service members.

                                 * * *

                     Patriotic Employer Act of 2004

    H.R. 4477, the ``Patriotic Employer Act of 2004,'' would amend 
USERRA to require employers to post a notice of the rights and duties 
that apply under that Act. The Department is always interested in 
finding new and effective ways to convey the rights and 
responsibilities of employers under USERRA. As part of its ongoing 
compliance assistance efforts, the Department continues to reach out to 
employers and, as such, is not opposed to this bill.

           USERRA Health Care Coverage Extension Act of 2004

    Section 2 of the draft bill, ``USERRA Health Care Coverage 
Extension Act of 2004,'' would extend the period of USERRA continuation 
coverage from 18 to 24 months for service members who elect such 
coverage, which would align this coverage period with the length of 
time reservists can be mobilized under the current mobilization 
authority. The bill provides that the 24-month period applies to all 
continuation coverage elections occurring on or after the date of 
enactment.
    The Department supports the intent of this bill and would be 
pleased to work with the Committee on any technical issues.
    In Section 3, the bill would reinstate the requirement to report on 
certain cases and complaints in consultation with the U.S. Attorney 
General and the U.S. Special Counsel. In the past, the Department found 
this requirement to be useful. As such, the Department has no objection 
to the reinstatement of these reporting requirements. The Department 
would defer to the Attorney General and the Special Counsel for their 
respective views on the implementation of this provision.

                               CONCLUSION

    We remain committed to informing employers about USERRA and 
continuing our mission of protecting the reemployment rights of our 
service members, including the 76 service members employed by this 
Department. Mr. Chairman and members of the Committee, this concludes 
my statement. I will be happy to answer any questions.

                              ----------                              


TESTIMONY OF CRAIG W. DUEHRING, PRINCIPAL DEPUTY ASSISTANT SECRETARY OF 
  DEFENSE, RESERVE AFFAIRS, BEFORE THE COMMITTEE ON VETERANS' AFFAIRS, 
                        HOUSE OF REPRESENTATIVES

                                 * * *

                              JUNE 23, 2004

    Mr. Chairman and members of the Committee, thank you for giving me 
the opportunity to come before you this morning to discuss several 
proposed improvements to the Servicemembers Civil Relief Act (SCRA) and 
the Uniformed Services Employment and Reemployment Rights Act (USERRA).
    The Department of Defense supports enactment of the Servicemembers 
Legal Protection Act of 2004, which would amend several provisions of 
the SCRA to reflect our experience with the SCRA during its first six 
months. Each proposed amendment in the draft bill addresses a problem 
that has been encountered by servicemembers and brought to the 
attention of the Department through the legal assistance programs of 
the Military Services. Legal assistance attorneys play a key role in 
ensuring that servicemembers are able to fully exercise the rights and 
protections afforded by the SCRA, and we have been attentive to their 
experiences during this initial shakedown period under the new law. The 
Department passed on its concerns and recommendations to your staff, 
and you have responded expeditiously with this draft bill and this 
hearing. I commend and thank the Committee and its staff for this 
impressive responsiveness to the needs of our servicemembers.
    Section 2 of the draft bill would amend the SCRA by defining the 
term ``judgment'' to include any judgment, decree, order, or ruling, 
final or temporary. Defining this term, which is used in several key 
provisions of the Act, will ensure that servicemembers are not excluded 
from any of the Act's rights or protections, such as the section 201 
protection against default judgments, by a narrower State definition of 
the term ``judgment.''
    Section 3 of the draft bill would require that written waivers of 
SCRA rights or protections be executed as an instrument separate from 
the obligation or liability to which they apply and that any such 
waiver that applies to a contract, lease, or similar legal instrument 
be in at least 12-point type. This amendment would protect 
servicemembers from fine print embedded in, for example, residential 
and motor vehicle leases that would waive the right under section 305 
of the SCRA to terminate those leases under certain circumstances.
    Section 4 of the draft bill would simply clarify that the right to 
request a stay of proceedings under section 202 of the SCRA applies to 
servicemembers who are plaintiffs in civil proceedings as well as those 
who are defendants. The applicability of the stay provisions to both 
plaintiffs and defendants was clear in the predecessor Soldiers' and 
Sailors' Civil Relief Act, and this amendment would provide the same 
clarity in the SCRA.
    Section 5 of the draft bill has several purposes. First, it would 
clarify that when a servicemember terminates a residential or motor 
vehicle lease under section 305 of the SCRA, any obligation of a 
dependent who is jointly liable under the lease is also terminated. 
This clarification is essential if the full intent of this lease-
termination provision is to be realized and military family members are 
to have the flexibility they need when a servicemember is deployed. For 
example, this amendment will ensure that if a servicemember's spouse 
chooses to return to his or her hometown and the family support network 
there, he or she will not be deterred from doing so because of a 
residential lease obligation.
    Second, section 5 would also extend the ability to terminate a 
motor vehicle lease upon a permanent change-of-station to 
servicemembers stationed in States or Territories outside the 
continental United States, such as Alaska, Hawaii, and Puerto Rico. 
This amendment would simply correct the unintentional exclusion of 
these servicemembers resulting from the current wording of section 305 
of the SCRA.
    Third, section 5 would define the term ``military orders'' to mean 
official military orders, or any notification, certification, or 
verification from a servicemember's commanding officer with respect to 
the servicemember's current or future military-duty status. This 
amendment recognizes that, in the case of deployments, servicemembers 
are usually not issued official orders that could be provided to a 
lessor as required by section 305 of the SCRA when terminating a 
residential or motor vehicle lease. Under this broad definition of 
``military orders'', a servicemember could satisfy this procedural 
requirement by presenting the lessor with, for example, a letter from 
his or her commanding officer confirming the particulars of an upcoming 
deployment.
    Fourth, section 5 would clarify that the deployments that trigger a 
servicemember's ability to terminate a residential or motor vehicle 
lease under section 305 of the SCRA include not only deployments with a 
military unit, but also deployments by individuals in support of a 
military operation. This amendment recognizes that some servicemembers 
deployed in support of a military operation do not deploy with a unit, 
but as individuals.
    Section 6 of the draft bill would amend section 511 of the SCRA to 
state that a tax jurisdiction may not impose a use, excise, or similar 
tax on the property of a nonresident servicemember when the laws of the 
tax jurisdiction fail to provide a credit against such sales, use, 
exercise, or similar taxes previously paid on the same property to 
another tax jurisdiction. This amendment is needed to protect 
servicemembers from double taxation, which is possible under the 
current wording of section 511, as interpreted by the Supreme Court 
(Sullivan v. United States, 395 U.S. 169 (1969)) when it considered 
identical language in the Soldiers' and Sailors' Civil Relief Act.

                                 * * *

    The Department of Defense supports section 2 of the draft USERRA 
Health Care Coverage Extension Act of 2004. Increasing from 18 months 
to 24 months the maximum period of employer-provided health care plan 
coverage that an employee covered by USERRA may elect to continue is an 
important amendment that will align this coverage period with the 
length of time for which reservists can be mobilized under the current 
mobilization authority.
    We defer to the Department of Labor on section 3 of the draft bill, 
which would reinstate the requirement for a comprehensive annual report 
on the disposition of cases filed under USERRA.
    The Department also defers to the Department of Labor on section 2 
of H.R. 4477, the Patriotic Employer Act of 2004, which would require 
employers to post notice of USERRA rights, benefits, and obligations in 
the place of employment of individuals protected by that Act.
    I would again like to thank the Committee and its staff for all of 
your efforts on behalf of our servicemembers. The Department of Defense 
appreciates this opportunity to discuss these important matters with 
you.

                              ----------                              


  STATEMENT OF JACK McCOY, DIRECTOR, VA EDUCATION SERVICE, BEFORE THE 
     SUBCOMMITTEE ON BENEFITS, HOUSE COMMITTEE ON VETERANS' AFFAIRS

                              JUNE 16, 2004

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to appear today before this Subcommittee. I am pleased to 
testify today on H.R. 4032 and the draft bill, the ``Veterans Self-
Employment Act of 2004.'' Let me first discuss H.R. 4032, the 
``Veterans Fiduciary Act of 2004.''

                               H.R. 4032

Background

    During testimony before this Subcommittee in July of last year, we 
provided extensive background information about VA's Fiduciary Program, 
as well as statistics relating to quality reviews and to other steps VA 
is taking to oversee payments made to beneficiaries who are incapable 
of managing funds. The information we provided then remains accurate, 
and VA has not experienced any significant problems carrying out 
activities related to the Fiduciary Program since our July 2003 
testimony.

Summary of VA's Position

    Before getting into the specifics of the bill, I would first like 
to summarize VA's position. We agree that there is a value in 
strengthening the protections afforded to incompetent beneficiaries and 
for close oversight of fiduciaries. However, we see the current bill as 
imposing restrictions and requirements that are, in many instances, too 
broad for VA's unqualified support.

Key Provisions of H.R. 4032

    Section 2(a) of H.R. 4032 would define, for purposes of chapters 55 
and 61 of title 38, United States Code, the term ``fiduciary'' as: (1) 
a person who is a guardian, curator, conservator, committee, or person 
legally vested with the responsibility or care of a claimant (or a 
claimant's estate) or of a beneficiary (or a beneficiary's estate); or 
(2) any other person having been appointed in a representative capacity 
to receive money paid under any of the laws administered by the 
Secretary for the use and benefit of a minor, incompetent, or other 
beneficiary. Section 2(b) would make conforming changes to 38 U.S.C. 
Sec. Sec. 5502 and 6101. This definition provides needed clarity, and 
we can support this provision. There would be no costs associated with 
this change.
    Section 3 of H.R. 4032 would require the Secretary to base any 
certification of a person as a beneficiary's fiduciary on an 
investigation of that person's fitness to serve as that beneficiary's 
fiduciary, adequate evidence that certification of that person would be 
in the beneficiary's interest, and the furnishing of any bond that may 
be required. Proposed 38 U.S.C. Sec. 5507 would also require the 
Secretary to conduct investigations in advance of certification as a 
fiduciary, would require a face-to-face interview with the person to 
the extent practicable, and would require the Secretary to request 
information about whether the person has a criminal record that 
resulted in imprisonment for more than one year. If a person has such a 
criminal record, VA could certify the person as a fiduciary only if the 
Secretary specifically finds that the person has been rehabilitated and 
is the most appropriate person to act as fiduciary for the beneficiary. 
For certain proposed fiduciaries (the parent of a minor beneficiary, 
the spouse or parent of an incompetent beneficiary, or a court-
appointed fiduciary), VA would be permitted to investigate the 
fiduciary's fitness on an expedited basis, which may include waiver of 
any specific requirement relating to investigations.
    This provision would codify requirements already contained in VA's 
Adjudication Procedures Manual (M21-1MR, Part XI, Ch. 2, Section D.12) 
concerning initial appointment of fiduciaries and would add a 
requirement to investigate a person's fitness to serve as a fiduciary. 
Because VA has directives in place that generally parallel the 
requirements of this proposal, the provision is unnecessary. We also 
note that the requirement for investigation of potential fiduciaries 
carries a cost of about $527,000 annually. We believe the current 
screening procedure is sound and see little benefit in routinely 
requiring investigations that could unnecessarily delay urgently needed 
appointments of fiduciaries. Accordingly, we do not support this 
provision.
    Should the committee decide to proceed with this portion of the 
legislation, we suggest that an additional category be added to 
proposed 38 U.S.C. Sec. 5507(c)(2) that would authorize VA to expedite 
investigation of fiduciaries if the amount of benefits the fiduciary 
will be handling is minimal.
    Finally, in this regard, the proposed statutory language requiring 
heightened scrutiny of potential fiduciaries that have been convicted 
of an offense that resulted in imprisonment for more than one year is 
also unnecessary. VA believes that it would be unnecessarily burdensome 
to determine if such a potential fiduciary were rehabilitated, 
particularly since VA already has the authority to make payment to any 
fiduciary who we determine will serve the best interest of a 
beneficiary. Further, VA already strives to avoid appointing as 
fiduciaries individuals who have criminal records.
    In summary, we believe that VA's current process of appointing 
fiduciaries is working well and do not feel that the legislation would 
provide any significant improvements. Indeed, addition of proposed 38 
U.S.C. Sec. 5507 may unnecessarily complicate a process that, in most 
instances, achieves VA's goal of appointing well-qualified fiduciaries. 
If it is enacted, we estimate that 6 additional FTE at the GS 10/5 
level would be required to carry out these functions in VBA's field 
offices. Additionally, 1 FTE at the GS 13/5 level would be required to 
support these functions in VA's Central Office. We estimate that the 
total annual cost of this provision would be $447,000.
    Section 4 of H.R. 4032 would add two new provisions to title 38 to 
enhance VA's ability to protect incompetent beneficiaries. The first, 
proposed 38 U.S.C. Sec. 6106, would have five subsections. The first 
subsection would prohibit a fiduciary from collecting a fee from a 
beneficiary for any month for which VA or a court of competent 
jurisdiction has determined that the fiduciary misused all or a part of 
the benefits provided to the fiduciary. We support enactment of this 
provision.
    The second subsection, 38 U.S.C. Sec. 6106(b), would make a 
fiduciary liable to the United States if the Secretary or a court of 
competent jurisdiction has determined that the fiduciary has misused 
benefits entrusted to him or her in a fiduciary capacity. This 
provision, which excludes Federal, State, or local government agency 
fiduciaries, would direct VA to treat misused funds that are not repaid 
by the fiduciary as erroneous benefits payments, which may be recovered 
as debts owed to the United States and subsequently repaid by VA to the 
beneficiary. We support enactment of this provision.
    The third, fourth, and fifth subsections of proposed section 6106 
would define ``misuse of benefits by a fiduciary,'' authorize certain 
VA regulations, and subject VA's decision that a fiduciary has misused 
benefits to appeal to the Board of Veterans' Appeals and the Court of 
Appeals for Veterans Claims. Making these decisions appealable would be 
consistent with the fact that VA determinations concerning overpayments 
of benefits are currently appealable. Accordingly, we support these 
provisions provided that savings found in another VA program can offset 
any new costs. However, we have reservations about the recourse of 
appeal through the Board of Veterans' Appeals (BVA). Our concerns 
involve both appropriateness of this venue and administrative 
efficiency. The BVA traditionally handles appeals relating to veterans' 
(or dependents' or survivors') claims for benefits. If this appeal 
mechanism would prove to be unduly burdensome to the claims-
adjudication process in practice, we would recommend an alternative 
process. We currently cannot provide costs concerning these provisions, 
and will forward this information as soon as it becomes available.
    Section 4 of H.R. 4032 would also add to title 38 a new section 
6107. That provision would consist of three new subsections. The first 
subsection, 38 U.S.C. Sec. 6107(a), would require VA to reissue 
benefits to the beneficiary or alternative fiduciary in any case in 
which the Secretary's negligent failure to investigate or monitor a 
fiduciary results in the misuse of benefits by the fiduciary. VA, 
through its Fiduciary Program staff, field examinations, review of 
fiduciary accountings, general monitoring, and quality control, strives 
to avoid all instances of misuse of VA funds by fiduciaries. 
Nevertheless, VA recognizes that in isolated incidents its fiduciary 
staff may fail to meet the high standards set for this program. We do 
not believe that a beneficiary should suffer financially because of 
VA's negligent failure to oversee a fiduciary. Accordingly, we support 
enactment of 38 U.S.C. Sec. 6107(a) provided that savings found in 
another VA program can offset any new costs.
    The second subsection, 38 U.S.C. Sec. 6107(b), would require VA to 
reissue benefits in a case of benefit misuse by a fiduciary who is not 
an individual or is an individual who serves fifteen or more 
beneficiaries. VA supports enactment of this provision provided that 
savings found in another VA program can offset any new costs. We 
estimate that subsections (a) and (b) together would cost $364,000 in 
the first year and approximately $4 million over ten years.
    The third subsection, 38 U.S.C. Sec. 6107(c), would require VA to 
make a good-faith effort to recoup from the original fiduciary funds 
reissued to a beneficiary or alternative fiduciary under subsection (a) 
or (b). VA supports enactment of this provision provided that savings 
found in another VA program can offset any new costs. At this time, we 
do not know what the costs of the provision would be.
    Section 5 of H.R. 4032 would add four new sections to title 38. The 
first of these, 38 U.S.C. Sec. 5508, has three major requirements. The 
first would require the Secretary to provide for periodic onsite review 
of any fiduciary who is a person who serves fifteen or more 
individuals, is a certified community-based nonprofit social service 
agency, or is an agency that provides VA-related fiduciary services for 
50 or more individuals. Section 5508(b) would define ``certified 
community-based nonprofit social service agency'' for these purposes. 
Proposed 38 U.S.C. Sec. 5508(c) would require VA, within 120 days of 
the end of each even-numbered fiscal year, to report the results of the 
periodic onsite reviews conducted under 38 U.S.C. Sec. 5508(a) and (b) 
during the previous two fiscal years, as well as any other fiduciary 
reviews conducted during that time.
    The requirement to conduct the onsite reviews described in this 
provision appears to duplicate a requirement in the recently enacted 
Social Security Protection Act of 2004 (Public Law 108-203). Section 
102 of Public Law 108-203 contains extensive requirements pertaining to 
oversight of entities that serve as representative payees for Social 
Security Administration (SSA) beneficiaries, including an annual report 
on the results of reviews conducted during that year. Because SSA has 
6.7 million beneficiaries in their representative payee program, 
compared to VA's 100,000 beneficiaries, we believe it would be 
preferable for VA to use SSA's reports on such representative payees. 
In cases where the payee is not on the SSA list of payees, VA would 
either ask SSA to add that payee to its list or VA would conduct an on-
site review of that payee.
    We believe the requirements in proposed 38 U.S.C. Sec. 5508(a) and 
(b) are too broad to serve VA purposes and that alternative means are 
available to accomplish the intended purpose. The reporting 
requirements in proposed section 5508(c) are also nearly identical to 
those in section 102 of Public Law 108-203. See Pub. L. No. 108-203, 
Sec. 102(b), 118 Stat. 493, 498 (2004). We also believe that the 
resources devoted to producing such a report would be better used 
elsewhere.
    Accordingly, we cannot support enactment of proposed 38 U.S.C. 
Sec. 5508. We estimate that 6 additional FTE at the GS 10/5 level, and 
1 FTE at the GS 13/5 level would be required to carry out the functions 
associated with enactment of 38 U.S.C. Sec. 5508. We estimate that the 
total annual cost of this FTE would be approximately $447,000. 
Additionally, we estimate that there will be a cost of $350,000 in the 
first year associated with updating several VA computer systems in 
order to generate the data necessary for the biennial report to 
Congress.
    Section 5 would also add a new section entitled ``Authority to 
redirect delivery of benefit payments when a fiduciary fails to provide 
required accounting.'' This provision, which would be codified at 38 
U.S.C. Sec. 5509, would include the authority both to require reports 
and accountings from fiduciaries and to direct a fiduciary who fails to 
file a required report or accounting to personally appear at the local 
regional office to receive benefit payments. VA's current procedures 
already require certain fiduciaries to submit regular accountings and 
authorizes the replacement of a fiduciary that fails to provide a 
required accounting. The new provision has a purpose very similar to 
that of the current 38 U.S.C. Sec. 5502(b), which states in pertinent 
part:

        The Secretary, in the Secretary's discretion, may suspend 
        payments to any such guardian, curator, conservator, or other 
        person who shall neglect or refuse, after reasonable notice, to 
        render an account to the Secretary from time to time showing 
        the application of such payments for the benefit of such 
        incompetent or minor beneficiary, or who shall neglect or 
        refuse to administer the estate according to law.

    Although proposed 38 U.S.C. Sec. 5509 essentially restates 
authority already provided by 38 U.S.C. Sec. 5502(b), we have no 
objection to including it in the current legislation provided that 
savings found in another VA program can offset any new costs. Indeed, 
the addition of this provision may provide a means by which VA can 
emphasize to fiduciaries the need to submit timely reports and 
accountings. Accordingly, we have no objection to this provision. We 
are currently evaluating whether this provision will result in any 
additional costs; our preliminary conclusion is that there will be no 
costs.
    Section 5 of H.R. 4032 would also add two new sections to chapter 
61 of title 38. The first would be 38 U.S.C. Sec. 6108, ``Civil 
monetary penalties,'' authorizing a civil penalty of not more than 
$5,000 for each conversion by a fiduciary appointed under 38 U.S.C. 
Sec. 5502 of a VA benefit payment to a use that the fiduciary knows or 
should know is for a use other than for the intended beneficiary. 
Section 6108(b) would subject a fiduciary who improperly converts a VA 
benefit payment to an assessment, in lieu of damages sustained by the 
United States, of not more than twice the amount of any payments 
converted. Under section 6108(c), any amounts collected as civil 
penalties or assessments would be credited to applicable appropriations 
to recoup VA's costs in pursuing civil collection actions against 
fiduciaries. Although we have no objection to these provisions, 
provided that any costs associated with them could be offset from 
savings found in another VA program, VA does not have a process in 
place for pursuing civil penalties against persons who misuse VA 
benefit payments. Costs associated with pursuing civil collection 
actions against fiduciaries would be borne primarily by VA's Office of 
General Counsel, through its various regional counsels. Such costs 
would depend directly on the number of civil penalty cases pursued by 
those offices. At this point, it is impossible to estimate such costs.
    The final new provision that H.R. 4032 would add is a new 38 U.S.C. 
Sec. 6109, ``Authority for judicial orders of restitution.'' Section 
6109(a) would authorize a Federal court, as part of the sentencing of a 
defendant convicted of an offense involving the misuse of VA benefits, 
to order the defendant to make restitution to VA. Section 6109(b) would 
make various provisions of title 18, United States Code, applicable to 
such restitution orders, and section 6109(c) would require a court that 
does not order full restitution to state its reasons on the record.
    Proposed 38 U.S.C. Sec. 6109(d) would describe the framework for 
handling payments obtained as a result of a court-ordered restitution. 
Subsection (d)(1) would authorize use of amounts recovered under 
restitution orders to defray expenses incurred in the supervision and 
investigation of fiduciaries. Subsection (d)(2) would require that 
``amounts received in connection with misuse by a fiduciary of funds 
paid as benefits'' be paid to the individual whose benefits were 
misused or, if VA has reissued the benefits, be treated as a recouped 
overpayment and deposited into the applicable revolving fund, trust 
fund, or appropriation. VA has no objection to this amendment and does 
not expect to incur any costs as a result of this provision.
    Section 6 of H.R. 4032 would make the provisions of this act, with 
the exception of new 38 U.S.C. Sec. Sec. 6106 and 6107, effective the 
first day of the seventh month beginning after the date of the 
enactment of this Act. Sections 6106 and 6107, which concern 
fiduciaries' misuse and reissuance of benefits, would apply to 
determinations of fiduciary misuse of funds made by VA after the date 
of enactment. VA has no objection to this provision.
    Section 7 of H.R. 4032 would require VA to prepare a report 
evaluating whether the existing procedures and reviews for the 
qualification of fiduciaries are sufficient to enable the Secretary to 
protect benefits paid to such individuals from being misused by 
fiduciaries and to submit the report no later than 270 days after 
enactment. This provision would direct the Secretary to include in the 
report any recommendations the Secretary considers appropriate. The 
purpose such a report would serve 270 days following enactment (and 
less than 90 days following the proposed effective date) is uncertain 
to us, and we therefore oppose this requirement.
    In closing my remarks on H.R. 4032, Mr. Chairman, I want to 
emphasize again that VA's fiduciary program has a long history of 
providing oversight for those veterans who cannot manage their VA 
benefits. We take this responsibility seriously. I look forward to 
working with you and your committee to strengthen the safeguards 
available to provide additional protection to these beneficiaries. Now 
I would like to address the Veterans Self-Employment Act of 2004.

                                 * * *

    Mr. Chairman, this concludes my statement. I will be pleased to 
respond to any questions you or the members of the Subcommittee may 
have.

                            Roll Call Votes

    During Committee consideration of H.R. 4658, there was a 
recorded vote on an amendment offered by Mr. Buyer to strike 
section 402, ``Care for newborn children of veterans receiving 
maternity care.'' The amendment was rejected on a roll call 
vote of 21-1. The vote of Committee Members is as follows:

Date:         Wednesday, July 21, 2004
Call to Order: 1:15 p.m.
Adjourn:      2:25 p.m.
Subject:       Markup of H.R. 4658, the Servicemembers and 
            Veterans Legal Protections Act of 2004



----------------------------------------------------------------------------------------------------------------
                 NAME                            YEA                      NAY                   NOT VOTING
----------------------------------------------------------------------------------------------------------------
Chris Smith, NJ, Chairman............    .....................  x......................
Michael Bilirakis, FL................    .....................  x......................
Terry Everett, AL....................    .....................    .....................  x
Steve Buyer, IN......................  x......................    .....................
Jack Quinn, NY.......................    .....................    .....................  x
Cliff Stearns, FL....................    .....................    .....................  x
Jerry Moran, KS......................    .....................  x......................
Richard Baker, LA....................    .....................    .....................  x
Rob Simmons, CT......................    .....................  x......................
Henry Brown, SC......................    .....................  x......................
Jeff Miller, FL......................    .....................  x......................
John Boozman, AR.....................    .....................  x......................
Jeb Bradley, NH......................    .....................  x......................
Bob Beauprez, CO.....................    .....................  x......................
Ginny Brown-Waite, FL................    .....................  x......................
Rick Renzi, AZ.......................    .....................    .....................  x
Tim Murphy, PA.......................    .....................  x......................
Lane Evans, IL, Ranking..............    .....................  x......................
Bob Filner, CA.......................    .....................    .....................  x
Luis Gutierrez, IL...................    .....................    .....................  x
Corrine Brown, FL....................    .....................    .....................  x
Vic Snyder, AR.......................    .....................  x......................
Ciro Rodriguez, TX...................    .....................  x......................
Michael Michaud, ME..................    .....................  x......................
Darlene Hooley, OR...................    .....................  x......................
Ted Strickland, OH...................    .....................    .....................  x
Shelley Berkley, NV..................    .....................  x......................
Tom Udall, NM........................    .....................  x......................
Susan Davis, CA......................    .....................  x......................
Tim Ryan, OH.........................    .....................  x......................
Stephanie Herseth, SD................    .....................  x......................
          TOTAL......................  1......................  21.....................  9
----------------------------------------------------------------------------------------------------------------


               Congressional Budget Office Cost Estimate

    The following letter was received from the Congressional 
Budget Office concerning the cost of the reported bill:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, August 24, 2004
Honorable Christopher H. Smith
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC

    Dear Mr. Chairman: As you requested, the Congressional 
Budget Office has prepared the enclosed cost estimate for H.R. 
4658, the Servicemembers and Veterans Legal Protections Act of 
2004.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Dwayne 
Wright, who can be reached at 226-2840.

            Sincerely,
                                       Douglas Holtz-Eakin,
                                                           Director
    Enclosure.
                                ------                                


               Congressional Budget Office Cost Estimate


  H.R. 4658, Servicemembers and Veterans Legal Protections Act of 2004


As ordered reported by the House Committee on Veterans' Affair on July 
                                21, 2004


SUMMARY

    H.R. 4658 would affect several veterans programs, including 
education, health care, disability compensation, and pensions. 
CBO estimates that enacting this legislation would raise direct 
spending for veterans programs by $11 million over the 2005-
2009 period and by $16 million over the 2005-2014 period. In 
addition, CBO estimates that discretionary spending resulting 
from H.R. 4658 would total almost $28 million over the 2005-
2009 period, assuming appropriation of the necessary amounts.
    H.R. 4658 contains both intergovernmental and private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA), but CBO estimates that the costs for state, local, and 
tribal governments and the private sector to comply with those 
mandates would be well below the thresholds established by UMRA 
($60 million in 2004 and $120 million in 2004, respectively, 
adjusted annually for inflation).

ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of H.R. 4658 is shown in 
Table 1. The costs of this legislation fall within budget 
function 700 (veterans benefits and services).





                                TABLE 1. ESTIMATED BUDGETARY IMPACT OF H.R. 4658
----------------------------------------------------------------------------------------------------------------
                                                                        By Fiscal Year, in Millions of Dollars
                                                                    --------------------------------------------
                                                                       2005     2006     2007     2008     2009
----------------------------------------------------------------------------------------------------------------

                                           CHANGES IN DIRECT SPENDING

Estimated Budget Authority.........................................        *        2        2        2        2
Estimated Outlays..................................................        *        2        2        2        2

                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level......................................        4        5        5        6        6
Estimated Outlays..................................................        4        5        5        6        6
----------------------------------------------------------------------------------------------------------------


    NOTES:  Five and 10-year costs in the text may differ slightly from 
a summation of the annual costs listed here because of rounding.

             * = less than $50,000.




BASIS OF ESTIMATE

    For this estimate, CBO assumes that the bill will be 
enacted before the end of calendar year 2004, and that the 
amounts necessary to implement the bill will be appropriated 
for each year.

    Direct Spending

    H.R. 4658 would affect direct spending in veterans' 
programs for education, compensation, and pensions. Table 2 
summarizes those effects, and the individual provisions that 
would affect direct spending are described below. In total, CBO 
estimates that enacting this legislation would increase direct 
spending by about $11 million over the 2005-2009 period and by 
$16 million over the 2005-2014 period.





                                  TABLE 2. ESTIMATED CHANGES IN DIRECT SPENDING FOR VETERANS' BENEFITS UNDER H.R. 4658
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         By Fiscal Year, in Millions of Dollars
                  Description of Provisions                   ------------------------------------------------------------------------------------------
                                                                 2005      2006     2007     2008     2009     2010     2011     2012     2013     2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
MGIB for Self-Employment Training............................         0        2        2        2        2        3        *        0        0        0
Misuse of Benefits by a Fiduciary............................         *        *        *        *        *        *        *        *        *        *

Total Changes................................................         *        2        2        2        2        3        1        *        *        *
--------------------------------------------------------------------------------------------------------------------------------------------------------


    NOTES:  Five and 10-year costs in the text may differ slightly from 
a summation of the annual costs listed here because of rounding.

             MGIB = Montgomery GI Bill

             * = less than $500,000.




    Montgomery GI Bill (MGIB) for Self-Employment Training. 
Section 403 would allow veterans to use their education 
benefits to receive on-the-job training without pay for periods 
of less than six months, when that training is needed to obtain 
a license to engage in a self-employment occupation or is 
required for ownership and operation of a franchise. This 
provision would take effect October 1, 2005, and remain in 
force through September 30, 2010. Under current law, education 
benefits for on-the-job training would only be approved if the 
veteran was paid wages that, at the start of training, equaled 
at least 50 percent of the wage paid for the job for which the 
veteran was to be trained, and increased over the course of the 
training to at least 85 percent of the prevailing wage. Based 
on information from the Department of Veterans Affairs (VA), 
CBO believes this temporary waiver of the wage requirement 
would be of use primarily to those seeking to own and operate a 
franchise. Franchise companies typically require prospective 
owners to undergo a four-to-six week program of on-the-job 
training and they do not pay wages to the prospective owners.
    Based on information from the Department of Labor, CBO 
estimates that about 6,500 eligible veterans took self-
employment classes through Small Business Development Centers 
in 2002, and we assume that about 1,600 of these also completed 
an average of five weeks of on-the-job training that was 
associated with the purchase of a franchise. Because the 
population eligible for and using MGIB benefits is growing, we 
estimate this number will increase to about 1,700 in 2006 and 
2,000 by 2014. Under current law, the MGIB benefit, currently 
$1,000 a month, is adjusted annually for increases in the cost 
of living. CBO estimates that by 2006 the MGIB benefit will 
increase to about $1,020 a month or about $1,270 for a five-
week period. Thus, CBO estimates that enacting section 403 
would increase direct spending for veterans' education benefits 
by $2 million in 2006, $9 million over the 2006-2009 period, 
and $12 million over the 2006-2011 period.

    Misuse of Veterans' Benefits by a Fiduciary. H.R. 4658 
contains several provisions dealing with fiduciary fraud. Taken 
together, CBO estimates that enactment of those provisions 
would increase direct spending for veterans compensation and 
pensions by about $2 million over the 2005-2009 period and $4 
million over the 2005-2014 period.

    Reissuing of Benefits Associated with Fiduciary Fraud. 
Section 303 would require VA to reissue veterans' compensation 
and pension benefits to beneficiaries when those benefits were 
misused by a fiduciary if the fraud can be attributed to 
negligence by VA. (A fiduciary is the guardian, curator, 
organization, or person legally vested to care for a claimant 
or beneficiary's estate.) Under the bill, VA negligence would 
be defined as:

        VA's failure to review a fiduciary's accounting 
in a timely manner, or
        VA's failure to act on allegations of fraud by 
a fiduciary in a timely manner, or
        Any other case in which actual negligence is 
shown.

    Under section 303, VA also would be required to reissue 
benefits to a beneficiary in cases where a fiduciary represents 
10 or more beneficiaries, regardless of whether or not the 
benefits are recouped from the fiduciary. Currently, VA only 
reissues benefits that were recouped from the fiduciary through 
court-ordered restitution. Any benefits that are not recovered 
from the fiduciary are not reissued to the beneficiary.
    CBO assumes that under the bill, VA would be held liable 
for any fraud that stems from certifying fiduciaries. (Under 
section 302 of the bill, VA would be required to complete in-
depth investigations to determine the fitness of an individual 
before certifying him or her as a fiduciary.) According to data 
provided by VA for the 1999-2003 period, it received about 50 
referrals a year for fiduciary fraud on average. Those 
referrals resulted in about 10 arrests a year and about 
$350,000 annually in recoveries. CBO assumes that roughly 90 
percent of the recoveries are for actual benefit payments which 
would be reissued under the bill and that under the conditions 
specified most fiduciary fraud would be found to stem from VA 
negligence. After adjusting for inflation, CBO estimates that 
this provision would raise direct spending for veterans' 
disability compensation and pensions by less than $500,000 in 
2005, about $2 million over the 2005-2009 period, and about $4 
million over the 2005-2014 period.

    Judicial Orders of Restitution. Section 304 would give VA 
the ability to pursue civil monetary penalties against 
fiduciaries of no more than $5,000 for each fraudulent act, and 
would subject a fiduciary to an assessment, in lieu of damages, 
of no more than twice the amount of any payments recovered. 
Section 304 also would allow VA to use court-ordered amounts 
recovered as penalties or fines that are not received in 
connection with misuse of benefits by a fiduciary to defray the 
costs of investigations of fiduciaries.
    Under current law, all amounts received due to restitution, 
penalties, or court-ordered fines are returned to the Treasury. 
Thus, the spending of these receipts under section 304 by VA 
would be considered direct spending. Absent more information 
from VA, CBO cannot determine the amount of fines and penalties 
that VA might expect to recover and spend over the 2005-2014 
period.

    Spending Subject to Appropriation

    CBO estimates that implementing H.R. 4658 also would 
increase discretionary spending for veterans' medical care and 
operating expenses within the Veterans Benefits Administration 
by about $28 million over the 2005-2009 period, assuming 
appropriation of the necessary amounts.
    Veterans Receiving Maternity Care. Section 402 would allow 
VA to provide care to newborn infants when the mother is a 
veteran receiving maternity care from VA. According to VA, a 
little more than 700 women a year are expected to receive 
maternity care from VA. Based on data from VA, CBO estimates 
that the cost of providing neonatal care to those infants would 
be about $5,700 per infant in 2005. (Providing neonatal care 
for most infants would cost much less; the high average cost is 
driven by those infants who require extensive care for longer 
periods of time.) Based on assumed enactment late in calendar 
year 2004, CBO estimates that implementing section 402 would 
cost $3 million in 2005 and $21 million over the 2005-2009 
period, assuming appropriation of the estimated amounts.

    Qualification of Fiduciaries. Section 302 would both codify 
and expand upon current requirements for VA certification of 
status as a fiduciary. Under section 302, VA would be required 
to certify a fiduciary based upon an inquiry or investigation 
into the fitness of an individual to serve as a fiduciary, 
adequate evidence that certification of the fiduciary would be 
in the beneficiary's best interest, and the furnishing of any 
bond as required by VA.
    Under current practice, when required, VA conducts 
investigations to determine the type of fiduciary best suited 
to a beneficiary. Using its field examiners, VA contacts the 
beneficiary or their family and through face-to-face 
interviews, if possible, determines the ability of the 
beneficiary to manage their benefit payments. The field 
examiner then certifies a fiduciary based upon his or her 
observations. VA also maintains periodic contact with certified 
fiduciaries to observe the performance of the fiduciary and 
also completes a review to determine whether the continued use 
of a fiduciary is necessary.
    Under this section, VA would be required to review the 
proposed fiduciary's credit report and conduct a criminal 
background check to determine if that person has been convicted 
of any federal or state offense resulting in imprisonment for 
more than a year. If that person had been convicted and 
imprisoned, VA would be allowed to certify that person as a 
fiduciary only if it determines that the proposed fiduciary has 
been rehabilitated and is an appropriate person to act as a 
fiduciary for a beneficiary.
    Based on information from VA, CBO estimates that requiring 
more in-depth reviews would require VA to hire seven additional 
people at an annual cost of about $500,000. Based on the cost 
of similar investigations conducted by the Social Security 
Administration, and using VA's estimate of new fiduciaries 
(excluding the number of family members who might become a 
fiduciary), CBO also estimates that conducting the required 
criminal background investigations would cost an additional 
$500,000 a year. Thus, CBO estimates that implementing section 
302 would cost about $4 million over the 2005-2009 period, 
assuming appropriation of the necessary amounts

    Additional Protections for Beneficiaries. Section 304 would 
codify and expand current procedures that protect beneficiaries 
from misuse of their benefits by fiduciaries. These protections 
include:

      Requiring VA to complete periodic on-site reviews 
of fiduciaries who serve 20 or more beneficiaries and manage 
benefits greater that $50,000;
      Requiring a report of accounting from the 
fiduciary;
      Allowing VA to pursue civil monetary penalties 
against persons who commit fraud; and
      Requiring any federal court to order a defendant 
convicted of fraud involving benefits to make restitution to 
VA, or to explain why no restitution was ordered.

    Based on information from VA, CBO estimates that to 
complete the tasks of completing periodic on-site reviews and 
pursuing civil penalties, VA would hire an additional seven 
people at an annual cost of about $500,000. Thus, CBO estimates 
implementing section 304 would cost about $2 million over the 
2005-2009 period, subject to appropriation of the necessary 
amounts.

    Annual Report on Fiduciary Program. Section 305 would 
require VA to prepare an annual report on the fiduciary 
program. The report would include the number of beneficiaries, 
total amount of benefits involved, number of fiduciaries, and 
information regarding fiduciary fraud and results of 
investigations. According to VA, preparation of the report 
would require an update to their computer systems to comply 
with the data requirements for the report. Based on information 
provided by VA, CBO estimates that implementing section 305 
would cost less than $500,000 in 2005, subject to appropriation 
of the necessary amounts.

INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT

    H.R. 4658 contains both intergovernmental and private-
sector mandates as defined in UMRA, but CBO estimates that the 
costs for state, local, and tribal governments and the private 
sector to comply with those mandates would be well below the 
thresholds established by UMRA ($60 million in 2004 and $120 
million in 2004, respectively, adjusted annually for 
inflation).

    Extension of Health Insurance

    Current law imposes a mandate on public and private-sector 
employers by requiring them to continue to provide health 
insurance coverage to certain workers, including those who are 
absent from work because of military service. Although those 
workers can be required to pay the employer 102 percent of the 
average cost of the insurance, research suggests that the 
actual cost of providing that coverage generally is greater 
than that amount.
    This bill would increase, from 18 months to 24 months, the 
amount of time those reservists who are mobilized are eligible 
to continue their health insurance. That extension would 
increase the cost of the existing mandate on both public and 
private-sector employers to provide continued coverage. 
However, CBO estimates that few workers would participate in 
the program and the total direct cost for employers to comply 
with that mandate would be about $2 million annually.

    State and Local Government Authority to Tax

    H.R. 4658 also contains an intergovernmental mandate as 
defined by UMRA because it would prohibit state and local 
jurisdictions from collecting certain taxes from 
servicemembers. Specifically, the bill would prohibit those 
governments from collecting sales, use, and excise taxes from 
nonresident servicemembers unless they provided a credit for 
fees paid on the same property in other jurisdictions.
    The Servicemembers' Civil Relief Act (SCRA) protects 
servicemembers from paying the same tax in multiple 
jurisdictions and provides that, for certain tax purposes, a 
servicemember's place of residence is his or her home state, 
not the state in which he or she is stationed. This bill would 
extend the SCRA tax provisions to explicitly include excise and 
other use taxes. Currently, no state or local governments 
collect those taxes from nonresident servicemembers. It would 
require jurisdictions, if they choose to collect such revenues, 
to credit payments made in other locations. CBO estimates that 
the cost, if any, for those governments to comply with that 
mandate would be minimal.

    Termination of Leases

    Section 104 of this bill would provide that, in the case of 
joint leases, the termination of a lease (residential and motor 
vehicle) by a servicemember under the provisions of section 305 
of the Servicemembers Civil Relief Act also terminates the 
obligation of a dependent under that lease. However, 
implementation of current law has typically extended coverage 
of lease termination to both servicemembers and their 
dependents. In particular, the disputes that have arisen about 
dependents' rights to terminate leases have usually been 
resolved in favor of a servicemember's dependent. Therefore, 
CBO estimates that this section of H.R. 4658 would not create 
new costs for the private sector. The joint lease language in 
H.R. 4658 is predominantly clarifying and would not create a 
new mandate.

ESTIMATE PREPARED BY:
    Federal Costs:
    Readjustment Benefits: Sarah T. Jennings (226-2840)
    Compensation and Pensions: Dwayne M. Wright (226-2840)
    Health Care: Sam Papenfuss (226-2840)
     Impact on State, Local, and Tribal Governments: Melissa 
Merrell (225-3220)
    Impact on the Private Sector: Adebayo Adedeji (226-2900)

ESTIMATE APPROVED BY:
    Peter H. Fontaine,
    Deputy Assistant Director for Budget Analysis

                     Statement of Federal Mandates

    The preceding Congressional Budget Office (CBO) cost 
estimate states that the bill contains intergovernmental or 
private sector mandates as defined in the Unfunded Mandates 
Reform Act, but CBO estimates that those mandates would be well 
below the thresholds established by the Act.

                 Statement of Constitutional Authority

    Pursuant to Article I, section 8 of the United States 
Constitution, the reported bill is authorized by Congress' 
power to ``provide for the common Defense and general Welfare 
of the United States.''

   Exchange of Letters Regarding H.R. 4658 Between the Committee on 
        Government Reform and the Committee on Veterans' Affairs


                            Committee on Veterans' Affairs,
                                  Washington, DC, September 7, 2004
Honorable Tom Davis
Chairman, Committee on Government Reform,
House of Representatives, Washington, DC

    Dear Mr. Chairman: The Committee on Veterans' Affairs 
wishes to schedule for rapid Floor consideration H.R. 4658, the 
Servicemembers and Veterans Legal Protections Act of 2004, a 
bill that would, among other things, under section 212 
authorize a demonstration project for referral of claims under 
the Uniformed Services Employment and Reemployment Act against 
Federal agencies to the Office of Special Counsel.
    It is my understanding that the Committee on Government 
Reform does not intend to request an additional referral of the 
bill and has no objection to Floor consideration of the bill. 
Of course, this would not be construed as affecting in any way 
the jurisdiction of the Committee on Government Reform over the 
Office of Special Counsel or as precedent for other bills. Upon 
confirmation of my understanding, I will include our exchange 
of letters in the report on H.R. 4658 or place the letters in 
the record during Floor consideration of the bill.
    Thank you for your cooperation in this matter and I look 
forward to working with you again on other legislation of 
mutual interest.

            Sincerely,
                                       Christopher H. Smith
                                                           Chairman

                                ------                                


                            Committee on Government Reform,
                                  Washington, DC, September 7, 2004
Honorable Christopher H. Smith
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC

    Dear Mr. Chairman: Thank you for consulting with the 
Government Reform Committee regarding H.R. 4658, ``the 
Servicemembers and Veterans Legal Protections Act,'' and for 
your recent letter. Section 212 of H.R. 4658 authorizes a 
demonstration project for referral of claims under the 
Uniformed Services Employment and Reemployment Act against 
Federal agencies to the Office of Special Counsel. As you know, 
the Committee on Government Reform has jurisdiction over the 
Office of Special Counsel. In order to expedite the 
consideration of this important bill in the house and because 
of your willingness to consult with my committee, I do not 
intend to seek a sequential referral of H.R. 4658 to the 
Committee on Government Reform.
    By agreeing to waive its consideration of the bill, the 
Government Reform Committee does not waive its jurisdiction 
over H.R. 4658 or the Office of Special Counsel. In addition, 
the Committee on Government Reform reserves its authority to 
seek outside conferees on this bill or a similar Senate bill 
and I would ask for your support in the event of a conference 
with the Senate on this or similar legislation.
    I respectfully request that you include this letter and 
your response in your committee report and Congressional Record 
during consideration of this legislation on the House floor. 
Thank you for your attention to these matters.

            Sincerely,
                                                  Tom Davis
                                                           Chairman

                                ------                                


                            Committee on Veterans' Affairs,
                                  Washington, DC, September 9, 2004
Honorable Tom Davis
Chairman, Committee on Government Reform,
House of Representatives, Washington, DC

    Dear Mr. Chairman: Thank you for your letter of September 
7, 2004, regarding the jurisdictional interest of the Committee 
on Government Reform in section 212 of H.R. 4658, the 
``Servicemembers and Veterans Legal Protections Act.''
    Your willingness to forego a sequential referral to 
expedite House consideration of H.R. 4658 is most appreciated. 
The Committee on Veterans' Affairs understands that your letter 
does not waive jurisdiction of the Committee on Government 
Reform over the bill and is not a precedent for other bills. In 
addition, if a conference on H.R. 4658 should become necessary, 
I will support any request by you for the Committee on 
Government Reform to be represented on the conference.
    Again, thank you for your cooperation in this matter.

            Sincerely,
                                       Christopher H. Smith
                                                           Chairman

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

SERVICEMEMBERS CIVIL RELIEF ACT

           *       *       *       *       *       *       *


                      TITLE I--GENERAL PROVISIONS

SEC. 101. DEFINITIONS.

  For the purposes of this Act:
          (1) * * *

           *       *       *       *       *       *       *

          (9) Judgment.--The term ``judgment'' means any 
        judgment, decree, order, or ruling, final or temporary.

           *       *       *       *       *       *       *


SEC. 107. WAIVER OF RIGHTS PURSUANT TO WRITTEN AGREEMENT.

  (a) In General.--A servicemember may waive any of the rights 
and protections provided by this Act. Any such waiver that 
applies to an action listed in subsection (b) of this section 
is effective only if it is in writing and is executed as an 
instrument separate from the obligation or liability to which 
it applies. In the case of a waiver that permits an action 
described in subsection (b), the waiver is effective only if 
made pursuant to a written agreement of the parties that is 
executed during or after the servicemember's period of military 
service. The written agreement shall specify the legal 
instrument to which the waiver applies and, if the 
servicemember is not a party to that instrument, the 
servicemember concerned.

           *       *       *       *       *       *       *

  (c) Prominent Display of Certain Contract Rights Waivers.--
Any waiver in writing of a right or protection provided by this 
Act that applies to a contract, lease, or similar legal 
instrument must be in at least 12 point type.
  [(c)] (d) Coverage of Periods After Orders Received.--For the 
purposes of this section--
          (1) * * *

           *       *       *       *       *       *       *


TITLE II--GENERAL RELIEF

           *       *       *       *       *       *       *


SEC. 202. STAY OF PROCEEDINGS WHEN SERVICEMEMBER HAS NOTICE.

  (a) Applicability of Section.--This section applies to any 
civil action or proceeding in which the plaintiff or defendant 
at the time of filing an application under this section--
          (1) * * *

           *       *       *       *       *       *       *


 TITLE III--RENT, INSTALLMENT CONTRACTS, MORTGAGES, LIENS, ASSIGNMENT, 
LEASES

           *       *       *       *       *       *       *


SEC. 305. TERMINATION OF RESIDENTIAL OR MOTOR VEHICLE LEASES.

  [(a) Termination by Lessee.--The lessee on a lease described 
in subsection (b) may, at the lessee's option, terminate the 
lease at any time after--
          [(1) the lessee's entry into military service; or
          [(2) the date of the lessee's military orders 
        described in paragraph (1)(B) or (2)(B) of subsection 
        (b), as the case may be.]
  (a) Termination by Lessee.--
          (1) In general.--The lessee on a lease described in 
        subsection (b) may, at the lessee's option, terminate 
        the lease at any time after--
                  (A) the lessee's entry into military service; 
                or
                  (B) the date of the lessee's military orders 
                described in paragraph (1)(B) or (2)(B) of 
                subsection (b), as the case may be.
          (2) Joint leases.--A lessee's termination of a lease 
        pursuant to this subsection shall terminate any 
        obligation a dependent of the lessee may have under the 
        lease.
  (b) Covered Leases.--This section applies to the following 
leases:
          (1) Leases of premises.--A lease of premises 
        occupied, or intended to be occupied, by a 
        servicemember or a servicemember's dependents for a 
        residential, professional, business, agricultural, or 
        similar purpose if--
                  (A) * * *
                  (B) the servicemember, while in military 
                service, executes the lease and thereafter 
                receives military orders for a permanent change 
                of station or to deploy with a military unit, 
                or as an individual in support of a military 
                operation, for a period of not less than 90 
                days.
          (2) Leases of motor vehicles.--A lease of a motor 
        vehicle used, or intended to be used, by a 
        servicemember or a servicemember's dependents for 
        personal or business transportation if--
                  (A) * * *
                  (B) the servicemember, while in military 
                service, executes the lease and thereafter 
                receives [military orders for a permanent 
                change of station outside of the continental 
                United States or to deploy] military orders--
                          (i) for a change of permanent 
                        station--
                                  (I) from a location in the 
                                continental United States to a 
                                location outside the 
                                continental United States; or
                                  (II) from a location in a 
                                State outside the continental 
                                United States to any location 
                                outside that State; or
                          (ii) to deploy with a military unit, 
                        or as an individual in support of a 
                        military operation, for a period of not 
                        less than 180 days.

           *       *       *       *       *       *       *

  (i) Definitions.--
          (1) Military orders.--The term ``military orders'', 
        with respect to a servicemember, means official 
        military orders, or any notification, certification, or 
        verification from the servicemember's commanding 
        officer, with respect to the servicemember's current or 
        future military duty status.
          (2) Conus.--The term ``continental United States'' 
        means the 48 contiguous States and the District of 
        Columbia.

           *       *       *       *       *       *       *


TITLE V--TAXES AND PUBLIC LANDS

           *       *       *       *       *       *       *


SEC. 511. RESIDENCE FOR TAX PURPOSES.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Personal Property.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Use, excise, or similar taxes.--A tax 
        jurisdiction may not impose a use, excise, or similar 
        tax on the personal property of a nonresident 
        servicemember when the laws of the tax jurisdiction 
        fail to provide a credit against such taxes for sales, 
        use, excise, or similar taxes previously paid on the 
        same property to another tax jurisdiction.

           *       *       *       *       *       *       *

                              ----------                              


TITLE 38, UNTIED STATES CODE

           *       *       *       *       *       *       *


PART II--GENERAL BENEFITS

           *       *       *       *       *       *       *


   CHAPTER 17--HOSPITAL, NURSING HOME, DOMICILIARY, AND MEDICAL CARE

                          subchapter i--general

Sec.
1701.    Definitions.
     * * * * * * *

       subchapter viii--health care of persons other than veterans

1781.    Medical care for survivors and dependents of certain veterans.
     * * * * * * *
1786.    Care for newborn children of veterans receiving maternity care.
     * * * * * * *

SUBCHAPTER VIII--HEALTH CARE OF PERSONS OTHER THAN VETERANS

           *       *       *       *       *       *       *


Sec. 1786. Care for newborn children of veterans receiving maternity 
                    care

  (a) Authority.--Subject to subsections (b) and (c), when a 
female veteran who is enrolled in the health-care system 
established under section 1705 of this title is receiving 
maternity care from the Department delivers of a child in a 
Department facility or in a non-Department facility under a 
Department contract the Secretary may furnish care to the 
neonate.
  (b) Care in a Department Facility.--In a case in which a 
neonate covered by subsection (a) is born in a Department 
facility, care furnished for the neonate at that facility shall 
be furnished without charge to the veteran who delivered of 
that neonate.
  (c) Care in a Non-Department Facility.--In a case in which a 
neonate covered by subsection (a) is born in a non-Department 
facility or is provided care in a non-Department facility 
following birth in a Department facility and transfer from that 
facility, the Secretary may provide for the payment of the cost 
of care and services for the neonate in the same manner, and 
subject to the same limitations, as if such care and services 
were emergency treatment furnished the veteran subject to 
section 1725 of this title, except that--
          (1) the services for which the Secretary may make 
        payment shall be limited to those items and services 
        for which payment may be made under the medicare 
        program under title XVIII of the Social Security Act 
        for post-natal care furnished to a neonate; and
          (2) the rate of payment for such services may not 
        exceed the payment rates applicable to those items and 
        services under the medicare program under such title.

           *       *       *       *       *       *       *


PART III--READJUSTMENT AND RELATED BENEFITS

           *       *       *       *       *       *       *


CHAPTER 34--VETERANS' EDUCATIONAL ASSISTANCE

           *       *       *       *       *       *       *


                   SUBCHAPTER I--PURPOSE; DEFINITIONS

Sec. 3452. Definitions

  For the purposes of this chapter and chapter 36 of this 
title--
  (a) * * *

           *       *       *       *       *       *       *

  (e) The term ``training establishment'' means any 
establishment providing apprentice or other training on the 
job, including those under the supervision of a college or 
university or any State department of education, or any State 
apprenticeship agency, or any State board of vocational 
education, or any joint apprenticeship committee, or the Bureau 
of Apprenticeship and Training established pursuant to the Act 
of August 16, 1937, popularly known as the ``National 
Apprenticeship Act'' (29 U.S.C. 50 et seq.), or any agency of 
the Federal Government authorized to supervise such training.
          (1) * * *
          (2) [An] For the period beginning on October 1, 2005, 
        and ending on September 30, 2010, an establishment 
        providing self-employment on-job training consisting of 
        full-time training for a period of less than six months 
        that is needed or accepted for purposes of obtaining 
        licensure to engage in a self-employment occupation or 
        required for ownership and operation of a franchise 
        that is the objective of the training.

           *       *       *       *       *       *       *


CHAPTER 36--ADMINISTRATION OF EDUCATIONAL BENEFITS

           *       *       *       *       *       *       *


SUBCHAPTER I--STATE APPROVING AGENCIES

           *       *       *       *       *       *       *


Sec. 3677. Approval of training on the job

  (a) * * *
  (b)(1) * * *

           *       *       *       *       *       *       *

  (3) Notwithstanding paragraph (1)(A) and subsection (c)(8), 
no wages shall be required to be paid an eligible person or 
veteran by a training establishment described in section 
3452(e)(2) of this title.

           *       *       *       *       *       *       *


   CHAPTER 43--EMPLOYMENT AND REEMPLOYMENT RIGHTS OF MEMBERS OF THE 
                           UNIFORMED SERVICES

                          subchapter i--general

4301.    Purposes; sense of Congress.
     * * * * * * *

                 subchapter iv--miscellaneous provisions

4331.    Regulations.
     * * * * * * *
4334.    Notice of rights and duties.

           *       *       *       *       *       *       *


  SUBCHAPTER II--EMPLOYMENT AND REEMPLOYMENT RIGHTS AND LIMITATIONS; 
PROHIBITIONS

           *       *       *       *       *       *       *


Sec. 4317. Health plans

  (a)(1) In any case in which a person (or the person's 
dependents) has coverage under a health plan in connection with 
the person's position of employment, including a group health 
plan (as defined in section 607(1) of the Employee Retirement 
Income Security Act of 1974), and such person is absent from 
such position of employment by reason of service in the 
uniformed services, the plan shall provide that the person may 
elect to continue such coverage as provided in this subsection. 
The maximum period of coverage of a person and the person's 
dependents under such an election shall be the lesser of--
          (A) the [18-month period] 24-month period beginning 
        on the date on which the person's absence begins; or

           *       *       *       *       *       *       *


SUBCHAPTER IV--MISCELLANEOUS PROVISIONS

           *       *       *       *       *       *       *


Sec. 4332. Reports

  The Secretary shall, after consultation with the Attorney 
General and the Special Counsel referred to in section 
4324(a)(1) and [no later than February 1, 1996, and annually 
thereafter through 2000] no later than February 1, 2005, and 
annually thereafter, transmit to the Congress, a report 
containing the following matters for the fiscal year ending 
before such February 1:
          (1) * * *

           *       *       *       *       *       *       *


Sec. 4334. Notice of rights and duties

  (a) Requirement to Provide Notice.--Each employer shall 
provide to persons entitled to rights and benefits under this 
chapter a notice of the rights, benefits, and obligations of 
such persons and such employers under this chapter. The 
requirement for the provision of notice under this section may 
be met by the posting of the notice where employers customarily 
place notices for employees.
  (b) Content of Notice.--The Secretary shall provide to 
employers the text of the notice to be provided under this 
section.

           *       *       *       *       *       *       *


PART IV--GENERAL ADMINISTRATIVE PROVISIONS

           *       *       *       *       *       *       *


CHAPTER 53--SPECIAL PROVISIONS RELATING TO BENEFITS

           *       *       *       *       *       *       *


Sec. 5312. Annual adjustment of certain benefit rates

  (a) * * *
  (b)(1) Whenever there is an increase in benefit amounts 
payable under title II of the Social Security Act (42 U.S.C. 
401 et seq.) as a result of a determination made under section 
215(i) of such Act (42 U.S.C. 415(i)), the Secretary shall, 
effective on the date of such increase in benefit amounts, 
increase the maximum monthly rates of dependency and indemnity 
compensation for parents payable under subsections (b), (c), 
and (d), and the monthly rate provided in subsection (g), of 
section 1315 of this title and the annual income limitations 
prescribed in subsections (b)(3), (c)(3), and (d)(3) of such 
section, and the annual benefit amount limitations under 
sections 5507(c)(2)(D) and 5508 of this title, as such rates 
and limitations were in effect immediately prior to the date of 
such increase in benefit amounts payable under title II of the 
Social Security Act, by the same percentage as the percentage 
by which such benefit amounts are increased.

           *       *       *       *       *       *       *


           CHAPTER 55--MINORS, INCOMPETENTS, AND OTHER WARDS

Sec.
5501.    Commitment actions.
     * * * * * * *
5506.    Definition of ``fiduciary''.
5507.    Inquiry, investigations, and qualification of fiduciaries.
5508.    Periodic onsite reviews of institutional fiduciaries.
5509.    Authority to redirect delivery of benefit payments when a 
          fiduciary fails to provide required accounting.
5510.    Annual report.

           *       *       *       *       *       *       *


Sec. 5502. Payments to and supervision of fiduciaries

  (a)(1) Where it appears to the Secretary that the interest of 
the beneficiary would be served thereby, payment of benefits 
under any law administered by the Secretary may be made 
directly to the beneficiary or to a relative or some [other 
person] other fiduciary for the use and benefit of the 
beneficiary, regardless of any legal disability on the part of 
the beneficiary. Where, in the opinion of the Secretary, any 
fiduciary receiving funds on behalf of a Department beneficiary 
is acting in such a number of cases as to make it impracticable 
to conserve properly the estates or to supervise the persons of 
the beneficiaries, the Secretary may refuse to make future 
payments in such cases as the Secretary may deem proper.
  (2) In a case in which the Secretary determines that a 
commission is necessary in order to obtain the services of a 
fiduciary in the best interests of a beneficiary, the Secretary 
may authorize a fiduciary appointed by the Secretary to obtain 
from the beneficiary's estate a reasonable commission for 
fiduciary services rendered, but the commission for any year 
may not exceed 4 percent of the monetary benefits under laws 
administered by the Secretary paid on behalf of the beneficiary 
to the fiduciary during such year. A commission may not be 
authorized for a fiduciary who receives any other form of 
remuneration or payment in connection with rendering fiduciary 
services for benefits under this title on behalf of the 
beneficiary.
  (b) Whenever it appears that any [guardian, curator, 
conservator, or other person] fiduciary, in the opinion of the 
Secretary, is not properly executing or has not properly 
executed the duties of the trust of such [guardian, curator, 
conservator, or other person] fiduciary or has collected or 
paid, or is attempting to collect or pay, fees, commissions, or 
allowances that are inequitable or in excess of those allowed 
by law for the duties performed or expenses incurred, or has 
failed to make such payments as may be necessary for the 
benefit of the ward or the dependents of the ward, then the 
Secretary may appear, by the Secretary's authorized attorney, 
in the court which has appointed such fiduciary, or in any 
court having original, concurrent, or appellate jurisdiction 
over said cause, and make proper presentation of such matters. 
The Secretary, in the Secretary's discretion, may suspend 
payments to any such [guardian, curator, conservator, or other 
person] fiduciary who shall neglect or refuse, after reasonable 
notice, to render an account to the Secretary from time to time 
showing the application of such payments for the benefit of 
such incompetent or minor beneficiary, or who shall neglect or 
refuse to administer the estate according to law. The Secretary 
may require the fiduciary, as part of such account, to disclose 
any additional financial information concerning the beneficiary 
(except for information that is not available to the 
fiduciary). The Secretary may appear or intervene by the 
Secretary's duly authorized attorney in any court as an 
interested party in any litigation instituted by the Secretary 
or otherwise, directly affecting money paid to such fiduciary 
under this section.

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  (d) All or any part of any benefits the payment of which is 
suspended or withheld under this section may, in the discretion 
of the Secretary, be paid temporarily to the person having 
custody and control of the incompetent or minor beneficiary, to 
be used solely for the benefit of such beneficiary, or, in the 
case of an incompetent veteran, may be apportioned to the 
dependent or dependents, if any, of such veteran. Any part not 
so paid and any funds of a mentally incompetent or insane 
veteran not paid to the chief officer of the institution in 
which such veteran is a patient nor apportioned to the 
veteran's dependent or dependents may be ordered held in the 
Treasury to the credit of such beneficiary. All funds so held 
shall be disbursed under the order and in the discretion of the 
Secretary for the benefit of such beneficiary or the 
beneficiary's dependents. Any balance remaining in such fund to 
the credit of any beneficiary may be paid to the beneficiary if 
the beneficiary recovers and is found competent, or if a minor, 
attains majority, or otherwise to the beneficiary's [guardian, 
curator, or conservator] fiduciary, or, in the event of the 
beneficiary's death, to the beneficiary's personal 
representative, except as otherwise provided by law; however, 
payment will not be made to the beneficiary's personal 
representative if, under the law of the beneficiary's last 
legal residence, the beneficiary's estate would escheat to the 
State. In the event of the death of a mentally incompetent or 
insane veteran, all gratuitous benefits under laws administered 
by the Secretary deposited before or after August 7, 1959, in 
the personal funds of patients trust fund on account of such 
veteran shall not be paid to the personal representative of 
such veteran, but shall be paid to the following persons living 
at the time of settlement, and in the order named: The 
surviving spouse, the children (without regard to age or 
marital status) in equal parts, and the dependent parents of 
such veteran, in equal parts. If any balance remains, such 
balance shall be deposited to the credit of the applicable 
current appropriation; except that there may be paid only so 
much of such balance as may be necessary to reimburse a person 
(other than a political subdivision of the United States) who 
bore the expenses of last sickness or burial of the veteran for 
such expenses. No payment shall be made under the two preceding 
sentences of this subsection unless claim therefor is filed 
with the Secretary within five years after the death of the 
veteran, except that, if any person so entitled under said two 
sentences is under legal disability at the time of death of the 
veteran, such five-year period of limitation shall run from the 
termination or removal of the legal disability.

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Sec. 5506. Definition of ``fiduciary''

  For purposes of this chapter and chapter 61 of this title, 
the term ``fiduciary'' means--
          (1) a person who is a guardian, curator, conservator, 
        committee, or person legally vested with the 
        responsibility or care of a claimant (or a claimant's 
        estate) or of a beneficiary (or a beneficiary's 
        estate); or
          (2) any other person having been appointed in a 
        representative capacity to receive money paid under any 
        of the laws administered by the Secretary for the use 
        and benefit of a minor, incompetent, or other 
        beneficiary.

Sec. 5507. Inquiry, investigations, and qualification of fiduciaries

  (a) Any certification of a person for payment of benefits of 
a beneficiary to that person as such beneficiary's fiduciary 
under section 5502 of this title shall be made on the basis 
of--
          (1) an inquiry or investigation by the Secretary of 
        the fitness of that person to serve as fiduciary for 
        that beneficiary, such inquiry or investigation--
                  (A) to be conducted in advance of such 
                certification;
                  (B) to the extent practicable, to include a 
                face-to-face interview with such person; and
                  (C) to the extent practicable, to include a 
                copy of a credit report for such person issued 
                within one year of the date of the proposed 
                appointment;
          (2) adequate evidence that certification of that 
        person as fiduciary for that beneficiary is in the 
        interest of such beneficiary (as determined by the 
        Secretary under regulations); and
          (3) the furnishing of any bond that may be required 
        by the Secretary.
  (b) As part of any inquiry or investigation of any person 
under subsection (a), the Secretary shall request information 
concerning whether that person has been convicted of any 
offense under Federal or State law which resulted in 
imprisonment for more than one year. If that person has been 
convicted of such an offense, the Secretary may certify the 
person as a fiduciary only if the Secretary makes a specific 
finding that the person has been rehabilitated and is an 
appropriate person to act as fiduciary for the beneficiary 
concerned under the circumstances.
  (c)(1) In the case of a proposed fiduciary described in 
paragraph (2), the Secretary, in conducting an inquiry or 
investigation under subsection (a)(1), may carry out such 
inquiry or investigation on an expedited basis that may include 
waiver of any specific requirement relating to such inquiry or 
investigation, including the otherwise applicable provisions of 
subparagraphs (A), (B), and (C) of such subsection. Any such 
inquiry or investigation carried out on such an expedited basis 
shall be carried out under regulations prescribed for purposes 
of this section.
  (2) Paragraph (1) applies with respect to a proposed 
fiduciary who is--
          (A) the parent (natural, adopted, or stepparent) of a 
        beneficiary who is a minor;
          (B) the spouse or parent of an incompetent 
        beneficiary;
          (C) a person who has been appointed a fiduciary of 
        the beneficiary by a court of competent jurisdiction; 
        or
          (D) being appointed to manage an estate where the 
        annual amount of veterans benefits to be managed by the 
        proposed fiduciary does not exceed $3600, as adjusted 
        pursuant to section 5312 of this title.
  (d) Temporary Fiduciaries.--When in the opinion of the 
Secretary, a temporary fiduciary is needed in order to protect 
the assets of the beneficiary while a determination of 
incompetency is being made or appealed or a fiduciary is 
appealing a determination of misuse, the Secretary may appoint 
one or more temporary fiduciaries for a period not to exceed 
120 days. If a final decision has not been made within 120 
days, the Secretary may not continue the appointment of the 
fiduciary without obtaining a court order for appointment of a 
guardian, conservator, or other fiduciary under the authority 
provided in section 5502(b) of this title.

Sec. 5508. Periodic onsite reviews of institutional fiduciaries

  In addition to such other reviews of fiduciaries as the 
Secretary may otherwise conduct, the Secretary shall provide 
for the periodic onsite review of any person or agency located 
in the United States that receives the benefits payable under 
laws administered by the Secretary to another individual 
pursuant to the appointment of such person or agency as a 
fiduciary under section 5502(a)(1) of this title in any case in 
which the fiduciary is serving in that capacity with respect to 
more than 20 beneficiaries and the total annual amount of such 
benefits exceeds $50,000, as adjusted pursuant to section 5312 
of this title.

Sec. 5509. Authority to redirect delivery of benefit payments when a 
                    fiduciary fails to provide required accounting

  (a) Required Reports and Accountings.--The Secretary may 
require a fiduciary to file a report or accounting pursuant to 
regulations prescribed by the Secretary.
  (b) Actions Upon Failure to File.--In any case in which a 
fiduciary fails to submit a report or accounting required by 
the Secretary under subsection (a), the Secretary may, after 
furnishing notice to such fiduciary and the beneficiary 
entitled to such payment of benefits, require that such 
fiduciary appear in person at a regional office of the 
Department serving the area in which the beneficiary resides in 
order to receive such payments.

Sec. 5510. Annual report

  The Secretary shall include in the Annual Benefits Report of 
the Veterans Benefits Administration or the Secretary's Annual 
Performance and Accountability Report information concerning 
fiduciaries who have been appointed to receive payments for 
beneficiaries of the Department. As part of such information, 
the Secretary shall separately set forth the following:
          (1) The number of beneficiaries in each category 
        (veteran, surviving spouse, child, adult disabled 
        child, or parent).
          (2) The types of benefit being paid (compensation, 
        pension, dependency and indemnity compensation, death 
        pension or benefits payable to a disabled child under 
        chapter 18 of this title).
          (3) The total annual amounts and average annual 
        amounts of benefits paid to fiduciaries for each 
        category and type of benefit.
          (4) The number of fiduciaries who are the (spouse, 
        parent, legal custodian, court-appointed fiduciary, 
        institutional fiduciary, custodian in fact, and 
        supervised direct payment).
          (5) The number of cases in which the fiduciary was 
        changed by the Secretary because of a finding that 
        benefits had been misused.
          (6) How such cases of misuse of benefits were 
        addressed by the Secretary.
          (7) The final disposition of such cases of misuse of 
        benefits, including the number and dollar amount of any 
        civil or criminal penalties imposed.
          (8) Such other information as the Secretary considers 
        appropriate.

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PART IV--GENERAL ADMINISTRATIVE PROVISIONS

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              CHAPTER 61--PENAL AND FORFEITURE PROVISIONS

Sec.
6101.    Misappropriation by fiduciaries.
     * * * * * * *
6106.    Misuse of benefits by fiduciaries.
6107.    Reissuance of benefits.
6108.    Civil monetary penalties.
6109.    Authority for judicial orders of restitution.

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Sec. 6101. Misappropriation by fiduciaries

  (a) Whoever, being a [guardian, curator, conservator, 
committee, or person legally vested with the responsibility or 
care of a claimant or a claimant's estate, or any other person 
having charge and custody in a fiduciary capacity of money 
heretofore or hereafter paid under any of the laws administered 
by the Secretary for the benefit of any minor, incompetent, or 
other beneficiary,] fiduciary (as defined in section 5506 of 
this title) for the benefit of a minor, incompetent, or other 
beneficiary under laws administered by the Secretary, shall 
lend, borrow, pledge, hypothecate, use, or exchange for other 
funds or property, except as authorized by law, or embezzle or 
in any manner misappropriate any such money or property derived 
therefrom in whole or in part and coming into such fiduciary's 
control in any manner whatever in the execution of such 
fiduciary's trust, or under color of such fiduciary's office or 
service as such fiduciary, shall be fined in accordance with 
title 18, or imprisoned not more than five years, or both.

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Sec. 6106. Misuse of benefits by fiduciaries

  (a) Fee Forfeiture in Case of Benefit Misuse by 
Fiduciaries.--A fiduciary may not collect a fee from a 
beneficiary for any month with respect to which the Secretary 
or a court of competent jurisdiction has determined that the 
fiduciary misused all or part of the individual's benefit, and 
any amount so collected by the fiduciary as a fee for such 
month shall be treated as a misused part of the individual's 
benefit.
  (b) Liability of Fiduciaries for Misused Benefits.--(1) If 
the Secretary or a court of competent jurisdiction determines 
that a fiduciary that is not a Federal, State, or local 
government agency has misused all or part of a beneficiary's 
benefit that was paid to such fiduciary, the fiduciary shall be 
liable for the amount misused, and such amount (to the extent 
not repaid by the fiduciary) shall be treated as an erroneous 
payment of benefits under this title to the fiduciary for 
purposes of laws pertaining to the recovery of overpayments. 
The amount of such overpayment shall constitute a liability of 
such fiduciary to the United States and may be recovered in the 
same manner as any other debt due the United States. Subject to 
paragraph (2), upon recovering all or any part of such amount, 
the Secretary shall pay an amount equal to the recovered amount 
to such beneficiary or such beneficiary's successor fiduciary.
  (2) The total of the amounts paid to a beneficiary (or a 
beneficiary's successor fiduciary) under paragraph (1) and 
under section 6107 of this title may not exceed the total 
benefit amount misused by the fiduciary with respect to that 
beneficiary.
  (c) Misuse of Benefits Defined.--For purposes of this 
chapter, misuse of benefits by a fiduciary occurs in any case 
in which the fiduciary receives payment, under any of laws 
administered by the Secretary, for the use and benefit of a 
beneficiary and uses such payment, or any part thereof, for a 
use other than for the use and benefit of such beneficiary or 
that beneficiary's dependents. Retention by a fiduciary of an 
amount of a benefit payment as a fiduciary fee or commission, 
or as attorney's fees (including expenses) and court costs, if 
authorized by the Secretary or a court of competent 
jurisdiction, shall be considered to be for the use or benefit 
of such beneficiary.
  (d) Regulations.--The Secretary may prescribe by regulation 
the meaning of the term ``use and benefit'' for purposes of 
this section.
  (e) Finality of Determinations.--A determination by the 
Secretary that a fiduciary has misused benefits is a decision 
of the Secretary for purposes of section 511(a) of this title.

Sec. 6107. Reissuance of benefits

  (a) Negligent Failure by Secretary.--(1) In any case in which 
the negligent failure of the Secretary to investigate or 
monitor a fiduciary results in misuse of benefits by the 
fiduciary, the Secretary shall pay to the beneficiary or the 
beneficiary's successor fiduciary an amount equal to the amount 
of benefits that were so misused.
  (2) There shall be considered to have been a negligent 
failure by the Secretary to investigate and monitor a fiduciary 
in the following cases:
          (A) A case in which the Secretary failed to timely 
        review a fiduciary's accounting.
          (B) A case in which the Secretary was notified of 
        allegations of misuse, but failed to act in a timely 
        manner to terminate the fiduciary.
          (C) In any other case in which actual negligence is 
        shown.
  (b) Reissuance of Misused Benefits in Other Cases.--(1) In 
any case in which a fiduciary described in paragraph (2) 
misuses all or part of an individual's benefit paid to such 
fiduciary, the Secretary shall pay to the beneficiary or the 
beneficiary's successor fiduciary an amount equal to the amount 
of such benefit so misused.
  (2) Paragraph (1) applies to a fiduciary that--
          (A) is not an individual; or
          (B) is an individual who, for any month during a 
        period when misuse occurs, serves 10 or more 
        individuals who are beneficiaries under this title.
  (c) Recoupment of Amounts Reissued.--In any case in which the 
Secretary reissues a benefit payment (in whole or in part) 
under subsection (a) or (b), the Secretary shall make a good 
faith effort to obtain recoupment from the fiduciary to whom 
the payment was originally made.

Sec. 6108. Civil monetary penalties

  (a) Penalty for Conversion.--Any person (including an 
organization, agency, or other entity) who, having received, 
while acting in the capacity of a fiduciary pursuant to section 
5502 of this title, a payment under a law administered by the 
Secretary for the use and benefit of another individual, 
converts such payment, or any part thereof, to a use that such 
person knows or should know is other than for the use and 
benefit of such other individual shall be subject to, in 
addition to any other penalty that may be prescribed by law, a 
civil monetary penalty assessed by the Secretary of not more 
than $5,000 for each such conversion.
  (b) Penalty in Lieu of Damages.--Any person who makes a 
conversion of a payment described in subsection (a) and is 
subject to a civil monetary penalty under that subsection by 
reason of such conversion shall also be subject to an 
assessment by the Secretary, in lieu of damages sustained by 
the United States resulting from the conversion, of not more 
than twice the amount of any payments so converted.
  (c) Costs of Recovery.--From amounts collected under this 
section, the amount necessary to recoup the Department's costs 
of such collection shall be credited to appropriations 
currently available for the same purpose as the appropriation 
that incurred those costs, to remain available until expended.

Sec. 6109. Authority for judicial orders of restitution

  (a) Any Federal court, when sentencing a defendant convicted 
of an offense arising from the misuse of benefits under this 
title, may order, in addition to or in lieu of any other 
penalty authorized by law, that the defendant make restitution 
to the Department.
  (b) Sections 3612, 3663, and 3664 of title 18 shall apply 
with respect to the issuance and enforcement of orders of 
restitution under subsection (a). In so applying those 
sections, the Department shall be considered the victim.
  (c) If the court does not order restitution, or orders only 
partial restitution, under subsection (a), the court shall 
state on the record the reasons therefor.
  (d)(1) Except as provided in paragraph (2), amounts received 
or recovered by the Secretary pursuant to an order of 
restitution under subsection (a), to the extent and in the 
amounts provided in advance in appropriations Acts, shall be 
available to defray expenses incurred by the Office of the 
Inspector General for the investigation of fiduciaries under 
this title.
  (2) Paragraph (1) shall not apply with respect to amounts 
received in connection with misuse by a fiduciary of funds paid 
as benefits under laws administered by the Secretary. Such 
amounts shall be paid to the individual whose benefits were 
misused unless the Secretary has previously reissued the 
misused benefits, in which case the amounts shall be treated in 
the same manner as overpayments recouped by the Secretary and 
shall be deposited to the credit of the applicable revolving 
fund, trust fund, or appropriation.

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