20 CFR 404.337(a) and (i)
Effective October 1966, section 228 of the Social Security Act provides monthly payments to certain persons who are not insured under the regular or transitional insured status provisions of the Act, and who reach age 72 before 1968, or who have at least 3 quarters of coverage, earned at any time, for each calendar year after 1966 and before the year in which age 72 is attained.
R, who was receiving a non-service-connected disability pension of $78.75 a month from the Veterans' Administration, payable under section 521 of title 38, United States Code, and hereinafter referred to as a "pension," filed an application and became entitled to special age 72 payments of $35 a month under section 228 of the Social Security Act beginning with October 1966.
Section 228(c)(1) of the Act provides that:
Section 228(h)(2) of the Act in pertinent part defines the term "governmental pension system" as:
In accordance with section 228(c)(1), therefore, R's special age 72 payment of $35 was reduced to zero because of his receipt of the VA pension of $78.75 a month.
In December 1966 under the pertinent regulation of the Veterans' Administration (38 Code of Federal Regulations 3.701(a)), R elected to receive service-connected disability compensation of $82 a month from the Veterans' Administration payable under section 310 of title 38, United States Code, and hereinafter referred to as "compensation." This conversion to disabilty compensation was effective retroactively to December 1965.
Thus, beginning with December 1965, R was entitled to VA compensation, which under section 228(h)(2) of the Act (supra) is specifically excluded from the definition of "governmental pension system."
However, section 228(c)(1) calls for a reduction in the amount of the special age 72 benefit by the amount of any periodic benefit for which the beneficiary is eligible. Section 228(c)(4) of the Act in pertinent part provides that "* * * in determining whether an individual is eligible for periodic benefits under a governmental pension system -- (A) such individual shall be deemed to have filed application for such benefits * * *."
The question presented in this case is whether R continued to be eligible for the VA pension after he elected and became entitled to VA compensation in lieu of the pension. Should this eligibility continue, then his special age 72 payment would continue to be subject to the reduction called for by section 228(c)(1) of the Act, since such reduction is based upon eligibility for, rather than actual payment of, a periodic benefit.
Under the pertinent provisions of section 3104 of title 38, United States Code, pension and compensation cannot be concurrently paid. Accordingly, because of R's election and award of compensation effective December 1965, he cannot be considered as "eligible" for a pension for that and subsequent months for the purposes of section 228(c)(1) of the Act, at least as long as such election remains in effect. Rather, for such purposes, in the light of his subsequent election of compensation for those months he may now be considered as only eligible for compensation for those months. It is immaterial under the particular facts of this case that R had been drawing a pension for those months, or that his later election of compensation was optional.
Accordingly, it is held that R was not eligible for a periodic benefit under a governmental pension system for October 1966 or any later month, and therefore his special age 72 payment is not subject to reduction under section 228(c)(1) of the Act beginning with that month.
 Section 228(b) of the Act was amended by the Social Security Amendments of 1967 (P.L. 90-248) to increase the amount of this special payment from $35 to $40 a month, effective for payments for and after February 1968.
 R was unaware that he was potentially entitled to compensation in an amount higher than the amount of his pension, but in December 1966 when he elected to take the compensation in lieu of the pension, the Veterans' Administration awarded compensation retroactively to December 1965.
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