The term "retroactive payment" refers to a lump sum payment made to a claimant based on adjustments made to a prior monetary benefit or a payments for a first-time claim covering the period from the date the claim was received (or the effective date) until the date that the claim was awarded. In other words, retroactive payments are monetary benefits that were earned in the past but not paid to the claimant. Because of the lengthy delays in processing and appealing improper denials, some retroactive payments can be quite large – a few have been over $1 million.
It is important to understand that retroactive payments accumulate only while the underlying claim remains "alive" on appeal. This makes the possibility of a retroactive payment an important issue when a claimant is considering whether to continue appealing a denial or to re-submit a "new" or reopened claim. The backlog of appeals, especially at the Board of Veterans' Appeals, makes withdrawing an appeal (which can take 2-3 years to resolve) and resubmitting a new claim (which may take only 4-6 months) sometimes appears the quickest way to obtain an award. While this may seem to be a smart move, abandoning an appeal will forfeit all the retroactive payments owed to the claimant if an award is ultimately granted. In cases where the claimant has kept a claim alive for years or decades, abandoning the appeal could cost him or her a lot of money.
Retroactive payments can also be an important issue when a veteran dies with a VA claim pending. A surviving spouse, or in some cases a child or dependent parent, can file a claim for the retroactive benefits that would have been due the veteran had he or she not died, which are known as "accrued benefits" after the claimant's death. VA Form 21-534 [link] is the proper application for DIC, death pension, and accrued benefits. If an eligible person files an application for accrued benefits within one year of the claimant's death, VA must make a decision on the claim based on the information in the C-file at the date of death. If an award results, the survivor will receive a retroactive payment of the benefits that the deceased claimant would have received, in addition to any survivor benefits (DIC, burial allowance, etc.) that they are eligible to receive.