Restore Veterans' Compensation Act

Full Title:
Restore Veterans’ Compensation Act of 2026

Summary#

This bill, the Restore Veterans' Compensation Act of 2026, changes how certain separation and voluntary separation payments are handled when a service member later gets Veterans Affairs (VA) disability compensation or military retired/retainer pay. It removes the rule that reduces or takes back separation pay, severance pay, or readjustment pay from service members who later receive VA disability compensation. It also limits how the Department of Defense can recoup those earlier separation payments from a member's military retired or retainer pay: recoupment must be reduced by the amount of federal income tax withheld from the original separation pay, generally cannot take more than 25% of monthly retired/retainer pay unless the member agrees to faster repayment, requires a 90-day notice before deductions start, and allows the Secretary of Defense to waive deductions for financial hardship. The bill also applies these rules to voluntary separation incentives, voluntary separation pay, and related benefits, and clarifies certain exceptions for members who were eligible to retire when they accepted voluntary separation. The amendments take effect on the first day of the first month after the bill becomes law.

What it means for you#

  • If you got separation pay, severance, or readjustment pay and later qualify for VA disability compensation, your VA disability pay cannot be reduced because of those earlier payments.
  • If you later receive military retired or retainer pay and the Department seeks to recoup earlier separation payments, the recouped amount will be lowered by the federal tax withheld from the original separation pay and generally cannot exceed 25% of your monthly retired/retainer pay unless you agree to faster repayment.
  • You must get a clear notice at least 90 days before any deduction from retired or retainer pay begins. The Defense Secretary can waive deductions if they would cause financial hardship.
  • The same rules apply for people who took voluntary separation incentives or voluntary separation pay, with a specified exception for members who were already eligible to retire when they applied for voluntary separation.
  • These changes start the first day of the first month after the law is enacted.

Expenses#

No publicly available information.

Proponents' View#

The bill text states that it will protect service members from losing VA disability compensation because they previously received separation or similar payments, and it will limit and make clearer the process for recouping such payments from retired or retainer pay.

Opponents' View#

No publicly available information.