Restore Veterans’ Compensation Act of 2026

The **Restore Veterans’ Compensation Act of 2026** amends Title 10 of the United States Code to end the practice of reducing or withholding Department of Veterans Affairs (VA) disability compensation to reclaim (recoup) past separation, severance, readjustment, or voluntary separation payments made to military service members. It also establishes new limits, mandatory procedures, and hardship waiver rules for how the Department of Defense (DoD) recovers those past separation payments from a retiree's military retired or retainer pay.

* **Veterans and Military Retirees:** Veterans receiving VA disability compensation who previously received separation pay, severance pay, readjustment pay, Voluntary Separation Incentives (VSI), or Voluntary Separation Pay (VSP). * **Disabled Retirees:** Disabled uniformed services retirees and combat-related disabled retirees who received voluntary separation pay. * **Retirees Facing Recoupment:** Military retirees whose retired or retainer pay is subject to repayment demands for past separation benefits. * **Federal Agencies:** The Department of Veterans Affairs (VA) and the Department of Defense (DoD).

* **VA Disability Compensation Protections:** The government is prohibited from reducing, withholding, or denying VA disability compensation to recoup previously paid separation, severance, readjustment, VSI, or VSP payments. This protection specifically covers disabled retirees and combat-related disabled retirees. * **Recoupment Caps on Retired Pay:** When the DoD collects past separation pay from military retired or retainer pay, it cannot reclaim more than the *net amount* original received (the total amount minus federal income tax withheld at the standard flat rate). * **Monthly Deduction Limits:** Monthly deductions from retired or retainer pay are capped at a maximum of 25% of the member's monthly retired pay, unless the retiree explicitly asks for a faster repayment schedule. * **Notice and Consultation Requirements:** The Secretary of Defense **must** give the service member detailed written notice at least 90 days before recoupment deductions begin, outlining the repayment amount and schedule. The Secretary **must** also consult with the member to set a repayment rate that avoids financial hardship for the member or their dependents. * **Hardship Waiver Permission:** The Secretary of Defense is **authorized** (permitted) to completely waive the recoupment of separation pay from retired or retainer pay if the deductions would cause financial hardship. * **Effective Date:** The changes take effect on the first day of the first month starting on or after the bill is enacted.

The summary does not outline specific legislative appropriations or overall spending totals. However, it changes financial rules for individuals by: * Stopping the government from withholding VA disability payments. * Limiting DoD repayment collections to the net post-tax amount of past separation payments. * Limiting monthly repayment deductions from military retired pay to no more than 25%.

* **Retirement-Eligible Exemption:** Service members are entirely exempt from repaying voluntary separation pay upon retirement if they were already eligible for military retirement at the time they applied for and received that voluntary separation pay. * **Accelerated Repayment Exception:** The 25% monthly cap on retired pay deductions does not apply if the service member directly requests a faster repayment schedule. * **Waiver Authority:** The Secretary of Defense is permitted, but not strictly required, to grant hardship waivers for repayment from military retired pay.

This bill prevents the government from taking money out of veterans' VA disability checks to pay back military separation, severance, or readjustment bonuses they received in the past. If the Department of Defense reclaims those past payments from a veteran's military retirement pay instead, the bill requires advance notice, limits monthly payments to 25% of retired pay, bases repayment only on post-tax amounts, and allows hardship waivers.