To amend title 10, United States Code, to eliminate the recoupment of 
 separation pay, special separation benefits, and voluntary separation 
 incentive payments from members of the Armed Forces who subsequently 
    receive disability compensation under laws administered by the 
    Department of Veterans Affairs and to impose limitations on the 
 authority of the Secretary of Defense to recoup such pay from members 
       who subsequently receive military retired or retainer pay.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Restore Veterans' Compensation Act 
of 2022''.

SEC. 2. RECOUPMENT OF SEPARATION PAY, SPECIAL SEPARATION BENEFITS, 
              VOLUNTARY SEPARATION INCENTIVE, AND VOLUNTARY SEPARATION 
              PAY AND BENEFITS FROM MEMBERS OF THE ARMED FORCES.

    (a) Separation Pay Upon Involuntary Discharge or Release From 
Active Duty and Special Separation Benefits.--
            (1) Elimination of recoupment from members receiving 
        veterans disability compensation.--Paragraph (2) of section 
        1174(h) of title 10, United States Code, is amended to read as 
        follows:
    ``(2)(A) A member who has received separation pay under this 
section, or severance pay or readjustment pay under any other provision 
of law, based on service in the armed forces shall not be deprived, by 
reason of the receipt of such separation pay, severance pay, or 
readjustment pay, of any disability compensation to which the member is 
entitled under the laws administered by the Department of Veterans 
Affairs.
    ``(B) The amount of disability compensation to which a member may 
be entitled under the laws administered by the Department of Veterans 
Affairs may not be reduced on account of the receipt of separation pay, 
severance pay, or readjustment pay.''.
            (2) Recoupment from members receiving retired or retainer 
        pay limited to net amount of separation pay.--Section 
        1174(h)(1) of title 10, United States Code, is amended by 
        inserting before the period at the end the following: ``, less 
        the amount of Federal income tax withheld from the separation 
        pay, severance pay, or readjustment pay (such withholding being 
        at the flat withholding rate for Federal income tax 
        withholding, as in effect pursuant to regulations prescribed 
        under chapter 24 of the Internal Revenue Code of 1986)''.
            (3) Percentage limitations on recoupment from members 
        receiving retired or retainer pay and recoupment process.--
        Section 1174(h)(1) of title 10, United States Code, as amended 
        by paragraph (2), is further amended--
                    (A) by inserting ``(A)'' after ``(1)'';
                    (B) by striking ``shall specify, taking into 
                account the financial ability of the member to pay and 
                avoiding the imposition of undue financial hardship on 
                the member and member's dependents,'' and inserting 
                ``(subject to subparagraph (B)) shall specify''; and
                    (C) by adding at the end the following new 
                subparagraphs:
    ``(B) The amount deducted under subparagraph (A) from a payment of 
retired or retainer pay may not exceed 25 percent of the amount of the 
member's retired or retainer pay for that month unless the member 
requests deductions at an accelerated rate. The Secretary of Defense 
shall consult with the member regarding the repayment rate to be 
imposed, taking into account the financial ability of the member to pay 
and avoiding the imposition of an undue hardship on the member and the 
member's dependents.
    ``(C) The deduction of amounts from the retired or retainer pay of 
a member under this paragraph may not commence until the date that is 
90 days after the date on which the Secretary of Defense notifies the 
member of the deduction of such amounts under this paragraph. Any 
notice under this subparagraph shall be designed to provide clear and 
comprehensive information on the deduction of amounts under this 
paragraph, including information on the determination of the amount and 
period of installments under this paragraph.
    ``(D) The Secretary of Defense may waive the deduction of amounts 
from the retired or retainer pay of a member under this paragraph if 
the Secretary determines that deduction of such amounts would result in 
a financial hardship for the member.''.
    (b) Conforming Amendments.--
            (1) Voluntary separation incentive.--Section 1175(e) of 
        title 10, United States Code, is amended--
                    (A) in paragraph (3)(A)--
                            (i) by striking the first sentence and 
                        inserting the following new sentence: 
                        ``Subsection (h) of section 1174 of this title 
                        shall apply to any member who has received the 
                        voluntary separation incentive and who later 
                        qualifies for retired or retainer pay under 
                        this title or for disability compensation under 
                        the laws administered by the Department of 
                        Veterans Affairs.''; and
                            (ii) in the second sentence, by striking 
                        ``the deduction required under the preceding 
                        sentence'' and inserting ``the deduction from 
                        the member's retired or retainer pay''; and
                    (B) by striking paragraph (4) and redesignating 
                paragraph (5) as paragraph (4).
            (2) Voluntary separation pay and benefits.--Subsection (h) 
        of section 1175a of title 10, United States Code, is amended to 
        read as follows:
    ``(h) Coordination With Retired or Retainer Pay and Disability 
Compensation.--(1) Subsection (h) of section 1174 of this title shall 
apply to any member who receives voluntary separation pay under this 
section and who later qualifies for retired or retainer pay under this 
title or title 14 or for disability compensation under the laws 
administered by the Department of Veterans Affairs.
    ``(2) No deduction shall be made from the disability compensation 
paid to an eligible disabled uniformed services retiree under section 
1413, or to an eligible combat-related disabled uniformed services 
retiree under section 1413a of this title, who is paid voluntary 
separation pay under this section.
    ``(3) The requirement under this subsection to repay voluntary 
separation pay following retirement from the armed forces does not 
apply to a member who was eligible to retire at the time the member 
applied and was accepted for voluntary separation pay and benefits 
under this section.''.
    (c) Effective Date and Application of Amendments.--The amendments 
made by this section shall take effect on the first day of the first 
month beginning on or after the date of the enactment of this Act. In 
the case of deductions to be made from the retired or retainer pay of 
members of the uniformed services, the amendments shall apply to that 
month and subsequent months.
                                 <all>
Restore Veterans’ Compensation Act of 2022
To amend title 10, United States Code, to eliminate the recoupment of separation pay, special separation benefits, and voluntary separation incentive payments from members of the Armed Forces who subsequently receive disability compensation under laws administered by the Department of Veterans Affairs and to impose limitations on the authority of the Secretary of Defense to recoup such pay from members who subsequently receive military retired or retainer pay.
Restore Veterans’ Compensation Act of 2022
Rep. Gallego, Ruben