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S 5367

Restore Veterans’ Compensation Act of 2026

119th Congress Introduced by Ruben Gallego

Prohibits recoupment of separation-related pay from VA disability, while allowing limited, hardship-protected recoupment from retired/retainer pay if later receiving retirement.

Introduced in Senate
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WeVote Research Nonpartisan
Bill Summary · S 5367

Overview

  • Bill: S. 5367 – Restore Veterans’ Compensation Act of 2026
  • Session: 119th Congress, 2nd Session
  • Purpose: Amend title 10, United States Code to eliminate recoupment of certain separation benefits when a service member later receives disability compensation from the Department of Veterans Affairs (VA), and to impose limitations on the Secretary of Defense’s authority to recoup such pay from members who later receive military retired or retainer pay.
  • Introduced by: Sen. Brian Gallego (co-sponsor: Sen. Ruben Gallego)
  • Introduced date: August 7, 2026

What the bill would do (main purpose)

  • Prohibits recoupment of separation pay, severance pay, readjustment pay, and benefits tied to voluntary separation when a service member later qualifies for VA disability compensation.
  • Imposes capped, regulated recoupment from retired or retainer pay if the member later receives retirement pay, ensuring protections against financial hardship and requiring consultation with the member.
  • Aligns treatment of voluntary separation incentives and related benefits with disability compensation protections and retirement pay considerations.

Key provisions and changes (substantive provisions)

  • Section 2(a) – Separation pay and related benefits
    • Eliminates recoupment of separation pay, severance pay, and readjustment pay from VA disability compensation recipients.
    • VA disability compensation may not be reduced due to receipt of separation/ severance/ readjustment pay.
    • Recoupment from retired or retainer pay is limited to the net amount of separation pay after federal income tax withholding.
    • New restrictions on the rate and process of recoupment:
    • Deductions from retired/retainer pay may not exceed 25% of the monthly amount.
    • Secretary of Defense must consult with the service member to determine repayment rate, aiming to avoid undue hardship.
    • Deductions may begin no earlier than 90 days after the member is notified.
    • Notices must clearly explain how deductions, amounts, and installment periods are determined.
    • The Secretary of Defense may waive deductions if they would cause financial hardship.
  • Section 2(b) – Conforming amendments
    • Voluntary Separation Incentive (VSI) provisions updated to coordinate with retirement/retainer pay and VA disability compensation:
    • Subsection 1175(e)(3)(A) now clarifies applicability to those who later qualify for retired/retainer pay or VA disability compensation.
    • Deduction language updated to reference deductions from retired/retainer pay.
    • Removes certain language about pre-deduction procedures.
    • VSI and related benefits (section 1175a) updated to reflect:
    • Subsection (h) coordination with retired/retainer pay and disability compensation.
    • Prohibits deductions from disability compensation for certain disabled retirees who received VSI.
    • Clarifies that repay requirements do not apply to members eligible to retire at the time VSI was granted.
  • Section 2(c) – Effective date
    • Changes take effect on the first day of the first month after enactment.
    • For deductions from retired/retainer pay, the amendments apply starting in the month following enactment.

Who would be affected

  • Active-duty, reserve, and retired/retainer service members who:
    • Received separation pay, severance pay, readjustment pay, or VSI benefits in connection with voluntary separation from service.
    • Later qualify for VA disability compensation.
    • Later receive military retired or retainer pay (and, in some cases, VSI-related payments).
  • Department of Defense and military pay officials responsible for administering recoupment and notification processes.

Procedural and timeline notes

  • Legislative status: Introduced in the Senate on August 7, 2026; assigned to the Committee on Veterans' Affairs.
  • Effective date: The act would take effect on the first day of the first month after enactment, with specific retroactivity rules for monthly pay deductions (start in the month after enactment).

Practical impact

  • Provides clearer protections for veterans who receive disability compensation after separation-related payments, ensuring VA disability benefits are not reduced by prior separation payments.
  • Establishes a structured, member-friendly framework for any necessary recoupment from retirement/retainer pay, including annualized rate limits, notice requirements, and hardship waivers.
  • Reduces the administrative risk of hardship for disabled veterans and aligns incentives for separation programs with long-term financial stability.

Compiled from official sources — confirm details with the bill’s official record.

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