To amend title 10, United States Code, to provide flexibility in the recoupment of separation pay, severance pay, and readjustment pay from members of the Armed Forces receiving veterans' disability compensation.

To amend title 10, United States Code, to provide flexibility in the recoupment of separation pay, severance pay, and readjustment pay from members of the Armed Forces receiving veterans' disability compensation.

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

SECTION 1. Short title.

SEC. 2. Recoupment of separation, severance, and readjustment pay from members of the Armed Forces receiving veterans' disability compensation.

(a) In general.—Section 1174(h)(2) of title 10, United States Code, is amended—

(1) by inserting “(A)” after “(2)”;

(2) by inserting “(as provided under subparagraph (B))” after “there shall be deducted”; and

(3) by adding at the end the following new subparagraph:

“(B) The Secretary of Veterans Affairs may—

“(i) deduct the amount described in subparagraph (A) from the disability compensation of a member in monthly installments, as a lump sum, or using such other payment plan as the Secretary determines appropriate; and

“(ii) waive the requirement for such deductions in the case of a member who demonstrates to the Secretary that such deductions would create a financial hardship for the member.”.

(b) Regulations.—Not later than 90 days after the date of the enactment of this Act, the Secretary of Veterans Affairs shall prescribe regulations to carry out subparagraph (B) of section 1174(h)(2) of title 10, United States Code, as added by subsection (a)—

(1) to ensure that a deduction from the veterans' disability compensation of a member under that subparagraph in a month does not exceed 25 percent of the member's veterans' disability compensation for that month; and

(2) to establish a process under which a member may apply for a hardship waiver under clause (ii) of that subparagraph.

(c) Effective date.—The amendments made by this section shall—

(1) take effect on the first day of the first month beginning after the date on which final regulations under subsection (b) are published in the Federal Register; and

(2) apply to veterans' disability compensation paid on or after that date.

(d) Veterans' disability compensation defined.—In this section, the term “veterans' disability compensation” has the meaning given the term “compensation” in section 101 of title 38, United States Code.