To amend title 10, United States Code, to permit retired members of the Armed Forces who have a service-connected disability to receive a portion of their military retired pay concurrently with veterans' disability compensation.

Summary: Military Retirement Equity Act of 2001 - Permits retired members of the armed forces to be paid retirement pay concurrently with compensation for any service-connected disability, with an exception for members retired with less than 20 years of creditable service.Reduces the retirement pay of individuals receiving both types of pay by a specified percentage of the disability compensation which decreases as the disability rating increases. Prohibits any reduction in the retirement pay of a disabled person when the disability rating is total.Provides retired pay amounts for members who retired with 20 years or more of service due to a physical disability.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Military Retirement Equity Act of 
2001''.

SEC. 2. CONCURRENT PAYMENT OF RETIRED PAY AND COMPENSATION.

    (a) Limitation on Duplication of Benefits.--Chapter 71 of title 10, 
United States Code, is amended by adding at the end the following new 
section:
``Sec. 1414. Concurrent payment of retired pay and veterans' disability 
              compensation
    ``(a) Payment of Both Retired Pay and Compensation.--Except as 
provided in subsections (c) and (d), a member or former member of the 
uniformed services who is entitled to retired pay (other than as 
specified in subsection (b)) and who is also entitled to veterans' 
disability compensation is entitled to be paid both without regard to 
sections 5304 and 5305 of title 38.
    ``(b) Exception.--Subsection (a) does not apply to a member retired 
under chapter 61 of this title with less than 20 years of service 
otherwise creditable under section 1405 of this title at the time of 
the member's retirement.
    ``(c) Proportional Reduction in Retired Pay.--In the case of a 
person described in subsection (a) who is receiving both retired pay 
and veterans' disability compensation, the amount of that person's 
retired pay shall be reduced (but not below zero) based on the rating 
of the person's disability for veterans' disability compensation 
purposes as follows:
            ``(1) If and while the disability is rated 10 percent, by 
        the amount equal to 90 percent of the amount of the disability 
        compensation paid such person.
            ``(2) If and while the disability is rated 20 percent, by 
        the amount equal to 80 percent of the amount of the disability 
        compensation paid such person.
            ``(3) If and while the disability is rated 30 percent, by 
        the amount equal to 70 percent of the amount of the disability 
        compensation paid such person.
            ``(4) If and while the disability is rated 40 percent, by 
        the amount equal to 60 percent of the amount of the disability 
        compensation paid such person.
            ``(5) If and while the disability is rated 50 percent, by 
        the amount equal to 50 percent of the amount of the disability 
        compensation paid such person.
            ``(6) If and while the disability is rated 60 percent, by 
        the amount equal to 40 percent of the amount of the disability 
        compensation paid such person.
            ``(7) If and while the disability is rated 70 percent, by 
        the amount equal to 30 percent of the amount of the disability 
        compensation paid such person.
            ``(8) If and while the disability is rated 80 percent, by 
        the amount equal to 20 percent of the amount of the disability 
        compensation paid such person.
            ``(9) If and while the disability is rated 90 percent, by 
        the amount equal to 10 percent of the amount of the disability 
        compensation paid such person.
The retired pay of a person entitled to disability compensation may not 
be reduced under this subsection if and while the disability of such 
person is rated as total.
    ``(d) Special Rule for Chapter 61 Career Retirees.--Notwithstanding 
subsection (c), in the case of a retired member described in subsection 
(a) who retired under chapter 61 of this title with 20 years or more of 
service otherwise creditable under section 1405 of this title at the 
time of the member's retirement, the amount of the member's retired pay 
shall be the lesser of the following:
            ``(1) The amount of retired pay determined in accordance 
        with subsection (c).
            ``(2) The amount of retired pay determined subject to the 
        applicability of sections 5304 and 5305 of title 38, but not 
        less than the amount of retired pay to which the member would 
        have been entitled under any other provision law based upon the 
        member's service in the uniformed services if the member had 
        not been retired under chapter 61 of this title.
    ``(e) Definitions.--In this section:
            ``(1) The term `retired pay' includes retainer pay, 
        emergency officers' retirement pay, and naval pension.
            ``(2) The term `veterans' disability compensation' has the 
        meaning given the term `compensation' in section 101(12) of 
        title 38.''.
    (b) Repeal of Special Compensation Program.--Section 1413 of such 
title is repealed.
    (c) Clerical Amendments.--The table of sections at the beginning of 
such chapter is amended--
            (1) by striking the item relating to section 1413; and
            (2) by adding at the end the following new item:

``1414. Concurrent payment of retired pay and veterans' disability 
                            compensation.''.

SEC. 3. EFFECTIVE DATE; PROHIBITION ON RETROACTIVE BENEFITS.

    (a) In General.--The amendments made by this Act shall take effect 
on--
            (1) the first day of the first month that begins after the 
        date of the enactment of this Act; or
            (2) the first day of the fiscal year that begins in the 
        calendar year in which this Act is enacted, if later than the 
        date specified in paragraph (1).
    (b) Retroactive Benefits.--No benefits may be paid to any person by 
reason of section 1414 of title 10, United States Code, as added by the 
amendment made by section 2(a), for any period before the effective 
date specified in subsection (a).