To amend title 10, United States Code, to permit certain retired members of the uniformed services who have a service-connected disability to receive both disability compensation from the Department of Veterans Affairs for their disability and either retired pay by reason of their years of military service or Combat-Related Special Compensation.

Summary: Retired Pay Restoration Act of 2005 - Allows the receipt of both military retired pay and veterans' disability compensation with respect to any service-connected disability (currently, only a disability rated at 50 percent or more).

Makes the 2004 through 2013 phase-in limitations for the concurrent receipt of such pay for qualified retirees with service-connected disabilities rated as total applicable: (1) only during 2004 for retirees with a 100 percent disability; and (2) only during 2004 and 2005 for retirees with a total disability by reason of unemployability.

Makes eligible for the full concurrent receipt of both veterans' disability compensation and either military retired pay or combat-related special pay those individuals who were retired or separated from military service due to a service-connected disability.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Retired Pay Restoration Act of 
2005''.

SEC. 2. ELIGIBILITY FOR PAYMENT OF BOTH RETIRED PAY AND VETERANS' 
              DISABILITY COMPENSATION FOR CERTAIN MILITARY RETIREES 
              WITH COMPENSABLE SERVICE-CONNECTED DISABILITIES.

    (a) Extension of Concurrent Receipt Authority to Retirees With 
Service-Connected Disabilities Rated Less Than 50 Percent.--
            (1) Repeal of 50 percent requirement.--Section 1414 of 
        title 10, United States Code, is amended by striking paragraph 
        (2) of subsection (a).
            (2) Computation.--Paragraph (1) of subsection (c) of such 
        section is amended by adding at the end the following new 
        subparagraph:
                    ``(G) For a month for which the retiree receives 
                veterans' disability compensation for a disability 
                rated as 40 percent or less or has a service-connected 
                disability rated as zero percent, $0.''.
    (b) Repeal of Phase-in of Concurrent Receipt for Retirees With 
Service-Connected Disabilities Rated as Total.--Subsection (a)(1) of 
such section is amended by striking ``except that'' and all that 
follows and inserting ``except--
                    ``(A) in the case of a qualified retiree receiving 
                veterans' disability compensation for a disability 
                rated as 100 percent, payment of retired pay to such 
                veteran is subject to subsection (c) only during the 
                period beginning on January 1, 2004, and ending on 
                December 31, 2004; and
                    ``(B) in the case of a qualified retiree receiving 
                veterans' disability compensation for a disability 
                rated as total by reason of unemployability, payment of 
                retired pay to such veteran is subject to subsection 
                (c) only during the period beginning on January 1, 
                2004, and ending on December 31, 2005.''.
    (c) Clerical Amendments.--
            (1) The heading for section 1414 of such title is amended 
        to read as follows:
``Sec. 1414. Members eligible for retired pay who are also eligible for 
              veterans' disability compensation: concurrent payment of 
              retired pay and disability compensation''.
            (2) The item relating to such section in the table of 
        sections at the beginning of chapter 71 of such title is 
        amended to read as follows:

``1414. Members eligible for retired pay who are also eligible for 
                            veterans' disability compensation: 
                            concurrent payment of retired pay and 
                            disability compensation.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2006, and shall apply to payments for months 
beginning on or after that date.

SEC. 3. COORDINATION OF SERVICE ELIGIBILITY FOR COMBAT-RELATED SPECIAL 
              COMPENSATION AND CONCURRENT RECEIPT.

    (a) Eligibility for TERA Retirees.--Subsection (c) of section 1413a 
of title 10, United States Code, is amended by striking ``entitled to 
retired pay who--'' and inserting ``who--
            ``(1) is entitled to retired pay, other than a member 
        retired under chapter 61 of this title with less than 20 years 
        of service creditable under section 1405 of this title and less 
        than 20 years of service computed under section 12732 of this 
        title; and
            ``(2) has a combat-related disability.''.
    (b) Amendments to Standardize Similar Provisions.--
            (1) Clerical amendment.--The heading for paragraph (3) of 
        section 1413a(b) of such title is amended by striking ``rules'' 
        and inserting ``rule''.
            (2) Qualified retirees.--Subsection (a) of section 1414 of 
        such title, as amended by section 2(a), is amended--
                    (A) by striking ``a member or'' and all that 
                follows through ``retiree')'' and inserting ``a 
                qualified retiree''; and
                    (B) by adding at the end the following new 
                paragraph:
                    ``(2) Qualified retirees.--For purposes of this 
                section, a qualified retiree, with respect to any 
                month, is a member or former member of the uniformed 
                services who--
                            ``(A) is entitled to retired pay, other 
                        than in the case of a member retired under 
                        chapter 61 of this title with less than 20 
                        years of service creditable under section 1405 
                        of this title and less than 20 years of service 
                        computed under section 12732 of this title; and
                            ``(B) is also entitled for that month to 
                        veterans' disability compensation.''.
            (3) Disability retirees.--Subsection (b) of section 1414 of 
        such title is amended--
                    (A) by striking ``Special Rules'' in the subsection 
                heading and all that follows through ``is subject to'' 
                and inserting ``Special Rule for Chapter 61 Disability 
                Retirees.--In the case of a qualified retiree who is 
                retired under chapter 61 of this title, the retired pay 
                of the member is subject to''; and
                    (B) by striking paragraph (2).
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2006, and shall apply to payments for months 
beginning on or after that date.