SECTION 1. EXPANSION OF ELIGIBILITY FOR CONCURRENT RECEIPT OF MILITARY 
              RETIRED PAY AND VETERANS' DISABILITY COMPENSATION TO 
              INCLUDE ALL CHAPTER 61 DISABILITY RETIREES REGARDLESS OF 
              DISABILITY RATING PERCENTAGE.

    (a) Phased Expansion Concurrent Receipt.--Subsection (a) of section 
1414 of title 10, United States Code, is amended to read as follows:
    ``(a) Payment of Both Retired Pay and Disability Compensation.--
            ``(1) Payment of both required.--
                    ``(A) In general.--Subject to subsection (b), a 
                member or former member of the uniformed services who 
                is entitled for any month to retired pay and who is 
                also entitled for that month to veterans' disability 
                compensation for a qualifying service-connected 
                disability (in this section referred to as a `qualified 
                retiree') is entitled to be paid both the retired pay 
                and the veterans' disability compensation for that 
                month without regard to sections 5304 and 5305 of title 
                38.
                    ``(B) Applicability of full concurrent receipt 
                phase-in requirement.--During the period beginning on 
                January 1, 2004, and ending on December 31, 2013, 
                payment of retired pay to a qualified retiree is 
                subject to subsection (c).
                    ``(C) Phase-in exception for 100 percent disabled 
                retirees.--The payment of retired pay is subject to 
                subsection (c) only during the period beginning on 
                January 1, 2004, and ending on December 31, 2004, in 
                the case of the following qualified retirees:
                            ``(i) A qualified retiree receiving 
                        veterans' disability compensation for a 
                        disability rated as 100 percent.
                            ``(ii) A qualified retiree receiving 
                        veterans' disability compensation at the rate 
                        payable for a 100 percent disability by reason 
                        of a determination of individual 
                        unemployability.
                    ``(D) Phase-in exception for certain chapter 61 
                disability retirees.--Subject to subsection (b), on and 
                after January 1, 2011, subsection (c) shall not apply 
                to a qualified retiree who has a qualifying service-
                connected disability described in subparagraph (B) or 
                (C) of paragraph (2).
            ``(2) Qualifying service-connected disability defined.--In 
        this section, the term `qualifying service-connected 
        disability', with respect to a qualified retiree, means the 
        following:
                    ``(A) In the case of a qualified retiree receiving 
                retired pay under any provision of law other than 
                chapter 61 of this title, or under chapter 61 with 20 
                years or more of service otherwise creditable under 
                section 1405 or computed under section 12732 of this 
                title, a service-connected disability or combination of 
                service-connected disabilities that is rated as 
                disabling by the Secretary of Veterans Affairs.
                    ``(B) In the case of a qualified retiree receiving 
                retired pay under chapter 61 of this title with less 
                than 20 years of service otherwise creditable under 
                section 1405 or computed under section 12732 of this 
                title, a service-connected disability or combination of 
                service-connected disabilities that is rated by the 
                Secretary of Veterans Affairs at the disabling level 
                specified in one of the following clauses (and is 
                effective on or after the date specified in the 
                applicable clause):
                            ``(i) January 1, 2011, rated 100 percent, 
                        or a rate payable at 100 percent by reason of 
                        individual unemployability or rated 90 percent.
                            ``(ii) January 1, 2012, rated 80 percent or 
                        70 percent.
                            ``(iii) January 1, 2013, rated 60 percent 
                        or 50 percent.
                    ``(C) In the case of a qualified retiree receiving 
                retired pay under chapter 61 regardless of years of 
                service, a service-connected disability or combination 
                of service-connected disabilities that is rated by the 
                Secretary of Veterans Affairs at the disabling level 
                specified in one of the following clauses (and is 
                effective on or after the date specified in the 
                applicable clause):
                            ``(i) January 1, 2014, rated 40 percent or 
                        30 percent.
                            ``(ii) January 1, 2015, any rating.''.
    (b) Conforming Amendment to Special Rules for Chapter 61 Disability 
Retirees.--Subsection (b) of such section is amended to read as 
follows:
    ``(b) Special Rules for Chapter 61 Disability Retirees..--
            ``(1) Career retirees.--The retired pay of a member retired 
        under chapter 61 of this title with 20 years or more of service 
        otherwise creditable under section 1405 of this title, or at 
        least 20 years of service computed under section 12732 of this 
        title, at the time of the member's retirement, is subject to 
        reduction under sections 5304 and 5305 of title 38, but only to 
        the extent that the amount of the member's retired pay under 
        chapter 61 of this title exceeds the amount of retired pay to 
        which the member would have been entitled under any other 
        provision of law based upon the member's service in the 
        uniformed services if the member had not been retired under 
        chapter 61 of this title.
            ``(2) Special rule for retirees with fewer than 20 years of 
        service.--The retired pay of a member retired under chapter 61 
        of this title with fewer than 20 years of creditable service 
        otherwise creditable under section 1405 or computed under 
        section 12732 of this title, at the time of the member's 
        retirement, is subject to reduction under sections 5304 and 
        5305 of title 38, but only to the extent that the amount of the 
        member's retired pay under chapter 61 of this title exceeds the 
        amount equal to 2\1/2\ percent of the member's years of 
        creditable service multiplied by the member's retired pay base 
        under section 1406(b)(1) or 1407 of this title, whichever is 
        applicable to the member.''.
    (c) Full Concurrent Receipt Phase-In.--Subsection (c) of such 
section is amended--
            (1) by striking ``the second sentence of'' in the matter 
        preceding paragraph (1); and
            (2) in paragraph (1), 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.''.
    (d) Clerical Amendments.--
            (1) Section heading.--The heading of such section is 
        amended to read as follows:
``Sec. 1414. Concurrent receipt of retired pay and veterans' disability 
              compensation''.
            (2) Table of sections.--The table of sections at the 
        beginning of chapter 71 of such title is amended by striking 
        the item related to section 1414 and inserting the following 
        new item:

``1414. Concurrent receipt of retired pay and veterans' disability 
                            compensation.''.
    (e) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2011.
    (f) Funding Offset.--The Chairman of the Committee on the Budget of 
the House of Representatives shall provide the necessary adjustments in 
allocations, aggregates, and other appropriate levels in the concurrent 
resolution on the budget for fiscal year 2011 to implement this section 
and the amendments made by this section.
Extends through 2013 eligibility for the concurrent receipt of military retired pay and veterans' disability compensation for veterans who were retired or separated due to physical disability, regardless of their disability rating or years of service.
To amend title 10, United States Code, to expand the eligibility for concurrent receipt of military retired pay and veterans' disability compensation to include all members of the uniformed services who are retired under chapter 61 of such title for disability, regardless of the members' disability rating percentage.