To provide alternative retired pay rates under title 10, United States Code, and alternative disability compensation rates under title 38, United States Code, for members of the Armed Forces with a combat-related disability, with such rates based on the average monthly salary for high school graduates in the United States, and for other purposes.

SECTION 1. ALTERNATIVE RETIRED PAY RATES FOR MEMBERS OF THE ARMED 
              FORCES WITH A COMBAT-RELATED DISABILITY.

    (a) Alternative Retired Pay Base for Chapter 71 Retired Pay.--
Section 1401 of title 10, United States Code, is amended by adding at 
the end the following new subsection:
    ``(c) Alternative Retired Pay Base for Members With a Combat-
Related Disability.--(1) In the case of a member of the armed forces 
with a combat-related disability who is entitled to monthly retired pay 
computed using a formula specified in subsection (a), the Secretary 
concerned shall permit the member to elect to have used in that 
formula, in lieu of the retired pay base of the member computed under 
section 1406(b) or 1407 of this title, a retired pay base equal to 
$2,917, which represents the average monthly salary for high school 
graduates in the United States, as determined by the Census Bureau for 
2006.
    ``(2) The alternative retired pay base in effect under paragraph 
(1) for a calendar year shall be adjusted on December 1 of that year in 
the manner provided by section 1401a(b) of this title for use during 
the next calendar year.
    ``(3) In this subsection, the term `combat-related disability' 
means a disability that is compensable under the laws administered by 
the Secretary of Veterans Affairs and that--
            ``(A) is attributable to an injury for which the member was 
        awarded the Purple Heart; or
            ``(B) was incurred (as determined under criteria prescribed 
        by the Secretary of Defense for purposes of section 1413a of 
        this title) as a direct result of armed conflict.''.
    (b) Alternative Retired Pay Base for Retired Pay for Non-Regular 
Service.--Section 12739 of such title is amended by adding at the end 
the following new subsection:
    ``(e)(1) In the case of a member of the armed forces with a combat-
related disability who is entitled to monthly retired pay computed 
under subsection (a), the Secretary concerned shall permit the member 
to elect to have used in paragraph (1) of such subsection, in lieu of 
the retired pay base of the member computed under section 1406(b) or 
1407 of this title, a retired pay base equal to $2,917, which 
represents the average monthly salary for high school graduates in the 
United States, as determined by the Census Bureau for 2006.
    ``(2) The alternative retired pay base in effect under paragraph 
(1) for a calendar year shall be adjusted on December 1 of that year in 
the manner provided by section 1401a(b) of this title for use during 
the next calendar year.
    ``(3) In this subsection, the term `combat-related disability' 
means a disability that is compensable under the laws administered by 
the Secretary of Veterans Affairs and that--
            ``(A) is attributable to an injury for which the member was 
        awarded the Purple Heart; or
            ``(B) was incurred (as determined under criteria prescribed 
        by the Secretary of Defense for purposes of section 1413a of 
        this title) as a direct result of armed conflict.''.
    (c) Application of Amendments.--The amendments made by subsections 
(a) and (b) shall apply with respect to members of the Armed Forces who 
retired or whose names were placed on the temporary disability retired 
list after September 11, 2001, except that any recomputation of the 
retired pay for a member on account of such amendments who retired or 
whose name was placed on the temporary disability retired list before 
the date of the enactment of this Act shall be effective only for 
months beginning after the date of the enactment of this Act.

SEC. 2. ALTERNATIVE WARTIME DISABILITY COMPENSATION RATES FOR CERTAIN 
              VETERANS.

    (a) Alternative Compensation Base for Chapter 11 Wartime Disability 
Compensation.--Section 1114 of title 38, United States Code, is amended 
by adding at the end the following new subsection:
    ``(t)(1) In the case of a veteran--
                    ``(A) having a covered service-connected disability 
                rated as total, the Secretary shall permit the veteran 
                to elect to receive, in lieu of the monthly 
                compensation rate in effect under subsection (j), a 
                monthly compensation equal to $2,917, which represents 
                the average monthly salary for high school graduates in 
                the United States, as determined by the Census Bureau 
                for 2006; and
                    ``(B) having a covered service-connected disability 
                rated at a percentage other than total, the Secretary 
                shall permit the veteran to elect to receive, in lieu 
                of the monthly compensation rate in effect under 
                subsections (a) through (i), as applicable, a monthly 
                compensation equal to the amount that is the percentage 
                of $2,917 that corresponds to the percentage of the 
                service-connected disability rating of the veteran.
    ``(2) For purposes of this subsection, the term `covered service-
connected disability' means a service-connected disability that--
            ``(A) is attributable to an injury for which the veteran 
        was awarded the Purple Heart; or
            ``(B) was incurred (as determined under criteria prescribed 
        by the Secretary of Defense for purposes of section 1413a of 
        title 10) as a direct result of armed conflict.''.
    (b) Application of Amendment.--The amendment made by subsection (a) 
shall apply with respect to veterans who became eligible to receive 
compensation under section 1110 of title 38, United States Code, after 
September 11, 2001, except that any recomputation of disability 
compensation for a veteran on account of such an amendment who so 
became eligible before the date of the enactment of this Act shall be 
effective only for months beginning after the date of the enactment of 
this Act.

Summary: Directs the Secretary of the military department concerned, in the case of a regular or reserve member of the Armed Forces with a combat-related disability who is entitled to monthly retired pay, to permit such member to elect an alternative retired pay rate based on $2,917, the average monthly salary for high school graduates in the United States. Directs the Secretary of Veterans Affairs, with respect to veterans with service-connected disabilities, to permit such veterans to elect to receive a monthly compensation of $2,917 or a percentage of such amount .