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.

SECTION 1. SHORT TITLE.

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

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.--Subsection 
(a) of section 1414 of title 10, United States Code, is amended--
            (1) by striking ``Compensation'' in the subsection heading 
        and all that follows through ``Subject'' and inserting 
        ``Compensation.--Subject''; and
            (2) by striking paragraph (2).
    (b) Phase-In of Concurrent Receipt for Retirees With Service-
Connected Disabilities Rated as 40 Percent or Less.--Subsection (c) of 
such section is amended--
            (1) in the matter before paragraph (1), by striking 
        ``subsection (a)(1)'' and inserting ``subsection (a)''; 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.''.
    (c) Clerical Amendments.--
            (1) Section heading.--The heading for such section 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) Table of sections.--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, 2010, 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 all that follows through the end of paragraph 
(1) 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''.
    (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) Specification of qualified retirees for concurrent 
        receipt purposes.--Section 1414 of such title, as amended by 
        section 2, is amended--
                    (A) in subsection (a)--
                            (i) by striking ``a member or'' and all 
                        that follows through ``retiree')'' and 
                        inserting ``an individual who is a qualified 
                        retiree for any month''; and
                            (ii) by inserting ``retired pay and 
                        veterans' disability compensation'' after 
                        ``both''; and
                    (B) in subsection (e), by adding at the end the 
                following new paragraph:
            ``(5) Qualified retiree.--The term `qualified retiree' 
        means a member or former member of the uniformed services who, 
        with respect to any month--
                    ``(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 entitled 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, 2010, and shall apply to payments for months 
beginning on or after that date.

Summary: Retired Pay Restoration Act - Allows the receipt of both military retired pay and veterans' disability compensation with respect to any service-connected disability (under current law, only a disability rated at 50% or more). Provides a phase-in for the concurrent receipt of retired pay with respect to retirees with service-connected disabilities rated at 40% or less.

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.