Subtitle D--Retired Pay and Survivor Benefits

SEC. 641. PHASE-IN OF FULL CONCURRENT RECEIPT OF MILITARY RETIRED PAY AND VETERANS DISABILITY COMPENSATION FOR CERTAIN MILITARY RETIREES.

(a) CONCURRENT RECEIPT- Section 1414 of title 10, United States Code, is amended to read as follows:

`Sec. 1414. Members eligible for retired pay who are also eligible for veterans' disability compensation for disabilities rated 50 percent or higher: concurrent payment of retired pay and veterans' disability compensation

`(a) PAYMENT OF BOTH RETIRED PAY AND COMPENSATION-

`(1) 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 (hereinafter in this section referred to as a `qualified retiree') is entitled to be paid both for that month without regard to sections 5304 and 5305 of title 38. During the period beginning on January 1, 2004, and ending on December 31, 2013, payment of retired pay to such a qualified retiree is subject to subsection (c).

`(2) QUALIFYING SERVICE-CONNECTED DISABILITY- In this section, the term `qualifying service-connected disability' means a service-connected disability or combination of service-connected disabilities that is rated as not less than 50 percent disabling by the Secretary of Veterans Affairs.

`(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) DISABILITY RETIREES WITH LESS THAN 20 YEARS OF SERVICE- 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, or with less than 20 years of service computed under section 12732 of this title, at the time of the member's retirement.

`(c) PHASE-IN OF FULL CONCURRENT RECEIPT- During the period beginning on January 1, 2004, and ending on December 31, 2013, retired pay payable to a qualified retiree shall be determined as follows:

`(1) CALENDAR YEAR 2004- For a month during 2004, the amount of retired pay payable to a qualified retiree is the amount (if any) of retired pay in excess of the current baseline offset plus the following:

`(A) For a month for which the retiree receives veterans' disability compensation for a disability rated as total, $750.

`(B) For a month for which the retiree receives veterans' disability compensation for a disability rated as 90 percent, $500.

`(C) For a month for which the retiree receives veterans' disability compensation for a disability rated as 80 percent, $350.

`(D) For a month for which the retiree receives veterans' disability compensation for a disability rated as 70 percent, $250.

`(E) For a month for which the retiree receives veterans' disability compensation for a disability rated as 60 percent, $125.

`(F) For a month for which the retiree receives veterans' disability compensation for a disability rated as 50 percent, $100.

`(2) CALENDAR YEAR 2005- For a month during 2005, the amount of retired pay payable to a qualified retiree is the sum of--

`(A) the amount specified in paragraph (1) for that qualified retiree; and

`(B) 10 percent of the difference between (i) the current baseline offset, and (ii) the amount specified in paragraph (1) for that member's disability.

`(3) CALENDAR YEAR 2006- For a month during 2006, the amount of retired pay payable to a qualified retiree is the sum of--

`(A) the amount determined under paragraph (2) for that qualified retiree; and

`(B) 20 percent of the difference between (i) the current baseline offset, and (ii) the amount determined under paragraph (2) for that qualified retiree.

`(4) CALENDAR YEAR 2007- For a month during 2007, the amount of retired pay payable to a qualified retiree is the sum of--

`(A) the amount determined under paragraph (3) for that qualified retiree; and

`(B) 30 percent of the difference between (i) the current baseline offset, and (ii) the amount determined under paragraph (3) for that qualified retiree.

`(5) CALENDAR YEAR 2008- For a month during 2008, the amount of retired pay payable to a qualified retiree is the sum of--

`(A) the amount determined under paragraph (4) for that qualified retiree; and

`(B) 40 percent of the difference between (i) the current baseline offset, and (ii) the amount determined under paragraph (4) for that qualified retiree.

`(6) CALENDAR YEAR 2009- For a month during 2009, the amount of retired pay payable to a qualified retiree is the sum of--

`(A) the amount determined under paragraph (5) for that qualified retiree; and

`(B) 50 percent of the difference between (i) the current baseline offset, and (ii) the amount determined under paragraph (5) for that qualified retiree.

`(7) CALENDAR YEAR 2010- For a month during 2010, the amount of retired pay payable to a qualified retiree is the sum of--

`(A) the amount determined under paragraph (6) for that qualified retiree; and

`(B) 60 percent of the difference between (i) the current baseline offset, and (ii) the amount determined under paragraph (6) for that qualified retiree.

`(8) CALENDAR YEAR 2011- For a month during 2011, the amount of retired pay payable to a qualified retiree is the sum of--

`(A) the amount determined under paragraph (7) for that qualified retiree; and

`(B) 70 percent of the difference between (i) the current baseline offset, and (ii) the amount determined under paragraph (7) for that qualified retiree.

`(9) CALENDAR YEAR 2012- For a month during 2012, the amount of retired pay payable to a qualified retiree is the sum of--

`(A) the amount determined under paragraph (8) for that qualified retiree; and

`(B) 80 percent of the difference between (i) the current baseline offset, and (ii) the amount determined under paragraph (8) for that qualified retiree.

`(10) CALENDAR YEAR 2013- For a month during 2013, the amount of retired pay payable to a qualified retiree is the sum of--

`(A) the amount determined under paragraph (9) for that qualified retiree; and

`(B) 90 percent of the difference between (i) the current baseline offset, and (ii) the amount determined under paragraph (9) for that qualified retiree.

`(11) GENERAL LIMITATION- Retired pay determined under this subsection for a qualified retiree, if greater than the amount of retired pay otherwise applicable to that qualified retiree, shall be reduced to the amount of retired pay otherwise applicable to that qualified retiree.

`(d) COORDINATION WITH COMBAT-RELATED SPECIAL COMPENSATION PROGRAM-

`(1) IN GENERAL- A person who is a qualified retiree under this section and is also an eligible combat-related disabled uniformed services retiree under section 1413a of this title may receive special compensation in accordance with that section or retired pay in accordance with this section, but not both.

`(2) ANNUAL OPEN SEASON- The Secretary concerned shall provide for an annual period (referred to as an `open season') during which a person described in paragraph (1) shall have the right to make an election to change from receipt of special compensation in accordance with section 1413a of this title to receipt of retired pay in accordance with this section, or the reverse, as the case may be. Any such election shall be made under regulations prescribed by the Secretary concerned. Such regulations shall provide for the form and manner for making such an election and shall provide for the date as of when such an election shall become effective. In the case of the Secretary of a military department, such regulations shall be subject to approval by the Secretary of Defense.

`(e) DEFINITIONS- In this section:

`(1) RETIRED PAY- The term `retired pay' includes retainer pay, emergency officers' retirement pay, and naval pension.

`(2) VETERANS' DISABILITY COMPENSATION- The term `veterans' disability compensation' has the meaning given the term `compensation' in section 101(13) of title 38.

`(3) DISABILITY RATED AS TOTAL- The term `disability rated as total' means--

`(A) a disability, or combination of disabilities, that is rated as total under the standard schedule of rating disabilities in use by the Department of Veterans Affairs; or

`(B) a disability, or combination of disabilities, for which the scheduled rating is less than total but for which a rating of total is assigned by reason of inability of the disabled person concerned to secure or follow a substantially gainful occupation as a result of disabilities for which veterans' disability compensation may be paid.

`(4) CURRENT BASELINE OFFSET-

`(A) IN GENERAL- The term `current baseline offset' for any qualified retiree means the amount for any month that is the lesser of--

`(i) the amount of the applicable monthly retired pay of the qualified retiree for that month; and

`(ii) the amount of monthly veterans' disability compensation to which the qualified retiree is entitled for that month.

`(B) APPLICABLE RETIRED PAY- In subparagraph (A), the term `applicable retired pay' for a qualified retiree means the amount of monthly retired pay to which the qualified retiree is entitled, determined without regard to this section or sections 5304 and 5305 of title 38, except that in the case of such a retiree who was retired under chapter 61 of this title, such amount is 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.'.

(b) REPEAL OF SUPERCEDED SPECIAL COMPENSATION AUTHORITY- Section 1413 of title 10, United States Code, is repealed.

(c) SOURCE OF FUNDS FOR SPECIAL COMPENSATION AUTHORITIES FOR DEPARTMENT OF DEFENSE RETIREES-

(1) Sections 1413(g) and 1413a(h) of title 10, United States Code, are each amended--

(A) by inserting before `Payments under' the following new sentence: `Payments under this section for a member of the Army, Navy, Air Force, or Marine Corps shall be paid from the Department of Defense Military Retirement Fund.'; and

(B) by inserting `for any other member' before `for any fiscal year'.

(2) Section 1463(a)(1) of such title is amended by inserting before the semicolon the following: `and payments under section 1413, 1413a, or 1414 of this title paid to such members'.

(3) Section 1465(b) of such title is amended by adding at the end the following new paragraph:

`(3) At the same time that the Secretary of Defense makes the determination required by paragraph (1) for any fiscal year, the Secretary shall determine the amount of the Treasury contribution to be made to the Fund for the next fiscal year under section 1466(b)(2)(D) of this title. That amount shall be determined in the same manner as the determination under paragraph (1) of the total amount of Department of Defense contributions to be made to the Fund during that fiscal year under section 1466(a) of this title, except that for purposes of this paragraph the Secretary, in making the calculations required by subparagraphs (A) and (B) of that paragraph, shall use the single level percentages determined under subsection (c)(4), rather than those determined under subsection (c)(1).'.

(4) Section 1465(c) of such title is amended--

(A) in paragraph (1)--

(i) in subparagraph (A), by inserting before the semicolon at the end the following: `, to be determined without regard to section 1413, 1413a, or 1414 of this title';

(ii) in subparagraph (B), by inserting before the period at the end the following: `, to be determined without regard to section 1413, 1413a, or 1414 of this title'; and

(iii) in the sentence following subparagraph (B), by striking `subsection (b)' and inserting `subsection (b)(1)';

(B) by redesignating paragraph (4) as paragraph (5); and

(C) by inserting after paragraph (3) the following new paragraph (4):

`(4) Whenever the Secretary carries out an actuarial valuation under paragraph (1), the Secretary shall include as part of such valuation the following:

`(A) A determination of a single level percentage determined in the same manner as applies under subparagraph (A) of paragraph (1), but based only upon the provisions of sections 1413, 1413a, and 1414 of this title.

`(B) A determination of a single level percentage determined in the same manner as applies under subparagraph (B) of paragraph (1), but based only upon the provisions of sections 1413, 1413a, and 1414 of this title.

Such single level percentages shall be used for the purposes of subsection (b)(3).'.

(5) Section 1466(b) of such title is amended--

(A) in paragraph (1), by striking `sections 1465(a) and 1465(c)' and inserting `sections 1465(a), 1465(b)(3), 1465(c)(2), and 1465(c)(3)'; and

(B) by adding at the end of paragraph (2) the following new subparagraph:

`(D) The amount for that year determined by the Secretary of Defense under section 1465(b)(3) of this title for the cost to the Fund arising from increased amounts payable from the Fund by reason of section 1413, 1413a, or 1414 of this title.'.

(6) The amendments made by this subsection shall take effect as of October 1, 2003. The Secretary of Defense shall provide for such administrative adjustments as necessary to provide for payments made for any period during fiscal year 2004 before the date of the enactment of this Act to be treated as having been made in accordance with such amendments and for the provisions of such amendments to be implemented as if enacted as of September 30, 2003.

(d) CLERICAL AMENDMENTS- The table of sections at the beginning of chapter 71 of such title is amended--

(1) by striking the item relating to section 1413; and

(2) by striking the item relating to section 1414 and inserting the following:

`1414. Members eligible for retired pay who are also eligible for veterans' disability compensation for disabilities rated 50 percent or higher: concurrent payment of retired pay and veterans' disability compensation.'.

(e) EFFECTIVE DATE- The amendments made by subsections (a) and (b) shall take effect on January 1, 2004, and shall apply to payments for months beginning on or after that date.

SEC. 642. REVISIONS TO COMBAT-RELATED SPECIAL COMPENSATION PROGRAM.

(a) Extension of Program to Combat-Related Disabilities Rated Below 60 Percent- (1) Subsection (e) of section 1413a of title 10, United States Code, is amended to read as follows:

`(e) COMBAT-RELATED DISABILITY- In this section, the term `combat-related disability' means a disability that is compensable under the laws administered by the Secretary of Veterans Affairs and that--

`(1) is attributable to an injury for which the member was awarded the Purple Heart; or

`(2) was incurred (as determined under criteria prescribed by the Secretary of Defense)--

`(A) as a direct result of armed conflict;

`(B) while engaged in hazardous service;

`(C) in the performance of duty under conditions simulating war; or

`(D) through an instrumentality of war.'.

(2) Subsection (c)(2) of such section is amended by striking `qualifying'.

(b) CLARIFICATION OF SERVICE REQUIRED FOR ELIGIBILITY- Subsection (c)(1) of such section is amended by inserting before the semicolon the following: `or is entitled to retired pay under section 12731 of this title (other than by reason of section 12731b of this title)'.

(c) CLARIFICATION OF DETERMINATION OF AMOUNT OF COMPENSATION- Subsection (b)(1) of such section is amended by striking `for a' and all that follows and inserting `under subsection (a) for any month is the amount of compensation to which the retiree is entitled under title 38 for that month, determined without regard to any disability of the retiree that is not a combat-related disability.'.

(d) REVISED COORDINATION PROVISION- Subsection (f) of such section is amended to read as follows:

`(f) COORDINATION WITH CONCURRENT RECEIPT PROVISION- Subsection (d) of section 1414 of this title provides for coordination between benefits under that section and under this section.'.

(e) CLERICAL AMENDMENTS- (1) The heading of such section is amended to read as follows:

`Sec. 1413a. Combat-related special 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:

`1413a. Combat-related special compensation.'.

(f) EFFECTIVE DATE- The amendments made by subsections (a), (b), and (c) shall apply to payments under section 1413a of title 10, United States Code, for months beginning on or after January 1, 2004. The amendment made by subsection (d) shall take effect on January 1, 2004.