The Restore Veterans’ Compensation Act of 2026 seeks to amend title 10, United States Code, primarily by eliminating the recoupment of separation pay, special separation benefits, and voluntary separation incentive payments from members of the Armed Forces who subsequently receive disability compensation from the Department of Veterans Affairs. This ensures that veterans are not deprived of their disability compensation due to prior receipt of separation benefits, nor will their disability compensation be reduced. Furthermore, the bill imposes significant limitations on the authority of the Secretary of Defense to recoup such pay from members who later receive military retired or retainer pay. Recoupment will now be based on the net amount of separation pay, after federal income tax withholding. Monthly deductions from retired or retainer pay are capped at 25 percent , unless the member requests a faster repayment schedule. The legislation also mandates that the Secretary of Defense consult with members regarding repayment rates, taking into account their financial ability and avoiding undue hardship. Deductions cannot commence until 90 days after the member receives clear and comprehensive notification. Crucially, the Secretary of Defense gains the authority to waive deductions if they would result in financial hardship for the member. These provisions also apply to voluntary separation incentive and voluntary separation pay programs, with specific protections for disabled retirees.