The Restore Veterans' Compensation Act of 2026 eliminates the military's practice of taking back separation pay from service members who later receive disability benefits through the Department of Veterans Affairs. The bill affects military members who received separation pay, special separation benefits, or voluntary separation incentive payments and subsequently qualify for VA disability compensation or military retirement pay. For those who receive retirement pay instead of disability compensation, the bill limits recoupment to 25 percent of monthly retirement pay unless the member requests faster repayment, requires the Pentagon to notify members 90 days before deductions begin, and allows the Secretary of Defense to waive deductions if they would cause financial hardship. The changes take effect the first day of the first month after the bill becomes law and apply to all future deductions from retirement pay.