TDIU Reform Act of 2026

This Act may be cited as the “Total Disability based on Individual Unemployability Reform Act of 2026” or the “TDIU Reform Act of 2026”.

(a) In general.— Chapter 11 of title 38, United States Code, is amended—

(1) by redesignating the second section 1167 (relating to mental health consultations) as section 1169; and

(2) by inserting after such section 1169, as so redesignated, the following new section:

“1170. Individual unemployability.—

(a) In general.— In the case of a veteran described in subsection (b), the Secretary may assign to the veteran a disability rating of total if the Secretary determines that the veteran is unable to secure or follow a substantially gainful occupation as a result of a service-connected disability or combination of service-connected disabilities.

(b) Eligible veterans.—

(1) A veteran described in this subsection is a veteran who has—

(A) one service-connected disability rated at 60 percent or more; or

(B) two or more service-connected disabilities, of which—

(i) one disability is rated at 40 percent or more; and

(ii) the other disability or disabilities bring the combined rating to 70 percent or more.

(2) For purposes of a disability under paragraph (1)(A) or (B)(i), each of the following will be considered as one disability:

(A) Disabilities of one or both upper extremities, or of one or both lower extremities, including the bilateral factor, if applicable.

(B) Disabilities resulting from common etiology or a single accident.

(C) Disabilities affecting a single body system, for example, orthopedic, digestive, respiratory, cardiovascular-renal, or neuropsychiatric.

(D) Multiple injuries incurred in action.

(E) Multiple disabilities incurred as a prisoner of war.

(3) In determining whether a veteran is eligible under this subsection, the Secretary shall disregard the existence or degree of any non-service-connected disabilities or previous unemployability status of the veteran.

(c) Treatment of other veterans.—

(1) In the case of a veteran who a rating board determines is unable to secure and follow a substantially gainful occupation by reason of one or more service-connected disabilities but who is not eligible under subsection (b), the rating board shall submit to the Director of Compensation Service a full statement of—

(A) the service-connected disability or disabilities of the veteran;

(B) the employment history of the veteran;

(C) the educational and vocational attainment of the veteran; and

(D) any other factor the rating board determines relevant.

(2) The Director of Compensation Services shall evaluate each statement submitted under paragraph (1) and make a determination with respect to the individual unemployability of the veteran.

(d) Limitation.—

(1) Compensation under this chapter based on individual unemployability may not be paid to a veteran aged 67 or older.

(2) The limitation under paragraph (1) shall apply with respect to a veteran who first received compensation for individual unemployability on or after December 31, 2026.

(e) Marginal employment.—

(1) For purposes of this section, marginal employment shall not be considered a substantially gainful occupation.

(2) In this section, the term “marginal employment” means, with respect to a veteran, that—

(A) the earned annual income of the veteran does not exceed the amount established by the U.S. Department of Commerce, Bureau of the Census, as the poverty threshold for one person; or

(B) the earned annual income of the veteran exceeds the poverty threshold for one person and the Secretary determines based on the nature of the employment and, if applicable, the reason for the veteran’s termination, that the employment is marginal, including in cases of employment in a protected environment such as a family business or sheltered workshop.”.

(b) Clerical amendment.— The table of sections at the beginning of such chapter is amended—

(1) by redesignating the second item relating to section 1167 (relating to mental health consultations) as relating to section 1169 and moving the item to appear after the item relating to section 1168; and

(2) by inserting after such item 1169 the following new item: