Armed Forces Disability Retirement Enhancement Act

Armed Forces Disability Retirement Enhancement Act - Adds new federal provisions concerning the retirement for disability of members of the Armed Forces (members) retiring one year or more after the enactment of this Act. Allows members who retire on or after October 7, 2001, but before the one-year period after the enactment of this Act, as well as members on the temporary retired list up to such date, to elect to retire under the new provisions in lieu of the current provisions. Makes such elections irrevocable.

Authorizes the Secretary of the military department concerned, under the new provisions, to retire a member if: (1) the disability is of a permanent nature, or of uncertain permanency such that a temporary disability retirement is appropriate; (2) the injury, illness, or disease rendering the member unfit was incurred or aggravated in the line of duty; and (3) such injury, illness, or disease was not the result of intentional misconduct or willful neglect, or incurred during an unauthorized absence.

Outlines provisions concerning: (1) qualifications for placement on the temporary disability retired list; and (2) determinations of unfitness for duty for disability retirement purposes.

Authorizes the Secretary of Defense to continue after discharge or separation from active duty respite care and aid and other extended care benefits for members who incur a serious injury or illness while serving on such duty.

Provides for expanded availability and use by separating members (and their dependents) of Department of Labor transition assistance programs.