A bill to amend section 4118 of title 38, United State Code, to modify the treatment of special pay paid to certain physicians and dentists employed by the Veterans' Administration.

Entitles a physician or dentist who becomes employed in the Department of Medicine and Surgery of the Veterans Administration and who enters into an agreement to serve in such capacity for a certain length of time to special pay commencing on the date of such employment or the date of such agreement, whichever is later.

Considers any such special pay paid to an employee after September 30, 1980, as basic pay. Considers such special pay as included in average pay for purposes of annuity computation only in limited circumstances.

Provides that such special pay may not be included in average pay in computing an employee's annuity that commences before October 1, 1985. Considers a certain percentage of special pay paid after September 30, 1980, as average pay in computing an annuity that commences on or after October 1, 1985.