The Uniformed Services Employment and
Reemployment Rights Act of 1994 (USERRA) establishes that upon reemployment
after a period of military service, participants are entitled to all rights and
benefits based upon seniority that they would have accrued with reasonable
certainty had they maintained continuous employment without the separation from
service for military service (including basic seniority).
Depending on the length of the military
service, a returning servicemember is entitled to take from one (for periods of
service not exceeding thirty-one days) to ninety (for periods of service exceeding
180 days) days following the military service before reporting back to work.
The employer is generally required to rehire the employee within two weeks of
application for reemployment “absent unusual circumstances.”
Regulations make it clear that this period must
be treated as service with the employer for purposes of eligibility, vesting,
and benefit accrual.
With respect to qualified retirement plans,
reemployed veterans are given an opportunity to make up elective deferrals that
they would have made had it not been for the separation from service for
military service. The compensation considered in making up salary deferrals
will be the amount of compensation the reemployed veteran would have made from
the employer had he not separated from service for military service. Where it
would be difficult to establish the compensation the reemployed veteran would
have been paid had he not incurred a separation from service, the plan must use
the reemployed veteran’s average compensation from the twelve-month period
preceding the break in service for military service. Any makeup of employee
salary deferrals and matching contributions will not result in the plan’s
violating the limits on contributions or minimum participation rules. The
returning employee is not required to pay interest (lost opportunity costs) on
made-up contributions.
If the missed elective deferrals cannot be made
up by the employee, the employee will not receive the employer match or the
accrued benefits attributable to his or her contribution, because the employer
is required to make contributions that are contingent on or attributable to the
employee’s contributions or elective deferrals only to the extent that the
employee makes up payments to the plan.
Employer contributions that are not contingent
on employee contributions (or elective deferrals) must be made no later than 90
days after the date of reemployment, or when plan contributions are normally
due for the year in which the uniformed service was performed, whichever is
later
Additionally, reemployed veterans will not be
treated as having incurred any breaks in service for the period of time spent
on active military duty. That period of time is to be considered service with
the employer even though the veteran was actually in active military status.
This rule applies to the plan’s rules regarding nonforfeitability of accrued
benefits and for determining accruals under the plan.
Finally, the plan is permitted to suspend any
requirement of loan repayments by participants during the period the
participants are in active military service. If the returning employee withdrew
part or all of his account balance prior to the military service, the employee
must have buy-back rights, and must be allowed a certain amount of time to
repay the amount withdrawn. In the case of a defined benefit plan, the employee
must have the right to buy back the interest that would have otherwise accrued.
Regarding multiemployer plans, the regulations
specify that a returning servicemember does not have to be reemployed by the
same employer for whom the employee worked prior to the period of service in
order to be reinstated under the plan with all of his or her USERRA rights. An
employer of a returning servicemember who is entitled to benefits under a plan
is required to notify the plan administrator of the reemployment within thirty
days.
USERRA covers ERISA-qualified group health
plans, including multiemployer plans. If the employee has coverage under such a
plan, the plan must permit employees to elect to continue coverage for
themselves and their dependents for a period of time that is the lesser of the
twenty-four-month period beginning on the date on which their leave of absence
for military service begins, or the date on which their absence for military
service begins and ending on the date when they fail to return from service or
apply for reemployment.
Regarding veterans’ reemployment rights under a
health plan, the regulations describe two situations in which health coverage
may be canceled upon departure for uniformed service:
1.
The departing employee fails to give advance
notice of service and fails to elect continuation coverage; and
2.
An employee leaves for a period of service
exceeding thirty days and gives advance notice of service but fails to elect
continuation coverage.
If the employee is in active military service
for less than thirty-one days, he or she cannot be required to pay more than
the regular employee share, if any, for the health coverage. Employees in
military service thirty-one or more days may be required to pay no more than
102 percent of the full premium under the plan, which represents the employer’s
share, plus the employee’s share, plus 2 percent for administrative costs.
Plans may also adopt reasonable rules allowing cancellation of continuation
coverage if timely payment is not made.
However, if a departing employee who fails to
give advance notice and fails to elect continuation coverage was excused from
giving advance notice of service under USERRA’s provisions because of military
necessity, impossibility, or unreasonableness, then coverage must be
retroactively reinstated upon the employee’s election to continue coverage and
upon his or her payment of all amounts due (no administrative reinstatement
costs can be charged).
If the employee who has provided advance notice
of leave exceeding thirty days but has failed to elect coverage subsequently
elects to continue coverage, the scope of his reinstatement right depends upon
whether the plan has developed reasonable rules regarding the period within
which employees may elect continuing coverage. If reasonable rules have been
established, then the plan must permit retroactive reinstatement of
uninterrupted coverage upon the employee’s election and payment of all unpaid
amounts due within periods established under the plan rules. If the plan has
not established reasonable rules regarding the election period, it must permit
retroactive reinstatement of uninterrupted coverage upon the employee’s
election and payment of all unpaid amounts at any time during the maximum
coverage period under USERRA.
The Veterans’ Housing Opportunity and Benefits
Improvement Act of 2006(VHOBIA) extended employer health plan continuation and
reinstatement rights to reservists entitled to the federal government’s health
insurance program for all branches of the military. The program, known as
TRICARE, provides health care coverage to civilian dependents of military
servicemembers. VHOBIA extends TRICARE participation rights to active-duty
reservists and their dependents upon being called to active duty. It also
extends USERRA continuation coverage rights to reservists upon termination of
active-duty status. The USERRA rights apply even if reservists’ active-duty
orders are cancelled and they do not actually leave employment to perform
active military service.
Reservists who receive active-duty orders with
delayed effective dates are treated as if called to active duty for more than
thirty days, starting on the later of the date the order was issued or ninety
days before the date for active service. When these reservists are considered
on “active duty,” they and their family members are eligible for military
health and dental benefits under TRICARE.
Practitioner’s Pointer: An employer who fails
to establish reasonable rules regarding the election period may find itself
bound to longer maximum coverage periods than those otherwise mandated under
USERRA.
The regulations indicate that where health
plans are also covered by COBRA, it may be reasonable to adopt COBRA-compliant
rules regarding election of and payment for continuing coverae, so long as
those rules do not conflict with USERRA or the new cancellation rules. This has
the effect of allowing plan sponsors to streamline their health plan
administrative provisions by implementing applicable COBRA provisions already
in place (except where they would violate USERRA).
The definition of “employer” under the final
regulations excludes entities to which employers or plan sponsors have
delegated purely ministerial functions, such as third-party administrators. The
preamble to the final regulations indicates that the definition of employer was
intended to apply to insurance companies administering employers’ health plans,
“so that such entities cannot refuse to modify their policies in order for
employers to comply with requirements under” USERRA, adding that employers with
insured health plans are “obliged to negotiate coverage that is compliant with
USERRA”
On June 17, 2008, President Bush signed the
Heroes Earnings Assistance and Relief Tax Act of 2008 into law.¹ The Heroes Act
makes specific modifications to USERRA in an effort to assist veterans who die
or become totally disabled while on active military duty and the beneficiaries
of veterans who die on active military duty.
After December 31, 2006, the Heroes Act
requires 401(k) and other qualified retirement plans to provide the survivors
of a plan participant who dies while performing qualified military service with
any additional benefits (such as accelerated vesting and ancillary life
insurance benefits) that would have been provided if the participant had
resumed employment and then died.
Another provision of the Heroes Act permits
(but does not require) 401(k) and other qualified retirement plans to be
amended to treat individuals who die or become disabled while performing
qualified military service as if they had resumed employment in accordance with
their USERRA reemployment rights on the day before death or disability, and
then terminated employment on the date of death or disability. This provision
allows a plan to provide such “deemed rehired employees” (or their survivors)
partial or full retroactive benefit accruals that the plan must provide to
reemployed service members under USERRA. These additional benefit accruals must
be credited on a reasonably equivalent basis to all individuals who die or
become disabled during their military service. Under this rule, when
determining the amount of matching contributions, individuals are treated as
having made deferrals based on their average deferrals for the 12 months immediately
before qualified military service. This provision applies to deaths or disabilities
occurring after December 31, 2006.
