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Extension of time to return to work for service-connected injury
An employee who is hospitalized for, or convalescing from, an illness or injury incurred in, or aggravated during, uniformed service, may report to work or submit an application for reemployment at the end of the recovery period from the illness or injury. This period may not exceed two years after leaving uniformed service (except in circumstances beyond his or her control). The time spent recovering is part of the continuous service with the employer.
Permanent loss of ability to return to work does not satisfy the return to work rights of USERRA
One of the commentators, requested that servicemen who die in the service or who are permanently unable to return to work, receive pension credit for the period beginning with departure from pre-service employment and ending on the date reemployment rights end. The DOL stated that because section 4318(a) of USERRA states that pension entitlements do not accrue until the returning employee is reemployed, the DOL declined to adopt this commentators suggestion.
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Retirement plan benefits covered under USERRA |
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Any Employee Retirement Income Security Act of 1974 (ERISA) employee pension benefit plans providing retirement income to employees, or permitting deferral of employee income to or beyond the termination of employment. |
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Certain non-ERISA pension plans, such as certain 403(b) and 457 plans sponsored by a State, or other government entity, or a church for its employees. |
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However, USERRA does not cover pension benefits under the Federal Thrift Savings Plan(for most Federal government employees); instead those benefits are covered under 5 U.S.C. 8432b. |
Responsibility for funding plan obligation to provide the employee with pension benefits
Generally, the employer is liable to the pension benefit plan to fund any obligation of the plan to provide benefits that are attributable to the employee’s period of uniformed service (with the exception of multiemployer plans).
Rule of thumb: The employer is not required to make any contribution until the employee is reemployed. |
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For defined contribution plan, nonelective contributions, once the employee is reemployed, the employer must make a contribution for the period of uniformed service. |
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For defined contribution, elective deferrals or after-tax contributions, re-employed participants will have the right to make-up deferrals or after-tax voluntary contributions. The time period for the repayment of employee contributions starts on the date of reemployment, and must be complete within a period of the lesser of three times the period of service prior to the uniformed service or five years. |
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For defined benefit plans, the employee’s accrued benefit will be increased for the period of service once he or she is reemployed and, if applicable, has repaid any amounts previously paid to him or her from the plan and made any employee contributions that may be required to be made under the plan. |
Deadline for employer to make contribution eased from proposed regulation |
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Non-contributory plans
For a plan in which the employee is not required or permitted to contribute, the employer must make the contribution attributable to the employee’s period of uniformed service no later than: |
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90-days after the date of reemployment, or |
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when plan contributions are normally due for the year in which the service in the uniformed services was performed, whichever is later. |
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However, if it is impossible or unreasonable for the employer to make the contribution within this time period, the employer is permitted to make the contribution “as soon as practicable.” |
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Example. Employer contributions are made each year on February 15 for the preceding calendar year. An employee leaves the employer to perform military services on May 1, 2004. The employee completes the uniformed service in early 2005 and is reemployed in a timely manner on February 10, 2005. In this example, the employee receives pension contributions for the period of military service (from May 1, 2004 through December 31, 2004). The employer contribution would be due 90 days after the reemployment date of February 10, 2005 because that date is later than February 15, 2005. Employer contributions for the period from Jan. 1, 2005 to Feb. 9, 2005 would be due by Feb. 15, 2006 because that date is later than the date that is 90 days following reemployment. |
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Contributory plans. The employee is allowed (but not required) to make-up his or her missed after-tax contributions or elective deferrals. |
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The make-up time period starts with the date of reemployment and continues for up to three times the length of the employee’s immediate past period of uniformed service, not to exceed five years. |
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In an important administrative change from the proposed regulations, the employee’s make-up time period ends at the earlier of |
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the employee’s termination of service, or |
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the end of the make-up time period. |
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Thus, the employee’s make-up period ends when service is terminated. However, there is an exception if the employee is rehired again in which case, the remainder of the make-up time would become available to the rehired employee. |
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Employer match or contingent contribution
The employee must make-up the contributions or elective deferrals in order to receive the employer match or the accrued benefit attributable to his or her contribution. The deadline for the employer contribution of the match is based on when the make-up contributions are made. |
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Any employer contributions that are contingent on or attributable to the employee’s make-up contributions or elective deferrals must be made according to the plan’s requirements for employer matching contributions. |
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Ability to partially make-up employee contributions required. |
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Example
A plan design permits an employee to contribute from zero to 5% of compensation to receive a commensurate match. The reemployed service member must be permitted to make a partial make-up contribution and receive the employer match. Where contributions from all employees are handled in a consistent fashion under the plan, either the plan documents or the normal, established practices of the plan control the disposition of partial contributions or deferrals.
MHC Comment:
This seems to leave open the question of plans that have changed the amount of match over the time the former service member was gone; or who had a discretionary match for only part of the time that the service member was gone. Without sequencing of the make-up contribution, it is impossible to know which make-up contribution is the first, and thus, in what order to provide the match. The employer will have to rely on providing the best benefit that the former service member could have received had they been on the job instead of in service. This comment is based on the Supreme Court’s admonition (in the prior laws and interpretations section of the final rules) that “This legislation is to be liberally construed for the benefit of those who left private life to serve their country in its hour of greatest need. * * * And no practice of employers or agreements between employers and unions can cut down the service adjustment benefits which Congress has secured the veteran under the Act.” |
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An adjustment in the make-up amount will be made for any employee contributions or deferrals made during the period of uniformed service. (This would be the case where a serviceman receives differential pay from the employer while in service and is able to make contributions and receive benefits based on that pay.) |
Regarding the comment received by the DOL concerning make-up contributions being sequential, e.g. beginning with the first deferral that could have been made and the associated match, and going forward; the department declined to impose this requirement on all employers and pension plans. The department instead suggests that employers and plan administrators develop reasonable rules for the allocation of make-up contributions that are appropriate for the size and type of plan.
Vested accrued benefits that the employee was entitled to prior to the period of uniformed service remain-intact, regardless of whether the individual was reemployed after leaving the uniformed service.
The employee may not adjust the make-up contributions for interest
The reemployed employee is only permitted to contribute the principal amount of the missed contribution that would have been allowed or required had employment continued during the period of uniformed service.
Defined benefit plan distributions may be repaid upon reemployment
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An employee who received a distribution of all or part of his or her accrued benefit from a defined benefit (DB) plan in connection with leaving employment for duty in the uniformed services must be allowed to repay the withdrawn amounts when reemployed. |
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The employee must repay the amount of the defined benefit that would have accrued had the monies not been withdrawn with interest included. |
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The repayment time period starts upon reemployment and continues for up to three times the length of the employee’s immediate past period of uniformed service, with the repayment period not to exceed five years (or such longer time as may be agreed to between the employer and the employee). The final rules added: provided the employee is employed with the post-service employer during this period. Thus, if the employee left before the end of the make-up period, the make-up period would end at that time. |
| Upon reemployment with the pre-uniformed service employer, the employee’s defined benefit (DB) pension benefit will be the same as if he or she had remained continuously employed: |
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Non-contributory DB plan
Because the amount of the pension benefit is determined according to a specific formula, and the contribution is made entirely by the employer, the employee’s benefit will be the same as though he or she had remained continuously employed during the period of service. |
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Contributory DB plan
The employee must make-up the contributions in order to have the same benefit as if he or she was continuously employed during the period of service. The employer’s liability is limited to the benefit based upon the employer’s contribution towards the accrued benefit. |
Upon reemployment with the pre-uniformed service employer, the employee’s defined contribution (DC) benefit will not be the same as if he or she had remained continuously employed:
With a DC plan, the benefit will not be exactly the same as if the employee had never gone into the service. The difference is caused by the fact that:
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the employee is not entitled to forfeitures for the interim period, and |
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the employee may only contribute the make-up amount of contributions and deferrals and may not contribute the earnings that may have occurred on the contribution, and |
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the employee does not have to make adjustments to the make-up amounts for any experience losses that would have happened to the make-up contributions during the period or periods of service. |
Determining compensation for the period of service in order to determine the employee’s pension benefits, if benefits are based on compensation.
The calculation must be made using the rate of pay that the employee would have received but for the period of uniformed service.
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If the employee had 12 months or more of service before the period of uniformed service, and the rate of pay the employee would have received is not reasonably certain, such as where compensation is based on commissions earned, the average rate of compensation during the 12-month period prior to the period of uniformed service must be used. |
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If the employee had less than 12 months of service before the period of uniformed service, and the rate of pay the employee would have received is not reasonably certain, the average rate of compensation must be derived from this shorter period of employment that preceded service. |
NOTE: The Final Regulations reiterate that USERRA does not supersede any state laws that are more beneficial to affected plan participants. Therefore, plan sponsors and their advisors will need to familiarize themselves with state law, as well as USERRA, when administering plans with affected participants.
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| Bill Grossman, QPA |
