Military Leaves of Absence
Due to the tragic events that occurred in New York and Washington, DC, on Sept. 11, 2001, employers will be faced with granting leave for military duty. The following guidelines will help you comply with federal law under the Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA ").
USERRA was amended by the Small Business Job Protection Act of 1996 (the "Act"), which expanded the reemployment and employee benefit rights of employees on duty with a uniformed service. USERRA applies to all private sector employers regardless of size (including tax-exempt employers), the federal government (generally), and all state and local governmental entities.
Which Employees are Protected?
Generally, USERRA' s protections apply to all employees on duty with a uniformed service. "Duty" includes (whether voluntary or involuntary) active duty, active duty for training, initial active duty for training, inactive duty training, full-time National Guard duty, and an absence to determine fitness for duty. "Uniformed services" include the U.S. armed forces, National Guard, or the commissioned corps of the Public Health Services.
Certain protections apply when the duty commences, others apply on reemployment. Nearly all protections expire if the employee is discharged from duty with a uniformed service with a dishonorable discharge, or under other than honorable conditions.
An employee on duty with a uniformed service is entitled to reemployment if the duty lasted less than five years (extensions apply in certain circumstances), and the employee reports/applies for reemployment within a specific period of time based on the length of duty, as follows:
A reemployed employee is entitled to the seniority, and other riglc1ts and benefits determined by seniority, that the employee had at the start of the leave, plus the additional seniority, rights, and benefits that the employee would have had, but for the absence for duty. The employee must generally be returned to the position he or she would have had but for the absence, including promotions. If the employee is not qualified for such position, and reasonable efforts by the employer fail to qualify the employee, he or she may be returned to the same position as was held when the duty commenced. Under either circumstance, if the absence for duty lasted longer than 90 days, the employee may be placed in an alternate position with like seniority, status, pay and benefits.
If reasonable efforts by the employer fail to qualify the employee for his or her prior position, the employee is to be reinstated in any position of lesser status and pay which the employee is qualified to perform, but with full seniority.
If the employee returns with a service related disability which makes him or her unqualified to perform the position which he or she would have enjoyed except for the duty absence, an employer must make reasonable efforts to accommodate the employee. If accommodation is not possible, the employer must place the employee in an equivalent position for which the employee is qualified, or if the employee is not qualified for an equivalent position, to the nearest approximation.
Employee Benefits other than Health or Retirement Benefits
An employee who is on duty with a uniformed service is deemed to be on a leave of absence or furlough, and must receive the same employee benefits (other than health or retirement coverage) not based on seniority as other employees on leave or furlough. The employee may be required to pay any employee contribution otherwise required of employees on leave or furlough. No benefits are required to be maintained under this provision if the employee knowingly provides the employer with a written statement that he or she will not be returning to employment with the employer following the absence for duty.
All seniority and benefits which the employee had when the absence for duty commenced must be reinstated when an employee is reemployed pursuant to the above USERRA requirements. Additionally, the employee must receive all seniority, rights and benefits which the employee would have enjoyed had he or she remained- continuously employed.
USERRA provides separate rules for continued health care coverage of the employee and dependents during duty with a uniformed service. If the period of duty is less than 31 days, coverage must be maintained if the employee pays any required employee contribution. If the period of duty is for more than 31 days, an employer (regardless of size) must permit an employee to continue coverage under rules similar to COBRA. The maximum coverage period is the lesser of: 18 months or the period of duty. Employees can be required to pay 102% of the applicable premium. Except for coverage for illnesses or injuries incurred or aggravated during the performance of leave duties, no waiting period or pre-existing condition exclusion can be imposed on a returning employee and his or her dependents if the period or exclusion would have been satisfied had the employee's coverage not terminated due to the duty leave.
An employee who is reemployed pursuant to the above USERRA requirements must be treated as not having incurred a break in service for defined benefit, defined contribution, 403(b), and 457 plan purposes. In addition, the leave must count as service for vesting and benefit accrual purposes; all accruals that would have been made if the employee had not been absent for duty must be funded.
Matching contributions must be "made up" if, on reemployment, the employee makes any necessary pre-tax or after-tax contributions within the lesser of three times the period the employee was absent for duty or five years. The employer must also make up any profit sharing or other employer contributions that the employee would have received ifhe or she had not been on leave. There is no requirement to credit earnings or allocate forfeitures to returning employees.
The dollar limits on deferrals to 401(k), 403(b) and 457 plans, the 415 limits and the deduction limits apply to make-up contributions for the year to which they relate, not the year in which they were made. Make-up contributions will not cause a plan to violate the Code's nondiscrimination rules in either the year to which the contributions relate or in the year in which they are actually made. Although there are some conflicting provisions in the Act, this apparently means that no 401(a)(4) nondiscrimination, ADP or ACP, top-heavy, participation or coverage testing must be performed on make-up contributions.
For purposes of the 403(b) maximum exclusion allowance, the defined contribution plan 415 limit, the 457 plan deferra1limit, as well as limits due to plan terms, an employee's "compensation" is deemed to be the amount that would have been received, based on the pay rate that would have applied, had the employee remained actively employed. If this amount cannot be determined, "compensation" is generally to be based on the employee's average compensation during the 12-month period immediately preceding the leave.
Participant loan repayments may be suspended during the absence for duty. It is not clear whether payments following the absence for duty must be adjusted to avoid violating the maximum term limits (generally 5 years) or to account for lost interest.