Last month, the U.S. Department of Labor (DOL) released a fact sheet delineating the responsibilities employers have under the Uniformed Services Employment and Reemployment Rights Act (USERRA) to re-employed veterans who participate in an employer’s retirement plan.
USERRA applies to all United States uniformed services and their respective reserve elements. The law, passed by U.S. Congress and signed into law by President Clinton in 1994, protects “the civilian employment of active and reserve military personnel in the United States called to active duty. The law applies to all United States uniformed services and their respective reserve components.”
The act, according the Society for Human Resource Management, entitles returning veterans “to all accrued pension benefits they would have received had their civilian employment been continuous. This requirement applies to defined benefit pensions, defined contribution plans and profit-sharing plans, as well as to single-employer and multiemployer plans.”
Curious about the rules? Here is a useful Q&A on the topic – provided by the DOL*:
- Is the pension plan I maintain for my employees covered by USERRA?
- USERRA covers any plan, other than the federal government’s Thrift Savings Plan, that provides retirement income to employees or that defers payment of income to employees until after employment has ended. 38 U.S.C. § 4318(a)(1)(A); 20 C.F.R. § 1002.260.
- The rights of reemployed service members with respect to the Thrift Savings Plan are governed by 5 U.S.C. § 8432b and 5 C.F.R. §§ 1620.40 to 1620.46.
- My employee was absent from work due to military service and has now returned to work. What are my pension obligations to this employee under USERRA?
- USERRA requires employers to reemploy an eligible returning service member into the position and benefits the service member would have had, with reasonable certainty, if not for the military service. In other words, a returning service member is entitled to the seniority, rights, and benefits they would have attained had they remained continuously employed. 38 U.S.C. §§ 4312, 4316(a), 4318; 20 C.F.R. § 1002.191.
- Therefore, employers are required to determine a reemployed service member’s eligibility for participation in a pension plan and the vesting and accrual of the service member’s pension benefits as if the service member had not left for military service. 38 U.S.C. § 4318; 20 C.F.R. § 1002.191.
- What period of an employee’s military-related absence must I treat as continuous employment for purposes of determining pension benefits?
- The reemployed service member’s entire “period of absence from employment due to or necessitated by” military service must be treated as continuous employment. 20 C.F.R. § 1002.259; see also 38 U.S.C. § 4318(a)(2).
- Additionally, (1) time spent in preparation for military service, and (2) post-service time “within which a person may apply for reemployment and/or recover from an illness or injury incurred or aggravated by the military service” must be treated as continuous employment. 70 Fed. Reg. 75,246, 75,280 (Dec. 19, 2005); see also 20 C.F.R. § 1002.259.
- My employee is currently absent from work for military service. Must I make contributions to the employee’s pension while the employee is away?
- No. Employers are not required to make pension contributions until the service member employee returns to work. 20 C.F.R. § 1002.262.
- When must I make pension contributions attributable to the employee’s military related absence?
- For employer contributions to a plan in which employees are not required or permitted to contribute, the employer must make the contribution attributable to the reemployed service member’s military-related absence no later than ninety days after the date of reemployment, or when plan contributions are normally due for the year in which the military service was performed, whichever is later. 20 C.F.R. § 1002.262(a).
- If it is impossible or unreasonable for the employer to make the contribution within this time period, the employer must make the contribution as soon as practicable. 20 C.F.R. § 1002.262(a).
- For employer contributions to a plan that provides for both employer and employee contributions, please see the next question.
- I maintain a contributory pension plan for my employees. What are my obligations to make pension contributions for an employee who has missed contributions during military-related absence?
- If a pension plan is contributory, the employer is required to make contributions that are contingent on a reemployed service member’s contributions or elective deferrals only to the extent that the service member makes up those payments to the plan. 20 C.F.R. § 1002.262(c).
- Any employer contributions that are contingent on or attributable to the service member’s make-up contributions or elective deferrals must be made according to the plan’s requirements for employer matching contributions. 20 C.F.R. § 1002.262(c).
- Are there any limitations on a service member’s ability to make up payments to a pension plan that were missed during military-related absence?
- A reemployed service member may make up all or part of their missed contributions or elective deferrals. However, they are not required to do so. 20 C.F.R. § 1002.262(d).
- No makeup payment may exceed the amount the service member would have been permitted or required to contribute had they remained continuously employed. 38 U.S.C. § 4318(b)(2).
- A reemployed service member’s makeup payments may be made starting on the date of reemployment for a period that is three times the duration of the service member’s military service, but not to exceed five years. 38 U.S.C. § 4318(b)(2).
- I maintain a pension plan in which employee compensation determines the amount of the employee’s contribution or the retirement benefit to which the employee is entitled. How do I determine a reemployed service member’s pension entitlement?
- A determination of a reemployed service member’s pension entitlement requires an analysis of what pension benefits a service member would have received had the service member not left for military service. To make this calculation, the employer must determine the rate or rates of compensation the service member would have received but for the military-related absence. 38 U.S.C. § 4318(b)(3)(A). The methodology differs depending on whether the rate of pay the service member would have received if not for the military-related absence is reasonably certain.
- In order to determine the rate of compensation a service member would have received, an employer must analyze how many hours the service member likely would have worked and how much the service member would have earned based on the service member’s work history leading up to the military-related absence. 38 U.S.C. § 4318(b)(3)(A).
- If the service member’s rate of compensation cannot be determined with reasonable certainty because, for example, the service member consistently works variable hours or earns variable rates of pay under a commission scheme, the employer is required to look at the average rate of compensation the service member received during the preceding twelve months (referred to as the “12-month look-back”). If the service member was employed less than 12 months prior to leaving for military service, the employer is required to determine the average rate of compensation during the period of employment immediately preceding the military service. 38 U.S.C. § 4318(b)(3)(B).
- I maintain a contributory pension plan. How do I determine the amount a reemployed service member is permitted or required to contribute?
- Follow the same procedures as outlined in response to question 8.
- My employees are always scheduled to work 40 hours per week at a consistent rate of compensation. Therefore, for pension purposes, a reemployed service member’s rate of compensation for a period of military-related absence should be based on 40 hours per week, right?
- Not necessarily. Pension benefits should be determined based on the rate the reemployed service member would have earned but for the period of military service, if that rate can be determined with reasonable certainty. If the service member consistently worked 40 hours per week prior to the military-related absence, it is reasonably certain that the service member would have worked 40 hours per week if not for the period of service.
- However, if the service member was scheduled to work 40 hours per week, but consistently worked 50 hours per week prior to the military-related absence, it is reasonably certain that the service member would have worked 50 hours per week if not for the period of service. It is the number of hours worked, not the number of hours scheduled, that determines the rate of compensation the service member would have earned if not for the period of service.
- Additionally, if the service member was scheduled to work 40 hours per week, but the number of hours worked varied each week, then the rate of pay the service member would have received if not for the period of service is not reasonably certain. In this case, the rate of pay must be calculated based on the average rate of compensation the service member earned during the 12-month period preceding the military-related absence.
If you’re an employer and have questions about labor and employment law, including questions about the treatment of U.S. military personnel in your employment, consider calling on the attorneys at Kainen, Escalera & McHale in Connecticut. We do one thing and one thing only – we are an employer defense law firm – in fact, we are one of the largest employer defense law firms in the region. What’s more, each of our attorneys has over 25 years of experience in employment law and labor law matters and can provide your business with comprehensive legal counsel ranging from assistance with necessary preventive measures to trial advocacy. Please contact us if we can help you.
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