Year-End Troop Return Triggers Benefit Obligations under USERRA

Last month President Obama announced that the remaining 40,000 or so American troops in Iraq would be returning home by December 31 of this year; it is also expected that he will announce an additional troop draw-down from Afghanistan.

For U.S. employers, this means that it is time to get reacquainted with benefit reinstatement rights under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). USERRA generally protects the workplace rights of persons who voluntarily or involuntarily leave employment positions to undertake military service and broadly applies applies to all U.S. employers, public or private. Essentially USERRA requires employers to treat employees as if they were employed throughout their period of military service, despite their physical absence.

Provided that the returning servicemember applies for reemployment within set time frames under the regulation, which are based on the period of military service, there is a duty to rehire the servicemember that is subject to very few exceptions. Further, the returning servicemember must be reinstated not to his or her “old” job but to the position – and compensation and perks – that the servicemember would have enjoyed had he or she never interrupted their career to serve our country. This is called the “escalator position.” As with the duty of reemployment there are exceptions to the duty to restore to the “escalator position” but they are few and narrowly construed.

With specific regard to health benefits, employees have a COBRA-like continuation coverage right upon leaving for military service that, provided they pay applicable premiums at 102% of the active employee’s rate, can last for as long as two years following commencement of military service. Upon return to employment those employees would simply transition to the same coverage they enjoyed as active employees. Employees who let their group health coverage lapse while on military leave have the right to have their coverage reinstated. If no waiting period or exclusions would have applied to the servicemember had their coverage been uninterupted, none may apply upon restoration of such coverage. USERRA regulations allow an employer to permit a servicemember to delay reinstatement of health plan coverage until a date that is later than the date of reemployment, but the employer is not required to do so, and employers who wish to do so are advised to first checkwith their insurers to make sure that such coverage will be honored.  Employers planning to delay coverage within USERRA guidelines should also be aware that they may have different insurance reinstatement obligations under the Servicemembers Civil Relief Act.  In short, any plan other than to provide immediate reinstatement of coverage upon reemployment should be discussed with legal counsel and otherwise vetted before implementation.

With regard to retirement plans, the reemployed servicemember is treated as though he or she had remained continuously employed for purposes of pension plan participation, vesting, and accrual of benefits. USERRA treats military service as continuous service with the employer for benefit plan purposes, such that “break in service” rules are not triggered. USERRA pension protections apply to defined benefit plans and defined contributions plans as well as plans provided under federal or state laws governing pension benefits for government employees.

If pension plan contributions are not dependent on employee contributions, the employer must make them within 90 days after reemployment or when contributions are normally made for the year in which the military service was performed, whichever is later. If pension plan contributions are derived from employee contributions or elective deferrals, (such as employer matching contributions to a 401(k) plan) or from a combination of employee contributions or elective deferrals and matching employer contributions, the reemployed service member may make his or her contributions or deferrals during a time period starting with the date of reemployment and continuing for up to three times the length of the employee’s immediate past period of military service, with the repayment period not to exceed five years. The employer is not required to restore retirement plan contributions in advance of a servicemember’s actual return to work.

More information is available in a convenient question and answer format in the Department of Labor’s Final Regulation under USERRA, published December 19, 2005, which you can review here.