• Proposed USERRA Regulations Include Guidance Regarding Employee Benefit Rights
  • November 4, 2004 | Author: Margaret R. Bernardin
  • Law Firms: Ford & Harrison LLP - Orlando Office; Ford & Harrison LLP - Tampa Office
  • The Veterans' Employment and Training Service ("VETS") has issued proposed regulations intended to provide additional guidance to employers regarding the rights of individuals who voluntarily or involuntarily leave employment positions to undertake military service. The rules are intended to become effective 30 days after they are finalized. Comments are requested by November 19, 2004. As with the statute itself, VETS has stated that the regulations should be "liberally construed for the benefit of those who left private life to serve their country in its hour of great need."

    Benefits Rights While Performing Service in the Uniformed Services

    An employee is to be treated as though he or she were on a leave of absence during his or her period of military service. During this time, he is entitled to any non-seniority rights and benefits your company provides to other employees with similar seniority, status and pay that are on a leave of absence. Non-seniority rights and benefits are those that do not accrue with or are not determined by an employee's length of service. If non-seniority benefits vary depending upon the type of leave, service members must be provided with the most favorable treatment accorded to any comparable form of leave.

    The rights and benefits that service members are entitled to receive include rights and benefits in effect before their leave began, as well as those that were implemented during the leave. They must be provided even if the employer provides full or partial pay to the service member. However, they need not be provided if the service member knowingly provides written notice to the employer that he does not intend to return to work for the employer after the period of service.

    A service member must be permitted to use any accrued vacation or similar pay during his period of service, but may not be required to do so. Service members are not entitled to use sick leave as that is not similar to vacation pay.

    There are special rules for continuation of health benefits during a period of military leave. A service member is entitled to elect to continue health benefits for himself (and for his dependents, if the plan offers dependent coverage) for the lesser of (i) 18 months beginning from the date of absence for military service, or (ii) the period beginning on the date of absence for military service and ending on the date the service member applies for reemployment or fails to return to work following his military service. As with COBRA continuation coverage, service members can be required to pay up to 102% of the cost of coverage, although no more than the regular employee premium can be charged for the first 31 days of military service. Unlike COBRA, there are no prescribed rules regarding electing coverage or paying for the coverage. The proposed rules provide that plan administrators should develop reasonable procedures to address these issues.

    When a service member returns to work, health coverage that was terminated during the period of military service must be reinstated. The health plan cannot generally impose any waiting period or exclusions on the returning employee. However, a health plan can impose a waiting period or exclusion with regard to illnesses or injuries that are determined by the Secretary of Veterans Affairs to have been incurred in, or aggravated during, a period of military service.

    A service member who has reemployment rights under USERRA is entitled, upon reemployment, to any seniority-based rights and benefits he had on the date his service began, plus any rights and benefits he would have attained had he remained continuously employed during his period of service. This includes not only rights and benefits that were available when the period of military service began, but also those that are established during the period of military service. The proposed rules provide that a right or benefit is a seniority-based right or benefit if it (i) is a reward for length of service rather than a form of short-term compensation for work performed, (ii) is reasonably certain to have been received if the service member had remained continuously employed during his period of service, and (iii) is the employer's actual practice or custom to provide or withhold the right or benefit as a reward for length of service.

    Special rules exist with regard to pension benefits. The proposed rules provide that upon reemployment, the period of military service completed by the service member must not be treated as a break in service under a pension plan, and that the period of service, and any time provided under USERRA for reporting back to work (including periods of convalescence) must be treated as service with the employer for purposes of participation, vesting and benefit accruals. In addition, the employer must increase the service member's accrued benefit under a defined benefit plan, or allocate make-up contributions to a defined contribution plan.

    If the pension plan is one to which the employee is neither required nor permitted to contribute, any funding obligation must be made within 30 days of reemployment or as soon thereafter as practicable. If the pension plan conditions employer contributions on employee contributions, the returning employee must be allowed to make up any contributions missed during the period of service. The employee must have a period of time starting with his date of reemployment and continuing for a length of time equal to three times his period of military service (but not longer than five years) to contribute any missed contributions. The employer contribution that corresponds to the employee contribution must be deposited at the times required by the plan document generally.

    The proposed regulations state that if the returning employee cannot make up the missed employee contributions (for example, because he is no longer employed by the plan sponsor), the plan must provide an equivalent opportunity to receive any matching contributions, such as by permitting the individual to make after-tax contributions to the plan. Further, the rules state that a returning employee must be allowed to repay to the plan any amounts previously withdrawn, including interest if the plan is a defined benefit plan. The employee may have a longer period of time to repay the withdrawn amounts than he had to make up missed contributions to the plan.

    Where the returning employee's compensation is used to calculate pension benefits, the plan must base the compensation on the rate of pay the employee would have received if he had not been absent for military service or, if that rate of pay cannot reasonably be determined, based on the average rate of pay for the 12-month period prior to the date the period of military service began or the average rate of pay for any shorter period of employment.

    Special rules are provided for multiemployer pension benefit plans.