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Reemployment and Benefit Plan Rights of Employees Called up for Active Military Service
May 2001

The Uniform Services Employment and Reemployment Rights Act of 1994 ("USERRA") generally provides employees who leave their regular jobs to perform military service for the United States with certain reemployment and benefit continuation rights. In light of the federal government's recent decision to shift more than 30,000 members of the military reserves to active duty, employers need to familiarize themselves with the requirements of USERRA.

1. Who Is Entitled To USERRA Reemployment Rights? USERRA provides reemployment rights to any person who meets the following five conditions:

(a) The person held any civilian job (without regard to the size or nature of the employer).

(b) The person notifies the employer (orally or in writing) in advance that he or she is leaving the job for service in the Army, Navy, Marine Corps, Air Force, Coast Guard, or Public Health Service commissioned corps or for activity duty training, inactive duty training or full time duty in the Army National Guard or Air National Guard. This condition is excused if military necessity precludes the giving of notice. The leave may be voluntary or involuntary.

(c) The employee's absence is limited to five years, with certain exceptions.

(d) The employee must not be released from military service on account of a dishonorable discharge or other punitive conditions.

(e) The person must report back to the employer or submit an application for reemployment within specified time periods following expiration of his or her military service. The applicable time periods vary based on the duration of the individual's military service and their health status. For example, in the case of persons on military leave more than 180 days, the reporting and employment application deadline is 90 days after termination of military service. A 14-day deadline normally applies to periods of military service of between 31 and 180 days. A next business day deadline applies for military leaves of less than 31 days, with exceptions for travel time and an eight-hour rest period. Notwithstanding the foregoing, service members convalescing from service related injuries have up to two years to return to work.

2. What Are The USERRA Reemployment Rights? Subject to certain exceptions, the reemployment rights of a person who meets the above five criteria consists principally of the right to be placed in the same job, with the same seniority, pay and status, (a) as the veteran would have attained had they not been absent for military service, provided they are qualified to perform that job, or (b) if they are not so qualified, then the job they held when they went on military leave (or if the leave exceeds 90 days, a similar job of like status, seniority and pay). The employer must take reasonable steps, such as training or retraining, to allow the returning employee to qualify for the position they would have attained but for the military leave. In effect, USERRA employs an "escalator" concept - it isn't necessarily sufficient to put the employee back in the position they held when they left; the employee must be given the benefit of any promotions they would have earned had they not been absent so long as they are qualified, or can reasonably become qualified, for the higher position.

The employer is relieved of the obligation to reemploy the veteran, however, if the employer can prove that (a) its circumstances have so changed as to render the obligation to rehire impossible or "unreasonable," (b) due to the veteran's disability or lack of qualifications that the employer cannot reasonably remedy, employing the returning veteran would impose an "undue hardship" on the employer; or (c) with respect to the job which the veteran left, there was no reasonable expectation of continued employment for an indefinite or substantial period. Relying on these exceptions involves a fair degree of legal risk.

3. What Other Protections and Rights Does USERRA Provide?

(a) No Discharge Without Cause. A USERRA-protected veteran may not be discharged within 12 months after his or her return to employment if the period of their military leave was more than 180 days, except for "cause." The 12-month no-discharge period is reduced to 180 days if the period of military leave is more than 30 but less than 181 days.

(b) Paid Time Off While On Military Leave. Employees on military leave who meet the first three requirements set forth in Section 1 above, must be allowed to use accrued vacation pay and/or paid annual or similar leave during their period of military service. Employees cannot be forced to use paid vacation, annual or personal leave for periods of military service.

(c) Health Plan Coverage. While on military leave, the employee and their family members must be allowed to continue their group health plan coverage (medical, dental and medical expense reimbursement) for up to 18 months at COBRA coverage rates (except that if the military leave is 30 days or less, the employee is only responsible for the active employee share of premiums during the 30-day period). This coverage is similar to COBRA but technically different. It is unclear whether the USERRA health care continuation coverage rules displace COBRA. To be safe, if the reduction in hours associated with a military leave of absence would otherwise result in a loss of health plan coverage, an employer subject to COBRA should give the COBRA notice and provide full COBRA rights based on the leave being a "qualifying event" under COBRA. Except for the issue of the premium split during a military leave of 30 days or less, providing COBRA coverage should also satisfy the USERRA continuation coverage requirement for group health plans.

(d) Other Welfare Benefits. If (1) the employer has or adopts a general employee leave plan, policy or practice that applies to other employees having similar status, seniority and pay as the person going on USERRA protected military duty (e.g., a FLMA leave policy), and (2) that policy or practice (a "Leave Policy") provides for continuation of life and/or disability insurance coverage while on leave, then life and/or disability insurance coverage must be extended to the employee on USERRA protected military duty on the same basis, terms and conditions as apply under the Leave Policy. In other words, for purposes of life and disability insurance coverage, the individual on USERRA military duty must be treated as if they were on a leave of absence.

(e) Pension Benefits. If an individual returns to his or her job under USERRA, then for purposes of any qualified or non-qualified ERISA pension plan (including a 401(k) plan or profit sharing plan) maintained by the employer: (1) the military leave may not be treated as a break in service; (2) vesting and eligibility credit must be given for the period of military service; (3) in a defined benefit plan, the employee must accrue for his or her period of absence the same benefit he or she would have accrued but for the absence (computed at the rate of pay he or she would have earned but for the military absence, or if that cannot be determined, the average rate of pay for the 12 months prior to the leave) (4) in a defined contribution plan, the employee must be credited with the same employer contributions (but not forfeitures or earnings on such contributions) as he or she would have received but for the military absence (computed at the rate of pay he or she would have earned but for the military absence, or if that cannot be determined, the average rate of pay for the 12 months prior to the leave); and (5) the employee must be allowed to make the 401(k) contributions (and receive any applicable matching contribution) that might otherwise have been made but for the period of absence. The period for contributing such "make-up contributions" is three times the length of the military leave or five years, whichever is less.

Make-up and other pension plan contributions required under USERRA are subject to the applicable tax law dollar and percentage limits for the years to which the contributions relate, not the limits for the years in which paid, and are exempt from the various tax law non-discrimination rules.

401(k) Plan loan repayments can be suspended during the borrower's USERRA protected period of military service without adverse tax consequences (i.e., a deemed taxable distribution) to the borrower.

To meet the ERISA fiduciary duty of adequate disclosure, plans should disclose the above pension plan rules to participants going on USERRA protected military duty.

(f) Continuing Vacation/Paid Leave Accruals. To the extent that any employer leave plan or policy applicable to the class of employees of which a USERRA protected veteran is a member allows employees on a leave of absence to continue to accrue additional vacation time while on a leave, an employee protected by USERRA must continue to earn vacation time on the same basis during the period of his or her military absence. Otherwise no additional vacation pay accrues during a military leave of absence. If post-reemployment vacation accruals are based on years of service or seniority, however, a USERRA protected veteran must be given seniority credit for the period of his or her military leave in determining the rate at which he or she accrues vacation after returning from military duty.

(g) Other Leave Benefits. With respect to other employee benefits not specifically described above, an USERRA protected employee on military duty must be treated as if he or she was on a leave of absence under whatever other leave policies the employer maintains for the class of employees of which the uniformed service employee is a member.