First Proposed Regulations Implementing USERRA Issued

Employees who leave their jobs for a period of military service are granted rights to reemployment and reinstatement of benefits by the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).* For the first time since USERRA was enacted, proposed USERRA regulations have been published by the Veterans Employment and Training Service (VETS), which is the agency within the Department of Labor (DOL) that interprets and enforces the law.**

The proposed regulations discuss rules regarding anti-discrimination and anti-retaliation, eligibility and procedures to assure reemployment and several other protections in USERRA. To a great extent, they simply mirror the law itself. This Compliance Alert highlights the key provisions in the proposed regulations that would add some detail to the rules for employee benefit plans, including some issues of special interest to sponsors of multiemployer plans. Because the recent rules are only proposed, they may be changed or clarified before going into effect. The rules will not be effective until 30 days after publication of the final regulations.

Types of Military Service Recognized

USERRA rights apply to National Guard and reserve military personnel as well as persons serving in the active components of the U.S. Armed Forces (e.g., Army, Navy, Marines, Air Force and Coast Guard). However, the proposed regulation clarifies that USERRA rights do not apply to people who are called up for National Guard duty under authority of state law, although there may be similar protections under state law.

Period Of Absence Prior To Start Of Service

Under USERRA "any person whose absence from a position of employment is necessitated by reason of service in the uniformed services shall be entitled to the reemployment rights and benefits and other employment benefits." See 43 U.S.C. § 4312(a). The proposed regulations recognize that a person entering military service needs a period of time to organize personal affairs and travel to the site of his or her military duty. Therefore the proposed regulations say that an employee's period of military service is protected even if it does not begin immediately after the person leaves civilian employment.

HEALTH BENEFITS

Special USERRA Rules

USERRA provides specific rules governing the health-benefits rights of employees who take military leave. The proposed regulations make clear that those rules (described below) are the exclusive source of health coverage protections for employees who take time out for military service.

Continuation of Coverage During Military Leave

USERRA provides that plan participants away from their civilian jobs because of service in the military are entitled to purchase continued health care coverage under their employment-based plan for themselves and their families, for up to 18 months.*** The proposed regulations reiterate the statute's requirement that for a service-related absence of less than 31 days, the reservist cannot be charged more than the regular participant contribution to keep health care coverage in force. If the military call-up is for 31 days or longer, then the plan sponsor can charge up to 102 percent of the plan cost for individual or family coverage.

The proposed regulations acknowledge that USERRA does not provide procedures for electing and paying for this continuation coverage. Instead of providing specific guidelines, the DOL proposes allowing plans to develop their own reasonable standards for election and payment as long as the standards take into account special circumstances that may prevent an individual from meeting a specific standard.

In the absence of specific notice requirements concerning USERRA election and payment, plans should at a minimum make sure that USERRA rights and procedures for election and payment are described in their summary plan descriptions (SPD). Because continued coverage under USERRA is essentially the same as COBRA coverage, after the first 30 days of military duty, plans may want to include a description of USERRA protections in their COBRA notices.

Health Benefits Upon Reinstatement

USERRA provides that a person returning from eligible military service is entitled to immediate reinstatement of his or her health care coverage through the civilian job. No new waiting periods or exclusions for pre-existing conditions may be imposed, except that coverage for military service-related medical conditions may be excluded. The proposed regulation restates this requirement from the statute and adds that USERRA does not require an employer to allow an individual to delay reinstatement of health plan coverage until a date that is later than the date of reemployment.

RETIREMENT BENEFITS

The proposed regulations closely follow the statute and the legislative history of USERRA. They require that each period of uniformed service be treated as an uninterrupted period of employment for purposes of participation, vesting, accrual of benefits, contributions and elective deferrals.

Although USERRA is silent with respect to the amount of time allowed the employer to pay in make-up contributions to a plan after a veteran's return, the proposed regulations generally require that those contributions be made within 30 days after the date of the person's reemployment, or otherwise as soon as practicable.

Often employer contributions are made to match employees' pretax or after-tax contributions to the plan. The employee's opportunity to pay make-up elective contributions starts with the date of his reemployment and continues for up to three times the length of the employee's most recent period of military service, not to exceed five years. Where the employee's post-military employment has ended before all make-up contributions can be paid on a pre-tax basis through salary reduction, the employee must be allowed to continue paying make-up contributions on an after-tax basis in order to receive the full employer match that would have been available during the period of his military service.

Employers do not have to make matching contributions until the employees have paid in their shares.

The proposed regulations would require that employees who took distributions from their retirement plans when leaving for military duty be allowed to repay those amounts with interest, to have all of their service credit restored.

The proposed regulations do not make clear whether the service member should receive retirement-plan credit for travel and preparation time between the end of employment and the start of military service. Many plan administrators rely on the Department of Defense Form 214 when determining the dates of entry and exit from military service for benefit purposes. However that form does not show travel time.

SPECIAL ISSUES FOR MULTIEMPLOYER PLANS

The proposed regulations incorporate special rules for multiemployer plans contained in the statute. These include a requirement that multiemployer plans reinstate health and pension coverage for a veteran who returns to covered service even if the individual's last contributing employer no longer participates in the plan. The plan sponsor (i.e., the board of trustees) has authority to allocate the responsibility for funding the veterans' make-up benefits. If the plan sponsor does not make express provision for this, the liability is allocated to the last employer employing the individual before military service. However, other allocation arrangements can and should be made if they would better reflect the economic realities of the industry. Absent any other rule, if liability is assigned to the last employer but that company is no longer functional, the plan itself has the responsibility for covering any cost associated with the returning veteran. Also clarified is the special rule applicable to multiemployer pension plans that a returning service member need only be reemployed by a contributing employer, not the same employer from whom the person left to go into military service, in order to be reinstated in the pension plan and receive credit for the period of uniformed service.

The proposed regulations declare that a hiring hall is considered an employer subject to USERRA if hiring and job assignment functions have been delegated by an employer to the hiring hall. Union or employer-run hiring halls that meet that description therefore must meet the statute's reemployment, anti-discrimination and anti-retaliation requirements. **** The proposed regulations do not provide any specifics concerning how or whether USERRA's other requirements would be adapted to the treatment of hiring halls as employers.

An employer that contributes to a multiemployer plan and reemploys a service member is obligated to give written notice to the plan administrator within 30 days after the service member has been reemployed.

Although the proposed regulations provide some limited information on health and pension issues beyond the USERRA statute, relevant legislative history and case law, there are still open questions concerning how a multiemployer plan must implement USERRA. For example, USERRA's application is not clear where an individual worked in covered employment prior to military service but was not working at the time he or she entered military service.

In order to ensure consistent application, it may be necessary for the trustees to establish their own reasonable rules for these areas.

Employers and benefit-plan sponsors should, of course, consult their attorneys for advice on all legal requirements including the requirements related to employees who return from military service. DOL requests that any comments on the draft rules be submitted by November 19, 2004.