Guest Article

USERRA: Employment and Retirement Rights and Obligations

by Lowell J. Walters
GrayHarris
Tampa, Florida

OVERVIEW

Employers only have obligations towards applicable veterans who terminated employment and seek reemployment in accordance with the provisions of the Uniform Services Employment and Reemployment Rights Act (USERRA). Even then, employers are not required to rehire those veterans, but only to do so when it would be reasonable.

APPLICABLE VETERANS

USERRA sets forth an employer's obligations towards former employees seeking reemployment upon return from "qualified military service." Qualified military service is limited to the voluntary or involuntary performance of duties for the Armed Forces, Army National Guard or Air National Guard when involved in active or inactive duty for training or as designated by the President in time of war or national emergency./1/ Of those individuals who terminated employment to perform qualified military service, employers only have additional obligations towards those (1) who gave advance notice of their intention to serve (unless impossible or impractical), (2) whose absence from their employer does not exceed five years, and (3) individuals who report for work or submit applications for reemployment in a timely manner./2/ A reemployment request is considered to be in a timely manner for individuals whose qualified military service lasted less than 31 days if they report to the employer one day and eight hours (excluding travel time) after completion of their qualified military service./3/ Individuals who performed qualified military services for more than 30 days seek reemployment in a timely manner when (i) they submit applications for reemployment no later than 14 days after completing their qualified military service if such service was for less than 181 days, or (ii) by submitting such applications for employment no later than 90 days after completing their qualified military service if such service lasted longer than 180 days./4/ As you can see, the statute that provides reemployment rights seeks to limit its own application.

REEMPLOYMENT OBLIGATIONS

Of those individuals who gave notice of their intention to perform qualified military service, were absent for less than five years, and properly sought reemployment within the required time period, their employers are still not required to reemploy them./5/ If reemployment by the employer would be unreasonable, result in an undo hardship, or relates to a temporary position where the individual who left to perform qualified military services had no reasonable expectation for such employment to continue indefinitely, the employer is not obligated to rehire that individual./6/ Accordingly, such individuals' rehire is not required.

DISABLED VETERANS

Employers are also given leeway with those returning from qualified military service with disabilities. An employer must make "reasonable efforts" to accommodate disabled, former employees./7/ If, in spite of the employer's reasonable efforts, the disabled former employees are not able to perform the occupations they would have been involved with had those individuals' employment not been interrupted by qualified military service, then those individuals may instead be employed (1) in other positions with similar seniority, status, and salary (if the individuals are qualified to perform the duties of such position) or (2) positions the disabled individuals are able to perform that are also as similar in seniority, status, and pay as their prior positions, taking into account their disabilities./8/ Those with injuries or illnesses that prevent them from reporting to their former employer have two years to recover from such injuries or illnesses before reporting to that former employer./9/ If the individuals do not recover, their former employer has no further obligations./10/

RETIREMENT PLANS

Former employees who do not return to employment, whether due to a disability incurred or aggravated from qualified military service or not, are not entitled to any greater retirement benefits than they were entitled to upon their initial termination of employment. In other words, returning veterans only have additional rights concerning retirement plans if they have been reemployed pursuant to the provisions previously discussed herein./11/ Each provision discussing the obligations a retirement plan and the related employer have to former participants who terminated participation to perform qualified military services is limited to those former employees who are ultimately reemployed./12/

Upon reemployment, veterans must be given the opportunity to make up for lost benefits./13/ Employers maintaining defined contribution plans must make the non-elective employer contributions that would have been made during the military service period./14/ The employer must fund these contributions over a time period of up to three times the military service period, not to exceed five years, commencing with the veteran's return to employment with that employer./15/ If the plan provides for employee deferrals, the reemployed veterans have that same time period within which to make up missed employee deferrals./16/ If the plans provided for employer matching contributions on employee deferrals during the period of qualified service, those contributions must be funded as soon as the reemployed veteran makes up for those missed elective deferrals./17/ Reemployed veterans are not entitled to missed allocations resulting from any forfeitures that occurred during their qualified military service, nor for lost earnings on missed (and subsequently made up) contributions./18/ Employers maintaining defined benefits plans with mandatory employee contributions must allow reemployed veterans to purchase past service credit./19/ If employee contributions are not required, service credit must automatically be allocated for qualified military service./20/

Reemployed veterans are automatically entitled to the employers' non-elective contributions or past service credit for years without mandatory employee contributions for the time period in which they were performing qualified military services because those amounts are not contingent upon any actions of the reemployed veterans, other than their properly terminating employment and properly seeking and obtaining reemployment. Reemployed veterans only become entitled to receive employer matching contributions or past service credit in defined benefit plans that require employee contributions "to the extent the individual makes payment to the plan with respect to such contributions or deferrals."/21/

If permitted by the plan document, a plan can allow for a suspension of plan loan repayments for the period during which a participant is performing qualified military services./22/ Upon reemployment, such participants must resume loan repayments with the same or greater frequency and payment amounts as with the pre-military schedule./23/ The reemployed veteran must repay the full loan amount with interest (interest accrues during periods of qualified military service) by the end of the maximum loan term for the original loan not including the period of time during which qualified military services were performed./24/

CONCLUSION

In summary, neither an employer nor a retirement plan has any obligations to former employees who do not return to employment with the same employer. The legal reasoning behind this is as follows (citations omitted):

• An employer has obligations to rehire employees who properly terminated employment to perform qualified military services and who seek reemployment in a timely manner;

• If an employer cannot rehire such a former employee in spite of reasonable attempts, then that employer is not obligated to do so;

• An employer and a retirement plan only have additional obligations towards reemployed veterans;

• Therefore, an employer or retirement plan has no further obligations towards a veteran who is not reemployed.

If, however, applicable veterans properly seek reemployment, their employer must make reasonable efforts to reemploy them, and give them opportunities to make up for lost retirement benefits.

Footnotes

/1/ See 38 USC 4303(13), (16), IRC 414(u)(5).

/2/ See 38 USC 4312.

/3/ See footnote 2

/4/ See footnote 2

/5/ 38 USC 4312(d)

/6/ See footnote 5. Subsection (d)(2) of this provision places this burden of proof on the employer.

/7/ See 38 USC 4313.

/8/ See footnote 7.

/9/ See 38 USC 4312(e).

/10/ See 38 USC 4312.

/11/ See 38 USC 4318, see also IRC Section 414(u)(8).

/12/ See footnote 11.

/13/ Veterans hired by a different employer are not entitled to make up benefits.

/14/ See IRC 414(u)(7).

/15/ See Employee Plans News, Internal Revenue Service, vol. 3, Spring 2003, p. 5.

/16/ See IRC 414(u)(2)(A)(i).

/17/ See IRC 414(u)(2)(A)(ii).

/18/ See IRC 414(u)(3).

/19/ See IRC 414(u)(1).

/20/ See IRC 414(u)(8)(B).

/21/ See IRC 414(u)(8)(C).

/22/ See IRC 414(u)(4).

/23/ See footnote 15.

/24/ See footnote 15.

Lowell J. Walters is an attorney who focuses on Retirement Plan, Welfare Plan and Related Tax Issues with the law firm of GrayHarris.

Copyright 2003, Lowell J. Walters
GrayHarris
201 North Franklin St., Suite 2200
Tampa, FL 33602
(813) 273-5000
(813) 273-5145 fax
www.grayharris.com