Mechanics of USERRA make up contributions.

[Guest Jose Rosario]

My understanding is that USERRA prohibits discrimination against employees because of membership in the uniformed services, however, the employees are not allowed to make greater contributions than they could have made if they had not left at all. Thus, a USERRA eligible employee is limited, I think, by the Plan's, as well as the Code's, limits. So, I think we need to ask two questions: 1) When would the employee have been able to change his deferral rate; and 2) By how much, within the Plan's, as well as the Code's, limits.

I would appreciate any sites/guidance people may be able to provide on the subject. I worked up the following examples and answers for comment.

EXAMPLE 1

If a person was on leave for military service and was deferring 4% of pay when they left, they served for 12 months during which their salary would have been $40,000. The make up amounts they can add to new contributions upon return is $1,600. And if the company matches 100% up to 6% then they need to match the $1,600 as it is made.

Or, can the participant claim they want to make up 6% as military catch up and receive the full 6% in match in addition to any match due on current contributions.

Answer 1

If their Plan was a calendar year Plan that permitted deferral rate changes only annually on 1/1, and they left for service on 1/2, they may be limited to 4% upon returning. Note, if they were gone for two years, they could increase to 6% for the second year when they returned, because, but for their military service, they would have been able to do so.

On the other hand, if their Plan was a calendar year Plan that permitted deferral rate changes each calendar quarter, they could indeed make 6% as military catch up and receive the full 6% in match in addition to any match due on current contributions for the first, as well as the second, year of their eligible service.

EXAMPLE 2

If the leave extends over calendar year how does the catch up work?

For example,

Jan - Nov - works and defers 6% or $2,200 on his salary of 11 months in 2002. Leaves for service end of November 2002 returns the following November in 2003. Does he have the right to make only the 6% or can he make up $8,800 for calendar year 2002 and another $12,000 for calendar 2003 during the 36 month repayment period?

ANSWER 2

If their Plan was a calendar year Plan that permitted deferral rate changes only annually on 1/1, or was a calendar year Plan that permitted deferral rate changes each calendar quarter, then they may be limited 6% for the months of November and December 2002, plus $12,000 for calendar 2003, during the 36 month repayment period.

[Guest CRC02]

Section 414(u)(1)(A) of the Code specifies that the Code limits in 402(g) do not apply with respect to a year in which an individual is making up contributions for time spent in qualified military service. 414(u)(1)(B) specifies that a contribution is subject to the limits of 402(g) for the year to which the contribution relates.