USERRA

[pookah]

A plan has an employee on leave for uniformed service. The plan would like to make current contributions to her profit sharing account while she is gone and also include her for testing purposes (she was a critical cog to testing).

I can't find anything to preclude an employer from funding a person on leave's account currently and if they do so, is there any reason not to include that participant in 401(a)(4) testing.

Thanks

[QDROphile]

Is the leave unpaid? What is the formula for allocation of contributions? The plan has to be operated in accordance with its terms, so you might need to find something that says you can make a contribution for which there is no basis in the plan document. I don't think USERRA will do that for you. USERRA is generally about what employers are required to do; employers are not required to provide compensation (imputed or otherwise) or benefits during the military leave.

The nest feathering will just cost a bit more this year. Consider it a war tax.

[chc93]

But note that any missed contributions while on USERRA leave is only paid to the plan after return from deployment and return to employment within a specified number of days (based on length of deployment). So without return to employment within the specified time, I don't think a contribution is possible, even if desired. Seems like it would be like giving a contribution to someone who is not an employee. And as QDROphile says, there should be a basis for a contribution. If not an employee, there wouldn't be any basis.

[ESOP Guy]

I am with chc93 USERRA only requires a make up contribution if the person comes back to work for them after their military leave. You don't know if they will come back yet so USERRA doesn't apply.

I believe you will find the plan document reflects USERRA's rules so you will be operating outside the terms of the plan document. That would be a disqualifying defect to the plan.

[Peter Gulia]

pookah, is it possible for the employer to meet its purpose by providing a differential wage for those of its employees who are on military absence and applying the plan's (current or amended) contribution and allocation provisions counting the differential wages?

[pookah]

The way I read 20 CRF 1002.262, "The employer is not required to make its contribution until the employee is reemployed.", while the employer is not required to make its contribution until then, it is not precluded from doing so earlier.

The question is whether a contribution is required unless the employee on uniformed leave returns. §414(u)(1)(a) says that any contribution shall not be subject to any otherwise applicable imitation of §§404(a), 404(h) and 415, among others if such contribution is required by reason of such employee's rights under chapter 43 of title 38, United States Code, resulting from qualified military service. What if the employer chooses to roll the dice in the interim.

Does it help (or make the argument) if the employer provides some modicum of differential pay (as commented by Peter, above?

[chc93]

pookah... I agree with you. But again, as others have mentioned, there has to be a basis (usually compensation) for a contribution allocation while on leave. If I remember correctly, I was asked once if they could give a substantial bonus just before being deployed so that there will a basis for a "normal" contribution (no last day of work requirement).