Under the Heroes Earnings Assistance and Relief Tax Act of 2008 (“HEART Act”) and the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) military persons and their survivors or beneficiaries are afforded additional rights and benefits regarding their 403(b) and 457 Plans.
Under USERRA an employee who leaves a civilian job for qualified military service generally is entitled to be reemployed by the pre-service civilian employer if the individual returns to employment within a specified period and meets the other eligibility criteria. USERRA also provides that an individual, upon reemployment, is entitled to receive certain pension, profit-sharing, and similar benefits that would have been received but for the employee’s absence during military service.
Section 414(u) of the Internal Revenue Code provides rules regarding the interaction of USERRA with the rules governing tax-qualified retirement plans. Section 414(u)(8) provides, in part, that an employer maintaining a plan is treated as meeting the requirements of USERRA only if: 1) an employee reemployed under USERRA is treated as not having incurred a break in service because of the period of military service, 2) the employee’s military service is treated as service with the employer for vesting and benefit accrual purposes, 3) the employee is permitted to make additional elective deferrals and employee contributions in an amount not exceeding the maximum amount the employee would have been permitted or required to contribute during the period of military service if the employee actually had been employed by the employer during that period, and 4) the employee is entitled to any accrued benefits that are contingent on employee contributions or elective deferrals to the extent the employee pays the contributions or elective deferrals to the plan.
The applicable sections of the HEART Act are section 104 (relating to survivor and disability payments with respect to qualified military service), section 105 (relating to treatment of differential military pay as wages), and section 107 (relating to distributions from retirement plans to individuals called to active duty).