403(b) / 457(b)Transactions/Distributions: What is HEART Section 104(b)?

Section 104(b) of the HEART Act adds a new § 414(u)(9) to the Code. Under § 414(u)(9), an employer sponsoring a retirement plan may, for benefit accrual purposes, treat an individual who dies or becomes disabled while performing qualified military service as if the individual had resumed employment in accordance with the individual’s USERRA reemployment rights on the day preceding the death or disability and then terminated employment on the actual date of death or disability. Section 414(u)(9) also provides that this provision applies only if all individuals performing qualified military service with respect to the employer maintaining the plan who die or become disabled as a result of performing qualified military service prior to reemployment by the employer are credited with service and benefits on reasonably equivalent terms. Section 414(u)(9)(C) provides that the amount of employee contributions and the amount of elective deferrals of an individual treated as reemployed under § 414(u)(9) are determined on the basis of the individual’s average actual employee contributions or elective deferrals for the lesser of: (1) the 12-month period of service with the employer immediately prior to qualified military service, or (2) the actual length of continuous service with the employer.

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