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Winter 2006-06 U.S. Labor Department promulgates final regulation implementing USERRA

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Number 62
Winter 2006

U.S. Labor Department promulgates final regulation implementing USERRA

The Department of Labor's Veterans Employment and Training Services promulgated a final rule on December 19, 2005, implementing the Veteran Benefits Improvement Act amendments to the Uniformed Services Employment and Reemployment Rights Act.

The regulations took effect on January 18, 2006, giving employers less than a month to bring employee benefits procedures into compliance with USERRA.

The DOL also issued a final (and revised) version of the USERRA notice that informs employees of their rights, benefits and obligations under USERRA.

In general

In general, for purposes of determining benefits under a welfare (including health and disability plans) or pension plan, a reemployed veteran or service member must be treated as though the employee had remained continuously employed during the military leave.

Notice requirement

USERRA requires employers to notify employees of their rights under the law. Employers may meet this requirement by displaying the text of the notice where they customarily place notices for employees. There are a number of alternative means by which an employer may achieve compliance (including electronic communication).

Health plan benefits

The regulation pertaining to health plans details how employees choose and pay for continued coverage during military service, the amount they must pay, the health plan administrator's obligations during continued coverage and upon reemployment of the veteran, and the type of health plans covered. If the insurance plan does not state who is the plan administrator, the Employee Retirement Income Security Act establishes a presumption that the administrator is the employer.

Continuation of coverage and reinstatement

The regulation permits employers to cancel an employee's health insurance if the employee departs for military service without advance notice or without electing continuation coverage, unless circumstances warrant retroactive reinstatement. However, there are no time frames for employers to follow when setting up these procedures. The only guideline given to employers is that the procedures and time frames be "reasonable."

If a plan administrator does not establish reasonable time periods for election and payment of premiums, the plan is required to reinstate continuation coverage if the employee elects coverage, and pay premiums in full within the maximum coverage period allowed by USERRA. This maximum coverage period is 23 months, which is longer than the time a plan could choose to establish as a reasonable deadline for elections to reinstate coverage.

Upon reemployment, a veteran or service member must be allowed to reenter the employer's health plan without any waiting period or exclusion.

The final regulation also states that employers who use third party insurance plans to provide coverage must negotiate coverage that is compliant with USERRA to avoid liability for not reinstating coverage upon reemployment.

Definition of "pension plan"

USERRA defines a pension or retirement plan in the same way that ERISA defines the term. In addition, plans excluded from ERISA requirements may be subject to USERRA, including church plans and government plans.

Counting military service

No break in service is deemed to have taken place under USERRA if a veteran or service member is reemployed. All time before, during and after military service is counted as service for purposes of vesting, accrual and eligibility, including time spent applying for reemployment, or recovering from an illness or injury incurred through military service.

Repaying contributions

Employers now have a longer period to make contributions that are not linked to employee contributions or deferrals. Employers must make contributions within 90 days after an individual is reemployed rather than 30 days, or when contributions are normally made for the year in which service was performed, whichever is earlier.

Employees may make up missed contributions or deferrals during the period starting with their reemployment date and continuing for up to three times the length of the employee's military leave, not to exceed five years. If a reemployed employee leaves and returns to work again with the same employer, the employee may still resume payments within the statutory period described above.

Although a service member can repay amounts withdrawn from a plan before military leave, the final regulations limit this provision to defined benefit plans.

What is an "employer"

The definition of the term "employer" is broad and includes insurance companies and (in some cases) supervisors and managers, which could result in an insurance company violating USERRA to the extent it refuses to allow a participating employer to comply with the prohibition against imposing exclusions or waiting periods when an employee returns from military leave. The definition of "employer" excludes third-party entities that perform purely administrative functions, such as maintaining an employer's personnel files.


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