Military Leave and 401(k) Contributions

If a person goes on military leave, it is my understanding they cannot make any type of contributions to the 401(k)plan, even if they want to make it from their military pay. Correct? Our physicians fund a profit sharing plan for a portion of employees' retirement separate and apart from 401(k). This would have to contiue. Correct? This person will be gone for over a year on military duty.


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  • I don't know about private, but I know that we (a municipality) were required to continue to make contribution to employees pension/retirement plan while he was deployed.
  • Rockie,

    You are correct that the participant can not make elective deferrals from military pay. However, the participant can "make up" deferrals once he or she is reemployed after the absence (and any missed company match must be credited to the participant.) Participants must also receive vesting and benefit credit for the time they were absent once they are reemployed (which would directly affect the profit sharing plan as well as the 401(k).)

    USERRA, passed in 1994, provided several protections for retirement plan participants while they are absent because of protected military service. When your plan documents were restated recently for GUST, the USERRA amendments should have been included in the restatements.

    The above are just a few general requirements of USERRA. There are specific guidelines as to how these requirements should be implemented (for example, there is a limit on the time a participant can make up deferrals upon returning to employment.) If you would like I can fax you a recap of USERRA requirements which might be a good starting point.

    Hope this helps.
  • Hi Jen!

    Yes, you can fax to me at (803) 376-2870 or you can email at
    [email][/email]. Thanks for your help. Very informative.
  • You are probably right but one should read the plan documents and follow the plan document. The (SPD) Summary Plan Document may cover the military connection. Go to [url][/url] there is a USERRA facts, Question and Answers for Employers there. Also at [url][/url] is another location for information on military leave of absence. Basic understanding is that the employee is not present but everything that is available to other employees of equal status would, likewise, be available to the civilian/soldier as if he/she was there. Employer contributions to the civilian/soldier's accounts would proceed as if he/she was still present but making $0.00 contributions, this comes into play most likely at the end of the year when profit sharing amounts or discretionary awards are added to current plan participants. Once he/she returns, your plan may have an opportunity for the employee to make a catch - up payment and it be matched, accordingly. Follow your published policy and procedures as if he/she were there. Our policy allows us to pay the employee for their holidays missed and awards vacation time on their anniversary date. Since we do not want the expense to hit us in one period, we usually make arrangements with the civilian/soldier to cut them a check to pay out the holidays and vacation time during the year. You must follow your policy or be in trouble with the Feds.

    Good luck, whatever you do, do not terminate or discriminate without the employee's written understanding and a waiver of his/her rights under USERRA. We are facing that now, because we thought the employee was and did, infact, lead us to treat him/her as a "voluntary quit", so that he/she could get his/her 401K monies out, as a terminated employee. A year and a half later the x-employee denies any knowledge of our actions and has the "attorney dogs" hot after our trail. It is not nice, but we could not have been a nicer guy, as we were, and helped the individual get around plan rules. Oh how I wished now that I had briefed him and made him put in writing his "voluntary quit" resignation. We did not because we do not require any one to resign by letter format, verbal quits are acceptable. You can bet our future civilian/soldiers will comply with every aspect of our policy and they will not be informed of the "play off of rules, one against another" opportunities.
  • So, Pork, are you saying the employee continues to accrue vacation time per pay period as if he were still with us? It is our policy not to allow employees on leave to accrue PTO time, but I know this law is very stringent and I sure don't want to get into trouble with the FEDS. Thanks.
  • Rockie, look at page 9 of "A Non-Technical Resource Guide to the Uniformed Services Employment and Reemployment Rights Act" (USERRA), put our by DOL dated October 2001. This is a very handy document to have on hand. It has a service member and employer checklist in the last three pages that is very helpful. My future civilian/soldiers will get a copy of this document and I will answer their questions but I will no longer lead them into any personal beneficial decision. They will make their decisions and put in writing how they want us to play. Sorry for my length, but the "dawgs are hollowing" and I may not have much time left.
  • Rockie, Here it is [url][/url]. From here you can go to any piece of the law. I could not find the Non-Tecnical guide; it is in there somewhere. I am having the local vet office with DOL e-mailing me a copy. Give me your e-mail address and I'll forward it on to you. Why all this because I need to work out my frustrations over this issue and it might as well be worked out with helping someone else that might follow my wrong path. Pork
  • Pork: I have the guide and it is very useful. Always a good idea to get everything in writing from employees. They always claim amnesia when things don't go their way. Thanks for your help and good luck with the dawgs!
  • Rockie, Thing is, everything did go his way. He knew exactly what he was doing and now claims amnesia in order to get things to continue going his way. Of course, the DOL has jumped all over this a "primia facia" case in their view. The poor employee done wrong by the big daddy employer! The DOL was not getting very far, so they planted the seed to get a personal attorney "dawg" and they will assist in petting the "dawg". Its called "joining in on the dawg fight"! We got our attorney "dawg" on board today. I'll let you know who wins most, likely no one; it is a loose loose situation for everyone. DOL wanted him to get back pay and benefits from the date he was discharged from the military service to the day he starts to work. USERRA states, if proven we willfully did this, the package could be doubled. Right now it is about $12,000.00. Doubled gets to be $25,000.00 and of course his "dawg" is going after a Title VII issue for sure. Ain't it fun being in the HR business! To your other question of exclamation, yes we do pay our civilian/soldiers their holiday pay. Now our civilian/soldier who is also an exempt employee which your physician may very well be do not get holiday pay while on military leave of absence. Their sick time is based on computer generated hours worked so the sick paid hours do not accumalate. The vacation hours get awarded based on a minimum 40 hour week and we do pay it out to all employees each year. They do not have to use it or loose it. When our employees need some extra money for something we let them sell their vacation hours. We owe it and would rather pay it out over the year rather than all at one performance period.
  • Rockie: An Up-date, the Feds have backed out of the case as the x-employee has retained an attorney. We have also put the case in the hands of our attorney and now the time clocks are marching to their $75.00 per hour schedules. Our position remains that the employee "voluntary quit" when he sold his vacation time and sick time accurred and then was no longer available for work. We had no orders on file and abided by his wishes to take off before he deployed overseas. Additionaly, he cashed out his 401 K as a terminated employee, which he was not otherwise entitled to receive as a civilian/soldier on military leave. He also did not reapply within the 90 day limit specified by the law. We are waiting to see where the attorneys will get this thing! We messed up when we did not get the employee to sign a resignation. Pork
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