IRS Logo
Print - Click this link to Print this page

Retirement Plans FAQs regarding USERRA and SSCRA

The Spring 2003 Edition of the Employee Plans News presented an article describing the Uniformed Services and Reemployment Rights Act (USERRA) and the Veterans and Sailors Civil Relief Act of 1940 (SSCRA). The article included several frequently asked questions concerning the re-employment of veterans and the restoration of retirement plan benefits.
 

Due to the interest generated by the article, supplemental FAQs on this topic have been collected and are presented below. Additional USERRA-related FAQs will be posted as they develop.
 

Additional Information:
 

USERRA is administered by the Department of Labor, through the Veterans' Employment and Training Service (VETS). Information and a USERRA Resource Guide are available (see www.dol.gov.vets). In addition, frequently asked questions for reservists being called to active duty (including those which focus on the continuation of health care for reservists and their families) may be found on the DOL site.
 


These frequently asked questions and answers provide general information and should not be cited as any type of legal authority. They provide the user with information responsive to general inquiries. Because these answers do not apply to every situation, yours may require additional research.



Employer Contributions:

  1. What is the basic rule for employers re-employing veterans?
  2. How does that work for profit-sharing or money purchase pension plans?
  3. How should compensation be calculated for the leave?
  4. How long does an employer have to make these makeup contributions?
  5. Are there special rules for forfeitures or lost earnings?


Employee Contributions:


Participant Loans:


W-2 Reporting:


What is the basic rule for employers re-employing veterans?

Employers must fund pension benefits that a re-employed participant did not receive due to qualifying military service.


Return to List of FAQs
 

How does that work for profit-sharing or money purchase pension plans?

Employers must make the non-elective employer contributions that would have been made during the military service period.


Return to List of FAQs
 

How should compensation be calculated for the leave?

To calculate the amount of the makeup contributions and allocations, assume the rehired employee earned compensation at the same rate they would have received during the military service period (Code section 414(u)(7)). If this is not reasonably certain, use the employee's average compensation during the 12-month period immediately preceding the qualified military service.

Return to List of FAQs
 

How long does an employer have to make these makeup contributions?

The employer does not have to begin the makeup contributions until after the veteran returns to civilian employment with the same employer. The employer's makeup contribution period is equal to three times the period of qualified military service - not to exceed five years.

If the employer contributions were contingent on the employee making elective contributions and the employee makes up the missed contributions, the employer must make up its contributions over the same period the veteran uses to pay the makeup deferrals.

Return to List of FAQs
 

Are there special rules for forfeitures or lost earnings?

A rehired employee is not entitled to additional benefits for allocations resulting from any forfeitures that occurred during the military service period, nor lost earnings on makeup contributions.


Return to List of FAQs
 

Are there rules for contributory defined benefit plans?

A rehired veteran must be permitted to make up missed contributions required to earn a benefit accrual for the military service period.

Return to List of FAQs
 

How long do rehired veterans have to make up elective contributions?

A rehired veteran has up to three times the period of service - not to exceed five years - to make up missed employee contributions. The amount of makeup contributions is subject to the limits that would have applied during the military service period.


Return to List of FAQs
 

When an employee is gone for more than one year, for which year does the makeup contribution apply?

The employee designates the specific year or years their contributions cover.


Return to List of FAQs
 

In a 401(k) plan, who decides whether the returned employee's 401(k) contribution is a makeup contribution or a current deferral?

The employee designates what period the contributions cover.


Return to List of FAQs
 

What is the impact on a veteran covered by both an employer plan and governmental plan under Code section 402(g)?

The law provides that the employee may make up elective deferrals to the extent that the employee could have made them (see Code section 414(u)(2)(B)). These deferrals are adjusted for any elective deferrals actually made during the period of qualified military service.

Return to List of FAQs
 

Can a plan allow for a suspension of plan loan repayments when the participant is performing military service?

Yes.

Return to List of FAQs
 

What happens to the loan when the veteran is rehired?

The participant must resume loan repayments when the military service ends with the payment frequency and amount at least equal to the pre-military schedule. The rehired veteran must repay the full loan amount (including interest accrued during the military service period) by the end of the maximum term for the original loan plus the military service period.


Return to List of FAQs
 

Is there a cap on the interest rate used during the military service period?

Participant loan interest accrued during the military service period is generally limited to no more than 6%. The participant must supply a copy of the military orders to the plan sponsor and must ask that the 6% interest rate limit be applied.


Return to List of FAQs
 

An employee elects to do employee makeup contributions to his 401(k) and the contributions span a few years. Such makeup contributions exceed the current year 402(g) limit. How should these contributions be recorded on the W-2 without appearing to exceed the current year limit?

Report the prior year contributions separately in Box 12 as a "Code D". Beginning with the earliest year, enter the code, the year and the amount. For example, elective deferrals of $2,250 for 2003; $1,250 for 2004 and $7,000 for 2005 would be entered in Box 12 as follows:

  • D 03 2250.00
  • D 04 1250.00
  • D 7000.00


The 2005 contribution does not require a year designation. Report the code and the year for the prior year contributions to the left of the vertical line in boxes 12a-d. See Instructions, Forms W-2 and W-3, page 11.
 

For reporting USERRA makeup non-elective contributions, voluntary after-tax contributions, required employee contributions and employer matching contributions, use box 14 and report each amount separately for each year. See Instructions, Forms W-2 and W-3, Forms W-2 and W-3, page 13.

Return to List of FAQs
 
Page Last Reviewed or Updated: 21-Nov-2013