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Reservists Called to Active Duty Entitled to Job, Benefits Protected

  • October 15, 2001

As thousands of employees are called to active military duty in response to the September 11 terrorist attacks, employers should be prepared to address employee concerns regarding the impact of military leaves on their jobs and their employee benefits, especially health and retirement plans. The Uniformed Services Employment and Reemployment Rights Act (USERRA) was adopted in the wake of the Gulf War, and it gives employees who are called to active military duty substantial protections while on military leave and upon reemployment. USERRA applies to virtually all employers regardless of size.

Right to Leave and Reinstatement

USERRA requires that employers provide up to five years job-protected leave to activated reservists. While this leave is unpaid, reservists are entitled at their option to payment of accrued but unused vacation time. Returning reservists must be given their previous job back. If otherwise entitled to a promotion while away on active duty, the reservist must be returned to that elevated position. Reservists can only be discharged for cause for certain time periods after return based on the length of absence.

Health Benefits

Continuing Coverage Requirements.
Under USERRA, employers must offer employees on military leave the opportunity to continue health coverage for themselves and their dependents (even dependents covered by CHAMPUS, the military’s health plan for dependents) for up to a maximum of 18 months. This requirement extends to medical, dental, and vision benefits provided through traditional indemnity arrangements, health maintenance organizations, self-insured group health plans, and medical reimbursement accounts. An employer is required to offer the continued coverage even if the employer does not provide health coverage during other leaves of absence, and regardless of whether or not the employer is subject to COBRA. An employer usually can charge up to 102% of the premium cost for the coverage. However, if an employee’s military leave is less than 31 days, the employee cannot be required to pay more than active employees.

Interaction of USERRA with COBRA.
USERRA coverage and COBRA coverage can operate concurrently. This means that the USERRA coverage does not extend the maximum period of COBRA coverage. However, this also means that employers’ COBRA responsibilities to employees who take military leave will continue during the 18-month period of continued coverage, and employers will be required to provide COBRA notices and elections to extend a dependent’s period of coverage in cases of death, divorce, or loss of a child’s dependent status. Employers should be sure that the COBRA materials given to employees taking military leave clearly explain that the USERRA coverage and COBRA coverage run concurrently.

Reinstatement of Coverage Requirements.
Even if the health coverage for an employee on military leave terminates (or even if the employee does not elect the continued coverage), employers are required to reinstate coverage to a returning employee without imposing any coverage exclusions or waiting periods that would not have been imposed if the coverage had not been terminated. However, this protection does not apply to the coverage of any illness or injury that was incurred or aggravated during the performance of military service.

Qualified Retirement Plans

If an employee returns to employment following military leave, an employer may not treat the period of military leave as a break in service under qualified retirement plans. In addition, employers must recognize the period of military leave as continued service for vesting purposes.

Benefit Accrual under Defined Benefit Plans.
Employers must recognize the period of military leave as continued service for benefit accrual purposes under defined benefit pension plans.

Defined Contribution Plan Requirements.
Under USERRA, employers are required to make up contributions to defined contribution plans on behalf of reinstated employees for the period of time that the employee was on military leave. However, employers are not required to credit earnings on the contributions or to make forfeiture allocations. Employees who return from a period of military leave are also entitled to make up their 401(k) salary deferral contributions and/or required employee contributions from the period of leave. These make-up contributions cannot exceed the amount that would have been allowed or required if the employee had remained employed throughout the period of military service. The employees can make these contributions over a period up to three times the period of military service, but not longer than five years after reemployment. When an employee pays the plan make-up contributions, the employer must also make matching contributions that would have been required had the employee made the same contributions during the period of military service.

In calculating either employer or employee contributions, an employer must generally use the rate of compensation that the employee would have received if the employee had not entered military service. If this figure is not reasonably certain, the employer may use the employee’s average rate of compensation during the 12-month period immediately preceding the period of military leave.

Other Employee Benefits

Employees on military leave are entitled to continuation of other employee benefits that are provided to employees on other types of leave, such as FMLA absences. Once reemployed, these employees are entitled to the seniority and other rights and benefits they otherwise would have had but for the military leave. For example, if the amount of vacation time or any other benefit is determined based on length of service, military service must count for those purposes.


Employer awareness of the impact of a military leave of absence on health, retirement and other benefits will be important as employees are called to engage in active military duty. Employers found to be in violation of USERRA can face lawsuits or administrative actions seeking back wages and benefits, liquidating damages, and attorneys fees and costs. Employers need to be aware of their obligations to activated reservists as these issues begin to surface.