Proposed USERRA Regulation Clarifies 401(k) Contribution Rules

September 24, 2004 ( - The proposed regulations released with the intent of clarifying the Uniformed Services Employment and Reemployment Act of 1994 (USERRA) have made it clear that returning service men and women must be allowed to make up any voluntary contributions to a 401(k) plan missed while away on service.

>Also, an employee who cannot make up missed tax-deferred contributions to a plan because he or she no longer works for the plan sponsor must be given the opportunity to receive the maximum matching contribution available under the plan through a match of after-tax contributions, according to an EBIA report.

>The regulations also make clear that USERRA requires employers to make up any contribution that would have been made to a 401(k) had it not been for the employee absence. If the plan included matching contributions, then the employer is required to make the contributions only to the extent that the returning service member makes catch-up contributions within a certain time frame. USERRA does not state this time frame; however, the proposed regulations would set out these guidelines. For a plan in which an employer is not permitted or required to contribute, employer contributions must be made within 30 days of the employee’s reemployment, except under exceptional circumstances. Matching contributions must be made “according to the plan’s requirements for employer matching contributions,” according to the proposed regulations.

>The proposed regulations were released earlier this week, and the Department of Labor is requesting comment on the proposed rules (See DoL Proposes Regulations Clarifying USERRA ). The rule clarification comes following a rise in complaints by returning veterans regarding the reemployment process (See DoL Reminds Employers of Soldier-Rehire Law after Complaints Rise ).