* Last of three columns on the financial impact of military service. As you who are reservists leave your jobs for military assignments, you and your families as well as your employer must know your company's position regarding vacations, leaves absence, re-employment rights, insurance, health plans and pension benefits. The issue is raised by the Persian Gulf crisis because the nation is not technically at war, and many of the legal requirements are not clear.
Eli J. Warach, editor of Maxwell Macmillan/Prentice Hall's 1991 Federal Tax Handbook, has searched his company's wide resources to enable me to report to you what employers must do under federal law -- and to examine key questions.
RE-EMPLOYMENT: Under the Vietnam Era Veterans' Readjustment Assistance Act, employers must grant reservists leaves of absence for military service. They also must offer reservists and National Guard the same or similar jobs when they return to work from active duty. This rule covers and controls all private employers, regardless of size.
Reservists must "request" a leave of absence for training duty. Employers may not deny the request where active duty is involved.
As a reservist, you maintain your reinstatement rights for up to a total of four years of active service -- or longer if the government requires you to serve additional duty. But watch this: Employee-reservists lose these rights if they do not perform the military duty in a satisfactory manner.
Reservist employees must be reinstated, in general, to their previous jobs or to positions of "like seniority, status and pay." In addition, the Supreme Court has established that returning employees must be given the position, compensation and benefits they would have earned if they had not been called to active duty.
PENSION PLANS: Federal law affecting reservists does not specifically mention pension benefits. But the Supreme Court has ruled that reinstatement with "seniority" includes the right to service credits under a pension plan. The court ruled in 1977 that a returning employee must be granted credit during military leave for both vesting and benefit accrual purposes.
But watch this: Profit-sharing contributions, in general, do not have to be made while you are on active duty. However, active duty time must be counted toward vesting tests.
Some plans fall between the strict pension and profit-sharing categories. There do not seem to be any definite legal rules. It is a good guess that the following would happen:
Employers would be required to give credit for time for defined-benefit type plans (pension-like), while they would not have to continue contributions under defined contributions (profit-sharing) plans.
It is probable that employers would not have to contribute to a 401(k) or savings plan for employees on active duty.
Reservists should be given the rights held by active employees under the plan.
Some employers may, in fact, take the position that the call-up itself is an event that would justify a 401(k) hardship distribution. The rule is that an employee faces a hardship when he or she has an immediate and heavy financial need. This means that a hardship distribution from the plan is justified if there are no other resources to meet that need.
Keep in mind if you have borrowed from your 401(k) or savings plan: Under the Soldiers' and Sailors' Relief Act, interest on obligations incurred by a reservist prior to the date of the call-up is restricted to 6 percent during the period of active duty. In addition, the Act forbids any attempt to foreclose on assets securing the loan during this period.
Some companies are contemplating going beyond legal requirements -- as well as their own written policies -- in recognition of the unique circumstances, according to Hewitt Associates, an international benefits consulting firm.
1989 Los Angeles Times Syndicate
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