labor lawAdivision of labor law center

Two recent changes to the law require employers to change their benefits for employees who serve in the Military Reserve.

 

The Heroes Earnings Assistance and Relief Tax Act or HEART Act requires employers to permit distributions from healthcare flexible spending accounts. The law prevents a “use-it-or-lose-it” policy for qualified reservists. Under the new law, reservists cannot lose unused funds, as can other employees under cafeteria benefits plans. Reservists must be permitted to withdraw the funds without penalty.

 

The new regulations went into effect in the middle of 2008, but many employers still struggle with compliance.

 

Under the HEART Act, benefit plan sponsors must amend cafeteria plans to allow distributions to qualified military reservists and notify all participants – not only qualified reservists – of the changes.

 

The law also permits active duty reservists to withdraw money from their retirement plans including a 401k for up to two years following the end of active duty, without penalty.

 

The law gives small businesses with 50 or fewer employees a tax credit when they pay reservists a wage differential to make up the difference between the reservist’s military pay and his or her civilian wages.

 

It also creates a series of tax credits and incentives for members of the U.S. military and their families, on their 2008 taxes.

 

wages and the pay they receive during active military duty. These tax credits take effect in 2008 and will be reflected on the employer’s 2008 tax returns.

 

According to New York Representative Charles B. Rangel, “This bill enhances [military reservists’] ability to get tax benefits such as the Earned Income Tax Credit, buy homes, make penalty-free withdrawals from their pension plans, access amounts held in flexible savings accounts, and remove other impediments that keep them from getting the relief they deserve.”

 

The act increases the protection of benefits, civilian jobs and wages that active reservists currently enjoy under USERRA.  Those benefits are fully spelled out on mandatory USERRA posters.

 

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