HEART Act Protects Military Personnel
The Heroes Earnings and Assistance and Relief Tax Act of 2008 (HEART Act) essentially picks up where the Uniformed Services Employment and Reemployment Rights Act (USERRA) left off, providing enhanced benefits for those in military service. Some of the interesting highlights are as follows:
Retirement Plans (Tax-qualified retirement plans, including 403(b) and 457 plans) must treat participants who die while performing USERRA-qualified military service as if they had died while actively employed for purposes of applying plan provisions relating to survivorship benefits (e.g., full vesting and ancillary death benefits). Plans may treat individuals who die or become disabled while performing USERRA-qualified military service as if their death or disability had occurred immediately after reemployment. For example, this would enable a plan to credit the individual’s plan account with the retroactive benefit accruals he or she would have received under USERRA upon a qualifying reemployment . These requirements apply to deaths and disabilities occurring on or after January 1, 2007.
In addition, effective for years beginning after December 31, 2008, a tax-qualified plan may permit a participant who is on active military duty for more than 30 days to receive a distribution of his or her elective deferrals. The individual is treated as if his or her employment had been terminated. As with safe harbor hardship distributions, the participant’s right to make on going elective deferrals will be suspended for six months following the distribution.
Effective June 17, 2008, a cafeteria plan may permit a reservist called to active duty to receive a distribution of unused health FSA amounts. The purpose of this provision is to prevent a reservist called to active duty from forfeiting his or her unused balance under the “use it or lose it” rule. The distribution must constitute a “qualified reservist distribution.” A qualified reservist distribution is specifically defined as a distribution (a) to an individual who is a member of a military service unit ordered or called to active duty for a period in excess of 179 days or for an indefinite period (b) that is made between the date of the order or call to active duty and the last date that reimbursements from the health FSA could otherwise be made for the plan year that includes the date of the order or call to active duty (i.e., the last day of the claims submission period following the end of the plan year).
