USERRA1 was enacted October 13, 1994 to “clarify and strengthen” the Veteran’s Reemployment Rights (“VRR”) Statute and other laws protecting veterans originating with the Selective Training and Service Act of 1940.2 In addition to protecting jobs for veterans, USERRA protects employee benefits as well. The Department of Labor (“DOL”) regulates health benefit claims under USERRA through the Veterans’ Employment and Training Service (“VETS”) and the Department of Defense (“DOD”) has issued regulations that address veterans’ reemployment rights.

Generally, there are five criteria that must be met before an employer must comply with USERRA:

1. The person must have held a civilian job;
2. The person must have given notice to the employer that he or she was leaving the job for service in the uniformed services, unless giving notice was precluded by military necessity or otherwise impossible or unreasonable;
3. The cumulative period of service must not have exceeded five years;
4. The person must not have been released from service under dishonorable or other punitive conditions; and
5. The person must have reported back to the civilian job in a timely manner or have submitted a timely application for reemployment.

There are two distinct continuation health benefit plan requirements under USERRA provided to employees who are in “service in the uniformed services”3: continuation of existing employer coverage for a limited period of time during uniformed service, regardless of whether the employee ever seeks reemployment, and the opportunity to participate in the employer’s health plan without meeting initial eligibility requirements upon reemployment after service.

 

Continuation of Existing Health Benefit Coverage under USERRA

USERRA broadly applies to all ERISA health plans, as defined under ERISA Section 733(a),4 including multiemployer and single employer group health plans, as well as insurance policies and contracts, medical and hospital service agreements, and any other arrangement under which any employer, public or private, pays for health services for its employees.5

An employee who is covered under a health plan in connection with his or her employment, must be permitted to elect to continue the coverage for a period of time “beginning on the date on which the employee’s absence for the purpose of performing service begins, and ending on the date on which he or she fails to return from service or to apply for a position of employment,” up to a maximum of 24 months.6 The plan has the option of offering coverage for an extended period of time. If the plan offers dependent coverage, the continuation coverage must offer it as well.7 COBRA (Consolidated Omnibus Budget Reconciliation Act) regulations provide that USERRA coverage is an alternative to COBRA and therefore USERRA and COBRA continuation coverage run concurrently, not consecutively.8

Also, like COBRA continuation coverage, USERRA does not require the employer to establish a health plan if one does not already exist, nor does it require the employer who has a plan to provide any particular type of coverage or increased coverage. The statute also does not require the employer to permit the employee to initiate new health plan coverage at the beginning of a period of uniformed service if he or she did not previously have such coverage.9

 

Election of Continuation Coverage

USERRA does not specify requirements for electing continuation coverage and plan administrators may develop reasonable requirements that address how to elect continuation coverage, which is unlike the requirements of continuation coverage under COBRA. Other procedures may be similar to the COBRA notice, election, and timing requirements, but they must be consistent with the terms of the plan and USERRA’s exception to the requirements that the employee give advance notice of uniformed service to the employer or to the hiring hall.10 When the employee returns from service, health coverage must be reinstated without any waiting period or exclusions for preexisting conditions, other than waiting periods or exclusions that would have applied even if there had been no absence for uniformed service. This rule does not apply to the coverage of any illness or injury determined by the Secretary of Veterans’ Affairs to have been incurred in, or aggravated during, performance of service in the uniformed service. The employee cannot be precluded from electing continuation coverage if he or she is prevented from doing so timely by military necessity or because it is otherwise impossible or unreasonable to give notice under the circumstances.11 Only a designated authority can make a determination of “military necessity” and such a determination is not subject to judicial review.12

 

Administrative Procedures for Election and Payment of USERRA Coverage

Payment of Premium

An employee performing service in the uniformed service for fewer than 31 days cannot be required to pay more than the “regular employee share,” if any, for health plan coverage and that employee is considered to continue with health care coverage, “as if the service member had remained employed.”13 In the case of multiemployer health plans, liability for employer contributions and benefits is allocated in the manner that the plan sponsor provides; if the plan sponsor is silent on the matter, it is allocated to the last employer who employed the person before the period of uniformed service began, and if that employer is no longer functional, then the plan has the responsibility of providing such benefits.14 It appears that multiemployer plans that use an eligibility account system, such as an hour bank or money bank, may apply the normal monthly charge-off specified in the plan, such as a deduction of, for example, 120 hours from the bank at the beginning of the month of coverage.15

An employee performing uniformed service for 31 or more days may be required to pay no more than 102 percent of the full “premium” or stated actuarially calculated contribution rate for coverage under the plan, which represents the employer’s share and the employee’s share, plus two percent for the administrative costs.16 Although the DOL’s USERRA regulations do not compare this figure to the 102 percent of the “applicable premium” under COBRA as defined in IRC § 4980B(f)(4), many plan administrators procedurally calculate this figure in the same manner.

An employee who has an hour bank balance may choose to either pay for continuation coverage and preserve the bank or use the hour bank balance to provide continuation coverage.17

 

Plan Procedures for Election of USERRA Coverage

USERRA does not prescribe any procedural limits, which is unlike COBRA that contains specific deadlines that participants must meet in order to avoid forfeiting their COBRA rights. If the plan does not develop its own USERRA administrative procedures for election and payment for coverage, the plan will be required to permit an employee to elect and pay for coverage retroactively to the date of departure from employment.18 Retroactive coverage under these circumstances can be for a period as long as 24 months, which may result in permitting adverse selection against the best interests of the plan where participants, who know that their claims exceed the cost of coverage, elect to continue coverage while those without claims typically choose not to elect coverage and thereby save on premium payments.

If an employee in uniformed service does not elect or pay for continuation coverage, the Plan Administrator may take appropriate actions to terminate the employee’s coverage, depending upon whether the employee is excused from the requirement to give advance notice, whether the plan has established reasonable rules for election of continuation coverage, and whether the plan has established reasonable rules for the payment for continuation coverage.19

Where an employee leaves employment for uniformed service without giving advance notice of service, the health plan administrator may cancel the employee’s health plan coverage that was previously provided by the employer, effective with the employee’s departure. However, if an employee’s failure to give advance notice of service was excused under USERRA because it was impossible, unreasonable, or precluded by military necessity, the plan administrator must reinstate the employee’s health coverage retroactively upon his or her election to continue coverage and payment of all unpaid amounts due, and cannot impose any administrative charge.20

The employer’s health plan administrator may terminate coverage if an employee leaves employment for uniformed service for more than 30 days after having given advance notice of service but without making an election regarding continuing coverage, but must reinstate the coverage retroactive to the date of departure if the employee elects continuing coverage and pays for it within the periods that have been established by the plan.21 If the plan has not developed rules that establish time frames for reinstatement, the plan must permit retroactive reinstatement to the date of departure at any point until the employee’s time for application for reemployment expires, to a maximum of 24 months.22

 

Employee Reinstatement Upon Reemployment

As with other provisions under USERRA, health coverage in the employer’s plan for the employee or a dependent that was terminated because of uniformed service must be reinstated upon the employee’s reemployment.23 The plan may not impose an exclusion or waiting period if an exclusion or waiting period would not have been imposed had coverage not been terminated by reason of such service,24 except for illnesses or injuries that the Secretary of Veterans Affairs determines were incurred in, or aggravated during, performance of uniformed service.25 Upon reemployment, the plan must reinstate the employee immediately, but may require the employee to pay the cost of coverage until he or she earns the credits necessary for continued coverage in the plan.26

In the multiemployer plan context, where the plan utilizes an hour bank system that requires, for example, an employee to receive credit for 360 hours in a three-month period in order to establish initial eligibility, an employee who had previously met this requirement while working for a contributing employer under the same multiemployer employee welfare benefit plan cannot be required to meet it again.

 

Notice of Rights of Military Personnel

The Veterans Benefit Improvement Act of 2004 amended USERRA by adding a new notice, which requires employers to provide a notice of USERRA rights to all “persons entitled to rights and benefits under [USERRA],” which includes individuals who leave civilian employment to undertake military service or certain types of service in the National Disaster Medical System.27 Compliance with this notice requirement is by posting the notice in a prominent place that is customarily used for employee notices, or by hand-delivering, mailing, or e-mailing the notice to employees. Two model notices have been developed by the DOL for this purpose, one for private employers and state government employers; and the other one for federal government employers.28

 

Remedies Available to Claimants Against Employers

There are two courses of remedies available to service members who claim they have not received benefits that should have been provided under USERRA: Administrative and Litigation. Administrative remedies are governed under VETS and the litigation remedies are handled by the United States Attorney General or the Office of Special Counsel.

Administrative remedies for health benefits include the reinstatement of coverage and lost benefits, while the litigation will result in court orders requiring the employer to comply with the USERRA laws and restore benefits to or compensate the service member for lost benefits. However, if the court finds the violation is willful, an award of double the amount due as liquidated damages may be imposed. “A violation shall be considered to be willful if the employer either knew or showed reckless disregard for whether its conduct was prohibited by the Act.” However, USERRA does not permit the courts to impose punitive or special damages.29

Web based compliance assistance is available on the VETS Web site: www.dol.gov/vets. and on the elaws Uniformed Services Employment and Reemployment Rights Act (USERRA) Advisor at: www.dol.gov/elaws/userra.htm, which assists veterans with understanding employee eligibility and job entitlements, employer obligations, benefits, and remedies under the Act.

Other USERRA resources may be found under the Department of Labor USERRA regulations (20 CFR § 1002), which implement the law for non-Federal employers; a fact sheet (OASVET 97-3) about USERRA; the notice/poster to employees of their rights, benefits and obligations under USERRA, and a non-technical USERRA Guide that contains general information about the law. Copies of VETS’ publications, or answers to questions about USERRA, may also be obtained from local VETS offices. For additional compliance assistance, anyone with questions may contact the Department of Labor’s Toll-Free Help Line at 1-866-4-USA-DOL.

Douglas M. Selwyn is a name partner in the office of Sessions Lambert Selwyn, LLP, specializing in employee benefits law, representing employee pension and welfare benefit plans. Selwyn is co-chair of the American Bar Association Labor and Employment Law Section’s Employee Benefits Committee, and he is a fellow of the American College of Employee Benefits Counsel. Selwyn is a chapter editor of the Second Edition, Employee Benefits Law, published by the ABA Section of Labor and Employment Law and BNA.

 

Endnotes

1. 38 U.S.C. §§ 4301 - 4334   2. Ch. 720, 54 Stat. 885 (September 16, 1940).   3. For definitions of “service in uniformed service” see 20 CFR § 1002.5(I) and 20 CFR § 1002.6.  For the definition of “uniformed service” see 20 CFR § 1002.5(o) and 20 CFR §§ 1002.54-1002.64.   4. 29 U.S.C. § 1191b(a).   5. 20 CFR § 1002.163.   6. 20 CFR § 1002.164.   7. Id.   8. Treas. Reg. § 54.4980B-7, Q&A.7.   9. 20 CFR § 1002.164.   10. 20 CFR § 1002.38 discusses the circumstances in which a hiring hall is treated as the employer.  A hiring hall is considered the employer if the employer has delegated hiring and job assignment functions to it.   11. 20 CFR § 1002.165.   12. 20 CFR § 1002.86.  DOD defines “military necessity” at 32 CFR § 104.3: “For the purpose of determining when providing advance notice of uniformed service is not required, a mission, operation, exercise or requirement that is classified, or a pending or ongoing mission, operation, exercise or requirement that may be compromised or otherwise adversely affected by public knowledge is sufficient justification for not providing advance notice to an employer.”   13. DOL VETS Fact Sheet 3 – www.dol.gov/vets.   14. 38 USC § 4317; 20 CFR § 1002.170.   15. Information correspondence with DOL suggests that DOL views the charge-off as permissible.   16. 20 CFR § 1002.166.   17. 20 CFR § 1002.171.   18. 20 CFR § 1002.167(b)(2).   19. 20 CFR § 1002.167.   20. 20 CFR § 1002.167(a).   21. 20 CFR § 1002.167(b)(1).   22. 20 CFR § 1002.167(b)(2).   23. 20 CFR § 1002.168(a).   24. Id.   25. 20 CFR § 1002.168(b).   26. 20 CFR § 1001.171(a)(1).   27. 38 U.S.C. § 4334.   28. 70 Fed. Reg. 12,106 (Mar. 10, 2005), and 70 Fed. Reg. 75,313 (Dec. 19, 2005).   29. 20 CFR  § 1002.312 and 20 CFR § 1002.313.