This fall has seen two important developments in the area of veterans’ rights under employee benefit plans. On September 20, 2004, the Veterans’ Employment and Training Service (“VETS”) of the Department of Labor (“DOL”) issued proposed regulations under the Uniformed Services Employment and Reemployments Rights Act of 1994, as amended (“USERRA”). (For more information about USERRA, see the April 2003 issue of Trucker Huss Benefits Report, available on our web site.)

These proposed regulations (the “Proposed Regulations”) are the first issued since USERRA’s passage in 1994. According to the news release accompanying these regulations, they “will spell out the rights of our returning service men and women and the responsibilities of employers to honor their service” and, as promised in the news release, they are drafted in a plain language question and answer format.

Also, on December 10, President Bush signed the Veterans Benefits Improvement Act of 2004 (the “Act”). The Act makes some substantive changes to USERRA and will, as a result, affect the substance of the Proposed Regulations. For example, USERRA section 4317 currently requires employers of all sizes to provide continuation of health coverage, at the service member’s expense, for a period of up to18 months. The Act extends this period of coverage to 24 months for elections made after December 10, 2004. In addition, the Act contains a new requirement that employers provide a notice of the rights, benefits, and obligations of service members under USERRA, to be drafted by the DOL by March 10, 2005. This USERRA notice will be required to be posted “where employers customarily place notices for employees.”

The Proposed Regulations address all aspects of USERRA. Because these regulations are only in proposed form, we do not address them in any detail here. We do, however, want to point out some issues of interest to the benefits community.

Section 4318 of USERRA requires that, upon a service member’s reemployment after military service, he or she “be treated as not having incurred a break in service with the employer or employers maintaining the [pension] plan” for vesting, accrual and benefit purposes. It also requires that the returning service member receive pension accruals or contributions for the period of military service as if the service member had continued in employment with the employer maintaining the plan during that period. Section 4318 also provides funding liability rules and reemployment notice requirements applicable specifically to multiemployer plans. Proposed Regulations section 1002.266 implements those multiemployer plan-specific obligations and, in Subsection (c), promises service members that they are entitled to the USERRA-mandated pension accruals or employer contributions upon their return from military service “whether [they] are reemployed by [their] pre-service employer or by a different employer contributing to the same multiemployer plan.” This is in stark contrast to USERRA itself, which bases the availability of pension protections and rights on the reemployment of a service member. We question whether a reemployment has in fact occurred under the statute in every case in which a service member is employed after his or her period of military service by an employer different from the pre-service employer, based solely on the fact that both employers contribute to the same multiemployer plan.

The DOL specifically acknowledges the hiring hall situation (in Proposed Regulations section 1002.38) as one in which the reemployment responsibilities fall on the hiring hall because it is the “employer” to the extent that it has been delegated the hiring and job assignment functions by the employer(s) in the industry covered by the multiemployer plan. Where a person is typically referred to employment by a hiring hall in certain industries (like construction and longshoring), and it is therefore the hiring hall that is the principal source of the service member’s employment opportunities in that industry, the DOL’s proposed rule in Section 1002.266(c) appears to be a proper interpretation of USERRA (and, in fact, case law supports this—see Imel v. Laborers Pension Trust Fund for Northern California, 904 F.2d 1327 (9th Cir. 1990), cert. denied).

If the DOL, in its final rule, retains its broad extension of pension rights to all service members who return to an employer participating in the same multiemployer plan as their pre-service employer, even if there is otherwise no relationship between those employers, many multiemployer plans, and their participating employers, could face significant administrative and fiscal challenges as a result. (Under the DOL’s interpretation in Proposed Regulations section 1002.266(c), there may be a whole new class of persons who are considered “reemployed” under USERRA and new funding obligations will result. The Proposed Regulations, like the statute, do give multiemployer plans the flexibility to designate how the benefit cost of USERRA compliance is funded—for example, out of plan assets, by contributions from the service member’s pre-service employer, or by contributions from his or her new employer. The statute only contemplates the first two alternatives.)

The DOL and VETS provided a 60-day comment period during which they invited general comments on the Proposed Regulations, as well as comments addressing certain specific issues. For example, as discussed above, Section 4317 of USERRA currently requires that service members be given the opportunity to continue coverage in employment-related health plans, at their own expense. This continuing coverage requirement bears some similarities to the continuation coverage required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), under which currently there is a 60-day election period for such coverage (though there is still some confusion surrounding how USERRA continuing coverage and COBRA continuation coverage work together). In contrast, the Proposed Regulations section 1002.165 provides only that “health plan administrators … develop reasonable requirements addressing how continuing coverage may be elected.” The preamble to the Proposed Regulations specifically requests comments on whether the DOL should instead “establish a date certain by which time continuing health plan coverage must be elected.”

Another area where the DOL sought comments is in the proposed timing of employer pension plan contributions upon a service member’s reemployment—a topic on which USERRA itself is silent. In Section 1002.262, the DOL proposes a thirty-day deadline for making such contributions, but specifically solicited comment on whether the proposed thirty-day period is too long or too short.

Finally, the DOL sought comment on whether its proposed effective date of thirty days following publication of the final regulations will provide enough time for employers to implement any adjustments in their policies and practices. Given the possible implications described above, especially those for multiemployer plans, we hope that the Department provides more time than the thirty days it proposed, especially if the regulations on that topic are finalized in their current form.

Trucker Huss submitted comments to the Proposed Regulations on the issues described above (e.g., stating that in our opinion, the DOL’s attempt to expand USERRA’s scope in the multiemployer plan arena is not supported either by the statutory language or the relevant case law). We hope that the DOL will address these issues in its final regulations. We will provide a more comprehensive analysis of the USERRA regulations in a future Benefits Report once the final DOL regulations are issued.