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Retirement benefits
  • In most cases, employers must treat retirement benefits for employees on military leave the same as if the employee had been working.

Employers may not consider military service as a reason not to pay retirement benefits. Accrual and vesting must occur as if the employee had been working.

Employers are not required to make contributions to 401(k) plans while the employees are on military leave. Once employees return from military duty and are reemployed, however, they must make the employer contributions that would have been made if the employees had been employed during the period of military leave. If employee contributions are required or permitted under the plan, the employee may take up to three times the duration of the military duty or five years, whichever ends first, to make up the contributions.

If, for example, a person was in military service for one year, as soon as the person returns and is reemployed, payments to the retirement plan resume. This employee then has up to three years to make payments to make up for the one-year lapse.

If the employee makes up the contributions, the employer must make up any matching contributions. Employer contributions do not have to include earnings or forfeitures that would have been allocated to the employee if those contributions had been made during military service.

To determine the liability or an employee’s contributions under a pension benefit plan, base the employee’s compensation during the period of the employee’s military service on the rate of pay the employee would have received but for the absence during the leave.

Under the Honoring Existing Retirement Obligations for Every Servicemember (HEROES) Act, when a service member dies while on active duty, employers are required to treat the day prior to the date of death as the date the employee returned to work for purpose of triggering payment of survivor benefits or other beneficiary payments under the employee’s pension plan.