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DOL FAQs Explain Application of USERRA to Compensation-Based Pension Benefits


· 5 minute read


· 5 minute read

DOL Webpage: VETS USERRA Fact Sheet 1: Employers’ Pension Obligations to Reemployed Service Members Under USERRA

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The DOL has posted a set of FAQs explaining how the Uniformed Services Employment and Reemployment Rights Act (USERRA) applies to compensation-based pension benefits for reemployed servicemembers. USERRA requires employers to provide reemployed servicemembers with pension benefits under covered plans (including 401(k) plans) as if the servicemember had not left for military service. This includes the opportunity to make employee contributions and elective deferrals. The FAQs, referencing applicable regulations, describe which periods of service-related absence must be treated as continuous employment for benefit calculation purposes, and when employer contributions attributable to a participant’s service-related absence must be made. The remainder of the guidance focuses primarily on USERRA’s rules for determining what a servicemember’s compensation would have been for a period of military service when compensation determines or limits plan contributions or benefits.

Generally, USERRA requires an employer to determine a participant’s rate or rates of compensation (which may be affected by hours worked as well as pay rate) based on the returning servicemember’s work history preceding the service-related absence. But the FAQs explain that if compensation cannot be determined with reasonable certainty—e.g., because the individual worked variable hours or earned commissions or other variable pay—the employer must use an average rate of compensation during the 12 months preceding the military service (or the period of employment, if less than 12 months). Examples illustrate some key concepts.

  • Work Schedules Are Not Determinative. Several of the examples feature situations in which returning servicemembers’ actual work hours preceding their leave varied from their scheduled hours. In Examples A and B, the FAQs conclude that the employer is required to base the servicemember’s rate of compensation (and in turn, the servicemember’s pension contributions or benefits) on the servicemember’s hours worked prior to military service—and not on the servicemember’s work schedule or guaranteed minimum hours—because, given the length of the period during which the variations occurred and the length of the military service, it was reasonably certain the variations would have continued for the duration of the military service. Example D reaches a similar conclusion in a situation involving a recent hire whose varying hours rarely conformed to her work schedule.
  • Promotions. In Example C, involving a servicemember who would have been promoted to a higher-paying position during a three-year period of military service, the FAQs conclude that the servicemember’s pension contributions must be calculated taking the promotion into account from the time the promotion would, with reasonable certainty, have occurred.
  • Commissions. Examples E and F conclude that if the compensation the servicemember would have received (absent the period of military service) is not reasonably certain because the individual is paid commissions, the rate of compensation during the period of military service must be determined based on the servicemember’s average compensation during the 12-month period preceding the military service.
  • Military Service During the 12-Month Lookback. Examples F and G illustrate situations in which averaging must be used, but the servicemember was absent during part of the 12-month lookback period due to a period of military service. In both cases, the examples indicate that the employer must exclude the period of military service and calculate the servicemember’s rate of compensation based only on the remainder of the lookback period. (The examples do not require earlier months to be taken into account.)

EBIA Comment: These FAQs still leave considerable room for interpretation. For example, the facts they use to illustrate the effect of work-schedule variations make it fairly clear those variations would have continued if there were no military service (nine weeks of varied hours preceding two weeks of military service; eight months of higher-than-guaranteed hours preceding one month of military service; and only one week of scheduled hours in the six weeks preceding a week of military service). Situations in the real world may be less clear-cut. And the authority of the FAQs is limited: The guidance states that it is “for general information and is not to be considered in the same light as official statements of position contained in the regulations.” Still, the arm of the DOL that issued these FAQs is responsible for educating employers about USERRA and enforcing violations of USERRA’s benefit protections, and there are few other available resources interpreting the obligation to provide compensation-based pension benefits. The FAQs should therefore be very helpful to anyone who, for purposes of USERRA, must determine what a participant’s benefit would have been—or, in the case of elective deferrals and employee contributions, what a participant’s maximum contribution could have been—if the participant had not left for military service. For more information, see EBIA’s 401(k) Plans manual at Section XXXIX.F (“Make-Up Deferrals and Contributions”).

Contributing Editors: EBIA Staff.

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