The nation relies on the National Guard and Reserve. Employees usually serve their two weeks during the summer, but others may be away longer. Here’s what you need to know.
√ Ask employees about their. Note: Some states allow employees’ family members to take leave.
√ For military leave beginning midweek, offset military pay against exempts’ salaries; nonexempts need no offset, since they need not be paid if they don’t work.
√ Employees may choose to use vacation time for military leave; withhold taxes from vacation pay and from the value of time donated to them by co-workers.
√ Watch child-support withholding; employees’ disposable pay may decrease when they’re gone, or they may skip a pay period; notify the appropriate state office.
√ Withhold income and FICA taxes from military differential payments made to employees who are absent for up to 30 days. Withhold only income taxes from differential pay paid to employees who are serving for longer periods. You may treat the pay as supplemental wages.
√ If your cafeteria plan allows, employees who are away for at least 180 days or indefinitely may take qualified reservist distributions from their health flexible spending accounts; these distributions are fully taxable.
√ Nonseniority benefits (e.g., health benefits) provided to employees must match benefits provided to employees on nonmilitary leave. If leave is for 31 days or fewer, you can’t charge reservists more than the regular amount. Idea: Allow them to prepay.
√ For longer periods of military leave, military law allows reservists and their dependents to elect COBRA-like benefits (i.e., benefits for 24 months at 102% of the premium). Warning: This applies to all employers, including small employers that aren’t covered under COBRA. For COBRA-covered employers, COBRA also applies.
√ The accrual rate for seniority-based benefits includes all time spent on military leave. Example: If vacation increases from two to three weeks after five years, military service counts when determining when that threshold is met.
√ Employers’ pension contributions continue during employees’ absence; employees must be allowed to make up contributions when they return to work. Employees called to military duty for a period exceeding 30 days may receive distributions of their 401(k) pretax amounts.
- State-by-state chart on vacation pay-upon-termination laws
- Are payments taxable if an individual isn't yet an employee?
- Regs outline IRS whistle-blowers' rights and responsibilities
- Lessons from the 2006 SHRM conference: Do you really need to offer that employee benefit?
- How should we apply the pretax contribution limits for 401(k)s?