How to handle pay for Guard and Reserve members

If you have employees away on extended military deployments or who will train for two weeks this summer as members of the National Guard or the military reserves, you face tricky HR and pay problems. Here’s what you need to know:

  • Withhold income and FICA taxes from military differential payments made to employees who are absent for up to 30 days. Withhold only income taxes if they are serving for longer periods.
  • 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.
  • Benefits such as health insurance provided to employees on military leave must match benefits provided to employees on nonmilitary leave.
  • For longer periods of military leave, the 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, such as vacation, includes all time spent on military leave.
  • Employers’ pension contributions continue during employees’ absence. Employees must be allowed to make up contributions when they return to work.