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Advisors should be aware of laws affecting boomer citizen soldiers on active duty

By Allison Bell

Financial advisors who work with baby boomers and their employers might want to learn something about the laws that protect the rights of members of Guard and Reserve units who go away on active duty.

Years ago, the military was dominated by young recruits and career military personnel who had only limited economic ties to the civilian world. Today, the Army, the Navy, the Marine Corps, the Air Force and the Coast Guard have 173,335 citizen soldiers on active duty, according to the latest U.S. Department of Defense mobilization report.

The Pentagon does not have an official count of baby boomer service members. But, in 2002, when boomers were between the ages of 38 and 56, 72% of the military Guard and Reserve officers and 36% of the enlisted personnel were over age 35, according to estimates based on age distribution figures published in the militarys 2002 Demographics Report.

Advisors who work with boomer doctors and nurses with no military ties also may want to know something about government rules that affect the finances of citizen soldiers: The Seattle Post Intelligencer reported in May that the Pentagon has sketched out an emergency medical draft system that, in some cases, could call civilian doctors and nurses as old as 44 to active military service.

Although many members of the Guard and Reserves have low incomes in civilian life, about 12% suffer a drop in income of $5,000 or more when they are activated, and 2.4% suffer a drop of more than $25,000, according to a report released by the U.S. Government Accountability Office in March 2003.

Many of the citizen soldiers who see the steepest drops in income are boomers who work in the civilian world as doctors, lawyers or pilots, says Dr. Linda Eagle, president of Edcomm Group Ltd., New York, a company that has developed a free SCRA tutorial to serve as a sample of its course-development services.

Major federal laws that protect citizen soldiers include the Uniformed Services Employment and Re-employment Rights Act of 1994 and the Servicemembers Civil Relief Act of 1993.

USERRA requires employers of all sizes to hold citizen soldiers jobs open for them while they are away on active duty for at least 5 years.

The law also requires employers to offer activated employees and dependents a chance to buy continuation health benefits for at least 18 months. At press time, Congress was working to extend the minimum coverage continuation period to 24 months.

Employers can exclude health coverage for service-related medical problems when the employees return. But employers, their health carriers and their benefits administrators cannot apply any other exclusions, waiting periods or other limitations to health coverage for returning service members, according to the law.

Once employees return, they have a chance to catch up on any employee contributions that they missed while they were away. Proposed guidance released in September by the U.S. Labor Department suggests that, under normal conditions, employers may have to make up for any retirement plan contributions missed while an employee was on military leave within 30 days after reemploying the employee. If it were “impossible or unreasonable” for the employer to make the payments within 30 days, the employer would have to make the contributions “as soon as practicable,” according to the guidance.

The other law, SCRA, does everything from limiting interest rates on activated service members debts to 6% to preventing landlords from evicting the families of activated service members who pay less than $1,200 per month in rent.

One major insurance section of SCRA requires life insurers to keep service members life insurance policies in effect for at least 2 years after the service members return to civilian life, even if the service members fail to pay the policy premiums.

Another section of SCRA requires companies that have sold individual health insurance to activated service members to reinstate the coverage without any exclusions or waiting periods once the service members return to civilian life.

Sellers of individual health insurers can withhold coverage or impose extra restrictions only if the returning service members have employer-sponsored coverage or suffer from disabilities incurred or aggravated in the line of duty, according to the text of the law.

USERRA and SCRA protect workers who are drafted or volunteer for regular military service as well members of the Guard and Reserve.

The GAO now is conducting a study that looks at compliance with USERRA and SCRA insurance provisions, and an arm of the Labor Department is starting to survey service members to assess their views on USERRA compliance.

Robert Kaplan, education director at McKay Hochman Company Inc., Butler, N.J., a benefits consulting firm, has written about USERRA and talks about USERRA legal developments in discussions with employers. So far, though, he has not run into many questions about real-life incidents involving returning service members.

Because many citizen soldiers are still on active duty, handling the workers return “is an issue that probably hasnt kicked in yet,” Kaplan says.

Many activated service members need help with SCRA concerns long before they need help with returning to their civilian jobs.

Edcomm, the company that developed the SCRA tutorial, is starting to get questions from employers and returning boomers who need immediate help with SCRA and some who need help with USERRA, Eagle says.

Eagle has heard from some returning boomers who were shut out of their old jobs and some whose employers have tried to impose waiting periods or pre-existing condition limits on health coverage.

In most cases, “thats illegal,” Eagle says.

Kaplan is not sure how much advisors who work with individual consumers have to do to explain USERRA and SCRA to members of the Guard and Reserve.

“The military does a pretty good job of explaining the law,” Kaplan says.

But Kaplan points to the recommendation in the proposed USERRA guidance about making up missed retirement plan contributions as an example of why employers who employ boomers should hear something from their benefits advisors about USERRA.

“The employer could be on the hook for making up the contributions within 30 days,” Kaplan says.

Eagle argues that individuals, employers, advisors and financial services companies all need to hear more about SCRA and USERRA.

Employers and financial services companies usually want to do the right thing, but they often are unfamiliar with the laws because, up till now, the laws have been used so little, Eagle says.

Reproduced from National Underwriter Edition, October 21, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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