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<nobr>Aug 10, 2004</nobr>
ERIC Calls on Congress to Allow 401(k) Participation for Workers Called to Active Military Duty
August 9, 2004 – The ERISA Industry Committee (ERIC) today called on Congress to pass legislation that would permit workers called to active military duty to continue to make pre-tax contributions and receive company matching payments in their 401(k) plans, even though federal law would recognize them as former employees of their company.
The Internal Revenue Service regulations (I.R.S. Rev. Ruling 69-136) allow former employees actively serving in either the armed forces or the national guard to receive payments from their employers to supplement their military pay. Under the ruling, such payments are not subject to employment taxes (FICA/FUTA) or income tax withholding. The current tax rules, however, do not make clear that military personnel -- because they are classified under the ruling as former employees -- can continue to make contributions to a 401(k) plan or receive matching contributions from the employer.
“Many major employers recognize and appreciate the enormous sacrifice their employees are making by protecting America,” said Mark Ugoretz, president of The ERISA Industry Committee. “Employers are committed to providing financial security to these individuals and their families whose retirement security should not be put on hold because of military service. We call on Congress to amend the laws so employers can confidently continue to maintain 401(k) plans for military personnel. Individuals called to active duty for our country should not have their future retirement security curtailed because of that service.”
ERIC warned that the alternative would be to impose the employment taxes as though the individual were an employee on leave -- an action that, for employees currently not paying those taxes, would amount to a substantial pay reduction at a time of additional expense and financial stress for their families.
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Contact: Doug Baj, Director of Communications, (202) 789-1400, dbaj@eric.org
The ERISA Industry Committee (ERIC) is a non-profit association committed to the advancement of employee retirement, health, and welfare benefit plans of America's largest employers and represents exclusively the employee benefits interests of major employers. ERIC's members provide comprehensive retirement, health care coverage and other economic security benefits directly to some 25 million active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.
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