Heros Earnings Assistance and Relief Tax Act of 2008

June 2nd, 2008

Late last month (May 20th and May 22nd), the House and the Senate, respectively, unanimously approved the Heros Earnings Assistance and Relief Tax Act of 2008 (H.R. 6081).  The bill is now pending President Bush’s signature to enact it as law.  President Bush is expected to sign it.

H.R. 6081, among its many provisions, includes changes to the Internal Revenue Code of 1986, as amended, that may impact certain employee benefits plans.  The provisions of H.R. 6081 are effective at differing dates and include provisions that:

  • Amend existing rules governing cafeteria plans to allow Health Flexible Spending Accounts to distribute account balances to reservists who are called for active duty for indefinite periods or 180 days or more
  • Require qualified retirement plans to provide additional benefits that would have been provided to the participant had he/she resumed employment prior to death to the survivors of plan participants who die during qualified military service
  • Allow employers to make contributions to qualified retirement plans on behalf of participants who die or become disabled in combat
  • Allow employers to treat the day prior to the day of the participant’s death or disability as the day the participant returned to work from military duty so as to provide the retroactive benefit accruals available under USERRA
  • Require qualified plans to treat differential military pay as compensation for plan purposes and as wages subject to withholding
  • Provide a tax credit under certain circumstances for small employers that provide differential military pay
  • Authorize qualified plans to treat participants on active duty for greater than 30 days as terminated in order to access distribution from a qualified retirement plan
  • Make the PPA waiver of the 10% penalty tax for early retirement distributions permanent

As mentioned above, it is expected that President Bush will sign the legislation and it will therefore become law.  Employers should make plans to begin reviewing their plans for areas that need amending to comply with the required provisions.  Additionally, employers should review the non-mandatory provisions to determine whether they wish to amend their plans to allow for these provisions. 

During the plan review, employers need to keep in mind the differing effective and/or application dates of the provisions.  Benefits counsel can assist employers with the review and amendment of plan documents to ensure that plans are updated appropriately.

4 Responses to “Heros Earnings Assistance and Relief Tax Act of 2008”

  1. […] On June 17, 2008, President Bush signed the Heroes Earnings Assistance and Relief Tax (HEART) Act.  This bill includes a number of changes that may impact certain employee benefits plans.  For more details on the Heart Act, see our blog posted on June 2, 2008. […]

  2. Chris Woodon 11 Jul 2008 at 10:36 am

    This affects some workers who are employed by foreign subsidiaries who are US owned or regulated. I work in Iraq for SEII (KBR) as a government contract paramedic and would like to know how this affects us. See Sec. 302 of the Act. Since this makes us US employees now, liable for social security and FICA taxation, do we fall under all of the rest of the US labor laws?

  3. Shanel Bigusiakon 07 Apr 2010 at 12:29 am

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