The law—known as the Heroes Earnings Assistance and Relief Tax Act of 2008—will allow employers to amend their FSAs to permit reservists called up for at least six months of active duty to take FSA balances as a taxable cash distribution. The provision goes into effect immediately.
The law also retroactively and permanently extends an expired law to allow employee reservists called up for at least six months of active military service to withdraw funds from their 401(k) or other defined-contribution plans without paying the 10 percent penalty tax that applies on most distributions taken before age 59½.
In addition, the HEART Act requires employers providing differential pay to employees called up for active military service to recognize that compensation in calculating employees’ pension benefits.
Differential pay is provided by some employers and represents the difference between what the employee earned before being called up and the military pay the employee receives while on active duty.
Finally, unrelated to the military provisions, the law retroactively renews through December 31, 2008, a 1996 federal law that bars group health care plans from providing lower annual and lifetime dollar coverage limits on mental health care services than for other medical services. The 1996 law expired on December 31, 2007.
That extension comes as congressional conferees are trying to iron out differences in bills separately passed by the House and Senate that would significantly expand the 1996 law. Among other things, the two bills would require group health plans to provide the same coverage for mental disorders as they do for other medical conditions.Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail email@example.com.