LAW REVIEW 1119
USERRA and Public Sector Pension Plans
By Captain Samuel F. Wright, JAGC, USN
220.127.116.11—Application of USERRA to State and Local
18.104.22.168—Character and Duration of Service
22.214.171.124—Pension Credit for Service Time
1.8—Relationship between USERRA and other
Q: Our state’s
new Governor recently appointed me to head the state pension system. The system provides pension benefits for
employees of the state and its counties, cities, school districts, etc. It is a traditional defined benefit plan, and
it is woefully underfunded. I recently
learned that, on top of all our other problems, we may also be responsible for
pension benefits for current state employees for periods of time when they were
away from work for military training or service. We just do not have the money to pay the
promised benefits, even without regard to funding benefits for periods of time
when employees were away from work for military service. I have talked to the unions representing
state, county, municipal, and school district employees, and the unions are
willing to waive the requirement to fund pension benefits for military service
time. How do we go about getting
exempted from these requirements?
A: Your system cannot be exempted from the requirement to
comply with the Uniformed Services Employment and Reemployment Rights Act
(USERRA), which was enacted in 1994, and the Veterans’ Reemployment Rights Act
(VRRA), which was enacted in 1940 and superseded by USERRA in 1994. In the bargaining unit represented by a
public sector union, veterans with rights under the VRRA and USERRA probably
amount to less than 1% of the employees.
Thus, it is not surprising, and also not relevant, that the union seeks
to waive their rights, in order to maximize benefits for the other 99% of the
Congress enacted the VRRA in
1940, as part of the Selective Training and Service Act (STSA), the law that
led to the drafting of millions of young men (including my late father) for
World War II. A year later, as part of
the Service Extension Act of 1941, Congress expanded the VRRA to make it apply
to voluntary enlistees as well as draftees.
The VRRA has applied to the Federal Government and to private employers
since 1940. In 1974, as part of the
Vietnam Era Veterans Readjustment Assistance Act, Congress expanded the VRRA to
make it apply to state and local governments as well.
In its first case construing
the VRRA, the Supreme Court held: “No
practice of employers or agreements between employers and unions can cut down
the service adjustment benefits that Congress has secured the veteran under the
Act.” Fishgold v. Sullivan Drydock & Repair Corp., 328 U.S. 275, 285
(1946). Section 4302 of USERRA (38
U.S.C. 4302) codifies this principle in the current reemployment statute. The collective bargaining agreement between
the employer and the union can give the returning veteran greater or additional rights, but it cannot take away the veteran’s
federal statutory reemployment rights.
understand, but the bottom line is that the money is not there. The money set aside by employees and by the
state and local governments was never enough to pay the promised benefits, and
then in 2008 our investments took a big hit in the stock market crash. You cannot get blood from a stone.
A: If there is not enough money set aside to pay all the
promised benefits, then all employees (including veterans) are going to have to
“take a haircut” and suffer a proportional reduction in the benefits that have
been promised. The actuarial problems of
the pension plan make it all the more important that those employees who are veterans
receive credit for their military service time before their benefits are proportionately reduced, along with the
other 99% of employees who are not veterans.
It is impermissible for you
to contemplate balancing the pension benefit-asset imbalance on the backs of
those who served our country in uniform.
In Fishgold, the Supreme Court
held that the reemployment statute is to be “liberally construed for he who
laid aside his civilian pursuits to serve his country in its hour of great
need.” 328 U.S. at 285.
Q: Our state
law does not provide for state pension credit for military service time. I am a state official, and I am bound to
comply with state law. Paying these
pension benefits for time not worked for the state and its political
subdivisions would violate state law.
A: Under Article VI, Clause 2 of the United States
Constitution (commonly called the “Supremacy Clause”), federal statutes
(including the VRRA and USERRA) trump conflicting state statutes and state
constitutions. You are required to
comply with federal law, regardless of what your state law says. If you insist on “making a federal case out
of this” you will lose.
Q: Just what
are our obligations under the VRRA and USERRA?
A: In Fishgold, the
Supreme Court enunciated the “escalator principle” when it held that “the
returning veteran does not step back on the seniority escalator at the point he
stepped off. He steps back on at the
precise point he would have occupied had he kept his position continuously
during the war.” 328 U.S. at 285. Section 4316(a) of USERRA [38 U.S.C. 4316(a)]
codifies the escalator principle in the current reemployment statute. Section 4318 of USERRA (38 U.S.C. 4318) sets
forth the application of the escalator principle to civilian employer pension
entitlements (under defined contribution plans as well as defined benefits
In 1977, the Supreme Court
applied the escalator principle to benefits under a defined benefit plan. Alabama
Power Co. v. Davis, 431 U.S. 581 (1977).
Mr. Davis’ 1936-71 career at the Alabama Power Co. was interrupted by
World War II Army service, from 1943 to 1945.
The Court held that Davis must be treated as if he had been continuously employed by the company during that
1943-45 service, meaning an additional $18 per month in his pension check. I discuss Alabama
Power and its implications in Law Review 0915 (Apr. 2009).
As I explained in Law Review
0766 and other articles, an individual must meet five eligibility criteria to
have the right to reemployment under USERRA:
Must have left a civilian job (federal, state,
local, or private sector) for the purpose of performing voluntary or
involuntary service in the uniformed services.
Must have given
the employer prior oral or written notice.
or periods of uniformed service, relating to the employer relationship for
which the person seeks reemployment, do not exceed five years. All involuntary
service and some voluntary service
are exempted from the computation of the individual’s five-year limit. Please see Law Review 201 for a definitive
discussion of what counts and what does not count.
Must have been
released from the period of service without having received a punitive (by
court martial) or other-than-honorable discharge.
Must have made a
timely application for reemployment with the pre-service employer, after
release from the period of service.
If Joe Smith meets these
criteria and returns to work for the state or one of its political
subdivisions, Joe Smith must be treated as
if he had been continuously employed during the time he was away from work
Q: I know a
state employee (let’s call her Mary Smith) who served on active duty from 1995
to 1999, and who became a state employee in 2005. When she became a state employee, she
purchased state retirement credit for her 1995-99 active duty. What are Mary’s rights under USERRA?
A: Mary does not have rights under USERRA, because she
did not leave a civilian job for the state to go on active duty in 1995. Her military service did not interrupt her
civilian career as a state employee.
Rather, her military service pre-dated the start of her state employee
career. Mary’s rights are under state
law, not USERRA. Under section 4302(a)
of USERRA [38 U.S.C. 4302(a)], USERRA does not supersede a state law that
provides greater or additional rights.
Q: My lawyer
says that our public employee pension plan is not covered by the federal
Employee Retirement Income Security Act (ERISA). Why do I have to concern myself with federal
law at all?
A: “Except as provided in subparagraph (B) [pertaining to
the Thrift Savings Plan (TSP) for federal employees, and not pertinent to this
discussion], in the case of a right provided pursuant to an employee pension
benefit plan (including those described in sections 3(2) and 3(33) of the
Employee Retirement Income Security Act of 1974) or a right provided under any Federal or State law governing pension
benefits for government employees, the right to pension benefits of a
person reemployed under this chapter shall be determined under this
section.” 38 U.S.C. 4318(a)(1)(A)
Public employee pension plans
are exempted from ERISA, but they are not exempted from USERRA.
Q: My lawyer
tells me that these state employee-veterans cannot sue the state agency that I
lead in federal court, because of the 11th Amendment of the United
States Constitution. What do you have to
say about that?
A: “In the case of such an action [to enforce USERRA]
against a State (as an employer), the action shall be brought [by the Attorney
General of the United States] in the name of the United States as the plaintiff
in the action.” 38 U.S.C. 4323(a)(1) (final
sentence). The 11th Amendment
does not bar a suit against a state by the United States. The Department of Justice has shown that it
is most willing and able to sue states, and win, to make them comply with
USERRA. With regard to the 11th
Amendment issue, I invite the readers’ attention to Law Reviews 89, 0848, 0918,
1011, 1014, and 1051.
I invite the readers’ attention to www.roa.org/law_review. You will find more than 600 articles about
the VRRA and USERRA and another 200 articles about the Servicemembers Civil
Relief Act, the Uniformed and Overseas Citizens Absentee Voting Act, and other
laws that are particularly pertinent to those who serve our country in
uniform. You will also find a detailed
Subject Index and a search function, to facilitate finding articles about very
Under the VRRA, the service duration limit was four years. The VRRA eligibility criteria are otherwise
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