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"HEART" Act for Military Personnel to Provide Additional Benefits

The Heroes Earnings Assistance and Relief Tax Act of 2008 is a law that amends the Internal Revenue Code in order to provide certain benefits to members of the military, Reserves and National Guard who work for an employer in addition to performing their military duties.

Here are some of the more interesting provisions:

1. payments made by an employer to supplement the wages the employee receives in the military must have proper tax withholding by the employer. This applies to payments made after December 31, 2008.

2. Interestingly, the employee receiving such payments is to be treated as an employee under the employer's retirement plans, even though he or she may be on active duty. The employer must include the payments it makes to the employee as wages when calculating retirement plan benefits/contributions. BUT, at the same time, the employee can be considered TERMINATED from employment so that he/she can take advantage of certain plan provisions that permit the individual to obtain certain distributions from the plan.

3. With respect to plan distributions or withdrawals, the participant employee/military service member, under certain conditions, can take withdrawals from the plan prior to age 59 ½ without penalties. Similar provision apply to Section 125 Plans.

4. If a service member is killed in the line of duty, he/she is now treated for retirement plan purposes as if he/she died while employed by the employer – assuming that the service member returned to duty with the employer on the date before his/her death.

5. For small employers, there is a tax credit for providing wages to supplement military pay. This applies to employers with less than 50 employees.

For the House of Representative's 55 page "summary" explanation follow this link:

TECHNICAL EXPLANATION OF H.R. 6081, THE “HEROES EARNINGS ASSISTANCE AND RELIEF TAX ACT OF 2008"

For a comprehensive explanation see, Janell Grenier's post her her Benefits Blog:

H.R. 6081: Heroes Earnings Assistance and Relief Tax Act of 2008

Full post as published by Strategic HR Lawyer on July 01, 2008 (boomark / email).