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Alternative Method of Reporting USERRA “Make-Up” Contributions

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The Internal Revenue Service ("IRS") recently announced an alternative method of reporting "make-up" contributions made pursuant to the Uniformed Services Employment and Reemploy-ment Rights Act of 1994 ("USERRA"). Under USERRA, an employee who is absent from work because of a military leave is permitted, upon the employee's return to work, to make up certain pension contributions that the employee would have made if he/she would have been employed during the period of military service.

Initially, employers were required to report such "make-up" contributions in Box 13 on Form W-2. However, some employers found that it was difficult to use their current payroll systems to satisfy the USERRA reporting requirements on Form W-2. To reduce the administrative burden placed upon employers, the IRS developed an alternative method of reporting USERRA "make-up" contributions.

Under the alternative method, an employer may provide a separate statement to an employee instead of including the USERRA "make-up" contribution amount on the employee's Form W-2. If an employer chooses to issue a separate statement to an employee, the statement must contain the following information:

  • type of plan;
  • years to which contributions relate; and
  • amount of the contributions.

While an employer may elect to use the alternative method of reporting USERRA "make-up" contributions, it is not required to do so. Thus, if an employer has not encountered any difficulties in using its payroll system to report USERRA "make-up" contributions, the employer may continue to report the "make-up" contributions on Form W-2.

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