LEGISLATIVE BRIEFS*
	COBRA Temporary Extension
	Proposition Q
	Children's Health Insurance Program Reauthorization Act of 2009
	The HITECH Rules: Impact on Insurance Brokers as Business Associates
	5500 Electronic Filing Reqirements for 2009 Plan
	2010 DOL Publishes Model ARRA NDAA Notices
	2010 Update on COBRA/ARRA Extension
	2009 Health Savings Accounts / High Deductible Health Plans Limits Released
	The Heroes Earnings  Assistance and Relief Tax (HEART) Act of 2008
	2008 Indexed Figures for Qualified Retirement Plans
*	Legislative Briefs are not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

The HEART Act

On June 17, 2008, President Bush signed the Heroes Earnings Assistance and Relief Tax Act of 2008 (the HEART Act), which provides tax benefits for service members and their families. This Legislative Brief summarizes the main provisions of the HEART Act.

Health FSA Distributions

Under the HEART Act, a cafeteria plan or health flexible spending arrangement (health FSA) may provide for qualified reservist distributions. If the plan so provides, a member of an Armed Forces reserve component who is ordered or called to active duty for a period of 180 days or longer may withdraw unused amounts in the FSA. The distribution will be tax free if it is made during the period beginning with the call to active duty and ending on the last day of the coverage period including the date of the call to active duty. This provision applies to distributions made after June 17, 2008.

Survivor Benefits

The HEART Act makes several changes that benefit survivors of service members:

• The Uniformed Services Employment and Reemployment Rights Act (USERRA) is modified to provide additional benefits to survivors of qualified retirement plan participants who die while performing qualified military service. Under the new rules, survivors are entitled to any additional benefits (aside from benefit accruals) that would have been provided if the participant had returned to work and then terminated employment on account of death, such as accelerated vesting and ancillary life insurance benefits.
• Subject to certain conditions, employers may credit any employee who is killed or becomes disabled in combat with benefit accruals as if the employee had returned to work as of the day before death or disability and then terminated employment on the date of death or disability. These rules apply to deaths and disabilities occurring on or after January 1, 2007.
• Recipients of military death benefit gratuities may roll over amounts received, tax free, to a Roth IRA or an Education Savings Account without being subject to contribution limits that would otherwise apply, as long as the rollover is made within one year after receipt. Generally, this provision is effective with respect to payments made on account of deaths occurring on or after June 17, 2008. Individuals who received payments on or after October 7, 2001 may also make rollover contributions by June 17, 2009.

Combat Pay

The HEART Act makes permanent the ability to include combat pay as earned income for purposes of the Earned Income Tax Credit (EITC). To qualify for the credit, low-income individuals or families must have "earned income," which typically includes taxable wages, salaries, tips and other employee compensation. The HEART Act enables individuals and families who have no earned income aside from non-taxable combat pay to qualify for the credit and applies to taxable years beginning after December 31, 2007.

Differential Pay

Under the HEART Act, differential pay that is paid by an employer to an employee who becomes active duty military is treated as wages for withholding and retirement plan purposes. For purposes of wage withholding, this rule applies to wages paid after December 31, 2008. For all other purposes, this provision is effective for years beginning after December 31, 2008. The HEART Act also provides a tax credit for small employers for differential pay paid between June 17, 2008 and January 1, 2010 to employees on active military duty.

Retirement Plan Withdrawals

The special rules allowing active duty reservists to make penalty-free withdrawals from certain retirement plans are made permanent by the HEART Act. Under these rules, reservists can avoid the ten percent penalty on early distributions if the distribution meets the requirements of a qualified reservist distribution:

• The distribution is from an IRA or is attributable to elective deferrals from certain types of plans;
• The individual is a member of a reserve component called to active duty for at least 180 days; and
• The distribution is made during the period beginning on the date of the call to duty and ending at the close of the active duty period.

In addition, an individual who receives a qualified reservist distribution can contribute the amount of the distribution to an IRA any time during the two-year period beginning on the day after the end of the active duty period. This rule previously applied to individuals called to active duty between September 11, 2001 and December 31, 2007. The HEART Act makes it permanent for individuals called to active duty on or after December 31, 2007.

Economic Stimulus Payment

The HEART Act clarifies that active military personnel who file a joint tax return are eligible for the economic stimulus payment even if the spouse does not have a Social Security number. This provision permits service members who are married to foreign nationals to receive the stimulus payment.