The Heroes Earnings Assistance and Relief Tax Act or HEART Act provides service members and their families with certain pension and tax benefits while living or in the event of the service member’s death.
According to http://myarmybenefits.us.army.mil/ these are some of the benefits that can be taken advantage of due to the HEART ACT:
- Accelerated vesting in the retirement plan (but not any imputed additional benefit accruals for the period of military service)
- Additional life insurance benefits
- Other survivor’s benefits depending on the benefits of the employer
Employers also have the choice of treating the disabled or deceased service member as if they had returned to work the day before the disability or death occurred. Employers can also choose to pay the service member for their wages while on active duty. While that income used to have to be reported by the service member as 1099-MISC (self-employment) income, the HEART Act now requires that to be subject to normal W2 income.
Service members that are on active duty more than 180 days can also take distributions from their retirement plans without being subject to the 10% early withdrawal penalty. They must wait 6 months however, to make any new contributions to the plan.
The HEART Act also allows surviving spouses to deposit death gratuities and SGLI (Service Members Group Life Insurance) death benefits into a Roth IRA. This means that the death benefits can go into the Roth and grow tax free. This is also in addition to any deposits the surviving spouse is allowed to make in a given year.
At any time the surviving spouse is allowed to withdraw any of those contributions at any time without tax or penalty. This is a tremendous benefit that is not allowed on any other life insurance death benefits outside of the military. The death benefits may also be deposited into a Coverdell Education Savings Account (CESA), however qualified distributions must be used for education expenses otherwise they may be subject to taxes and penalties.
