Short answer: Often yes, but the plan may have to reinstate it retroactively if the employee later elects and pays what is owed within the plan’s election period, with no reinstatement fee.
The Department of Labor rules turn on whether the employee gave advance notice of service and whether the plan has reasonable election and payment rules:
- No advance notice and no election: the plan may cancel coverage at departure. But if the missing notice was excused (impossible, unreasonable or precluded by military necessity), the plan must reinstate coverage retroactively once the employee elects and pays all unpaid amounts, with no administrative reinstatement cost.
- Notice given, service over 30 days, no election: the plan may cancel at departure, but must reinstate retroactively to the date of departure if the employee elects and pays within the plan’s election period. If the plan has no election-period rule, the employee can do this any time during the USERRA continuation period.
- Election made but payment late: the plan may adopt reasonable rules allowing cancellation for nonpayment; COBRA-style payment rules can be reasonable if they do not conflict with USERRA.
Practical step: make sure the plan document or SPD has written USERRA election and payment rules, so the plan is not stuck with an open-ended election window.