Supplemental Reservist Payments

Here's a timely reminder for contractors with military reservists being called up to active duty. Many companies choose to continue certain fringe benefits, such as health insurance, for employees who have been called to military duty. In addition, many companies pay these individuals the difference between their civilian and military salaries in an effort to help mitigate the hardships that those called to active military duty will experience. For the past 10 years, DoD's official policy has been that those types of supplemental benefits for extended military leave are to be considered allowable costs pursuant to FAR 31.205-6 (Compensation).

There are some limitations however. Allowable amounts are limited to the lessor of:

• the contractor's extended military leave benefits plus active duty pay, or
• the total compensation of an employee at the time of entry into active military duty.

For purposes of computing this limitation, active duty pay includes basic pay, all specialty pay, and all allowances, except for subsistence, travel, and uniform allowances. Contractor policies for administering this benefit will necessarily require reservists to submit their military pay records.