Normally, reservists’ jobs, at least, are safe. When they return, their companies have to rehire them at their old jobs or equal ones, and pay them any raises due. Ditto for enlistees who serve no more than four years. The only exception to these rules might be the company that shrinks. Reservists who’d have lost their jobs if they’d stayed home may find themselves out of work when they’re released.
But even getting your office back doesn’t always make you whole. Many reservists have to swallow losses in income, benefits and retirement funds.
Income. No law requires an employer to continue a reservist’s pay. A majority of the major firms make up any difference between civilian salary and military pay, but only for short periods. Of 155 such companies responding to a survey by the Reserve Officers Association (ROA), most provide this differential for a mere one week to six months. Fourteen percent pay nothing at all. Only 8 percent keep their people whole for the full term. Had the ROA added small companies to its survey, the percentage paying nothing would have leaped. Ironically, Honda and Toyota are more generous than Chrysler and General Motors.
The stingier your company, the more savings you need if you’re in the Reserves or planning to join. The same is true if you run a solo business or professional practice which would lose clients while you’re gone. Without a big organization behind you, it’s risky to be a reservist at all.
Benefits. Some employers finance group health insurance for reservists’ families; others don’t. If the family switches to government insurance, they usually have to use military health facilities–and sometimes pay more of the medical bills than they did under their private plans. By law, companies that employ 20 people or more have to let reservists keep their employee plans at their expense for up to 18 months–but this perk doesn’t come cheap.
As for life insurance, the military offers $50,000 worth of coverage for just $4 a month, regardless of age. But that might not be enough to replace a reservist’s group insurance if his or her company cancels it. People who join the military Reserve should (1) check on whether their employers will continue group coverage if there’s a call-up; (2) buy backup coverage from an insurer whose policies pay even if they die in war (plenty of such insurance is around); (3) remember that USAA Life in San Antonio sells limited amounts of insurance even to men and women already in a war zone.
Pensions. If your pension depends on your salary at retirement, a bit of active duty won’t hurt. But you’ll be docked if you (1) lose some salary during a call-up and (2) your pension is based on each year’s pay.
Profit-sharing plans, 401(k) savings and thrift plans also use current pay to establish each year’s contribution. If a called-up reservist gets no civilian pay, or reduced pay, the company’s contribution drops. A legal argument might be made that this shouldn’t happen, says Charles Kerby of the consulting firm William M. Mercer. He wouldn’t be surprised to see some reservists litigate the issue. One more pension point: while in service you’re covered by a military retirement plan. That might cost you your right to contribute to an Individual Retirement Account.
On the bright side, reservists save money on debt. If you’re called up, the interest on almost all loans drops immediately to 6 percent. That’s on car loans, mortgages, business loans, credit cards, lines of credit, even auto leases. (One exception: government-insured student loans.) Lenders can challenge your rate reduction if they think that your income hasn’t suffered. But they have to give you the 6 percent and then take their complaint to court. Some banks, says Sydney Hickey of the National Military Family Association, are illegally checking your income first.
Happily, many lenders are more lenient than the law requires. American Express, for one, charges zero additional interest on any balances a reservist carries on an Optima card on the day he or she is called up (although new purchases are billed at regular rates). The Wells Fargo Bank defers principal and interest payments on reservists’ existing business and consumer loans.
In Washington, the legislative channels are choking on bills meant to help the troops (chart). A sentimental favorite: a bill to keep single parents, or a pair of parents, out of a war zone. On that I demur. The government should be able to rely on all the people it pays and trains. A reservist unwilling to put his or her family at risk has the ultimate duty to quit.
Washington is afloat in proposals that would protect returning reservists from financial loss. Among them:
