The Congressional Budget Office says reserve activations are getting to be more expensive for employers as well as for the reservists and their families.[@@]

With the regular military stretched to the limits by the prolonged war in Iraq, the Defense Department is relying on more and longer reserve activations to fill the gaps.

The Uniformed Services Employment and Reemployment Rights Act of 1994 guarantees reservists’ right to return to their civilian jobs after service and requires employers to let reservists continue their civilian health coverage for 18 months after they are activated. USERRA also spells out the rights of reservists who return to employer-sponsored health plans and retirement plans once their tours of active duty end.

“Although USERRA provided employment protections to reservist employees, it might be exacerbating the difficulties that call-ups present for those individuals’ employers,” the CBO states. “The legislation limits firms’ flexibility in avoiding vacancies and imposes additional costs on some employers.”

Tax credits, subsidized loans or subsidizing call-up insurance could ease employers’ financial burdens, but that would cost the government money, the CBO says.

Subsidies that would compensate employers for actual losses might be less expensive but harder to administer, the CBO says.

“Calculating the decrease in profitability associated with call-ups may be virtually impossible,” the CBO warns.

Although USERRA states that a called-up employee may keep employer-sponsored coverage during reserve service, an employer can require the employee to pay for the entire cost of the premium. But some employers continue to pay their share of the premium for called-up employees, the CBO says.

One survey found that 40% of large employers said they maintained their activated employees’ health coverage at existing levels.

An employer that provides pension benefits for its employees must maintain reservists’ eligibility to participate in the pension plan. Once reservists return, the employer must handle the reservists’ vesting and accrual of benefits as if returning reservists had been continuously employed.

At employers that provide a 50% match for the first 6% of salary contributed to a 401(k) plan, the typical cost of a 1-year activation would be about $2,100, the CBO estimates.

The Defense Department could ease employer problems resulting from call-ups by exempting certain reservists or particular civilian positions from call-ups, but “declaring some individuals ineligible for activation might impede DoD’s ability to mobilize sufficient personnel and might discourage participation in the reserves,” the CBO says. “DoD would then need to use pecuniary or other incentives to attract additional people to reserve service.”