Military Personnel: DOD Needs More Data to Address Financial and 
Health Care Issues Affecting Reservists (10-SEP-03, GAO-03-1004).
                                                                 
Since the 1991 Persian Gulf War, National Guard and Reserve	 
personnel have been deployed to a number of contingency 	 
operations. Since September 2001, about 300,000 reservists have  
been called to active duty, and the pace of reserve operations is
expected to remain high for the foreseeable future. House Report 
107-436 accompanying the Fiscal Year 2003 National Defense	 
Authorization Act (P.L. 107-314) directed GAO to review 	 
compensation programs for reservists serving on active duty. GAO 
evaluated information on income change reported by reservists	 
when activated; reserve families' readiness for call-ups and	 
their awareness and use of family support programs, focusing on  
personal financial management; and a legislative proposal for the
Department of Defense (DOD) to offer TRICARE, the military's	 
health care program, to reservists and their families when	 
members are not on active duty. 				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-1004					        
    ACCNO:   A08329						        
  TITLE:     Military Personnel: DOD Needs More Data to Address       
Financial and Health Care Issues Affecting Reservists		 
     DATE:   09/10/2003 
  SUBJECT:   Armed forces reserves				 
	     Combat readiness					 
	     Defense contingency planning			 
	     Families						 
	     Financial management				 
	     Health care planning				 
	     Health care programs				 
	     Health care services				 
	     Income statistics					 
	     Military pay					 
	     Military reserve personnel 			 
	     Mobilization					 
	     National Guard					 
	     Family support programs				 
	     Income insurance					 
	     DOD Ready Reserve Mobilization Income		 
	     Insurance Program					 
                                                                 
	     DOD TRICARE Program				 

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GAO-03-1004

Report to Congressional Committees

United States General Accounting Office

GAO

September 2003 MILITARY PERSONNEL

DOD Needs More Data to Address Financial and Health Care Issues Affecting
Reservists

GAO- 03- 1004

DOD lacks sufficient information on the magnitude, the causes, and the
effects of income change to determine the need for compensation programs
targeting reservists who (1) fill critical wartime specialties, (2)
experience high degrees of income loss when on extended periods of active
duty, and (3) demonstrate that income loss is a significant factor in
their retention decisions. Such data are critical for assessing the full
nature and scope of income change problems and in developing cost-
effective solutions. DOD self- reported survey data from past and current
military operations indicate that activated reservists have experienced
widely varying degrees of income change. While many reservists lost
income, more than half of reservists had

either no change or a gain in income. However, survey data are
questionable primarily because it is unclear what survey respondents
considered as income loss or gain in determining their financial status.

DOD has placed greater emphasis on preparing reservists* families for
potential call- ups, yet survey data show that one- third of spouses do
not feel prepared, over half of reservists are not aware of family support
programs, and more than 90 percent of spouses do not use these programs.
Personal financial management, one of DOD*s core family support programs,
illustrates the continuing challenges DOD faces in providing outreach to
reservists. The 2000 survey data showed that 61 percent of reservists did
not know whether personal financial management services were available.
The

survey also showed that reservists have financial problems similar to
their active duty counterparts. DOD is taking steps to improve personal
financial management, but it has not assessed the financial well- being of
reserve families, assessed the impact of reservists* financial problems on
mission readiness, or determined how to tailor its programs to reservists.

Available DOD data do not identify a need to offer TRICARE to reservists
and their families when members are not on active duty. Estimates from
DOD*s 2000 survey showed that nearly 80 percent of reservists had health
care coverage when they were not on active duty. This rate is similar to
that of comparable groups within the overall U. S. population. DOD has
expressed concern over the estimated costs of this proposal. Cost
estimates range up to $5.1 billion a year. However, DOD has not fully
assessed the ramifications of this proposed legislation, including the
impact on recruiting and retention, the effects on active duty personnel,
the extent reservists and their families might participate in such a
program, or the impact on the TRICARE system. In addition, a high
percentage of reservists* civilian employers who currently pay some or all
of health care premiums for reservists during activations could
discontinue providing such assistance. A number of recent improvements
have been made to reservists and their families* health care when members
are activated. However, DOD lacks data on problems reservists and their
families have experienced with health care

since the mobilizations following September 11, 2001; the causes of these
problems; and their effects on readiness, recruiting, and retention. Since
the 1991 Persian Gulf War,

National Guard and Reserve personnel have been deployed to a number of
contingency operations. Since September 2001, about 300, 000 reservists
have been called to active duty, and the pace of reserve operations is
expected to remain high for the foreseeable future. House Report 107- 436
accompanying the Fiscal Year 2003 National Defense Authorization Act

(P. L. 107- 314) directed GAO to review compensation programs for
reservists serving on active duty.

GAO evaluated information on income change reported by reservists when
activated; reserve

families* readiness for call- ups and their awareness and use of family
support programs, focusing on personal financial management; and a
legislative proposal for the

Department of Defense (DOD) to offer TRICARE, the military*s health care
program, to reservists and their families when members are not on active
duty. GAO recommends that DOD

determine the need for and, if necessary, develop targeted compensation
programs to address

income loss incurred by certain activated reservists; improve awareness
and access to personal financial management programs;

and assess the need for and ramifications of additional improvements to
health care for reservists and their families. DOD concurred with our

recommendations.

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 1004. To view the full product,
including the scope and methodology, click on the link above. For more
information, contact Derek B. Stewart (202) 512- 5559 or stewartd@ gao.
gov. Highlights of GAO- 03- 1004, a report to

congressional committees

September 2003

MILITARY PERSONNEL

DOD Needs More Data to Address Financial and Health Care Issues Affecting
Reservists

Page i GAO- 03- 1004 Reserve Personnel Compensation Letter 1 Results in
Brief 3 Background 6 DOD Lacks Data to Determine the Need for Income
Protection Programs 11 DOD Faces Challenges in Family Readiness and
Support 26 DOD Has Not Fully Assessed the Need for Expansion of TRICARE

to Nonactivated Reservists 33 Conclusions 42 Recommendations for Executive
Action 43 Matters for Congressional Consideration 44 Agency Comments and
Our Evaluation 44 Appendix I Scope and Methodology 46

Appendix II DOD Surveys of Reservists and Spouses 49

Appendix III Policies and Protections That May Help Mitigate Reservists*
Financial Hardship During Activation 51

Appendix IV Selected States* Policies on Compensation for Activated
Employees 55

Appendix V Preactivation Activities of Spouses of Activated Reservists 70

Appendix VI Comments from the Department of Defense 72

Appendix VII Staff Acknowledgments 75 Contents

Page ii GAO- 03- 1004 Reserve Personnel Compensation Tables

Table 1: Estimates of Drilling Unit Members* Total Reported Change in
Family Income for Mobilizations or Deployments Prior to 2001 14 Table 2:
Estimates of Spouses* Monthly Reported Change in Family

Income during Activation 16 Table 3: Reservists* Views on Availability of
Selected Family Support Programs or Services 28 Table 4: Income
Assistance, Military Leave, and Health Benefits Offered to State Employees
Called to Federal Active Duty 56 Table 5: Comparison of Spouses*
Preparedness to Preactivation Activities and Other Factors 70 Figures

Figure 1: Annual Number of Days Per Capita for Reserve Mobilizations and
Support to the Services and Combatant Commands (Fiscal Years 1986- 2002) 8
Figure 2: Annual Basic Military Compensation for Selected Pay

Grades (Fiscal Years 1990- 2003) 52 Abbreviations

COBRA Consolidated Omnibus Budget Reconciliation Act DOD Department of
Defense OSD Office of the Secretary of Defense

This is a work of the U. S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
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Page 1 GAO- 03- 1004 Reserve Personnel Compensation September 10, 2003 The
Honorable John W. Warner

Chairman The Honorable Carl Levin Ranking Minority Member Committee on
Armed Services United States Senate

The Honorable Duncan Hunter Chairman The Honorable Ike Skelton Ranking
Minority Member Committee on Armed Services House of Representatives

Since the 1991 Persian Gulf War, National Guard and Reserve 1 personnel
have been deployed to a number of contingency operations, including those
in Southwest Asia and the Balkans. About 300,000 reservists have been
called to active duty since September 2001 to support the war on
terrorism, conflicts in Afghanistan and Iraq, and other operations. Some
reservists have served for a year or more, and the pace of reserve
operations is expected to remain high for the foreseeable future. Citing
the increased reliance on the reserves, House Report 107- 436 accompanying
the Fiscal Year 2003 National Defense Authorization Act 2 directed us to

review compensation 3 programs for reservists serving on active duty. Our
objectives were to evaluate (1) information on income change reported by
reservists when activated for a military operation to determine the need

for compensation programs; (2) reserve families* readiness for call- ups
and their awareness and use of family support programs, specifically
focusing on personal financial management; and (3) a legislative proposal
for the Department of Defense (DOD) to offer TRICARE, the military*s
health care program, to reservists and their families when members are not
on active

1 We use the generic terms *reserves* and *reservists* throughout this
report to refer to both National Guard and Reserve personnel. 2 Public Law
107- 314, Dec. 2, 2002. 3 For this report, we use the term *compensation*
to refer to both pay and employee benefits, to include programs and
services that support servicemembers and their families. United States
General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 1004 Reserve Personnel Compensation duty. This report is a
follow- on to our March 2003 testimony, Military Personnel: Preliminary
Observations Related to Income, Benefits, and

Employer Support for Reservists During Mobilizations, GAO- 03- 549T
(Washington, D. C.: Mar. 19, 2003). 4 Military compensation is one of the
tools DOD uses to attract, retain, and motivate people. One of DOD*s
guiding principles for military compensation is that servicemembers, both
reserve and active component members, be treated fairly. 5 Military
compensation for reservists is affected by the type of military duty they
perform. In peacetime* when a reservist is training or performing military
duty not related to a contingency operation* certain thresholds are
imposed at particular points in service before a reservist is eligible to
receive the same compensation as a member serving in the active component.
For

contingency operations, these same thresholds generally do not apply.
Thus, reservists activated for contingency operations such as Iraqi
Freedom, Noble Eagle, and Enduring Freedom are generally eligible to
receive the same compensation as active component personnel. 6 Our review
focused on the more than 870,000 reservists who generally drill

and train part- time with their military units (referred to as drilling
unit members in this report). To review compensation programs for
reservists on active duty, we analyzed legislation, policies, and other
pertinent documents; obtained and analyzed proposals to enhance reserve
compensation; and discussed these with officials from the Office of the
Assistant Secretary of Defense for Reserve Affairs, the Office of Military
Compensation, the Deputy Under Secretary of Defense for the Office of
Military Community and Family Policy, reserve component headquarters,

and the TRICARE Management Activity. To gain the perspective of 4 In
response to the mandate, we also issued a report on special pay for duty
in the polar regions. See U. S. General Accounting Office, Military
Personnel: DOD Needs to Assess Certain Factors in Determining Whether
Hazardous Duty Pay Is Warranted for Duty in the Polar Regions, GAO- 03-
554 (Washington, D. C.: Apr. 29, 2003). 5 Department of Defense, Office of
the Secretary of Defense, Military Compensation Background Papers:
Compensation Elements and Related Manpower Cost Items, Their Purposes and
Legislative Backgrounds (September 1996).

6 In a prior report comparing the benefits offered to active duty
servicemembers with those offered in the private sector, we found no
significant gaps in military benefits. See U. S. General Accounting
Office, Military Personnel: Active Duty Benefits Reflect Changing
Demographics, but Opportunities Exist to Improve, GAO- 02- 935
(Washington, D. C.: Sept. 18, 2002).

Page 3 GAO- 03- 1004 Reserve Personnel Compensation reservists and their
spouses, we obtained and analyzed the results of a 2000 DOD survey of
reservists, which covered reservists* experiences

during military operations between 1991 and 2000, and a 2002 DOD survey of
spouses of activated reservists. (See app. I for more information on our
scope and methodology and app. II for a description of the 2000 and 2002

surveys.) We completed our work for this report from March to July 2003 in
accordance with generally accepted government auditing standards.

DOD lacks sufficient information on the magnitude, the causes, and the
effects of income change to determine the need for compensation programs
targeting reservists who meet three criteria: (1) fill critical wartime
specialties, (2) experience high degrees of income loss when on extended
periods of active duty, and (3) demonstrate that income loss is a
significant factor in their retention decisions. Such data are critical
for assessing the full nature and scope of income change problems and in
developing cost- effective solutions. DOD self- reported survey data from
past and current military operations indicate that reservists have
experienced widely varying degrees of income change when they are
activated. A 2000 DOD survey of reservists showed that of those who served
in military operations from 1991 to 2000, an estimated 59 percent of
drilling unit members had no change or a gain in family income when they

were mobilized or deployed for a military operation, and about 41 percent
lost income. A higher percentage of reservists in certain groups, such as
self- employed individuals and health care professionals, lost income
compared with reservists overall. A 2002 DOD survey of spouses of
activated reservists showed that an estimated 70 percent of families
experienced a gain or no change in monthly income and 30 percent
experienced a decrease in monthly income. However, survey data are
questionable primarily because it is unclear what survey respondents
considered as income loss or gain in determining their financial status.
Although existing pay policies and protections may help mitigate
reservists* financial hardship during activation, additional measures have
been proposed to provide income protection to reservists. For example, the
Army has proposed a new special pay targeting certain self- employed
physicians to make up for some of the income loss they may experience
while serving on active duty over an extended period of time. Targeted
compensation programs, such as the Army*s special pay proposal, could
provide a cost- effective means of providing income protection to
reservists who meet the three criteria above. Other proposals to provide
income protection to reservists* including legislative proposals to
provide differential pay to activated federal employees and an Air Force
proposal Results in Brief

Page 4 GAO- 03- 1004 Reserve Personnel Compensation to establish an income
insurance program* are not targeted compensation programs.

Although DOD has placed greater emphasis on family readiness* preparing
servicemembers and their families for potential activation* and on making
family support services available during activation, many reserve families
do not feel prepared and many do not use and are not aware of family
support services. In 2002, one- third of spouses felt they were unprepared
or very unprepared when the member was notified of active duty, and more
than 90 percent of spouses did not use the military*s family support
programs. The 2000 survey estimates showed that more than half of
reservists either did not know that family support services were available
or thought they were unavailable. DOD officials acknowledge that they face
outreach challenges in preparing families and providing family support and
have expanded outreach efforts. Personal financial management, one of
DOD*s core family support programs, illustrates some of the challenges DOD
faces in providing outreach to reservists. Under DOD policy, military
personnel bear primary responsibility for the welfare of their families,
but the commitment demanded by military service requires that they be
provided a comprehensive family support system, to include financial
planning assistance. DOD is taking some steps to improve servicemembers*
personal financial management, including drafting a new policy and
developing partnerships with nonprofit groups that support financial

assistance programs. DOD, however, has not assessed the financial
wellbeing of reserve families or determined how to tailor its programs to
this population. Our review of DOD survey data shows that reservists
reported having many of the same financial problems as their active duty
counterparts. The 2000 DOD survey showed that an estimated 61 percent of
drilling unit members did not know whether financial counseling and

management education services were available, and another 16 percent did
not think these services were available. In addition, DOD has found a link
between financial problems and readiness in the active component. For
example, the Navy identified $250 million in productivity and salary
losses due to poor personal financial management. However, DOD has not
assessed the impact of reservists* financial problems on mission
readiness. DOD and the military services have noted a need to improve
reservists* and their spouses* awareness of and access to personal
financial management programs, but they have not tailored their programs
to reservists by developing plans that specify how these needs will be
met.

Available DOD data do not identify a need to offer TRICARE to reservists
and their families when members are not on active duty. Estimates from

Page 5 GAO- 03- 1004 Reserve Personnel Compensation DOD*s 2000 survey
showed that nearly 80 percent of reservists reported having health care
coverage when they were not on active duty. This rate

is similar to that of comparable groups within the overall U. S.
population. DOD has expressed concern over the estimated costs of this
proposal. Cost estimates range up to $5.1 billion a year. However, DOD has
not fully assessed the ramifications of this proposed legislation,
including the impact on recruiting and retention, the effects on active
duty personnel, the extent reservists and their families might participate
in such a program, or the impact on the TRICARE system. In addition, a
high percentage of reservists* civilian employers who currently pay some
or all of health care premiums for reservists during activations could
discontinue providing such assistance. A number of recent improvements
have been made to reservists and their families* health care when members
are activated. Recent improvements include earlier access to certain
TRICARE programs when a member is activated and higher reimbursement rates
for care received from physicians outside DOD*s health care networks.
However, DOD lacks data on problems reservists and their families have
experienced in maintaining continuity of health care since the activations
following September 11, 2001; the causes of

these problems; and their effects on readiness, recruiting, and retention.
We are making recommendations in this report to (1) enhance DOD*s ability
to determine the need for and, if necessary, develop compensation programs
targeted at reservists in critical specialties who experience high degrees
of income loss when activated; (2) improve reservists* and their

spouses* awareness of and access to personal financial management
programs; and (3) assess the need for and ramifications of additional
improvements to health care for reservists and their families. In
commenting on a draft of this report, DOD concurred with our
recommendations. On the basis of DOD*s concurrence with our recommendation
concerning reserve health care benefits, we are also including matters for
congressional consideration concerning the legislative proposal to extend
TRICARE benefits to nonactivated reservists and their families.

Page 6 GAO- 03- 1004 Reserve Personnel Compensation The reserve forces are
divided into three major categories, one of which is the Ready Reserve. 7
The Ready Reserve, with approximately 1.2 million

reservists at the end of fiscal year 2002, is further subdivided into the
Selected Reserve, the Individual Ready Reserve, and the Inactive National
Guard. The Selected Reserve, with approximately 880,000 members in fiscal
year 2002, includes all personnel who are active members of reserve units
and who participate in regularly scheduled drills and training. In this
report, we refer to these personnel as *drilling unit members.* The

Selected Reserve also includes individual mobilization augmentees*
individuals who regularly train with active component units. The
Individual Ready Reserve principally consists of individuals who have had
training and have previously served in the active forces or in the
Selected Reserve, and the Inactive National Guard contains individuals who
are

temporarily unable to participate in regular training with the Guard unit.
Together, the Individual Ready Reserve and Inactive National Guard had
about 320,000 members in fiscal year 2002. There are seven reserve
components* the Army Reserve, the Army National Guard, the Air Force
Reserve, the Air National Guard, the Naval Reserve, the Marine Corps
Reserve, and the Coast Guard Reserve.

7 The other two categories of the reserve forces are the Standby Reserve
and the Retired Reserve. Background

Components of the Reserve Forces

Page 7 GAO- 03- 1004 Reserve Personnel Compensation Since the end of the
Cold War, there has been a shift in the way reserve forces have been used.
Previously, reservists were viewed primarily as an

expansion force that would supplement active forces during a major war.
Today, reservists not only supplement but also replace active forces in
military operations worldwide. 8 In fact, DOD has stated that no
significant operation can be conducted without reserve involvement. Figure
1 shows per capita involvement of reservists annually since 1986 and
illustrates the spikes in reserve participation in military operations in
fiscal years 1991 (Desert Shield and Desert Storm) and 2002 (Noble Eagle
and Enduring Freedom), as well as a fairly steady level of involvement
between 1996 and 2001. We derived per capita calculations by dividing the
total days of support for military missions by the end strength of the
Selected Reserve. However, force structure within the Selected Reserve
qualifies only a

portion of those available to serve for a particular mission. Despite
this, the data highlight trends in the average number of support days
served by reservists.

8 The average reservist trains 38 or 39 days per year. In addition to this
training, some reservists provide support for counterdrug operations,
domestic emergencies, exercises, and established and emerging operations,
including those involving either presidential callups or mobilizations.
Reserve Participation in Military Operations

Page 8 GAO- 03- 1004 Reserve Personnel Compensation Figure 1: Annual
Number of Days Per Capita for Reserve Mobilizations and Support to the
Services and Combatant Commands (Fiscal Years 1986- 2002)

Notes: GAO analysis of Office of the Assistant Secretary of Defense for
Reserve Affairs data. This figure includes the contributions of the Coast
Guard Reserve. Mobilizations are operations using the Presidential Reserve
Call- up or mobilization authorities. Support of the services or combatant
commands is mission assistance provided under voluntary orders and
includes both contingency operations and other missions. The figure
excludes days for training as well as support for counterdrug operations,
exercises, and domestic emergencies.

Per capita calculations are derived by dividing the total days of support
for these missions by the end strength of the Selected Reserve. However,
force structure within the Selected Reserve qualifies only a portion of
those available to serve for a particular mission. Despite this, the data
highlight trends in the average number of support days served by
reservists.

Page 9 GAO- 03- 1004 Reserve Personnel Compensation There have been wide
differences in the operational tempos 9 of individual reservists in
certain units and occupations. Prior to the current mobilization,
personnel in the fields of aviation, special forces, security,
intelligence, psychological operations, and civil affairs had been in high
demand, experiencing operational tempos that were two to seven times

higher than those of the average reservist. Since September 2001,
operational tempos have increased significantly for reservists in DOD
reserve components due to the partial mobilization in effect to support
Operations Iraqi Freedom, Noble Eagle, and Enduring Freedom.

For each year from fiscal year 1997 to 2002, the reserves on the whole
achieved at least 99 percent of their authorized end strength. In 4 of
these 6 years, they met at least 100 percent of their enlistment goals.
During this

time period, enlistment rates fluctuated from component to component. For
the fiscal year 1997- 2002 period, only the Army National Guard
experienced a slight overall increase in attrition. 10 The attrition data
suggest there has not been a consistent relationship between a component*s
average attrition rate for a given year and the attrition rate for that
component*s high demand capabilities (which include units and
occupations). In other words, attrition rates for high demand capabilities
were higher than average in some cases but lower than average in other
cases. Shortfalls have been identified in certain specialties, such as
health care professionals.

DOD uses surveys of reservists and their spouses to obtain information on
reservists* income change when they are activated for a military operation
and to obtain their perspective on a number of issues relating to
activation, including family support and health care. The most recent
survey of reservists was completed in 2000, 11 prior to the terrorist
attacks

9 For this report, operational tempo refers to the total days reservists
spend participating in normal drills, training, and exercises, as well as
domestic and overseas operational missions. 10 Attrition is the total
number of personnel losses from the Selected Reserve divided by the
average Selected Reserve end strength for the year. Under this definition,
attrition is not a

true measure of retention since it does not reflect the number of
personnel who left compared with the eligible population of those who
could have left. 11 The population of interest consisted of all Selected
Reserve members below flag or general officer rank, with at least 6 months
of service when the questionnaires were first mailed in August 2000. The
sample consisted of 74, 487 members. Eligible respondents returned 35, 223
completed surveys. End Strength, Enlistment,

and Attrition DOD*s Use of Survey Data

Page 10 GAO- 03- 1004 Reserve Personnel Compensation that occurred on
September 11, 2001, and the ensuing mobilization. The 2000 survey included
questions on various aspects of mobilization and

deployment for operations dating back to the 1991 Persian Gulf War. In
2002, the Office of the Assistant Secretary of Defense for Reserve Affairs
surveyed spouses of activated reservists. 12 In 2003, DOD fielded a new
*status of forces* survey of activated reservists. However, the survey had
not been completed at the time we were conducting our work.

The Under Secretary of Defense for Personnel and Readiness has oversight
for policies, plans, and programs for military personnel management,
military compensation, and personnel support programs. The Assistant
Secretary of Defense for Reserve Affairs is responsible for the overall
supervision of issues involving reserve forces. The Assistant Secretary of
Defense for Health Affairs has the responsibility to execute DOD*s health
care mission. The TRICARE Management Activity manages

and executes the Defense Health Program Appropriation and supports the
uniformed services in implementation of TRICARE. Regarding family support
programs, the secretaries of the military departments are responsible for,
among other things, ensuring that comprehensive family support systems are
developed at DOD installations and that family support systems are
monitored and evaluated to ensure that they are accessible, effective, and
responsive to the needs of DOD personnel and their families.

We have previously reported on several issues surrounding the increased
use of reserve forces. In August 2003, we reported on the efficiency of
DOD*s process for mobilizing reservists following September 11, 2001. 13
In April 2003, we examined whether the Army was collecting and maintaining
information on the health of early- deploying reservists. 14 In March
2003, we testified before the Subcommittee on Total Force, House Committee
on

12 The population of interest was spouses of reservists activated for
Operations Noble Eagle, Enduring Freedom, Bosnia, Southwest Asia, or
Southern Watch. The sample consisted of 7, 658 spouses when the survey was
first mailed in August 2002. Eligible respondents returned 3,874 completed
surveys.

13 U. S. General Accounting Office, Military Personnel: DOD Actions Needed
to Improve the Efficiency of Mobilizations for Reserve Forces, GAO- 03-
921 (Washington, D. C.: Aug. 21, 2003).

14 U. S. General Accounting Office, Defense Health Care: Army Needs to
Assess the Health Status of All Early- Deploying Reservists, GAO- 03- 437
(Washington, D. C.: Apr. 15, 2003). Roles and Responsibilities

Recent GAO Reports on Reserve Forces

Page 11 GAO- 03- 1004 Reserve Personnel Compensation Armed Services, on
our preliminary observations related to the issues covered in this report,
as well as employer support. 15 Also in March 2003, we testified before
the Subcommittee on Total Force concerning DOD*s

oversight of TRICARE*s network of civilian providers, and we issued a
report on this topic in July 2003. 16 In September 2002, we issued a
report in response to a congressional mandate to study the health care
benefits of reserve component members and dependents and the effect
mobilization may have on these benefits. 17 In June 2002, we noted that
maintaining employers* continued support for their reservist employees
will be critical if DOD is to retain experienced reservists in these times
of longer and more frequent deployments. 18 DOD lacks sufficient
information from the survey data to determine the

magnitude of income loss or gain experienced by reservists, the causes for
this change, and the effects of income loss on reserve retention. Such
data are critical for assessing the full nature and scope of income change

problems and in developing cost- effective solutions. DOD self- reported
survey data from past and current military operations indicate that
reservists have experienced widely varying degrees of income change when
they are activated. While many reservists have reported lost income during
activation, more than half of reservists have reported either no

change or a gain in income. Current pay policies and protections, as well
as emergency aid services, may help mitigate reservists* financial
hardship during activation. Additional income protection initiatives for
reservists

have been proposed. Three of these proposals are (1) an Army initiative to
provide special deployment pay to self- employed physicians who fill 15
GAO- 03- 549T. We also provided a statement for the record to the
Subcommittee on Personnel, Senate Committee on Armed Services, titled
Military Personnel: Preliminary Observations Related to Income, Benefits,
and Employer Support for Reservists During Mobilization, GAO- 03- 573T
(Washington, D. C.: Mar. 19, 2003).

16 U. S. General Accounting Office, Defense Health Care: Oversight of the
Adequacy of TRICARE*s Civilian Provider Network Has Weaknesses, GAO- 03-
592T (Washington, D. C.: Mar. 27, 2003) and Defense Health Care: Oversight
of the TRICARE Civilian Provider Network Should Be Improved, GAO- 03- 928
(Washington, D. C.: July 31, 2003).

17 U. S. General Accounting Office, Defense Health Care: Most Reservists
Have Civilian Health Coverage but More Assistance Is Needed When TRICARE
Is Used, GAO- 02- 829 (Washington, D. C.: Sept. 6, 2002). 18 U. S. General
Accounting Office, Reserve Forces: DOD Actions Needed to Better Manage
Relations between Reservists and Their Employers, GAO- 02- 608
(Washington, D. C.: June 13, 2002). DOD Lacks Data to

Determine the Need for Income Protection Programs

Page 12 GAO- 03- 1004 Reserve Personnel Compensation critical medical
wartime positions in the reserves, (2) legislative proposals to authorize
differential pay for federal employee reservists, and (3) an Air

Force initiative to establish an income insurance program for activated
reservists.

The 2000 and 2002 DOD surveys provide incomplete information on the
magnitude of income change experienced by activated reservists, the causes
of income loss, and the effects of income loss on reservists* attitudes
toward military life and on retention. Such data are critical for
assessing the full nature and scope of income change problems and in
developing cost- effective solutions. Based on the 2000 survey data, DOD
estimated that the average total income change for all reservists
(including losses and gains) was almost $1,700 in losses. However, this
figure should be considered with caution because of the estimating
methodology that was used and because it is unclear what survey
respondents considered as

income loss or gain in answering this question. 19 For example, when
members reported income loss or gain, they may or may not have included
the value of indirect compensation, such as health care benefits, or
considered changes in their expenses, such as those for household and car
maintenance and for child care. In addition, it is unclear whether survey
respondents included paid civilian leave received concurrently with
military pay or whether they included differential pay if provided by
their employer. Further, reservists were mobilized or deployed for varying
lengths of time, which is likely to affect their overall income change.
According to DOD*s analysis of the survey data, certain groups reported
greater losses of income on average. For example, self- employed
reservists reported an average income loss of $6,500, physicians/
registered nurses reported an average income loss of $9,000, and self-
employed physicians/ registered nurses reported an average income loss of
$25, 600. DOD*s analysis presents little data on those groups who reported
an overall income gain. Two groups that were identified as reporting a
gain were clergy and those who worked for a family business without pay.

The existing survey data provide incomplete information on the causes of
income change. Income change can be attributed to various factors,
including a difference between civilian and military pay, a change in

19 The 2000 survey asked respondents: *Please estimate your (and your
spouse*s) total income change from all sources as a result of your most
recent mobilization and deployment. If you (and your spouse) have
continuing losses from a business or practice, include those in your
estimate.* Information on Magnitude, Causes, and Effects of

Income Loss Is Incomplete

Page 13 GAO- 03- 1004 Reserve Personnel Compensation spousal income, a
change resulting from continuing losses from a business or practice, a
different job being performed, or some combination of these.

The 2002 spouse survey estimates showed that about 60 percent had an
increase in the military member*s earnings, 10 percent had an increase in
their own earnings due to working more hours or taking a second job, 31
percent had a reduction in the military member*s earnings, 19 percent had
a reduction in their own earnings because they were unable to work as
much, 6 percent had other increases in income, and 15 percent had other
reductions in income. In addition to these factors, military households
may also experience a change in expenses during the activation period. The
2000 survey estimates showed that about 22 percent of drilling unit
members had an increase in child- care expenses, 26 percent had an
increase in household maintenance and car repair expenses, and 63 percent
had an increase in telephone expenses. However, neither

survey provides complete information on the extent these individual
factors contribute to overall income change.

Although reservists have reported that income loss causes problems for
them, the effects of these problems are not clear. When asked to rank
income loss among other problems they have experienced during mobilization
or deployment, about 41 percent of drilling unit members ranked it as one
of their most serious problems. 20 But the survey data are inconclusive
concerning the effects of income loss problems on servicemembers*
attitudes toward military life or on retention. Our prior work has shown
that retention decisions are highly personal in nature and that many
factors may affect the decision of a servicemember to stay in the military
or leave. A 1998 RAND study conducted for DOD found that income loss
during the 1991 Persian Gulf War, while widespread among reservists, did
not have a measurable effect on the retention of enlisted reservists. 21
The study was cautiously optimistic that mobilizing the reserves under
similar circumstances in the future would not have adverse effects on
enlisted recruiting and retention. However, the effects of future
mobilizations can depend on the mission, the length of time reservists are
deployed, the frequency of deployment, the degree of support from
employers and family members, and other factors. Office of the Secretary
of Defense (OSD) officials told us it was too early to know how the
current

20 The survey listed 22 possible problems and asked respondents to choose
their top 3 most serious problems experienced during mobilization or
deployment. 21 RAND, The Effect of Mobilization on Retention of Enlisted
Reservists After Operation Desert Shield/ Storm, MR- 943- OSD (1998). The
study did not include officers.

Page 14 GAO- 03- 1004 Reserve Personnel Compensation mobilization would
affect retention or what factors would be driving reservists* retention
decisions.

The 2000 DOD survey showed that an estimated 41 percent of reservists who
were drilling unit members in the Selected Reserve lost family income when
they were mobilized or deployed for a military operation, 30 percent had
no change in income, and 29 percent had an increase in income. Table 1
shows the distribution of income change reported by drilling unit members
in the 2000 survey.

Table 1: Estimates of Drilling Unit Members* Total Reported Change in
Family Income for Mobilizations or Deployments Prior to 2001

Total income change Percentage

Decreased $50, 000 or more 0.9 Decreased $25, 000 to $49,999 1.5 Decreased
$10, 000 to $24,999 4.1 Decreased $5, 000 to $9,999 6.0 Decreased $2, 500
to $4,999 8.9 Decreased $1 to $2,499 19.5

Subtotal 40.9

No change in income 30.0

Subtotal 30.0

Increased $1 to $2,499 16.6 Increased $2,500 to $4,999 6.8 Increased
$5,000 or more 5.7

Subtotal 29.1 Total 100.0

Sources: DOD 2000 Reserve Component Survey (data); GAO (presentation).

Our analysis of the 2000 DOD survey estimates showed that differences in
total family income change were attributable to different civilian
occupations. For example, a higher percentage of self- employed reservists
lost income (55 percent) 22 compared with drilling unit members overall
(41 percent). About 10 percent of self- employed drilling unit members had
income loss of $25,000 or more, compared with about 3 percent for drilling
unit members overall. The percentage of federal employee reservists who

22 The sampling error for this estimate is plus or minus 9 percentage
points. Reservists Have

Experienced Widely Varying Degrees of Income Loss or Gain

Page 15 GAO- 03- 1004 Reserve Personnel Compensation lost income did not
differ statistically from the overall average for drilling unit members.
Of federal employee reservists, about 39 percent had an

income loss, and 62 percent had no change or a gain in income. 23 Of
reservists in selected civilian career fields, 24 a higher percentage of
health care professionals had income loss compared with reservists in
other career fields, and about 38 percent of health care professionals 25
had an income loss of $25,000 or more. Income change differences were also
evident based on reserve component and pay grade. For example, a higher
percentage of members in the Marine Corps Reserve and the Naval Reserve
had income loss compared with members of the Army National Guard.

The 2002 DOD survey of spouses of activated reservists found that an
estimated 58 percent had an increase in monthly family income, 30 percent
had a loss in monthly income, and 12 percent experienced no change in
monthly income (see table 2).

23 The percentages do not add to 100 due to rounding. Sampling errors for
federal employees who had a decrease, no change, or a gain in income were
about plus or minus 6 percentage points.

24 The 2000 survey obtained information on reservists in the following
civilian career fields: medical professionals, lawyers, information
technology specialists, clergy, and pilots/ navigators.

25 The sampling error for this estimate was about plus or minus 8
percentage points.

Page 16 GAO- 03- 1004 Reserve Personnel Compensation Table 2: Estimates of
Spouses* Monthly Reported Change in Family Income during Activation
Monthly income change Percentage

Decreased more than $3,500 3 Decreased $2, 001-$ 3,500 4 Decreased $1,
001-$ 2,000 7 Decreased $501-$ 1,000 8 Decreased $251-$ 500 6 Decreased
$1-$ 250 2

Subtotal 30

No change 12

Subtotal 12

Increased $1-$ 250 8 Increased $251-$ 500 12 Increased $501-$ 1,000 16
Increased $1,001-$ 2, 000 14 Increased $2,001-$ 3, 500 6 Increased more
than $3,500 2

Subtotal 58 Total 100

Sources: DOD (data); GAO (presentation).

Current pay policies and protections, as well as emergency aid services,
may help mitigate reservists* financial hardship during activation. For
example, basic military compensation has increased in recent years. In
addition, the Soldiers* and Sailors* Civil Relief Act provides numerous
financial protections to reservists. (See app. III for more information on
existing pay policies and protections.) Additional income protection
measures for reservists have been proposed. Three proposals are (1) an
Army initiative to provide special deployment pay to self- employed
physicians who fill critical medical wartime positions in the reserves,
(2) legislative proposals to authorize differential pay for federal
employee reservists, and (3) an Air Force initiative to establish income
insurance for activated reservists. Additional Income

Protection Measures Have Been Proposed to Supplement Existing Pay Policies
and Protections

Page 17 GAO- 03- 1004 Reserve Personnel Compensation The Army, through
DOD*s Unified Legislation and Budgeting process, 26 has proposed a special
deployment pay to limit income loss and improve

retention of certain Army Reserve Medical Corps physicians. The pay would
be targeted at reservists called to active duty who are (1) self-
employed, 27 (2) serve as officers in the Army Reserve Medical Corps in
critical wartime medical specialties, and (3) deploy involuntarily beyond
the established rotation. The special deployment pay would be available
during contingencies and funded through a supplemental appropriation.
Under this proposal, an eligible reservist would receive an additional
monthly pay that would vary by specialty, level of training, and years of
active duty service as a Medical Corps officer. The monthly pay would be
limited to no more than twice the special pay currently earned by an
eligible individual. The Army estimates the mean cost at $6,000 per

month per eligible professional. The Army estimates that had this pay
policy been in place in May 2003, Army Reserve physicians deployed beyond
the established rotation period (90 days) would have received a total of
$630, 000 in special deployment pay for that month. 28 According to the
Army, this special pay is needed because of difficulties

retaining and replacing fully trained physicians 29 in the Army Reserve
Medical Corps to meet its wartime needs. These retention difficulties are
due, in part, to reservists* concerns about financial loss during
deployment. According to the Army, it has been unsuccessful in recruiting
and retaining enough fully trained physicians to meet authorized personnel
levels in the Selected Reserve and has had to rely on transfers from the
Individual Ready Reserve to reconstitute its Selected Reserve strength.
The Army attributes retention challenges within the reserves to a decrease
in the number of active duty physicians transferring to the reserve

26 DOD established the Unified Legislation and Budgeting process in 1994
to develop and review personnel compensation proposals. 27 Internal
Revenue Publication 533 defines *self- employed* individuals as sole
proprietors or independent contractors; members of a partnership that
carries on a trade or business; or otherwise in business for themselves. A
2001 survey of medical personnel conducted for

the Army Surgeon General found that almost 40 percent of Army Reserve
Medical Corps officers identified themselves as self- employed. 28 The
cost estimate assumes that about 30 percent of the 350 Army Reserve
Medical Corps officers deployed in May 2003 would have qualified for the
special deployment pay. The actual total monthly cost may be less since
this figure assumes that all qualifying physicians had been deployed
involuntarily beyond the 90- day rotation schedule.

29 The Army considers physicians to be fully trained and deployable when
they have passed a written exam and completed their residency. Special
Deployment Pay for Physicians in Critical Wartime Specialties

Page 18 GAO- 03- 1004 Reserve Personnel Compensation component, attrition
due to an aging force and professionals meeting retirement eligibility,
and the inability of some medical professionals to

tolerate income loss resulting from frequent or lengthy activations. Every
2 years, the Assistant Secretary of Defense for Health Affairs publishes a
list of critical officer skills needed to meet Ready Reserve medical
shortages and for which the services could offer retention and recruiting
incentives. During fiscal years 2002 and 2003, the Army Reserve was
projected to have critical shortages* that is, projected to fill less than
80 percent of authorized positions during the next 24 months* in 18
wartime health care specialties, such as general surgery, thoracic
surgery, and preventative medicine. For example, as of January 2003, the
Army Reserve had filled 78 percent of authorized general surgeon
positions, 62 percent of thoracic surgeon positions, and 41 percent of
preventative medicine positions.

A 1996 survey conducted for the Chief, Army Reserve, found that 54 percent
of Army Reserve physicians cited the financial impact of mobilization as a
primary reason that they did not intend to remain in the reserves until
retirement. The survey showed that catastrophic financial loss associated
with long- term deployments was the primary factor in their decisions to
leave the Army Reserve. Furthermore, over three- quarters of all Army
Reserve physicians surveyed in 1996 and 2001 required mobilization periods
of 90 days or less to avoid seriously affecting their medical practices.
Fifty- nine percent of respondents to the 2001 survey preferred a maximum
deployment length of 60 days or less. However, these respondents indicated
that a special deployment pay would allow them to deploy for longer
periods of time and would increase the likelihood that they would remain
in the Army Reserve. The amount of special pay that respondents would need
varied by medical specialty, with the majority indicating a need for less
than $10,000 a month to maintain their practices while deployed.

To increase retention among medical professionals concerned about the
financial impact of lengthy mobilizations on their practices, the Army
implemented the Presidential Reserve Call- Up 90- Day Rotation Pilot
Program in 1999. The 3- year pilot program limited deployments of
physicians, dentists, and nurse anesthetists to 90 days in the area of
operations. A 2001 survey of Army Reserve medical personnel found that
intent to remain in the Army Reserve increased among self- employed

medical professionals who were aware of the 90- day rotation pilot
program. By 2001, the percentage of Army Reserve medical professionals who
indicated that they did not intend to remain until retirement had

Page 19 GAO- 03- 1004 Reserve Personnel Compensation dropped slightly.
Those aware of the 90- day cap who indicated that they would leave because
of the financial impact of mobilization decreased by 23 percent from 1996
to 2001. Moreover, those indicating that they would

leave because of concerns about future mobilizations decreased by 20
percent over the same time period. Respondents to the 2001 survey
indicated that a special deployment pay would allow them to deploy for
longer periods of time. For example, of respondents whose original optimal
deployment length was 31 to 60 days, 76 percent indicated that they could
increase their deployment time up to 90 days with a special deployment
pay.

Federal employee reservists called to active military duty do not receive
paid compensation from their civilian employing agency other than paid
military and annual leave. 30 Under various legislative proposals
introduced during the current congressional cycle, 31 federal agencies
that employ reservists called to active duty would be required to pay the
difference, if any, between the employee*s civilian pay and military pay
from appropriated funds. DOD*s 2000 survey estimates indicated that 9
percent of drilling unit members were federal employees in 1999.
Proponents of differential pay for federal employee reservists state that
providing this pay (1) would recognize the demands and burdens placed on
reservists and their families, (2) would help federal employee reservists
maintain their standard of living, and (3) would set an example for other
employers of reservists. The Office of Personnel Management has opposed
similar legislation in the past on the basis of equity and cost issues. In
addition, as noted earlier, available data indicate that federal employee
reservists are not suffering income loss to a greater extent than other
reservists, such as certain health care professionals.

Federal law provides many rights and benefits for federal employees called
to active military duty. In December 2001, federal agencies were granted
discretionary authority to pay both the employee and government

30 Activated federal employees who use military leave receive full
compensation from their civilian agency in addition to their military pay
for the same period. Federal employee reservists earn up to 15 days of
military leave a year. Employees who perform active military duty to
assist domestic civilian authorities in the protection of life or property
may be granted an additional 22 days of military leave.

31 Four legislative proposals that would offer differential pay to
activated federal employee reservists are S. 593, Reservists Pay Security
Act of 2003; S. 442, Reservists and Guardsmen Pay Protection Act of 2003;
H. R. 217, Reservists Pay Security Act of 2003; and H. R. 1345, Equity for
Reservists Pay Act of 2003. Differential Pay for Activated

Federal Employees

Page 20 GAO- 03- 1004 Reserve Personnel Compensation shares of the Federal
Employees Health Benefits Program premium for any or all of an 18- month
period when an employee is called to active duty

in support of a contingency operation. 32 As of March 2003, about 64
percent of federal agencies reported paying the entire premium when an
employee is called to active duty. At agencies that have not used this
discretionary authority, employees may continue to pay their share of
premiums for the first 12 months and their share of premiums plus the
government*s share of premiums and a 2 percent administrative processing
fee for the next 6 months. 33 Other benefits for activated federal
employee reservists include the

following:  continuation of life insurance for up to 12 months at no
cost;  continued accrual of military leave, which may be carried over to
the

following fiscal year or used while activated; and  retroactive
retirement credits upon return to their civilian positions. In an August
2002 memorandum, the Office of Personnel Management cited *equity issues*
in its opposition to differential pay for federal employee reservists.
While the Office of Personnel Management did not elaborate, differential
pay could create inequities in pay between federal employee reservists and
their active duty counterparts who are serving in the same positions and
pay grades. Two servicemembers performing the

same military job could receive different amounts of compensation simply
because one is a reservist with a full- time job in the federal civilian
sector. In addition, there may not be a correlation between a reservist*s
civilian and military pay grades. A federal employee*s civilian salary is
based on work performed at a certain pay grade and may require different
skills and knowledge than the employee*s military job. Providing
differential pay would, in effect, be paying the reservist for a job other
than that being performed.

The Office of Personnel Management also stated that the cost of providing
differential pay for activated federal employee reservists on an
indefinite basis would be significant and that data are lacking to make an
accurate 32 Public Law 107- 107, sec. 519. (Dec. 28, 2001) 5 U. S. C. sec.
8906( e)( 3).

33 Federal employees can extend coverage beyond 18 months for 31 days and
convert to an individual policy offered by the plan carrier. Public Law
103- 353, Oct. 13, 1994, 38 U. S. C. sec. 4301- 4333.

Page 21 GAO- 03- 1004 Reserve Personnel Compensation cost projection. It
noted that because federal agencies would fund the cost of differential
pay, agencies with greater numbers of activated reservists would have
higher costs, reducing the amount of funds available for other program
operations. The Congressional Budget Office developed a cost

estimate for one of the legislative proposals. 34 It estimated that this
proposal would cost $201 million for the fiscal year 2003- 08 period,
which includes retroactive payments for federal employees called to active
duty since September 11, 2001. 35 A factor that complicates calculation of
the total cost of differential pay is

DOD*s lack of complete information about reservists* employment. Until
recently, DOD did not require reservists to provide information to DOD
about their civilian employers. In response to our recommendation that DOD
collect complete data about reservists* employment, DOD and the services
implemented the Civilian Employment Information Program in March 2003. 36
Under this program, Selected Reserve members are required to provide their
employment status, employer*s name, and civilian job title, among other
information. When fully established, the program will allow DOD to
consider employment- related factors during premobilization planning and
assist the department in accomplishing its employer outreach efforts. The
data could also help to identify the number of federal employees who could
be called to active duty and to develop a total cost

estimate if a pay differential were offered to them. While civilian
employers are not required under the Uniformed Services Employment and
Reemployment Rights Act 37 to provide differential pay to activated
reservists, we have found that many employers do so. As part of our
earlier work on employer support for the Guard and Reserve, we contacted
359 employers of reservists in high tempo units between November 2001 and
March 2002 about their pay practices for activated employees. Of 183
employers who completed and returned the survey,

34 S. 593, Reservist Pay Security Act of 2003, as introduced on March 11,
2003. 35 For its analysis, the Congressional Budget Office assumed that
(1) 15 percent of those reserves called to active duty at any time are
federal employees; (2) the average annual

reduction in salary while serving on active duty is about $3,000; and (3)
an average of 20,000 federal employees will be on active duty military
service between July 1, 2003, and September 30, 2003, diminishing to about
2, 000 by 2008. Lengthier, larger, or more frequent deployments could
increase the costs of differential pay.

36 GAO- 02- 608. 37 Public Law 103- 353, 38 U. S. C., sec. 4301- 4333.

Page 22 GAO- 03- 1004 Reserve Personnel Compensation about 40 percent
indicated that they provide either full pay, differential pay, or a
combination of both to activated reservists. For this report, we

also surveyed officials from 22 states about their compensation policies
for state employees called to federal active duty and found that most
offer some type of financial assistance to their activated employees.
Nineteen of the 22 states offer financial assistance, such as pay
differentials, to

employees who are on military leave without pay and can document a loss of
income. (App. IV provides information on income assistance, military
leave, health benefits, and other benefits offered by the 22 states to
their employees who are called to active duty.) DOD*s 2002 spouse survey
estimates showed that the reserve member*s civilian employer continued to
pay the member*s salary in full or in part for 22 percent of spouses.

From 1996 to 1997, DOD offered the Ready Reserve Mobilization Income
Insurance Program to reservists as a way to protect their civilian income
when called to active duty. The program was canceled after it failed

financially. Through DOD*s Unified Legislation and Budgeting process, the
Air Force has proposed that DOD establish a somewhat similar income
insurance program that addresses some of the problems associated with the
original program but not others.

The original DOD program was initiated after concerns were raised
following the 1991 Persian Gulf War that income loss would adversely
affect retention of reservists. According to a 1991 DOD survey of
reservists activated during the Gulf War, economic loss was widespread
across all pay grades and military occupations. In response to
congressional direction, 38 DOD in 1996 established the Ready Reserve
Mobilization Income Insurance Program, an optional, self- funded income
insurance program for members of the Ready Reserve ordered involuntarily
to active duty for more than 30 days. Reservists who elected to enroll
could obtain monthly coverage ranging from $500 to $5,000 for up to 12
months within an 18- month period. Far fewer reservists than DOD expected
enrolled in the program. Many of those who enrolled were activated for
duty in Bosnia and, thus, entitled to almost immediate benefits from the
program. The program was terminated in 1997 after going bankrupt.

We reported in 1997 that private sector insurers were not interested in
underwriting a reserve income mobilization insurance program due to
concerns about actuarial soundness and unpredictability of the frequency,

38 See section 512, National Defense Authorization Act for Fiscal Year
1996 (P. L. 104- 106). Income Insurance for Activated

Reservists

Page 23 GAO- 03- 1004 Reserve Personnel Compensation duration, and size of
future call- ups. 39 Certain coverage features violated many of the
principles private sector insurers usually require to protect

themselves from adverse selection. 40 These features include voluntary
coverage and full self- funding by those insured, the absence of rates
that differentiated between participants based on their likelihood of
mobilization, the ability to choose coverage that could result in full
replacement of their lost income rather than those insured bearing some
loss, and the ability to obtain immediate coverage shortly before an

insured event occurs. DOD officials told us that private sector insurers
remain unsupportive of a new reserve income insurance mobilization program
and that the amount of federal financial commitment required for the
program is prohibitive. Thus, DOD has no plans to implement a new
mobilization insurance program.

However, the Air Force has proposed that DOD establish a self- funded
income insurance program for reserve component members ordered
involuntarily to active duty for more than 30 days, or in support of
forces activated during a war declared by Congress or a period of national
emergency. The Air Force proposal attempts to address adverse selection,
low participation rates, and funding concerns that contributed to the

failure of the Ready Reserve Mobilization Income Insurance Program. For
instance, to address adverse selection and low participation rates, all
drilling unit members and individual mobilization augmentees would be
automatically enrolled in the program for $1,000 of monthly coverage with
the option to opt out. Individual Ready Reserve members would have the
option to enroll. To further mitigate adverse selection and funding
concerns, payments would not be made during the first 6 months of
enrollment in the program, regardless of mobilization or recall status.
This delay would allow funds to accrue for future payouts. Furthermore,
DOD would be able to suspend the annual enrollment open season during
national emergencies and periods of war that are declared by Congress.
Mandatory waiting periods for coverage to become effective would help
counter adverse selection that resulted when reservists with knowledge of
their imminent mobilization enrolled in the Ready Reserve Mobilization

39 U. S. General Accounting Office, Reserve Forces: Observations on the
Ready Reserve Mobilization Income Insurance Program, GAO/ T- NSIAD- 97-
154 (Washington, D. C.: May 8, 1997).

40 Adverse selection occurs when those enrolling in an insurance program
have significantly higher claim probabilities than the average for the
population to which the insurance is offered.

Page 24 GAO- 03- 1004 Reserve Personnel Compensation Income Insurance
Program. However, instituting waiting periods and requiring mandatory
participation still would not overcome financial

liability associated with large mobilizations. Even infrequent
mobilizations could produce a large number of claims. As a result, funding
for the program could be exhausted quickly. In 1998, the Congressional
Research Service estimated that if every Selected Reservist were enrolled
for coverage of $1,000 per month and paid premiums of $10 per month, the
fund would accumulate $9 million in income each month and $702 million
over 5 years, assuming that premiums were invested at a 10 percent
compound interest rate. 41 A mobilization of 250,000 reservists would
create a monthly liability of $250 million, making the fund insolvent by
the fourth month of mobilization. 42 The Air Force proposal does not
completely address some of the problems

experienced with the prior program, including adverse selection, low
participation rates, proof of loss of income, and funding concerns. As
currently structured, the Air Force*s proposed income insurance program
would not have graduated premiums that differentiate between participants
based on their likelihood of mobilization. However, participants would be
able to purchase additional coverage or opt out of the program depending
on their perceived risk of activation. Similar to the Ready Reserve
Mobilization Income Insurance Program, the Air Force*s proposed program is
designed to be financed entirely by premiums paid by individual members.
DOD would need to assume responsibility for any unfunded liability that
may result from a larger than expected mobilization. As a result, the
Secretary of Defense would need to submit a supplemental appropriation
request. In addition, the Air Force*s proposed income insurance program
does not

require proof of loss of income. As designed, the program would pay
benefits based on the amount of coverage chosen by the reservists
regardless of actual losses incurred. Premium rates would be set for a
specified amount of insurance coverage. There is no provision to prevent
reservists from subscribing to amounts of coverage significantly greater
than their actual loss of income. To minimize the program*s financial
liability, reservists could be required to document income loss when

41 This estimate seems overly optimistic in today*s environment based on
the assumed 10 percent compound interest rate. 42 Reserve mobilizations
exceeded 200,000 by mid- March 2003 and remained above that level into
July 2003.

Page 25 GAO- 03- 1004 Reserve Personnel Compensation submitting claims.
However, verifying losses from self- owned businesses, lost commissions or
bonuses, or additional expenses could be difficult and delay timely
payment of benefits.

Even if these design criteria were addressed, designing a financially
sound program may not be possible. There is no reliable way to estimate
the duration, number, and timing of future mobilizations and the number
and specialties of reservists that would be called up. DOD*s increased
reliance on the reserve components in a changing and unpredictable world
situation makes projections of future call- ups exceedingly difficult. To
be financially sound, an insurance program, at a minimum, should have a

large eligible population of whom a large proportion are insured and the
proportion of those insured who file claims should be reasonably stable
over time. In addition, to be affordable, the majority of those insured
will not, in any period, incur the losses that they insure against.

Furthermore, it is unclear whether reservists want or need an income
insurance program. Although the 2000 DOD survey indicated that an
estimated 41 percent of drilling unit members had losses in family income
when mobilized or deployed, it is unknown whether reservists would be
willing to participate in a new income insurance program. For example,
high premiums and a mandatory waiting period before becoming eligible for
payouts could discourage participation. A survey conducted before the
Ready Reserve Mobilization Income Insurance Program was implemented showed
that about 70 percent of enlisted members and 55 percent of officers
indicated interest in participating in such a program. The DOD Office of
the Actuary estimated that about 40 percent of reservists would
participate. However, only about 3 percent of Selected Reserve members
actually enrolled. The enrollment pattern indicated that reservists in
certain military specialties had a greater need or demand for income
protection. Of the approximate 5,500 military specialties in the reserve
components, about 1,930 (35 percent) had some reservists enrolled in the
program, including 420 military specialties that had enrollment levels of
10 percent or more. Although these 420 military specialties accounted for

less than 8 percent of the total military specialties within the reserve
components, they made up over 25 percent of the total reservists enrolled
in the program. Of the 420 specialties with enrollment levels of 10
percent or more, 250 were in aviation, legal, and medical fields.

Page 26 GAO- 03- 1004 Reserve Personnel Compensation Although DOD has
placed greater emphasis on family readiness, many reserve families
indicate they do not feel prepared for call- ups. In addition,

although reservists and their families are eligible for military family
support services, many reservists appear not to be aware of these
services, and most spouses of activated reservists have not used these
services. DOD officials have acknowledged they face challenges in
providing family support outreach to reservists and have taken steps to
improve outreach.

Personal financial management, one of DOD*s core family support programs,
illustrates the continuing challenges DOD faces in providing outreach to
reservists. DOD has not assessed the financial well- being of reserve
families, nor has it assessed the impact of reservists* financial problems
on mission readiness. DOD has noted a need to improve reservists* and
their spouses* awareness of and access to personal financial management
programs, but it has not tailored its programs to reservists by developing
plans that specify how these needs will be met.

DOD has recognized the importance of family readiness and family support
for its servicemembers, including reservists. Under a 1994 DOD policy, the
military services must *ensure National Guard and Reserve members and
their families are prepared and adequately served by their services*
family care systems and organizations for the contingencies and stresses
incident to military service.* According to DOD, families of reservists
who use family support services and who are provided information from the
military cope better during activations. Furthermore, military members who
are preoccupied with family issues during deployments may not perform well
on the job, which in turn, may negatively affect the mission. According to
DOD*s 2000 survey estimates, reservists who had been activated stated that
among the most serious problems they experienced were burdens placed on
their spouse and problems created for their children. More than half of
all reservists are married, and about half have dependents. As of
September 2001, there were about 960,000 family members of Selected
Reserve members, including spouses, children, and adult dependents.

Despite this recognition of the importance of family readiness and family
support, many reserve families feel they are not prepared when the member
is notified for active duty. According to DOD officials, Operations Noble
Eagle and Enduring Freedom highlighted that not all reserve families were
prepared. Since many families never thought their military member would be
mobilized, they had not become involved in their family readiness
networks. Results from the 2000 DOD survey also showed a substantial
number of reservists did not anticipate call- up* about DOD Faces

Challenges in Family Readiness and Support

Surveys Indicate a Lack of Readiness among Many Reserve Families and Low
Awareness and Use of Support Programs

Page 27 GAO- 03- 1004 Reserve Personnel Compensation 35 percent of
drilling unit members thought it was unlikely or very unlikely that they
would be mobilized or deployed in the next 5 years.

Furthermore, about one- fourth of drilling unit members said their
dependent care arrangements were not realistically workable for
deployments lasting longer than 30 days.

DOD*s 2002 spouse survey showed that an estimated 33 percent of spouses
felt they were unprepared or very unprepared when they first learned of
the member*s order to active duty, while 37 percent felt they were very
well prepared or well prepared and 30 percent felt they were neither
prepared nor unprepared. The survey data indicated that less than half of
spouses were involved in family readiness groups, 43 attended readiness
briefings, received preactivation materials, or had a military point of
contact to help them deal with emergency issues that might arise. Our
analysis showed that some of these factors appeared to be related to
whether spouses felt prepared or unprepared when the member was notified
for active duty, although involvement in family readiness groups and
receiving preactivation materials upon the member*s notification to active
duty did not appear to be significant factors. (See app. V.) Compared with
unprepared spouses, a higher percentage of prepared spouses had a longer
period of notice before the member was activated. As might be expected, a
higher percentage of prepared spouses than unprepared spouses were coping
well or very well during the activation. An estimated 84 percent of
prepared spouses were coping well or very

well, 3 percent were coping poorly or very poorly, and 13 percent were
coping neither poorly nor well. Of unprepared spouses, 41 percent were
coping well or very well, 31 percent were coping poorly or very poorly,
and 28 percent were coping neither poorly nor well.

Although activated reservists and their family members are eligible for
the same family support services as their active duty counterparts, the
DOD 2000 survey estimates showed that more than half of all reservists
either believed that family support services were not available to them or
did not know whether these services were available (see table 3).

43 Asked what prevented them from participating with their unit*s family
readiness program or from being a member of their unit*s family readiness
group, about 37 percent of spouses were not aware of a family readiness
group, 34 percent did not have time, for 31 percent the location was not
convenient, and 30 percent had not been asked. (These percentages do not
add to 100 percent because more than one reason could be indicated.)

Page 28 GAO- 03- 1004 Reserve Personnel Compensation Table 3: Reservists*
Views on Availability of Selected Family Support Programs or Services

Estimated percentage of drilling unit members Program/ service

Available off installation, on installation or both Not available Don*t
know Services for families

during separation 25 13 62 Crisis referral services 15 17 68

Financial counseling/ manage ment education 22 16 61

Family support centers 35 14 51

Sources: DOD 2000 Reserve Component Survey (data); GAO (presentation).
Note: Rows may not add to 100 percent due to rounding.

DOD has found that the degree to which reservists are aware of family
support programs and benefits varies according to component, unit
programs, command emphasis, reserve status, and willingness of the
individual member to receive or seek out information. Among the key
challenges in providing family support are the long distances that many
reservists live from their home unit and military installations, 44 the
difficulty in persuading reservists to share information with their
families, the unwillingness of some reservists and their families to take
the responsibility to access available information, conflicting priorities
during drill weekends that limit the time spent on family support, and a
heavy reliance on volunteers to act as liaisons between families and
units.

Spouses of activated reservists have not made extensive use of military
family support programs. DOD*s 2002 spouse survey indicated that most
spouses did not use family programs during activation. When asked to rate
the helpfulness of various military support services, an estimated

94 percent of spouses said they had not used family programs. In response
to another survey question concerning the difficulty they experienced

44 The 2000 survey of reservists showed that about 40 percent of drilling
unit members lived 50 miles or farther from their home unit. The 2002
survey of spouses showed that about 22 percent lived more than 100 miles
away from where the member*s unit regularly drills or trains. In addition,
28 percent of spouses said they lived more than 50 miles from the nearest
military installation.

Page 29 GAO- 03- 1004 Reserve Personnel Compensation accessing military
services, 87 percent said they had not used family programs. It is unclear
from the survey data why spouses did not use

family programs. About 1 percent of spouses rated family programs as their
most important military support service.

DOD has recognized the need for improved outreach. For example, the
department has published benefit guides for reservists and family members
and has enhanced information posted on its Web sites. 45 DOD published a
*Guide to Reserve Family Member Benefits* that informs family members
about military benefits and entitlements and a family readiness *tool kit*
to enhance communication about predeployment and mobilization information
among commanders, servicemembers, family members, and family program
managers. Each reserve component has established family program
representatives to provide information and referral services, with
volunteers at the unit level providing additional assistance. The U. S.
Marine Corps began offering an employee assistance program in December
2002 to improve access to family support services for Marine Corps
servicemembers and their families who reside far from installations.
Through this program, servicemembers and their families can obtain
information and referrals on a number of family issues, including
parenting, preparing for and returning from deployment, basic tax
planning, legal issues, and stress. The National Guard has established
family assistance centers across the United States to act as an entry
point for service and assistance that a family member may need during the

current mobilization. As of May 2003, over 400 family assistance centers
had been established.

Personal financial management, one of DOD*s core family support programs,
illustrates the continuing challenges DOD faces in providing outreach to
reservists. These challenges include improving access to and awareness of
personal financial management programs for reservists and their family
members. Under DOD policy, military personnel bear primary responsibility
for the welfare of their families, but the commitment demanded by military
service requires that they be provided a comprehensive family support
system, to include financial planning assistance. Servicemembers receive
financial management training during

45 Examples of these Web sites are www. armyfamilyteambuilding. org/ home.
asp, www. afcrossroads. com/ index- home. cfm, www. usmc- mcss. org/
mcftb/ fa_ te_ build_ main. html, and www. cnet. navy. mil. DOD Has
Identified Outreach Challenges for

Personal Financial Management Programs

Page 30 GAO- 03- 1004 Reserve Personnel Compensation their basic training
and, in some cases, during advanced training. In addition, personal
financial management is one of the core services

offered at the military services* family support centers. Personal
financial management consists of programs conducted by counselors who
provide personal and family financial training, counseling, and
assistance. DOD studies have identified problems with personal financial
management in the active duty force, particularly among junior enlisted
members. A 2002 study found that (1) 20 percent of the junior enlisted
force in the active component has financial problems; (2) these personnel
have substantially more financial problems than does the comparable
civilian population; and (3) financial problems are not related to family
income, which suggests that financial problems are shaped by spending
patterns and management skills rather than by the level of income. 46
According to this study, *unit leaders consistently complained that much
of their time was spent dealing directly with financially overextended
members. These problems had a corrosive effect on the unit because they
affected work performance through added stress on members as well as
through absences to deal with creditors or get credit counseling.* A 2000
Navy study found that 57 percent of Navy leaders cited financial concerns
as the

main servicemember issue with which they dealt most often. 47 Further, in
response to a House Committee on Armed Services requirement in the Fiscal
Year 2002 National Defense Authorization Act, the Navy identified $250
million in productivity and salary losses due to poor personal

financial management. In 2002, as part of its human capital strategic
plan, DOD identified a need to improve the financial literacy and
responsibility of servicemembers, including reservists. 48 The plan states
that mission readiness and quality of life are dependent upon
servicemembers* using their financial resources responsibly and that the
military services must make a commitment to educate servicemembers and
their families and encourage them to use good financial sense. Financial
literacy training and counseling is one of

46 RAND, Assessing the Personal Financial Problems of Junior Enlisted
Personnel,

MR- 1444- OSD (2002). 47 Caliber Associates, U. S. Navy Family Service
Center Leadership Survey 2000.

48 Department of Defense, Deputy Assistant Secretary of Defense (Military
Community and Family Policy), A New Social Compact: A Reciprocal
Partnership Between the Department of Defense, Service Members, and
Families (July 2002).

Page 31 GAO- 03- 1004 Reserve Personnel Compensation the pillars that
support financial well- being. However, DOD has not developed plans to
address these needs.

DOD is reviewing a draft uniform personal financial management policy.
Currently, DOD and service regulations address aspects of personal
financial management. The draft policy seeks to establish a uniform
approach to educating and training all servicemembers, including

reservists. Regarding the reserves specifically, the draft policy would
require the military departments to provide a financial planning package
and instructional information to reservists as part of their mobilization
training. In addition, the draft policy outlines metrics to track
financial well- being, such as the number of delinquent government credit
cards, the number of individuals who have had their wages garnished, the
selfreported financial condition of military personnel and their families,
and the number of administrative Uniform Code of Military Justice actions
taken against military personnel for financial indebtedness and
irresponsibility.

In addition to drafting a personal financial management policy, DOD has
taken steps to improve personal financial management programs. In May
2003, DOD formally launched a *financial readiness campaign* to address
servicemembers* poor financial habits and to increase financial management
awareness, savings, and protection against predatory practices. It has
also entered into a number of partnerships with nonprofit organizations
and government agencies that have agreed to support counselors who offer
financial assistance programs to servicemembers. The services have also
made improvements. For example, the Navy has increased the number of
mandatory hours of personal financial management training and uses mobile
financial management teams to train financial specialists, including in
geographically remote regions where there are no financial educators to
provide training. The services also provide financial planning information
on their Web sites.

As shown in table 3, the 2000 DOD survey showed that an estimated 61
percent of drilling unit members did not know whether financial counseling
and management education services were available, and 16 percent did not
think these services were available. DOD*s 2002 spouse survey showed that
about 76 percent of spouses did not use the military*s financial
information and counseling services, although it is unclear why they did
not. Although DOD has identified challenges in the service personal
financial management programs, it has not developed plans to provide
outreach to reservists and their spouses. A DOD official from the Office
of the Deputy Under Secretary of Defense for Military Community

Page 32 GAO- 03- 1004 Reserve Personnel Compensation and Family Policy
said that little attention has been placed on extending personal financial
management programs to the reserve population. In a

2002 report to Congress, 49 DOD stated, *The services should improve
access to personal financial management information by Reserve forces.*
The DOD report also stated that most personal financial management

training *does not adequately provide support to spouses.* The Army noted
that *increasing spouse participation is not easy and requires significant
marketing and leadership support.* The Air Force and the Marine Corps
specifically identified the lack of spousal outreach as a gap in their
programs. The services also recognize a need to improve marketing of
financial management programs to reservists and their spouses. Two
services* the Army and the Air Force* cited lack of resources, including
dedicated personal financial management personnel, as a challenge to
increasing access to and awareness of personal financial management
programs.

In addition, while DOD has assessed the financial well- being of the
active duty force, it has not conducted such assessments of reservists.
Our review of DOD survey data showed that reservists reported having many
of the same financial problems as their active duty counterparts. 50 For
instance, about 20 percent of reservists and 19 percent of active duty
personnel characterized their family*s financial condition as *in over
your head* or *tough to make ends meet but keeping your head above water.*
However, a higher percentage of reservists reported having such financial
difficulties as bouncing checks, receiving a letter of indebtedness, and
falling behind in paying rent or mortgage, than did their active duty
counterparts. For example, 12 percent of reservists fell behind in paying
rent or mortgage compared with 3 percent of active duty members. In

addition, while DOD has found a link between financial problems and
readiness in the active component, it has not assessed the impact of
reservists* financial problems on mission readiness.

49 In 2001, Congress expressed concern that the military departments were
not providing sufficient personal financial management training and that
when personal financial problems occurred, the services were not providing
adequate supervision to ensure that servicemembers and their families
regained financial security. Due to these concerns, Congress directed DOD
to review personal financial management programs. H. Rpt. 107- 194.

50 We compared responses to identical questions included in DOD*s 1999
Survey of Active Duty Members and the 2000 Reserve Component Survey.

Page 33 GAO- 03- 1004 Reserve Personnel Compensation Reservists* family
members are eligible for TRICARE when reservists have been activated for
31 days or more, and a number of recent improvements

have been made to reserve family health benefits. These improvements
include earlier access to certain benefits, expanded options, higher
reimbursement rates for nonnetwork physicians, and efforts to improve
outreach. Reserve families may choose to use TRICARE when reservists are
activated or remain under civilian health insurance coverage. Our prior
work showed that despite having access to TRICARE, most reservists with
civilian health insurance had opted to retain their civilian health care

coverage for their families during periods of activation. To further
expand reservists and their family members* access to health care,
Congress is considering legislation to offer military health care coverage
to reservists and their families when members are not on active duty.
However, DOD has not fully assessed the need for or ramifications of this
proposal. For example, DOD does not know the impact this proposal would
have on recruiting and retention, the effects on active duty personnel,
the extent reservists and their families might participate in such a
program, or the impact on the TRICARE system. Cost estimates range up to
$5.1 billion a year.

When activated for a contingency operation, reservists and their family
members are eligible for health care benefits under TRICARE, DOD*s managed
health care program. TRICARE offers beneficiaries three health care
options: Prime, Standard, and Extra. TRICARE Prime is similar to a

private HMO plan and does not require enrollment fees or copayments.
TRICARE Standard, a fee- for- service program, and TRICARE Extra, a
preferred provider option, require copayments and annual deductibles. None
of these three options require reservists to pay a premium. Benefits under
TRICARE are provided at more than 500 military treatment facilities
worldwide, through a network of TRICARE- authorized civilian providers, or
through nonnetwork physicians who will accept TRICARE reimbursement rates.

Reservists who are activated for 30 days or less are entitled to receive
medical care for injuries and illnesses incurred while on duty. In
addition, Congress requires the Army to monitor the health status of those
designated as early- deploying reservists by providing annual medical and
dental screenings, selected dental treatment, and* for those over age 40*
physical examinations every 2 years. Those under age 40 are required to
undergo a physical examination once every 5 years. For its early-
deploying reservists, the Army conducts and pays for physical and dental
examinations and selected dental treatment at military treatment
facilities DOD Has Not Fully

Assessed the Need for Expansion of TRICARE to Nonactivated Reservists

Improvements to Reserve Family Health Benefits

Page 34 GAO- 03- 1004 Reserve Personnel Compensation or pays civilian
physicians and dentists to provide these services. Reservists who are
placed on active duty orders for 31 days or more are

automatically enrolled in TRICARE Prime and receive most care at a
military treatment facility. Family members of reservists who are
activated for 31 days or more may obtain coverage under TRICARE Prime,
Standard, or Extra. Family members who participate in Prime obtain care
either at a military treatment facility or through a network provider.
Under Standard or Extra, beneficiaries may use either a network provider
or a nonnetwork physician who will accept TRICARE rates. Upon release from
active duty that extended for at least 30 days, reservists and their
family members are entitled to continue their TRICARE benefits for 60 days
or 120 days, depending on the reservists* cumulative active duty service
time. Reservists and their dependents may also elect to purchase extended
health care coverage for 3 months at a time for a maximum of up to either
18 months or 3 years under the Continued Health Care Benefit Program.
Legislation passed in December 2002 (P. L. 107- 314, sec. 702) made family

members of reservists activated for more than 30 days eligible for TRICARE
Prime if they reside more than 50 miles, or an hour*s driving time, from a
military treatment facility. In March 2003, DOD altered TRICARE policy
such that all family members of reservists activated for 31 days or more
are eligible for TRICARE Prime. In conjunction with this

change, DOD announced a change in the eligibility of reserve families for
TRICARE Prime Remote for Active Duty Family Members. 51 DOD stated that a
legislative provision of the program that required a family member to
*reside with* the servicemember would be interpreted as meaning that
eligible family members resided with the servicemember before the
servicemember left for their home station, mobilization site, or
deployment location, and the family members continue to reside there.

Under DOD authorities in the National Defense Authorization Acts for 2000
and 2001, DOD instituted several demonstration programs to provide
financial assistance to reservists and family members. For example, DOD
instituted the TRICARE Reserve Component Family Member Demonstration
Project for family members of reservists mobilized for

Operations Noble Eagle and Enduring Freedom to reduce TRICARE costs and
assist dependents of reservists in maintaining relationships with their 51
TRICARE Prime Remote for Active Duty Family Members provides reserve
component families with access to civilian health care providers when the
servicemember and family reside more than 50 miles, or a 1- hour commute,
from a military medical treatment facility.

Page 35 GAO- 03- 1004 Reserve Personnel Compensation current health care
providers. The demonstration project eliminates the TRICARE deductible and
the requirement that dependents obtain

statements saying that inpatient care is not available at a military
treatment facility before they can obtain nonemergency treatment from a
civilian hospital. In addition, DOD may pay a nonnetwork physician up to
15 percent more than the current TRICARE rate.

About 40 percent of the problems reservists have reported relate to
understanding TRICARE*s benefits and obtaining assistance when questions
or problems arose. Because these problems could be reduced through
improved education about TRICARE*s benefits and better

assistance while navigating the TRICARE system, we recommended in
September 2002 that DOD ensure that reservists, as part of their ongoing
readiness training, receive information and training on health care
coverage available to them and their dependents when mobilized and provide
TRICARE assistance during mobilizations targeted to the needs of
reservists and their dependents. 52 DOD has added information for
reservists to its TRICARE Web site and, in response to our recommendation,
has begun to implement a TRICARE reserve communications plan aimed at
outreach and education of reservists and their families.

The TRICARE Web site is a robust source of information on DOD*s health
care benefits. The Web site contains information on all TRICARE programs,
TRICARE eligibility requirements, briefing and brochure information,
location of military treatment facilities, toll free assistance numbers,
network provider locations and other general network information,
beneficiary assistance counselor information, and enrollment information.
There is also a section devoted specifically to reservists, with
information and answers to questions that reservists are likely to have.
Results from DOD*s 2000 survey showed that about 9 of every 10 reservists
had access to the Internet.

DOD has begun to implement a TRICARE communications plan to educate
reservists and their family members on available health care and dental
benefits. The plan identifies a number of tactics for improving how health
care information is delivered to reservists and their families. Under the

plan, materials are to be delivered through direct mailing campaigns, fact
sheets, brochures, working groups, and briefings. The plan also identifies
52 GAO- 02- 829.

Page 36 GAO- 03- 1004 Reserve Personnel Compensation methods of
measurement that will assist in identifying the degree information is
being requested and received. In March 2003, OSD

distributed educational materials for beneficiary counseling assistance
coordinators, reserve component staff, and others. In May 2003, the
TRICARE Management Activity established a working group to improve reserve
component communications.

Most reservists who are not on active duty have civilian health insurance
through either their own or their spouse*s employer. Estimates from DOD*s
2000 survey showed that nearly 80 percent of reservists had health care
coverage when they were not on active duty and about 20 percent did not.
According to DOD*s 2002 survey, an estimated 90 percent of spouses of
activated reservists had private health insurance prior to activation, and
4 percent had no insurance. The other 6 percent had TRICARE coverage or
some combination of TRICARE and private health insurance. While DOD
requires activated reservists to use TRICARE for their own health care,
using TRICARE is an option for their dependents. During mobilization, some
reservists may choose to save the cost of premiums by dropping civilian
insurance for their dependents and relying on TRICARE, which has no
associated premium. However, doing so means that dependents must learn the
benefits and requirements of a new health plan. It also means they may be
unable to use the same civilian providers if these providers do not
participate in TRICARE networks or accept TRICARE patients. Reservists*
decisions regarding health care coverage for their dependents are affected
by a variety of factors* whether they or their spouses have civilian
health coverage, the amount of support civilian employers are willing to
provide with health care premiums, and where

they and their dependents live. Despite the availability of DOD health
care benefits with no associated premium, our prior work has shown that
many reserve family members elect to maintain their civilian health care
insurance during mobilizations. 53 According to estimates from DOD*s 2000
survey, about 90 percent of

reservists with civilian health care coverage maintained it during their
mobilization. Reservists we interviewed often told us that they maintained
this coverage to better ensure continuity of health benefits and care for
their dependents. The Uniformed Services Employment and Reemployment
Rights Act does not require employers to continue paying 53 GAO- 02- 829.
Reservists* Families Have

Health Care Choices and Challenges

Page 37 GAO- 03- 1004 Reserve Personnel Compensation their share of health
care premiums when mobilizations extend beyond 30 days. However, employers
continued to pay at least their portion of health insurance premiums
beyond this 30- day period for about 80 percent

of the reservists we contacted who maintained their employer- sponsored
coverage. DOD*s 2002 survey of spouses of activated reservists indicated
that only a small percentage of reserve families had to pick up the entire
premium in order to retain the member*s civilian health care coverage
during activation. Specifically, the survey estimated that

 35 percent of families paid the employee share of the premium,  29
percent paid no additional costs because the member*s employer paid

the full health care premium,  18 percent paid no additional costs
because the family was covered under the spouse*s health care plan, and 
8 percent paid the full health care premium. 54 Our surveys of reservists*
civilian employers also show that a high

percentage of employers provide assistance with continued health care
benefits for their activated reservists. Of the 183 employers of
reservists in high tempo units who completed and returned our survey on
employer support, 121 employers provided information on their health
benefit policies. Of these 121 employers, 105 (88 percent) reported that
they paid the full heath care premium or the employer share of the health
care premium during the activation period. Of the 22 states we surveyed
about pay and benefit policies for their activated reserve employees, 13
(59 percent) reported that they paid the full health care premium or the
employer share of the health care premium. Most of these states provided
these benefits during the entire activation period. In our prior work, we
found that many reservists who did drop their

civilian insurance and whose dependents did use TRICARE reported
difficulties moving into and out of the system, finding a TRICARE
provider, establishing eligibility, understanding TRICARE benefits, and
knowing where to go for assistance when questions and problems arose.
While reserve and active component beneficiaries report similar
difficulties using the TRICARE system, these difficulties are magnified
for reservists and their dependents. For example, 75 percent of reservists
live more than 50 miles from military treatment facilities, compared with
5 percent of active component families. As a result, access to care at

54 An estimated 11 percent of the spouses did not know how much it cost.

Page 38 GAO- 03- 1004 Reserve Personnel Compensation military treatment
facilities becomes more challenging for dependents of reservists than
their active component counterparts.

Reservists may also transition into and out of TRICARE several times
throughout a career. These transitions create additional challenges in
ensuring continuity of care, reestablishing eligibility in TRICARE, and
familiarizing or refamiliarizing themselves with the TRICARE system.
Reservists are also not part of the day- to- day military culture and,
according to DOD officials, generally have less incentive to become
familiar with TRICARE because it becomes important to them and their
families only if they are mobilized. Furthermore, when reservists are
first mobilized, they must accomplish many tasks in a compressed period.
55 For example, they must prepare for an extended absence from home, make
arrangements to be away from their civilian employment, obtain military
examinations, and ensure their families are properly registered in the
Defense Enrollment Eligibility Reporting System (DOD*s database system
maintaining benefit eligibility status). It is not surprising that many
reservists, when placed under condensed time frames and high stress
conditions, experience difficulties when transitioning to TRICARE.

To further expand reservists and their family members* access to health
care, Congress is considering legislation to offer TRICARE to reservists
when they are not on active duty. 56 The legislation would entitle members
of the Selected Reserve and certain members of the Individual Ready
Reserve 57 and their dependents to the same TRICARE benefits as a member
of the uniformed services on active duty or a dependent of such a member.
An enlisted reservist enrolled in the TRICARE program would pay an annual
premium of $330 for self only coverage and $560 for self and family
coverage, while a reserve officer would pay an annual premium of $380 for
self only coverage and $610 for self and family coverage. (Military
personnel on active duty and family members of personnel on active duty

55 OSD has established a goal of providing reservists with at least 30
days notice prior to mobilization when operationally feasible. Our prior
work on DOD*s mobilization process found that advance notice was often not
possible following the events of September 11, 2001.

56 See S. 1050, amend. 696. 57 The amendment applies to a special category
of Individual Ready Reserve members who have volunteered to be called to
active duty under Presidential Reserve Call- up authority when needed. DOD
Has Not Assessed the

Need for or Ramifications of Expanding TRICARE to Reservists Not on Active
Duty and Paying Health Insurance Premiums of Activated Reservists

Page 39 GAO- 03- 1004 Reserve Personnel Compensation do not pay a premium
for TRICARE coverage.) The legislation also would require DOD to pay
premium costs incurred by reservists who choose to

continue their civilian health care insurance coverage when activated. DOD
would cover the civilian insurance costs up to the total cost of the
reservist*s premium and would be required to pay an amount equal to
TRICARE*s average cost of providing TRICARE for self and family

coverage. Proponents have stated that the legislation (1) would recognize
an expansion of reserve roles and missions in recent years and an
increased demand placed on reservists and their families, (2) would assist
DOD in recruiting and retaining reservists, and (3) would help reservists
who opt to join TRICARE maintain continuity of their health care coverage.

We have a number of concerns with the proposal to extend TRICARE coverage
to reservists not on active duty and their family members and to require
DOD to pay premium costs incurred by reservists who choose to continue
their civilian health care insurance coverage when activated. First, while
there has been an expansion of reserve participation in military
operations, with a dramatic increase in mobilizations to support
operations in Iraq, many reservists have deployed only once or not at all.
According to the results of DOD*s 2000 survey, only 25 percent of
reservists reported in 2000 that they had been mobilized or deployed. Of
those mobilized or deployed at least once, nearly 70 percent had
participated in only one operation. Since September 2001, DOD has called
300,000 reservists to active duty, representing one- fourth of the 1.2
million reservists eligible for call- up. Second, DOD officials we spoke
with about the proposed legislation noted that DOD currently has not
identified an overall recruiting and retention problem in the reserves and
that it was too early to project the potential for future recruiting and
retention problems that might result from the ongoing mobilization. They
also could not tell us what effect the proposed legislation would have on
the military*s ability to recruit and retain reservists. Third, as noted
previously, most reservists

activated prior to 2001 achieved continuity of care for their families by
retaining civilian health insurance during activation. However, DOD
officials said that little is known about reservists* behavior patterns of
health care usage during mobilizations since September 2001 and that it is
difficult to project their behavior if the current proposal were approved.
According to a DOD official, it is unknown whether younger members of the
reserve force would purchase TRICARE health care coverage even at reduced
rates. In addition, a high percentage of reservists* civilian employers
who currently pay some or all of health care premiums for reservists
during activations could discontinue providing such assistance if DOD
makes this coverage available to reservists year- round.

Page 40 GAO- 03- 1004 Reserve Personnel Compensation Other concerns with
the proposed legislation have also been raised. DOD officials said that
creating greater uniformity of benefits between active

and reserve forces could have unanticipated effects on the active
component if active component members are enticed into leaving the active
component and joining the reserves. The OSD Health Affairs Policy Director
also noted that DOD could have difficulties tracking reservists* premium
costs in order to pay these costs during activation as required by the
legislative proposal. Another concern is the stress that could be placed

upon the TRICARE system. Currently, TRICARE provides care for 8.7 million
beneficiaries* eligible active duty personnel, retirees, and dependents.
It is not clear to what extent reservists and their eligible dependents
would use TRICARE and the impact this could have on the system.
Beneficiary groups have described problems with access to care from
TRICARE civilian providers. In March 2003, we testified on DOD*s oversight
of the TRICARE civilian provider network, noting the problems with
assessing the network*s adequacy due to insufficient information.

In addition, controlling rising health care costs is a major concern of
DOD*s. According to a 2003 Congressional Budget Office analysis of long-
term defense spending, 58 spending for military medical care, which
already makes up more than 10 percent of DOD*s operation and support
costs, is the fastest growing category of operation and support spending.
In this projection of the administration*s plans, annual medical spending
rises by 67 percent over the 2007- 2020 period, from $33 billion to $55
billion. Many of the same forces that cause national health expenditures
to rise* an increase in the volume of health care services

available and expanded use of new, high- cost drugs and procedures*
translate into higher military medical costs. In addition, retirees and
their dependents now make up a larger share of beneficiaries, increasing
the average age and costs of the people who receive health coverage
through DOD. Two reasons military medical costs are expected to rise
dramatically

over the next 5 years are (1) new benefits for military retirees over age
65 (called TRICARE for Life), which had an actuarial liability estimated
at $592 billion as of September 30, 2001, and (2) a switch to an accrual
accounting system* with DOD*s budget being charged each year for the
expected costs of future benefits. DOD*s fiscal year 2003 budget for the
defense health program was $14.8 billion.

58 Congressional Budget Office, The Long- Term Implications of Current
Defense Plans (Washington, D. C.: January 2003).

Page 41 GAO- 03- 1004 Reserve Personnel Compensation The Congressional
Budget Office estimated that implementing the legislation* extending
TRICARE coverage to reservists not on active duty

and their family members and requiring DOD to pay premium costs incurred
by reservists who choose to continue their civilian health care insurance
coverage when activated* would cost a total of $466 million in 2004 and
$7.3 billion over 2004- 2008. 59  The Congressional Budget Office
estimated that extending TRICARE

coverage to reservists who are not on active duty would cost $393 million
in 2004 and $7.1 billion over 2004- 2008. On the basis of DOD data, the
Congressional Budget Office estimated that the provision would apply to
760,000 reservists after excluding 120, 000 who work for the federal
government. 60 It also estimated that about 70 percent of qualified
reservists would opt to enroll in the TRICARE program.  The Congressional
Budget Office estimated that requiring DOD to pay

premium costs for continued civilian health care coverage during
activation would cost $73 million in 2004 and $155 million over 2004-
2008. According to this estimate, the amount DOD would pay reservists
would cover about 60 percent of the average civilian premium. 61 DOD
estimated that the cost of extending TRICARE coverage to reservists

who are not on active duty would be $5.1 billion per year. DOD*s estimate
does not include the costs to pay the premiums of activated reservists*
civilian health care. DOD*s estimate is significantly higher than the
Congressional Budget Office estimate due to certain assumptions concerning
the number of potential beneficiaries, the proportion of potential
beneficiaries that would opt to enroll in TRICARE, and the per capita
costs of providing care. DOD officials told us that they used historical
cost profile data to develop their cost estimates. However, we did not
independently verify either the DOD or the Congressional Budget Office
cost estimate. Noting the high cost of this proposed legislation, the
Secretary of Defense has expressed opposition to this legislation, stating
he will recommend that the President veto the National Defense

59 Congressional Budget Office, Cost Estimate, S. 1050, National Defense
Authorization Act for Fiscal Year 2004 as passed by the Senate (June 2,
2003). 60 Federal government employees in the reserves who are called to
active duty continue to receive health benefits under the Federal Employee
Health Benefits Program up to 18 months. 61 The Congressional Budget
Office projected that the average cost of self and family TRICARE coverage
in 2004 will be $5, 600.

Page 42 GAO- 03- 1004 Reserve Personnel Compensation Authorization Act for
Fiscal Year 2004 if a provision to expand TRICARE is included. DOD survey
estimates showed income change varied considerably among

activated reservists, with a sizeable proportion of reservists
experiencing income loss, but more than half experiencing no change or a
gain in income. However, these data are questionable because it is unclear
what survey respondents considered as income loss or gain in determining
their

financial status. For example, the number of reservists reporting income
loss could be lower if respondents did not include the sum of their
military pay* basic pay, special pays, allowances, and indirect
compensation, such as health care benefits. Currently, DOD cannot
determine the need for compensation programs to provide income protection
to reservists because it lacks sufficient information on the scope and
nature of income change experienced by activated reservists. More
specifically, DOD lacks

sufficient data on the magnitude of income change, the causes of income
change, and the effects of income change on reservists* retention
decisions. Survey results showed that a higher percentage of reservists in
certain groups, such as self- employed reservists and health care
professionals, experienced greater income loss compared with reservists
overall and that, for some, income loss or the potential for income loss
is a significant factor in their decisions on whether to stay in the
reserves. A number of approaches to providing income protection have been
proposed, including an income insurance program, differential pay for
activated federal employee reservists, and special pay for certain reserve
physicians. Of these three, only the last is targeted at reservists who
(1) fill

critical wartime specialties, (2) experience high degrees of income loss
when on active duty, and (3) demonstrate that income loss is a significant
factor in their retention decisions. This is the kind of business case
approach that we think is necessary to determine the need for income
protection compensation programs.

In the area of family support, DOD and the military services have taken
steps to improve personal financial management programs. They have also
identified challenges such as increasing reservists* and spouses*
awareness of and access to personal financial management programs.
However, they have not developed specific plans to address these
identified needs.

Further, while DOD has assessed the financial well- being of active duty
members and linked financial well- being with mission readiness, it has
not conducted similar assessments of the reserve force. Our review of DOD
survey data showed that reservists reported having many of the same
financial problems as their active duty counterparts. For instance, a
higher Conclusions

Page 43 GAO- 03- 1004 Reserve Personnel Compensation percentage of
reservists reported having such financial difficulties as bouncing checks
and receiving a letter of indebtedness than have their

active duty counterparts. Conducting these assessments would provide a
better understanding of financial difficulties reservists encounter and
the impact these difficulties have on mission readiness.

Recent improvements have been made to reservists and their families*
access to TRICARE when the member is activated. In past military
operations, most activated reservists retained civilian health care
insurance coverage for their families during the activation period. To
further expand access to health care benefits, legislation has been
proposed that would provide TRICARE benefits to reservists and their
family members when they are not on active duty. Furthermore, the
legislation would require DOD to pay premium costs incurred by reservists
who choose to continue civilian health care insurance coverage when
activated. While proponents have cited a number of reasons for this
legislation, concerns have also been raised. We believe these concerns may
outweigh the perceived benefits and costs of the legislation. Currently,
DOD lacks sufficient information to determine the need for the expanded
health care benefits offered in the legislation and the implications of
the proposal for reservists, active duty members, and the military health
care system. DOD officials further stated that currently no problem has
been demonstrated in overall reserve recruiting and retention. DOD has not
yet identified problems reservists and their families have experienced
with access to health care during mobilizations since September 11, 2001,
such as problems in maintaining continuity of health care; the causes of
these problems; and their effects on readiness, recruiting, and retention.
We recommend that the Secretary of Defense direct the Under Secretary

of Defense for Personnel and Readiness to determine the need for
compensation programs aimed at addressing reservists* income loss during
periods of active duty by obtaining more complete information on the
magnitude of income change, the causes of income change, and the effects
of income change on reserve retention. At a minimum, these efforts should
be designed to identify reservists who (1) fill critical wartime
specialties, (2) experience high degrees of income loss when on active
duty, and (3) demonstrate that income loss is a significant factor in
their retention decisions. We further recommend that, on the basis of this
information, the Secretary of Defense develop targeted compensation
programs, as appropriate, to retain these reservists in the armed forces.
Recommendations for

Executive Action

Page 44 GAO- 03- 1004 Reserve Personnel Compensation We recommend that the
Secretary of Defense direct the Secretaries of the Army, the Air Force,
and the Navy and the Commandant of the Marine

Corps to develop specific plans for improving reservists* and their
spouses* awareness of and access to personal financial management
programs. In developing these plans, the military services, in conjunction
with the Under Secretary of Defense for Personnel and Readiness, should
assess the financial well- being of reservists and determine whether
reservists* financial problems affect mission readiness.

We recommend that the Secretary of Defense direct the Under Secretary of
Defense for Personnel and Readiness to assess problems reservists have
experienced since the mobilizations following the events of September 11,
2001, in maintaining continuity of health care; the causes of these
problems; and their effects on readiness, recruiting, and retention. As
part of this assessment, DOD should evaluate the ramifications of
extending TRICARE coverage to reservists not on active duty and their
family members as well as paying premium costs incurred by reservists who
choose to continue their civilian health care insurance coverage when
activated. DOD should also evaluate the potential impact of extending such
coverage on the retention of active duty personnel and on the TRICARE
system.

In order to provide DOD an opportunity to determine the need for and
ramifications of expanding TRICARE, Congress may wish to delay a decision
on the legislative proposal to offer TRICARE to reservists and their
families when members are not on active duty. Furthermore, Congress may
wish to direct the Secretary of Defense to assess and report on reserve
health care benefits as we have recommended in this report.

In written comments on a draft of this report, DOD concurred with our
recommendations. Regarding our recommendation that DOD develop targeted
compensation programs to retain reservists in the armed forces,

DOD stated that the department must exercise concern about paying its
part- time force more than its full- time force when undertaking similar
duties. As discussed in our report, we agree that equity between active
component and reserve component personnel is one factor that must be
considered in compensation programs that address income loss.
Nevertheless, we believe that DOD could target such compensation programs
appropriately by gathering more complete information on reservists* income
loss and applying the three criteria included in our recommendation.
Matters for

Congressional Consideration

Agency Comments and Our Evaluation

Page 45 GAO- 03- 1004 Reserve Personnel Compensation On the basis of DOD*s
concurrence with our recommendation concerning reserve health care
benefits, we have added matters for congressional

consideration concerning the legislative proposal to extend TRICARE
benefits to nonactivated reservists and their families. We believe the
proposed expansion of TRICARE deserves scrutiny due to its high costs, the
current lack of information on the need for this expansion of TRICARE, and
its potential ramifications. An assessment of this proposed expansion of
TRICARE is likely to be a complex and time- consuming undertaking. DOD*s
comments are reprinted in appendix VI.

We are sending copies of this report to the Secretary of Defense, the
Under Secretary of Defense for Personnel and Readiness; the Secretaries of
the Army, the Air Force, and the Navy; and the Commandant of the Marine
Corps. We will also make copies available to appropriate congressional
committees and to other interested parties on request. In addition, the
report will be available at no charge at the GAO Web site at http:// www.
gao. gov.

If you or your staff have any questions concerning this report, please
call me at (202) 512- 5559. Major contributors to this report are listed
in appendix VII.

Derek B. Stewart Director, Defense Capabilities and Management

Appendix I: Scope and Methodology Page 46 GAO- 03- 1004 Reserve Personnel
Compensation To evaluate information on income change reported by
reservists when activated for a military operation, we obtained and
analyzed the results of

the Department of Defense*s (DOD) 2000 Reserve Component Survey and 2002
Survey of Spouses of Activated National Guard and Reserve Component
Members. We stratified the results of these surveys by pay grade group,
reserve component, and for certain other groups such as type of employers.
Further, we discussed the extent of income change with

officials from the following offices or commands:  Office of the
Assistant Secretary of Defense for Reserve Affairs. 1  Office of the
Deputy Under Secretary of Defense for Military Personnel

Policy, Office of Military Compensation.  National Guard Bureau. 
National Committee for Employer Support of the Guard and Reserve.

 Service Reserve Forces Policy Committees.  Office of the Assistant
Secretary of the Army for Manpower and Reserve

Affairs.  U. S. Army Reserve Command, Fort McPherson, Georgia.  Office
of the Chief of Army Reserve.  U. S. Army National Guard.  U. S. Air
Force Reserve.  U. S. Air National Guard.  U. S. Naval Reserve.

 U. S. Marine Corps Reserve, Quantico, Virginia. We reviewed relevant
reports from the DOD Office of the Inspector General and the U. S. Army
Audit Agency and our prior GAO reports and testimony. We discussed with an
official from the Congressional Budget Office the estimated cost of a pay
differential for federal employees who are called to active duty. We did
not verify the methodology used to calculate this estimate. We analyzed
current compensation and benefits policies for activated federal employees
from the Office of Personnel

Management. Further, we surveyed officials from 22 states between May and
July 2003 and obtained their compensation and benefits policies to gain
the perspective of state governments* financial assistance and benefits
for state employee reservists called to federal active duty. To determine
the 22 states, we chose the 11 states with the highest total population of
reservists in the state, the 5 states with the smallest total

1 Unless otherwise noted, the officials listed in this scope and
methodology appendix have their offices in the Pentagon or at other
locations in the Washington, D. C., metropolitan area. Appendix I: Scope
and Methodology

Appendix I: Scope and Methodology Page 47 GAO- 03- 1004 Reserve Personnel
Compensation reservist population, and 6 states in the middle. We obtained
a standard set of information regarding each state*s policy. We also
updated information

on employer compensation policies from our June 2002 report on employer
support of the National Guard and the Reserve. 2 We had surveyed 359
employers of reservists in high tempo units between November 2001 and
March 2002. Due to concerns about mail contaminated with anthrax, not all
completed surveys were obtained before issuance of the employer support
report. We updated the data with an additional 72 surveys for a total of
183 completed surveys. Employers

were not randomly selected; therefore, the results are not projectable to
all employers. We also reviewed data from the Defense Manpower Data Center
regarding Army Reserve Medical Corps authorized and actual fill rates for
critical medical specialties and gains and losses from the Army Selected
Reserve and the Army Individual Ready Reserve from 1991 to

2002 to review an Army proposal for special deployment pay. We reviewed
DOD surveys on Army Reserve physicians* experiences during mobilizations,
on a rotation program to address earlier concerns about the length of
deployments, and on associated catastrophic income loss. We also contacted
military aid associations, including the Army Emergency Relief, the Navy-
Marine Corps Relief Society, and the Air Force Aid Society, to obtain and
review information on emergency loans and financial assistance provided to
activated reservists on active duty.

To evaluate reserve families* readiness and awareness and use of family
support programs, we reviewed DOD family policy regulations. We also
reviewed DOD Web sites and other materials designed to inform
servicemembers and their families about benefits. To obtain further
insight into reservists* awareness and access to family support programs,
we reviewed service personal financial management regulations and policies
to determine the extent to which these programs are extended to reservists
and their family members. To evaluate the financial well- being of
reservists, we reviewed RAND and other DOD studies. We also compared the
results of the 2000 DOD survey with the 1999 DOD Survey of Active Duty
Personnel. Specifically, we met with and obtained information

from DOD officials from the Office of the Assistant Secretary of Defense
for Reserve Affairs, the Office of the Deputy Under Secretary of Defense
for Military Community and Family Policy, the military services, and
reserve components. We also met with representatives from the National

2 GAO- 02- 608.

Appendix I: Scope and Methodology Page 48 GAO- 03- 1004 Reserve Personnel
Compensation Military Family Association and the JumpStart Coalition for
Financial Literacy to discuss challenges reservists face when called to
active duty.

To evaluate a legislative proposal for DOD to offer TRICARE to reservists
and their families when members are not on active duty, we reviewed
relevant GAO reports. We discussed health care benefits and eligibility
criteria for reservists and their family members and recent improvements
to military health care with DOD health care officials. We obtained cost
estimates of the legislative proposal from the Congressional Budget Office
and DOD, but we did not verify the methodology used to calculate the
estimates. During our survey of officials from 22 states, we obtained
their respective health care benefits policies to gain the perspective of
state governments* health benefits for state employee reservists called to
federal active duty. We met with and obtained information from DOD
officials within the Office of the Assistant Secretary of Defense for
Reserve Affairs, Office of the Assistant Secretary of Defense for Health
Affairs, and the TRICARE Management Activity. We completed our work for
this report from March to July 2003 in

accordance with generally accepted government auditing standards.

Appendix II: DOD Surveys of Reservists and Spouses

Page 49 GAO- 03- 1004 Reserve Personnel Compensation This appendix
describes DOD*s 2000 survey of reserve personnel and 2002 survey of
spouses of activated reserve personnel. We did not participate in the
design or collection of the results.

The 2000 Survey of Reserve Component Personnel is a survey of Selected
Reserve members of the reserve components sponsored by the Office of the
Assistant Secretary of Defense for Reserve Affairs. The study

population consisted of 728,347 members below flag or general officer rank
and having at least 6 months of reserve duty service as of August 2000.
The sample consisted of 74,487 members, and eligible

respondents returned 35,223 questionnaires for a response rate of 47
percent. DOD officials believe that the response rate for the survey is as
good as other similar surveys that they have conducted. However, there is
a potential for bias in the estimates to the extent that respondents and
nonrespondents had different opinions on the questions asked. Data were
weighted by the Defense Manpower Data Center to allow the study to provide
estimates for the study population or subpopulations. This was a mail- out
survey, with the data collection period running from August 16, 2000,
through December 29, 2000.

Because this is a probability sample based on random selections, the
sample is only one of a large number of samples that might have been
drawn. Since each sample could have provided different estimates,
confidence in the precision of the particular sample*s results is
expressed as a 95 percent confidence interval (e. g., plus or minus 4
percentage points). This is the interval that would contain the actual
population value for 95 percent of the samples that could have been drawn.
As a result, we

are 95 percent confident that each of the confidence intervals in this
report will include the true values in the study population. All
percentage estimates from the survey review have sampling errors of plus
or minus 5 percentage points or less, unless otherwise noted. We used the
weighting

factors and the sampling error methodology provided by the Defense
Manpower Data Center to develop 2000 estimates and sampling error
estimates. In some cases, we used the estimates developed by the Defense
Manpower Data Center. Appendix II: DOD Surveys of Reservists and Spouses

2000 Survey of Reserve Component Personnel

Appendix II: DOD Surveys of Reservists and Spouses

Page 50 GAO- 03- 1004 Reserve Personnel Compensation The 2002 survey of
spouses was sponsored by the Office of the Assistant Secretary of Defense
for Reserve Affairs to assess the needs and concerns

of National Guard and Reserve families prior to and during activation, to
assess the status of family support initiatives, and to gather data from
spouses of members who have been activated since September 11, 2001. The
study population for this survey consisted of 29,673 spouses of

reservists activated for Operations Noble Eagle, Enduring Freedom, Bosnia,
Southwest Asia, or Southern Watch. The survey was a stratified random
sample consisting of 7,658 spouses. Eligible respondents returned 3,874
completed surveys for a response rate of 51 percent. DOD officials believe
that the response rate for the survey is as good as other similar surveys
that they have conducted. However, there is a potential for bias in the
estimates to the extent that respondents and nonrespondents had

different opinions on the questions asked. As with the 2000 survey, the
2002 spouse survey is also a probability sample based on random
selections, so the sample is only one of a large number of samples that
might have been drawn. For this survey, we express confidence in the
precision of our estimates as a 95 percent confidence interval. All
percentage estimates from the 2002 survey have sampling errors of plus or
minus 5 percentage points or less, unless

otherwise noted. To produce estimates of the study population, the sample
data were weighted to reflect the sample design and to adjust for
nonresponse. Because weighting factors were not provided to us for use
with the data, we computed weighting factors as the ratio of the
population to respondents for each stratum. 2002 Survey of

Spouses of Activated National Guard and Reserve Component Members

Appendix III: Policies and Protections That May Help Mitigate Reservists*
Financial Hardship During Activation Page 51 GAO- 03- 1004 Reserve
Personnel Compensation This appendix discusses existing pay policies and
protections, as well as

emergency aid services, that may help mitigate reservists* financial
hardship during activation.

While basic military compensation, in constant dollars, remained fairly
steady during most of the 1990s, it has increased in recent years. 1 As a
result, reservists activated today are earning more in the military than
they did just a few years ago. (See fig. 2.) For example, an enlisted
member in pay grade E- 4 who is married with no other dependents would
earn $3,156 per month in basic military compensation in fiscal year 2003,
compared with $2,656 per month in fiscal year 1999, or a 19 percent
increase. These figures are calculated in constant 2003 dollars to account
for the effects of inflation.

1 Basic military compensation consists of basic pay, basic allowance for
housing, basic allowance for subsistence, and the federal tax advantage.
It does not include special and incentive pays, other allowances, and the
value of fringe benefits such as health care and retirement. Appendix III:
Policies and Protections That

May Help Mitigate Reservists* Financial Hardship During Activation

Appendix III: Policies and Protections That May Help Mitigate Reservists*
Financial Hardship During Activation Page 52 GAO- 03- 1004 Reserve
Personnel Compensation Figure 2: Annual Basic Military Compensation for
Selected Pay Grades (Fiscal Years 1990- 2003)

Note: GAO analysis.

In addition to increases in basic military compensation, Congress in April
2003 increased family separation allowance from $100 to $250 per month and
imminent danger pay from $150 to $225 per month. These increases expire
September 30, 2003. 2 The Senate and House are also

2 Public Law 108- 11, section 1316, April 16, 2003.

Appendix III: Policies and Protections That May Help Mitigate Reservists*
Financial Hardship During Activation Page 53 GAO- 03- 1004 Reserve
Personnel Compensation considering a new special pay of up to $1,000 per
month that would

compensate servicemembers for frequent or lengthy deployments. 3 In
addition to these increases in pay, other pay policies and protections may
help to mitigate reservists* financial hardship during deployment. For
example:

 The Soldiers* and Sailors* Civil Relief Act caps debt interest rates at
6 percent annually for debts incurred prior to activation and provides
many other financial protections if members can show that their ability to
pay is materially affected by being activated. Legislation currently
before Congress would amend the act to expand certain protections for
activated servicemembers. 4  Income that servicemembers earn while
mobilized in combat zones is taxfree.

The President designates combat zones. Military pay received while in
these combat zones is excluded from gross income and not subject to
federal income tax. Legislation currently before Congress would expand
combat zone tax exemptions to any designated contingency operation. 5 
For Iraqi Freedom, Noble Eagle, and Enduring Freedom, DOD has

authorized reservists to receive both a housing allowance and per diem for
their entire period of activation, up to 2 years.  Military Reservist
Economic Injury Disaster Loans up to $1.5 million are

available through the Small Business Administration to help small
businesses meet necessary operating expenses and debt payments until a

3 Senate Bill 1050, the National Defense Authorization Act for Fiscal Year
2004, would require payment of up to $1, 000 each month during which a
member has been (1) deployed for at least 401 days out of the preceding
730 days; (2) deployed continuously for more than 191 days; or (3) in the
case of a reservist called or ordered to active duty for a period of more
than 30 days, if this period begins within 1 year after the date on which
the member was released from previous active- duty service lasting more
than 30 days. The House

version of the act contains similar language. This high tempo allowance
would replace a $100 per diem allowance authorized for servicemembers
deployed for more than 400 days in a 720- day period. However, DOD has
suspended the payment of this per diem.

4 H. R. 100, the Servicemembers Civil Relief Act, passed the House of
Representatives by a vote of 425 to 0 in May 2003. As approved by the
House, the bill would delay eviction proceedings for at least 3 months if
rent does not exceed $1,700 and the servicemember invokes the act;
guarantee the payment of premiums for a servicemember*s life insurance
policy for policies up to $250,000; and give protection to a servicemember
who has fallen behind on car payments by requiring the lessor to obtain a
court order before repossessing the car.

5 H. R. 1307, the Armed Forces Tax Fairness Act of 2003, passed the House
of Representatives in March 2003.

Appendix III: Policies and Protections That May Help Mitigate Reservists*
Financial Hardship During Activation Page 54 GAO- 03- 1004 Reserve
Personnel Compensation key employee* including the owner* is able to
return from active duty to the business and normal operations resume.

Servicemembers who are experiencing financial hardship can also obtain
emergency assistance in the form of interest- free loans or grants from
private aid organizations to pay for basic living expenses such as food or

rent during activation. The Army Emergency Relief, the Air Force Aid
Society, and the Navy- Marine Corps Relief Society are nonprofit
charitable organizations that provide financial, educational, and other
assistance to

servicemembers and their families who are in need. These organizations
provide assistance to active component members, reservists, and retirees.

 In 2002, the Navy- Marine Corps Relief Society distributed approximately
$41 million to almost 51,000 individuals, including $1.5 million provided
due to inadequate income to meet basic living expenses such as rent or
mortgage, food, and utilities. The Navy- Marine Corps Relief Society did
not track separately the assistance it provided to reservists.

 The Air Force Aid Society distributed over $24 million in 2002 to more
than 34,000 individuals. Of this amount, $600,000 was provided to
reservists. The Aid Society reported significant increases in reservists*
receiving emergency assistance and phone card use. About 140 reservists
received emergency assistance for basic living expenses because they
experienced loss of civilian pay or military pay problems.  Army
Emergency Relief distributed $41 million in 2002 to more than

56,000 people. At least $850,000 went to about 900 reservists for
emergency travel assistance, vehicle repairs, rent or mortgage assistance,
and as an income supplement while waiting for delayed military pay when
called to active duty.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 55 GAO- 03- 1004 Reserve Personnel Compensation This
appendix displays the results of our survey of 22 states to obtain their
policies regarding pay and benefits offered to state employees who are

called to federal active duty. It describes the military leave policies
and financial assistance programs such as state pay differentials for
activated state employees who experience income loss as a result of
federal activation. It also describes each state*s policy on the
continuation of dependent health care coverage and other reported
benefits. To determine the 22 states, we chose the 11 states with the
highest total population of reservists in the state, the 5 states with the
smallest total reservist population, and 6 states in the middle. We
conducted our survey of the 22 states between April and July 2003.

In summary, we found that 19 of the 22 states surveyed offer pay
differentials to employees who are on military leave without pay and can
document a loss of income. Of these 19 states, 16 are mandated under state
law or executive order to provide financial assistance, while 3 states*
Colorado, Georgia, and Texas* allow the individual state agencies to offer
pay differentials at the agencies* discretion. The other three states do
not offer pay differentials to activated employees on unpaid leave. The
manner in which states calculate the amount of the pay differential
varies. For example, 7 states calculate the amount of the pay differential
as the difference between an employee*s civilian salary and basic military
pay, not including military special pays and allowances. In contrast, 10
states include military special pays, allowances, or both in the
calculation, which can lower the differential amount that the state pays
to its activated employees. Georgia allows state agencies to formulate
their own differential calculation, while Pennsylvania offers a flat rate
monthly stipend to all activated employees. States offering financial
assistance do so for a period of time ranging from 90 days in Colorado to
the duration of the activation in states like Florida and Alabama. We did
not find a correlation between the size of a state*s reservist population
and the type or extent of financial assistance the state offers. The
results of our survey are presented in table 4. Appendix IV: Selected
States* Policies on Compensation for Activated Employees

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 56 GAO- 03- 1004 Reserve Personnel Compensation Table 4:
Income Assistance, Military Leave, and Health Benefits Offered to State
Employees Called to Federal Active Duty State (Reserve population) a
Income assistance

offered to activated state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b Alabama (22,255) State pay differential Alabama began

implementing a pay differential policy for activated state employees in
July 2002. It is active for the duration of the war on terrorism and
retroactive to September 11, 2001. The state offers 21 working days of
paid military leave each year, after which activated employees are placed
on military leave without pay. Employees activated for 30 or more
consecutive days and who are on military leave without pay are eligible to
receive a pay differential if their state pay exceeds their base military
pay, excluding all special pays and allowances. Employees must submit a
military Leave and Earnings Statement each month to receive the
differential. Activated employees receive the differential for the
duration of their activation.

The state continues to contribute its portion of an employee*s dependent
health care premium for the duration of the activation.

Employees in the state*s retirement system continue to receive retirement
credit while on military leave without pay, unless they receive credit for
the time in another public retirement system, other than the federal
social security system. Employees who used accrued leave while on active
duty for the war on terrorism are eligible to reclaim the expended

leave. Activated state employees do not continue to accrue leave while on
leave without pay.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 57 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b Alaska (3,650) Not available Alaska offers its

employees 16. 5 working days of paid military leave each year for reserve
training, but it does not offer paid military leave for active duty.

The state suspends its employees* dependent health coverage when they are
called to active

military duty. Activated employees may continue their dependent health

care coverage under the Consolidated Omnibus Budget Reconciliation Act
(COBRA) in which they must pay the full premium plus a 2 percent
administrative fee.

Employees in the state*s retirement system continue to receive retirement
credit while on active military duty.

Arizona (11,041) State pay differential Arizona enacted a pay differential
policy for activated state employees in May 2002. The policy is
retroactive to September 11, 2001, and expires on June 30, 2004. The state
offers 60 working days of paid military leave for every 2 consecutive
years that a reservist is employed by the state. Employees who are on
military leave without pay and have exhausted all annual and military
leave balances are eligible to receive a pay differential if their state
pay, including all other compensation except overtime, exceeds the sum of
their base military pay, special pays, and allowances. Employees must
submit each military Leave and Earnings Statement received during the
period of active duty to receive the pay differential. During any

consecutive 5- year period, activated employees may receive a

Employees on military leave without pay may continue to participate in the
health benefit plan for

a maximum of 6 months by paying both the state and employee contributions.
After 6 months, they are eligible for COBRA.

Upon return from active duty, the employing agency pays the employee*s and
employer*s share of retirement contributions accrued during the period of
active duty.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 58 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b pay differential one time

for up to 270 days.

Arkansas (12,446) Not available Arkansas offers its employees called to
duty in emergency situations 30 days of paid military leave, after which
activated employees go on military leave without

pay. The state continues to

contribute a portion of an employee*s dependent health care premium for
the duration of an employee*s activation.

The state continues to contribute its portion to any life or disability
insurance policies. State employees continue to accumulate retirement
credit while on active duty.

California (57,441) State pay differential California enacted a pay
differential policy for activated state employees in February 2002. The
policy is active for the war on terrorism and is retroactive to September
11, 2001. It expires December 31, 2003. The state offers 30 days of paid
military leave each year, after which activated employees are placed on
military leave without pay. Employees are eligible to receive a pay
differential if their state pay exceeds the sum of their base military
pay, special pays, and allowances. Employees must prepare a worksheet to
receive the

pay differential and must provide a copy of their military Leave and
Earnings Statement and military orders to their supervisor. Employees are
eligible to receive the pay differential until the policy expires in
December 2003.

While on military leave during war or national emergency, employees
continue to receive state paid health, dental, and vision care benefits
for the duration of the activation or until the policy expires in December
2003.

State employees continue to accrue retirement credits while on military
leave without pay. They also continue to accrue annual leave, vacation,
and sick leave for up to 6 months.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 59 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b Colorado (13,524) Pay differential at agency

discretion Colorado enacted a pay differential policy for

activated state employees in December 2001. The policy is retroactive to
September 11, 2001, and

is active for military operations designated in the war against terrorism.
The policy authorizes state agencies to provide a pay differential to
their employees at the agencies* discretion. The state offers 15 working
days of paid military leave each year. Following the 15 days of paid
leave, agencies may grant their employees administrative leave, during
which they receive a pay differential if their state pay exceeds the sum
of their base military pay, special pays, and allowances. Employees may
receive administrative leave for up to 90 days. According to a state
official, all Colorado state agencies were offering a pay differential to
their employees as of June 12, 2003. Employees must furnish proof of their
military pay, such as a military Leave and Earnings Statement, to receive
the pay differential.

The state continues to contribute the employer portion of an employee*s
dependent health care coverage as long as the employee is in a pay status.
An employee may remain in a pay status by using at least 1 day of annual
leave each month while on military leave. Otherwise, an employee can
continue group health insurance benefits by paying the entire premium
amount.

The state does not offer any additional benefits while state employees are
on military leave without pay.

Florida (30,477) State pay differential Florida enacted a pay differential
policy for activated state employees in September 2001. The policy applies
to state employees called

The state continues to provide all health insurance and to contribute its
portion of an employee*s dependent health care

Employees may choose to continue all other benefit programs by paying
their portion of the premiums for the duration of the activation.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 60 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b to active duty for the war

on terrorism. The state offers 30 days of paid military leave per year.
After the first 30 days, employees are eligible for a pay differential if
their state pay exceeds their base military pay, excluding special pays
and allowances. Employees must provide copies of their military Leave and
Earnings Statements to their supervisors to receive the pay differential.
Employees receive the pay differential for the duration of their
activation.

premium for the duration of the activation. Employees on military

leave receive full retirement credit for their period of military service
upon their return to employment. They also accrue full annual and

sick leave and holiday pay.

Georgia (25,123) Pay differential at agency discretion Georgia authorized
state

agencies to offer a pay differential to their activated state employees at
the agencies* discretion in July 2002. The state

offers 18 working days of paid military leave each year, after which
employees are placed on military leave without pay. State agencies have
the discretion to offer a pay differential and independently determine the
calculation of the pay

differential. A pay differential is the difference between state
government and military salaries.

The state continues to contribute its portion of an employee*s dependent
health care premium for up to 18 months if the employee was activated on
an

emergency basis. After 18 months, employees may retain health insurance
for their family by paying 102 percent of the premium as specified under
the COBRA provisions.

The state suspends retirement benefits while the employees are on military
leave without pay. The activated employees have the option of paying their
premiums retroactively upon return from active duty to reclaim lost
credits. They do not accrue any kind of leave while on leave without pay.

Illinois (24,382) State pay differential Illinois enacted a pay
differential policy for activated state employees in February 2003. While
on military leave, activated

l liibl The state continues to

contribute its portion of an employee*s dependent health care premium for
the duration of the activation.

The state continues to pay an employee*s full retirement coverage while on
military leave without pay. Employees also continue to accrue

ti d i k l

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 61 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b employees are eligible

for a pay differential if their state pay exceeds their base military pay,
excluding special pays and allowances. Employees must submit a copy of
their military Leave and Earnings Statement to their employing agency to
receive the pay differential. Employees

receive the pay differential for the duration of their activation.

vacation and sick leave.

Iowa (12,593) Not available The state offers its employees 30 days of paid
military leave each year, after which activated employees go on military
leave without

pay. The state suspends its

contributions for dependent health care coverage for employees on military
leave without pay. Employees may continue their dependent health care
coverage under COBRA.

Employees continue to accrue retirement credit while on military leave
without pay.

Nevada (3,939) State pay differential Nevada enacted a pay differential
policy for activated state employees in October 2001. The state offers 15
working days of paid administrative leave each year for employees called
to active military duty. Employees are then placed on civil leave at
reduced pay and receive a pay differential if their state pay exceeds the
sum of their base military pay, special pays, and allowances except for
clothing. To receive the differential, employees must provide their
supervisor copies of their deployment orders and military Leave and

The state allows its employees to continue dependent health care coverage
for the duration of the activation if the employees pay the full premium.

The state offers two retirement policies. Under one policy, the employee
can elect to pay for a portion of the premium and the state contributes
the remainder. Under the second option, the state pays the entire premium,
but the employee either receives less pay or forfeits the equivalent basic
salary and/ or costof living increases. According to a state official, the
state encourages its employees who are called to active duty to transition
their retirement coverage to the second option, which allows

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 62 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b Earnings Statements,

among other forms, each month they are on active duty. Employees receive
the pay differential for the duration of their activation.

them to continue to accumulate retirement credit while on active duty.

New Hampshire (3,617) State pay differential New Hampshire enacted a pay
differential policy for activated full- time, permanent state employees in
March 2003. The policy applies only to the conflict in Iraq. The state
offers 15 days of paid military leave each federal fiscal year to eligible
employees called to active military duty, after which employees are placed
on military leave without pay. Employees receive a pay differential if
their state pay exceeds their base military pay, excluding special pays
and allowances. To receive the differential, employees must submit an
application and a military Leave and Earnings Statement to the Adjutant
General*s office. They receive the pay differential for up to 1 year after
activation beginning March 21, 2003.

The state pays the full premium for all state employees* dependent health
care coverage and continues to pay the full premium for the duration of
their military activation.

State employees continue to accrue retirement credit while on military
leave without pay.

New Jersey (15,891) State pay differential New Jersey enacted a pay
differential policy for activated state employees in February 2003. The
policy applies to the global war on terrorism, armed conflict in Iraq, or
heightened tensions with North Korea. The state also

The state continues to contribute its portion of an employee*s dependent
health care premium for the duration of the activation.

The state continues to contribute its portion to an employee*s life
insurance and pension coverage during federal active duty.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 63 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b authorized pay differentials for

employees called to active service to support the Bosnia and Kosovo
missions. The state offers 90 days of paid military leave to state
employees serving in the National Guard and 30 days of paid leave to
members of the Reserves. After employees exhaust their paid military leave
they are placed on leave without pay, but without loss of time, during
which they receive a pay differential if their state pay exceeds their
base military pay, excluding special pays and allowances. Employees must
submit their orders to their employing agency to receive the pay
differential. Employees remain on partial military leave for

the duration of their time on active duty.

New York (30,997) State pay differential New York enacted a pay
differential policy for activated state employees in September 2000. The
policy expires in December 2004. The state offers 44 working days or 60
days (whichever is longer) of

paid military leave each year or continuous period of absence that spans
more than 1 calendar year, after which activated employees are placed on
military leave at reduced pay. Employees receive a pay The state offers
its

employees on military leave at reduced pay continued health care coverage
for their dependents at no cost for the duration of the employees*
activation.

Employees enrolled in the M/ C Life Insurance Program may continue their
life insurance coverage by paying their portion of the premiums.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 64 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b differential if their state

pay exceeds the sum of their base military pay, basic allowance for
housing, and basic allowance for subsistence. They must submit a military
Leave and Earnings Statement to their employing agency to receive the pay
differential. Activated employees receive the differential until the
policy expires.

North Carolina (20,697) State pay differential North Carolina extended its
pay differential policy for involuntarily activated state employees to
include all reservists in September 2001. The state offers 30 days of paid
military leave for each period of involuntary service, after which
activated employees are placed on military leave without pay. Employees
receive a pay differential if their state pay exceeds their base military
pay, excluding special pays and allowances. To receive the differential,
employees must provide their military Leave and Earnings Statements to
their employing agency. They receive the pay differential for the duration
of their activation.

The state continues to contribute its portion of an employee*s dependent
health care premium for 30 days from the date of active service. After 30
days, an employee may choose to continue dependent coverage in the State
Health Plan by paying the full premium.

Activated state employees continue to receive retirement service credit
while on military leave without pay and to accrue vacation and sick leave.
Ohio (28,080) State pay differential Ohio enacted a pay

differential policy for activated state employees in 1991. The state
offers 22 working days of paid military l hft

The state continues to contribute its portion of an employee*s dependent
health care coverage for the duration of the employee*s time

ti d t Employees continue to

earn retirement credit while on active military duty for up to 10 years if
they meet certain state employment criteria.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 65 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b leave each year, after

which activated employees are placed on military leave without pay.
Employees receive a pay differential if their state pay exceeds the sum of
their base military pay, special pays, and allowances. They must apply for
the pay differential on a pay period- by- pay period basis and submit each
military Leave and Earnings Statement they receive while on active duty to
their employing agency. They receive the pay differential for the duration
of their activation.

on active duty.

Oklahoma (15,502) State pay differential Oklahoma enacted a pay
differential for activated state employees in May 2003. The policy is
retroactive to September 11, 2001. The state offers 20 days of paid
military leave each federal fiscal year, after which activated employees
are placed on military leave without pay. State agencies must grant their
employees on military leave without pay a pay differential for active
service on or after September 11, 2001, during the period Operation
Enduring Freedom is in effect, if the employees* state pay exceeds the sum
of their base military pay and housing allowance. Agencies may require
employees to submit a

military Leave and To ensure continuation of

state- sponsored dependent health care coverage, activated employees may
choose to use annual leave each month to remain in pay status. Employees
continue to pay their portion of the premium if they remain in pay status,
and the amount of state pay received for the used annual leave is deducted
from the pay differential payments.

The state suspends its employees* dependent health benefits when they are
on military leave without pay. Employees may retain health insurance for
their family by paying 102 percent of the premium as specified under COBRA
provisions.

Activated employees may continue to pay into their retirement accounts.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 66 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b Earnings Statement to

receive the differential. Employees receive the pay differential for the
duration of their activation.

Pennsylvania (35,189) Stipend Pennsylvania began offering stipends to all
activated permanent state employees in September 2001. The state offers 30
days of paid military leave, after which activated employees are placed on
military leave without pay. All employees on military leave without pay
receive a $500 monthly stipend, regardless of whether they gain or lose
income as a result of being called to federal active duty. Activated

employees must show their military orders to their employing agency to
receive military leave. Employees receive the stipend for the duration of
their activation. The state pays the full

premium for all state employees* dependent health care coverage and
continues to pay the full premium for the duration of state employees*
military activation.

Employees retain retirement and supplemental health benefits if they
continue to pay their portion of the premium.

Texas (46,922) Pay differential at agency discretion The governor of Texas

encouraged agencies to provide pay differentials to federally activated
employees in November 2001. The state offers 15 working days of paid
military leave each federal fiscal year, after which employees are placed
on military leave without pay. Agency heads may grant federally activated
employees on leave without pay a pay differential if their state pay
exceeds the sum of

The state will continue to contribute its portion of employees* dependent
health care coverage for employees who are still in a pay status beginning
September 2003. Activated employees can remain on a pay status by using as
little as 1 hour of paid leave (compensatory, overtime, vacation, etc.)
each month they are on military leave. If employees are unable or choose
not to remain in a pay status, they may Employees will continue to accrue
full retirement

credit by receiving at least 1 hour of state pay during each month of
active military service by using any combination of paid leave beginning
September 2003.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 67 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b their base military pay,

special pays, and allowances.

A new law requires state agencies to provide a pay differential to their
employees in September 2003. The employing agency requests a copy of the
employee*s military Leave and Earnings Statement to determine the
differential. Under the new law, employees can receive the pay
differential up to 5 years.

retain dependent health insurance coverage for up to 12 months by paying
the full premium.

Vermont

(3,824) State pay differential Vermont enacted a pay differential policy
for

activated state employees in 2001. The policy expires June 2005. The state
offers 11 working days of paid military leave each federal fiscal year to
its employees, after which they are placed on military leave without pay.
Employees receive a pay differential if their state pay exceeds the sum of
their base military pay, special pays, and allowances. Employees must
provide a military Leave and Earnings Statement to their employing agency
to receive the differential. Employees can receive the pay differential
for a period of up to 6 months from their date of activation.

The state continues to contribute the employer portion of an activated
employee*s dependent health care coverage for 1 month after the employee*s
activation. After 1 month, employees may continue their dependent health

care coverage by paying the full premium.

The state does not offer any additional benefits while state employees are
on military leave without pay.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 68 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b Virginia (22,458) State pay differential Virginia enacted a pay

differential policy for activated classified state employees in March
2002. The state offers 15 working days of paid military leave each federal
fiscal year to its employees, after which they are placed on military
leave without pay. Employees receive a pay differential if their state pay
exceeds the sum of their base military pay, special pays, and allowances.
Employees must provide a military Leave and Earnings Statement to their
employing agency to receive the differential. Employees may receive the
pay differential for the duration of their activation.

The state continues to contribute the employer portion of an activated
employee*s dependent health care coverage and the additional 2 percent
administrative fee under COBRA for up to 18 months. After 18 months,
employees may convert their dependent health care to nongroup coverage.

Employees continue to receive retirement credit while on active duty if
they receive an honorable discharge. The

state continues to pay basic life insurance for up to 2 years from the
date military leave without pay begins. Optional life insurance can be
continued if the employee continues to

pay the premiums.

Wyoming (2,344) State pay differential Wyoming enacted a pay differential
policy for activated state employees in October 2001. The policy expires
in October 2005. The state offers up to 15 calendar days of paid military
leave in any calendar year, after which employees are placed on military
leave without pay. While on military leave without

pay, activated employees are eligible for a pay differential if their
state pay exceeds their base military pay, excluding special pays and
allowances. Employees must submit a copy of each military Leave and

The state continues to contribute its portion of an employee*s dependent
health care coverage for the duration of the activation.

The state continues to match any type of pay deferrals that activated
employees make to their deferred compensation plans. Employees continue to
accrue vacation leave while on active military duty. Life insurance
continues if employees continue to pay their portion of the premium.

Appendix IV: Selected States* Policies on Compensation for Activated
Employees Page 69 GAO- 03- 1004 Reserve Personnel Compensation State
(Reserve population) a Income assistance offered to activated

state employees on military leave without pay

Military leave and compensation policy for state employees on federal
active duty

Status of dependent health care coverage for state employees on federal
active duty

Status of other reported state benefits for employees on federal active
duty b Earnings Statement they

receive while on active military duty to their employing agency to receive
the pay differential. Employees

receive the pay differential for the duration of their activation.

Source: GAO. a Reserve population denotes the total number of reserve
members residing in the state as of April 2003 and includes, but is not
limited to, state employees who are reservists. The population figures
exclude Active Guard/ Reserve members. b Information in this column
reflects responses to an open- ended question regarding state benefits,

other than health coverage, for state employees activated for federal duty
and may not necessarily describe the full range of benefits offered to
state employees on federal active duty.

Appendix V: Preactivation Activities of Spouses of Activated Reservists
Page 70 GAO- 03- 1004 Reserve Personnel Compensation This appendix
provides an analysis of data from the 2002 DOD survey of

spouses of activated reservists concerning preactivation activities of
spouses. Based on spouses* self- reported feelings of being prepared or
unprepared upon receiving a notice of activation for the military member,
we compared their responses to questions concerning preactivation
activities* volunteering or participating in unit family readiness
programs or groups, attending preactivation briefings, receiving
preactivation materials. We also compared their responses to questions
concerning other factors that could affect preparedness, such as being
assigned a military point of contact and the amount of advance notice
received prior to activation. Finally, we compared their responses to a
question concerning how well they have coped with the activation. The
results of our analysis are presented in table 5. Table 5: Comparison of
Spouses* Preparedness to Preactivation Activities and Other Factors

Numbers in percent

Question Spouses who felt

prepared or very prepared

Spouses who felt unprepared or very

unprepared Spouses who felt

neither prepared nor unprepared All spouses

Are you a volunteer with the family readiness program or a member of your
spouse*s unit*s Family Readiness Group?

Yes No

13 87

12 88

9 91

11 89 Have you attended any briefings to help you and your family prepare
for your spouse*s order to active duty? Yes, in the past year 14 10 11 12

Have you attended any briefings to help you and your family prepare for
your spouse*s order to active duty? Yes, upon notification of this order
to

active duty 24 30 28 27 Did you receive any preactivation materials such
as checklist or booklet * to help you and your family prepare? Yes, in the
past year 28 19 22 23

Did you receive any preactivation materials such as checklist or booklet *
to help you and your family prepare? Yes, upon notification of this order
to

active duty 44 43 43 43

Appendix V: Preactivation Activities of Spouses of Activated Reservists

Appendix V: Preactivation Activities of Spouses of Activated Reservists
Page 71 GAO- 03- 1004 Reserve Personnel Compensation Numbers in percent

Question Spouses who felt

prepared or very prepared

Spouses who felt unprepared or very

unprepared Spouses who felt

neither prepared nor unprepared All spouses

Before the military member reported for active duty, did you have a
military point of contact * to help you deal with emergency issues that
might arise during the activation? Yes

No 48

52 36

64 41

59 42

58 How far in advance did your family receive notice of the activation
before the military member reported for active duty?

24 hours or less 2- 6 days 1- 2 weeks 2- 4 weeks more than 1 month

14 24 23 20 18

28 29 20 15

8 22

27 22 18 11

21 27 22 18 13 Overall, how well have you coped with this activation?

Very well Well Neither poorly nor well Poorly

Very poorly 37

47 13

2 1

6 35 28 21 10

15 44 30

9 2

20 42 23 10

4 Source: GAO analysis of DOD 2002 Survey of Spouses of Activated National
Guard and Reserve Component Members.

Note: Percentages may not add to 100 due to rounding.

Appendix VI: Comments from the Department of Defense Page 72 GAO- 03- 1004
Reserve Personnel Compensation Appendix VI: Comments from the Department
of Defense

Appendix VI: Comments from the Department of Defense Page 73 GAO- 03- 1004
Reserve Personnel Compensation Now on p. 44. Now on p. 43.

Now on p. 43.

Appendix VI: Comments from the Department of Defense Page 74 GAO- 03- 1004
Reserve Personnel Compensation Now on p. 44. Now on p. 44.

Appendix VII: Staff Acknowledgments Page 75 GAO- 03- 1004 Reserve
Personnel Compensation Kelly Baumgartner, Brenda S. Farrell, Thomas W.
Gosling, Krislin M. Nalwalk, Jennifer R. Popovic, Mark F. Ramage, Loch-
Hung Leo Sze, and Nicole Volchko made significant contributions to this
report.

Appendix VII: Staff Acknowledgments Acknowledgments

(350343)

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GAO Reports and Testimony

Order by Mail or Phone To Report Fraud, Waste, and Abuse in Federal
Programs Public Affairs
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