**GAO-09-688R**                      Published: Jun 23, 2009. Publicly Released: Jun 23, 2009.                  

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## Highlights

Since September 2001, the Department of Defense (DOD) has relied heavily on the reserve component primarily in support of ongoing contingency operations for the Global War on Terrorism, which is now known as the Overseas Contingency Operation. As of February 2009, approximately 691,000 reserve servicemembers have been activated in support of operations in Iraq and Afghanistan, with many of these servicemembers being called for multiple deployments or extended for more than one year. This increased use of the reserve component servicemembers has led to questions by Congress about whether reserve component servicemembers might be experiencing a decline in earnings as a result of extended and frequent activations. Citing the nation's increased reliance on the reserve component, Congress mandated in 2002 that we review compensation programs available to reserve component servicemembers serving on active duty. In September 2003, we reported that DOD lacked sufficient information to determine the need for compensation programs and recommended that DOD obtain more complete information on the magnitude of income change, the causes of any such identified change, and the effect of income change on retention. The results of DOD's 2004 Status of Forces Survey of Reserve Component Members showed that about 51 percent of reserve component servicemembers responding to the survey reported that they had experienced a decline in earnings while activated. However, our 2003 report noted that survey data are questionable primarily because it is unclear what survey respondents considered as income loss or gain in determining their financial status. The Ronald W. Reagan National Defense Authorization Act for Fiscal Year 20056 directed DOD to conduct a survey to determine the extent to which such members sustained a reduction in monthly income during their active duty service compared to their average monthly civilian income during the 12 months preceding their mobilization. DOD was also required to include a survey question that would solicit information regarding the likely effect that a reoccurring monthly active duty income differential while serving on active duty would have on the servicemember's decision to remain in the armed forces. The Secretary was required to analyze the data and to submit a report, containing the results of the survey, results of the required analysis, and any recommendations the Secretary considered to be appropriate regarding alternatives for the restoration of any lost income.

Although most reserve component servicemembers in response to surveys conducted in 2004 and 2005 reported earnings losses when activated, DOD-sponsored technical studies determined that for calendar years 2004 and 2005, on average, reserve component servicemembers earned more income while serving on active duty than they had earned as civilians before being activated. In 2008, RAND Corporation (RAND) produced its most recent technical study on the effect of activation on reserve component servicemembers' income, which compared survey responses with pay reported to the Social Security Administration and with military pay records. RAND determined that on average, reserve component servicemembers experienced a net gain of approximately $1,400 a month in 2004 and approximately $1,600 a month in 2005, after activation. However, RAND found that reserve component servicemembers in three enlisted military occupations--sonar operator, general; investigations; and military training instructor--earned less income on average after activation in 2005 than they earned before activation in 2004. Further, the study also identified 48 enlisted military occupations and 14 officer occupations for which more than 20 percent of sampled reserve component servicemembers experienced any earnings loss after activation. RAND noted that these identified occupations represented 18 percent of activated enlisted members and 31 percent of activated officers. Seniorlevel reserve component servicemembers and officials from the Office of the Assistant Secretary of Defense for Reserve Affairs told us that they concurred with RAND's findings. The studies cited underreporting of military earnings by omitting tax-free earnings as the main reason for the difference between the self-reported income amounts in survey responses and the studies' analysis of military pay and civilian earnings. Importantly, after 2005, Congress passed several pieces of legislation providing additional compensation and financial protections to deployed servicemembers, including benefits provided under the Reserve Income Replacement Program, to help alleviate income loss by reserve component servicemembers activated for frequent or extended periods. Although DOD has not yet provided its report to Congress determining whether income loss while serving on active duty has an effect on a servicemember's decision to remain in the reserve component, we found no correlation between attrition rates and income loss in the military occupations identified by RAND as having over 20 percent of reserve component servicemembers who experienced a decline in income when activated. Even though over 70 percent of reserve component servicemembers responded in the 2004 Status of Forces Survey of Reserve Component Members that both income loss and insufficient pay would be reasons to leave the service, these responses were not provided by military occupation, and subsequent Status of Forces Surveys did not include questions specifically gauging reserve component servicemembers' opinions on whether insufficient pay or income loss constituted reasons for leaving the service. DOD has not determined whether attrition can be attributed specifically to income loss. In discussions with Reserve and National Guard personnel officials, they told us that reserve component servicemembers leave the service for many reasons other than income loss, such as length of deployment, frequency of deployment, and degree of support from employers and family members.

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## Topics

National Defense

Armed forces reservesAttrition ratesComparative analysisCompensationIncome statisticsIncome taxesInternal controlsLossesMilitary compensationMilitary forcesMilitary reserve personnelOccupational surveysSurveysWage surveysMilitary payContingency operationsMilitary personnel deploymentPolicies and procedures