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Iraq deployments hurting employers, they tell lawmakers

WASHINGTON—Increased reliance in Iraq on the part-time warriors of the National Guard and military reserves is straining U.S. businesses and could cause big problems over time, business leaders and military experts told lawmakers on Friday.

Employers must hold jobs open for those called up for duty, but the short notice, long deployments and unpredictability are stressing small and midsized companies, said Jeffrey Crowe, who sits on the board of the U.S. Chamber of Commerce.

Military officials worry that re-enlistment rates may plummet, but despite all the strains, no one believes the country is anywhere near reviving the draft because it's unpopular with Americans.

Currently, 155,805 guard members and reservists are mobilized. They constitute 40 percent of U.S. troops in Iraq. Unease in the business community has forced the Chamber of Commerce, which represents more than 3 million employers, to lobby Congress and the Pentagon for commitments on how long guardsmen and reservists can be called up and when they'll return.

"The military ought to obligate itself to hard and fast dates for taking—and returning—members of the Guard and reserve. From our perspective, the reservists and their employers deserve no less," Crowe said.

The Pentagon doesn't track how businesses are affected, but it recognizes that using reservists "inextricably links the defense of this nation to employers," said Bobby G. Hollingsworth, the director for the Pentagon's National Committee for Employer Support of the Guard and Reserve.

Some Army reservists are expected to spend 12 months with "boots on the ground," plus varying time for predeployment training. That means businesses lose their employees for up to 18 months at a time, Crowe said. Some reservists are called up for duty repeatedly, making it hard for some employers to plan budgets and strategies.

Small and midsized businesses are hit hardest because they often lack the resources and expertise to adjust, said Harold Coxson Jr., a lawyer who specializes in labor law and military-leave benefits at Ogletree, Deakins, Nash, Smoak & Stewart, PC.

Employers are required to keep any reservist's or guardsman's job open for up to five years. Some have trouble finding temporary replacement workers, especially for high-skill jobs, Coxson said.

Also, the rules for contributing to benefit and compensation packages are complicated. Some companies make up the difference between an absent employee's military pay and his or her private-sector salary. Some also allow employees to continue to contribute to their retirement funds.

But a 1969 IRS Revenue ruling requires employees on active military duty to be treated for tax purposes as though they'd been terminated. That means their retirement plans could be immediately taxable, for the employer and employee. The IRS doesn't allow employers to withhold income taxes on differential pay. So active-duty employees could face large and unexpected tax liabilities at the end of the year.

Rep. John Kline, R-Minn., who organized the informal hearing, said he'll propose legislation to change the IRS code. Sen. Judd Gregg, R-N.H., is proposing a remedy in the Senate.

"Are these factors going to lead us back to a draft?" asked Rep. Rob Simmons, R-Conn.

The Bush administration opposes reviving the draft, and many lawmakers say the draft is so unpopular that its revival is highly unlikely, and certainly not before November's elections.

Instead, Congress has voted to add more active-duty troops, and Democratic presidential candidate John Kerry calls for adding 40,000 through voluntary enlistments.

"A draft? It's just not going to happen. Our all-volunteer force is the best we've ever seen," Kline said.

Nevertheless, military officers worry about the strain of current demands.

Maj. Gen. Larry Shellito, who's in charge of Minnesota National Guard units, spoke of guardsmen who were willing to serve their year in Iraq but won't sign up again. They have families that need them back home, he said.

"If we continue with the current force and level of missions, then we can last 18 to 24 months. We are not going to be able last very long after that. Things are going to break," Shellito said.


(c) 2004, Knight Ridder/Tribune Information Services.