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When duty calls, they suffer

Author: Christine Dugas
Publication: USA Today
Document Dated: April 16, 2003
Date Posted: April 30, 2003

The reserves have played an increasingly important role since the end of the Cold War, as the ranks of the active armed services declined by about 35% to 1.4 million today. Currently, about 223,000 reservists and guard members are on active duty out of a total of 1.2 million.

"Because of the downsizing of the active duty forces, many assignments are given to the reserves," says Michael Glazeski, an optometrist in Alameda, Calif., who is a Navy reservist.

Reservists are being called up more often, and they are serving for longer periods of time. That can put an enormous financial burden on reservists and their families, especially solo practitioners and heads of small businesses. The problem isn't limited to lost income during the time a reservist is away from home. "You run the risk that if you're gone for a while, your patients will seek services elsewhere," Glazeski says. "And that could have an impact on your business for years to come."

About 6% of reservists are self-employed, according to a survey conducted by the Department of Defense in 2000. After Operation Desert Storm, some of them returned home to find their businesses in shambles.

Howard Nelson, an optometrist and Army reservist in Louisville, was forced to seek bankruptcy-court protection because his practice languished while he was called up for nine months during Operation Desert Shield. He is still in Chapter 13 bankruptcy.

An increasing number of self-employed reservists are taking steps to protect their businesses:

  • Amy Vincent decided not to re-enlist in the Army National Guard because she feared the impact of military duty on her Charleston, W.Va.-based business, Tidal Creek, which makes embroidered clothing and engraved plaques. She recently took on a partner, who retired from active duty in the Army National Guard last month.

"It was a tough decision," Vincent says. But the business is growing and her partner is not fully trained yet. "I didn't want to leave her hanging."

  • Steve Kaufman, a commander in the Navy reserves, has prepared a plan to keep his public relations firm in Jacksonville running smoothly if he's called up. He arranged for his mentor to oversee the company, made sure he has a service to help with the clerical work and discussed the plan with his clients.

"I'm blessed to have patriotic clients," he says. "But it's my name on the business, so at some point if they don't have me, they'll want to go somewhere else."

  • Robert Kalb, an orthopedic surgeon in Toledo, Ohio, is in the Navy reserves. If he's called up, he can rely on his partner to help fill in for him. But Kalb is concerned about paying his staff's salaries and other office overhead while he has no income.

After the Gulf War, a federally sponsored mobilization insurance program was offered to reservists to help make up for business losses. But it quickly ran into financial problems.

The Reserve Officers Association of the United States looked into providing similar coverage for its members. But an insurance company that studied the issue said it was too difficult to assess the risk, according to John O'Shea, the association's director of education.

After the Gulf War, Nelson, the Louisville optometrist, organized the Self Employed Recalled Reservists and Retirees Committee and lobbied legislators to provide more financial assistance to small-business owners. Finally in 1999, Congress passed the Military Reservists Small Business Relief Act. But it came too late for Nelson.

The legislation authorized the Military Reservists Economic Injury Disaster Loan Program, which began in October 2001. It provides low-interest loans, up to $1.5 million, so that eligible small businesses can meet ordinary and necessary operating expenses that they are unable to pay because an essential employee in the reserves is mobilized.

Since its inception, the program, which is administered by the Small Business Administration, has approved 79 loans for a total of $6.4 million. The average amount is $78,834.

One recipient is Richard Parsons, Jr., a veterinarian in Churchville, N.Y., and a member of the Army National Guard. When Parsons was called to active duty in October 2002 and sent to Afghanistan, he applied for a loan to help keep his animal hospital functioning. Parsons received a $49,500 loan at about a 4% interest rate.

Parsons' wife, Marla, quit her job to oversee the business. So far, she has been able to find only a part-time veterinarian to replace her husband. "Our income has been drastically severed," she says. "The money definitely helped us, but it is a loan. I wish there was some sort of grant available."

Nelson agrees that the government needs to do more. For example, small-business owners in the British reserves can get hardship grants, he notes. Congress is considering a number of bills to help reservists, but none specifically focuses on the financial hardship facing small businesses and self-employed workers. O'Shea says one option might be a tax-deferred IRA type of savings account that reservists can contribute to and draw on when they are mobilized.

"Small firms must make extraordinary sacrifices when they lose one of their most productive employees," he says. "They often don't have the means to weather the storm."

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