Cutback Puts Major Decision before Military Personnel

Article excerpt

For the past several years, financial pundits have been talking about the "peace dividend." This is the financial windfall that Americans would get when the democratization of the former Soviet Union decreased our need for costly weapons of war. There was no end to the speculation about what all those dollars could do.

However, the term may have a far more tangible meaning to active members of the military. For them, the peace dividend may translate into some cash and a pink slip.

The Department of Defense is now offering activety service men and women what amounts to a employee buyout. And like the hundreds of U.S. companies that have offered similar programs over the past few years, the defense department is taking a carrotdick approach.

Those who opt to leave the service when they're offered the program can choose between two generous severance packages _ the Voluntary Separation Incentive or the Special Separation Benefit. Those who don't take those may get fired _ or, as the defense department puts it, they may be subject to "involuntary termination."

With a goal of reducing the armed forces by roughly 360,000 men and women by the year 1997, this may well be the nation's biggest employee buyout program. But, by and large, the recipients of the military's plan are much younger _ sometimes in their 20s and 30s.

As a result, their choices have longrm repercussions. And these choices are tough.

Those who don't take the buyout and make it to military retirement age _ often around 40 _ are afforded some of the best posttirement benefits in the nation. They forgo these benefits if they take one of the military's voluntary separation programs.

Service men and women also need to choose between two plans _ a lump sum or an annual annuity. The annuity works out to substantially more cash for those who have been in the service for a significant period of time, but it also comes with more restrictions.

Those who get the annuity must serve in the military reserves for as long as they continue to receive separation payments. And that could be 20 years. Those who get the lump sum are required to serve in the reserves only for three years.

Finally, service men and women have to determine whether their military skills can translate into civilian jobs during a slow economy and a time of severe defense industry cutbacks. …

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