Pay and Benefits Watch: Part-time pensions

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If you're a longtime federal employee and are thinking about easing into retirement by switching to a part-time work schedule, you might want to think again.

Your pension could suffer.

Back in 1986, Congress decided to change the way pensions are calculated for federal employees who work part-time. Under the pension formula used until that year, sneaky employees could work part-time for most of their careers and then switch to full-time the last three years to collect the same pension as employees who worked full-time their entire careers.

The pre-1986 part-timers' pension formula used the "high-3" salary formula. Say an employee worked part-time their entire career and earned a $30,000 salary during their three highest salary years. The employee's pension would be based on the $30,000 salary. But if the employee switched to full-time for three years and earned $60,000 each of those years, he or she could get a much larger pension.

To prevent crafty part-timers from getting full-time pensions, Congress created the post-1986 part-timers' pension formula. The new formula focuses on actual time in service. So the employee who switched to full-time for three years for $60,000 per year would receive a pro-rated pension that factored in the employee's part-time schedule for most of his or her career.

The new formula is very fair-except for employees or retirees who meet the following criteria:

  • They worked before April 1986.
  • At least a portion of their service before April 1986 was on a full-time basis.
  • They worked part-time and then retired after April 1986, or are still working, plan to work part-time and then retire.

Rosemarie Moore is such a retiree. Moore worked full time from 1962 to 1987 and then switched to a part-time schedule from 1987 to 1994 to care for her mother. Moore returned to a full-time schedule for her last year in federal service. She retired in 1995.

The problem for Moore, and others like her, is that the new part-time pension formula applies only to service after April 1986. Because of the way the formula works for pre-1986 service, people who worked full-time earlier in their careers and then later switched to part-time work receive the same pension as an employee who worked part-time their entire career.

"My 25 years of full-time service were given credit at a part-time rate of pay, even though I paid into the retirement system as a full timer," said Moore, who worked for the Immigration and Naturalization Service. "Such an unfair scheme is definitely not what Congress intended."

Moore and other retirees and employees who have realized that their pensions are reduced because of the 1986 change have begun banding together to get the Office of Personnel Management or Congress to revise the formula so that people like them get pensions that reflect their service.

The part-timers group thinks OPM could fix the problem with a regulatory change. But an OPM official, speaking on background, said the problem is statutory. Congress would have to make the change, the official said.

Sen. Charles Robb, D-Va., has introduced a bill (S. 772) to address the problem. The bill would help both current employees and retirees. The OPM official said the agency supports helping current employees, but trying to identify affected retirees would be an administrative nightmare.

Moore doesn't buy OPM's stance on retirees: "A mistake was made," she said.

The part-timers' group has created a Web site to help people figure out if they are affected. The Web site is at: www.homestead.com/ptretirement/federal.html

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