Not all feds will have the option of phased retirement

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The Office of Personnel Management has released new information on implementing a phased retirement option for federal employees, noting among other details that participation is “entirely voluntary” and not all workers are eligible.

The Moving Ahead for Progress in the 21st Century Act, which President Obama signed on July 6, includes language that allows federal employees to ease into retirement by working part time and collecting a partial annuity. The plan received widespread support from lawmakers on both sides of the aisle, labor unions and the White House as a way for retirement-eligible employees to stick around and mentor younger workers and to cut costs.

OPM did not provide a specific startup date for the program, saying only that it will be accomplished “as soon as possible,” but a new fact sheet from the agency, first published by The Washington Post, explains the basics of how the program will work; gives eligibility requirements; and provides details about how the plan fits into existing survivor benefits, unused sick leave, and life and health insurance rules.

The fact sheet announced that participation in phased retirement will be optional and will require the mutual consent of employees and their agencies. Workers subject to mandatory retirement -- including law enforcement officers, firefighters, nuclear materials couriers, air traffic controllers, Customs and Border Protection officers, and members of the Capitol Police and Supreme Court Police -- will not be eligible.

Under the law that will remain in effect until the new option is implemented, retirement-eligible employees who want to continue working part time have little economic incentive to do so because their potential retirement benefits often are equal to or greater than their prospective salary from their part-time employment, the fact sheet explains. Under phased retirement, the employee’s annuity and salary would be prorated according to the number of hours worked.

For example, if a fed who earns an annual salary of $80,000 enters the phased retirement program and works half his former schedule, he would earn a salary of $40,000, plus $26,500 in retirement annuity, or half his full-time entitlement, under a Civil Service Retirement System high-three calculation. Those benefits would accumulate and could be received during the part-time service; the full annuity could not be collected until after the employee completed the part-time work.

“At the time of full retirement, the individual would be appropriately compensated for the value of both full-time and part-time service, with an annuity greater than if they had fully retired at the time of transition to phased retirement but less than if the individual had continued employment on a full-time basis during the period of phased retirement,” OPM said.

OPM also said a phased retiree could return to full-time employment if the employer agrees. The phased retirement annuity then would end and that employee could not return to the retirement-work hybrid.

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