Retired -- and Working

By Tammy Flanagan

July 20, 2012

On July 6, President Obama signed the “Moving Ahead for Progress in the 21st Century Act” into law. It includes a phased retirement option for federal employees that will allow them to continue working while they sample retirement. That’s not only a nice option for them, but a valuable tool for managers to enable senior employees to mentor and train those who will eventually replace them.

What should we call this new hybrid retired/working status? How about “Retorking?”

The Office of Personnel Management has provided some guidance on the new retirement option, but the biggest question -- when will it be available? -- is still unanswered. OPM says the program will go into effect “at the time set in the regulations to be issued.” But it’s not clear when the regulations will be issued or what schedule will be set in those rules.

It seems that everyone wins by allowing this option of easing into retirement -- except maybe OPM. The new option will place an additional burden on the agency’s already strained retirement processing system. For employees who choose phased retirement, OPM will have to process their retirement applications twice -- once to determine the partial retirement benefit and then again when the employee shifts to full retirement. The agency already is behind on processing traditional retirements. OPM received 7,814 new retirement claims in June, during which time it processed 8,964 claims. That cut the inventory of retirement claims waiting to be processed to 48,323 -- but that’s still a huge backlog.

The Basics

If you are interested in phased retirement, here are some things you should know:
Considerations

So who’s a good candidate for phased retirement? An employee who:
Who is not a good candidate for this option? An employee who:  In addition to accruing additional CSRS or FERS retirement benefits during the period of phased retirement, employees who take this option would have additional wages credited toward their Social Security benefits, and would be able to keep contributing to the Thrift Savings Plan. Also, their sick leave balance would be available if needed. It seems that annual leave also would continue to accrue, but that was not clear in OPM’s explanation.
 
On the other hand, employees who fully retire could still pursue another career or part-time work. That way, they would receive their full CSRS or FERS retirement, although, depending on their earnings and age, they probably would not receive Social Security or the FERS supplement while working. They also could increase their Social Security benefits by adding additional wages to their earnings record. In the case of a CSRS employee, the second career option would allow someone to pay into Social Security to qualify for a benefit that they might not otherwise be entitled to because CSRS employees are exempt from paying the FICA tax.
 
One other option that provides flexibility for retiring employees is the ability to come back to work as a reemployed annuitant either with or without a dual compensation waiver. I’ve written about this option in the past. Here are those columns:
   
Final Word
 
For those employees who have been losing sleep over proposed changes to federal retirement benefits pending in Congress, remember that the phased retirement option is a change -- but not a negative one. If you look back over the past 30 years of modifications to the federal retirement system, I would guess the positives outweigh the negatives by at least 10 to 1.
 
On Monday, July 23, my colleague Bob Leins and I will be discussing the phased retirement option on our “For Your Benefit”show on Federal News Radio.  Tune in here. 


By Tammy Flanagan

July 20, 2012

http://www.govexec.com/pay-benefits/retirement-planning/2012/07/retired-and-working/56885/