Congress approves partial retirement, spares fed pensions

Transportation deal drops proposed retirement contribution hike and high-five calculation.

Congress passed a bill on Friday that will allow retirement-eligible federal employees to work part time and held back several provisions targeting federal pension benefits.

Legislators agreed to drop a pension contribution hike that was put forward by Republicans in both chambers to help pay for a one-year extension of the Stafford student loan interest rate and provisions in sweeping transportation legislation. Republicans also had proposed determining pension rates based on federal employees’ five highest paid years, rather than the high-three calculation used now -- a change labor unions strongly opposed and lawmakers rejected on Friday.

The House passed the bill in a 373-52 vote; the Senate agreed by a vote of 74-19. The legislation extends the current 3.4 percent interest rate on Stafford student loans for one year; the subsidized rate was set to expire July 1. The bill also extends mass transportation funding and national flood insurance funding.

In a victory for Democrats, the legislation will pay for the interest rate extension by changing the formula for companies’ required pension plan contributions, thus freeing up more taxable income, while also increasing their premiums paid to the Pension Benefit Guaranty Corporation. Republicans previously had proposed a 0.4 percent pension contribution hike for federal employees in calendar years 2012 through 2015.

The phased retirement provision has received widespread support in both parties; it is also favored by labor unions. Under the plan, federal employees nearing retirement can work part time while receiving partial annuities and earning additional retirement benefits proportional to the amount of time they work.

National Treasury Employees Union President Colleen Kelley called the provision a “sensible option” for federal workers nearing the end of their careers, but not ready to retire. “Ultimately, the phased retirement option will benefit federal employees, agencies and the American people they serve,” Kelley said in a statement following the votes Friday.

Rep. Darrell Issa, R-Calif., one of the lawmakers who previously introduced the phased retirement plan in the House Oversight and Government Reform Committee, praised its passage Friday, calling it a “win-win” for both federal employees and taxpayers.

“Phased retirement allows federal employees to continue to contribute their talent and experience to their agency’s mission and saves taxpayer dollars at the same time,” Issa said.

The Office of Personnel Management included a similar proposal in its fiscal 2013 budget request. The White House estimated that easing older employees into retirement by offering a part-time work program would save the Obama administration $720 million in the next decade.

Congress lumped highway and student loan measures into one bill in order to pass legislation before transportation funding expired. President Obama was expected to sign the bill quickly.

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