Phased Retirement is Finally Here

After more than two years in federal regulation limbo, the law allowing federal employees to partially retire while continuing to work part-time for the government is finally being implemented.

Eligible federal employees can submit their applications for phased retirement beginning Nov. 6. The Office of Personnel Management on Thursday filed the 129-page final rule on the new program for publication in the Federal Register on Friday. The so-called phased retirement provision, included in the 2012 transportation reauthorization act, allows eligible feds to work 20 hours per week, receiving half their pay as well as half their retirement annuity. Those employees who enter phased retirement must devote at least 20 percent of their work time, or about 8 hours a pay period, to mentoring other employees, ideally for those who take over for them when they fully retire.

“The regulations are another way that our administration, the president’s administration is giving agency leaders new tools to manage and plan for the 21^st century workforce,” said OPM Director Katherine Archuleta, during a Thursday press briefing on the final rule. “They will let managers provide the kind of flexibility that will meet the needs of our employees while allowing us to continue to tap into their experience, their wisdom and their judgment of the talented federal workforce.”

Phased retirement seems like a win-win for the government and retirement-eligible federal workers: Uncle Sam gets to keep valuable employees for a bit longer, and partially-retired employees will earn more money than they would by fully retiring, or simply working part-time. Eligibility for phased retirement is similar to the criteria for federal workers who are fully retiring.

“Upon retirement, the employee will be entitled to a greater annuity than if the employee had fully retired at the time of transition to phased retirement, but less than if the employee continued on a full-time basis,” said Ken Zawodny, associate director for retirement services at OPM, during the call with reporters. Partial retirees will work 50 percent of the time and receive half of what their annuity would have been (not including credit for sick leave) had they fully retired. That work ratio, however, could change eventually. “In the future, and at OPM’s discretion, different working percentages could be permitted,” Zawodny said.

Employees who enter into phased retirement will have their annuity payments calculated twice – once when they partially retire and again when they fully retire – and are treated as part-time employees for most employment purposes, including leave and pay. But their health care won’t change once they go part-time, said Mark Reinhold, OPM’s associate director of employee services and the agency’s chief human capital officer. Phased retirees will continue to receive the full contribution from the government under the Federal Employees Health Benefits Program and their costs won’t change, Reinhold said.

Zawodny said OPM made some minor tweaks to the proposed rule except for a new requirement in the final regulation that directs agencies to draft a written plan when approving or denying applications for phased retirement. “Requiring the written plan protects both the agency and the employee,” he said.

The National Active and Retired Federal Employees Association praised the release of the final rule -- more than a year after the proposed rule was published. “The new regulations are arriving just as the federal government faces a critical retirement wave,” NARFE President Joseph A. Beaudoin said. “Three years from now, the number of retirement-eligible federal workers will double. The phased retirement program should help stem the tide of this retirement surge.”

Agencies will have broad discretion in deciding how to implement phased retirement, including deciding which jobs are eligible for it, determining mentoring activities and deciding how long an employee can remain partially retired. There won’t be much wiggle room when it comes to requiring partial retirees to mentor, however. “Mentoring is an essential component of phased retirement, and agencies have very limited authority to waive that requirement,” Reinhold said.

But Beaudoin expressed skepticism over how well the mentoring requirement will be enforced. “While most of NARFE’s concerns were addressed or clarified in the final regulations, we are disappointed that they allow agencies too much leeway to waive the mentoring requirement,” he said. “Unfortunately, there are several mentoring requirements already in regulation that are not being used to their fullest extent. Given the federal government’s current limited use of mentorship programs, NARFE believes that agencies could benefit from additional guidance from OPM on mentoring best practices.”

OPM officials said they will provide detailed guidance to agencies soon on how to implement phased retirement.

As for the retirement claims backlog, which OPM has made progress on reducing, Zawodny said the agency didn’t know how phased retirement would affect that workload, since the government will be processing some applications twice. “We hope it’s spread out enough so that the impact is not going to be an issue,” he said, though he pointed out that the initial retirement calculation for partial retirees “won’t be that different than the final calculation.”

OPM officials said they received hundreds of comments on the proposed rule and had to coordinate with other agencies, including the Social Security Administration and the Federal Retirement Thrift Investment Board, because of how complicated the change is. “We just wanted to make sure we got it right and I think we did,” Reinhold said.

(Image via Ditty_about_summer/Shutterstock.com)