A sharp uptick in federal retirements this year has caught the Office of Personnel Management -- and its director, John Berry -- off guard. (Staff)
Retirement applications for the first 10 months of 2011 soared 24 percent from the same time last year, topping 92,000, according to statistics from the Office of Personnel Management.
If that rate continues, nearly 104,700 federal employees are likely to apply for retirement by the end of December.
Retirement applications saw an unexpected spike in October. That month's 11,411 applications were 42 percent higher than October 2010, and 60 percent higher than October 2009.
That jump caught OPM off guard, since retirement applications usually spike around January. OPM Director John Berry told Congress last month that the uptick in retirements — which he said was likely caused by cash-strapped agencies offering buyouts and taking other steps to cut their workforces — is increasing pressure on the agency to process more pension claims.
"As agencies are looking at increasing their buyouts and other options to tighten their belts, it's increasing our retirement pressure," Berry told Congress.
If current trends hold, the government will see its biggest retirement year since at least 2001, the earliest year statistics were available. According to an OPM report, retirements over the last decade have fluctuated between roughly 75,000 and 95,000, aside from 2006, when more than 103,000 employees retired.
Federal experts agree that the increase in retirements is alarming, even if it isn't surprising. Federal employees are about to enter their second year with frozen pay scales. Lawmakers are likely to extend that freeze at least one more year — and some, such as Senate Minority Leader Mitch McConnell, R-Ky., want to extend it three more years.
Meanwhile, lawmakers are eyeing federal retirement benefits as a juicy target for deficit reduction. Congress could switch from a high-three to a high-five system for determining federal pensions — that is, basing their pensions on the average of their five highest annual salaries, instead of the three highest as is the current system. Congress also could require feds to contribute much more to their retirement plans.
Julie Tagen, legislative director for the National Active and Retired Federal Employees Association, said her membership is scared to death of what could happen to their pensions.
"When I go out and speak to groups, there's always a couple of people who come up to me and ask, ‘Should I retire tomorrow?' " Tagen said. "It really doesn't surprise me to see this [increase in retirements]. Anyone who's getting close to retirement has to be thinking it through."
Henry Romero, a former OPM executive, said some federal employees may have been putting their retirement off a year or two to increase their high-threes. But with the pay scale freeze in effect, the only chance feds have of increasing their high-three now is to get a step increase or a promotion. And some employees who have been in their grades several years have to wait three years for a step increase, or if they've reached step 10, are ineligible for future step increases.
Romero said those employees have little financial reason to stay longer, and may be bailing out.
And the increasingly dire budget situation — combined with more than a year of politicians' attacks on the integrity of federal workers — is probably sapping some employees' enthusiasm for their jobs.
"When you look around, at the prospect of reduced budgets and the continued assault on federal employees and benefits, all of that is contributing to a lack of desire to stay on," Romero said.
Jessica Klement, governmental affairs director for the Federal Managers Association, thinks all of these factors are combining to push feds into retirement.
"I think January [when retirements traditionally peak] may tell a pretty good story," Klement said.
And Tagen is worried that the retirements will leave gaping holes in the government's skill set — and the current anti-fed rhetoric and budget situation will make it tough to fill those gaps.
"Do you really want that brain drain?" Tagen said.
Colleen Kelley, president of the National Treasury Employees Union, agreed.
"Congress cannot create this type of poisonous environment and not expect to have a negative effect on the morale of federal employees, and discourage others from pursuing a career serving their fellow Americans," Kelley said.
Some of these added retirees may have wanted to retire a few years ago, but were unable to because of the economy. In early 2009, shortly after the stock market crash wiped out large chunks of employees' Thrift Savings Plan savings, OPM saw signs that employees were putting off retirement. About 7 percent of the federal employees who were projected to retire in 2008 didn't, and OPM downgraded its retirement projections slightly over the next few years.
OPM said in 2009 that it expected feds to start retiring again in 2012, as the economy recovered and people felt more confident.
OPM cautioned then that while the wave of retirements seemed to have stalled, agencies should keep working on their succession plans to replace employees when they do retire. Without adequate workforce and knowledge management plans, OPM said, agencies will lose decades of experience when an employee leaves, and won't have a way to replace those skills.
Romero, who is now a consultant at Federal Management Partners, said large swaths of the government still haven't done the necessary succession planning. He said smaller agencies such as the Nuclear Regulatory Commission and the National Science Foundation typically do a good job, because their human capital officials can more easily conduct surveys and see where the skills gaps are.
But large agencies are often lost when it comes to succession planning, Romero said, and will likely be blindsided when vital employees start retiring.
"They'll be shell-shocked when large amounts of expertise goes out the door in one fell swoop," Romero said.
Klement fears what will happen when agencies find vital, experienced parts of their workforce have retired, but they're still expected to accomplish the same missions.
"Congress isn't going to give them the budget to hire people to replace those who are retiring," Klement said. "But agencies can't just stop doing some things, because they're mandated by Congress."
Tagen said the combination of a retirement wave with a mandated $1.2 trillion in sequestration cuts will prove devastating to agencies.
"Retirement alone is one thing," Tagen said. "But together with sequestration, that could impact services for everyone."