Sen. Max Baucus, D-Mont., listens during a hearing on Capitol Hill in Washington, D.C. (Alex Wong / Getty Images)
Congress last week took a big step closer to allowing federal employees to work part time at the end of their careers while earning partial pensions.
The Senate on March 14 easily passed a transportation bill containing the phased retirement provision, 74-22. The bill, S 1813, will now head to the House, where Speaker John Boehner, R-Ohio, has pledged to bring it up for a vote.
If the provision becomes law, it will represent a significant change in how federal employees and agencies plan for retirement. Instead of abruptly moving from full employment to full retirement, older employees will be able to ease into retirement over a period of several months or even a few years. The Obama administration, which proposed phased retirement last month as part of its fiscal 2013 budget proposal, hopes it will alleviate the government's "brain drain" problem by giving employees with decades of experience more time to pass on their expertise and wrap up crucial projects.
Employees phasing into retirement will also be required to spend at least 20 percent of their working hours mentoring younger employees. Employees must be eligible to retire and must have worked full time for the preceding three years to elect a "phased retirement."
Office of Personnel Management Director John Berry last month called the proposal "a no-brainer" and one of the budget's most important personnel proposals.
"You can only play so much golf" in retirement, Berry said. "We have this incredible pool of talent in the federal government. People are living longer, and they want to continue to contribute."
The Senate amendment, sponsored by Sen. Max Baucus, D-Mont., says most employees who take advantage of the option will work half time and retire half time, although eligible feds could also choose to work one, two, three or four days per week and retire for the remainder. Employees would not be able to change the amount of time they work during the phased retirement, even if they transfer to another federal job. Agencies would have to approve all phased retirements.
An employee under phased retirement would receive an annuity that is reduced proportionally by the amount of time he works. So if an employee works half time, he would get half his pension; if he works one-fifth of the time, he would get four-fifths of his pension. Unlike full pensions, partial pensions would not include credit for unused sick leave.
A phased retiree would continue to accrue pay raises through step increases, and his partial annuity would be increased by the standard annual cost-of-living adjustment.
When he enters full retirement, his pension would be recalculated to consist of two parts. The first part would be the full annuity he earned before entering phased retirement, only no longer reduced to account for his partial work schedule.
The second would be a partial pension accounting for his phased retirement period, which would take into account the additional time he worked and any pay raises received during that time. Both parts would be added together for his final pension.
Law enforcement officers — including Customs and Border Protection, Capitol Police and Supreme Court Police officers — firefighters, nuclear materials couriers and air traffic controllers, all of whom face a mandatory retirement age, would not be eligible for phased retirement.
Phased retirees would not technically be considered part-time employees, according to the bill. That means other details, such as how leave and fringe benefits such as transit subsidies will be handled for phased retirees, still have to be worked out.
If someone enters phased retirement and then wants to start working full-time again, he would be able to if the employing agency agrees. Those employees' phased-retirement period would be treated as part-time employment, but they would not be able to move back into phased-retirement status.
Response mostly positive
The proposal is generally supported by federal employee groups, although the American Federation of Government Employees objected to using phased retirements to pay for projects unrelated to federal employees.
Baucus' amendment in the transportation bill would apply the estimated $465 million in savings generated by semiretirements to public roads, schools and forest-related economic development projects in rural areas.
AFGE spokesman Tim Kauffman said doing that will give federal employee groups less leverage to argue against future cuts in other federal pay and benefits.
"That money could have provided a safeguard against cutting pensions for federal employees," Kauffman said. "We know more is coming down the pike. They could have used that instead of increasing retirement contributions, or going to the high-five [a reduced system for setting federal pensions] or cutting the [Federal Employees Retirement System Social Security] supplement. Now that the Senate has voted for this, there's no leverage to say, ‘Why don't we do this versus that?' "
Higher transit subsidies
The bill also would increase federal employees' mass transit subsidy to $240 per month, the same amount they now get for a monthly parking benefit. Last year, both subsidies were $230, but the mass transit benefit dropped to $125 per month when 2012 began.
The National Treasury Employees Union praised the move.
"Improving transit benefits will prove incredibly important to all working people that use, or would like to use, public transportation, and are seeking critical relief for commuting costs," NTEU President Colleen Kelley said.
But the Senate rejected another amendment, from Sen. Pat Roberts, R-Kan., that would have extended the federal pay freeze through the end of 2013. The freeze is slated to end after this year.
Boehner's plan to take up the Senate's transportation bill — and not the more controversial House transportation bill, HR 7 — is good news for feds because it does not contain a provision increasing their pension contributions. House Republican leadership wanted to use a bill from Rep. Dennis Ross, R-Fla. — which would increase the amount current feds contribute to their pension plans by 1.5 percent over three years — to pay for their transportation bill.
But Boehner had trouble corralling support for HR 7, even from members of his own party. Ross, for example, objected to using his Securing Annuities for Federal Employees, or SAFE, Act to pay for the transportation bill, and said its savings should be used for deficit reduction.
Ross' bill could still be considered as a stand-alone bill.