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Few feds expected to take phased retirement

Jul. 15, 2012 - 02:19PM   |  
By STEPHEN LOSEY   |   Comments
Kenneth Zawodny is associate director of retirement services at OPM.
Kenneth Zawodny is associate director of retirement services at OPM. ()

A new phased-retirement option for federal employees amounts to one of the biggest changes in the government’s retirement policy in years, but the administration expects few employees will take it.

President Obama on July 6 signed a bill that would allow retirement-eligible federal employees to work part time at the end of their careers while drawing partial pensions.

Feds who no longer wish to work full time — but aren’t ready to fully retire — would have more time to wrap up crucial projects or pass along their institutional knowledge to prevent brain drain. The law requires most phased retirees to spend at least 20 percent of their working time mentoring younger workers.

Dozens of federal employees have written to Federal Times to express interest in the option. But the Office of Personnel Management projects that only about 1,000 employees each year will opt for phased retirement.

In a statement to Federal Times, OPM associate director of retirement services Ken Zawodny said the agency assumes that up to 1 percent of eligible employees will take phased retirement each year. More than 100,000 employees retired in 2011.

“It is always difficult to predict human behavior in response to a new opportunity,” Zawodny said.

Dave Snell, retirement benefits director for the National Active and Retired Federal Employees Association, also thinks the appeal of phased retirement will be limited.

“I think feds as a group are rather conservative in nature and might be wary of opting for the phased retirement,” Snell said. “There will be some individuals that find it tailor-made for their personal circumstances. I suspect that the popularity of the option will pick up steam as agencies become better at administrating it.”

Snell also said phased retirement will likely be constrained by agencies’ limited willingness to consider the option. Any employee who wants to try phased retirement must first get permission from his agency.

The Congressional Budget Office in May projected that over a decade, phased retirement will cut spending $427 million and increase revenues $24 million. CBO assumed that 1,000 phased retirees annually would work half time for three years before fully retiring.

CBO calculated the savings on the assumption that the employees otherwise would have fully retired when they entered into semi-retirement. But that may not be how phased retirement works in reality. Some employees might opt to retire earlier than planned because of this option, while others may use it to extend their careers.

Increased revenues would come from allowing Civil Service Retirement System employees — who contribute 7 percent of their salaries to their pensions — to stay longer and contribute more to the government’s retirement fund.

Had phased retirement not been an option, CBO said, those CSRS employees would have been replaced earlier by newer Federal Employees Retirement System employees, who contribute less — 3.1 percent of their salaries beginning in 2013.

FERS employees who fully retire before becoming eligible for Social Security receive a supplement to their pension that amounts to what they would have earned had they been eligible for Social Security. But phased retirees will not be eligible for the FERS supplement, Zawodny said.

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