Posted on Thursday, 14th August 2014 by

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On August 8, 2014, the guidance allowing a “Phased Retirement” option for federal employees was published by the Office of Personnel Management (OPM). Under this option, federal employees eligible for retirement can work half-time while receiving partial retirement benefits before they fully retire. According to Katherine Archuleta, OPM Director, “Phased Retirement offers an innovative alternative to traditional retirement for the 21st century workforce.” Below are important details of this new benefit.

What are the features of Phased Retirement?

As a phased retiree you:

  1. Work half-time per pay period.
  2. Receive half of your retirement annuity. If you enter into phased retirement, you will have your annuity payments calculated twice – once when you enter into phased retirement and again when you fully retire.
  3. Spend at least 20% of working time mentoring co-workers to pass on your knowledge and skills. United States Postal Service workers are exempt from this requirement.
  4. Are treated as a part-time employee for most employment purposes, including leave and pay. You continue to receive the full contribution from the government under the Federal Employees Health Benefits Program (FEHB).
  5. Can fully retire at any time; conversely, you can return to a full-time work schedule with your agency’s approval.

Your agency has broad discretion in deciding how to implement phased retirement, including which jobs are eligible for it, defining mentoring activities and determining how long an employee can remain in the program.

When does Phased Retirement start?

Phased Retirement regulations are effective November 6, 2014.

Who is eligible for Phased Retirement?

Participation is voluntary and requires the mutual consent of both you and your agency. In order to participate, you must have been employed on a full-time basis for the preceding three years. You must be eligible for immediate retirement under Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS).

Who isn’t eligible for Phased Retirement?

Employees subject to mandatory retirement such as law enforcement officers, firefighters, nuclear materials couriers, air traffic controllers, some Customs and Border Protection officers, or members of the Capitol Police or Supreme Court police are not eligible for phased retirement. Also, non-CSRS and non-FERS employees such as those in the Foreign Service retirement system aren’t able to participate.

How do I apply?

If you are interested, the first thing to do is check with your manager and /or your Human Resources office. If you are eligible, you will need to fill out an application. Once your agency approves it, OPM will process it beginning November 6, 2014. If you change your mind after applying, you can withdraw your application before it becomes effective but not afterwards.

Can I make a military service credit deposit?

If you desire to make a military service credit deposit for military service performed, it must be made prior to entering phased retirement status. A military service credit deposit for military service performed prior to an individual’s entry into phased retirement status cannot be made after the effective date of phased employment and the commencing date of phased retirement annuity.

How will my retirement benefits be affected if I participate?

Your annuity will be computed as if you are fully retired. (Unused sick leave is not credited as creditable time serviced.) Half of the computed annuity amount will be payable during phased retirement. There is no reduction for survivor benefits from the phased annuity. You will keep accruing additional service credit toward your final annuity.

If you are under FERS and not eligible for Social Security you will not get the FERS supplement. That supplement pays traditional FERS retirees who are not yet 62 the amount they would have gotten from Social Security if they had been eligible.

You do not receive a lump-sum annual leave payment until you fully retire from the agency.

Can I change my mind and return to full-time work?

With your agency’s approval you can return to full time work in the agency. The phased retirement annuity would terminate. You would become ineligible for phased retirement in the future.

What happens at the end of Phased Retirement when I fully retire?

Once you fully retire, the annuity is recalculated to take the additional working time into account with the time in phased retirement treated as part-time service. Survivor benefit elections would be made at that time. The annuity will be more than if you had fully retired before you started phased retirement but less than if you had worked full time.
Phased Retirement is a creative retirement option that appears to be worth considering if you’re looking for a way to test out the “retirement waters” before jumping in. You get the ability to transition into retirement by working half-time, get half your annuity and help your agency in mentoring junior workers.

References:

Section 100121 of Public Law 112-141, the “Moving Ahead for Progress in the 21st Century Act,” or “MAP-21,” approved on July 6, 2012.
Federal Register – Phased Retirement- A Rule by the Office of Personnel Management (August 8, 2014)

Learn more about your benefits,  employment, and financial planning issues on our site and visit our Blog frequently at https://fedretire.net to read all forum articles.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and financial information are subject to change. To ensure the accuracy of this information, contact relevant parties and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice and our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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