Phased retirement: A double-edged perk

Monday - 8/11/2014, 2:00am EDT

For lots of people, the most important personal decisions they will ever make include marriage (yes, no or to whom), children (yes, no), divorce (yes, no) and last, but not least, whether and when to retire. The latter is especially true for federal workers who (unlike many private sector types) get defined benefits pensions based on salary and length of service.

The majority of active duty feds (under the FERS retirement system) are also more dependent on their own savings and investments (via the Thrift Savings Plan), than those under the old CSRS program with its more generous, guaranteed retirement benefit.

The decision to retire in 2014 is much tougher today than it was when many long-service employees signed on with Uncle Sam.

Which is why ...

For hundreds of thousands of working feds, Nov. 6 is D-Day. That's when workers can apply for the long-awaited phased retirement (PRP) program. It will permit them to work part time, getting used to retirement while mentoring less senior coworkers.

For an equal number of civil servants, including those decades away from their retirement party, the PRP will open up the promotion pipeline that is now narrowed or blocked in many agencies and divisions.

Over the last several years — until this year — the only way most white-collar federal workers could get a pay raise was to come due for a longevity step increase (WIG) or receive a promotion. While WIGs are semi-automatic, based on time in grade, promotions have been few and far between. But the PRP program will change that, at least to some extent.

"I don't see the so-called retirement tsunami because of the new program," said he just-retired head of a medium-size agency HR operation. "I think a lot of people are in for a rude-awakening. You just won't be able to walk into your boss' office and say, 'Hey, put me on phased retirement.'"

He said it's going to be a "very selective" program, like the buyout and early retirement options. "You can long for a buyout, and talk yourself into seeing the merits of taking an early out," he said, "but nothing is going to happen until your agency applies for it, OPM OKs it ... and then your boss decides it works for the agency. It is not an employee option."

Managers have no idea how many workers will initially apply for phased retirement, much less how many will be approved. As one serving official said, "I think the health of the economy, both real and as perceived by individuals, will be the determining factor."

"If people have the time in government, are comfortable with the thought of retirement ... as in what they will get in pension ... and think their Thrift Savings Plan account is stable, a lot may go," she said. But she cautioned that the recent downturn in the stock market — which wiped out all of the 2014 gains — "may put a chill on retirement planning."

Many anxious individual feds and employee groups criticized the Office of Personnel Management for taking two years to set up the PRP. That's partly because it is easier to write a law — with general goals and guidelines — than to make it both legal, and work. That is especially true in tax law and legislation dealing with issues such as the federal retirement program, which also covers most members of Congress and congressional staffers.

The primary questions about the PRP and how it will work have been answered.

Still to be decided are issues like the TSP contributions level for workers getting reduced civil service pay while in phased retirement.


NEARLY USELESS FACTOID:

By Michael O'Connell

When Social Security was passed in 1930, the life expectancy for men and women was 58 and 62, respectively.

Source: Forbes/Social Security


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