In guidance to agencies on experience so far with the phased retirement program–authorized since 2014 but little-used in practice—OPM said that it has seen instances in which agencies provided incorrect information to the employees on how it will affect them financially.
“Employees are receiving estimates for an immediate retirement instead of a phased retirement estimate. This causes confusion for the employees and does not provide the sound information the employees need for informed consent and financial planning purposes,” it said.
While a phased retirement benefit generally amounts to half of what the person has accumulated to that point, the calculation is not to include the value of unused sick leave, which remains to phased retirees’ credit since they remain active employees. Unused sick leave is credited at full retirement as service time, which for long-time employees—the primary pool of those considered for phased retirement—can increase the value of the annuity substantially. An estimate of a phased retirement benefit that includes the value of unused sick leave would produce a number that is too high.
OPM further said there have been instances of employees not being informed of policies regarding payments they must make to capture service credit for certain periods of employment. One includes periods of work for which no retirement deductions were withheld from their salaries—virtually unknown today but not rare years ago when many of those now eligible for retirement were early in their careers. The other involves periods for which the employee took a refund of their retirement contributions at a break in service and later returned to the government but have not paid the money back into the retirement fund.
As with credit for unused sick leave, making such payments in some cases will add years to the creditable service used in the retirement calculation.
Says the guidance, which includes some words in capital letters for emphasis: “Employees who elect phased employment who also have unpaid deposits and/or redeposits are unaware that they MUST pay all deposits/redeposits upon the processing of their phased retirement. They will NOT have another opportunity to make a service credit payment upon separation for the full final retirement status . . . It is important to note that if these deposits and redeposits are not paid, the employee in phased retirement status will not have an opportunity to pay them upon entering full retirement status.”
Such payments must be completed before the phased retirement annuity is finalized and OPM gives employees only 30 days to make them after it receives the phased retirement application.
OPM told agencies that they “should counsel and provide estimates for comparison of the employee’s annuity with and without the deposits paid and stress the importance of completing the deposits either prior to entering phased retirement or within the limited time allotted per the deposit/redeposit letter sent to them by OPM during the adjudication of the phased retirement benefit.”
Read more about phased retirement from a federal job at ask.FEDweek.com