OPM has said that it is seeing problems with how agencies are carrying out the phased retirement program, including mistakes that could leave employees responsible for making a payment to the government.
Phased retirement is a hybrid work/retirement arrangement that can be offered at management’s discretion and is voluntary for the employee. It allows employees who are eligible to retire under the standard age and service combinations that involve at least 20 year of service to cut back to 20 hours per pay period and receive half of their salary plus half of the retirement benefit they have accumulated (several special rules apply in the calculation since the phased retirees are still considered active employees, not retirees). During that period—typically about a year—they are to spend a fifth of their working time in mentoring and on full retirement they receive their full annuity with an increase for the part-time work.
In new guidance to agencies, dated in May but only recently publicly released, OPM said that some of them “have approved employees who have applied for phased retirement who seemingly are not working the full 40 hours per pay period per the statutory requirement. A work schedule of less than 40 hours per pay period does not meet the 50% working percentage requirement of phased retirement, which will result in OPM disallowing the phased retirement.”
“This means that the final full status retirement will convert to a regular retirement in which the phased employment service will be processed as part-time service. This also means that all annuity payments made during phased retirement are erroneous and the employee will be responsible to pay the full amount of the annuity received to OPM,” it said.
Further, OPM said that some agencies have reported to OPM incorrect effective starting and ending dates for phased retirement periods; and some have failed to provide all the required documentation, “which causes a delay in processing times” for the employees’ retirement benefits.