Reg Jones Expert's View

The "Moving Ahead for Progress in the 21st Century Act" was approved on July 6, 2012. Shorthanded as "Map-21," it contains a feature that has fired the imagination of federal employees across the country. That feature is "phased retirement." When I wrote about it last May, it was only a proposal. Now OPM has issued guidance that spells out what it is and how it will work, but that guidance requires some close reading and reflection to be fully understood.

What is phased retirement?

According to OPM, "It’s a tool to ensure continuity of operations and to facilitate knowledge management" by enhancing the "mentoring and training of the employees who will be filling the positions of more experienced employees who are preparing for full retirement. It is intended to encourage experienced employees to remain, in at least part-time capacity, until less experienced employees are fully equipped to fulfill the same duties and responsibilities as those employees who wish to retire."

How will it work?

OPM uses a hypothetical example to explain how phased retirement will work. If you are like me, you’ll need to read it over twice (or more) to be sure you understand what they’re trying to say.

"Consider two half-time employees who fill one full-time job. Employee one retires while employee two continues working. Employee one receives half an annuity based on half-time employment, and employee two continues to work half-time for half-pay. Eventually, employee two retires, and receives an annuity based upon half-time service, including credit for time worked after employee one retired. Now assume that employee one and employee two are the same person. This is in essence how Phased Retirement operates."

In short, if you enter into phased retirement, your annuity would be computed as if you had fully retired and then divided by two. You’d receive that half-annuity while you were working a half-time schedule and receiving half the salary of that position. Then when you retired for good, the annuity of you part-time position would be computed as if you’d been working full-time and then divided by two. That figure would be added to the half-annuity you’d been receiving. The combination – your full retirement annuity – would be used to determine any adjustments that needed to be made for such things as a survivor annuity.

Survivor annuity? When you initially retired, wouldn’t you have already made a survivor election and accepted a reduction in your annuity to pay for it? The answer is no. According to OPM, if you died "prior to full retirement, survivor benefits will be those applicable for an employee who died in service, with provision for minor computational adjustments necessitated by the unique nature of Phased Retirement."

If you were to die while a phased retiree, your basic employee death benefit would be based on the full-time salary of the position you held. The period during which you were in phased retirement would be treated as a period of part-time service in the computation of any survivor annuity.

Next week, I’ll look at who is eligible to participate and get into the nitty gritty about the treatment of unused sick leave, life and health insurance benefits, the possibility of full-time retirement, and – most importantly – when the phased retirement program will become available.