New law will let federal employees ease into retirement

It's been a worry for many years: What happens when older federal workers retire and take decades of institutional knowledge with them?

"The last thing any manager or any organization or company wants is for folks that are ready to retire to just walk out the door," said Kenneth J. Zawodny Jr., associate director of retirement services at the federal Office of Personnel Management.

With the aging of the workforce, the challenge has grown urgent. More than 40 percent of federal employees in 2010 were 50 or older.

Now a new law aims to prevent this brain drain. Under legislation signed last month by President Barack Obama, federal workers will be able to phase into retirement — working part time while drawing a partial pension.

One of the key conditions: Phased retirees must spend at least 20 percent of their time mentoring other employees. In other words, they must help their agency prepare for the future.

Zawodny expects that phased retirement could be available within a year. The Office of Personnel Management is drawing up the regulations.

"We are working feverishly to get them implemented as swiftly as we can," he said.

To qualify, a federal employee must have worked at least three years full time and be eligible for retirement. That means the earliest age at which anyone could take phased retirement would be 55.

It will be up to each agency whether to adopt phased retirement based on its needs. An agency might offer phased retirement only to employees working on certain projects or choose to make it available to anyone eligible. Or an employer might not offer it at all.

Initially, phased retirees will work half time, receiving half their salary and half their pension.

The law allows the Office of Personnel Management to change the rules so that phased retirees could work 20 percent to 80 percent of a full schedule. Pension payments will be adjusted according to the amount of time worked. For instance, phased retirees working one day a week would receive 80 percent of their annuity; those putting in a four-day work week would get 20 percent.

These part-time workers will continue to accrue benefits. Once they retire completely, their pensions will be recomputed.

Zawodny says it's unclear how many workers will sign up for the program, though one estimate put the figure at 1,000 employees annually.

Based on that projection, the Congressional Budget Office calculated that phased retirement would cut spending by $427 million over 10 years because workers would draw a smaller pension than they would if they had retired entirely. It is also expected to raise $24 million in revenue over that decade because phased retirees would maintain contributions to their retirement plan.

For some, the option can't come fast enough.

"There's a lot of interest in this," said Colleen M. Kelley, president of the National Treasury Employees Union, which represents more than 150,000 workers.

Kelley said she has had many conversations with members about phased retirement, even before the term was coined.

'They would say, 'I would love to be able to work at the end of my career part time, not just go from full time to nothing,' " she said.

Her concern is that many agencies might delay implementation to see how it works elsewhere.

"That's what we don't want to happen with this," Kelley said. "We don't want to waste valuable time."

Lisa Foust, president of the National Federation of Federal Employees Local 178 at Aberdeen Proving Ground in Edgewood, said she has been getting questions at union meetings about phased retirement for the past several months.

Her local has about 1,500 members, many of whom are of retirement age. Foust estimates that about one-third of the members would opt for phased retirement if it were available.

"It's a great tool for workers to … get a small paycheck, instead of having to get a part-time job, and still be able to pass knowledge on to the ones that are left behind," she said.

Union representatives said some workers have concerns, such as what happens to their health insurance if they go part time. Zawodny said health insurance won't change under phased retirement.

David Snell, director of federal benefit services at the National Active and Retired Federal Employees Association, said he expects it will take time for the concept to catch on.

"The nature of most employees in the government is rather conservative, especially given the economic situation as it is," said Snell, whose association represents more than 270,000 members.

"Those who are eligible may just stay another year as an employee full time in order to make sure their finances are in good shape," he said. "Once we get back to better times, they will take a more serious look at it."

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