OPM Finalizes Long-Awaited Phased Retirement Regulations for Federal Government (Posted on August 8, 2014 by )

Office of Personnel ManagementHighlights of the regulations, as issued by the Office of Personnel Management (OPM) today:

  • Participation is entirely voluntary, and requires the mutual consent of both the employee and employing agency.
  • Agencies have the discretion to approve some, all, or none of the phased retirement applications received from employees, and can if they wish have a policy of not allowing phased retirement at all.
  • Agencies must establish written criteria to be used when approving or denying applications for phased retirement.
  • Eligible employees who enter phased retirement will work half-time and will receive additional credit for that service toward their full retirement.
  • An employee in phased retirement must spend 20 percent of work time in mentoring activities.
  • While working part-time during phased retirement, employees will also receive 50% of the annuity payments to which they would be entitled if fully retired.
  • A phased retiree does not have to obtain the permission of his or her agency to fully retire.
  • When the phased retiree fully retires immediately after the phased retirement period, the individual will receive a “composite retirement annuity.” The composite retirement annuity will be the amount of phased retirement annuity as of the commencing date of full retirement, plus one-half of the amount of annuity that would have been payable at the time of full retirement if the individual had not elected phased retirement and as if the individual was employed on a full-time basis in the position occupied during the phased retirement period.

The regulations specify that election of phased retirement does not disqualify a retiree from later consideration for full-time status; a phased retiree can end his or her phased retirement to return to being a regular full-time employee, if the employing agency agrees to the change. The proposed regulations impose limitations on phased retirement:

  • Although the OPM is permitted to allow schedules other than a 50% schedule, it has not elected to do so in these proposed regulations.
  • Employees subject to mandatory retirement are not eligible for phased retirement, even if mandatory retirement is waived.

The regulations also include provisions for continuing health coverage, both during phased retirement and upon full retirement, and for administrative matters like child support enforcement in the case of a phased retiree.

While the regulations deal only with phased retirement from federal government service, many state governments are considering various phased retirement alternatives. It appears likely that the OPM regulations will receive attention as state governments draft their own phased retirement systems.