The Office of Personnel Management (OPM) has published a draft rule in the Federal Register to implement the phased retirement program for federal employees. The proposed rule includes information on eligibility, benefits and pay, and the transition from phased to full retirement. OPM on the draft rule must receive comments on the rule by August 5, 2013.

Congress passed and the president signed legislation authorizing phased retirement last July. Under the program, federal employees approaching retirement can continue working part time, while beginning retirement. 

The notice in the Federal Register states “the purpose of phased retirement is to allow the Federal Government to continue to benefit from the services of experienced employees who might otherwise choose to retire.”

According to the proposed rule, eligible employees must have been in full employment status for the previous three years and be eligible for immediate retirement under either the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). Employees subject to mandatory retirement, such as law-enforcement officers, firefighters, air traffic controllers, and most Border Protection officers are not eligible for phased retirement. An employee in phased retirement status is considered a part-time employee, not a reemployed annuitant.

Part-time work by participants in the program is limited to half-time, except in very limited circumstances. The eligible employee receives income from a combination of part-time salary (50%) and partial annuity payments (50%). The phased retiree also accrues future retirement benefits proportional to the time they work.

Health insurance (FEHB) and life insurance (FEGLI) stay with the employing agency during the phased retirement period. FEGLI coverage is based on the full-time salary for the position and the FEHB employer contribution is the same as that for full-time employees. The legally set pay raise adjustment would apply to the employee’s salary portion of total pay. Retirement Cost of Living Adjustments (COLAs) would apply to the employee’s retirement annuity portion.

A phased retiree can return to full-time status if the employing agency agrees. However, after electing to return to full time status, the employee cannot go back into phased retirement. When such an employee fully retires, the phased retirement period is treated as part-time service when calculating the full retirement annuity.

When electing full retirement, the phased retiree receives a “composite retirement annuity.” This is calculated as the phased retirement annuity in force at the time of full retirement plus one-half of the annuity payable at full retirement as if the employee had been in full-time status during the phased retirement period.

Phased retirees are expected to spend 20 percent of their time mentoring other employees. According to the draft rule, this will “allow the Federal Government to continue to benefit from the services of experienced employees who might otherwise choose to retire.”