OPM releases final rule on phased retirement

The rule comes more than two years after President Barack Obama signed the provision into law on July 6, 2012. Under the final rule, eligible employees can work...

(This story was last updated Aug. 8, 2014 at 10:30 a.m.)

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The Office of Personnel Management released the final rule on phased retirement Thursday morning.

The rule comes more than two years after President Barack Obama signed the provision into law on July 6, 2012.

Employees may begin to submit applications for phased retirement on Nov. 6, 2014 — 90 days after release of the final regulations.

Under the final rule, eligible employees can work part time while drawing on part of their earned retirement benefits. Phased retirees must also spend at least 20 percent of their time mentoring other employees.

To qualify for phased retirement, CSRS employees must be age 55 and have 30 years of government service, or be age 60 with at least 20 years of service. FERS employees must reach minimum retirement age and have 30 years of service, or be age 60 with at least 20 years of service.

During their time as phased retirees, employees will still be considered federal employees.

The National Active and Retired Federal Employees Association (NARFE) says phased retirement will save the federal government an estimated $450 million over the next 10 years.

“To me, this program is a win-win, for employees who want to design a smooth transition into the next phase of their lives, and agencies across government can also work together to get a head start on succession planning,” OPM Director Katherine Archuleta said.

Why the delay?

Although the final rule is now out, Jessica Klement, legislative director for NARFE, said the process of phased retirement will still take time.

“Your agency still has to implement this. Your supervisor has to approve you becoming a phased retiree. There are more steps in the process,” Klement told Federal News Radio in a recent interview.

Unions and feds alike are frustrated by the delay in OPM’s publishing of the final rule.

“I’ve had to hold off on what things I plan to do after retirement. I was hoping that phased retirement would allow me to get some things done outside of work,” said Dan Berkowitz, a hydrometeorologist with the National Weather Service Radar Operations Center in Norman, Oklahoma. Berkowitz has worked at NWS for 45 years.

“For nearly two years, NARFE has received calls almost daily from federal workers wanting to know when they could participate in the phased retirement program,” NARFE President Joseph A. Beaudoin said in a statement. “They were looking for the flexibility to cut back on their hours, but they still wanted to serve their country.”

OPM says it wanted to ensure it addressed all of the comments it received on the draft rule.

“There are a lot of questions and answers that we’ve spent a good amount of time making sure that we were very thoughtful about considering all of the implications and consequences of this,” said Mark Reinhold, associate director of employee services and chief human capital officer at OPM. “I think we’ve got probably around 18 or 20 pages of Q&As.”

Contributing to TSP

In the final rule, OPM says phased retirement is “not a one-size-fits-all program.” Employees and their agency must mutually agree that phased retirement is an appropriate option. The employee submits a signed request and obtains approval from an agency official. The employee then files an application for phased retirement. Once that decision is in place, the agency needs to coordinate with OPM.

OPM says it will issue separate guidance “to assist agencies and employees with administrative and procedural matters.”

The National Treasury Employees Union (NTEU) wants phased retirement to be “broadly available” to federal employees.

“We will be talking to the agencies where NTEU represents employees about establishing a phased retirement program and all the details that surround it,” NTEU President Colleen Kelley said. “We will also make use of labor-management forums and collective bargaining opportunities to bring the program to life.”

OPM says it does not yet know how many applications it expects to receive for phased retirement. The agency also says it’s unsure how phased retirement will affect the processing of retirement claims.

When OPM issued the draft regulations in June 2013, agencies and federal employee unions responded with a number of questions and comments. The proposed rule received 237 comments.

A number of employees asked how withdrawals from the Thrift Savings Plan would work under phased retirement. The final rule says guidelines around TSP withdrawals are outside the scope of OPM, because the Federal Retirement Thrift Investment Board administers the TSP.

OPM does say, however, that phased retirees are still federal employees, which means they can continue making contributions to the TSP.

To transition into full retirement, an employee submits an application to OPM. The employee then begins to accrue composite retirement annuity.

Alternatively, a phased retiree can elect to return to regular employment status at any time. The process to do so is similar as the application for phased retirement. Once the employee returns to regular employment, he or she may not apply for phased retirement again.

Mentoring activities

OPM says agencies will determine what qualifies as a mentoring activity.

“To provide agencies with the maximum amount of flexibility in meeting the mentoring requirement, we have purposefully included a broad definition of mentoring so that employees and managers would have options in choosing 37 mentoring activities that would best fit an agency’s needs,” OPM states in the final rule.

Berkowitz says the mentoring component is one of the main appeals of phased retirement for him versus full retirement.

“I have some experience that no one else in my organization has at this time. It might be difficult to find somebody else with the equivalent background,” Berkowitz said. “I basically feel that my contributions are important to the agency, and I would like to see that continue.”

Some unions complained that the mentoring provision in the draft regulations was too vague.

“If this is the main purpose for phased retirement, why are they giving agencies so much leeway to waive the mentoring requirement, and the discretion to decide what types of mentoring activities meet this requirement?” Klement said.


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