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Federal Eye
Posted at 04:10 PM ET, 05/23/2012

CBO: Phased retirement for federal employees a cost-saver

Allowing federal employees to phase into retirement by working part-time while collecting a partial annuity would reduce the government’s costs and increase its income, according to an analysis that could boost the plan’s prospects.


(Chip Somodevilla - Getty Images)

The Congressional Budget Office estimated that the plan would reduce spending by $427 million over 10 years because the government would be paying less than the full annuities that the employees have accumulated. Meanwhile, because phased retirees would continue to pay into the federal retirement fund from their salaries, revenues would rise by $24 million over that time, CBO said.

Under the proposal, an agency could offer phased retirement to employees once they hit retirement eligibility. Typically, employees would work half-time and receive both a pro-rated salary and a pro-rated annuity. Working time could range between one and four days per week on average, with both the salary and the retirement benefit adjusted accordingly.

The proposal suffered a setback last week when the House did not allow a vote on an attempt to add it to a defense spending bill. However, the main sponsor, Rep. Stephen F. Lynch (D-Mass.), said he will continue to push for passage either as a separate bill or as an amendment to another. “The phased retirement option is a very basic and commonsense feature that will save taxpayers millions and will allow us to retain our most skilled and experienced workers,” he said in a statement.

The plan previously passed the Senate as an amendment to a transportation bill, and the House Oversight and Government Reform Committee approved it as a freestanding bill with bipartisan support. The CBO cost estimate examined the potential budgetary impact of that bill.

With few exceptions, under current law federal retirees who return to work for the government receive their full annuities but have their salaries offset by that amount.

Another provision would allow employees to invest in the Thrift Savings Plan the payment for unused annual leave they receive when they separate from the government for retirement or other reasons. CBO said that income tax revenue would be lower if employees invested the money on a tax-deferred basis. But it cited a separate analysis of that plan concluding that the difference would be insignificant.

By  |  04:10 PM ET, 05/23/2012

 
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