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Federal Eye
Posted at 12:10 PM ET, 04/18/2012

Phased retirement plan for federal employees advances

A House committee has approved a bill to allow federal employees to phase into retirement by continuing to work part-time while collecting a partial annuity, while a Senate panel has brought out a budget plan that calls for making federal retirement benefits less generous.

The bill approved Wednesday by the Oversight and Government Reform Committee with bipartisan support mirrors language passed by the Senate last month as part of a transportation bill that currently is stalled in Congress.

Under current law, the salaries of federal retirees who return to work for the government are reduced by the amount of their annuities, with some exceptions allowing for full payment of both. The phased retirement plan, which the Obama administration has proposed several times, would allow retirees to work between one and four days per week, drawing a proportionate salary and a proportionate annuity.

The plan anticipates that phased retirees typically would spend a fifth of their time mentoring younger employees, and that savings of more than $460 million over 10 years would be achieved by not hiring full-time replacements and by paying only partial annuities during that period.

“Employees would like to work part time and we would like them to be able to,” committee chairman Rep. Darrell Issa (R-Calif.) said. He said that phased retirement already is a common practice in the private sector and noted that under the bill it would be voluntary for the federal retiree and only available at the discretion of the agency.

“Currently many federal employees retire from government service on a Friday and come back on a Monday either as a rehired annuitant or as a contractor,” he said. However, the exceptions allowing receipt of both a full salary and full retirement benefits are rare, and “If you tell people that if they keep working they only get half pay or quarter pay, you’re effectively telling them to retire now.”

“This bill will enable employees to ease into retirement and enable agencies to benefit from the institutional knowledge of their most senior employees,” said ranking Democrat Rep. Elijah Cummings of Maryland.

The committee accepted an amendment to allow employees to deposit in their Thrift Savings Plan accounts the value of unused annual leave they receive on separation or retirement, which members said also is common in similar private sector savings plans.

Also approved was a bill to require new standards for measuring customer service provided by federal agencies and to make compliance with those standards part of employees’ performance evaluations; and a bill clarifying that TSP accounts are subject to federal tax levies, an issue that has been under dispute under current law.

Meanwhile, a budget plan offered by the chairman of the Senate Budget Committee, Sen. Kent Conrad (D-N.D.), contains several employee-related provisions based on those proposed by the Simpson-Bowles deficit commission in late 2010.

The Senate plan calls for continuing the federal salary rate freeze and reducing the federal workforce, although it does not provide specifics. The Simpson-Bowles group recommended continuing the freeze for three more years and reducing the workforce by 10 percent over 10 years by allowing the hiring of only two workers for every three who leave.

The Senate plan also would create a commission to study federal and military retirement benefits, with a goal of saving $100 billion over 10 years; the commission’s recommendations would get fast-track consideration in Congress. The plan calls federal retirement “out of line with pension benefits available to the average worker in the private sector, and in some cases, out of line with each other across different categories of federal employment.”

The Simpson-Bowles commission had proposed that such a commission study options including requiring employees to pay as much as the government pays toward retirement benefits, which would require an increase of employee contributions of about 6 percent of salary; and basing future annuities on an employee’s highest five salary years rather than the current three.

Conrad said that he does not expect to bring the plan to a vote in his committee but rather wants to use it as the basis for a possible future agreement.

The House in March passed a budget outline calling for extending the salary rate freeze through 2015, cutting federal employment by 10 percent over four years by hiring only one replacement for every three employees who leave, and requiring payment of equal shares toward retirement benefits. The House budget further requires several committees, including the Oversight and Government Reform panel, to recommend savings in areas under their control.

That Senate does not plan to take up that measure, instead using spending limits set by last year’s debt ceiling agreement as the outline for the budget for the fiscal year that starts in October.

By  |  12:10 PM ET, 04/18/2012

 
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