Bill for phased retirement moves in House

April 19, 2012

A House committee has approved a bill that would allow federal employees to phase into retirement by working part-time and 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 House Oversight and Government Reform Committee with bipartisan support mirrors language passed by the Senate last month as part of a transportation bill that is now stalled.

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 one to four days a week, drawing a proportionate salary and a proportionate annuity.

The plan expects that phased retirees 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.

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

“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 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.”

The panel’s ranking Democrat, Rep. Elijah E. Cummings (Md.), said, “This bill will enable employees to ease into retirement and enable agencies to benefit from the institutional knowledge of their most senior employees.”

The committee accepted an amendment that would allow employees to deposit in their Thrift Savings Plan (TSP) accounts the value of unused annual leave they receive upon separation or retirement.

The lawmakers also approved a bill that would require new standards for customer service at federal agencies and make compliance with those standards part of employees’ performance evaluations, and a bill that would clarify that TSP accounts are subject to federal tax levies, an issue that has been in dispute.

In the Senate, a plan offered by Budget Committee Chairman Kent Conrad (D-N.D.) contains several employee-related provisions based on proposals made by the Simpson-Bowles deficit-reduction commission in 2010.

The budget plan calls for continuing the federal pay freeze and reducing the size of the workforce, though it does not provide specifics. The Simpson-Bowles group recommended continuing the freeze three more years and reducing the workforce by 10 percent over 10 years by hiring two employees for every three who leave.

The Senate plan would also create a commission to study federal and military retirement benefits, with a goal of saving $100 billion over 10 years; its 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 proposed that such a panel study options including requiring workers to pay as much as the government does toward retirement benefits, which would mean an increase in employee contributions of about 6 percent of salary; and basing future annuities on a worker’s highest five salary years instead of the latest three.

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

The House in March passed a budget calling for extending the salary freeze through 2015, cutting federal employment by 10 percent over four years and requiring payment of equal shares toward retirement benefits. The budget also requires several committees to recommend savings in areas under their control.

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