Longtime federal workers who accept agency invitations to retire early to spare younger colleagues from layoffs would take a big pension cut under legislation that has been cleared by the Senate Governmental Affairs Committee.
Last year 4,200 federal workers took advantage of early-out retirements offered by agencies undergoing RIFs or job-cutting reorganizations. About 3,000 of those employes were under age 55. Under current rules they took a 2 percent annuity reduction for each year they were under age 55.
The White House plan approved by the Republican-controlled Senate committee would raise that early retirement penalty for the under-55 set from 2 percent to 4 percent a year. Under the current system, a 50-year-old early-out retiree takes a 10 percent annuity reduction. If the proposed legislation should pass, the reduction would be 20 percent instead. It would affect only those retiring after its passage.
A government worker can retire on immediate annuity and without any penalty at 55 with 30 years of service; 60 with 20 years, and 62 with 5 years of service. Annuities are based on salary and length of service.
When faced with RIFs or reorganizations, agencies can offer employes the option of retiring early with an immediate annuity, either at age 50 with 20 years of service, or at any age after 25 years service. Employes who take advantage of the early-out to get immediate pensions are hit with the 2 percent penalty.
There are now nearly 12,000 retirees who are under age 54, and 36 retirees who are 44 years old, according to the Office of Personnel Management. Most of them left under programs that allow people in high-stress or dangerous jobs (such as air traffic controllers or law enforcement types) to retire early on full and immediate annuities. The remainder, who retired because of RIF-inspired early-outs, took the standard penalty deduction.
The Democrat-controlled House Post Office-Civil Service Committee earlier rejected the administration plan to double the early-retirement penalty. The full House today is scheduled to vote on that approach in its consideration of the portion of the budget reconciliation package dealing with federal pay and pensions.
If the House sustains the Post Office-Civil Service Committee, the changes in the early-retirement penalty, which are not widely known or understood in Congress, may eventually have to be decided by a Senate-House conference committee.
If the Senate committee's version prevails, it would certainly reduce the number of federal workers retiring early in future when their agencies are hit by RIFs or reorganizations. Put another way, it means that more young, short-service people could be canned in the new round of RIFs scheduled to begin this October.