The Office of Personnel Management wants to eliminate a little-known "windfall" quirk in U.S. retirement rules that enables some people to work part-time most of their career but still retire on the same pension as a full-timer at the same pay level.
The General Accounting Office yesterday issued a report on the modification of the retirement formula. Because the formula bases pensions on days and years rather than hours worked, changing it would have little or no impact on regular full-timers -- but a major impact on some part-timers who switch at some point to full time. GAO said the formula change would probably save the retirement fund lots of money.
OPM is seeking White House clearance of legislation that would accomplish the change and base benefits on hours worked rather than years of service.
The government has 208,000 permanent part-time employes out of a work force of 2.7 million. About 12,500 of the Washington area's 340,636 civil servants are part-timers.
Although most part-timers are in relatively low-paying clerical positions, a growing number of mid-level and professional positions have been made available for part-timers.
Under the present formula, an individual can work part time for years, become a full-timer for three years and get the same pension as an employe at the same pay level who had a full career of five-day, 40-hour weeks. By the time he retired, the full-timer would have contributed almost twice as much (7 percent of salary) to the retirement fund as the part-timer.
GAO cited this example of two high-grade employes, each with 35 years of service:The full-timer put in 72,800 hours during his career. The part-timer, who spent just three of his 35 years of service working full-time, put in only 39,590 hours. Even so, GAO said, both the full-timer and the part-timer would qualify for the same pension -- $43,221 -- because of the government's formula for computing their annuities.
Federal retirement benefits are based on length of service and the highest three-year average salary. A 20-year employe gets a pension of just over 36 percent of that average. After 35 years' service, it rises to just over 66 percent.
The typical federal retiree gets about $12,000 a year.
In some cases, GAO said, part-timers with more years (but fewer hours) of service could get pensions bigger than those of employes at the same salary level who put in many more hours, but fewer years. OPM officials said they did not know how many part-timers switch to full-time status late in their career to take advantage of the formula.