NARFE Questions Aspects of OPM's Phased Retirement Option

By on August 4, 2013 in Current Events, Retirement with 4 Comments

In a recent letter to OPM, the National Active and Retired Federal Employees Association (NARFE) raised some concerns it has about OPM’s proposed phased retirement plan. A copy of the letter follows below.

July 30, 2013

Ms. Kristine Prentice
Retirement Policy, Retirement Services
Office of Personnel Management
1900 E Street, NW
Washington, DC 20415-3200

To Whom It May Concern,

Please accept the following comments regarding the Office of Personnel Management’s (OPM) proposed rules regarding Phased Retirement, identified by RIN number 3206-AM71, from the National Active and Retired Federal Employees Association (NARFE). NARFE, one of America’s oldest and largest associations, was founded in 1921 with the mission of protecting the earned rights and benefits of America’s active and retired federal workers. As the largest federal employee/retiree organization, NARFE represents the retirement interests of nearly five million current and future federal annuitants, spouses and survivors.

First, we would like to thank OPM for working to provide this new option to federal employees.  The new legal authority, implemented through the proposed rule, will allow federal employees the flexibility to cut back on their hours without fully retiring. It should also provide managerial flexibility, crucial during this time of austerity budgeting. Instead of losing valued employees, agencies will be able to retain them part-time and benefit from their ability to mentor junior employees, including their replacements. Continuity of government operations should improve as a result.

We would like to make the following comments regarding specific provisions of the proposed rules.

Employee Benefits

We appreciate that the proposed rules treat phased retirees as full-time employees for the purposes of participating in the Federal Employees Health Benefits Program (FEHBP) and the Federal Employees’ Group Life Insurance Program (FEGLI). However, the proposed rules are silent regarding phased retirees’ participation in other employee benefit programs, notably the Federal Employees Dental and Vision Insurance Program (FEDVIP), the Federal Long Term Care Insurance Program, and Flexible Spending Accounts. OPM should make it clear that phased retirees will be able to participate in these programs when the final regulations are published.

OPM should also make it clear that phased retirees will continue to receive appropriate agency matching contributions to their Thrift Savings Plans (TSP), pursuant to their part-time employment. The proposed rules are silent regarding TSP participation, and clarification should be made to avoid confusion.

Mentoring

It is the opinion of NARFE that mentoring is the key to the success of any phased retirement program. Indeed, it appears OPM agrees. As the proposed rules state: “The main purpose of phased retirement is to enhance mentoring and training of the employees who will be filling the positions of more experienced employees who are preparing for full retirement. It is intended to encourage experienced employees to remain, in at least a part-time capacity, while less experienced employees are preparing to assume the duties of the employees who are planning to retire.” As a whole, the federal government often lags behind the private sector in terms of succession planning, and phased retirement is a step forward in correcting this deficiency.

While the proposed rule requires the phased retiree to spend at least 20 percent of his/her time mentoring, it also gives the agency the discretion to decide “what types of mentoring activities satisfy this requirement and how to ensure this requirement is being fulfilled.” Unfortunately, there are several mentoring requirements already in regulation that are not used to their fullest extent. Therefore, NARFE believes agencies could benefit from guidance from OPM in this regard. Additionally, there is no mandate that the phased retiree mentor the employee(s) expected to assume the vacant position once the phased retiree fully retirees. While the replacement may not always be identifiable, when it is, the phased retiree should be required to mentor his/her successor.

The proposed rule also allows too much leeway in allowing the agency to waive the mentoring requirement should it see fit. Given the federal government’s limited use of mentorship programs currently, agencies should be given less flexibility in terms of avoiding mentorship requirements instead of more.

Eligibility

The proposed rules appear to limit eligibility for phased retirement unnecessarily.

The rules only extend eligibility for phased retirement under the Civil Service Retirement System (CSRS) to those employees eligible for immediate retirement pursuant to subsections (a) and (b) of 5 U.S.C. § 8336 (employees with 30 years of service and age 55 or older or employees with 20 years of service and age 60 or older).  But the rules do not extend eligibility to CSRS-covered employees eligible for immediate retirement pursuant to subsection (f) of 5 U.S.C. §8336 (employees with 5 years of service and age 62 or older).

For employees covered by the Federal Employees Retirement System (FERS), the rules extend eligibility for phased retirement to those employees eligible for immediate retirement pursuant to subsections (a) and (b) of 5 U.S.C. § 8412 (employees with 30 years of service and at or beyond the employee’s minimum retirement age or employees with 20 years of service and age 60 or older).  But the rules do not extend eligibility to FERS-covered employees eligible for immediate retirement pursuant to subsections (c) and (g) of 5 U.S.C. § 8412 (employees with 5 years of service and age 62 or older or employees entitled to a reduced annuity with 10 years of service and who are at or above the employee’s minimum retirement age).

It is unclear why the proposed rules exclude these employees from eligibility for phased retirement. In this time of austerity budgeting, phased retirement should be extended to as many retirement-eligible employees as possible. With many federal agencies in a hiring freeze, phased retirement may be the difference in whether or not a position stays filled, at least part time.

FERS Annuity Supplement

The proposed rules deprive FERS-covered phased retirees of the annuity supplement that the law provides to employees entering full retirement under FERS prior to the age of 62. This acts as a disincentive for employees considering phased retirement as an alternative to full retirement, contrary to the intent of the law. OPM should reconsider allowing phased retirees to receive an appropriate percentage of their annuity supplement.

CSRS Offset

The proposed rules do not specifically address how phased retirement annuities will be computed for CSRS Offset employees.  We assume that reductions in CSRS annuities pursuant to 5 U.S.C. § 8349 will be reduced by the phased retirees working percentage. OPM should clarify the effect of the CSRS Offset when the final regulations are published.

Conclusion

Thank you for accepting NARFE’s comments regarding the proposed rule. If you have any questions, please contact Jessica Klement, NARFE’s Legislative Director, at 703-838-7760.

Best regards,

Joseph A. Beaudoin
President, National Active and Retired Federal Employees Association

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