Is There a Phased Retirement In Your Future?

By on May 1, 2014 in Current Events, Retirement with 20 Comments

Will the Office of Personnel Management (OPM) ever get around to issuing final regulations on “Phased Retirement”?  Employees who are hoping to take advantage of this new opportunity are getting tired of waiting for something that was going to be introduced by “year end” (2013, that is).  Once OPM finalizes the regulations, it will take time for individual agencies to implement them, so let’s take a look at what options are currently available to those who want to return to federal employment after they retire.

There are specific rules and regulations on returning to work for Uncle Sam after you retire. We will not attempt to answer the question as to why someone would want to return to working for the federal government after retiring.  It will simply address the how.

Basically, there are three ways to return to a federal position.

  1. By accepting a non-waivered position
  2. By accepting a waivered position
  3. By returning part time based on a 2009 change in civil service law

There is a legal prohibition against receiving “dual compensation” from the federal government (e.g., receiving both your pension and a full salary from a government job.  This prohibition can be waived in certain situations, and has been repealed for certain approved part-time work.

If you are returning to a “non-waivered” position (i.e., a position that has not received a waiver of the prohibition on dual compensation, or is not approved part-time work), you cannot receive both your pension and the full salary for the job.  You will receive your pension, but the salary of the job to which you return will be reduced dollar for dollar by the amount of your pension.  If you make retirement contributions during this period of re-employment, you can become entitled to additional annuity payments.

  • If you remain in the new position as a re-employed annuitant for more than one year, but less than five years, you will, upon your “re-retirement”, become entitled to a supplemental annuity based on that period of re-employment
  • If you remain in the new position for more than five years, your entire annuity will be recomputed when you re-retire.

If you are returning to a “waivered” position (i.e., a position that has received a waiver from the prohibition on dual compensation), you will receive the full salary for the job and your full annuity.  Your re-employment will be limited to two years, and you will not earn any additional retirement credit for this period of re-employment.  The prohibition against dual compensation is generally waived only for special purposes.  Currently you may find waivered positions in agencies that deal with national security and counter-terrorism.  Earlier, you found many waivers being granted for Y2K issues.

These rules do not apply to someone who retired under discontinued service retirement (not a common occurrence).  They have special rules; when they return to federal employment, their annuity ends.

Retired federal employees can return to federal employment for limited hours without losing any of their annuity.  The restrictions on limited hours work are:

  • An agency cannot allow more than 3.5% of their positions to be filled by limited hours workers who are re-employed annuitants.
  • An individual cannot work more than:
    • 1040 hours per year;
    • 520 hours in six months;
    • A grand total of 3,120 hours.

John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. The book is written in an easy to understand question and answer format and covers all areas of federal benefits from the perspective of an employee at various stages of their career. Order your copy at shoplrp.com.

© 2016 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.

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