Is Phased Retirement The ‘New Coke™’ of Civil Service Reform?

By on January 24, 2016 in Retirement with 50 Comments

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Phased retirement, designed to allow federal workers to ease their transition into retirement while also helping their agencies get replacements up to speed, is not getting many takers.  A recent Government Executive article on phased retirement said OPM has received 31 applications for phased retirement since the law enabling it was passed in 2012.

With all of the hype surrounding the passage of phased retirement, you might have expected thousands of people to have signed up. What happened? Why did the reality and the hype not align? Is this an OPM problem? An Agency problem? Or not a problem at all? I think the answer is the latter. Here’s why.

Some people blame OPM. They say OPM took 2 years to issue regulations implementing phased retirement, costing valuable momentum that might have made employees much more interested in it. Other people blame agencies, saying they are dawdling and not getting their own policies in place, and when they do, they restrict it so much that most employees cannot take advantage of it. Another camp blames the unions, saying agencies have not been able to complete bargaining on the subject and that is keeping the phased retirement option off the table for most employees.

The problem with all of these “blame somebody” options is that they assume the federal workforce was eagerly looking forward to phased retirement and would jump at the chance to take advantage of it. It is looking more and more like that is not the case, and phased retirement is a solution to a problem that does not exist.

Let’s take a look at why that may be the case.

First, how many people do you know who want to semi-retire form the government? I do not mean the people we have all known who retired on the job, but still showed up every day to collect a full paycheck. Most people who want to retire want to leave government. They may have worked 25, 30 or 40 or more years and they are ready to go. They do not want to get up every morning, fight traffic, deal with office politics, work for the boss-of-the-month, and deal with yet another new political appointee. For those folks (and I believe that is most retirees), they are ready to move on with the next phase of their lives.

What about the people who want to retire from government, but who think they would be bored and still want to work? Wouldn’t they be great candidates for phased retirement? Probably not.

The problem with phased retirement is that the people who take it are neither in government nor out. They get a partial retirement check and a partial paycheck. If they really want to work, the people who do the math see that they are far better off retiring and going to work somewhere else. If they go to work in academia, for a non-profit, a contractor, or state or local government, they collect a full retirement check and a full paycheck and end up with much more income than they had as a federal employee.

Add to that the difficulty phased retirement can create for employers – they have to keep the employee (who can work only 20 hours per week) and hire a replacement. If the replacement works more than 20 hours per week, the agency’s cost goes up by 50% or more. If they don’t, they have to hire a part-time employee. Part-time employees are harder to find, cost more per hour of work than full-time employees, and would have to have to plan to transition from part-time to full-time when the phased retiree retires.

In addition, because they consume resources (such as computers, administrative costs such as issuing paychecks, and others) at the same rate as full-time workers, overhead costs go up. The net cost to the agency goes up. The supervisor of the phased retiree has two employees to supervise rather than one. There is confusion about who really does the job. The idea of job-sharing never really caught on in a big way in government for those reasons. Phased retirement simply overlays a semi-retirement option on top of a job-sharing arrangement.

So – we have an option that costs more, is more difficult to administer, and does not offer most employees something  they really want that is in their interest. And we question why it does not work.

When we are looking at government reform ideas, it is critical that we actually think about whether we can actually implement them and if there is really a market for them.

It is becoming apparent that there is not a market for phased retirement. It is looking more and more like it is the New Coke™ of Civil Service reform – an idea that seemed great, but never found a market.

Given how hard it is to pass any kind of substantive Civil Service reform, we need to be far more selective in deciding what to pursue. There is so little reform bandwidth available that it should be devoted to better bets than this one.

This column was originally published on Jeff Neal's blog, ChiefHRO.com, and has been reposted here with permission from the author. Visit ChiefHRO.com to read more of Jeff's articles regarding federal human resources and other current events along with his insights on reforming the HR system.

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

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About the Author

Jeff Neal is a senior vice president for ICF International and founder of the blog, ChiefHRO.com. He formerly served in the Obama Administration as Chief Human Capital Officer for the Department of Homeland Security and Chief Human Resources Officer for the Defense Logistics Agency. Jeff is also a Fellow at the National Academy of Public Administration and a Partnership for Public Service SAGE.

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