Phased Retirement for Federal Workers

Collect your pension and remain working part-time? Learn about the phased retirement option for CSRS and FERS employees.

Depending on what agency you work for and your occupation, a phased retirement might be an option for those who might not be personally ready for retirement (although eligible) but don’t want to continue working 40 hours per week. Or, if a position requires specialized skills or an agency is having difficulty filling the occupation for other reasons, an agency might use phased retirement to retain a worker who would’ve otherwise fully retired. Budget concerns can also lead to agencies offering phased retirement opportunities. In some cases, an agency may open up a timeframe where they are especially open to accepting phased retirement requests from eligible employees. Should they wish, agencies can offer phased retirements for a specific length of time with a possible chance for an extension.

Want to learn more about your retirement options as a FERS employee? Check out our latest retirement webinar for federal workers:

OPM has no standards when it comes to an agency offering phased retirement options. It goes by an agency-by-agency basis. So, federal employees don’t have an intrinsic right to a phased retirement. A phased retirement can also not be imposed as it must be approved by the agency and requested by the worker. In rare cases, an employee may assume a different occupation in the same agency, or even take a job with another agency, when entering part-time with a phased annuity. If switching agencies, then approval is needed from both government agencies.

Who is Eligible for a Phased Retirement?

Whether it be for a CSRS or FERS employee, to be eligible for a phased retirement, one must also be eligible for a full, immediate retirement. Postponed and deferred retirements are not allowed and same with those who retired via VERA/VSIP or had a mandatory retirement due to special provisions or is collecting a disability retirement. As well, at least 3 full years of full-time service must be earned. A normal part-time employee is not eligible for a phased pension. There are also some positions, such as nurses, where the nature of their occupation doesn’t allow for part-time work schedules. As a refresher, here are the ages and service requirements for an immediate FERS pension: minimum retirement age with 30 years of service, age 60 with 20 years, or age 62 with at least 5 years. For CSRS workers, you’ll need 30 years at age 55 or 20 years at age 60.

How is a Phased Retirement Calculated?

When working part-time while collecting a phased pension, it is calculated the same way as a normal FERS or CSRS annuity, just divided in half. Note that survivor benefits are not selected until you fully retire and there is no “lump sum” option , which is typically available to those with a terminal illness. Unused sick leave is not included in your retirement calculation until fully retiring, and the leave accrued while working with a phased annuity is added to your high-3 salary as if you were working full-time, but the actual service time worked is used for the “year of service” component of a FERS or CSRS computation. While working part-time while collecting a phased pension, you can also still make unpaid deposits for military service or previous part-time/temporary service that will be applied to your retirement calculation when you fully retire, which is something that can be done at any point after entering a phased retirement. When this is initiated, the service time attained during the part-time phase is added to the calculation.

How Other Benefits are Impacted by Phased Retirement

If in a phased retirement, you are still eligible for FEGLI. The coverage and the premium amounts remain based off your full-time salary. You’ll also be eligible for FEHB and time worked during a phased retirement does count toward the 5-year rule associated with keeping federal employee health benefits in retirement. Social security benefits aren’t really affected, but if you are under age 62 and would otherwise be able to receive the FERS Special Retirement Supplement (SRS), you cannot elect to receive this benefit when working part-time with a phased retirement. For the TSP, only options that are available to fully retired individuals (such as the TSP annuity option) are restricted.

During a phased retirement, each day of sick leave gained counts for 6 hours instead of 8. The amount of annual leave garnered is cut in half but the annual leave cutoff of 240 hours stays in place.

It is also important to remember that a phased retirement is not the same thing as a rehired annuitant, which is someone who fully retired from the US government and then rejoined the federal workforce down the road.

Until Next Time,

**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.