Phased Retirement. Gary Pugh Program Manager

Phased Retirement Gary Pugh Program Manager

Agenda WHAT IS PHASED RETIREMENT? ELIGIBILITY REQUIREMENTS FOR PHASED RETIREMENT HOW TO APPLY FOR PHASED RETIREMENT TIME LIMITATION FOR PHASED RETIREMENT EFFECT OF PHASED RETIREMENT ON AN EMPLOYEE PRE-RETIREMENT COUNSELLING (2)

Optional benefit that: What is Phased Retirement allows an eligible employee to work part-time while collecting a partial annuity under the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). assists agencies with knowledge management and continuity of operations in the short term, as the next generation of experts are prepared for success. allows the phased retiree to continue to receive pay for his or her parttime service while receiving additional credit for service performed prior to full retirement. However, each agency determines if phased retirement will be used, it is not a right and it requires the mutual agreement of both the employee and the authorizing official. (3)

Eligibility Requirements Employees eligible for phased retirement: Must have been employed full-time for not less than the 3 year period ending on the effective date of entry into a phased retirement status, and Must be eligible for immediate retirement under the following conditions: CSRS Minimum Age and Service AGE is at least and CREDITABLE SERVICE is at least 55 30 years 60 20 years FERS Minimum Age and Service AGE is at least Minimum Retirement Age (between ages 55 and 57) 60 20 years and CREDITABLE SERVICE is at least.. 30 years FERS Minimum Retirement Age(MRA) IF YEAR OF BIRTH IS MINIMUM RETIREMENT AGE IS Before 1948 55 1948 55 and 2 months 1949 55 and 4 months 1950 55 and 6 months 1951 55 and 8 months 1952 55 and 10 months 1953-1964 56 1965 56 and 2 months 1966 56 and 4 months 1967 56 and 6 months 1968 56 and 8 months 1969 56 and 10 months 1970 and After 57 (4)

Employees not eligible for Phased Retirement Employees Ineligible for Phased Retirement are retirement eligible however they are excluded from phased retirement as required by 5 U.S.C 8336a. The following are ineligible to participate in phased retirement: Employees occupying a law enforcement officer, firefighter, or air traffic controller position subject to mandatory retirement restrictions (except for customs and border protection officers who are exempt from mandatory separation and retirement under 5 U.S.C. 8335; Employees covered by a special work schedule authority that does not allow a recurring part-time schedule, such as firefighters covered by 5 U.S.C. 5545b or nurses covered by 38 U.S.C. 7456 or 7456A. (5)

How to apply for Phased Retirement An employee meeting eligibility for phased retirement must complete and submit the Standard Form 3116, Phased Employment/Phased Retirement Status Elections, along with any appropriate documentation, to an authorized DoD Component official. The authorized DoD Component official approves the application in writing and establishes a time limit for the period of phased retirement as a condition of approval, using DD Form 3018, Phased Retirement Request and Agreement in accordance with the Component s procedures. Once approved, the employee must submit the appropriate documentation to his or her servicing human resources office to transition into a phased retirement status. (6)

Time Limitation for Phased Retirement An employee may withdraw his or her application at any time before the phased retirement becomes effective, but not after. The DD Form 3018 will document the date the employee s period of phased employment will end and include a statement that the employee: may request permission to return to regular employment status at any time and an explanation of how returning to regular employment status would affect the employee. may elect to fully retire at any time without DoD Component approval. may accept a new appointment at another agency, with or without the new agency s approval for phased retirement, at any time before the agreement expires, or within 3 days after it expires and a statement that the DoD Component s agreement will terminate upon the employee s acceptance of an appointment at an outside agency. will be separated from employment when the phased retirement time limit ends and that such separation will be considered voluntary. will be deemed to have elected full retirement if the employee is separated from phased employment and is not employed by another federal agency within 3 days (i.e., the employee has a break in service of greater than 3 days). The authorized DoD Component official and the employee may mutually agree to rescind an existing agreement, or enter into a new agreement to extend or reduce the agreed upon term of phased employment, by entering into a new written agreement before the existing agreement expires. (7)

Effect of Phased Retirement on an Employee An employee who is approved for phased retirement will remain in the same position and just change his or her tour of duty. An employee will not be allowed to be appointed to more than one position simultaneously while in a phased retirement status. The agency is allowed to fill this position on a part-time basis as long as the total hours of both employees equal 80 hours per pay period. Bargaining Status - The bargaining unit status of a phased retiree could possibly change depending on his or her description found in the Certification of Representative issued by the Federal Labor Relations Authority. Work Schedule - The number of established hours per pay period to be worked by an employee in a phased retirement status must equal one-half the number of hours the phased retiree would have been scheduled to work had he or she remained in a full-time work schedule (i.e., 40 hours per pay period for most employees). (8)

Effect of Phased Retirement Mentoring Requirements There are numerous types of mentoring activities and the employing agency has leeway to establish mentoring guidelines to best fit the agency s needs. OPM requires a phased retiree to mentor at least 20% of his or her working hours. Phased retirees are required to work 40 hours per pay period with 8 hours of the total 40 hours should be utilized for mentoring. In the event of an emergency or other unusual circumstances an authorized agency official may waive the mentoring requirement (including active duty in the armed forces), when the authorized agency official determines that the event or circumstance would make it impracticable for a phased retiree to fulfill the mentoring requirement. (9)

Effects of Phased Retirement Transferring to another Agency - A phased retiree who desires to transfer to another agency and continue to remain in a phased retiree status must obtain approval from the gaining agency. This approval will be obtained by both the employee and the gaining agency authorizing official. A new Standard Form 3116 must be completed. Lump Sum Leave - An employee who enters phased retirement is ineligible for a lump sum leave payment. A lump sum leave payment is distributed to an employee, who is separated from Federal service for three or more workdays and, is entitled to payment in a lump sum. This lump sum leave payment is for all unused leave that he or she has accrued through the last full pay period prior to his or her separation. Given that phased retirees remain employed on a parttime basis they are ineligible for a lump sum leave payment because, they have not separated from Federal service for three or more workdays. (10)

Effects of Phased Retirement Within-Grade-Increase (WIGI) - Conditions for a part-time employee are applicable for a phased retiree. A phased retiree is treated just as any other employee on a part-time tour of duty. Federal Employees Health Benefits (FEHB) - The FEHB enrollment for a phased retiree will remain with the employer. (NOTE: Employees who enter full retirement will have their FEHB administered by OPM.) The phased retiree will continue to be responsible for paying the employee share of the FEHB premium, and the employee share of the FEHB premium will be deducted from the phased retiree s pay. The phased retiree will be treated as a full-time employee for FEHB purposes. The employer s contribution will continue for the phased retiree. Service performed as a phased retiree is creditable toward the 5 year service requirement for continuation of health coverage into full retirement. (11)

Effects of Phased Retirement Federal Employees Group Life Insurance (FEGLI) - A phased retiree who works on a part-time basis will be treated the same as when he or she was working full-time. He or she will continue to pay the employee share of Basic Insurance under FEGLI and the entire premium for all optional insurance under the full time salary rate. The employer s share of the Basic premium will continue to be made by the agency. The deduction for life insurance premiums will be deducted from the phased retiree s regular pay. Federal Employees Dental and/or Vision Program (FEDVIP) - If you are enrolled in a FEDVIP dental and or vision plan as a full-time employee your coverage will continue as a phased retiree. Unlike FEHB and FEGLI this program does not have a 5 year requirement for continuation of coverage into retirement. Individuals who are not enrolled in FEDVIP will have an opportunity to enroll during Open Season. (12)

Effects of Phased Retirement Thrift Savings Plan (TSP) - The employment status of a phased retiree does not differ from a regular part-time employee for TSP purposes. An employee who is covered by FERS and CSRS will continue to be eligible to participate and will be subject to the restrictions pertaining to: TSP loans, age-based in-service withdrawals and financial hardship withdrawals. The employee in a phased retirement status is ineligible for post-employment withdrawals. Employees in phased retirement status will not be subject to required minimum distributions or the TSP withdrawal deadline. Contributions to TSP will be based on basic pay. This includes employee contributions, Agency Automatic (1%) Contributions and Agency Matching Contributions for FERS employees. Deductions for TSP contributions fall into the category of other voluntary deductions, and agencies must follow the order of precedence for other mandatory deductions before taking TSP contributions If an employee has elected a TSP contribution based on a whole dollar amount, and if the whole dollar amount elected is greater than the available pay after other mandatory deductions have been subtracted, no employee contribution will be made for the pay period. Consequently, if covered by FERS, the employee receives no agency matching contribution for the pay period. (13)

Effects of Phased Retirement Payroll Deductions - Gross pay from the agency will continue to be subject to the employee s withholdings such as FEHB, FEGLI, FEDVIP, FLTCIP, TSP, Medicare tax, Federal tax, State tax, CSRS deductions, FERS deductions, and Social Security taxes. However, these deductions will be based on the actual pay that the part-time employee is receiving vice what she or he would have received as a full-time employee. Under phased retirement the premiums for FEHB, FEGLI, FEDVIP, and FLTCIP remain the same regardless of work schedule. (14)

Effects of Phased Retirement Leave Accrual (Sick and Annual) A part-time employee in a phased retiree status will accrue annual and sick leave in the same manner as other part-time employees. All phased retirees have a minimum of 20 years of service therefore they will accrue leave at the rate of 1 hour annual leave for every 10 hours that he or she is in a pay status and 1 hour sick leave for each 20 hours in a pay status. An employee, who is in a phased retirement status with a 50% work percentage; who works 40 hours per pay period will earn 4 hours of annual and 2 hours of sick leave per pay period. Phased employees may accrue additional leave for that pay period on a prorated basis based on hours in a pay status. For example, if a phased retiree works 20 hours beyond the established 40-hour biweekly work schedule for a total of 60 hours in a pay period, he or she would accrue 6 hours of annual leave and 3 hours of sick leave for that period. If a phased retiree has hours in a pay status that are less than the number necessary to accrue additional leave, the employer must carry forward those hours into the next pay period and credit them toward the phased retiree s future leave accrual. A phased retiree may not carry over more than 240 or 360 hours of annual leave per 5 CFR 630.304 on the same basis as a full-time employee. (15)

Effects of Phased Retirement Sick Leave Computation for a Composite Annuity A phased retiree does not receive credit for his or her unused sick leave in his or her phased retirement annuity computation. When the employee decides to leave phased retirement and enter a full retirement status, his or her sick leave balance will be credited in their composite annuity estimate. Without any adjustment to the phased retiree s unused sick leave balance, the value of the unused sick leave in the composite annuity computation would be comparably reduced when the fully retired phased component is multiplied by the working percentage. Dividing the phased retiree s unused sick leave balance by the working percentage (50%) and using the result in the computation of the fully retired phased component of the composite annuity ensures that the appropriate credit for the unused sick leave is retained in the annuity after the fully retired phased component is multiplied by the working percentage. (16)

Pre-Retirement Counselling An employee who is considering retirement is encouraged to attend a pre-retirement counselling session within a year of his or her retirement. If an employee desires to participate in phased retirement; he or she should request to meet with his or her manager to discuss phased retirement. An employee should then schedule an appointment to meet with their HR Specialist or Benefits Service Center. Requesting a Retirement Estimate - An employee should at a minimum request a couple of estimates to gauge what he or she would receive, if they were to fully retire now, and compare those to the retirement benefits if phased retirement were elected. There are numerous means for requesting a retirement estimate. Please contact your servicing HR Specialist or Benefits Service Center to determine your agency policy. (17)

Pre-Retirement Counselling Phased Annuity Computation A phased retiree under either CSRS or FERS will be at least 55-57 years with 30 years of service or 60 years with at least 20 years of service. EXAMPLE: Mr. Washington is an employee with 35 years and 9 months of service and his current annual salary is $68,275.00. (Assumed High-3 of $68,275.00) Example A: If Mr. Washington is a CSRS covered employee Example B: If Mr. Washington is a FERS covered employee A FERS employee who is in a phased retiree status is ineligible for the FERS Annuity Supplement. However, the FERS Annuity Supplement may be paid to a phased retiree after he or she retires with a composite retirement and is receiving an annuity. CSRS Phased Retirement Income Annual Monthly Current Salary $68,275 X 50% $34,137 $2,844.75 Current Annual Annuity $46,256.31 X 50% $23,128 $1,927.33 Total Employee Income in Phased Retirement $57,265 $4,772.08 FERS Phased Retirement Income Annual Monthly Current Salary $68,275 X 50% $34,137 $2,844.75 Current Annual Annuity $24,374 X 50% $12,187 $1,015.58 Total Employee Income in Phased Retirement $46,324 $3,860.33 (18)

Composite Annuity Computation When an employee in phased retirement status decides to fully retire (and submits an application for a full retirement annuity) the full retirement annuity (the composite retirement annuity ) will equal the sum of: The phased retirement annuity, updated by any cost-of-living adjustments (COLA) that were applied to the phased retirement annuity, plus The amount of the final phased portion of the full retirement annuity. The final phased portion of the full retirement annuity equals a percentage of the full annuity the employee would have received had the employee not elected phased retirement and, instead, continued working full-time until separation for full retirement. The final phased portion includes credit for unused sick leave. (19)

Composite CSRS Annuity Example CSRS Composite Annuity Computation Example (Chris) Chris Andrews elected phased retirement benefits effective December 14, 2016. Chris continued to work while in phased retirement status until he decided to separate and take full retirement. He was separated for retirement from his agency on December 31, 2018, and he elected the maximum survivor annuity for his wife on his application for immediate retirement. His full retirement composite annuity begins on January 1, 2019. The composite annuity is based on the following variables: (20)

Composite CSRS Annuity Example Annuitant: Chris Andrews DOB: Aug 1, 1956 (now age 62) Hi-3: $72,210 Creditable service: 11/21/1976 to 11/20/1977 non-deduction 05/12/1978 to 05/11/1982 CSRS refunded 02/25/1983 to 12/31/2018 CSRS paid Deposit balance for non-deduction service: $1,965.00 (as of 01/01/2019) Actuarial Reduction Applied to Phased Retirement Benefit: $75 (as of 12/14/2016) COLAs applied to Phased Retirement 12/01/17 -.3% Annuity 12/01/18 -.3% Unused Sick Leave Balance: 1042 hours (6m) -- (amount used in computation equals 6m.50 = 12 months = 1 year) Working Percentage / Phased Retirement Percentage: 50 percent / 50 percent STARTING YR-MO-DY ENDING YR-MO-DY COVERED/REFUNDED/ NONDEDUCTION/MILITARY YRS MOS DAYS 1976-11-21 1977-11-20 Non-deduction 1 0 0 1978-05-12 1982-05-11 CSRS Refunded 4 0 0 1983-02-25 2018-12-31 CSRS 35 10 16 TOTAL CIVILIAN/MILITARY 40 10 16 UNUSED SICK LEAVE CREDIT(6m.50 = 12m = 1y) 1 0 0 TOTAL SERVICE FOR COMPUTATION PURPOSES 41 10 Step 1 Update Initial Phased Annuity By COLAs Applied to Phased Annuity During Phased Retirement Status o Original Phased Retirement Annuity: $23,224.23 (effective 12/14/2016) o 12/01/17: $23,224.23 +.3% = $23,293.91 o 12/01/18: $23,293.91 +.3% = $23,363.80 (21)

Composite CSRS Annuity Example Step 2 Compute Final Phased Portion of Full Retirement Annuity High-3 Average Pay: $72,210 Retirement Factor (41) yrs (10) mos (See section 50C1.1-1,Chart 4) X.799167 Unreduced Final Phased Portion of Full Retirement Annuity $57,707.85 Reductions Made for 1) Non-deposit for service prior to 10-1-1982 (Subtract 10% of deposit due) - $196.50 Reduced Annuity $57,511.35 2) Working percentage X 50% Final phased portion of full retirement Annuity $28,755.68 Step 3 Compute Full Retirement Annuity (Composite Annuity) Sum of Step 1 and Step 2 Results: ($23,363.80 + $28,755.68) $52,119.48 Reductions are made for: 1) Survivor Election Survivor Base Selected by retiree: $52,119.48 Amount up to $3,600: $3,600.00 x.025 = $90.00 Amount over $3,600: $48,519.48 x.10 = + $4,851.94 - $4,941.94 Full Retirement Annuity Reduced for Survivor Election $47,177.54 Monthly Rate (Annuity reduced for survivor election divided by 12) $3,931.47 2) Unpaid redeposit for refunded service ending before 3-01-1991 o Unpaid Redeposit reduction from phased retirement: $75 (12/14/2016) o 12/01/17: $75.00 plus.3% = $75.23 = $76.00 o 12/01/18: $76.00 plus.3% = $76.23 = $77.00 - $79.00 Full Retirement (Composite) Gross Monthly Annuity Payable $3,854.47 (22)

Composite FERS Annuity Computation Example Composite Annuity Computation Example (Fran) Fran elected phased retirement benefits effective December 14, 2016. Fran continued to work while in phased retirement status until she decided to separate and take full retirement. She was separated for retirement from her agency on December 31, 2018. Fran elected the maximum survivor annuity for her husband on her application for immediate retirement. Her full retirement composite annuity began on January 1, 2019. The composite annuity is based on the following variables: (23)

Composite FERS Annuity Computation Example Annuitant: Fran Smith DOB: 04/08/1954 (now age 64) Hi-3: $72,210 Creditable Service: 03/03/1990 to 12/31/2018 FERS Unused Sick Leave: 733 Hours (4 months 7 days) /.50 = 8 months, 14 days Working Percentage / Phased Retirement Percentage: 50 percent / 50 percent COLAs applied to Phased Retirement Annuity: 12/01/16:.3% Starting Ending Covered/Refunded/Non- Yrs Mos Days deduction/military YR-MO-DY 1990-03-03 YR-MO-DY 2018-12-31 FERS 28 9 28 Total Civilian/Military 28 9 28 Unused Sick Leave Credit (733 hrs = 4m 7d divided by.50 = 8m 14d) 8 14 Total Service for Computation Purposes 29 6 Step 1 Update Initial Phased Annuity By COLAs Applied to Phased Annuity During Phased Retirement Status o Original Phased Retirement Annuity: $8,273.68 (effective 12/14/2016) o 12/01/17: $8,273.68 plus.3% = $8,298.51 o 12/01/18: $8,298.51 plus.3% = $8,323.41 (24)

Composite FERS Annuity Computation Example Step 2 Compute Final Phased Portion of Full Retirement Annuity High-3 Average Pay: $72,210 Retirement Factor (29 ) yrs. (6 ) mos. (See section 50C1.1-1, Chart 6 or 7) X.324500 Unreduced Final Phased Portion of Full Retirement Annuity $23,432.15 Reductions Made for 1) Working percentage X 50% Final phased portion of full retirement Annuity $11,716.08 Step 3 Compute Full Retirement Annuity (Composite Annuity) Sum of Step 1 and Step 2 Results: ($8,323.41 + $11,716.08) $20,039.49 Reductions are made for: 1) Survivor Election* Survivor Base Selected by retiree: $20,039.49 x 10% = $2,003.94 Full Retirement Annuity Reduced for Survivor Election - $18,035.55 $1,938.57 Full Retirement (Composite) Gross Monthly Annuity Payable (Annuity reduced for survivor election divided by 12) $1,502.97 *Gross monthly survivor annuity equals $20,039.49 x 50% = $10,019.75 12 = $834.97 (25)

References Title 5, United States Code, Sections 8336a and 8412a Title 5, Code of Federal Regulations, Subpart Q. Department of Defense (DoD) Directive Type Memorandum (DTM), June 21, 2016, Phased Retirement DCPAS website: https://dodhrinfo.cpms.osd.mil/directorates/hrops/benefits-and- Worklife/Benefits-and-Entitlements/Federal- Benefits/Pages/Home1.aspx OPM Website: http://www.opm.gov/retirement-services/phasedretirement/ (26)

Questions? (27)