From the March 14, 2012 FedWeek


Extended Pay Freeze Rejected


In what could amount to the first sign of a thaw in the federal salary rate freeze, the Senate has voted down a bid to extend the freeze by another year. The language, which would have meant no basic increase for the third straight year in January 2013, was offered to offset spending for certain energy-related programs in a transportation bill; many members of Congress have started expressing resistance to using funds from employment- related programs for unrelated purposes. The Senate vote doesn't necessarily guarantee that a raise will be paid in January, though, since the House already has voted to deny a raise as part of a different, stand-alone bill. If a raise is paid, it likely won't be a large one: although pay law indicates a 1.7 percent increase, the White House in its recent budget proposal advocated just 0.5 percent, a recommendation that effectively could act as the upper limit for any raise that is paid.

Phased Retirement Idea Advances


The House could take up the concept of creating a new retirement alternative for federal employees, phased retirement, as soon as next week when it returns from its recess this week.

The Senate has attached a phased retirement provision to a highway bill (S-1813) that the House likely will take up soon. Under the language, rather than retiring completely, a retiring employee would have the option of continuing to work part-time, drawing a prorated salary for the position depending on the percentage of time worked, while also drawing a prorated annuity.

Someone working 60 percent of the time would receive 60 percent of the pay for the position plus 40 percent of the annuity he or she has accumulated up to the beginning of phased retirement, for example. Employees subject to mandatory retirement, such as law enforcement officers, would not be eligible.

Idea Goes Back Years


The concept of mixed working and retirement has been around for years in the government, with certain exceptions having been carved out from the general principle that a reemployed annuitant must have his or her salary reduced by the amount of the annuity. The Obama administration in 2010 and again in its budget proposal last month proposed the current formula, which the Senate added as a spending offset for certain rural programs under the transportation bill. The plan is projected to save money by having agencies not fill positions with full-time replacements while the employee is in phased retirement status. There would also be a saving to the retirement system by delaying the point at which the individual would begin drawing full retirement benefits, the administration has said. Phased retirement would be strictly voluntary, although employee organizations criticized the provision on grounds that it diverts savings to be achieved in employee-related programs toward spending for other purposes.

 Scheduling Issues Also Addressed


Under the Senate language, which reflects the White House proposal, phased retirees typically would work half-time, although the range could be between one-fifth and four-fifths time. Similarly, there would be a policy that phased retirees would spend one-fifth of their working time mentoring younger employees, although exceptions to that would be allowed, as well. A phased retiree's schedule could not be changed during the course of the arrangement, and the individual could switch to full retirement at any time. On final retirement, the annuity would be paid in full, with additional credit given on a prorated basis for the part-time work. For benefit purposes, a phased retiree generally would be treated as an active employee during the working period.