Bring ’Em Back

Proposal would lift annuity offset to attract retirees to agencies in need.

Recruitment and retention of younger workers is imperative to offsetting a potential retirement tsunami across the federal workforce during the next few years. But the Bush administration believes another generation also should be targeted as part of the solution-retirees.

The Office of Personnel Management has been pushing a proposal that would remove a financial penalty for federal retirees who wish to return to government service. The agency has said federal retirees often have little incentive to return to work because current law would cut their salaries by the amount of their pensions. In many cases, retirees who wanted to return to government service would have to work for free.

OPM has gained some ground on the issue as it now has the authority to waive the offset for agencies on a case-by-case basis for positions that are difficult to fill or in emergencies. But that strategy might no longer prove useful in the coming years, OPM says, as 60 percent of the federal workforce and 90 percent of senior executives become eligible to retire. If agencies are unable to fill these potential voids with new workers, having the flexibility to lure back retired employees could be useful in sustaining agency missions.

"Modifying the rules to bring talented retirees back on a part-time basis without penalizing their annuity would allow federal agencies to rehire recently retired employees to assist with short-term projects, fill critical skill gaps and train the next generation of federal employees," says OPM Director Linda Springer.

Waiving the offset law has helped some agencies address critical challenges in recent years. The State Department, for example, gained approval in July 2007 to rehire retired Foreign Service employees to staff overwhelmed passport processing centers across the country. Rehired annuitants helped State process nearly 3 million passport applications-a backlog caused in part by a 2004 law that required passports for all U.S. citizens traveling by air in the Western Hemisphere.

Legislation introduced by Rep. Tom Davis, R-Va., in September 2007 seeks to extend the success at State to other agencies that face personnel shortages. The bill would permit the head of an agency to hire a federal annuitant on a temporary basis without OPM approval and without the annuity offset. The law would be restrictive, however, allowing retirees to work no more than 1,040 hours in any 12-month period and no more than 6,240 hours in a lifetime.

Daniel Adcock, assistant legislative director for the National Active and Retired Federal Employees Association, says passage of Davis' legislation is necessary to lure retirees back into the federal workforce, specifically because current law encourages them to work for government contractors where a federal annuity presents no barrier to being paid a full salary. "Should the federal government continue to deny itself access to this pool of experienced professionals at these critical times?" he asks. "Why pay a premium to a contractor when you can get the skills of a seasoned professional basically at cost?"

Patrick Purcell, a specialist in income security at the Congressional Research Service, told a House subcommittee in May that annuitants made up only 0.3 percent of the federal workforce in 2007, a one-tenth of a percent increase since 2000.

Of concern, however, is that the proposed legislation could encourage workers to retire and then seek re-employment in a federal job so they could receive both a salary and an annuity, thus increasing the total compensation costs to the government, Purcell says. "The prohibition on concurrent receipt of a federal retirement annuity and a federal salary under current law reflects the judgment of previous Congresses that federal employment policies should not encourage workers to retire and then seek re-employment in a federal job," he says.

Federal labor unions also cite the potential for abuse. The National Treasury Employees Union says because the legislation would not require agencies to contribute to a rehired annuitant's health premiums, retirement benefits or Thrift Savings Plan, many agencies could maximize their use of retirees rather than hire and promote full-time permanent employees needed to sustain agency missions.

"The fact that re-employed annuitants hired under the requirements of [the legislation] would not be eligible for most benefits that other employees receive would clearly put them at a budgetary advantage over other federal employees," NTEU says.

The union says a more useful approach to offsetting the sting of retirements could be expansion of options already available to agencies, including part-time, flexible and flexiplace schedules. Such arrangements have a real impact on the recruitment and retention of older workers, according to a recent report by the Government Accountability Office (GAO-08-630T).

NARFE's Adcock believes the bill includes provisions that would effectively prevent abuse. "The appointments [of retirees] would be temporary, under special circumstances and for limited duration," he says. "That should take care of the issue."

Purcell at CRS cautions lawmakers against making a permanent change to the statute, instead encouraging the creation of a five-year pilot program to evaluate how agencies respond. He also says putting a cap on the number of retirees an agency can hire could be helpful in preventing abuse. "Three-tenths of a percent of retirees are re-employed right now," he says. "Three-quarters of a percent should be ample room for an agency to fill positions for training, mentoring and bringing the new group of federal employees up to speed."