OPM calls for end to pension penalty for rehired retirees

Allowing federal retirees to return to work without an offset to their pensions could help address many of the government's future workforce challenges, the Office of Personnel Management told a House subcommittee on Tuesday.

Nancy Kichak, associate director of strategic human resources policy at OPM, told the House Oversight and Government Reform Subcommittee on the Federal Workforce that the government loses a lot of critical skills and knowledge because of a law that discourages federal annuitants from coming back to work part time for the government.

Salaries for re-employed retirees are reduced by the amount of their pensions. OPM can waive the offset for agencies on a case-by-case basis for positions that are difficult to fill or for emergencies. But with such a penalty in place, many retirees opt to work for contractors, where they can earn a full annuity and salary.

Legislation (H.R. 3579) introduced by Rep. Tom Davis, R-Va., would enable 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.

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

Kichak told lawmakers that offering the flexibility to all agencies is imperative, especially as the government faces a massive loss of critical skills and knowledge during the next decade due to retirements. The legislation would allow agencies to rehire retirees to help train and mentor new employees and to complete short-term projects, she said.

Subcommittee members and witnesses raised concerns about the legislation, noting that re-employed annuitants would not be eligible for most benefits that other employees receive, including contributions toward health premiums, retirement benefits or the Thrift Savings Plan. Subcommittee Chairman Danny K. Davis, D-Ill., questioned whether this could sway agencies to bring back annuitants rather than hire or promote full-time permanent employees.

Purcell also noted that the proposed legislation could encourage workers to retire and then seek re-employment in a federal job in which they could receive both a salary and an annuity. "This would present federal agencies with disruptions in staffing, and it could result in increased total compensation costs to the federal government," he said.

Maureen Gilman, legislative director for the National Treasury Employees Union, said at the hearing that OPM's authority to waive the offset rule was sufficient, noting that approval takes only a few weeks.

"NTEU is not aware of any serious problems with the current rules that allow for re-employment of annuitants. And for the most part we agree with the notion that if it's not broke, don't fix it," she said.

Gilman pointed to a recent report by the Government Accountability Office that found part-time work, flexible schedules and telework have a strong impact on recruitment and retention, specifically among older workers. She recommended encouraging agencies to use these flexibilities to retain those nearing retirement, rather than making the rehiring flexibility easily subject to abuse.

Del. Eleanor Holmes Norton, D-D.C., suggested launching a pilot program to determine the need for more flexibility in hiring retirees as well as the risk of abuse. "This may be the only answer that's available now," she said. "But I suggest we would want to document experience before moving forward. … I would think OPM would have done that before coming forward with this bill."