5 U.S.C. § 8336a — Phased retirement

(a) This subsection defines key terms. A "phased retiree" is a retirement-eligible employee who elects phased retirement and hasn't fully retired yet. "Phased employment" is their reduced work schedule. "Working percentage" is the employee's scheduled hours per pay period divided by the hours a full-time person in a similar job would work. "Phased retirement percentage" is whatever percentage, added to the working percentage, equals 100%. The "phased retirement period" runs from when the phased annuity starts until the employee dies or leaves phased employment. "Full retirement status" means the person has stopped working and can apply for a "composite retirement annuity" — their final combined pension. A "retirement-eligible employee" is someone who could retire under section 8336(a) or (b) right now, but does not include someone past the mandatory retirement age in section 8335.

(b) With their agency head's agreement, and under rules the Director sets, a retirement-eligible employee who has worked full-time for the last 3 years may elect phased retirement. When they enter it, they're normally scheduled to work 50% of full-time hours, though the Director can set that anywhere from 20% to 80% by regulation — and once set, it can't change during the phased period. At least 20% of their working hours must go to mentoring, though the Director can allow exceptions; this mentoring rule doesn't apply to Postal Service phased retirees, but can still apply at the Postal Regulatory Commission. A phased retiree can hold only one position at a time, and can only transfer to another position if the transfer doesn't change their working percentage. An employee can make this election only once in their life, and can't also elect the arrangement under section 8343a.

(c) The phased retirement annuity equals the annuity the employee would have gotten under section 8339 if they had fully retired the day they entered phased status, multiplied by their phased retirement percentage. It's paid on top of their part-time salary and gets the same cost-of-living increases as regular annuities under section 8340. It is never reduced to fund a survivor annuity, never used to calculate one, and can't be split up by a court order for that purpose — but it can still be reached by a court order for things like divorce division, garnishment, or debt collection, just like other annuities. Any reduction the employee elected for extra retirement credit under section 8334(d)(2) is applied after this annuity is calculated. Deposits to buy credit for military service or earlier uncredited civilian service must be made before entering phased retirement — not at full retirement — except that if a phased retiree dies while still working, their survivor can still make that deposit. If a phased retiree already chose to reduce their annuity instead of paying a deposit, and then dies while still working, the deposit is treated as fully paid. The phased annuity starts the day phased employment begins, and it does not credit unused sick leave.

(d) For the purpose of the retirement deductions taken out of pay under section 8334, all of a phased retiree's basic pay — up to the full-time rate for their position — counts as basic pay.

(e) A phased retiree can elect full retirement status at any time, following procedures the Director sets. Once they do, they get a composite retirement annuity.

(f) The composite retirement annuity is the sum of two parts. Part one is the phased retirement annuity as of the full-retirement date, before any reduction for the section 8334(d)(2) election, but with all its cost-of-living increases included. Part two is what the employee would have earned under section 8339 at full retirement if they had worked full-time (not phased) the whole time, before any survivor or 8334(d)(2) reduction, multiplied by the working percentage. After adding these together, the Director then applies any survivor-annuity reduction and any 8334(d)(2) reduction the employee chose. The composite annuity gets cost-of-living increases too, except one special rule in section 8340 doesn't apply to it. When figuring part two, any unused sick leave the employee has saved is divided by the working percentage before it's counted.

(g) With the agency's agreement, a phased retiree can elect to end phased status and go back to full-time work. Once they're back to full-time, their phased retirement annuity stops. After that, their retirement rights are governed by whatever law applies when they eventually leave service for good, and their phased-retirement time is treated as if it had been part-time work.

(h) For survivor-benefit purposes under section 8341, a phased retiree who dies is treated as an employee who died while still working, and their phased-retirement time counts as part-time work.

(i) A phased retiree's job is not counted as "part-time career employment" under section 3401(2).

(j) A phased retiree cannot apply for a disability annuity under section 8337.

(k) For one specific rule in section 8341(h)(4), a phased retiree is treated as retiring on the day they enter full retirement status.

(l) For sections 8343 and 8351, and a related part of chapter 84, a phased retiree is treated as an employee.

(m) The reemployment pay-offset rule in section 8344 does not apply to a phased retiree.

(n) For life-insurance purposes under chapter 87, a phased retiree is treated as earning full-time basic pay in their position.