Employers might not advertise the fact that they offer reduced hours—or phased retirement—for older workers, but if you’re interested, you should ask. Even if your employer doesn’t have a formal phased retirement program, there might be informal options, and both are beneficial to employers and employees, according to a recent Government Accountability Office report to the U.S. Senate’s Special Committee on Aging. The reality: A quarter of full-time workers aged 61 to 66 planned to reduce hours, but only 15% ended up doing so.

Employers say these programs help with worker retention, knowledge transfer and workforce planning (new workers can be hired at a lower cost). Employees like the gradual shift from full-time to part-time work to ease into retirement.

One reason you don’t hear more about this is because employers fear age-related discrimination backlash. If your manager seems circumspect, it’s because some employers have strict guidelines about what can and can’t be said about age and retirement. One employer told the GAO they wait for “windows” when workers bring it up to discuss their formal program. Another employer, with no formal program, said the worker and company representative work together to “make it work.”

Here are some talking points if you’re starting the conversation.

Do I qualify? Typically, there’s an age and length of service requirement for formal programs.  One employer the GAO interviewed offers phased retirement to all U.S. employees age 60 and older with five years of service; another to all workers age 55 plus with 10 years of service. The federal government’s phased retirement program, which launched in 2015, is available for those 50-plus with just three years’ full-time service.

How will it affect my pay? In one program the GAO looked at, workers work 80% time for 80% pay--and 80% bonus money. Run retirement projections to make sure your long-term retirement income plan can withstand the pay cut at this point.

How many hours should I work? At one employer the GAO interviewed, phasing workers worked 24 hours a week. Another program allows workers to pick 50% or 75% time. Watch out: how many hours you work can affect your health and pension coverage.

Does taking phased retirement affect my health coverage? Employers can offer group health coverage to part-time workers. All eight employers the GAO interviewed who offer phased retirement provided health care coverage to the phasing workers. In one case, employees had to work 50% time to keep their health coverage.

How long can the phase-out or wind-down be? At one employer the GAO interviewed, the length of phased retirement is set at 6 months to two years; at another it’s one to five years; at another it’s unlimited.

Will I get additional duties? Being a mentor is usually part of the bargain. In the federal government’s phased retirement program, older workers serve as a mentor for at least 20% of their working hours.

Will my pension be cut? If you have a defined benefit pension, depending on how the formula works (for example, if the formula looks at the last five years of wages), choosing phased retirement could cost you future benefits. If your DB pension is calculated based on your highest years of earnings, phased retirement won’t hurt you. One employer the GAO interviewed came up with this work-around: they pay workers a full-time salary and let them buy one day of vacation per week for 20% of their salary, so they effectively get 80% of their full-time salary for working four days a week and the full-time equivalent salary is used for the DB pension calculation.

Will I still be able to contribute to a 401(k)? The contribution formula (and employer matching formula) usually doesn’t change, but the amount you can contribute might go down in proportion to your reduced salary. If the employer provides a dollar for dollar match, that won’t change.

Can I take in-service withdrawals? By cutting down on work hours (and pay) you might need to start taking income from your 401(k) or start receiving pension payouts. That gets tricky because DB plans generally provide in-service distributions only to workers age 60 and older, and 401(k) participants generally can’t take out distributions until age 59 ½.

Can I design my own program? A Society for Human Resource Management study cited found that only 5% of employers offer a formal phased retirement program, while another 11% offer informal arrangements. Informal arrangements include ad hoc agreements for a worker to work fewer hours or to become a contractor (resign, and then get rehired). Some workers choose to switch out of duties on their career track to less stressful duties, or less complex duties. Another option: taking additional leave instead of working part-time.

by Ashlea Ebeling | Aug 4, 2017

 

Author: Ashlea Ebeling

Source: Forbes Media LLC

Retrieved from: www.forbes.com