USA Today


June 9, 2005

 

Phased-in retirement not universal

By Mindy Fetterman

At this time, not everyone can take advantage of phased-in retirement programs, and that's why many companies don't yet offer the flexibility.

Different government regulations restrict how and when pensions and retiree benefits can be paid, and define what is and is not "retirement." Changes in the laws will be required to make phased-in retirement more common.

For instance, an employee who is younger than a company's retirement age and covered by a traditional defined-benefit pension plan — not just a 401(k) plan — can't participate in a phased-in program. A worker who has reached a company's retirement age can continue working and collect a pension.

Employees with defined-benefit pensions wouldn't want to reduce their work hours gradually without officially retiring and taking a pension, because payments are based on the last three years of employment — traditionally, the best paying.

Taking a pay cut to work fewer hours would reduce the eventual pension payments.

Many employers think the requirement forces their retired workers to go to work for someone else.

According to an Employment Policy Foundation study, 65% of employers would offer phased-in retirement, but say government regulations keep them from doing so.

That's why most companies currently offering phased-in plans either don't have defined-benefit pensions, or require workers to retire for six months, then come back part time only.

They might or might not provide benefits beyond salary.

The Internal Revenue Service has asked for comment from businesses and individuals about proposals to change the rules for the "normal retirement age." It would make workers eligible at 591/2.

AARP supports offering phased-in retirement at age 62, says Deborah Russell, AARP director of economic security.