Phased Retirement, 33911-33939 [2013-13182]

Agencies

• Office of Personnel Management

[Federal Register Volume 78, Number 108 (Wednesday, June 5, 2013)]
[Proposed Rules]
[Pages 33911-33939]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-13182]



[[Page 33911]]

Vol. 78

Wednesday,

No. 108

June 5, 2013

Part III





Office of Personnel Management





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5 CFR Parts 581, 582, 831, et al.





Phased Retirement; Proposed Rule

Federal Register / Vol. 78 , No. 108 / Wednesday, June 5, 2013 / 
Proposed Rules

[[Page 33912]]


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 581, 582, 831, 838, 841, 842, 843, 848, 870 and 890

RIN 3206-AM71


Phased Retirement

AGENCY: Office of Personnel Management.

ACTION: Proposed rule.

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SUMMARY: The Office of Personnel Management (OPM) is proposing to 
implement phased retirement, a new human resources tool that allows 
full-time employees to work a part-time schedule while beginning to 
draw retirement benefits. Section 100121 of the ``Moving Ahead for 
Progress in the 21st Century Act,'' or ``MAP-21,'' authorizes phased 
retirement under the Civil Service Retirement System and the Federal 
Employees' Retirement System and requires OPM to publish regulations 
implementing phased retirement. The purpose of phased retirement is to 
allow the Federal Government to continue to benefit from the services 
of experienced employees who might otherwise choose to retire. These 
proposed regulations inform agencies and employees about who may elect 
phased retirement, what benefits are provided in phased retirement, how 
an annuity is computed during and after phased retirement, and how 
employees fully retire from phased retirement.

DATES: We must receive your comments by August 5, 2013.

ADDRESSES: You may submit comments, identified by docket number and/or 
RIN number 3206-AM71 by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: combox@opm.gov. Include RIN number 3206-AM71 in the 
subject line of the message.
     Mail: Kristine Prentice, Retirement Policy, Retirement 
Services, Office of Personnel Management, 1900 E Street NW., 
Washington, DC 20415-3200.

FOR FURTHER INFORMATION CONTACT: Kristine Prentice, (202) 606-0299.

SUPPLEMENTARY INFORMATION: OPM proposes to amend parts 581, 582, 831, 
838, 841, 842, 843, 870 and 890, and add a new 5 CFR part 848 to 
implement phased retirement as required by section 100121, the ``Moving 
Ahead for Progress in the 21st Century Act,'' or ``MAP-21,'' Public Law 
112-141.

Background

    Phased retirement is a new human resources management tool made 
possible by section 100121 of MAP-21, which amended chapters 83 and 84 
of title 5, United States Code, by adding provisions, at 5 U.S.C. 8336a 
and 8412a, for phased retirement. The phased retirement provisions of 
law require OPM to publish final regulations to implement phased 
retirement.
    Phased retirement will in essence permit an individual to retire 
from part of his or her employment, while continuing employment on a 
part-time basis and continuing to earn additional retirement benefits 
proportionately based upon the additional part-time employment. An 
eligible employee who enters phased retirement, which requires the 
approval of an authorized agency official, will work half-time and will 
receive one half of what his or her annuity would have been had the 
individual retired completely from Federal service. During phased 
retirement, he or she is a part-time employee, not a reemployed 
annuitant.
    Phased retirement will encourage the most experienced Federal 
employees to extend their contributions to the Nation, and will operate 
as a tool to ensure continuity of operations and to facilitate 
knowledge management. The main purpose of phased retirement is to 
enhance mentoring and training of the employees who will be filling the 
positions of more experienced employees who are preparing for full 
retirement. It is intended to encourage experienced employees to 
remain, in at least a part-time capacity, while less experienced 
employees are preparing to assume the duties of the employees who are 
planning to retire.
    An effective phased retirement plan has been a long-sought goal. 
However, under prior law, the problem was that an individual who was 
retirement eligible but wished to continue employment on a part-time 
basis generally had little economic incentive to do so because an 
employee's potential retirement benefits would often be equal to or 
greater than his or her salary would be for part-time employment.
    A person who enters phased retirement (hereafter a ``phased 
retiree,'') would receive more income than he or she would earn by 
simply changing to a part-time work schedule or by simply retiring, 
while continuing to share knowledge and expertise with the next 
generation of Federal leaders via mentoring and role-modeling. Once 
these individuals fully retire, they will be entitled to a greater 
annuity than if they had fully retired at the time of transition to 
phased retirement, but less than if they had continued employment on a 
full-time basis.

Eligibility

    Participation is entirely voluntary, and requires the mutual 
consent of both the employee and employing agency. An employee does not 
have an entitlement to phased retirement. In order to participate, an 
individual must have been employed on a full-time basis for the 
preceding three years. Under the Civil Service Retirement System 
(CSRS), the individual must be eligible for immediate retirement with 
at least 30 years of service at age 55, or with 20 years of service at 
age 60. Under the Federal Employees' Retirement System (FERS), the 
individual must be eligible for immediate retirement with at least 30 
years of service at MRA (minimum retirement age, which ranges between 
age 55 and 57 depending upon year of birth), or with 20 years of 
service at age 60.
    The law provides that employees subject to mandatory retirement 
(including Law Enforcement Officers, Firefighters, Nuclear Materials 
Couriers, Air Traffic Controllers, Customs and Border Protection 
Officers, or members of the Capitol Police or Supreme Court Police) may 
not participate. However, certain employees who are exempt from 
mandatory separation and retirement (such as Customs and Border 
Protection Officers exempted from mandatory retirement when special 
retirement provisions for Customs and Border Protection Officers were 
first enacted) may participate. This exemption does not apply to 
individuals for whom mandatory retirement has been waived, but only to 
individuals not subject to mandatory retirement by statute.
    It is noteworthy that while the statutory provisions concerning 
employees subject to mandatory retirement could have been more clearly 
drafted, the legislative history makes the intent both clear and 
specific. The language was taken directly from a different free-
standing phased retirement bill, H.R. 4363, reported out of the House 
of Representatives Committee on Oversight and Government Reform on June 
15, 2012. That report, H.R. Rep. No. 535, 112th Congress, 2nd Sess. 4 
(2012), discussed this provision, with this explanation in the section-
by-section analysis:

    Subsection (a) of 5 U.S.C. 8336a defines the terms that are used 
in the new section. Individuals subject to mandatory retirement, 
such as law enforcement, firefighters, nuclear materials couriers, 
air traffic controllers, customs and border protection officers, or 
members of the Capitol Police or Supreme Court Police, may not elect 
phased retirement.


[[Page 33913]]


    Moreover, the Conference Report, H.R. Rep. No. 557, 112th Congress, 
2nd Sess. 667 (2012), further describes details of the provisions 
including the exemption:

    The Senate amendment excludes from eligibility law enforcement 
officers, firefighters, nuclear materials couriers, air traffic 
controllers, customs and border protection officers, or members of 
the Capital Police or Supreme Court Police.
* * * * *
Second, the provision provides that certain law enforcement officers 
such as Customs and Border Protection Officers hired before 2008 
(when they were granted law-enforcement type status which makes them 
ineligible for phased retirement under the Senate Amendment because 
they are subject to mandatory retirement) are eligible for phased 
retirement.

Withdrawing From Phased Retirement To Resume Regular Employee Status

    After entering phased retirement, a phased retiree can end his or 
her phased retirement to return to being a regular full-time employee, 
if the employing agency agrees to the change. The phased retirement 
annuity will then terminate. Upon later full retirement, the 
individual's retirement will be calculated under the laws then in 
effect, with the period of phased retirement treated as part-time 
service. Once an individual has gone back to being a full-time 
employee, the individual cannot elect to go back into phased 
retirement.

Transition From Phased Retirement to Full Retirement

    A phased retiree may voluntarily apply for full retirement in the 
same manner as other employees. The employee does not have to obtain 
the permission of his or her agency to fully retire.

Benefits and Computation

    Eligible employees who enter phased retirement will work half-time 
and will receive additional credit for that service toward their full 
retirement. While working part-time during phased retirement, employees 
will also receive annuity payments, consistent with the retirement 
benefits they were entitled to prior to entering phased retirement 
status, divided by the ``phased retirement percentage'' (i.e., 50 
percent).
    Deposits and redeposits for service credit (including for military 
service) must be satisfied (either by payments or annuity reduction as 
applicable) prior to entry into phased retirement status; however, if 
an individual ends phased retirement status to return to regular 
employee status, deposits and redeposits for service credit would again 
be permitted. Any reduction in annuity or loss of service credit at the 
time of entry into phased retirement will be permanent for the 
employee, unless the individual ends phased retirement status by 
returning to full-time employment and has a new opportunity to make 
deposits or redeposits for service credit. Employees wishing to make a 
deposit or redeposit for civilian service may submit a request to make 
the service credit payment with their applications for phased 
retirement. They will then be given a final opportunity to pay the 
deposit or redeposit before processing of the phased retirement benefit 
is completed. No deposits or redeposits can be made by the employee 
after the phased retirement application has been processed (unless the 
employee elects to opt out of phased retirement status and return to 
regular employment). If a phased retiree dies while in phased 
employment status, the survivors can make deposits or redeposits on the 
same basis as if the decedent had not been a phased retiree.
    Phased retirement annuities will be subject to court orders 
providing for division, allotment, assignment, execution, levy, 
attachment, garnishment, or other legal process on the same basis as 
other annuities. At the same time, phased retirees' pay from their 
half-time employment is subject to garnishment and other legal process 
on the same basis as other Federal employee pay.
    During phased retirement, Federal Employee Health Benefits (FEHB) 
and Federal Employees' Group Life Insurance (FEGLI) enrollment will 
stay with the employing agency. FEGLI benefit coverage amounts will be 
based upon the full-time salary for the position. The FEHB employer 
contribution will be the same as for full-time employees.
    When the phased retiree fully retires immediately after the phased 
retirement period, the individual will receive a ``composite retirement 
annuity.'' The composite retirement annuity will be the amount of 
phased retirement annuity as of the commencing date of full retirement, 
plus one-half of the amount of annuity that would have been payable at 
the time of full retirement if the individual had not elected phased 
retirement and as if the individual was employed on a full-time basis 
in the position occupied during the phased retirement period. If, at 
the time of full retirement, the employee meets the participation 
requirements to continue FEHB and FEGLI during retirement, his or her 
FEHB and FEGLI enrollments will transfer to OPM when the phased retiree 
enters full retirement.
    No unused sick leave can be used in the computation of the phased 
retirement annuity. However, at full retirement the unused sick leave 
will be taken into account. While the computational provisions are 
somewhat complex, the value of the sick leave in that computation will 
be the same as for an individual retiring from a full-time position.

Survivor Benefits

    No survivor benefits can be based upon a phased retirement annuity. 
If the phased retiree dies prior to full retirement, survivor benefits 
will be those applicable for an employee who died in service, with 
provision for minor computational adjustments necessitated by the 
unique nature of phased retirement. If the individual dies during 
phased retirement, the period of phased retirement will be treated as a 
period of part-time service in the computation of the survivor annuity. 
However, the FERS Basic Employee Death Benefit will be based upon the 
full-time salary of the position.

Garnishment and Phased Retirees

    Garnishment orders for phased retirees will be treated much the 
same way as those for reemployed annuitants. The rules that typically 
apply to garnishment of annuities will continue to apply to the phased 
retirement annuity a phased retiree receives, and the rules that 
typically apply to pay will continue to apply to the salary a phased 
retiree receives during phased employment. For instance, phased 
retirement annuities, like regular Federal annuities, will not be 
subject to commercial garnishments under 5 CFR part 582, but the part-
time pay received during phased employment will continue to be subject 
to commercial garnishment.

Section-by-Section Description of Proposed Regulations

Part 581--Processing Garnishment Orders for Child Support And/Or 
Alimony

    Phased retirement annuities and pay are subject to the same rules 
for processing garnishment orders for child support and/or alimony as 
regular annuities and other Federal pay. Technical changes are made to 
add two definitions in Sec.  581.102. Paragraph (l) adds a definition 
for ``phased retirement status'' and paragraph (m) adds a definition 
for ``phased retirement annuity.'' Both terms are defined by cross-
reference to Sec.  838.103, which

[[Page 33914]]

provides new terms for processing court orders for phased retirees.
    The current Sec.  581.306 explains the obligation of governmental 
entities when in receipt of a garnishment order for child support and/
or alimony and when there is not money due to the employee-obligor or 
when the obligor moves to a different governmental entity. Paragraph 
(d) is added to Sec.  581.306 to account for employees who enter phased 
retirement status. Governmental entities will still be obligated to 
honor the garnishment order as it pertains to ongoing part-time pay. 
However, paragraph (d) imposes an additional obligation on the 
governmental entity, similar to current paragraph (c), to notify the 
party who caused the legal process to be served that the obligor is now 
entitled to a phased retirement annuity and to direct the party to the 
designated agent at the Office of Personnel Management who is 
responsible for the disbursement of retirement benefits. The title of 
Sec.  581.306 was also amended to add ``transfer of service of legal 
process to another governmental entity'' to account for the provisions 
in paragraphs (c) and (d).

Part 582--Commercial Garnishment of Federal Employees' Pay

    Phased retirees' pay is treated the same way as other Federal pay 
for purposes of commercial garnishment orders. Technical changes are 
made to Sec.  582.102, paragraph (2). In paragraph (2), the definition 
of ``employee or employee-obligor'' is amended to add ``individuals 
engaged in phased employment.''

Subpart Q of Part 831

    OPM is proposing to add subpart Q to part 831 to set out the 
requirements for entering, exiting, and retiring under the new phased 
retirement option under CSRS. Subpart Q establishes the eligibility 
requirements for making an election of phased retirement, the 
procedures for electing phased retirement, the requirements for 
agencies to notify OPM of phased retirement actions, and the 
methodology OPM intends to use to compute phased retirement annuities 
under 5 U.S.C. 8336a.
    Sections 831.1701 through 831.1703 explain the purpose and scope of 
the regulations, define terms used in subpart Q, and provide that the 
Director of OPM may issue implementing directives regarding the phased 
retirement program. In particular, Sec.  831.1702 provides a definition 
of ``full-time.'' This definition does not include certain categories 
of full-time employees listed in the definition of ``full-time 
service'' in Sec.  831.703--namely, certain firefighters compensated 
under 5 U.S.C. 5545b and certain employees with less-than-full-time 
schedules who are deemed to be full-time employees by express provision 
of law (e.g., nurses with special work schedules under 38 U.S.C. 7456 
or 7456A). Employees with these special work schedules may not elect 
phased retirement, since regularly recurring part-time employment is 
not a possibility under the applicable law. (Almost all firefighters 
compensated under 5 U.S.C. 5545b would also be ineligible for phased 
retirement on the additional basis that they are eligible for an early 
and enhanced retirement with mandatory separation provisions.)
    Section 831.1711 sets out the eligibility requirements for entering 
phased retirement. Eligibility for phased retirement is limited to 
employees who have been employed on a full-time basis for not less than 
the 3-year period ending on the effective date of the employee's 
election of phased retirement. Under CSRS, these employees must also be 
eligible for immediate retirement with at least 30 years of service at 
age 55, or with 20 years of service at age 60. Employees who do not 
meet these requirements will be excluded from electing phased 
retirement.
    For the purposes of phased retirement, a retirement-eligible 
employee is an employee who, if separated from the service, would meet 
the requirements for retirement under subsection (a) or (b) of 5 U.S.C. 
8336. As discussed above, a retirement-eligible employee in this 
context does not include an employee subject to mandatory retirement, 
with limited exceptions. There is no reason for such employees to wish 
to participate in phased retirement because 5 U.S.C. 8336a requires 
that the phased retirement computations are made using the general 
formula applicable to regular employee service.
    In addition, since the phased retirement law requires that an 
employee be converted from full-time to part-time, Sec.  831.1711 makes 
clear that phased retirement may not be elected by employees covered by 
a special work schedule authority that does not allow for a regularly 
recurring part-time schedule, such as a firefighter covered by 5 U.S.C. 
5545b or a nurse covered by 38 U.S.C. 7456 or 7456A.
    Section 831.1712 describes how ``working percentage'' would be 
defined. The law uses the term ``working percentage'' to refer to the 
percentage of a full-time schedule that a phased retiree would be 
scheduled to work. The statute permits a working percentage of 50 
percent (i.e., a half-time work schedule) and contemplates additional 
working percentages, at OPM's discretion. Although a working percentage 
of 50 percent would be the only working percentage permitted under 
Sec.  831.1712, the section has been drafted using general descriptive 
language to easily allow OPM to amend the regulations in the future to 
allow working percentages other than 50 percent, if and when OPM 
determines that such an amendment is appropriate. Unless and until OPM 
evaluates the phased retirement program and publishes regulations 
permitting a different ``working percentage,'' a phased retiree will 
not be permitted to have a working percentage other than 50 percent. 
Section 831.1712 defines ``working percentage'' as the percentage of 
full-time equivalent employment equal to the quotient obtained by 
dividing (1) the number of officially established hours per pay period 
to be worked by a phased retiree by (2) the number of hours per pay 
period to be worked by an employee serving in a comparable position on 
a full-time basis. In other words, the number of hours per pay period 
in a phased retiree's officially established part-time work schedule 
must equal one-half the number of hours the phased retiree would have 
worked had the phased retiree remained in a full-time work schedule and 
not elected to enter phased retirement status. The phased retiree's 
officially established part-time work schedule excludes any additional 
(excess) hours worked under the special exception authority in Sec.  
831.1715(h) (discussed below).
    Sections 831.1713 through 831.1715 set out the requirements for an 
employee to elect phased retirement, establish the commencing date of 
the phased annuity (and therefore the effective date of the half-time 
work schedule, or what we are calling ``phased employment''), and state 
the effect of phased retirement. Section 831.1713 provides that an 
authorized agency official must give the potential phased retiree 
written approval for the change. Section 831.1713(d) allows an agency 
to establish a time limit on the phased retirement election of any 
employee as a condition of approving the election to phased retirement. 
To implement such a time limit, the agency and the employee requesting 
phased retirement must complete a written and signed agreement. The 
agency is responsible for drafting an agreement that meets the 
requirements enumerated

[[Page 33915]]

in Sec.  831.1713(d)(3). The agency is also responsible for defending 
any challenges to an agreement made with an employee under Sec.  
831.1713(d). The election must be accompanied by a retirement 
application, in accordance with Sec.  831.104.
    Section 831.1715(a)(1) provides, consistent with 5 U.S.C. 8336a(i), 
that a phased retiree is deemed to be a full-time employee for the 
purpose of the Federal Employees Health Benefits Program. Section 
831.1715(a)(2) has provisions for determining the amount of deemed 
basic pay and the deemed full-time schedule for determining Federal 
Employees' Life Insurance benefits and premiums. Any premium pay 
normally creditable as basic pay under 5 CFR 870.204 for overtime work 
outside of a full-time schedule may not be considered in determining a 
phased retiree's deemed annual rate of basic pay for life insurance 
purposes. A conforming change is also being made to 5 CFR 870.204. 
Section 831.1715(h) describes the conditions under which a phased 
retiree may, in rare and exceptional circumstances, work hours in 
excess of officially established hours, as well as related agency 
responsibilities and OPM authorities. The limitations and controls on 
excess hours are necessary and proper to carry out the intent of the 
phased retirement law and ensure that phased retirees do not work 
significant hours beyond the working percentage used to compute the 
phased retirement annuity. In promulgating Sec.  831.1715(h), we are 
relying on OPM's broad regulatory authority in 5 U.S.C. 8347(a), as 
well as the authority in 5 U.S.C. 8336a(b)(1) to prescribe regulations 
governing the phased retirement resulting from employee elections.
    Sections 831.1721 through 831.1723 describe how a phased retiree 
may return to regular employment status, the effective date of the 
decision to end phased retirement, and what happens to the phased 
annuity as a result of returning to a regular employment status. 
Section 831.1721(a) provides that an authorized agency official must 
give the phased retiree written permission to return to regular 
employment on a form prescribed by OPM. With an authorized agency 
official's approval, the employee may enter into any type of work 
schedule after returning to regular employment. When an individual in 
phased retirement status returns to regular employment status, the 
phased retirement annuity terminates; therefore, agencies are required 
to immediately notify OPM of a phased retiree's return to regular 
employee status to prevent improper payments. Section 831.1721(b) also 
includes provisions concerning the return of a phased retiree to 
regular employment status. For a phased retiree who returns to regular 
employment under Sec.  831.1721(a) or (b), Sec.  831.1723 provides that 
the period of phased employment will be treated as a period of part-
time service under subchapter III, chapter 83, of title 5, United 
States Code. Consistent with 5 U.S.C. 8336a(g)(3), the phased 
retirement period will be deemed to have been a period of part-time 
employment with the work schedule described in Sec.  831.1712. The 
part-time proration adjustment will be based upon the individual's 
officially established part-time work schedule, with no credit for 
extra hours worked. In determining the individual's deemed rate of 
basic pay during the phased retirement period, only basic pay for hours 
within the individual's officially established part-time work schedule 
may be considered. No pay received for other hours during the phased 
retirement period may be included as part of basic pay for the purpose 
of computing retirement benefits, notwithstanding the normally 
applicable rules. A phased retiree who returns to regular employee 
status would not be entitled to a composite retirement annuity upon 
subsequent retirement; the employee's rights under subchapter III of 
chapter 83 or chapter 84 of title 5, United States Code, would be 
determined based on the law in effect at the time of any subsequent 
separation from service.
    Sections 831.1731 and 831.1732 describe how an employee may elect 
to fully retire and how OPM will determine the commencing date of the 
employee's composite retirement annuity. These sections also discuss 
how OPM will treat an employee who has separated from phased employment 
and the criteria by which OPM will either continue to pay a phased 
retirement annuity or terminate payment as required by law.
    Sections 831.1741 through 831.1744 establish how OPM intends to 
compute the phased retirement annuity and the composite annuity payable 
at full retirement under CSRS. Section 831.1741 provides that, subject 
to any adjustments for unpaid deposits of retirement contributions and 
Social Security old-age benefits, the phased retirement annuity equals 
(1) the amount of annuity computed under 5 U.S.C. 8339 that would have 
been payable to the phased retiree if, on the date on which the phased 
retiree enters phased retirement status, the phased retiree had 
separated from service and retired, (2) adjusted by the phased 
retirement percentage for the phased retiree. Phased retirement 
annuities will be increased by cost-of-living adjustments. Section 
831.1742 establishes the computation of the composite retirement 
annuity. Subject to any reduction to provide a survivor annuity and 
adjustments for unpaid deposits of retirement contributions and Social 
Security old-age benefits, the composite retirement annuity consists of 
the phased retirement annuity, increased by cost-of-living adjustments, 
plus the ``fully retired phased component.'' The ``fully retired phased 
component'' is (1) the amount of an annuity computed under 5 U.S.C. 
8339 that would have been payable at the time of full retirement if the 
individual had not elected phased retirement status and as if the 
individual was employed on a full-time basis in the position occupied 
during the phased retirement period and before any reduction for 
survivor annuity multiplied by (2) the working percentage. Section 
831.1742(b) establishes rules for deemed full-time and deemed basic pay 
for the purposes of computing the ``fully retired phased component.'' 
The law requires phased retirees to be deemed to be full-time for the 
purpose of determining basic pay for life insurance and composite 
annuity, and also limits pay subject to retirement deductions based on 
the concept of full-time. For those purposes, we have taken a 
consistent approach of defining full-time to be 40 hours a week and to 
exclude overtime hours; thus, any pay for overtime hours (hours beyond 
the full-time schedule--which normally should not be worked by a phased 
retiree) is not considered basic pay for life insurance or retirement 
purposes. The deemed full-time schedule is five 8-hour workdays each 
workweek, resulting in a 40-hour workweek, consistent with other 
provisions in the regulations. In determining the individual's deemed 
rate of basic pay during phased retirement, only basic pay for hours 
within the deemed full-time schedule will be considered for the 
computation of the composite retirement annuity at full retirement. 
Similarly, Sec. Sec.  831.1721 and 831.1761 include provisions 
concerning deemed part-time (see discussion of those sections).
    Sections 831.1751 through 831.1753 describe how OPM intends to 
treat civilian deposits and redeposits, as well as military service 
deposits. Section 831.1751 outlines the process OPM will follow with 
regard to deposits for civilian service for which no retirement 
deductions were withheld and for redeposits owed for civilian service 
previously refunded to the employee.

[[Page 33916]]

Deposits and redeposits will not be possible at the point where a 
phased retiree elects to enter full retirement status. Section 831.1752 
refers specifically to how OPM will treat military service deposits, 
whether for military service prior to phased retirement or military 
service after phased retirement begins. Section 831.1753 describes how 
OPM intends to treat civilian and military service of individual 
employees affected by erroneous retirement coverage determinations.
    Sections 831.1761 through 831.1763 set out how OPM plans to 
administer death benefits for employees who die while in phased 
retirement and for employees who die after separation from phased 
employment without having submitted an application for a composite 
retirement annuity. Consistent with 5 U.S.C. 8336a(h)(2), Sec.  
831.1761(a)(2) provides that when a phased retiree dies in service, the 
phased retiree is deemed to have had a part-time schedule consistent 
with the working percentage. Any hours beyond that part-time schedule 
and any pay associated with such hours would not be creditable for 
retirement purposes.
    Section 831.1771 addresses reemployment of an individual who has 
separated from phased employment and who dies before submitting an 
application for a composite retirement annuity.
    Section 831.1781, as provided by MAP-21, requires a phased retiree 
(other than an employee of the U.S. Postal Service) to spend at least 
20 percent of his or her working hours in mentoring activities. It is 
up to the phased retiree's employing agency to determine what types of 
mentoring activities satisfy this requirement and how to ensure this 
requirement is being fulfilled. The phased retiree may mentor one or 
more employees of the agency and need not mentor the same employees 
throughout the period of phased retirement. Although it would clearly 
be desirable in many instances for the phased retiree to mentor the 
employee or employees who are expected to assume his or her duties when 
the phased retiree fully retires, the law does not provide that this is 
the only way to implement the mentoring requirement. An authorized 
agency official may waive the mentoring requirement in the event of an 
emergency or other unusual circumstances that would make it 
impracticable, such as when the individual is called to active-duty 
military service. OPM expects waivers of the mentoring requirement to 
be very rare.

Part 848--Federal Employees' Retirement System

    Part 848 is being added to 5 CFR, to set out the requirements for 
entering, exiting, and retiring under the new phased retirement option 
under the Federal Employees' Retirement System (FERS). Part 848 
establishes the eligibility requirements for making an election of 
phased retirement, the procedures for electing phased retirement, the 
requirements for agencies to notify OPM of phased retirement actions, 
and the methodology OPM intends to use to compute phased retirement 
annuities under 5 U.S.C. 8412a.
    Sections 848.101 through 848.103 explain the purpose and scope of 
the regulations, define terms used in part 848, and provide that the 
Director of OPM may issue implementing directives regarding the phased 
retirement program. In particular, Sec.  848.102 provides a definition 
of ``full-time.'' This definition does not include certain categories 
of full-time employees listed in the definition of ``full-time 
service'' in Sec.  842.402--namely, certain firefighters compensated 
under 5 U.S.C. 5545b and certain employees with less-than-full-time 
schedules who are deemed to be full-time employees by express provision 
of law (e.g., nurses with special work schedules under 38 U.S.C. 7456 
or 7456A). Employees with these special work schedules may not elect 
phased retirement, since regularly recurring part-time employment is 
not a possibility under the applicable law. (Almost all firefighters 
compensated under 5 U.S.C. 5545b would also be ineligible for phased 
retirement on the additional basis that they are eligible for an early 
and enhanced retirement with mandatory separation provisions.)
    Section 848.201 sets out the eligibility requirements for entering 
phased retirement. Eligibility for phased retirement is limited to 
employees who have been employed on a full-time basis for not less than 
the 3-year period ending on the effective date of the employee's 
election of phased retirement. Under FERS, these employees must also be 
eligible for immediate retirement with at least 30 years of service at 
their minimum retirement age, or with 20 years of service at age 60. 
Employees who do not meet these requirements will be excluded from 
electing phased retirement.
    For the purposes of phased retirement, a retirement-eligible 
employee is an employee who, if separated from the service, would meet 
the requirements for retirement under subsection (a) or (b) of 5 U.S.C. 
8412. As discussed above, a retirement-eligible employee will not 
include an employee subject to mandatory retirement, with limited 
exceptions. There is no reason for such employees to wish to 
participate in phased retirement because 5 U.S.C. 8412a requires that 
the phased retirement computations be made using the general formula 
applicable to regular employee service.
    In addition, since the phased retirement law requires that an 
employee be converted from full-time to part-time, Sec.  848.201 makes 
clear that phased retirement may not be elected by employees covered by 
a special work schedule authority that does not allow for a regularly 
recurring part-time schedule, such as a firefighter covered by 5 U.S.C. 
5545b or a nurse covered by 38 U.S.C. 7456 or 7456A.
    Section 848.202 describes how ``working percentage'' would be 
defined. The law uses the term ``working percentage'' to refer to the 
percentage of a full-time schedule that a phased retiree would be 
scheduled to work. The statute permits a working percentage of 50 
percent- that is, a half-time work schedule--and contemplates 
additional working percentages, at OPM's discretion. Although a working 
percentage of 50 percent would be the only working percentage permitted 
under Sec.  848.202, the section has been drafted using general 
descriptive language to easily allow OPM to amend the regulations in 
the future to allow working percentages other than 50 percent, if and 
when OPM determines that such an amendment is appropriate. Unless and 
until OPM evaluates the phased retirement program and publishes 
regulations permitting a different ``working percentage,'' a phased 
retiree will not be permitted to have a working percentage other than 
50 percent. Section 848.202 defines ``working percentage'' as the 
percentage of full-time equivalent employment equal to the quotient 
obtained by dividing (1) the number of officially established hours per 
pay period to be worked by a phased retiree by (2) the number of hours 
per pay period to be worked by an employee serving in a comparable 
position on a full-time basis. In other words, the number of hours per 
pay period in a phased retiree's officially established part-time work 
schedule must equal one-half the number of hours the phased retiree 
would have worked had the phased retiree remained in a full-time work 
schedule and not elected to enter phased retirement status. The phased 
retiree's officially established part-time work schedule excludes any 
additional

[[Page 33917]]

(excess) hours worked under the special exception authority in Sec.  
848.205(j).
    Sections 848.203 through 848.205 set out the requirements for an 
employee to elect phased retirement, establish the effective date of 
phased employment and the commencing date of phased annuity, and state 
the effect of phased retirement. Section 848.203 provides that an 
authorized agency official must give the potential phased retiree 
written approval for the change. Section 848.203(d) allows an agency to 
establish a time limit on the phased retirement election of any 
employee as a condition of approving the election to phased retirement. 
To implement such a time limit, the agency and the employee requesting 
phased retirement must complete a written and signed agreement. The 
agency is responsible for drafting an agreement that meets the 
requirements enumerated in Sec.  848.203(d)(3). The agency is also 
responsible for defending any challenges to an agreement made with an 
employee under Sec.  848.203(d). The election must be accompanied by a 
retirement application, in accordance with Sec.  841.202.
    Section 848.205(a)(1) provides, consistent with 5 U.S.C. 8412a(i), 
that a phased retiree is deemed to be a full-time employee for the 
purpose of the Federal Employees Health Benefits Program. Section 
848.205(a)(2) has provisions for determining the amount of deemed basic 
pay and the deemed full-time schedule for determining Federal 
Employees' Life Insurance benefits and premiums. Any premium pay 
normally creditable as basic pay under 5 CFR 870.204 for overtime work 
outside of a full-time schedule may not be considered in determining a 
phased retiree's deemed annual rate of basic pay for life insurance 
purposes. A conforming change is also being made to 5 CFR 870.204. 
Section 848.205(j) describes the conditions under which a phased 
retiree may, in rare and exceptional circumstances, work hours in 
excess of officially established hours, as well as related agency 
responsibilities and OPM authorities. The limitations and controls on 
excess hours are necessary and proper to carry out the intent of the 
phased retirement law and ensure that phased retirees do not work 
significant hours beyond the working percentage used to compute the 
phased retirement annuity. In promulgating Sec.  848.205(j), we are 
relying on OPM's broad regulatory authority in 5 U.S.C. 8461(g), as 
well as the authority in 5 U.S.C. 8412a(b)(1) to prescribe regulations 
governing the phased retirement resulting from employee elections.
    Sections 848.301 through 848.303 describe how a phased retiree may 
return to regular employment status, the effective date of the decision 
to end phased retirement, and what happens to the phased annuity as a 
result of returning to a regular employment status. Section 848.301(a) 
provides that an authorized agency official must give the phased 
retiree written permission to return to regular employment on a form 
prescribed by OPM. With an authorized agency official's approval, the 
employee may enter into any type of work schedule after returning to 
regular employment. When an individual in phased retirement status 
returns to regular employment status, the phased retirement annuity 
terminates; therefore, agencies are required to immediately notify OPM 
of these changes to prevent improper payments. Section 848.301(b) also 
includes provisions concerning the return of a phased retiree to 
regular employment status. For a phased retiree who returns to regular 
employment under Sec.  848.301(a) and (b), Sec.  848.303 provides that 
the period of phased employment will be treated as a period of part-
time service under chapter 84 of title 5, United States Code. 
Consistent with 5 U.S.C. 8412a(g)(3), the phased retirement period will 
be deemed to have been a period of part-time employment with the work 
schedule described in Sec.  848.202. The part-time proration adjustment 
will be based upon the individual's officially established part-time 
work schedule, with no credit for extra hours worked. In determining 
the individual's deemed rate of basic pay during the phased retirement 
period, only basic pay for hours within the individual's officially 
established part-time work schedule may be considered. No pay received 
for other hours during the phased retirement period may be included as 
part of basic pay for the purpose of computing retirement benefits, 
notwithstanding the normally applicable rules. A phased retiree who 
returns to regular employee status would not be entitled to a composite 
retirement annuity upon subsequent retirement; the employee's rights 
under subchapter III of chapter 83 or chapter 84 of title 5, United 
States Code, would be determined based on the law in effect at the time 
of any subsequent separation from service.
    Sections 848.401 and 848.402 describe how an employee may elect to 
fully retire and how OPM will determine the commencing date of the 
employee's composite retirement annuity. These sections also discuss 
how OPM will treat an employee who has separated from phased employment 
and the criteria by which OPM will either continue to pay a phased 
retirement annuity or terminate payment as required by law.
    Sections 848.501 through 848.503 cover how OPM intends to compute 
the phased retirement annuity and the composite annuity payable at full 
retirement under FERS. Section 848.501 provides that the phased 
retirement annuity equals (1) the amount of annuity computed under 5 
U.S.C. 8412 that would have been payable to the phased retiree if, on 
the date on which the phased retiree enters phased retirement status, 
the phased retiree had separated from service and retired, (2) adjusted 
by the phased retirement percentage for the phased retiree. Phased 
retirement annuities will be subject to FERS cost-of-living adjustment 
provisions. Section 848.502 establishes the computation of the 
composite retirement annuity. Subject to any reduction to provide a 
survivor annuity, the composite retirement annuity consists of the 
phased retirement annuity, increased by cost-of-living adjustments, 
plus the ``fully retired phased component.'' The ``fully retired phased 
component'' is (1) the amount of an annuity computed under 5 U.S.C. 
8412 that would have been payable at the time of full retirement if the 
individual had not elected phased retirement status and as if the 
individual was employed on a full-time basis in the position occupied 
during the phased retirement period and before any reduction for 
survivor annuity multiplied by (2) the working percentage. Section 
831.502(b) establishes rules for deemed full-time and deemed basic pay 
for the purposes of computing the ``fully retired phased component.'' 
The law requires phased retirees to be deemed to be full-time for the 
purpose of determining basic pay for life insurance and composite 
annuity, and also limits pay subject to retirement deductions based on 
the concept of full-time. For those purposes, we have taken a 
consistent approach of defining full-time to be 40 hours a week and to 
exclude overtime hours; thus, any pay for overtime hours (hours beyond 
the full-time schedule--which normally should not be worked by a phased 
retiree) is not considered basic pay for life insurance or retirement 
purposes. The deemed full-time schedule is five 8-hour workdays each 
workweek, resulting in a 40-hour workweek, consistent with other 
provisions in the regulations. In determining the individual's deemed 
rate of basic pay during phased retirement, only basic pay for hours 
within the deemed full-

[[Page 33918]]

time schedule will be considered for the computation of the composite 
retirement annuity at full retirement. Similarly, Sec. Sec.  848.301 
and 848.701 include provisions concerning deemed part-time (see 
discussion of those sections).
    Section 848.504 specifically states that FERS phased retirees will 
not receive an annuity supplement under 5 U.S.C. 8421.
    Sections 848.601 and 848.602 describe how OPM intends to treat 
civilian deposits and redeposits as well as military service deposits. 
Section 848.601 states that deposits for civilian service for which no 
retirement deductions were withheld and redeposits owed for civilian 
service previously refunded to the employee must be paid within 30 days 
of the employee receiving OPM's notice. Deposits and redeposits will 
not be possible at the point where a phased retiree elects to enter 
full retirement status. Section 848.602 refers specifically to how OPM 
will treat military service deposits, whether for military service 
prior to phased retirement or military service after phased retirement 
begins.
    Sections 848.701 through 848.703 set out how OPM plans to 
administer death benefits for employees who die while in phased 
retirement and for employees who die after separation from phased 
employment without having submitted an application for a composite 
retirement annuity. Consistent with 5 U.S.C. 8412a(h)(2), Sec.  
848.701(a)(2) provides that when a phased retiree dies in service, the 
phased retiree is deemed to have had a part-time schedule consistent 
with the working percentage. Any hours beyond that part-time schedule 
and any pay associated with such hours would not be creditable for 
retirement purposes.
    Section 848.801 addresses reemployment of an individual who has 
separated from phased employment and who dies before submitting an 
application for a composite retirement annuity.
    Section 848.901, as provided by MAP-21, requires a FERS phased 
retiree (other than an employee of the U.S. Postal Service) to spend at 
least 20 percent of his or her working hours in mentoring activities. 
It is up to the phased retiree's employing agency to determine what 
types of mentoring activities satisfy this requirement and how to 
ensure this requirement is being fulfilled. The phased retiree may 
mentor one or more employees of the agency and need not mentor the same 
employees throughout the period of phased retirement. Although it would 
clearly be desirable in many instances for the phased retiree to mentor 
the employee or employees who are expected to assume his or her duties 
when the phased retiree fully retires, the law does not provide that 
this is the only way to implement the mentoring requirement. An 
authorized agency official may waive the mentoring requirement in the 
event of an emergency or other unusual circumstances that would make it 
impracticable (such as when the phased retiree is called to active duty 
military service). OPM expects waivers of the mentoring requirement to 
be very rare.

Other Technical Conforming Amendments to Existing Regulations

    Because a phased retiree is both an annuitant and an employee, and 
is treated as an annuitant for some purposes, but an employee for 
others, certain regulatory changes are necessary to inform agencies and 
employees about how phased retirement is structured, how the phased 
retirement annuity and the composite annuity will be computed, and how 
certain benefits and obligations will be treated during and after 
phased retirement.

Part 831

    The Civil Service Retirement System (CSRS) regulations located in 
part 831 are being updated where specific references to phased 
retirement are necessary as a result of the passage of MAP-21. The 
authority to update part 831 is found in title 5, United States Code, 
section 8336a. Therefore, OPM is updating certain definitions and 
cross-references to the new phased retirement provisions which will be 
located in subpart Q.
    In Sec.  831.402 we propose to revise the definition of ``applicant 
for retirement'' and add a definition of ``phased retiree.'' Section 
831.501, pertaining to the time for filing applications for retirement, 
is amended to include a reference to subpart Q for employees and 
agencies considering phased retirement. We also are inserting in Sec.  
831.701 a cross-reference regarding the effective date of an annuity 
with a phased retirement component. In Sec.  831.703, under which we 
compute part-time service, we propose to clarify the definition of 
``full-time service'' by specifically describing categories of full-
time employees. While this definition is outside the phased retirement 
area, we are taking this opportunity to make applicable paragraphs 
consistent with the clearer language in the definition of ``full-time'' 
in the phased retirement regulations in subpart Q. (See Sec.  
831.1702.)

Part 838

    OPM is proposing amendments to 5 CFR part 838, concerning court 
orders affecting retirement benefits, to allow a court order acceptable 
for processing that is directed at employee annuity to apportion phased 
retirement annuity or composite retirement annuity between an employee 
and his or her former spouse.
    Section 838.103 would be amended by changing and adding definitions 
relating to phased retirement. These changes include (1) defining 
``employee annuity'' to include recurring payments of phased retirement 
annuity and composite retirement annuity; (2) defining ``gross 
annuity,'' ``net annuity,'' and ``self-only annuity'' as including 
phased retirement annuity amounts paid to phased retirees; and (3) 
defining ``retiree'' to include a phased retiree who has entered full 
retirement status.
    Section 838.211 would be amended by adding paragraph (b), which 
would subject phased retirement annuity to division by a court order 
acceptable for processing.
    Sections 838.222, 838.232, 838.233, and 838.237 are being amended 
by including references to phased retirees and phased retirement.
    Section 838.242(b) would be amended to conform to the rule at 
Sec. Sec.  831.1742 and 848.502 concerning crediting unused sick leave 
in the computation of a composite retirement annuity.
    Section 838.305(e) would be amended by adding language providing 
that a court order directed at the division of phased retirement 
annuity or composite retirement annuity is not a court order acceptable 
for processing if it includes unacceptable instructions concerning the 
computation of an employee's salary or average salary.
    Section 838.306 would be revised to allow a court order to include 
express provisions specifically directed at division of phased 
retirement annuity, composite retirement annuity, or annuity payable to 
an employee who retires without having elected phased retirement 
status. Paragraph (b) of Sec.  838.306 would be amended to provide 
that, unless a court order otherwise directs, OPM will apply to gross 
annuity a formula, percentage, or fraction directed at annuity payable 
to either a retiree or a phased retiree. Paragraph (c)(2) of Sec.  
838.306 would provide that for a court order to separately provide for 
division of phased retirement annuity or composite retirement annuity, 
a provision of a court order must expressly state that it is directed 
at ``phased retirement annuity'' or ``composite retirement annuity,'' 
and

[[Page 33919]]

should state the type of annuity to be divided (e.g., ``net phased 
retirement annuity''). If such a provision is unclear as to whether it 
is directed at gross, net, or self-only phased retirement annuity or 
composite retirement annuity, the provision will be applied to gross 
phased retirement annuity or gross composite retirement annuity, as 
described in Sec.  838.306(b). Paragraph (c)(3) of Sec.  838.306 would 
provide that unless a court order expressly states that phased 
retirement annuity or composite retirement annuity is not to be 
divided, a court order meeting the requirements of Sec.  838.306(a) and 
that generally provides for division of annuity without meeting the 
requirements of paragraph (c)(2), regarding the specific type of 
annuity being divided, will be applied to divide any employee annuity, 
including phased retirement annuity and composite retirement annuity. 
Thus, paragraph (c)(3) of Sec.  838.306 would allow OPM to honor 
provisions in court orders on file with OPM, which were issued before 
MAP-21 was enacted. Parties to a divorce could also submit a new court 
order providing for a different apportionment of annuity than provided 
under Sec.  838.306(c)(3).
    Sections 838.612, 838.621, and 838.622 would be amended to add 
references to phased retirement annuity and composite retirement 
annuity.
    Section 838.623 would be amended to add references to phased 
retirement annuity and composite retirement annuity. Paragraph (e) of 
Sec.  838.623 would provide that a court order directed at phased 
retirement annuity or a composite retirement annuity cannot limit the 
computation and division of a phased retirement annuity or composite 
retirement annuity to a particular period of employment or service. The 
amount of service that is included in the computation of phased 
retirement annuity and composite retirement annuity is established by 
statute. Any adjustment in a court order of the division of annuity 
will have to be accomplished through other means.
    Appendix A to subpart F of 5 CFR part 838, has been amended by 
adding model paragraphs for dividing phased retirement annuity and 
composite retirement annuity.
    Section 838.803 would be amended by adding paragraph (c), which 
would provide that a court order that attempts to award a former spouse 
survivor annuity based on a phased retirement annuity or to reduce a 
phased retirement annuity to provide survivor benefits is not a court 
order acceptable for processing.
    Section 838.806(d)(2) would be amended to allow a former spouse 
survivor annuity to be awarded or a change to an award of a former 
spouse survivor annuity during an employee's phased retirement status, 
before the commencing date of a composite retirement annuity.
    Section 838.807 would be amended to make it clear that only 
employee annuity payable to a retiree and not a phased retiree is 
subject to reduction to provide a survivor annuity.
    Sections 838.1111 would be amended to make phased retirement 
annuities subject to child abuse judgment enforcement orders.

Part 841

    The Federal Employees' Retirement System (FERS) regulations located 
in parts 841, 842, and 843 are being updated where specific references 
to phased retirement are necessary as a result of the passage of MAP-
21. The authority for these updates is found in title 5, United States 
Code, section 8412a. Therefore, OPM is updating certain definitions and 
cross-references to the new phased retirement provisions which will be 
located in part 848.
    In Sec.  841.102, we add references to parts 848 and part 850. In 
Sec.  841.104 we revise how we define special terms throughout the 
regulations pertaining to FERS in parts 841 through 850.

Part 842

    The definition of ``full-time service'' in Sec.  842.402, under 
which we compute part-time service, would be clarified by specifically 
describing categories of full-time employees. While this definition is 
outside the phased retirement area, we are taking this opportunity to 
make applicable paragraphs consistent with the clearer language in the 
definition of ``full-time'' in the phased retirement regulations in 
part 848. (See Sec.  848.102.)

Part 843

    In Sec.  843.202 we are revising paragraph (b) to reflect the 
change in law affecting the consequences of employee refunds.

Part 870

    The change to Sec.  870.101 clarifies that, for FEGLI purposes, the 
date of retirement for a phased retiree is the date the individual 
enters full retirement status.
    The proposed rules provide in Sec.  870.204, for a phased retiree, 
the annual rate of pay used to calculate Basic and Optional coverage 
amounts is the full-time basic pay rate as fixed by applicable law and 
regulation for the position in which the individual serves.

Part 890

    The changes to Sec.  890.101 provide that in the case of a phased 
retiree, a composite retirement annuity is an immediate annuity for 
purposes of eligibility to continue FEHB into retirement. This 
clarifies that a phased retiree who retires on a composite retirement 
annuity must meet the requirement to retire on an immediate annuity in 
order to continue FEHB coverage into retirement.
    The proposed rules provide that, for a phased retiree, the FEHB 
Government contribution amount is the full-time employer contribution 
as fixed by applicable law and regulation for the position in which the 
individual serves. These changes can be found in Sec.  890.501(h).

Executive Order 13563 and Executive Order 12866

    The Office of Management and Budget has reviewed this rule in 
accordance with E.O. 13563 and E.O. 12866.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because the regulation 
will only affect retirement payments to Federal employees who elect 
phased retirement status.

List of Subjects

5 CFR Part 581

    Alimony, Child support, Government employees, Wages.

5 CFR Part 582

    Claims, Government employees, Wages.

5 CFR Part 831

    Administrative practice and procedure, Alimony, Claims, Disability 
benefits, Firefighters, Government employees, Income taxes, 
Intergovernmental relations, Law enforcement officers, Pensions, 
Reporting and recordkeeping requirements, Retirement.

5 CFR Part 838

    Alimony, Claims, Courts, Government employees, Pensions, 
Retirement.

5 CFR Part 841

    Administrative practice and procedure, Air traffic controllers, 
Claims, Disability benefits, Firefighters, Government employees, Income 
taxes, Intergovernmental relations, Law enforcement officers, Pensions, 
Retirement.

5 CFR Part 842

    Air traffic controllers, Alimony, Firefighters, Government 
employees,

[[Page 33920]]

Law enforcement officers, Pensions, Retirement.

5 CFR Part 843

    Air traffic controllers, Disability benefits, Firefighters, 
Government employees, Law enforcement officers, Pensions, Retirement.

5 CFR Part 848

    Air traffic controllers, Alimony, Firefighters, Government 
employees, Law enforcement officers, Pensions, Retirement.

5 CFR Part 870

    Administrative practice and procedure, Government employees, 
Hostages, Iraq, Kuwait, Lebanon, Life insurance, Retirement.

5 CFR Part 890

    Administrative practice and procedure, Government employees, Health 
facilities, Health insurance, Health professions, Hostages, Iraq, 
Kuwait, Lebanon, Military personnel, Reporting and recordkeeping 
requirements, Retirement.

    Office of Personnel Management.
Elaine Kaplan,
Acting Director.

    For the reasons discussed in the preamble, the Office of Personnel 
Management is proposing to amend 5 CFR parts 581, 582, 831, 838, 841, 
842, 843, 870, and 890 and add a new part 848 as follows:

PART 581--PROCESSING GARNISHMENT ORDERS FOR CHILD SUPPORT AND/OR 
ALIMONY

0
1. The authority citation for part 581 is revised to read as follows:

    Authority: 42 U.S.C. 659; 15 U.S.C. 1673; E.O. 12105 (43 FR 
59465 and 3 CFR 262)(1979). Secs. 581.102 and 581.306 also issued 
under 5 U.S.C. 8336a and 8412a.

0
2. Amend Sec.  581.102 to add paragraphs (l) and (m) to read as 
follows:


Sec.  581.102  Definitions.

* * * * *
    (l) Phased retirement status has the same meaning given that term 
in Sec.  838.103 of this chapter; and
    (m) Phased retirement annuity has the same meaning given that term 
in Sec.  838.103 of this chapter.
0
3. Amend Sec.  581.306 by revising the section heading and by adding 
paragraph (d) to read as follows:


Sec.  581.306  Lack of moneys due from, or payable by, a governmental 
entity served with legal process; transfer of service of legal process 
to another governmental entity.

* * * * *
    (d) In instances where an employee obligor, who is employed by a 
governmental entity which is honoring a continuing legal process, 
enters phased retirement status in accordance with part 831, subpart Q, 
and part 848 of this chapter, the entity must inform the party who 
caused the legal process to be served, or the party's representative, 
and the court or other authority, that remuneration for employment will 
continue at a reduced rate and that the employee obligor will be 
receiving a phased retirement annuity. The governmental entity must 
provide the party with the designated agent at the Office of Personnel 
Management who is responsible for the disbursement of retirement 
benefits.

PART 582--COMMERCIAL GARNISHMENT OF FEDERAL EMPLOYEES' PAY

0
4. The authority citation for part 582 is revised to read as follows:

    Authority: 5 U.S.C. 5520a; 15 U.S.C. 1673; E.O. 12897; Sec. 
582.102 also issued under 5 U.S.C. 8336a and 8412a.
0
5. Amend Sec.  582.102 by revising paragraph (2) to read as follows:


Sec.  582.102  Definitions.

* * * * *
    (2) Employee or employee-obligor means an individual who is 
employed by an agency as defined in this section, including a 
reemployed annuitant, an individual engaged in phased employment as 
defined in part 831, subpart Q, and part 848 of this chapter, and a 
retired member of the uniformed services who is employed by an agency. 
Employee does not include a retired employee, a member of the uniformed 
services, a retired member of the uniformed services, or an individual 
whose service is based on a contract, including an individual who 
provides personal services based on a contract with an agency.
* * * * *

PART 831--RETIREMENT

0
6. The authority citation for part 831 is revised to read as follows:

    Authority: 5 U.S.C. 8347; Sec. 831.102 also issued under 5 
U.S.C. 8334; Sec. 831.106 also issued under 5 U.S.C. 552a; Sec. 
831.108 also issued under 5 U.S.C. 8336(d)(2); Sec. 831.114 also 
issued under 5 U.S.C. 8336(d)(2), and Sec. 1313(b)(5) of Pub. L. 
107-296, 116 Stat. 2135; Sec. 831.201(b)(1) also issued under 5 
U.S.C. 8347(g); Sec. 831.201(b)(6) also issued under 5 U.S.C. 
7701(b)(2); Sec. 831.201(g) also issued under Secs. 11202(f), 
11232(e), and 11246(b) of Pub. L. 105-33, 111 Stat. 251; Sec. 
831.201(g) also issued under Secs. 7(b) and (e) of Pub. L. 105-274, 
112 Stat. 2419; Sec. 831.201(i) also issued under Secs. 3 and 7(c) 
of Pub. L. 105-274, 112 Stat. 2419; Sec. 831.204 also issued under 
Sec. 102(e) of Pub. L. 104-8, 109 Stat. 102, as amended by Sec. 153 
of Pub. L. 104-134, 110 Stat. 1321; Sec. 831.205 also issued under 
Sec. 2207 of Pub. L. 106-265, 114 Stat. 784; Sec. 831.206 also 
issued under Sec. 1622(b) of Pub. L. 104-106, 110 Stat. 515; Sec. 
831.301 also issued under Sec. 2203 of Pub. L. 106-265, 114 Stat. 
780; Sec. 831.303 also issued under 5 U.S.C. 8334(d)(2) and Sec. 
2203 of Pub. L. 106-235, 114 Stat. 780; Sec. 831.502 also issued 
under 5 U.S.C. 8337, and under Sec. 1(3), E.O. 11228, 3 CFR 1965-
1965 Comp. p. 317; Sec. 831.663 also issued under 5 U.S.C. 8339(j) 
and (k)(2); Secs. 831.663 and 831.664 also issued under Sec. 
11004(c)(2) of Pub. L. 103-66, 107 Stat. 412; Sec. 831.682 also 
issued under Sec. 201(d) of Pub. L. 99-251, 100 Stat. 23; Sec. 
831.912 also issued under Sec. 636 of Appendix C to Pub. L. 106-554, 
114 Stat. 2763A-164; Subpart P also issued under Sec. 535(d) of 
Title V of Division E of Pub. L. 110-161, 121 Stat. 2042; Subpart Q 
also issued under 5 U.S.C. 8336a; Subpart V also issued under 5 
U.S.C. 8343a and Sec. 6001 of Pub. L. 100-203, 101 Stat. 1330-275; 
Sec. 831.2203 also issued under Sec. 7001(a)(4) of Public Law 101-
508, 104 Stat. 1388-328.

0
7. Amend Sec.  831.303 by revising paragraph (c)(1) to read as follows:


Sec.  831.303  Civilian service.

* * * * *
    (c)(1)(i) An employee or Member whose retirement is based on a 
separation before October 28, 2009, and who has not completed payment 
of a redeposit for refunded deductions based on a period of service 
that ended before October 1, 1990, will receive credit for that service 
in computing the nondisability annuity for which the individual is 
eligible under subchapter III of chapter 83 of title 5, United States 
Code, provided the nondisability annuity commences after December 1, 
1990; and
    (ii) An employee or Member whose retirement is based on a 
separation on or after October 28, 2009, and who has not completed 
payment of a redeposit for refunded deductions based on a period of 
service that ended before March 1, 1991, will receive credit for that 
service in computing the nondisability annuity for which the individual 
is eligible under subchapter III of chapter 83 of title 5, United 
States Code.
* * * * *
0
8. Amend Sec.  831.402 to revise the definition of ``applicant for 
retirement'' and to add the definitions of ``full

[[Page 33921]]

retirement status'', and ``phased retiree'' in alphabetical order as 
follows:


Sec.  831.402  Definitions.

* * * * *
    Applicant for retirement means a person who is currently eligible 
to retire under CSRS on an immediate or deferred annuity, and who has 
filed an application to retire, other than an application for phased 
retirement status, that has not been finally adjudicated.
    * * *
    Full retirement status means the status of a phased retiree who has 
ceased employment and is entitled, upon application, to a composite 
retirement annuity.
    * * *
    Phased retiree means a retirement-eligible employee who--
    (1) Has entered phased retirement status under subpart Q of this 
part; and
    (2) Has not entered full retirement status.
* * * * *
0
9. Amend Sec.  831.403 by revising paragraph (a) to read as follows:


Sec.  831.403  Eligibility to make voluntary contributions.

    (a) Voluntary contributions may be made only by--
    (1) Employees (including phased retirees) or Members currently 
subject to CSRS, and
    (2) Applicants for retirement, including phased retirees who apply 
for full retirement status under subpart Q of this part.
* * * * *
0
10. Revise Sec.  831.501 to read as follows:


Sec.  831.501  Time for filing application.

    An employee or Member who is eligible for retirement must file a 
retirement application with his or her agency. A former employee or 
Member who is eligible for retirement must file a retirement 
application with OPM. The application should not be filed more than 60 
days before becoming eligible for benefits. If the application is for 
disability retirement, the applicant and the employing agency should 
refer to subpart L of this part. If the application is for phased 
retirement status, the employee and the employing agency should refer 
to subpart Q of this part.
0
11. Amend Sec.  831.701 as follows:
0
a. Revise paragraph (a) introductory text;
0
b. Redesignate paragraphs (d) through (f) as paragraphs (e) through 
(g);
0
c. Add paragraph (d).


Sec.  831.701  Effective dates of annuities.

    (a) Except as provided in paragraphs (b) through (d) of this 
section, an annuity of an employee or Member commences on the first day 
of the month after--
* * * * *
    (d) A phased retirement annuity and a composite retirement annuity 
granted to an employee under section 8336a of title 5, United States 
Code, and defined under Sec.  831.1702, commences as provided in 
subpart Q of this part.
* * * * *
0
12. Amend Sec.  831.703 to revise the definition of ``full-time 
service'' in paragraph (b) as follows:


Sec.  831.703  Computation of annuities for part-time service.

* * * * *
    (b) * * *
    Full-time service means service performed by an employee who has--
    (1) An officially established recurring basic workweek consisting 
of 40 hours within the employee's administrative workweek (as 
established under Sec.  610.111 of this chapter or similar authority);
    (2) An officially established recurring basic work requirement of 
80 hours per biweekly pay period (as established for employees with a 
flexible or compressed work schedule under 5 U.S.C. chapter 61, 
subchapter II, or similar authority);
    (3) For a firefighter covered by 5 U.S.C. 5545b(b) who does not 
have a 40-hour basic workweek, a regular tour of duty averaging at 
least 106 hours per biweekly pay period; or
    (4) A work schedule that is considered to be full-time by express 
provision of law, including a work schedule established for certain 
nurses under 38 U.S.C. 7456 or 7456A that is considered by law to be a 
full-time schedule for all purposes.
* * * * *
0
13. Add subpart Q to part 831 to read as follows:
Subpart Q--Phased Retirement
Sec.
831.1701 Applicability and purpose.
831.1702 Definitions.
831.1703 Implementing directives.

Entering Phased Retirement

831.1711 Eligibility.
831.1712 Working percentage and officially established hours for 
phased employment.
831.1713 Application for phased retirement.
831.1714 Effective date of phased employment and phased retirement 
annuity commencing date.
831.1715 Effect of phased retirement.

Returning to Regular Employment Status

831.1721 Ending phased retirement status to return to regular 
employment status.
831.1722 Effective date of end of phased retirement status to return 
to regular employment status.
831.1723 Effect of ending phased retirement status to return to 
regular employment status.

Entering Full Retirement Status

831.1731 Application for full retirement status.
831.1732 Commencing date of composite retirement annuity.

Computation of Phased Retirement Annuity at Phased Retirement and 
Composite Retirement Annuity at Full Retirement

831.1741 Computation of phased retirement annuity.
831.1742 Computation of composite annuity at final retirement.
831.1743 Cost-of-living adjustments.

Opportunity of a Phased Retiree to Pay a Deposit or Redeposit for 
Civilian or Military Service

831.1751 Deposit for civilian service for which no retirement 
deductions were withheld and redeposit for civilian service for 
which retirement deductions were refunded to the individual.
831.1752 Deposit for military service.
831.1753 Civilian and military service of an individual affected by 
an erroneous retirement coverage determination.

Death Benefits

831.1761 Death of phased retiree during phased employment.
831.1762 Death of an individual who has separated from phased 
employment and who dies before submitting an application for a 
composite retirement annuity.
831.1763 Lump-sum credit.

Reemployment After Separation From Phased Retirement Status

831.1771 Reemployment of an individual who has separated from phased 
employment and who dies before submitting an application for a 
composite retirement annuity.

Mentoring

831.1781 Mentoring.

Subpart Q--Phased Retirement


Sec.  831.1701  Applicability and purpose.

    This subpart contains the regulations implementing provisions of 5 
U.S.C. 8336a authorizing phased retirement. This subpart establishes 
the eligibility requirements for making an election to enter phased 
retirement status, the procedures for making an election, the record-
keeping requirements, and the methods to be used for certain 
computations not addressed elsewhere in part 831.


Sec.  831.1702  Definitions.

    In this subpart--
    Authorized agency official means--

[[Page 33922]]

    (1) For the executive branch agencies, the head of an Executive 
agency as defined in 5 U.S.C. 105;
    (2) For the legislative branch, the Secretary of the Senate, the 
Clerk of the House of Representatives, or the head of any other 
legislative branch agency;
    (3) For the judicial branch, the Director of the Administrative 
Office of the U.S. Courts;
    (4) For the Postal Service, the Postmaster General;
    (5) For any other independent establishment that is an entity of 
the Federal Government, the head of the establishment; or
    (6) An official who is authorized to act for an official named in 
paragraphs (1) through (5) of this definition in the matter concerned.
    Composite retirement annuity means the annuity computed when a 
phased retiree attains full retirement status.
    Director means the Director of the Office of Personnel Management.
    Full retirement status means that a phased retiree has ceased 
employment and is entitled, upon application, to a composite retirement 
annuity.
    Full-time means--
    (1) An officially established recurring basic workweek consisting 
of 40 hours within the employee's administrative workweek (as 
established under Sec.  610.111 of this chapter or similar authority); 
or
    (2) An officially established recurring basic work requirement of 
80 hours per biweekly pay period (as established for employees with a 
flexible or compressed work schedule under 5 U.S.C. chapter 61, 
subchapter II, or similar authority).
    Phased employment means the less-than-full-time employment of a 
phased retiree.
    Phased retiree means a retirement-eligible employee who--
    (1) With the concurrence of an authorized agency official, enters 
phased retirement status; and
    (2) Has not entered full retirement status.
    Phased retirement annuity means the annuity payable under 5 U.S.C. 
8336a before full retirement.
    Phased retirement percentage means the percentage which, when added 
to the working percentage for a phased retiree, produces a sum of 100 
percent.
    Phased retirement period means the period beginning on the date on 
which an individual becomes entitled to receive a phased retirement 
annuity and ending on the date on which the individual dies or 
separates from phased employment.
    Phased retirement status means that a phased retiree is 
concurrently employed in phased employment and eligible to receive a 
phased retirement annuity.
    Working percentage has the meaning given that term in Sec.  
831.1712(a).


Sec.  831.1703  Implementing directives.

    The Director may prescribe, in the form he or she deems 
appropriate, such detailed procedures as are necessary to carry out the 
purpose of this subpart.

Entering Phased Retirement


Sec.  831.1711  Eligibility.

    (a) A retirement-eligible employee, as defined in paragraphs (b) 
and (c), may elect to enter phased retirement status if the employee 
has been employed on a full-time basis for not less than the 3-year 
period ending on the effective date of phased retirement status, under 
Sec.  831.1714(a).
    (b) Except as provided in paragraph (c) of this section, a 
retirement-eligible employee means an employee who, if separated from 
the service, would meet the requirements for retirement under 
subsection (a) or (b) of 5 U.S.C. 8336.
    (c) A retirement-eligible employee does not include--
    (1) A member of the Capitol Police or Supreme Court Police, or an 
employee occupying a law enforcement officer, firefighter, nuclear 
materials courier, air traffic controller, or customs and border 
protection officer position, except a customs and border protection 
officer who is exempt from mandatory separation and retirement under 5 
U.S.C. 8335 pursuant to section 535(e)(2)(A) of Division E of the 
Consolidated Appropriations Act, 2008, Public Law 110-161;
    (2) An individual eligible to retire under 5 U.S.C. 8336(c), (m), 
or (n); or
    (3) An employee covered by a special work schedule authority that 
does not allow for a regularly recurring part-time schedule, such as a 
firefighter covered by 5 U.S.C. 5545b or a nurse covered by 38 U.S.C. 
7456 or 7456A.


Sec.  831.1712  Working percentage and officially established hours for 
phased employment.

    (a) For the purpose of this subpart, working percentage means the 
percentage of full-time equivalent employment equal to the quotient 
obtained by dividing--
    (1) The number of officially established hours per pay period to be 
worked by a phased retiree, as described in paragraph (b) of this 
section; by
    (2) The number of hours per pay period to be worked by an employee 
serving in a comparable position on a full-time basis.
    (b) The number of officially established hours per pay period to be 
worked by an employee in phased retirement status must equal one-half 
the number of hours the phased retiree would have been scheduled to 
work had the phased retiree remained in a full-time work schedule and 
not elected to enter phased retirement status. These hours make up the 
officially established part-time work schedule of the phased retiree 
and exclude any additional hours worked under Sec.  831.1715(h).


Sec.  831.1713  Application for phased retirement.

    (a) To elect to enter phased retirement status, a retirement-
eligible employee covered by Sec.  831.1711 must--
    (1) Submit to an authorized agency official a written and signed 
request to enter phased employment, on a form prescribed by OPM;
    (2) Obtain the signed written approval of an authorized agency 
official to enter phased employment; and
    (3) File an application for phased retirement, in accordance with 
Sec.  831.104.
    (b) Except as provided in paragraph (c) of this section, an 
applicant for phased retirement may withdraw his or her application any 
time before the election becomes effective, but not thereafter.
    (c) An applicant for phased retirement may not withdraw his or her 
application after OPM has received a certified copy of a court order 
(under part 581 or part 838 of this chapter) affecting the benefits.
    (d) (1) An employee and an agency approving official may agree to a 
time limit to the employee's period of phased employment as a condition 
of approval of the employee's request to enter phased employment and 
phased retirement, or by mutual agreement after the employee enters 
phased employment status.
    (2) To enter into such an agreement, the employee and the approving 
official must complete a written and signed agreement.
    (3) The written agreement must include the following:
    (i) The date the employee's period of phased employment will 
terminate;
    (ii) A statement that the employee can request the approving 
official's permission to return to regular employment status at any 
time as provided in Sec.  831.1721; the agreement must also explain how 
returning to regular employment status would affect the employee, as 
described in Sec. Sec.  831.1721 through 831.1723.
    (iii) A statement that the employee has a right to elect to fully 
retire at any time as provided in Sec.  831.1731;
    (iv) A statement that the employee may accept a new appointment at

[[Page 33923]]

another agency, with or without the new agency's approval of phased 
employment, at any time before the expiration of the agreement or 
within 3 days of the expiration of the agreement; the agreement must 
also explain how accepting an appointment at a new agency as a regular 
employee would affect the employee, as described in Sec. Sec.  831.1721 
through 831.1723;
    (v) An explanation that when the agreed term of phased employment 
ends, the employee will be separated from employment and that such 
separation will be considered voluntary based on the written agreement; 
and
    (vi) An explanation that if the employee is separated from phased 
employment and is not employed within 3 days (i.e., the employee has a 
break in service of greater than 3 days), the employee will be deemed 
to have elected full retirement.
    (4) The agency approving official and the employee may rescind an 
existing agreement, or enter into a new agreement to extend or reduce 
the term of phased employment agreed to in an existing agreement, by 
entering into a new written agreement meeting the requirements of this 
paragraph, before the expiration of the agreement currently in effect.


Sec.  831.1714  Effective date of phased employment and phased 
retirement annuity commencing date.

    (a) Phased employment is effective the first day of the first pay 
period beginning after phased employment is approved by the authorized 
agency official under Sec.  831.1713(a), or the first day of a later 
pay period specified by the employee with an authorized agency 
official's concurrence.
    (b) The commencing date of a phased retirement annuity (i.e., the 
beginning date of the phased retirement period) is the first day of the 
first pay period beginning after phased employment is approved by an 
authorized agency official under Sec.  831.1713(a), or the first day of 
a later pay period specified by the employee with the authorized agency 
official's concurrence.


Sec.  831.1715  Effect of phased retirement.

    (a)(1) A phased retiree is deemed to be a full-time employee for 
the purpose of 5 U.S.C. chapter 89 and 5 CFR part 890 (related to 
health benefits), as required by 5 U.S.C. 8336a(i). The normal rules 
governing health benefits premiums for part-time employees in 5 U.S.C. 
8906(b)(3) do not apply.
    (2) A phased retiree is deemed to be receiving basic pay at the 
rate applicable to a full-time employee holding the same position for 
the purpose of determining a phased retiree's annual rate of basic pay 
used in calculating premiums (employee withholdings and agency 
contributions) and benefits under 5 U.S.C. chapter 87 and 5 CFR part 
870 (dealing with life insurance), as required by 5 U.S.C. 8336a(n). 
The deemed full-time schedule will consist of five 8-hour workdays each 
workweek, resulting in a 40-hour workweek. Only basic pay for hours 
within the deemed full-time schedule will be considered, consistent 
with 5 U.S.C. 8336a(n) and the definition of ``full-time'' in Sec.  
831.1702. Any premium pay creditable as basic pay for life insurance 
purposes under 5 CFR 870.204 for overtime work or hours outside the 
full-time schedule that an employee was receiving before phased 
retirement, such as standby duty pay under 5 U.S.C. 5545(c)(1) or 
customs officer overtime pay under 19 U.S.C. 267(a), may not be 
considered in determining a phased retiree's deemed annual rate of 
basic pay under this paragraph.
    (b) A phased retiree may not be appointed to more than one position 
at the same time.
    (c) A phased retiree may move to another position in the agency or 
another agency during phased retirement status only if the change would 
not result in a change in the working percentage. To move to another 
agency during phased retirement status and continue phased employment 
and phased retirement status, the phased retiree must submit a written 
and signed request and obtain the signed written approval, in 
accordance with Sec.  831.1713(a)(1) and (2), of the authorized agency 
official of the agency to which the phased retiree is moving. 
Notwithstanding the provisions of Sec.  831.1714, if the authorized 
agency official approves the request, the phased retiree's phased 
employment and phased retirement status will continue without 
interruption at the agency to which the phased retiree moves. If the 
authorized agency official at the agency to which the phased retiree 
moves does not approve the request, phased employment and phased 
retirement status terminates in accordance with Sec.  831.1722(b).
    (d) A phased retiree may be detailed to another position or agency, 
subject to 5 CFR part 300, subpart C, if the working percentage of the 
position to which detailed is the same as the working percentage of the 
phased retiree's position of record.
    (e) A retirement-eligible employee who makes an election under this 
subpart may not elect an alternative annuity under 5 U.S.C. 8343a.
    (f) If the employee's election of phased retirement status becomes 
effective, the employee is barred from electing phased retirement 
status again. Ending phased retirement status or entering full 
retirement status does not create a new opportunity for the individual 
to elect phased retirement status.
    (g) Except as otherwise expressly provided by law or regulation, a 
phased retiree is treated as any other employee on a part-time tour of 
duty for all other purposes.
    (h)(1) A phased retiree may not be assigned hours of work in excess 
of the officially established part-time schedule (reflecting the 
working percentage), except under the conditions specified in paragraph 
(h)(2) of this section.
    (2) An authorized agency official may order or approve a phased 
retiree to perform hours of work in excess of the officially 
established part-time schedule only in rare and exceptional 
circumstances meeting all of the following conditions:
    (i) The work is necessary to respond to an emergency posing a 
significant, immediate, and direct threat to life or property;
    (ii) The authorized agency official determines that no other 
qualified employee is available to perform the required work;
    (iii) The phased retiree is relieved from performing excess work as 
soon as reasonably possible (e.g., by management assignment of work to 
other employees); and
    (iv) When an emergency situation can be anticipated in advance, 
agency management made advance plans to minimize any necessary excess 
work by the phased retiree.
    (3) Employing agencies must inform each phased retiree and his or 
her supervisor of--
    (i) The limitations on hours worked in excess of the officially 
established part-time schedule;
    (ii) The requirement to maintain records documenting that 
exceptions met all required conditions;
    (iii) The fact that, by law and regulation, any basic pay received 
for hours outside the employee's officially established part-time work 
schedule (as described in Sec.  831.1712(a)(1) and (b)) is subject to 
retirement deductions and agency contributions, in accordance with 5 
U.S.C. 8336a(d), but is not used in computing retirement benefits; and
    (iv) The fact that, by law and regulation, any premium pay received 
for overtime work or hours outside the full-time schedule, that would 
otherwise be basic pay for retirement, such as customs officer overtime 
pay

[[Page 33924]]

under 19 U.S.C. 267(a), will not be subject to retirement deductions or 
agency contributions, in accordance with 5 U.S.C. 8336a(d), and that 
any such premium pay received will not be included in computing 
retirement benefits.
    (4) Employing agencies must maintain records documenting that 
exceptions granted under paragraph (h)(2) of this section meet the 
required conditions. These records must be retained for at least 6 
years and be readily available to auditors. OPM may require periodic 
agency reports on the granting of exceptions and of any audit findings.
    (5) If OPM finds that an agency (or subcomponent) is granting 
exceptions that are not in accordance with the requirements of this 
paragraph (h), OPM may administratively withdraw the agency's (or 
subcomponent's) authority to grant exceptions and require OPM approval 
of any exception.
    (6) If OPM finds that a phased retiree has been working a 
significant amount of excess hours beyond the officially established 
part-time schedule to the degree that the intent of the phased 
retirement law is being undermined, OPM may require that the agency end 
the individual's phased retirement by unilateral action, 
notwithstanding the normally established methods of ending phased 
retirement. This finding does not need to be based on a determination 
that the granted exceptions failed to meet the required conditions in 
paragraph (h)(2) of this section. With the ending of an individual's 
phased retirement, that individual must be returned to regular 
employment status on the same basis as a person making an election 
under Sec.  831.1721--unless that individual elects to fully retire as 
provided under Sec.  831.1731.
    (7) A phased retiree must be compensated for excess hours of work 
in accordance with the normally applicable pay rules.
    (8) Any premium pay received for overtime work or hours outside the 
full-time schedule that would otherwise be basic pay for retirement, 
such as customs officer overtime pay under 19 U.S.C. 267(a), is not 
subject to retirement deductions or agency contributions, in accordance 
with 5 U.S.C. 8336a(d).
    (i) A phased retiree is deemed to be an annuitant for the purpose 
of subpart S of this part.

Returning to Regular Employment Status


Sec.  831.1721  Ending phased retirement status to return to regular 
employment status.

    (a) Election to end phased retirement status to return to regular 
employment status. (1) A phased retiree may elect, with the permission 
of an authorized agency official, to end phased employment at any time 
to return to regular employment status. The election is deemed to meet 
the requirements of 5 U.S.C. 8336a(g) regardless of the employee's work 
schedule. The employee is not subject to any working percentage 
limitation (i.e., full-time, 50 percent of full-time, or any other 
working percentage) upon electing to end phased retirement status.
    (2) To elect to end phased retirement status to return to regular 
employment status, a phased retiree must--
    (i) Submit to the authorized agency official, on a form prescribed 
by OPM, a written and signed request to end phased retirement status to 
return to regular employment status; and
    (ii) Obtain the signed written approval of the authorized agency 
official for the request.
    (3) An employee may cancel an approved election to end phased 
retirement status to return to regular employment status by submitting 
a signed written request to the agency and obtaining the approval of an 
authorized agency official before the effective date of return to 
regular employment status.
    (4) The employing agency must notify OPM that the employee's phased 
retirement status has ended by submitting to OPM a copy of the 
completed election to end phased retirement status to return to regular 
employment status within 15 days of its approval.
    (b) Mandated return to regular employment status. A phased retiree 
may be returned to regular employment status as provided under Sec.  
831.1715(h)(6).
    (c) Bar on reelection of phased retirement. Once an election to end 
phased retirement status to return to regular employment status is 
effective, the employee may not reelect phased retirement status.


Sec.  831.1722  Effective date of end of phased retirement status to 
return to regular employment status.

    (a) (1) Except as provided in paragraph (b) of this section, if a 
request to end phased retirement status to return to regular employment 
status is approved by an authorized agency official under Sec.  
831.1721 on any date on or after the first day of a month through the 
fifteenth day of a month, the phased retiree's resumption of regular 
employment status is effective the first day of the first full pay 
period of the month following the month in which the election to end 
phased retirement status to return to regular employment status is 
approved.
    (2) If a request to end phased retirement status to return to 
regular employment status is approved by an authorized agency official 
under Sec.  831.1721 on any date on or after the sixteenth day of a 
month through the last day of a month, the phased retiree's resumption 
of regular employment status is effective on the first day of the first 
full pay period of the second month following the month in which the 
election to end phased retirement status to return to regular 
employment status is approved.
    (3) The phased retirement annuity terminates on the date determined 
under paragraph (a)(1) or (2) of this section.
    (b) When a phased retiree moves from the agency that approved his 
or her phased employment and phased retirement status to another agency 
and the authorizing official at the agency to which the phased retiree 
moves does not approve a continuation of phased employment and phased 
retirement status, phased employment and phased retirement status 
terminates when employment ends at the current employing agency.


Sec.  831.1723  Effect of ending phased retirement status to return to 
regular employment status.

    (a) After phased retirement status ends under Sec.  831.1722, the 
employee's rights under subchapter III of chapter 83 or chapter 84 of 
title 5, United States Code, are determined based on the law in effect 
at the time of any subsequent separation from service.
    (b) After an individual ends phased retirement status to return to 
regular employment status, for the purposes of subchapter III of 
chapter 83 or chapter 84 of title 5, United States Code, at the time of 
the subsequent separation from service, the phased retirement period 
will be treated as if it had been a period of part-time employment with 
the work schedule described in Sec.  831.1712(a)(1) and (b). The part-
time proration adjustment for the phased retirement period will be 
based upon the individual's officially established part-time work 
schedule, with no credit for extra hours worked. In determining the 
individual's deemed rate of basic pay during the phased retirement 
period, only basic pay for hours within the

[[Page 33925]]

individual's officially established part-time work schedule may be 
considered. No pay received for other hours during the phased 
retirement period may be included as part of basic pay for the purpose 
of computing retirement benefits, notwithstanding the normally 
applicable rules.
    (c) The restrictions in Sec. Sec.  831.1751 and 831.1752 regarding 
when an individual must complete a deposit for civilian service, a 
redeposit for civilian service that ended on or after March 1, 1991, or 
a deposit for military service do not apply when a phased retiree ends 
phased retirement status to return to regular employment status under 
this section.
    (d) When a phased retiree whose phased retirement annuity was 
subject to an actuarial reduction for unpaid redeposit service, in 
accordance with Sec.  831.303(c) and (d), ends phased retirement status 
to return to regular employment status, the annuity the individual 
becomes entitled to at retirement is subject to the actuarial 
reduction, increased by cost-of-living adjustments under Sec.  
831.1743(d). For the purpose of applying the provisions of Sec.  
831.1743(d) under this paragraph, cost-of-living adjustments are 
applied through the annuity commencing date.

Entering Full Retirement Status


Sec.  831.1731  Application for full retirement status.

    (a) Election of full retirement. (1) A phased retiree may elect to 
enter full retirement status at any time by submitting to OPM an 
application for full retirement in accordance with Sec.  831.104. This 
includes an election made under Sec.  831.1715(h)(6) in lieu of a 
mandated return to regular employment status. Upon making such an 
election, a phased retiree is entitled to a composite retirement 
annuity.
    (2) A phased retiree may cancel an election of full retirement 
status and withdraw an application for full retirement by submitting a 
signed written request with the agency and obtaining the approval of an 
authorized agency official before the commencing date of the composite 
retirement annuity.
    (b) Deemed election of full retirement. A phased retiree who is 
separated from phased employment for more than 3 days enters full 
retirement status. The individual's composite retirement annuity will 
begin to accrue on the commencing date of the composite annuity as 
provided in Sec.  831.1732, and payment will be made after he or she 
submits an application in accordance with Sec.  831.104 for the 
composite retirement annuity.
    (c) Survivor election provisions. An individual applying for full 
retirement status under this section is subject to the survivor 
election provisions of subpart F of this part.


Sec.  831.1732  Commencing date of composite retirement annuity.

    (a) The commencing date of the composite retirement annuity of a 
phased retiree who enters full retirement status is the day after 
separation.
    (b) A phased retirement annuity terminates upon separation from 
service.

Computation of Phased Retirement Annuity at Phased Retirement and 
Composite Retirement Annuity at Full Retirement


Sec.  831.1741  Computation of phased retirement annuity.

    (a) Subject to adjustments described in paragraphs (b) and (c) of 
this section, a phased retiree's phased retirement annuity equals the 
product obtained by multiplying--
    (1) The amount of annuity computed under 5 U.S.C. 8339, including 
any reduction for any unpaid deposit for non-deduction service 
performed before October 1, 1982, but excluding reduction for survivor 
annuity, that would have been payable to the phased retiree if, on the 
date on which the phased retiree enters phased retirement status, the 
phased retiree had separated from service and retired under 5 U.S.C. 
8336(a) or (b); by
    (2) The phased retirement percentage for the phased retiree.
    (b)(1) The monthly installment of annuity derived from the 
computation of the annuity under paragraph (a) of this section is 
reduced by any actuarial reduction for unpaid redeposit service in 
accordance with Sec.  831.303(c) and (d).
    (2) For the purpose of applying Sec.  831.303(c) and (d) in 
paragraph (b)(1) of this section, the term ``time of retirement'' in 
Sec.  831.303(c)(2) and (d)(2)(i) means the commencing date of the 
phased retiree's phased retirement annuity.
    (c) The monthly installment of annuity derived from the computation 
of the annuity under paragraph (a) of this section is also subject to 
any offset under Sec.  831.1005, adjusted by multiplying the offset 
that would otherwise apply had the phased retiree fully retired under 5 
U.S.C. 8336(a) or (b) by the phased retirement percentage.


Sec.  831.1742  Computation of composite annuity at final retirement.

    (a) Subject to the adjustment described in paragraph (c) of this 
section, a phased retiree's composite retirement annuity at final 
retirement equals the sum obtained by adding--
    (1) The amount computed under Sec.  831.1741(a) without adjustment 
under Sec.  831.1741(b) and (c), increased by cost-of-living 
adjustments under Sec.  831.1743(c); and
    (2) The ``fully retired phased component'' computed under paragraph 
(b) of this section.
    (b)(1) Subject to the requirements described in paragraphs (b)(2) 
and (b)(3) of this section, a ``fully retired phased component'' equals 
the product obtained by multiplying--
    (i) The working percentage; by
    (ii) The amount of an annuity computed under 5 U.S.C. 8339 that 
would have been payable at the time of full retirement if the 
individual had not elected phased retirement status and as if the 
individual was employed on a full-time basis in the position occupied 
during the phased retirement period and before any reduction for 
survivor annuity.
    (2) In applying paragraph (b)(1)(ii) of this section, the 
individual must be deemed to have a full-time schedule during the 
period of phased retirement. The deemed full-time schedule will consist 
of five 8-hour workdays each workweek, resulting in a 40-hour workweek. 
In determining the individual's deemed rate of basic pay during phased 
retirement, only basic pay for hours within the deemed full-time 
schedule will be considered, consistent with the definition of ``full-
time'' in Sec.  831.1702. Any premium pay creditable as basic pay for 
retirement purposes for overtime work or hours outside the full-time 
schedule that an employee was receiving before phased retirement, such 
as standby duty pay under 5 U.S.C. 5545(c)(1) or customs officer 
overtime pay under 19 U.S.C. 267(a), may not be considered in 
determining a phased retiree's deemed rate of basic pay during phased 
retirement.
    (3) In computing the annuity amount under paragraph (b)(1) of this 
section--
    (i) The amount of unused sick leave equals the result of dividing 
the days of unused sick leave to the individual's credit at separation 
for full retirement by the working percentage; and
    (ii) The reduction for any unpaid deposit for non-deduction service 
performed before October 1, 1982, is based on the amount of unpaid 
deposit, with interest computed to the commencing date of the composite 
annuity.
    (c) The composite retirement annuity computed under paragraph (a) 
of this section is adjusted by applying any

[[Page 33926]]

reduction for any survivor annuity benefit.
    (d) The monthly installment derived from a composite retirement 
annuity computed under paragraph (a) of this section and adjusted under 
paragraph (c) is adjusted by any--
    (1) Actuarial reduction applied to the phased retirement annuity 
under Sec.  831.1741(b), increased by cost-of-living adjustments under 
Sec.  831.1743(d); and
    (2) Offset under Sec.  831.1005 (i.e., the offset based on all 
service, including service during the phased retirement period, 
performed by the individual that was subject to mandatory Social 
Security coverage).


Sec.  831.1743  Cost-of-living adjustments.

    (a) The phased retirement annuity under Sec.  831.1741 is increased 
by cost-of-living adjustments in accordance with 5 U.S.C. 8340.
    (b) A composite retirement annuity under Sec.  831.1742 is 
increased by cost-of-living adjustments in accordance with 5 U.S.C. 
8340, except that 5 U.S.C. 8340(c)(1) does not apply.
    (c)(1) For the purpose of computing the amount of phased retirement 
annuity used in the computation under Sec.  831.1742(a)(1), the initial 
cost-of-living adjustment applied is prorated in accordance with 5 
U.S.C. 8340(c)(1).
    (2) If the individual enters full retirement status on the same day 
as the effective date of a cost-of-living adjustment (usually December 
1st), that cost-of-living adjustment is applied to increase the phased 
retirement annuity used in the computation under Sec.  831.1742(a)(1).
    (d)(1) For the purpose of computing the actuarial reduction used in 
the computation under Sec.  831.1742(d)(1), the initial cost-of-living 
adjustment applied is prorated in accordance with 5 U.S.C. 8340(c)(1).
    (2) If the individual enters full retirement status on the same day 
as the effective date of a cost-of-living adjustment (usually December 
1st), that cost-of-living adjustment is applied to increase the 
actuarial reduction used in the computation under Sec.  831.1742(d)(1).
    (3) When applying each cost-of-living adjustment to the actuarial 
reduction used in the computation under Sec.  831.1742(d)(1), the 
actuarial reduction is rounded up to the next highest dollar.

Opportunity of a Phased Retiree To Pay a Deposit or Redeposit for 
Civilian or Military Service


Sec.  831.1751  Deposit for civilian service for which no retirement 
deductions were withheld and redeposit for civilian service for which 
retirement deductions were refunded to the individual.

    (a)(1) Any deposit an employee entering phased retirement status 
wishes to make for civilian service for which no retirement deductions 
were withheld (i.e., ``non-deduction'' service) must be paid within 30 
days from the date OPM notifies the employee of the amount of the 
deposit, during the processing of the employee's application for phased 
retirement. The deposit amount will include interest under Sec.  
831.105, computed to the effective date of phased retirement.
    (2) No deposit payment may be made by the phased retiree when 
entering full retirement status.
    (3) As provided under Sec.  831.1741(a)(1), for the computation of 
phased retirement annuity, the amount of any unpaid deposit for non-
deduction service performed before October 1, 1982, including interest 
computed to the effective date of phased retirement annuity, will be 
the basis for reduction of the phased retirement annuity for such 
unpaid deposit.
    (4) As provided under Sec.  831.1742(b)(2), the amount of any 
unpaid deposit for non-deduction service performed before October 1, 
1982, including interest computed to the commencing date of the 
composite annuity, will be the basis for reduction of the ``fully 
retired phased component'' for such unpaid deposit.
    (b)(1) Any redeposit an employee entering phased retirement status 
wishes to make for civilian service for which retirement deductions 
were refunded to the employee must be paid within 30 days from the date 
OPM notifies the employee of the amount of the redeposit, during the 
processing of the employee's application for phased retirement. The 
redeposit amount will include interest under Sec.  831.105 computed to 
the effective date of phased retirement.
    (2) No redeposit payment may be made by the phased retiree when 
entering full retirement status.
    (3) As provided under Sec.  831.1741(b), for the computation of 
monthly installment of phased retirement annuity, the amount of any 
unpaid redeposit at phased retirement, or unpaid balance thereof, 
including interest computed to the effective date of phased retirement, 
will be the basis, along with the phased retiree's age, for any 
actuarial reduction of the monthly installment of phased retirement 
annuity for such unpaid redeposit.
    (4) As provided under Sec.  831.1742(d)(1), any actuarial reduction 
for unpaid redeposit service applied to the monthly installment of 
phased retirement annuity, as described in paragraph (b)(3) of this 
section and Sec.  831.1741(b), is increased by cost-of-living 
adjustments and applied to the monthly installment derived from the 
composite retirement annuity.


Sec.  831.1752  Deposit for military service.

    (a) A phased retiree who wishes to make a military service credit 
deposit under Sec.  831.2104(a) for military service performed prior to 
entering phased retirement status must complete such a deposit no later 
than the day before the effective date of his or her phased employment 
and the commencing date of the phased retirement annuity. A military 
service credit deposit for military service performed prior to an 
individual's entry into phased retirement status cannot be made after 
the effective date of phased employment and the commencing date of 
phased retirement annuity.
    (b) A phased retiree who wishes to make a military service credit 
deposit under Sec.  831.2104(a) for military service performed after 
the effective date of phased employment and the commencing date of the 
phased retirement annuity and before the effective date of the 
composite retirement annuity (e.g., due to the call-up of the employee 
for active military service) must complete such a deposit no later than 
the day before the effective date of his or her composite retirement 
annuity.


Sec.  831.1753  Civilian and military service of an individual affected 
by an erroneous retirement coverage determination.

    (a) For the purpose of crediting service for which actuarial 
reduction of annuity is permitted under Sec.  831.303(d) for an 
employee who enters phased retirement, the deposit amounts under Sec.  
831.303(d) form the basis, along with the phased retiree's age, for any 
actuarial reduction of the phased retirement annuity for such unpaid 
deposits.
    (b) No deposit payment for service described under Sec.  831.303(d) 
may be made by the phased retiree when entering full retirement status.
    (c) As provided under Sec.  831.1741(b), the amount of any deposit 
under Sec.  831.303(d) at the commencing date of the individual's 
phased retirement annuity, or unpaid balance thereof, including 
interest computed to the

[[Page 33927]]

effective date of phased retirement annuity, will be the basis, along 
with the phased retiree's age, for any actuarial reduction of the 
phased retirement annuity for such unpaid deposit.
    (d) As provided under Sec.  831.1742(d)(1), any actuarial reduction 
for any unpaid deposit service under Sec.  831.303(d) applied to the 
phased retirement annuity, as described in Sec.  831.1741(b), is 
increased by cost-of-living adjustments and applied to the monthly 
installment derived from the composite retirement annuity.

Death Benefits


Sec.  831.1761  Death of phased retiree during phased employment.

    (a) For the purpose of 5 U.S.C. 8341--
    (1) The death of a phased retiree is deemed to be a death in 
service of an employee; and
    (2) The phased retirement period is deemed to have been a period of 
part-time employment with the work schedule described in Sec.  
831.1712(a)(1) and (b) for the purpose of determining survivor 
benefits. The part-time proration adjustment for the phased retirement 
period will be based upon the employee's officially established part-
time work schedule, with no credit for extra hours worked. In 
determining the employee's deemed rate of basic pay during the phased 
retirement period, only basic pay for hours within the employee's 
officially established part-time work schedule may be considered. No 
pay received for other hours during the phased retirement period may be 
included as part of basic pay for the purpose of computing retirement 
benefits, notwithstanding the normally applicable rules.
    (b) If a phased retiree elects not to make a deposit described in 5 
U.S.C. 8334(d)(1), such that his or her annuity is actuarially reduced 
under 5 U.S.C. 8334(d)(2) and Sec.  831.1741(b), and that individual 
dies in service as a phased retiree, the amount of any deposit upon 
which such actuarial reduction was to have been based will be deemed to 
have been fully paid.


Sec.  831.1762  Death of an individual who has separated from phased 
employment and who dies before submitting an application for a 
composite retirement annuity.

    (a) For the purpose of 5 U.S.C. 8341, an individual who dies after 
separating from phased employment and before submitting an application 
for composite retirement annuity is deemed to have filed an application 
for full retirement status, and composite retirement annuity, with OPM.
    (b) Unless an individual described in paragraph (a) of this section 
was reemployed with the Federal Government after separating from phased 
employment, the composite retirement annuity of an individual described 
in paragraph (a) of this section is deemed to have accrued from the day 
after separation through the date of death. Any composite annuity 
accrued during such period of time, minus any phased annuity paid 
during that period, will be paid as a lump-sum payment of accrued and 
unpaid annuity, in accordance with 5 U.S.C. 8342(c) and (f).


Sec.  831.1763  Lump-sum credit.

    If an individual performs phased employment, the lump-sum credit 
will be reduced by any annuity that is paid or accrued during phased 
employment.

Reemployment After Separation From Phased Retirement Status


Sec.  831.1771  Reemployment of an individual who has separated from 
phased employment and who dies before submitting an application for a 
composite retirement annuity.

    (a) Unless eligibility for annuity terminates under 5 U.S.C. 8344, 
a phased retiree who has been separated from employment for more than 3 
days and who has entered full retirement status, but who has not 
submitted an application for composite retirement annuity, is deemed to 
be an annuitant receiving annuity from the Civil Service Retirement and 
Disability Fund during any period of employment in an appointive or 
elective position in the Federal Government.
    (b) A phased retiree described in paragraph (a) of this section 
whose entitlement to a composite retirement annuity terminates under 5 
U.S.C. 8344 due to the employment, is an employee effective upon 
employment. The individual is not entitled to a phased retirement 
annuity (i.e., phased retirement annuity does not resume) during the 
period of employment, and the individual's entitlement to a composite 
retirement annuity terminates effective on the date of employment.

Mentoring


Sec.  831.1781  Mentoring.

    (a) A phased retiree, other than an employee of the United States 
Postal Service, must spend at least 20 percent of his or her working 
hours in mentoring activities as defined by an authorized agency 
official. For purposes of this section, mentoring need not be limited 
to mentoring of an employee who is expected to assume the phased 
retiree's duties when the phased retiree fully retires.
    (b) An authorized agency official may waive the requirement under 
paragraph (a) of this section in the event of an emergency or other 
unusual circumstances (including active duty in the armed forces) that, 
in the authorized agency official's discretion, would make it 
impracticable for a phased retiree to fulfill the mentoring 
requirement.

PART 838--COURT ORDERS AFFECTING RETIREMENT BENEFITS

0
14. The authority citation for part 838 continues to read as follows:

    Authority: 5 U.S.C. 8347(a) and 8461(g). Subparts B, C, D, E, J, 
and K also issued under 5 U.S.C. 8345(j)(2) and 8467(b). Sections 
838.221, 838.422, and 838.721 also issued under 5 U.S.C. 8347(b).

0
15. Amend Sec.  838.103 as follows:
0
a. Revise the definitions of ``employee'', ``employee annuity'', 
``gross annuity'', ``net annuity'', ``retiree'', and ``self-only 
annuity'';
0
b. Add the definitions of ``composite retirement annuity'', ``full 
retirement'', ``phased employment'', ``phased retiree'', ``phased 
retirement annuity'', ``phased retirement status,'' ``retirement'' and 
``retires'' in alphabetical order.


Sec.  838.103  Definitions.

* * * * *
    Composite retirement annuity means the annuity computed when a 
phased retiree attains full retirement status.
* * * * *
    Employee means an employee or Member covered by CSRS or FERS and a 
phased retiree as defined under this part.
    Employee annuity means the recurring payments under CSRS or FERS 
made to a retiree, the recurring phased retirement annuity payments 
under CSRS or FERS made to a phased retiree in phased retirement 
status, and recurring composite retirement annuity payments under CSRS 
or FERS made to a phased retiree when he or she attains full retirement 
status. Employee annuity does not include payments of accrued and 
unpaid annuity after the death of a retiree or phased retiree under 5 
U.S.C. 8342(g) or 8424(h).
* * * * *
    Full retirement status means that a phased retiree has ceased 
employment and is entitled, upon application, to a composite retirement 
annuity, as provided under subpart Q of 5 CFR part 831 or 5 CFR part 
848.
    Gross annuity means the amount of monthly annuity payable to a 
retiree or phased retiree after reducing the self-

[[Page 33928]]

only annuity to provide survivor annuity benefits, if any, but before 
any other deduction. Unless the court order expressly provides 
otherwise, gross annuity also includes any lump-sum payments made to 
the retiree under 5 U.S.C. 8343a or 8420a.
* * * * *
    Net annuity. (1) Net annuity means the amount of monthly annuity 
payable to a retiree or phased retiree after deducting from the gross 
annuity any amounts that are--
    (i) Owed by the retiree to the United States;
    (ii) Deducted for health benefits premiums under 5 U.S.C. 8906 and 
5 CFR 891.401 and 891.402;
    (iii) Deducted for life insurance premiums under 5 U.S.C. 8714a(d);
    (iv) Deducted for Medicare premiums;
    (v) Properly withheld for Federal income tax purposes, if the 
amounts withheld are not greater than they would be if the retiree 
claimed all dependents he or she was entitled to claim;
    (vi) Properly withheld for State income tax purposes, if the 
amounts withheld are not greater than they would be if the retiree 
claimed all dependents he or she was entitled to claim; or
    (vii) Already payable to another person based on a court order 
acceptable for processing or a child abuse judgment enforcement order.
    (2) Unless the court order expressly provides otherwise, net 
annuity also includes any lump-sum payments made to the retiree under 5 
U.S.C. 8343a or 8420a.
    Phased employment means the less-than-full-time employment of a 
phased retiree, as provided under 5 CFR part 831, subpart Q, or part 
848.
    Phased retiree. (1) Phased retiree means a retirement-eligible 
employee who--
    (i) With the concurrence of an authorized agency official, enters 
phased retirement status in accordance with 5 CFR part 831, subpart Q, 
or part 848; and
    (ii) Has not entered full retirement status;
    (2) For the purpose of this part, when the term employee is used it 
also refers to a phased retiree.
    Phased retirement annuity means the annuity payable under 5 U.S.C. 
8336a or 8412a, and 5 CFR part 831, subpart Q, or part 848, before full 
retirement.
    Phased retirement status means that a phased retiree is 
concurrently employed in phased employment and eligible to receive a 
phased retirement annuity.
* * * * *
    Retiree means a former employee, including a phased retiree who has 
entered full retirement status, or a Member who is receiving recurring 
payments under CSRS or FERS based on his or her service as an employee 
or Member. Retiree does not include an employee receiving a phased 
retirement annuity or a person receiving an annuity only as a current 
spouse, former spouse, child, or person with an insurable interest.
    Retirement means a retirement other than a phased retirement.
    Retires means enters retirement other than a phased retirement.
    Self-only annuity means the recurring unreduced payments under CSRS 
or FERS to a retiree with no survivor annuity payable to anyone. Self-
only annuity also includes the recurring unreduced phased retirement 
annuity payments under CSRS or FERS to a phased retiree before any 
other deduction. Unless the court order expressly provides otherwise, 
self-only annuity also includes any lump-sum payments made to the 
retiree under 5 U.S.C. 8343a or 8420a.
* * * * *


Sec.  838.136  [Removed]

0
16. Remove Sec.  838.136.
0
17. Amend Sec.  838.211 by revising paragraph (a)(1) introductory text, 
redesignating paragraph (b) as paragraph (a)(4), and by adding a new 
paragraph (b) to read as follows:


Sec.  838.211  Amounts subject to court orders.

    (a)(1) Employee annuities other than phased retirement annuities 
are subject to court orders acceptable for processing only if all of 
the conditions necessary for payment of the employee annuity to the 
former employee have been met, including, but not limited to--
* * * * *
    (b)(1) Phased retirement annuities are subject to court orders 
acceptable for processing only if all of the conditions necessary for 
payment of the phased retirement annuity to the phased retiree have 
been met, including, but not limited to--
    (i) Entry of the employee into phased retirement status under 5 CFR 
part 831, subpart Q, or part 848 of this chapter, respectively;
    (ii) Application for payment of the phased retirement annuity by 
the phased retiree; and
    (iii) The phased retiree's entitlement to a phased retirement 
annuity.
    (2) Money held by an employing agency or OPM that may be payable at 
some future date is not available for payment under court orders 
directed at phased retirement annuities.
    (3) OPM cannot pay a former spouse a portion of a phased retirement 
annuity before the employee annuity begins to accrue.
    (4) Payment to a former spouse under a court order may not exceed 
the phased retirement annuity.
* * * * *
0
18. Amend Sec.  838.222 by revising paragraph (a)(2) introductory text 
and paragraphs (b), (c)(1)(ii) and (c)(2) introductory text, and 
paragraph (d) introductory text to read as follows:


Sec.  838.222  OPM action on receipt of a court order acceptable for 
processing.

    (a) * * *
    (2) The retiree or phased retiree--
* * * * *
    (b) If OPM receives a court order acceptable for processing that is 
directed at an employee annuity but the employee has died, or if a 
retiree or phased retiree dies after payments from the retiree or 
phased retiree to a former spouse have begun, OPM will inform the 
former spouse that the employee, or retiree, or phased retiree has died 
and that OPM can only honor court orders dividing employee annuities 
during the lifetime of the retiree or phased retiree.
    (c) * * *
    (1) * * *
    (ii) That benefits cannot begin to accrue until the employee 
retires, or enters phased retirement status; * * *
    (2) The employee, separated employee, retiree, or phased retiree--
* * * * *
    (d) The failure of OPM to provide, or of the employee, separated 
employee, retiree, phased retiree or the former spouse to receive, the 
information specified in this section prior to the commencing date of a 
reduction or accrual does not affect--
* * * * *
0
19. Revise Sec.  838.232 to read as follows:


Sec.  838.232  Suspension of payments.

    (a) Payments from employee annuities under this part will be 
discontinued whenever the employee annuity payments are suspended or 
terminated. If employee annuity payments to the retiree or phased 
retiree are restored, payments to the former spouse will also resume, 
subject to the terms of any court order acceptable for processing in 
effect at that time.
    (b) Paragraph (a) of this section will not be applied to permit a 
retiree or phased retiree to deprive a former spouse of payment by 
causing suspension of payment of employee annuity.

[[Page 33929]]

0
20. Amend Sec.  838.233 by revising paragraph (d) to read as follows:


Sec.  838.233  Termination of payments.

* * * * *
    (d) The last day of the month immediately preceding the month in 
which the retiree or phased retiree dies; or
* * * * *
0
21. Amend Sec.  838.237 by revising paragraphs (a) and (b)(4) to read 
as follows:


Sec.  838.237  Death of the former spouse.

    (a) Unless the court order acceptable for processing expressly 
provides otherwise, the former spouse's share of an employee annuity 
terminates on the last day of the month immediately preceding the death 
of the former spouse, and the former spouse's share of employee annuity 
reverts to the retiree or phased retiree.
    (b) * * *
    (4) One or more of the retiree's or phased retiree's children as 
defined in 5 U.S.C. 8342(c) or 8424(d).
0
22. Amend Sec.  838.242 by revising paragraph (b) to read as follows:


Sec.  838.242  Computing length of service.

* * * * *
    (b) Unused sick leave is counted as ``creditable service'' on the 
date of separation for an immediate CSRS annuity. The unused sick leave 
of a phased retiree is counted as ``creditable service'' on the date of 
separation of the phased retiree to enter full retirement status. 
Unused sick leave is not apportioned over the time when earned.
0
23. Amend Sec.  838.305 by revising paragraph (e) introductory text to 
read as follows:


Sec.  838.305  OPM computation of formulas.

* * * * *
    (e) A court order directed at employee annuity is not a court order 
acceptable for processing if the court order directs OPM to determine a 
rate of employee annuity that would require OPM to determine a salary 
or average salary, other than a salary or average salary actually used 
in computing the employee annuity, as of a date prior to the date of 
the employee's entry into phased retirement or separation and to adjust 
that salary for use in computing the former spouse share unless the 
adjustment is by--
* * * * *
0
24. Revise Sec.  838.306 to read as follows:


Sec.  838.306  Specifying type of annuity for application of formula, 
percentage or fraction.

    (a) A court order directed at an employee annuity that states the 
former spouse's share of employee annuity as a formula, percentage, or 
fraction is not a court order acceptable for processing unless OPM can 
determine the type of annuity (i.e., phased retirement annuity, 
composite retirement annuity, net annuity, gross annuity, or self-only 
annuity) on which to apply the formula, percentage, or fraction.
    (b) The standard types of annuity to which OPM can apply the 
formula, percentage, or fraction are phased retirement annuity of a 
phased retiree, or net annuity, gross annuity, or self-only annuity of 
a retiree. Unless the court order otherwise directs, OPM will apply to 
gross annuity the formula, percentage, or fraction directed at annuity 
payable to either a retiree or a phased retiree. Section 838.625 
contains information on other methods of describing these types of 
annuity.
    (c)(1) A court order may include provisions directed at:
    (i) Phased retirement annuity payable to a phased retiree, to 
address the possibility that an employee will enter phased retirement 
status;
    (ii) Composite retirement annuity payable to a phased retiree at 
entry into full retirement status, to address the possibility that an 
employee will enter phased retirement status and then enter full 
retirement status; and
    (iii) Annuity payable to an employee who retires without having 
elected phased retirement status.
    (2) To separately provide for division of phased retirement annuity 
or composite retirement annuity, a provision of a court order must 
expressly state that it is directed at ``phased retirement annuity'' or 
``composite retirement annuity,'' and must meet the requirements of 
paragraph (a) of this section. That is, it must state the type of 
annuity to be divided (e.g., ``net phased retirement annuity''). If 
such a provision is unclear as to whether it is directed at gross, net, 
or self-only phased retirement annuity or composite retirement annuity, 
the provision will be applied to gross phased retirement annuity or 
gross composite retirement annuity, as described in paragraph (b) of 
this section.
    (3) Unless a court order expressly states that phased retirement 
annuity or composite retirement annuity is not to be divided, a court 
order meeting the requirements of paragraph (a) of this section and 
that generally provides for division of annuity, without meeting the 
requirements of paragraph (c)(2) of this section, regarding the 
specific type of annuity being divided, will be applied to divide any 
employee annuity, including phased retirement annuity and composite 
retirement annuity.
0
25. Revise Sec.  838.612 to read as follows:


Sec.  838.612  Distinguishing between annuities and contributions.

    (a) A court order that uses terms such as ``annuities,'' 
``pensions,'' ``retirement benefits,'' or similar terms, without 
distinguishing between phased retirement annuity payable to a phased 
retiree, or composite retirement annuity payable to a phased retiree 
upon entry into full retirement status, and employee annuity payable to 
a retiree, satisfies the requirements of Sec. Sec.  838.303(b)(2) and 
838.502(b)(2) for purposes of dividing any employee annuity or a refund 
of employee contributions.
    (b)(1) A court order using ``contributions,'' ``deductions,'' 
``deposits,'' ``retirement accounts,'' ``retirement fund,'' or similar 
terms satisfies the requirements of Sec.  838.502(b)(2) and may be used 
only to divide the amount of contributions that the employee has paid 
into the Civil Service Retirement and Disability Fund.
    (2) Unless the court order specifically states otherwise, when an 
employee annuity is payable, a court order using the terms specified in 
paragraph (b)(1) of this section satisfies the requirements of Sec.  
838.303(b)(2) and awards the former spouse a benefit to be paid in 
equal monthly installments at 50 percent of the gross annuity beginning 
on the date the employee annuity commences or the date of the court 
order, whichever comes later, until the specific dollar amount is 
reached.
0
26. Amend Sec.  838.621 by revising paragraphs (a) and (c) to read as 
follows:


Sec.  838.621  Pro rata share.

    (a) Pro rata share means one-half of the fraction whose numerator 
is the number of months of Federal civilian and military service that 
the employee performed during the marriage and whose denominator is the 
total number of months of Federal civilian and military service 
performed by the employee through the day before the effective date of 
phased retirement or separation for retirement, as applicable to the 
annuity calculation. In the computation of the division of phased 
retirement annuity and a composite retirement annuity, a pro rata share 
will be computed through the day before the effective date of an 
employee's phased retirement for the computation of the

[[Page 33930]]

division of a phased retirement annuity and then recomputed for 
division of the composite retirement annuity under Sec.  831.1742 and 
Sec.  848.502.
* * * * *
    (c) A court order that awards a portion of an employee annuity as 
of a specified date before the employee's phased retirement or 
retirement awards the former spouse a pro rata share as defined in 
paragraph (a) of this section.
* * * * *
0
27. Amend Sec.  838.622 by revising paragraphs (a) and (c)(2) to read 
as follows:


Sec.  838.622  Cost-of-living and salary adjustments.

    (a)(1) A court order that awards adjustments to a former spouse's 
portion of an employee annuity stated in terms such as ``cost-of-living 
adjustments'' or ``COLA's'' occurring after the date of the decree but 
before the date of phased retirement or retirement provides increases 
equal to the adjustments described in or effected under 5 U.S.C. 8340 
or 8462.
    (2) A court order that awards adjustments to a former spouse's 
portion of an employee annuity stated in terms such as ``salary 
adjustments'' or ``pay adjustments'' occurring after the date of the 
decree provides increases equal to the adjustments described in or 
effected under 5 U.S.C. 5303, until the date the individual enters 
phased retirement status or retires.
* * * * *
    (c) * * *
    (2)(i) Except as provided in paragraph (b) of this section, a court 
order that requires OPM to compute a benefit as of a specified date 
before the employee's phased retirement or retirement, and specifically 
instructs OPM not to apply salary adjustments after the specified date 
in computing the former spouse's share of an employee annuity, provides 
that the former spouse is entitled to the application of cost-of-living 
adjustments after the date the individual enters phased retirement 
status or retires (if the employee does not enter phased retirement 
status first), in the manner described in Sec.  838.241.
    (ii) To award cost-of-living adjustments between a specified date 
and the employee's phased retirement or retirement, the court order 
must specifically instruct OPM to adjust the former spouse's share of 
the employee annuity by any cost-of-living adjustments occurring 
between the specified date and the date the employee enters phased 
retirement status or retires (if the employee does not enter phased 
retirement status first).
    (iii) To prevent the application of cost-of-living adjustments that 
occur after the employee annuity begins to accrue to the former 
spouse's share of the employee annuity, the decree must either state 
the exact dollar amount of the award to the former spouse or 
specifically instruct OPM not to apply cost-of-living adjustments 
occurring after the date the employee enters phased retirement status 
or retires (if the employee does not enter phased retirement status 
first).
0
28. Amend Sec.  838.623 by revising paragraphs (c)(1), (c)(2) 
introductory text, (d)(1), and (d)(2) introductory text, and by adding 
paragraph (e) to read as follows:


Sec.  838.623  Computing lengths of service.

* * * * *
    (c)(1) When a court order directed at employee annuity (other than 
a phased retirement annuity or a composite retirement annuity) contains 
a formula for dividing employee annuity that requires a computation of 
service worked as of a date prior to separation and using terms such as 
``years of service,'' ``total service,'' ``service performed,'' or 
similar terms, the time attributable to unused sick leave will not be 
included.
    (2) When a court order directed at employee annuity other than a 
phased retirement annuity or a composite retirement annuity contains a 
formula for dividing employee annuity that requires a computation of 
``creditable service'' (or some other phrase using ``credit'' or its 
equivalent) as of a date prior to retirement, unused sick leave will be 
included in the computation as follows:
* * * * *
    (d)(1) General language such as ``benefits earned as an employee 
with the U.S. Postal Service * * *'' provides only that CSRS or FERS 
retirement benefits are subject to division and does not limit the 
period of service included in the computation (i.e., service performed 
with other Government agencies will be included).
    (2) To limit the computation of benefits other than a phased 
retirement annuity or a composite retirement annuity to a particular 
period of employment, the court order must--
* * * * *
    (e) A court order directed at a phased retirement annuity or a 
composite retirement annuity cannot limit the computation and division 
of a phased retirement annuity or composite retirement annuity to a 
particular period of employment or service. A phased retirement annuity 
is based on an employee's service as of phased retirement and a ``fully 
retired phased component,'' described in Sec. Sec.  831.1742 and 
848.502, of a composite retirement annuity is based on a phased 
retiree's service as of his or her full retirement. A court order that 
attempts to limit the computation of a phased retirement annuity or a 
composite retirement annuity to a particular period of employment or 
service is not a court order acceptable for processing. If the former 
spouse's award of a portion of phased retirement annuity or a composite 
retirement annuity is to be limited, the limitation of the division 
must be accomplished in a manner other than by limiting the service to 
be used in the computation.
0
29. Amend Appendix A to subpart F of part 838 by revising the table of 
contents, adding model paragraphs 212-217, and by revising model 
paragraph 232 and the introductory text for the 300 series paragraphs 
to read as follows:

Appendix A to Subpart F of Part 838--Recommended Language for Court 
Orders Dividing Employee Annuities

* * * * *

Table of Contents

000 Series--Special technical provisions.
    ]001 Language required in Qualified Domestic Relations Orders.
100 Series--Identification of the benefits and instructions that OPM 
pay the former spouse.
    ]101 Identifying retirement benefits and directing OPM to pay 
the former spouse.
    ]102-110 [Reserved]
    ]111 Protecting a former spouse entitled to military retired 
pay.
200 Series--Computing the amount of the former spouse's benefit.
     201-211--General award of employee annuity.
    ]201 Award of a fixed monthly amount.
    ]202 Award of a percentage.
    ]203 Award of a fraction.
    ]204 Award of a pro rata share.
    ]205-210 [Reserved]
    ]211 Award based on a stated formula.
    212-217 Award of phased retirement annuity or 
composite retirement annuity.
    ]212 Award of phased retirement annuity and composite retirement 
annuity while providing for the possibility that the employee 
retires in the usual manner without entering phased retirement 
status before fully retiring.
    ]213 Award of composite retirement annuity while providing for 
the possibility that the employee retires in the usual manner 
without entering phased retirement status, but not providing for 
award of phased retirement annuity.
    ]214 Award of employee annuity when the employee retires in the 
usual manner, without providing for the possibility that the 
employee enters phased retirement status and full retirement status.

[[Page 33931]]

    ]215 Award of phased retirement annuity and composite retirement 
annuity, without providing for the possibility that the employee 
retires in the usual manner without having entered phased retirement 
status and full retirement status.
    ]216 Award of only phased retirement annuity, but not awarding 
composite retirement annuity when the employee enters full 
retirement status or providing for the possibility that the employee 
retires in the usual manner without entering phased retirement 
status before fully retiring.
    ]217 Award of only composite retirement annuity when employee 
enters full retirement status following phased retirement, but not 
awarding phased retirement annuity when the employee enters phased 
retirement status or providing for the possibility that the employee 
retires in the usual manner without entering phased retirement 
status before fully retiring.
    ]218-230 [Reserved]
    231-232 Awarding or excluding COLA's.
    ]231 Awarding COLA's on fixed monthly amounts.
    ]232 Excluding COLA's on awards other than fixed monthly 
amounts.
300 Series--Type of annuity.
    ]301 Awards based on benefits actually paid.
    ]302-310 [Reserved]
    ]311 Awards of earned annuity in cases where the actual annuity 
is based on disability.
400 Series--Refunds of employee contributions.
    ]401 Barring payment of a refund of employee contributions.
    ]402 Dividing a refund of employee contributions.
500 Series--Death of the former spouse.
    ]501 Full annuity restored to the retiree.
    ]502 Former spouse share paid to children.
    ]503 Former spouse share paid to the court.
* * * * *

200 Series--Computing the amount of the former spouse's benefits.

* * * * *
    212-217 Award of phased retirement annuity or 
composite retirement annuity.
    A court order may include an award directed at phased retirement 
annuity payable to a phased retiree, to address the possibility that 
an employee will enter phased retirement status; composite 
retirement annuity payable to a phased retiree at entry into full 
retirement status, to address the possibility that an employee will 
enter phased retirement status and then enter full retirement 
status; or annuity payable to an employee who retires without having 
elected phased retirement status.
    A general non-specific award will apply to any employee annuity 
payable, including phased retirement annuity and composite 
retirement annuity (see ]] 201-211). For example, an award dividing 
employee annuity that uses terms such as ``annuities,'' 
``pensions,'' ``retirement benefits,'' or similar general terms, 
would apply to all types of employee annuity.
    To separately provide for division of phased retirement annuity 
or composite retirement annuity, a provision of a court order must 
expressly state that it is directed at ``phased retirement annuity'' 
or ``composite retirement annuity,'' and must indicate the share of 
employee annuity as a formula, percentage, or fraction. That is, it 
must state the type of annuity to be divided (e.g., ``net phased 
retirement annuity''). If such a provision is unclear as to whether 
it is directed at gross, net, or self-only phased retirement annuity 
or composite retirement annuity, the provision will be applied to 
gross phased retirement annuity or gross composite retirement 
annuity.
    It should be noted that a former spouse survivor annuity cannot 
be awarded from a phased retirement annuity; therefore, a phased 
retirement annuity is not subject to reduction to provide a former 
spouse survivor annuity. As a consequence, an award dividing either 
``self-only phased retirement annuity'' or a ``gross phased 
retirement annuity'' would be directed at identical annuities. 
However, a former spouse survivor annuity can be awarded from a 
composite retirement annuity payable to a phased retiree at entry 
into full retirement status (i.e., when the ``phased retiree'' 
enters full retirement status and becomes a ``retiree''); therefore, 
there would be a difference between an award of a share of ``self-
only composite retirement annuity'' and an award of a share of 
``gross composite retirement annuity.''
    Due to the complexity of the benefits, care should be taken in 
drafting separate awards of phased retirement annuity or composite 
retirement annuity. It should also be noted, for example, that an 
award directed only at the division of phased retirement annuity or 
composite retirement annuity payable to a phased retiree will not be 
effective to divide annuity payable to an employee who retires in 
the usual manner, without having entered phased retirement status 
first. If separate awards of phased retirement annuity or composite 
retirement annuity are to be provided, consideration should be given 
to including provisions in the paragraph addressing the possibility 
that the employee may retire in the usual manner without entering 
phased retirement status before fully retiring. Similarly, if 
employee annuity is only to be awarded in the event the employee 
retires in the usual manner, without entering phased retirement 
status before fully retiring, consideration should be given to 
including specific language to that effect.
    ]212 Award of phased retirement annuity and composite retirement 
annuity while providing for the possibility that the employee 
retires in the usual manner without entering phased retirement 
status before fully retiring.
    Using the following paragraph will award phased retirement 
annuity and composite retirement annuity and provides for the 
possibility that the employee retires in the usual manner without 
entering phased retirement status:
    ``[Employee] is (or will be) eligible for retirement benefits 
under the Civil Service Retirement System based on employment with 
the United States Government. If [employee] enters phased retirement 
status, the [former spouse] is entitled to a [insert description of 
percentage, fraction, formula, or insert term `pro rata share'] of 
[employee]'s [insert `gross,' `net,' or `self-only'] monthly phased 
retirement annuity under the Civil Service Retirement System. When 
[employee] enters full retirement status and receives a composite 
retirement annuity, [former spouse] is awarded [insert language 
awarding fraction, formula, or `pro rata share'] of [employee]'s 
monthly [insert ``gross,'' ``net'' or ``self-only''] composite 
retirement annuity under the Civil Service Retirement System. If 
[employee] retires from employment with the United States Government 
without entering phased retirement status before fully retiring, 
[former spouse] is entitled to [insert appropriate language from 200 
series or 300 series paragraphs] under the Civil Service Retirement 
System. The marriage began on [insert date]. The United States 
Office of Personnel Management is directed to pay [former spouse]'s 
share directly to [former spouse].''
    ]213 Award of composite retirement annuity while providing for 
the possibility that the employee retires in the usual manner 
without entering phased retirement status, but not providing for 
award of phased retirement annuity.
    Using the following will award composite retirement annuity when 
an employee enters phased retirement status and subsequently enters 
full retirement status, and provides for the possibility that the 
employee retires in the usual manner without having entered phased 
retirement status; however, the paragraph will not award a phased 
retirement annuity when the employee enters phased retirement 
status:
    ``[Employee] is (or will be) eligible for retirement benefits 
under the Civil Service Retirement System based on employment with 
the United States Government. If [employee] enters phased retirement 
status and subsequently enters full retirement status, the [former 
spouse] is entitled to a [insert description of percentage, 
fraction, formula, or insert term `pro rata share'] of [employee]'s 
[insert `gross,' `net,' or `self-only'] monthly composite retirement 
annuity under the Civil Service Retirement System. If [employee] 
retires from employment with the United States Government without 
entering phased retirement status before fully retiring, [former 
spouse] is entitled to [insert appropriate language from 200 series 
or 300 series paragraphs] under the Civil Service Retirement System. 
The marriage began on [insert date]. The United States Office of 
Personnel Management is directed to pay [former spouse]'s share 
directly to [former spouse].''
    ]214 Award of employee annuity when the employee retires in the 
usual manner, without providing for the possibility that the 
employee enters phased retirement status and full retirement status.
    Use the following paragraph if the former spouse is only to be 
awarded a portion of the employee's annuity when the employee 
retires in the usual manner, without an award of a portion of the 
employee's phased

[[Page 33932]]

retirement annuity or composite retirement annuity in the event that 
the employee enters phased retirement status. It should be noted, 
however, that if this conditional clause provided below is used in 
an appropriate 200 or 300 series paragraph without a conditional 
award of a portion of phased retirement annuity and composite 
retirement annuity, the former spouse will not receive a portion of 
the employee's annuity if the employee enters phased retirement 
status and then enters full retirement status:
    ``If [employee] retires from employment with the United States 
Government without entering phased retirement status before fully 
retiring, [former spouse] is awarded [insert remaining language for 
the paragraph from the appropriate 200 series or 300 series] . . . 
The marriage began on [insert date]. The United States Office of 
Personnel Management is directed to pay [former spouse]'s share 
directly to [former spouse].''
    ]215 Award of phased retirement annuity and composite retirement 
annuity, without providing for the possibility that the employee 
retires in the usual manner without having entered phased retirement 
status and full retirement status.
    Use the following paragraph to award only phased retirement 
annuity and composite retirement annuity. This paragraph will not 
award benefits if the employee retires in the usual manner without 
entering phased retirement status:
    ``[Employee] is (or will be) eligible for retirement benefits 
under the Civil Service Retirement System based on employment with 
the United States Government. If [employee] enters phased retirement 
status, the [former spouse] is entitled to a [insert description of 
percentage, fraction, formula, or insert term `pro rata share'] of 
[employee]'s monthly [insert `gross,' `net,' or `self-only'] phased 
retirement annuity under the Civil Service Retirement System. When 
[employee] enters full retirement status and receives a composite 
retirement annuity, [former spouse] is awarded [insert language 
awarding percentage, fraction, formula, or pro rata share] of 
[employee]'s monthly [insert ``gross,'' ``net'' or ``self-only''] 
composite retirement annuity under the Civil Service Retirement 
System. The marriage began on [insert date]. The United States 
Office of Personnel Management is directed to pay [former spouse]'s 
share directly to [former spouse].''
    ]216 Award of only phased retirement annuity, but not awarding 
composite retirement annuity when the employee enters full 
retirement status or providing for the possibility that the employee 
retires in the usual manner without entering phased retirement 
status before fully retiring.
    Using the following will award only phased retirement annuity. 
This paragraph will not award composite retirement annuity when the 
employee enters full retirement status nor will it provide for the 
possibility that the employee retires in the usual manner without 
entering phased retirement status. It should be noted that if this 
paragraph is used, the former spouse will not receive a portion of 
the employee's annuity benefits if the employee retires in the usual 
manner without entering phased retirement status first:
    ``[Employee] is (or will be) eligible for retirement benefits 
under the Civil Service Retirement System based on employment with 
the United States Government. If [employee] enters phased retirement 
status, the [former spouse] is entitled to a [insert description of 
percentage, fraction, formula, or insert term `pro rata share'] of 
[employee]'s [insert `gross,' `net,' or `self-only'] monthly phased 
retirement annuity under the Civil Service Retirement System. The 
marriage began on [insert date]. The United States Office of 
Personnel Management is directed to pay [former spouse]'s share 
directly to [former spouse].''
    ]217 Award of only composite retirement annuity when employee 
enters full retirement status following phased retirement, but not 
awarding phased retirement annuity when the employee enters phased 
retirement status or providing for the possibility that the employee 
retires in the usual manner without entering phased retirement 
status before fully retiring.
    Using the following will award only composite retirement annuity 
when the employee enters full retirement status following phased 
retirement. This paragraph will not award phased retirement annuity 
when the employee enters phased retirement status nor will it 
provide for the possibility that the employee retires in the usual 
manner without entering phased retirement status. It should be noted 
that if this paragraph is used, the former spouse will not receive a 
portion of the employee's annuity benefits if the employee retires 
without entering full retirement status from phased retirement 
status:
    ``[Employee] is (or will be) eligible for retirement benefits 
under the Civil Service Retirement System based on employment with 
the United States Government. If [employee] enters phased retirement 
status and enters full retirement status, the [former spouse] is 
entitled to a [insert description of percentage, fraction, formula, 
or insert term `pro rata share'] of [employee]'s [insert `gross,' 
`net,' or `self-only'] monthly composite retirement annuity under 
the Civil Service Retirement System. The marriage began on [insert 
date]. The United States Office of Personnel Management is directed 
to pay [former spouse]'s share directly to [former spouse].''
    ]218-230 [Reserved]
    231-232 Awarding or excluding COLA's.
* * * * *
    ]232 Excluding COLA's on awards other than fixed monthly 
amounts.
    Using the following paragraph will prevent application of COLA's 
to a former spouse's share of an employee annuity in cases where the 
former spouse has been awarded a percentage, fraction or pro rata 
share of the employee annuity, rather than a fixed dollar amount.
    ``[Employee] is (or will be) eligible for retirement benefits 
under the Civil Service Retirement System based on employment with 
the United States Government. [Insert language for computing the 
former spouse's share from ] 202, ] 203, ] 204, ] 211, or ]] 212-217 
of this appendix.] The United States Office of Personnel Management 
is directed to determine the amount of [former spouse]'s share on 
the date [insert `when [employee] retires or enters phased 
retirement status' or if the employee has not retired or entered 
phased retirement status, or `of this order' if the employee is 
already retired or entered phased retirement status] and not to 
apply COLA's to that amount. The United States Office of Personnel 
Management is directed to pay [former spouse]'s share directly to 
[former spouse].''

300 Series--Type of Annuity

    Awards of employee annuity to a former spouse (other than awards 
of fixed dollar amounts) must specify whether OPM will use the 
``phased retirement annuity,'' ``composite retirement annuity,'' 
``gross annuity,'' ``net annuity,'' or ``self-only annuity'' as 
defined in Sec.  838.103 (see also Sec.  838.306) in determining the 
amount of the former spouse's entitlement. The court order may 
contain a formula that has the effect of creating other types of 
annuity, but the court order may only do this by providing a formula 
that starts from ``phased retirement annuity,'' ``composite 
retirement annuity,'' ``gross annuity,'' ``net annuity,'' or ``self-
only annuity'' as defined in Sec.  838.103.
* * * * *
0
30. Amend Sec.  838.803 by adding paragraph (c) to read as follows:


Sec.  838.803  Language not acceptable for processing.

* * * * *
    (c) A court order that attempts to award a former spouse survivor 
annuity based on a phased retirement annuity or to reduce a phased 
retirement annuity to provide survivor benefits is not a court order 
acceptable for processing.
0
31. Amend Sec.  838.806 by revising paragraph (d)(2) to read as 
follows:


Sec.  838.806  Amended court orders.

* * * * *
    (d) * * *
    (2) The effective commencing date for the employee's annuity other 
than the commencing date of a phased retirement annuity.
* * * * *
0
32. Amend Sec.  838.807 by revising paragraphs (a), (b)(1), (b)(2), and 
(c), and adding paragraph (b)(3) to read as follows:


Sec.  838.807  Cost must be paid by annuity reduction.

    (a) A court order awarding a former spouse survivor annuity is not 
a court order acceptable for processing unless it permits OPM to 
collect the annuity reduction required by 5 U.S.C. 8339(j)(4) or 8419 
from annuity paid by OPM to a retiree. OPM will not honor a court order 
that provides for the retiree or former spouse to pay OPM the amount of 
the annuity reduction by any other means.
    (b) * * *

[[Page 33933]]

    (1) By reduction of the former spouse's entitlement under a court 
order acceptable for processing that is directed at employee annuity 
payable to a retiree;
    (2) By reduction of the employee annuity payable to a retiree; or
    (3) By actuarial reduction of the former spouse survivor annuity in 
the event the reduction of the employee annuity is not made for any 
reason prior to the death of the annuitant.
    (c) Unless the court order otherwise directs, OPM will collect the 
annuity reduction required by 5 U.S.C. 8339(j)(4) or 8419 from the 
employee annuity payable to a retiree.
0
33. Amend Sec.  838.1111 by redesignating paragraph (b) as paragraph 
(c), by revising paragraph (a)(1) introductory text, and by adding new 
paragraph (b) to read as follows:


Sec.  838.1111  Amounts subject to child abuse judgment enforcement 
orders.

    (a)(1) Employee annuities, other than phased retirement annuities, 
and refunds of employee contributions are subject to child abuse 
enforcement orders only if all of the conditions necessary for payment 
of the employee annuity or refund of employee contributions to the 
former employee have been met, including, but not limited to--
* * * * *
    (b)(1) Phased retirement annuities are subject to child abuse 
enforcement orders only if all of the conditions necessary for payment 
of the phased retirement annuity to the phased retiree have been met, 
including, but not limited to--
    (i) Entry of the employee into phased retirement status under 
subpart Q of part 831 of this chapter or part 848 of this chapter, 
respectively;
    (ii) Application for payment of the phased retirement annuity by 
the phased retiree; and
    (iii) The phased retiree's immediate entitlement to a phased 
retirement annuity.
    (2) Money held by an employing agency or OPM that may be payable at 
some future date is not available for payment under child abuse 
judgment enforcement orders.
    (3) OPM cannot pay a child abuse creditor a portion of a phased 
retirement annuity before the employee annuity begins to accrue.
* * * * *

PART 841--FEDERAL EMPLOYEES RETIREMENT SYSTEM--GENERAL 
ADMINISTRATION

0
34. The authority citation for part 841 continues to read as follows:

    Authority: 5 U.S.C. 8461; Sec. 841.108 also issued under 5 
U.S.C. 552a; Secs. 841.110 and 841.111 also issued under 5 U.S.C. 
8470(a); subpart D also issued under 5 U.S.C. 8423; Sec. 841.504 
also issued under 5 U.S.C. 8422; Sec. 841.507 also issued under 
section 505 of Pub. L. 99-335; subpart J also issued under 5 U.S.C. 
8469; Sec. 841.506 also issued under 5 U.S.C. 7701(b)(2); Sec. 
841.508 also issued under section 505 of Pub. L. 99-335; Sec. 
841.604 also issued under Title II, Pub. L. 106-265, 114 Stat. 780.

0
35. Amend Sec.  841.102 as follows:
0
a. Add paragraph (b)(6), and
0
b. Redesignate paragraphs (c)(6) through (11) as paragraphs (c)(7) 
through (12), and
0
c. Add new paragraph (c)(6).


Sec.  841.102  Regulatory structure for the Federal Employees 
Retirement System.

* * * * *
    (b) * * *
    (6) Part 848 of this chapter contains information about phased 
retirement under FERS.
    (c) * * *
    (6) Part 850 of this chapter contains information about CSRS and 
FERS electronic retirement processing.
* * * * *
0
36. Amend Sec.  841.104 by revising paragraph (a) and paragraph (b) 
introductory text to read as follows:


Sec.  841.104  Special terms defined.

    (a) Unless otherwise defined for use in any subpart, as used in 
connection with FERS (parts 841 through 850 of this chapter), terms 
defined in 5 U.S.C. 8401 have the same meanings assigned to them by 
that section.
    (b) Unless otherwise defined for use in any subpart, as used in 
connection with FERS (parts 841 through 850 of this chapter)--
* * * * *

PART 842--FEDERAL EMPLOYEES RETIREMENT SYSTEM-- BASIC ANNUITY

0
37. The authority citation for part 842 continues to read as follows:

    Authority: 5 U.S.C. 8461(g); Secs. 842.104 and 842.106 also 
issued under 5 U.S.C. 8461(n); Sec. 842.104 also issued under Secs. 
3 and 7(c) of Pub. L. 105-274, 112 Stat. 2419; Sec. 842.105 also 
issued under 5 U.S.C. 8402(c)(1) and 7701(b)(2); Sec. 842.106 also 
issued under Sec. 102(e) of Pub. L. 104-8, 109 Stat. 102, as amended 
by Sec. 153 of Pub. L. 104-134, 110 Stat. 1321-102; Sec. 842.107 
also issued under Secs. 11202(f), 11232(e), and 11246(b) of Pub. L. 
105-33, 111 Stat. 251, and Sec. 7(b) of Pub. L. 105-274, 112 Stat. 
2419; Sec. 842.108 also issued under Sec. 7(e) of Pub. L. 105-274, 
112 Stat. 2419; Sec. 842.109 also issued under Sec. 1622(b) of 
Public Law 104-106, 110 Stat. 515; Sec. 842.208 also issued under 
Sec. 535(d) of Title V of Division E of Pub. L. 110-161, 121 Stat. 
2042; Sec. 842.213 also issued under 5 U.S.C. 8414(b)(1)(B) and 
Sec.1313(b)(5) of Pub. L. 107-296, 116 Stat. 2135; Secs. 842.304 and 
842.305 also issued under Sec. 321(f) of Pub. L. 107-228, 116 Stat. 
1383, Secs. 842.604 and 842.611 also issued under 5 U.S.C. 8417; 
Sec. 842.607 also issued under 5 U.S.C. 8416 and 8417; Sec. 842.614 
also issued under 5 U.S.C. 8419; Sec. 842.615 also issued under 5 
U.S.C. 8418; Sec. 842.703 also issued under Sec. 7001(a)(4) of Pub. 
L. 101-508, 104 Stat. 1388; Sec. 842.707 also issued under Sec. 6001 
of Pub. L. 100-203, 101 Stat. 1300; Sec. 842.708 also issued under 
Sec. 4005 of Pub. L. 101-239, 103 Stat. 2106 and Sec. 7001 of Pub. 
L. 101-508, 104 Stat. 1388; Subpart H also issued under 5 U.S.C. 
1104; Sec. 842.810 also issued under Sec. 636 of Appendix C to Pub. 
L. 106-554 at 114 Stat. 2763A-164; Sec. 842.811 also issued under 
Sec. 226(c)(2) of Public Law 108-176, 117 Stat. 2529; Subpart J also 
issued under Sec. 535(d) of Title V of Division E of Pub. L. 110-
161, 121 Stat. 2042.

0
38. Amend Sec.  842.402 to revise the definition of ``full-time 
service'' as follows:


Sec.  842.402  Definitions.

* * * * *
    Full-time service means service performed by an employee who has--
    (1) An officially established recurring basic workweek consisting 
of 40 hours within the employee's administrative workweek (as 
established under Sec.  610.111 of this chapter or similar authority);
    (2) An officially established recurring basic work requirement of 
80 hours per biweekly pay period (as established for employees with a 
flexible or compressed work schedule under 5 U.S.C. chapter 61, 
subchapter II, or similar authority);
    (3) For a firefighter covered by 5 U.S.C. 5545b(b) who does not 
have a 40-hour basic workweek, a regular tour of duty averaging at 
least 106 hours per biweekly pay period; or
    (4) A work schedule that is considered to be full-time by express 
provision of law, including a work schedule established for certain 
nurses under 38 U.S.C. 7456 or 7456A that is considered by law to be a 
full-time schedule for all purposes.
* * * * *

PART 843--FEDERAL EMPLOYEES RETIREMENT SYSTEM--DEATH BENEFITS AND 
EMPLOYEE REFUNDS

0
39. The authority citation for part 843 continues to read as follows:

    Authority: 5 U.S.C. 8461; Sec. Sec.  843.205, 843.208, and 
843.209 also issued under 5 U.S.C. 8424; Sec.  843.309 also issued 
under 5 U.S.C. 8442; Sec.  843.406 also issued under 5 U.S.C. 8441.
0
40. Amend Sec.  843.202 by revising paragraph (b) to read as follows:

[[Page 33934]]

Sec.  843.202  Eligibility for payment of the unexpended balance to a 
separated employee.

* * * * *
    (b)(1) For a retirement based on a separation before October 28, 
2009, periods of service for which employee contributions have been 
refunded are not creditable service in determining whether the employee 
has sufficient service to have title to an annuity or for any other 
purpose.
    (2) For a retirement based on a separation on or after October 28, 
2009, periods of service for which employee contributions have been 
refunded are--
    (i) Creditable service in determining whether the employee has 
sufficient service to have title to an annuity; and
    (ii) Not creditable without deposit for any other purpose, except 
for average pay computation purposes.
0
41. Add part 848 to read as follows:

PART 848--PHASED RETIREMENT

Subpart A--General Provisions
Sec.
848.101 Applicability and purpose.
848.102 Definitions.
848.103 Implementing directives.
Subpart B--Entering Phased Retirement
848.201 Eligibility.
848.202 Working percentage and officially established hours for 
phased employment.
848.203 Application for phased retirement.
848.204 Effective date of phased employment and phased retirement 
annuity commencing date.
848.205 Effect of phased retirement.
Subpart C--Returning to Regular Employment Status
848.301 Ending phased retirement status to return to regular 
employment status.
848.302 Effective date of end of phased retirement status to return 
to regular employment status.
848.303 Effect of ending phased retirement status to return to 
regular employment status.
Subpart D--Entering Full Retirement Status
848.401 Application for full retirement status.
848.402 Commencing date of composite retirement annuity.
Subpart E--Computation of Phased Retirement Annuity at Phased 
Retirement and Composite Retirement Annuity at Full Retirement
848.501 Computation of phased retirement annuity.
848.502 Computation of composite annuity at final retirement.
848.503 Cost-of-living adjustments.
848.504 Non-eligibility for annuity supplement.
Subpart F--Opportunity of a Phased Retiree to Pay Deposit or Redeposit 
for Civilian or Military Service
848.601 Deposit for civilian service for which no retirement 
deductions were withheld and redeposit for civilian service for 
which retirement deductions were refunded to the individual.
848.602 Deposit for military service.
Subpart G--Death Benefits
848.701 Death of phased retiree during phased employment.
848.702 Death of an individual who has separated from phased 
employment and who dies before submitting an application for a 
composite retirement annuity.
848.703 Lump-sum credit.
Subpart H--Reemployment After Separation From Phased Retirement Status
848.801 Reemployment of an individual who has separated from phased 
employment and who dies before submitting an application for a 
composite retirement annuity.
Subpart I--Mentoring
848.901 Mentoring.

    Authority: 5 U.S.C. 8461; 5 U.S.C. 8412a.

Subpart A--General Provisions


Sec.  848.101  Applicability and purpose.

    This subpart contains the regulations implementing provisions of 5 
U.S.C. 8412a authorizing phased retirement. This subpart establishes 
the eligibility requirements for making an election to enter phased 
retirement status, the procedures for making an election, the record-
keeping requirements, and the methods to be used for certain 
computations not addressed elsewhere in parts 841-843 and 845.


Sec.  848.102  Definitions.

    In this subpart--
    Authorized agency official means--
    (1) For the executive branch agencies, the head of an Executive 
agency as defined in 5 U.S.C. 105;
    (2) For the legislative branch, the Secretary of the Senate, the 
Clerk of the House of Representatives, or the head of any other 
legislative branch agency;
    (3) For the judicial branch, the Director of the Administrative 
Office of the U.S. Courts;
    (4) For the Postal Service, the Postmaster General;
    (5) For any other independent establishment that is an entity of 
the Federal Government, the head of the establishment; or
    (6) An official who is authorized to act for an official named in 
paragraphs (1)-(5) in the matter concerned.
    Composite retirement annuity means the annuity computed when a 
phased retiree attains full retirement status.
    Director means the Director of the Office of Personnel Management.
    Full retirement status means that a phased retiree has ceased 
employment and is entitled, upon application, to a composite retirement 
annuity.
    Full-time means--
    (1) An officially established recurring basic workweek consisting 
of 40 hours within the employee's administrative workweek (as 
established under Sec.  610.111 of this chapter or similar authority); 
or
    (2) An officially established recurring basic work requirement of 
80 hours per biweekly pay period (as established for employees with a 
flexible or compressed work schedule under 5 U.S.C. chapter 61, 
subchapter II, or similar authority).
    Phased employment means the less-than-full-time employment of a 
phased retiree.
    Phased retiree means a retirement-eligible employee who--
    (1) With the concurrence of an authorized agency official, enters 
phased retirement status; and
    (2) Has not entered full retirement status;
    Phased retirement annuity means the annuity payable under 5 U.S.C. 
8412a before full retirement.
    Phased retirement percentage means the percentage which, when added 
to the working percentage for a phased retiree, produces a sum of 100 
percent.
    Phased retirement period means the period beginning on the date on 
which an individual becomes entitled to receive a phased retirement 
annuity and ending on the date on which the individual dies or 
separates from phased employment.
    Phased retirement status means that a phased retiree is 
concurrently employed in phased employment and eligible to receive a 
phased retirement annuity.
    Working percentage has the meaning given that term in Sec.  
848.202(a).


Sec.  848.103  Implementing directives.

    The Director may prescribe, in the form he or she deems 
appropriate, such detailed procedures as are necessary to carry out the 
purpose of this subpart.

Subpart B--Entering Phased Retirement


Sec.  848.201  Eligibility.

    (a) A retirement-eligible employee, as defined in paragraphs (b) 
and (c), may elect to enter phased retirement status if the employee 
has been employed on a full-time basis for not less than the 3-year 
period ending on the effective date of phased retirement status under 
Sec.  848.203.

[[Page 33935]]

    (b) Except as provided in paragraph (c) of this section, a 
retirement-eligible employee means an employee who, if separated from 
the service, would meet the requirements for retirement under 
subsection (a) or (b) of 5 U.S.C. 8412.
    (c) A retirement-eligible employee does not include--
    (1) A member of the Capitol Police or Supreme Court Police, or an 
employee occupying a law enforcement officer, firefighter, nuclear 
materials courier, air traffic controller, or customs and border 
protection officer position, except a customs and border protection 
officer who is exempt from mandatory separation and retirement under 5 
U.S.C. 8325 pursuant to section 535(e)(2)(A) of Division E of the 
Consolidated Appropriations Act, 2008, Public Law 110-161;
    (2) An individual eligible to retire under 5 U.S.C. 8412(d) or (e): 
or
    (3) An employee covered by a special work schedule authority that 
does not allow for a regularly recurring part-time schedule, such as a 
firefighter covered by 5 U.S.C. 5545b or a nurse covered by 38 U.S.C. 
7456 or 7456A.


Sec.  848.202  Working percentage and officially established hours for 
phased employment.

    (a) For the purpose of this subpart, working percentage means the 
percentage of full-time equivalent employment equal to the quotient 
obtained by dividing--
    (1) The number of officially established hours per pay period to be 
worked by a phased retiree, as described in paragraph (b) of this 
section; by
    (2) The number of hours per pay period to be worked by an employee 
serving in a comparable position on a full-time basis.
    (b) The number of officially established hours per pay period to be 
worked by an employee in phased retirement status must equal one-half 
the number of hours the phased retiree would have been scheduled to 
work had the phased retiree remained in a full-time work schedule and 
not elected to enter phased retirement status. These hours make up +- 
the officially established part-time work schedule of the phased 
retiree and exclude any additional hours worked under Sec.  848.205(j).


Sec.  848.203  Application for phased retirement.

    (a) To elect to enter phased retirement status, a retirement-
eligible employee covered by Sec.  848.201 must--
    (1) Submit to an authorized agency official a written and signed 
request to enter phased employment, on a form prescribed by OPM;
    (2) Obtain the signed written approval of an authorized agency 
official to enter phased employment; and
    (3) File an application for phased retirement, in accordance with 
Sec.  841.202.
    (b) Except as provided in paragraph (c) of this section, an 
applicant for phased retirement may withdraw his or her application any 
time before the election becomes effective, but not thereafter.
    (c) An applicant for phased retirement may not withdraw his or her 
application after OPM has received a certified copy of a court order 
(under part 581 or part 838 of this chapter) affecting the benefits.
    (d) (1) An employee and an agency approving official may agree to a 
time limit to the employee's period of phased employment as a condition 
of approval of the employee's request to enter phased employment and 
phased retirement, or by mutual agreement after the employee enters 
phased employment status.
    (2) To enter into such an agreement, the employee and the approving 
official must complete a written and signed agreement.
    (3) The written agreement must include the following:
    (i) The date the employee's period of phased employment will 
terminate;
    (ii) A statement that the employee can request the approving 
official's permission to return to regular employment status at any 
time or within three days after the expiration of the agreement as 
provided in Sec.  848.301. The agreement must also explain how 
returning to regular employment status would affect the employee, as 
described in Sec. Sec.  848.301-848.302.
    (iii) A statement that the employee has a right to elect to fully 
retire at any time as provided in Sec.  848.401;
    (iv) A statement that the employee may accept a new appointment at 
another agency, with or without the new agency's approval of phased 
employment, at any time before the expiration of the agreement or 
within 3 days of the expiration of the agreement; the agreement must 
also explain how accepting an appointment at a new agency as a regular 
employee would affect the employee, as described in Sec. Sec.  848.301-
848.302;
    (v) An explanation that when the agreed term of phased employment 
ends, the employee will be separated from employment and that such 
separation will be considered voluntary, based on the written 
agreement; and
    (vi) An explanation that if the employee is separated from phased 
employment and is not employed within 3 days (i.e., the employee has a 
break in service of greater than 3 days), the employee will be deemed 
to have elected full retirement.
    (4) The agency approving official and the employee may rescind an 
existing agreement, or enter into a new agreement to extend or reduce 
the term of phased employment agreed to in an existing agreement, by 
entering into a new written agreement meeting the requirements of this 
paragraph, before the expiration of the agreement currently in effect.


Sec.  848.204  Effective date of phased employment and phased 
retirement annuity commencing date.

    (a) Phased employment is effective the first day of the first pay 
period beginning after phased employment is approved by an authorized 
agency official under Sec.  848.203(a), or the first day of a later pay 
period specified by the employee with the authorized agency official's 
concurrence.
    (b) The commencing date of a phased retirement annuity (i.e., the 
beginning date of the phased retirement period) is the first day of the 
first pay period beginning after phased employment is approved by an 
authorized agency official under Sec.  848.203(a), or the first day of 
a later pay period specified by the employee with the authorized agency 
official's concurrence.


Sec.  848.205  Effect of phased retirement.

    (a)(1) A phased retiree is deemed to be a full-time employee for 
the purpose of 5 U.S.C. chapter 89 and 5 CFR part 890 (related to 
health benefits), as required by 5 U.S.C. 8412a(i). The normal rules 
governing health benefits premiums for part-time employees in 5 U.S.C. 
8906(b)(3) do not apply.
    (2) A phased retiree is deemed to be receiving basic pay at the 
rate applicable to a full-time employee holding the same position for 
the purpose of determining a phased retiree's annual rate of basic pay 
used in calculating premiums (employee withholdings and agency 
contributions) and benefits under 5 U.S.C. chapter 87 and 5 CFR part 
870 (dealing with life insurance), as required by 5 U.S.C. 8412a(o). 
The deemed full-time schedule will consist of five 8-hour workdays each 
workweek, resulting in a 40-hour workweek. Only basic pay for hours 
within the deemed full-time schedule will be considered, consistent 
with 5 U.S.C. 8412a(o) and the definition of ``full-time'' in Sec.  
848.102. Any premium pay creditable as basic pay for life insurance 
purposes under 5 CFR 870.204 for overtime work or hours outside the 
full-time schedule that an employee was receiving before

[[Page 33936]]

phased retirement, such as standby duty pay under 5 U.S.C. 5545(c)(1) 
or customs officer overtime pay under 19 U.S.C. 267(a), may not be 
considered in determining a phased retiree's deemed annual rate of 
basic pay under this paragraph.
    (b) A phased retiree may not be appointed to more than one position 
at the same time.
    (c) A phased retiree may move to another position in the agency or 
another agency during phased retirement status only if the change would 
not result in a change in the working percentage. To move to another 
agency during phased retirement status and continue phased employment 
and phased retirement status, the phased retiree must submit a written 
and signed request and obtain the signed written approval, in 
accordance with Sec.  848.203(a)(1) and (2), of the authorized agency 
official to which the phased retiree is moving. Notwithstanding the 
provisions of Sec.  848.204, if the authorized agency official approves 
the request, the phased retiree's phased employment and phased 
retirement status will continue without interruption at the agency to 
which the phased retiree moves. If the authorized agency official at 
the agency to which the phased retiree moves does not approve the 
request, phased employment and phased retirement status terminates in 
accordance with Sec.  848.302(b).
    (d) A phased retiree may be detailed to another position or agency 
if the working percentage of the position to which detailed is the same 
as the working percentage of the phased retiree's position of record.
    (e) A retirement-eligible employee who makes an election under this 
subpart may not elect an alternative annuity under 5 U.S.C. 8420a.
    (f) If the employee's election of phased retirement status becomes 
effective, the employee is barred from electing phased retirement 
status again. Ending phased retirement status or entering full 
retirement status does not create a new opportunity for the individual 
to elect phased retirement status.
    (g) With the exception of Sec.  841.803(f), a phased retiree is 
deemed to be an annuitant for the purpose of subpart H of 5 CFR part 
841.
    (h) A phased retiree is deemed to be an annuitant for the purpose 
of subpart J of 5 CFR part 841.
    (i) Except as otherwise expressly provided by law or regulation, a 
phased retiree is treated as any other employee on a part-time tour of 
duty for all other purposes.
    (j)(1) A phased retiree may not be assigned hours of work in excess 
of the officially established part-time schedule (reflecting the 
working percentage), except under the conditions specified in paragraph 
(j)(2) of this section.
    (2) An authorized agency official may order or approve a phased 
retiree to perform hours of work in excess of the officially 
established part-time schedule only in rare and exceptional 
circumstances meeting all of the following conditions:
    (i) The work is necessary to respond to an emergency posing a 
significant, immediate, and direct threat to life or property;
    (ii) The authorized agency official determines that no other 
qualified employee is available to perform the required work;
    (iii) The phased retiree is relieved from performing excess work as 
soon as reasonably possible (e.g., by management assignment of work to 
other employees); and
    (iv) When an emergency situation can be anticipated in advance, 
agency management made advance plans to minimize any necessary excess 
work by the phased retiree.
    (3) Employing agencies must inform each phased retiree and his or 
her supervisor of--
    (i) The limitations on hours worked in excess of the officially 
established part-time schedule;
    (ii) The requirement to maintain records documenting that the 
exceptions met all required conditions;
    (iii) The fact that, by law and regulation, any basic pay received 
for hours outside the employee's officially established part-time work 
schedule (as described in Sec.  848.202(a)(1) and (b)) is subject to 
retirement deductions and agency contributions, in accordance with 5 
U.S.C. 8412a(d), but is not used in computing retirement benefits; and
    (iv) The fact that, by law and regulation, any premium pay received 
for overtime work or hours outside the full-time schedule that would 
otherwise be basic pay for retirement, such as customs officer overtime 
pay under 19 U.S.C. 267(a), will not be subject to retirement 
deductions or agency contributions, in accordance with 5 U.S.C. 
8412a(d), and that any such premium pay received will not be included 
in computing retirement benefits.
    (4) Employing agencies must maintain records documenting that 
exceptions granted under paragraph (j)(2) of this section meet the 
required conditions. These records must be retained for at least 6 
years and be readily available to auditors. OPM may require periodic 
agency reports on the granting of exceptions and of any audit findings.
    (5) If OPM finds that an agency (or subcomponent) is granting 
exceptions that are not in accordance with the requirements of this 
paragraph (j), OPM may administratively withdraw the agency's (or 
subcomponent's) authority to grant exceptions and require OPM approval 
of any exception.
    (6) If OPM finds that a phased retiree has been working a 
significant amount of excess hours beyond the officially established 
part-time schedule to the degree that the intent of the phased 
retirement law is being undermined, OPM may require that the agency end 
the individual's phased retirement by unilateral action, 
notwithstanding the normally established methods of ending phased 
retirement. This finding does not need to be based on a determination 
that the granted exceptions failed to meet the required conditions in 
paragraph (j)(2) of this section. With the ending of an individual's 
phased retirement, that individual must be returned to regular 
employment status on the same basis as a person making an election 
under Sec.  848.301--unless that individual elects to fully retire as 
provided under Sec.  848.401.
    (7) A phased retiree must be compensated for excess hours of work 
in accordance with the normally applicable pay rules.
    (8) Any premium pay received for overtime work or hours outside the 
full-time schedule that would otherwise be basic pay for retirement, 
such as customs officer overtime pay under 19 U.S.C. 267(a), is not 
subject to retirement deductions or agency contributions, in accordance 
with 5 U.S.C. 8412a(d).

Subpart C--Returning to Regular Employment Status


Sec.  848.301  Ending phased retirement status to return to regular 
employment status.

    (a) Election to end phased retirement status to return to regular 
employment status. (1) A phased retiree may elect, with the permission 
of an authorized agency official, to end phased employment at any time 
to return to regular employment status. The election is deemed to meet 
the requirements of 5 U.S.C. 8412a(g) regardless of the employee's work 
schedule. The employee is not subject to any working percentage 
limitation (i.e., full-time, 50 percent of full-time, or any other 
working percentage) upon electing to end phased retirement status.
    (2) To elect to end phased retirement status to return to regular 
employment status, a phased retiree must--

[[Page 33937]]

    (i) Submit to an authorized agency official, on a form prescribed 
by OPM, a written and signed request to end phased retirement status to 
return to regular employment status; and
    (ii) Obtain the signed written approval of an authorized agency 
official for the request.
    (3) An employee may cancel an approved election to end phased 
retirement status to return to regular employment status by submitting 
a signed written request to the agency and obtaining the approval of an 
authorized agency official before the effective date of return to 
regular employment status.
    (4) The employing agency must notify OPM that the employee's phased 
retirement status has ended by submitting to OPM a copy of the 
completed election to end phased retirement status to return to regular 
employment status within 15 days of its approval.
    (b) Mandated return to regular employment status. A phased retiree 
may be returned to regular employment status as provided under Sec.  
848.205(j)(6).
    (c) Bar on reelection of phased retirement. Once an election to end 
phased retirement status to return to regular employment status is 
effective, the employee may not reelect phased retirement status.


Sec.  848.302  Effective date of end of phased retirement status to 
return to regular employment status.

    (a) (1) Except as provided in paragraph (b) of this section, if a 
request to end phased retirement status to return to regular employment 
status is approved by an authorized agency official under Sec.  848.301 
on any date on or after the first day of a month through the fifteenth 
day of a month, the phased retiree's resumption of regular employment 
status is effective the first day of the first full pay period of the 
month following the month in which the election to end phased 
retirement status to return to regular employment status is approved.
    (2) If a request to end phased retirement status to return to 
regular employment status is approved by an authorized agency official 
under Sec.  848.301 on any date on or after the sixteenth day of a 
month through the last day of a month, the phased retiree's resumption 
of regular employment status is effective on the first day of the first 
full pay period of the second month following the month in which the 
election to end phased retirement status to return to regular 
employment status is approved.
    (3) The phased retirement annuity terminates on the date determined 
under paragraph (a)(1) or (2) of this section.
    (b) When a phased retiree moves from the agency that approved his 
or her phased employment and phased retirement status to another agency 
and the authorizing official at the agency to which the phased retiree 
moves does not approve a continuation of phased employment and phased 
retirement status, phased employment and phased retirement status 
terminates when employment ends at the current employing agency.


Sec.  848.303  Effect of ending phased retirement status to return to 
regular employment status.

    (a) After phased retirement status ends under Sec.  848.302, the 
employee's rights under subchapter III of chapter 83 or chapter 84 of 
title 5, United States Code, are determined based on the law in effect 
at the time of any subsequent separation from service.
    (b) After an individual ends phased retirement status to return to 
regular employment status, for the purposes of subchapter III of 
chapter 83 or chapter 84 of title 5, United States Code, at the time of 
the subsequent separation from service, the phased retirement period 
will be treated as if it had been a period of part-time employment with 
the work schedule described in Sec.  848.202(a)(1) and (b). The part-
time proration adjustment for the phased retirement period will be 
based upon the individual's officially established part-time work 
schedule, with no credit for extra hours worked. In determining the 
individual's deemed rate of basic pay during the phased retirement 
period, only basic pay for hours within the individual's officially 
established part-time work schedule may be considered. No pay received 
for other hours during the phased retirement period may be included as 
part of basic pay for the purpose of computing retirement benefits, 
notwithstanding the normally applicable rules.
    (c) The restrictions in Sec. Sec.  848.601 and 848.602 regarding 
when an individual must complete a deposit for civilian service, a 
redeposit for civilian service, or a deposit for military service do 
not apply when a phased retiree ends phased retirement status to return 
to regular employment status under this section.

Subpart D--Entering Full Retirement Status


Sec.  848.401  Application for full retirement status.

    (a) Election of full retirement. (1) A phased retiree may elect to 
enter full retirement status at any time by submitting to OPM an 
application for full retirement in accordance with Sec.  841.202. This 
includes an election made under Sec.  848.205(j)(6) in lieu of a 
mandated return to regular employment status. Upon making such an 
election, a phased retiree is entitled to a composite retirement 
annuity.
    (2) A phased retiree may cancel an election of full retirement 
status and withdraw an application for full retirement by submitting a 
signed written request with the agency and obtaining the approval of an 
authorized agency official before the commencing date of the composite 
retirement annuity.
    (b) Deemed election of full retirement. A phased retiree who is 
separated from phased employment for more than 3 days enters full 
retirement status. The individual's composite retirement annuity will 
begin to accrue on the commencing date of the composite annuity, as 
provided in Sec.  848.402, and payment will be made after he or she 
submits an application in accordance with Sec.  841.202 of this chapter 
for the composite retirement annuity.
    (c) Survivor election provisions. An individual applying for full 
retirement status under this section is subject to the survivor 
election provisions of subpart F of 5 CFR part 842.


Sec.  848.402  Commencing date of composite retirement annuity.

    (a) The commencing date of the composite retirement annuity of a 
phased retiree who enters full retirement status is the day after 
separation.
    (b) A phased retirement annuity terminates upon separation from 
service.

Subpart E--Computation of Phased Retirement Annuity at Phased 
Retirement and Composite Retirement Annuity at Full Retirement


Sec.  848.501  Computation of phased retirement annuity.

    A phased retiree's phased retirement annuity equals the product 
obtained by multiplying the amount of annuity computed under 5 U.S.C. 
8415, excluding reduction for survivor annuity, that would have been 
payable to the phased retiree if, on the date on which the phased 
retiree enters phased retirement, the phased retiree had separated from 
service and retired under 5 U.S.C. 8412(a) or (b), by the phased 
retirement percentage for the phased retiree.

[[Page 33938]]

Sec.  848.502  Computation of composite annuity at final retirement.

    (a) Subject to the adjustment described in paragraph (c) of this 
section, a phased retiree's composite retirement annuity at final 
retirement equals the sum obtained by adding--
    (1) The amount computed under Sec.  848.501(a), increased by cost-
of-living adjustments under Sec.  848.503(c); and
    (2) The ``fully retired phased component'' computed under paragraph 
(b) of this section.
    (b)(1) Subject to the requirements described in paragraphs (b)(2) 
and (b)(3) of this section, a ``fully retired phased component'' equals 
the product obtained by multiplying--
    (i) The working percentage; by
    (ii) The amount of an annuity computed under 5 U.S.C. 8415 that 
would have been payable at the time of full retirement if the 
individual had not elected phased retirement status and as if the 
individual was employed on a full-time basis in the position occupied 
during the phased retirement period and before any reduction for 
survivor annuity.
    (2) In applying paragraph (b)(1)(ii) of this section, the 
individual must be deemed to have a full-time schedule during the 
period of phased retirement. The deemed full-time schedule will consist 
of five 8-hour workdays each workweek, resulting in a 40-hour workweek. 
In determining the individual's deemed rate of basic pay during phased 
retirement, only basic pay for hours within the deemed full-time 
schedule will be considered, consistent with the definition of ``full-
time'' in Sec.  848.102. Any premium pay creditable as basic pay for 
retirement purposes for overtime work or hours outside the full-time 
schedule that an employee was receiving before phased retirement, such 
as standby duty pay under 5 U.S.C. 5545(c)(1) or customs officer 
overtime pay under 19 U.S.C. 267(a), may not be considered in 
determining a phased retiree's deemed rate of basic pay during phased 
retirement.
    (3) In computing the annuity amount under paragraph (b)(1) of this 
section, the amount of unused sick leave credit equals the result of 
dividing the applicable percentage under 5 U.S.C. 8415(l) of the days 
of unused sick leave to the employee's credit at separation for full 
retirement, by the working percentage.
    (c) The composite retirement annuity computed under paragraph (a) 
of this section is adjusted by applying any reduction for any survivor 
annuity benefit.


Sec.  848.503  Cost-of-living adjustments.

    (a) The phased retirement annuity under Sec.  848.501 is increased 
by cost-of-living adjustments in accordance with 5 U.S.C. 8462.
    (b) A composite retirement annuity under Sec.  848.502 is increased 
by cost-of-living adjustments in accordance with 5 U.S.C. 8462, except 
that 5 U.S.C. 8462(c)(1) does not apply.
    (c)(1) For the purpose of computing the amount of phased retirement 
annuity used in the computation under Sec.  848.502(a)(1), the initial 
cost-of-living adjustment applied is prorated in accordance with 5 
U.S.C. 8462(c)(1).
    (2) If the individual enters full retirement status on the same day 
as the effective date of a cost-of-living adjustment (usually December 
1st), that cost-of-living adjustment, if applicable under 5 U.S.C. 
8462, is applied to increase the phased retirement annuity used in the 
computation under Sec.  848.502(a)(1).


Sec.  848.504  Non-eligibility for annuity supplement.

    A phased retiree is not eligible to receive an annuity supplement 
under 5 U.S.C. 8421.

Subpart F--Opportunity of a Phased Retiree to Pay Deposit or 
Redeposit for Civilian or Military Service


Sec.  848.601  Deposit for civilian service for which no retirement 
deductions were withheld and redeposit for civilian service for which 
retirement deductions were refunded to the individual.

    Any deposit under Sec.  842.304 and Sec.  842.305 of this chapter, 
or redeposit under 5 U.S.C. 8422(i), that an employee entering phased 
retirement wishes to make for civilian service must be paid within 30 
days from the date OPM notifies the employee of the amount of the 
deposit or redeposit, during the processing of the employee's 
application for phased retirement. The deposit or redeposit amount will 
include interest, computed to the effective date of phased retirement. 
No deposit or redeposit payment may be made by the phased retiree when 
entering full retirement status.


Sec.  848.602  Deposit for military service.

    (a) A phased retiree who wishes to make a military service credit 
deposit under Sec.  842.307 of this chapter for military service 
performed prior to entering phased retirement status must complete such 
a deposit no later than the day before the effective date of his or her 
phased employment and the commencing date of the phased retirement 
annuity. A military service credit deposit for military service 
performed prior to an individual's entry into phased retirement status 
cannot be made after the effective date of phased employment and the 
commencing date of phased retirement annuity.
    (b) A phased retiree who wishes to make a military service credit 
deposit under Sec.  842.307 of this chapter for military service 
performed after the effective date of phased employment and the 
commencing date of phased retirement annuity and before the effective 
date of the composite retirement annuity (e.g., due to the call-up of 
the employee for active military service) must complete such a deposit 
no later than the day before the effective date of his or her composite 
retirement annuity.

Subpart G--Death Benefits


Sec.  848.701  Death of phased retiree during phased employment.

    For the purpose of 5 U.S.C. chapter 84, subchapter IV--
    (a) The death of a phased retiree is deemed to be a death in 
service of an employee; and
    (b) The phased retirement period is deemed to have been a period of 
part-time employment with the work schedule described in Sec.  
848.202(a)(1) and (b) for the purpose of determining survivor benefits. 
The part-time proration adjustment for the phased retirement period 
will be based upon the employee's officially established part-time work 
schedule, with no credit for extra hours worked. In determining the 
employee's deemed rate of basic pay during the phased retirement 
period, only basic pay for hours within the employee's officially 
established part-time work schedule may be considered. No pay received 
for other hours during the phased retirement period may be included as 
part of basic pay for the purpose of computing retirement benefits, 
notwithstanding the normally applicable rules.


Sec.  848.702  Death of an individual who has separated from phased 
employment and who dies before submitting an application for a 
composite retirement annuity.

    (a) For the purpose of 5 U.S.C. chapter 84, subchapter IV, an 
individual who dies after separating from phased employment and before 
submitting an application for composite retirement annuity is deemed to 
have filed an application for composite retirement annuity with OPM.
    (b) The composite retirement annuity of a phased retiree described 
in paragraph (a) of this section is deemed to have accrued from the day 
after separation through the date of death. Any unpaid composite 
annuity accrued

[[Page 33939]]

during such period, minus any phased retirement annuity paid during 
that period, will be paid as a lump-sum payment of accrued and unpaid 
annuity, in accordance with 5 U.S.C. 8424(d) and (g).


Sec.  848.703  Lump-sum credit.

    If an individual performs phased employment, the lump-sum credit as 
defined in 5 U.S.C. 8401(19) will be reduced by any annuity that is 
paid or accrued during phased employment.

Subpart H--Reemployment After Separation from Phased Retirement 
Status


Sec.  848.801  Reemployment of an individual who has separated from 
phased employment and who dies before submitting an application for a 
composite retirement annuity.

    A phased retiree who has been separated from employment for more 
than 3 days and who has entered full retirement status, but who has not 
submitted an application for composite retirement annuity, is deemed to 
be an annuitant receiving annuity from the Civil Service Retirement and 
Disability Fund during any period of employment in an appointive or 
elective position in the Federal Government.

Subpart I--Mentoring


Sec.  848.901  Mentoring.

    (a) A phased retiree, other than an employee of the United States 
Postal Service, must spend at least 20 percent of his or her working 
hours in mentoring activities as defined by an authorized agency 
official. For purposes of this section, mentoring need not be limited 
to mentoring of an employee who is expected to assume the phased 
retiree's duties when the phased retiree fully retires.
    (b) An authorized agency official may waive the requirement under 
paragraph (a) of this section in the event of an emergency or other 
unusual circumstances (including active duty in the armed forces) that, 
in the authorized agency official's discretion, would make it 
impracticable for a phased retiree to fulfill the mentoring 
requirement.

PART 870--FEDERAL EMPLOYEES' GROUP LIFE INSURANCE PROGRAM

0
42. The authority citation for part 870 continues to read as follows:

    Authority: 5 U.S.C. 8716; Subpart J also issued under section 
599C of Pub. L. 101-513, 104 Stat. 2064, as amended; Sec. 
870.302(a)(3)(ii) also issued under section 153 of Pub. L. 104-134, 
110 Stat. 1321; Sec. 870.302(a)(3) also issued under sections 
11202(f), 11232(e), and 11246(b) and (c) of Pub. L. 105-33, 111 
Stat. 251, and section 7(e) of Pub. L. 105-274, 112 Stat. 2419; Sec. 
870.302(a)(3) also issued under section 145 of Pub. L. 106-522, 114 
Stat. 2472; Secs. 870.302(b)(8), 870.601(a), and 870.602(b) also 
issued under Pub. L. 110-279, 122 Stat. 2604; Subpart E also issued 
under 5 U.S.C. 8702(c); Sec. 870.601(d)(3) also issued under 5 
U.S.C. 8706(d); Sec. 870.703(e)(1) also issued under section 502 of 
Pub. L. 110-177, 121 Stat. 2542; Sec. 870.705 also issued under 5 
U.S.C. 8714b(c) and 8714c(c); Public Law 104-106, 110 Stat. 521.

0
43. Amend Sec.  870.101 by revising the definition of ``date of 
retirement'' to read as follows:


Sec.  870.101  Definitions.

* * * * *
    Date of retirement, as used in 5 U.S.C. 8706(b)(1)(A), means the 
starting date of annuity. For phased retirees, as defined in 5 U.S.C. 
8336a and 8412a, the date of retirement is the date the individual 
enters full retirement status.
* * * * *
0
44. Amend Sec.  870.204 by adding paragraph (h) to read as follows:


Sec.  870.204  Annual rates of pay.

* * * * *
    (h) Notwithstanding any other provision of this section, the annual 
pay for a phased retiree, as defined in 5 U.S.C. 8336a and 8412a, is 
deemed to be the rate of a full-time employee in the position to which 
the phased retiree is appointed, as determined under 5 CFR 
831.1715(a)(2) or 848.205(a)(2), as applicable.

PART 890--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

0
45. The authority citation for part 890 continues to read as follows:

    Authority: 5 U.S.C. 8913; Sec. 890.301 also issued under sec. 
311 of Pub. L. 111-03, 123 Stat. 64; Sec. 890.111 also issued under 
section 1622(b) of Pub. L. 104-106, 110 Stat. 521; Sec. 890.112 also 
issued under section 1 of Pub. L. 110-279, 122 Stat. 2604; 5 U.S.C. 
8913; Sec. 890.803 also issued under 50 U.S.C. 403p, 22 U.S.C. 4069c 
and 4069c-1; subpart L also issued under sec. 599C of Pub. L. 101-
513, 104 Stat. 2064, as amended; Sec. 890.102 also issued under 
sections 11202(f), 11232(e), 11246(b) and (c) of Pub. L. 105-33, 111 
Stat. 251; and section 721 of Pub. L. 105-261, 112 Stat. 2061.

0
46. Amend Sec.  890.101 by revising the definition of ``immediate 
annuity'' to read as follows:


Sec.  890.101  Definitions; time computations.

* * * * *
    Immediate annuity means an annuity which begins to accrue not later 
than 1 month after the date enrollment under a health benefits plan 
would cease for an employee or member of family if he or she were not 
entitled to continue enrollment as an annuitant. Notwithstanding the 
foregoing, an annuity which commences on the birth of the posthumous 
child of an employee or annuitant is an immediate annuity. For an 
individual who separates from service upon meeting the requirements for 
an annuity under Sec.  842.204(a)(1) of this chapter, immediate annuity 
includes an annuity for which the commencing date is postponed under 
Sec.  842.204(c). For phased retirees, as defined in 5 U.S.C. 8336a and 
8412a, a composite retirement annuity is an immediate annuity.
* * * * *
0
47. Amend Sec.  890.501 by adding paragraph (h) to read as follows:


Sec.  890.501  Government contributions.

* * * * *
    (h) Notwithstanding 5 U.S.C. 8906, the Government contribution for 
phased retirees, as defined in 5 U.S.C. 8336a and 8412a, is the same as 
that for employees and annuitants as fixed by paragraphs (a) and (b) of 
this section.

[FR Doc. 2013-13182 Filed 6-4-13; 8:45 am]
BILLING CODE 6325-39-P