Phased Retirement, 46607-46638 [2014-18681]

Agencies

• Office of Personnel Management

[Federal Register Volume 79, Number 153 (Friday, August 8, 2014)]
[Rules and Regulations]
[Pages 46607-46638]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18681]



[[Page 46607]]

Vol. 79

Friday,

No. 153

August 8, 2014

Part V





Office of Personnel Management





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





Phased Retirement; Final Rule

Federal Register / Vol. 79 , No. 153 / Friday, August 8, 2014 / Rules 
and Regulations

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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: Final rule.

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SUMMARY: The Office of Personnel Management (OPM) is adopting its 
proposed phased retirement regulations with four minor changes. Phased 
retirement is a human resources tool that will allow full-time 
employees to work a part-time schedule and draw partial retirement 
benefits during employment. The ``Moving Ahead for Progress in the 21st 
Century Act,'' or ``MAP-21,'' requires OPM to publish regulations 
implementing phased retirement under the Civil Service Retirement 
System (CSRS) and the Federal Employees' Retirement System (FERS). The 
final rule informs agencies and employees about who may elect phased 
retirement, what benefits are provided during phased retirement, how 
OPM intends to compute the annuity payable during and after phased 
retirement, and how employees may fully retire after a period of phased 
retirement. The final rule does not address every administrative detail 
of the phased retirement process. OPM will be issuing separate guidance 
to assist agencies and employees with administrative and procedural 
matters that do not need to be addressed in this rule. Employees may 
not enter phased retirement or submit applications for phased 
retirement to OPM until 90 days after publication of this final rule.

DATES: Effective November 6, 2014.

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

SUPPLEMENTARY INFORMATION: On June 5, 2013, OPM published (at 78 FR 
33912) proposed regulations to amend 5 CFR parts 581, 582, 831, 838, 
841, 842, 843, 870 and 890, and added 5 CFR part 848 to implement 
phased retirement pursuant to 5 U.S.C. 8336a and 8142a, as required by 
section 100121(d) of MAP-21, Public Law 112-141.
    Section 100121 of MAP-21 amended chapters 83 and 84 of title 5, 
United States Code, by adding provisions, at 5 U.S.C. 8336a and 8412a, 
to permit certain retirement-eligible employees to enter phased 
retirement. An employee participating in phased retirement is still an 
employee for all purposes, unless otherwise specified in law or 
regulation. Initially, OPM will implement the phased retirement working 
schedule as prescribed in the statute. Thus, the regulations will 
require an eligible employee who enters phased retirement, with the 
approval of an authorized agency official, to enter into a 50 percent 
working schedule and receive approximately 50 percent of what his or 
her annuity would have been (not including credit for sick leave), had 
the individual retired completely from Federal service, without 
electing a survivor annuity. Entry into phased retirement is not 
guaranteed and must be mutually agreeable to the eligible employee and 
the employing agency.
    Phased retirement is designed to assist agencies with knowledge 
management and continuity of operations in the short term. Although the 
main purpose of phased retirement is to enhance the mentoring and 
training of the employees who will be filling the positions or taking 
on the duties of more experienced retiring employees, it may also be 
used to provide employees with the opportunity to share experiences 
across sections or divisions of an agency. Phased retirement is simply 
another tool to enable agencies to manage their workforce, promote best 
practices, and encourage experienced employees to spend some time 
mentoring the next generation of experts.

Comments

    OPM received 237 comments regarding the proposed rule; 234 of which 
were submitted before the close of the public comment period. We 
decline to address the three comments received after the comment period 
closed. For the most part, OPM will not address comments that were 
aimed at benefits not in OPM's purview, nor administrative and 
procedural issues outside the scope of the regulations.

Out of Scope Comments

    A member of the public and one agency questioned OPM's decision to 
issue this rule as a proposed rule. This rule was properly issued as a 
proposed rule pursuant to section 4 of the Administrative Procedure Act 
(APA), 5 U.S.C. 553, and does not meet any of the exceptions to the 
required notice and public comment provisions in 5 U.S.C. 553(b)(3)(A) 
and (B), and Executive Order 13563. Although OPM is implementing phased 
retirement with all of the explicit statutory restrictions in place, 
the rule has been designed to allow OPM to modify both the rule and its 
accompanying guidance as needed in the future. Phased retirement is not 
a one-size-fits-all program; an agency and an employee must agree that 
phased retirement is appropriate for the agency and the employee. After 
making a decision that phased retirement is appropriate in a given 
situation, coordination is needed between the employing agency and OPM. 
Moreover, the technical variables present in the law require OPM to 
take a measured approach to implementation to ensure a smoother 
transition to the availability of a new end-of-career option. For these 
reasons, OPM must provide rules for phased retirement. OPM determined 
the most appropriate rulemaking process was to issue a proposed rule 
with public notice and comment to ensure that there is an opportunity 
for all issues appropriate for regulation to be fully considered and 
addressed.
    Several agencies, commenters, and professional organizations asked 
questions related to administrative and processing issues outside the 
scope of these regulations. One commenter suggested that OPM refashion 
this rule for ease of use by employees so they can make more informed 
decisions about phased retirement. We decline to make these changes as 
outside the scope of the rule. Administrative and procedural matters 
involved with employee elections, agency agreement, coding of personnel 
actions, processing of forms, and technical and employee information, 
and other similar issues, are best addressed in guidance, not 
regulation. This rule is intended to fill gaps in the statutory scheme 
of phased retirement, and to establish the relative rights and 
responsibilities of OPM, agencies, and employees with regard to phased 
retirement. Regulations are not the best means for conveying non-
substantive procedural and administrative details regarding the 
program. OPM has determined that guidance; in the form of advisory 
documents to agencies, is the most appropriate means to address those 
matters.
    We received many comments concerning benefits or programs 
administered by other agencies. For example, a few commenters asked 
about the effect phased retirement would have on Full Time Equivalents. 
One union suggested that OPM add specific language to the regulations 
requiring agencies to refrain from making certain budgetary statements 
and conclusions about the status of employees in phased retirement. OPM 
cannot address these comments because we do not have authority related 
to budgetary matters. With regard to Full Time Equivalents, information 
may be found in existing

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guidance, specifically in OMB Circular A-11, section 85.5.
    We also received numerous comments and questions about the role the 
Thrift Savings Plan (TSP) plays in many employees' plans for retirement 
and how employees' access to their TSP funds might be impacted by 
phased employment. Several professional organizations and agencies 
voiced similar concerns. For example, some commenters described their 
plans to rely on withdrawals from the TSP in retirement, particularly 
prior to age 62. The Federal Retirement Thrift Investment Board is 
responsible for administering the TSP. Therefore, TSP withdrawal rules 
and guidelines are outside the scope of this rule. OPM notes that this 
rule clearly states that participants in phased retirement are still 
Federal employees; therefore, they may continue to contribute to the 
TSP, in accordance with TSP rules, during phased employment.
    Similarly, several commenters suggested that OPM include more 
information about the interplay between OPM's benefits and the Social 
Security Administration's (SSA) benefits within the phased retirement 
regulations. Commenters requested information about the Windfall 
Elimination Provision (WEP) and the Government Pension Offset (GPO) as 
it applies to phased retirement. The SSA is responsible for applying 
the WEP and the GPO. OPM cannot address these comments.
    Other commenters asked how OPM plans to administer the offset 
applicable to CSRS offset annuities. How CSRS annuities will be offset 
during phased retirement is briefly addressed below and in the rule. 
But, more information will be provided in guidance to be issued 
separately. OPM will also provide information about where employees and 
agencies can look for more information on related topics.
    One commenter asked how OPM would address an employee's entitlement 
to worker's compensation if an on-the-job injury occurs during phased 
retirement. The Office of Workers' Compensation Programs, Division of 
Federal Employees' Compensation (OWCP), is responsible for the 
administration of Federal employees' compensation. OPM cannot address 
this comment. In general, however, an individual cannot receive both 
annuity (including a phased retirement annuity) and OWCP non-scheduled 
award benefits at the same time.
    Several commenters requested information about income tax-related 
issues. The Internal Revenue Service (IRS) is responsible for the tax 
code, tax regulations and official guidance. To the extent that OPM is 
responsible for providing information about taxes to annuitants, we 
will do so in guidance. We decline to address taxes here.
    Many commenters simply expressed interest in participating in 
phased retirement and requested information to that effect. Several 
commenters submitted duplicate comments and requests for information 
about when phased retirement would be available. Other commenters asked 
whether their specific work unit or branch of government would be 
implementing phased retirement. A commenter suggested that phased 
retirement should be mandatory for all federal employees beginning at 
age 55. Another commenter wanted OPM to apply lessons learned from 
academia's experiences with phased retirement. These comments are 
outside the scope of the rule and OPM declines to address them further 
except to state that agencies are responsible for employee retirement 
counseling; entry into phased retirement is not mandatory and it is 
just one of several end-of-career options for employees and agencies to 
consider on a case-by-case basis. Because agencies must decide whether 
to implement phased retirement, OPM cannot address comments or 
questions about specific work unit or agency timelines for 
implementation. However, OPM encourages agencies to evaluate and 
implement phased retirement as a workforce planning tool as soon as 
possible. OPM is not attempting to impose participation by employees or 
agencies on any set schedule.
    Multiple commenters inquired about a phased retiree's leave accrual 
and the lump-sum payment for annual leave. As provided by 5 CFR Sec.  
831.1715(g) and Sec.  848.205(i), except as otherwise expressly 
provided in law or regulation, a phased retiree is treated like any 
other employee on a part-time tour of duty. The normal leave accrual 
rules for part-time employees apply to phased retirees. Leave accrual 
for part-time employees is prorated based on hours in a pay status. See 
5 U.S.C. 6302(c) and 5 CFR 630.303. An employee does not receive a 
lump-sum payment for annual leave upon electing phased retirement. The 
lump-sum annual leave payment would be made in full when the phased 
retiree fully retires. See 5 U.S.C., chapter 55, subchapter VI, and 5 
CFR part 550, subpart L. Therefore, an employee would maintain his or 
her annual leave balance upon transition to phased retirement.
    Some commenters questioned whether or not a phased retire is 
eligible for holiday pay. Under 5 CFR 831.1715(g) and 848.205(i), 
except as otherwise expressly provided in law or regulation, a phased 
retiree is treated as any other employee on a part-time tour of duty. 
The normal rules for part-time employees and holidays apply to phased 
retirees. A part-time employee is entitled to a holiday when the 
holiday falls on a day when he or she would otherwise be required to 
work or take leave. If a holiday falls on a non-workday, part-time 
employees are not entitled to an ``in lieu of'' holiday.
    A few commenters inquired as to whether or not a phased retiree 
would be eligible to earn compensatory time off. Overtime pay and 
compensatory time off generally is earned for work in excess of 8 hours 
in a day or 40 hours in a workweek. (See 5 U.S.C. 5542 and 5 CFR 
550.101 for FLSA-exempt employees and 5 CFR part 551, subpart E, for 
FLSA-covered employees.) Phased retirees will normally not work more 
than 40 hours in a biweekly pay period (see limited exceptions 
discussed at 5 CFR 831.1715(h) and 848.205(j)), but they potentially 
could earn overtime pay or compensatory time off for work in excess of 
8 hours in a day.
    Some commenters and one agency, asked for clarification on work in 
excess of the part-time schedule and the ability of a phased retiree to 
earn compensatory time off for travel. Under 5 U.S.C. 5550b and 5 CFR 
part 550, subpart N, compensatory time off for travel is earned by an 
employee for time spent in a travel status away from the employee's 
official duty station when such time is not otherwise compensable. A 
phased retiree is eligible to earn compensatory time off for travel 
under the normal rules.
    Official travel time during periods when a part-time employee is 
otherwise scheduled to work counts as hours of work. Treatment of 
travel time outside an employee's officially established part-time 
schedule depends on the applicable rules. (Note: The rules on travel 
hours of work depend on whether an employee is covered by or exempt 
from the Fair Labor Standards Act (FLSA). For FLSA-exempt employees, 
the crediting of travel time as hours of work is governed under title 
5, United States Code. In particular, 5 U.S.C. 5542(b)(2) and 
5544(a)(3) and 5 CFR 550.112(g) and (j). For FLSA-covered employees, 
travel time is credited if it qualifies as hours of work under either 
the title 5 rules or under OPM's FLSA regulations. See, 5 CFR 
Sec. Sec.  551.401(h) and 551.422.
    If a phased retiree's travel time outside of the officially 
established part-time schedule does not count as hours of work under 
the applicable rules, it

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will not cause a violation of 5 CFR 831.1415(h) or 848.205(j). If the 
travel outside of the officially established part-time schedule is 
considered hours of work under the applicable rules, then the travel 
may be assigned only under the circumstances listed in 5 CFR 
831.1415(h) and 848.205(j).
    Multiple commenters inquired about eligibility for receiving 
voluntary separation incentive payments (VSIP) when entering phased 
retirement or when leaving phased retirement to enter full retirement. 
The VSIP authority, also known as buyout authority, allows agencies 
that are downsizing or restructuring to offer employees lump-sum 
payments of up to $25,000 as an incentive to voluntarily separate from 
Federal service. An employee entering phased retirement is not 
separating from Federal employment and is not eligible for a VSIP. An 
employee leaving phased retirement to separate and enter full 
retirement may be eligible for a VSIP if the eligibility criteria in 5 
U.S.C. Chapter 35, subchapter II, and the implementing regulations are 
met at that time.
    Multiple commenters also inquired about eligibility for voluntary 
early retirement in conjunction with entry into phased retirement. 
Employees eligible under an approved voluntary early retirement 
authority (VERA) are not eligible for phased retirement. The statutory 
definition of ``retirement-eligible employee'' in 5 U.S.C. Sec. Sec.  
8336a and 8412a expressly limits eligibility to phased retirement to 
individuals who meet the requirements for retirement under 5 U.S.C. 
8336(a) and (b) for CSRS and 5 U.S.C. 8412(a) and (b) for FERS. These 
subsections establish eligibility for optional retirement. The 
provisions concerning early retirement eligibility are set out at 5 
U.S.C. 8336(d) for CSRS and 5 U.S.C. 8414 for FERS. Therefore, 
employees eligible under a VERA do not meet the statutory definition of 
a ``retirement-eligible employee'' for entry into phased retirement.
    One agency remarked that the use of phased retirement may make VERA 
less attractive to employees when an agency is downsizing. OPM 
disagrees because employees eligible for VERA are not eligible for 
phased retirement. Any further discussion of the impact of phased 
retirement on the use of VERA is outside the scope of these 
regulations.
    Multiple commenters inquired about a phased retiree's treatment 
during a reduction in force (RIF). An employee in phased retirement is 
treated as a part-time employee for the purposes of RIF. The treatment 
of a part-time employee during a RIF is outside the scope of this 
regulation and is covered in 5 CFR part 351.
    One agency and one commenter asked whether a phased retiree would 
be subject to a furlough. An employee in phased retirement is a part-
time employee for the purposes of a furlough and as such, is subject to 
furlough in the same manner as part-time employees in regular 
employment. The treatment of part-time employees for the purposes of 
furloughs is outside the scope of these regulations.
    One commenter asked whether work schedules would be negotiable or 
fixed. Work schedules for employees represented by a labor organization 
are generally negotiable within the bounds of governing law and 
regulation, but the negotiability of a particular proposal relating to 
work schedules of a phased retiree, as for any part-time employee, will 
depend on the specific facts of each situation. Negotiability of work 
schedules is outside the scope of these regulations and will have to be 
addressed through regularly established employee relations processes.
    OPM received questions about the potential for outside employment 
while in phased retirement and the option for employment as a 
reemployed annuitant after the phased retiree enters full retirement. 
During a period of phased employment, phased retirees are still 
employees, and are bound, as such, by ethics rules and any restrictions 
on outside employment. We decline to address the issue of employment as 
a reemployed annuitant after a period of phased retirement because it 
is outside the scope of this rule.
    Two agencies expressed interest in how the use of phased retirement 
would impact an agency's authority to hire reemployed annuitants. One 
agency asked if phased retirement was intended to be a replacement for 
the use of reemployed annuitants. Phased retirement and reemployment of 
annuitants are both tools that an agency may use to meet workforce 
planning goals. Phased retirement is not meant to replace the 
reemployment of annuitants. Whether the use of phased retirement will 
impact an agency's use of reemployed annuitants is outside the scope of 
these regulations.
    Several commenters requested information about the appeals process 
available to phased retirees. They questioned, whether, in the final 
regulations, OPM intends to provide an appeals process for employees 
who believe they were unfairly denied the opportunity to participate in 
phased retirement initially or who were unfairly denied consent to 
return from phased retirement to regular full-time employment. 
Similarly, other commenters made excellent observations about 
circumstances where employees may dispute an agency's decision. All of 
these issues are best addressed in guidance. Participation in phased 
retirement is entirely voluntary and requires the mutual consent of 
both the employee and employing agency. A retirement-eligible employee 
``may elect'' to enter phased retirement status if she meets the 
eligibility criteria. This discretionary language regarding the 
employee's decision describes the voluntary nature of phased 
retirement. Also, an employee is not entitled to enter into phased 
retirement. Other than the new statutory and regulatory requirements 
unique to phased retirement, employees in phased retirement retain the 
same rights and responsibilities as in regular employment. Any 
complaint procedures, including any applicable administrative or 
collective bargaining grievance procedures that are available in 
regular employment remain available to phased retirees, but no new 
rights are provided.
    One commenter, presumably a CSRS employee not subject to OASDI tax, 
asked to be able to contribute to Social Security during phased 
retirement. Social Security coverage is governed by existing law and 
the amendments made by section 100121 of the MAP-21 made no change to 
the existing law. Employees who are excluded from Social Security 
coverage at the time they enter phased retirement continue to be 
excluded from Social Security coverage during phased retirement.
    Another commenter, also presumably a CSRS employee, asked OPM to 
clarify whether he would be able to receive more than 80 percent of his 
pension after phased retirement. In general, under CSRS an annuity may 
not exceed 80 percent of the average pay of the employee (see 5 U.S.C. 
8339(f)). Therefore, the amount of the phased retirement annuity 
computed under 5 U.S.C. 8339, before it is multiplied by the phased 
retirement percentage, cannot exceed 80 percent of the employee's 
average pay. Likewise, the amount of the fully retired phased component 
of the composite annuity computed under 5 U.S.C. 8339, before it is 
multiplied by the working percentage, may not exceed 80 percent of the 
employee's average pay (unless credit for the employee's unused sick 
leave raises the annuity above the 80 percent threshold). If a CSRS 
employee exceeds the 80 percent limitation either before or during 
phased retirement; his excess contributions will be refunded back to 
him at his full retirement.

[[Page 46611]]

    Several commenters requested information concerning changes to the 
eligibility rules and employee contributions for the Federal Employees 
Dental and Vision Program (FEDVIP), the Federal Long Term Care 
Insurance Program (FLTCIP), and the Federal Flexible Spending Account 
Program (FSAFEDS). The authorizing legislation for phased retirement 
did not alter the laws or regulations governing the FEDVIP, the FLTCIP, 
or the FSAFEDS programs. A phased employee may elect to participate in 
these benefit programs and work as a phased retiree if he/she meets all 
benefit eligibility requirements. Also, because a phased retiree is an 
active Federal employee, the rules governing enrollment and 
participation in these programs are the same as for all other eligible 
employees.
    One commenter requested information concerning an employee's 
bargaining unit status eligibility under a Master Agreement if the 
employee enters phased retirement. Whether an employee is in a 
particular bargaining unit depends on the bargaining unit's description 
found in the Certification of Representative issued by the Federal 
Labor Relations Authority. Phased retirees are part-time employees. 
Therefore, it is possible that bargaining unit status could change, for 
example, if full-time employees are covered by that particular 
bargaining unit's Certification of Representative, but part-time 
employees are excluded from that bargaining unit.
    One agency submitted a question concerning employees who elect 
phased retirement and are subsequently found to be in the wrong 
retirement system. Phased retirees are covered by the Federal Erroneous 
Retirement Coverage Corrections Act (FERCCA), Title II of Public Law 
106-265, 114 Stat. 762, enacted September 19, 2000, and have the same 
rights under the FERCCA as before entry into phased retirement. OPM 
expects coverage errors to be addressed by the agencies prior to an 
employee's entry into phased retirement.
    Below, OPM describes in more detail the comments we received which 
are specifically applicable to the proposed regulations themselves. In 
general, these comments will be addressed in regulatory part and 
section order. Certain comments referring to regulatory parts 831 and 
848 are addressed together for the convenience of the reader. In those 
instances, where the comments require different answers OPM will first 
address part 831 and then part 848. If a section is not addressed, 
either OPM did not receive comments referencing that section, or the 
comments were addressed more generally above.

Parts 581 and 582; Garnishment

    There were three comments regarding garnishment. One commenter 
asked that the new provision at 5 CFR 581.306(d) identify the 
responsible office within agencies for garnishment notification. This 
rule does not modify the other provisions related to processing 
garnishment orders found in 5 CFR parts 581 and 582. The agents 
designated for service of process for garnishment orders are listed in 
Appendix A of part 581 and Appendix A of part 582. Appendix A presently 
lists the following address for garnishment of payments of retirement 
benefits under CSRS and FERS: ``Associate Director for Retirement and 
Insurance, Office of Personnel Management, Court Ordered Benefits 
Branch, P.O. Box 17, Washington, DC 20044.'' OPM notes that parts 581 
and 582 may be further updated in a separate rule.
    One agency inquired whether court orders, including garnishments, 
would be included in the phased retirement application packages and, if 
not, inquired as to how agencies would otherwise receive such court 
orders. This rule does not revise the procedures or mechanisms for 
submitting court orders, including divorce decrees and garnishment 
orders, to the appropriate officials at the appropriate agencies. 
Rather, it adds one additional notice requirement when an employee 
enters phased retirement and has a garnishment order on record. 
Pursuant to new Sec.  581.306(d), when an employee enters phased 
retirement, agencies are required to notify the party who caused the 
garnishment order to be served that the obligor is now entitled to a 
phased retirement annuity.
    Another agency requested more information about the level of 
coordination required between the agencies and OPM with regard to 
garnishments. OPM addressed the issue of garnishment in the 
supplementary information to the proposed rule. Phased retirement 
annuities, like regular Federal annuities, will not be subject to 
commercial garnishments under 5 CFR part 582, and only the part-time 
pay received during phased employment will continue to be subject to 
commercial garnishment. Paragraph (d) is added to Sec.  581.306 to 
account for employees who enter phased retirement status and who are 
subject to non-commercial garnishment orders (such as child support 
orders).
    Governmental entities will still be obligated to honor the non-
commercial garnishment order as it pertains to ongoing part-time pay, 
subject to the rules set forth in part 581 of title 5, of the Code of 
Federal Regulation. The amounts subject to garnishment may have to be 
adjusted at the time an employee enters phased retirement as there are 
certain caps on the percentage of salary that may be garnished. 
However, paragraph (d) imposes an additional obligation on the 
governmental entity 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 OPM who is 
responsible for the disbursement of retirement benefits. The onus is 
then on the obligor to submit additional income withholding orders or 
other garnishment orders to OPM directly if the obligor also seeks to 
garnish the employee's phased retirement annuity.

831.1702 and 848.102; Definitions

    A commenter inquired about which level of the agency or sub agency 
would be responsible for approving or denying phased retirement 
applications. The regulations currently designate the agency head as 
the authorized approving official and also allow that approving 
official to delegate the responsibility as appropriate in Sec. Sec.  
831.1702 and 848.102. Therefore, an agency has the discretion to 
designate the appropriate approving officials.
    A number of commenters questioned whether OPM properly excluded 
them from participation in phased retirement by defining ``full-time'' 
as an officially established recurring basic workweek consisting of 40 
hours within the employee's administrative workweek (or 80 hours per 
biweekly pay period for employees with a flexible or compressed work 
schedule) under 5 CFR 831.1702 and 848.102. For example, one commenter 
from the judicial branch stated that she presently works a 36-hour 
workweek, which she stated was considered full-time for purposes of the 
Federal Employees Health Benefit Program (FEHB). In actuality, the FEHB 
law does not provide that a 36-hour workweek is a full-time schedule; 
it merely provides that employees with certain part-time schedules 
referenced in 5 U.S.C. 3401 (16 to 32 hours per week) are subject to a 
reduced, prorated Government contribution toward FEHB premiums. The 
amount of the Government contribution does not change the nature of a 
schedule as full-time versus part-time. The commenter would not be 
permitted to elect phased retirement because she does not meet the 
definition

[[Page 46612]]

of ``full-time'' for phased retirement purposes. The definition of 
full-time used for phased retirement is the standard definition used by 
the retirement program to compute annuities. The treatment of employees 
with various types of work schedules under other benefits programs are 
not applicable to chapters 83 and 84 of title 5 and would be counter to 
proper administration of the retirement program. Therefore, OPM 
declines to modify the regulations to accommodate employees already 
working a part-time work schedule.

831.1703 and 848.103; Implementing Directives

    Several commenters suggested that OPM regulate phased retirement 
more stringently; others suggested the opposite. For example, a number 
of comments suggested making it more difficult for agencies to deny 
entry into phased retirement. Still others advised that fewer 
restrictions were better. Some agency commenters recommended that OPM 
provide more information on aspects of the phased retirement program 
that impact internal processing issues and procedures. OPM declines to 
further regulate phased retirement at this time. Moreover, many of the 
issues raised by these commenters are more properly addressed in 
Benefits Administration Letters and other guidance to be promulgated by 
the Director of OPM in conjunction with this final rule.

831.1711 and 848.201; Eligibility

    Numerous commenters, including several unions and employee 
organizations, objected to the eligibility requirements described in 
Sec. Sec.  831.1711 and 848.201. Several commenters objected to the 
requirement in Sec.  831.1711(a) and Sec.  848.201(a) which states that 
in order to enter phased retirement, the employee must have been 
employed on a full-time basis for not less than the 3-year period 
ending on the effective date of entry into phased retirement status. A 
few commenters suggested that OPM allow some employees who have part-
time service in the preceding 3-year period to enter phased retirement 
with a smaller or prorated annuity. One commenter suggested that 
annuitants should be allowed to come back to mentor during an emergency 
situation like fighting a large forest fire. Another commenter asked 
that we allow persons who have retired since phased retirement was 
enacted to come back to work under phased retirement. OPM does not have 
the authority to waive or adjust the requirement that eligible 
employees must have been employed full-time for the 3 years preceding 
entry into phased retirement. This is an express statutory requirement 
of 5 U.S.C. 8336a(b)(1) and 8412a(b)(1).
    Many commenters, including several unions and employee 
organizations, also objected to the requirement in Sec.  831.1711(b) 
and Sec.  848.201(b) that describes, for the purposes of phased 
retirement only, a retirement-eligible employee as an employee, who if 
separated from service, would meet the requirements for retirement 
under subsections (a) or (b) of 5 U.S.C. 8336 and 8412. Several 
commenters opined that OPM is arbitrarily excluding certain groups of 
employees from participation in phased retirement. A few commenters 
noted that they became Federal employees later in life and felt 
unfairly excluded from phased retirement because of their late entry 
into Federal careers. Many commenters suggested that OPM allow persons 
with at least 15 years of service to participate in phased retirement, 
while others suggested that OPM allow those who have at least 5 years 
of service and who have reached at least age 62 to participate. Some 
commenters suggested that OPM should waive the eligibility requirements 
for employees in receipt of military retired pay. Two commenters asked 
for a waiver specific to their worksite. Some commenters argued that 
OPM should waive the age requirements in certain situations; others 
suggested that OPM simply restrict phased retirement using any of these 
criteria: Prior experiences, total number of years of service, or 
willingness to mentor others. OPM cannot modify the regulations to 
permit expansion of the eligibility criteria to include these 
employees. Under CSRS, participation in phased retirement is limited to 
those persons eligible for an immediate retirement with at least 30 
years of service and who are at least age 55 or who have at least 20 
years of service and who are at least age 60. See 5 U.S.C. 8336a(a)(9). 
Similarly, under FERS, participation in phased retirement is limited to 
those persons eligible for an immediate retirement with at least 30 
years of service and who have reached their minimum retirement age 
(between ages 55 and 57 depending on birth year) or who have at least 
20 years of service and who are at least age 60. See 5 U.S.C. 
8412a(a)(9). There is no ambiguity or flexibility in the law which 
would permit OPM to limit or expand phased retirement eligibility based 
on age or years of service, therefore, OPM cannot modify the rule as 
requested.
    Two commenters asked why OPM would exclude most retirement-eligible 
employees who are subject to mandatory retirement from entry into 
phased retirement under Sec.  831.1711(c) or Sec.  848.201(c). Both 
suggested that employees subject to mandatory retirement might want to 
spend the last couple of years of their career in phased retirement 
mentoring younger employees, particularly if they have already served 
twenty years, but are waiting until their mandatory separation age. OPM 
is unable to make the suggested changes. Except for certain Customs and 
Border Protection Officers hired prior to 2008, law enforcement 
officers, firefighters, nuclear materials couriers, air traffic 
controllers, customs and border protection officers, members of the 
Capital Police and members of the Supreme Court Police are excluded 
from participation in phased retirement under 5 U.S.C. 8336a(a)(9)(B) 
and 8412a(a)(9)(B). Further, sections 8336a and 8412a require OPM to 
compute phased retirement annuities using the annuity formulas under 5 
U.S.C. 8339 and 8415 applicable to regular employees; an outcome that 
employees subject to the higher retirement deductions would not want, 
if it were allowed, because it would entail giving up their higher 
annuity benefits computed using a higher accrual rate.

831.1712 and 848.202; Working Percentage and Established Hours

    Numerous commenters asked OPM to immediately allow a wider range of 
permissible working percentages. OPM declines to do so at this time. 
Under 5 U.S.C. 8336a(b)(2)(A) and (B) and 8412a(b)(2)(A) and (B), the 
working percentage for employees in phased retirement must be 50 
percent unless the Director of OPM determines that other percentages 
are appropriate. We have determined that the working percentage should 
remain at 50 percent for the time being. The implementation of phased 
retirement requires a complex realignment of end-of-career planning for 
both individuals and agencies. Multiple administrative and technical 
processes either have to be established or adjusted to accommodate 
phased retirement. Furthermore, OPM has determined that the working 
percentage should remain at 50 percent, at least during the beginning 
of the program, to allow time to assess the impact of phased retirement 
processing on regular retirement processing.
    Several other commenters suggested that under Sec. Sec.  831.1712 
and 848.202 OPM has promulgated too narrow a ``working percentage,'' 
arguing that OPM does not have the authority to specify a single 
``working percentage'' of 50 percent. Instead, they assert that the

[[Page 46613]]

50 percent ``working percentage'' would, not only not meet their needs, 
but OPM is wrong to mandate a particular working percentage at all. 
Under 5 U.S.C. 8336a(b)(2)(A) and 8412a(2)(A), the ``working 
percentage'' must be 50 percent unless the Director of OPM, in her 
discretion, decides otherwise. As we stated above, phased retirement is 
complex; it not only requires OPM to modify its processes and 
procedures, other organizations must make similar efforts to implement 
it effectively. Ultimately, OPM requires a certain amount of experience 
with phased retirement before we are comfortable introducing more 
complexity into the program. Therefore, OPM declines to modify the 
rule.
    Other commenters suggested that we provide a range of working 
percentages to accommodate other work schedules. As noted in the 
supplementary information of the proposed rule (see 78 FR 33914), the 
statute permits a working percentage of 50 percent (i.e., a halftime 
work schedule) and contemplates additional working percentages, at 
OPM's discretion. Although a working percentage of 50 percent is the 
only working percentage permitted under Sec. Sec.  831.1712 and 
848.202, these sections have been drafted using 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. OPM will be evaluating the phased 
retirement program to determine if different ``working percentages'' 
should be allowed. For now, a phased retiree will not be permitted to 
have a working percentage other than 50 percent.
    One commenter suggested that a step-down approach to the working 
percentage would enable phased retirement to be more widely adopted. 
Sections 8336a(b)(2)(C) and 8412(a)(b)(2)(C) specify that ``[t]he 
working percentage for a phased retiree may not be changed during the 
phased retiree's phased retirement period.'' Therefore, OPM cannot 
authorize agencies to allow phased retirees to change their working 
percentage during phased retirement.
    Some commenters asked OPM to allow phased employees to stagger 
their work schedules over months and not pay periods. As provided by 5 
CFR 831.1712 and 848.202, 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 (i.e., 
40 hours per pay period for most employees). The specific hours the 
phased retiree works is subject to agency work schedule policy and any 
applicable negotiated agreement. For example, a phased retiree may 
participate in an agency's flexible or compressed work schedule program 
under subchapter II of 5 U.S.C. 6101 and subpart D of 5 CFR part 610 on 
the same basis as any other part-time employee.
    One commenter suggested that OPM allow phased retirees to work at 
least 1,040 hours per year (50 percent of 2,080 hours per work year) to 
offer greater flexibility to potential retirees while allowing federal 
agencies to benefit from phased retirees' knowledge and experience. The 
commenter's suggestion cannot be implemented because a phased retiree 
must be a part-time employee with a regularly scheduled tour of duty. A 
phased retiree may not work on an intermittent basis (i.e., without a 
regularly scheduled tour of duty). For this reason, the required 
working percentage must be met on a pay period basis rather than an 
annual basis. We also note that using an annual approach would impose a 
more burdensome administrative and recordkeeping requirement on the 
agencies and payroll providers.
    A commenter questioned whether or not a phased retiree would be 
allowed to be placed into an intermittent schedule status. The 
commenter also noted that the proposed regulations appear to imply a 
fixed part-time tour of duty. Although unclear, the commenter seemed to 
be concerned as to whether such individuals would have their phased 
retirement benefits discontinued, or would be required to be removed 
from the phased retirement program. In certain circumstances, outside 
the context of phased retirement, employees may be moved to an 
intermittent tour (i.e., no weekly work guarantee). An intermittent 
employee does not have a scheduled tour of duty. A phased retiree must 
be a part-time employee with a scheduled tour of duty equal to 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 (i.e., 40 hours per pay 
period for most employees). The change to an intermittent schedule is 
not allowed for an employee in phased retirement. An employee in phased 
retirement wishing to make such a change in work schedule would need to 
opt out of the phased retirement program by returning to regular 
employee status before making the schedule change. A phased retiree may 
have a part-time flexible schedule under 5 U.S.C. 6122, but the number 
of hours worked each biweekly pay period must be fixed at 40 hours.

831.1713 and 848.203; Applications for Phased Retirement

    A number of commenters inquired whether employees in supervisory or 
managerial positions would be eligible to participate in phased 
retirement. Each agency has the discretion to determine whether or not 
phased retirement would be appropriate for an employee in a supervisory 
or managerial position just as for non-supervisory positions.
    Several commenters expressed interest in how an agency would use 
its discretion to approve or deny requests to enter phased retirement. 
Two commenters inquired as to whether or not there were specific 
criteria an agency must use when approving or denying requests. 
Similarly, an agency asked if there would be guidelines in place to 
ensure consistent application among managers. Yet another agency 
inquired about how an agency could implement its discretion based on 
the regulations and avoid discrimination concerns. OPM agrees that an 
agency should have criteria in place that guide decisions to approve or 
deny applications for phased retirement. Such criteria will provide 
transparency to the approval process by allowing managers and employees 
to understand the basis for an approval or denial decision. Therefore, 
we are amending the regulations at Sec. Sec.  831.1713(e) and 
848.203(e) to require agencies to establish written criteria to be used 
when approving or denying applications for phased retirement. Agencies 
should be aware that some matters relating to phased retirement, 
including procedures and arrangements for adversely affected employees, 
may be subject to collective bargaining obligations.
    One agency questioned whether an agency has the discretion to 
determine that it will not approve any applications for phased 
retirement. Phased retirement is a workforce planning tool that an 
agency may choose to use when appropriate. At the same time, phased 
retirement is not an employee entitlement. Agencies have the discretion 
to approve some, all, or none of the phased retirement applications 
received from employees. Phased retirement is just one of many tools 
designed to provide agencies with more flexibility in managing their 
workforces, therefore OPM encourages agencies to utilize phased 
retirement when

[[Page 46614]]

appropriate. Agencies should be aware that some matters relating to 
phased retirement, including procedures and arrangements for adversely 
affected employees, may be subject to collective bargaining 
obligations.

831.1713(d), 848.203(d); Time Limits

    Multiple commenters expressed concerns about the length of time 
that an employee may participate in phased retirement. Some agencies 
inquired as to whether OPM intended phased retirement to be open-ended 
or time-limited. OPM recognizes that for most employees phased 
retirement will be of a limited duration. However, there may also be 
instances where agencies may find it useful for phased retirees to 
serve for longer periods of time. To allow agencies the maximum amount 
of flexibility in using phased retirement as a workforce management 
tool, OPM is leaving the establishment and use of time limits to the 
discretion of the agencies.
    A number of commenters, employees and agencies alike, requested 
that OPM impose a maximum period of time for an employee to spend in 
phased retirement. OPM disagrees that a maximum time limit is needed 
for phased retirement. An agency's need for an employee in phased 
retirement will most likely vary on a case-by-case basis; therefore, 
agencies should have flexibility in determining the amount of time any 
employee may spend in phased retirement.
    Some commenters remarked that the use of a time limit as a 
condition of approval could potentially create a coercive situation. 
Other commenters noted that the use of a time limit is a way of 
establishing mandatory separations or imposing an adverse action upon 
the employee. OPM disagrees with these suggestions. By allowing the use 
of a time limit, the agency and the employee may choose a mutually 
agreeable time limit at the start of phased retirement as a tool to set 
clear expectations for both the agency and the employee. If an employee 
does not like the proposed time limit, he or she has the freedom to 
withdraw the application for phased retirement. Once a time limit 
agreement is in place, the employee still has the discretion to enter 
full retirement status at any time prior to reaching the established 
time limit or request approval from the agency to return to regular 
employment. At the end of the agreed upon time limit, the employee has 
the option to return to regular employment with the approval of the 
current agency, or to transfer to another agency (where phased 
retirement may or may not be continued), or to enter full retirement 
status. If an agency needs to remove an employee in phased retirement 
prior to the end of the time limit agreement due to budget 
restrictions, performance, or conduct, the agency may continue to use 
existing workforce authorities such as removal for performance or 
conduct; transfer of function or reduction in force; as appropriate.

831.1715(c)-(d), 848.205(c)-(d); Effect of Phased Retirement

    Several commenters inquired about the ability of an employee in 
phased retirement to transfer to another agency. To do so, the employee 
must request approval from the new agency to continue in phased 
retirement upon transfer just as he or she did when entering phased 
retirement in the current agency. OPM will provide additional 
procedural information on transferring an employee in phased retirement 
in guidance.
    One commenter noted that the agency would have to take an adverse 
action to separate a phased retiree who has no time limit agreement. 
While in phased retirement, an employee continues to have the same 
performance and conduct requirements as in regular employment. Thus, an 
employee in phased retirement who has poor performance or conduct 
problems will be subject to the appropriate action, up to and including 
removal. The individual retains the same due process rights as any 
other employee in a similar situation.

831.1715(g) and 848.205(i); Phased Retirees Treated as Part-Time 
Employees

    OPM also received several comments regarding employee contributions 
to FERS and CSRS. During phased employment, retirement deductions for 
FERS and CSRS, Social Security (as appropriate) and Medicare taxes, as 
well as income tax will continue to be withheld from the pay the 
employee receives from the employing agency during phased employment. 
Those deductions and taxes are made at the normal deduction and tax 
rates and are based on the pay the employee actually receives during 
phased employment, not on the amount the employee would have received 
had the employee continued to work full-time.
    A commenter inquired about the possibility of liquidating annual 
leave for those employees who receive approval for phased retirement. 
The commenter suggested that he would like the ability to roll over the 
dollar value of his annual leave directly into his traditional (non-
Roth) or Roth TSP. OPM does not have the statutory authority to permit 
liquidation of annual leave upon an employee's election of phased 
retirement.
    Some commenters asked if phased retirement would affect an 
employee's annual leave ceiling. As provided by 5 CFR 831.1715(g) and 
848.205(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. The normal leave accrual rules for part-time 
employees apply to phased retirees. Leave accrual for part-time 
employees is prorated based on hours in a pay status. See 5 U.S.C. 
6302(c) and 5 CFR 630.303. Under 5 CFR 630.304, a part-time employee 
may accumulate not more than 240 or 360 hours' of annual leave on the 
same basis as a full-time employee may accumulate not more than 30 or 
45 days' annual leave. Thus, the election of phased retirement will not 
alter an employee's annual leave ceiling (i.e., ``use-or-lose'' annual 
leave).
    Some commenters questioned if phased retirees would be eligible for 
within grade increases. A phased retiree is treated just as any other 
employee on a part-time tour of duty. See 5 CFR 831.1715(g) and 
848.205(i). The normal within-grade increase rules for part-time 
employees apply to phased retirees. Days of full-time and part-time 
service are equally creditable towards within-grade increase waiting 
periods. See 5 CFR 531.405(a).

831.1715, 848.205, and 890.501; Health and Life Insurance Premiums

    One commenter questioned why the proposed rule states that Federal 
Employees Health Benefit Program (FEHB) and Federal Employees' Group 
Life Insurance Program (FEGLI) contributions will be deducted from the 
phased retiree's pay, while the definition of ``net annuity'' in 5 CFR 
838.103 lists health and life insurance premiums among the deductions 
from a phased retiree's gross annuity. The definition of ``net 
annuity'' in 5 CFR 838.103 in used in applying regulations dealing with 
court orders, which apply to all retirees, not just phased retirees. 
Most retirees have health and life insurance premiums deducted from 
their annuities; therefore, the definition of ``net annuity'' must 
reference those premiums. In the case of phased retirees, the 
references to health and life insurance premiums in the definition of 
``net annuity'' may be disregarded, since during phased retirement the 
FEHB and FEGLI enrollments will stay with the employing agency and 
premiums will be deducted from a phased retiree's pay. Also, the FEHB 
employer contribution will be the same as for full-time

[[Page 46615]]

employees, and FEGLI benefit coverage amounts will be based upon the 
full-time salary for the position occupied during the phased employment 
period. See Sec. Sec.  831.1715(a)(1) and 848.205(a)(1) for FEHB 
premiums; Sec. Sec.  831.1715(a)(2) and 848.205(a)(2) for FEGLI 
premiums.
    Phased employment service is creditable toward the 5 years of 
service needed to continue FEHB coverage as an annuitant. In the event 
an employee ends his or her phased retirement for full retirement, FEHB 
benefits will continue if the employee meets all eligibility 
requirements as of the separation from service on which the full 
retirement is based.

831.1721, 831.1731, 848.301, and 848.401; Management Decision To End 
Phased Retirement

    One commenter asked if management can end phased retirement at its 
discretion; similar to the removal of a reemployed annuitant, the 
removal of an employee on a temporary appointment, or for reasons such 
as budget or poor performance. Employees in phased retirement remain 
employees on permanent appointments. The phased retirement statute 
specifies that an employee may return to regular employment by mutual 
agreement of the agency and the phased retiree. Agencies may continue 
to use existing workforce authorities such as removal for performance 
or conduct; transfer of function or reduction in force, as appropriate, 
should the agency need to limit, change or end the employment of an 
employee in phased retirement. Agencies should be aware that some 
matters relating to phased retirement, including procedures and 
arrangements for adversely affected employees, may be subject to 
collective bargaining obligations.

831.1731(b) and 848.401(b); Entering Full Retirement

    One union commented that OPM's deeming an employee to have elected 
full retirement results in a needlessly harsh outcome if the employee 
were separated from phased employment and not reemployed elsewhere in 
the Federal government within 3 days. The organization suggested that 
OPM modify the rule to allow 30 days to elapse before deeming an 
election of full retirement to have taken place. OPM declines to adopt 
this suggestion because Sec. Sec.  831.1732(b) and 848.402(b) require 
the phased retirement annuity to end upon an employee's separation from 
service as a phased retiree. OPM considers a separation of more than 3 
days after ending phased employment to be just like any other 3 day 
break in service affecting retirement coverage. Here, the difference is 
that the composite retirement annuity will commence the day after 
separation. Sections 831.1731(b) and 848.401(b) must be read in 
conjunction with Sec. Sec.  831.1732 and 848.402, since the later 
sections state that a phased retirement annuity terminates upon 
separation from service and the composite retirement annuity begins the 
next day. From an administrative standpoint, it does not make sense for 
OPM to continue phased retirement annuity payments for even a 30 day 
window where an improper payment might result. Employees are 
responsible for taking the appropriate actions to return to full 
employment, accept a different non-phased retirement part-time 
schedule, or to fully retire. Procedures are already in place that 
would enable a losing or gaining agency to modify an employee's 
retirement records where the employee's apparent inaction should be 
corrected.

831.1732 and 848.402; Commencing Date of the Composite Retirement 
Annuity

    A commenter and an agency noted that under Sec.  831.1732(a), 
unlike retirements under the regular CSRS rules, a phased retiree's 
composite annuity would commence the day after separation and wondered 
about the rationale OPM used to justify this change. Section 848.402(a) 
has the same effect. In analyzing the effect of phased retirement on 
employees, OPM determined that for a phased retiree, this change in 
practice was necessary to ensure continuity of income and proper 
crediting of service in the context of the composite retirement 
annuity. Therefore, under Sec. Sec.  831.1732(a) and 848.402(a), the 
composite retirement annuity commences the day after the employee's 
separation from service.

831.1741, 831.1742, 848.501, and 848.502; Phased Retirement Annuity 
Computation

    One commenter suggested that OPM increase the appeal of phased 
retirement by adjusting the CSRS annuity formula upward to make phased 
retirement more attractive to employees. Other commenters suggested 
that OPM similarly modify the FERS annuity formula as well. The 
commenters opined that more generous incentives would motivate CSRS and 
FERS employees to remain in Federal service as phased retirees. We also 
received comments suggesting that FERS employees should receive their 
full unreduced pensions upon final retirement to make up for the 
perceived shortfalls in their pensions as a result of not having 
coverage under CSRS. OPM cannot make the suggested changes because OPM 
has no authority to change the annuity formulas and calculations 
established by Congress in statute. Moreover, phased retirement is 
strictly optional and its attractiveness, or lack thereof, will not 
alter the basic structural differences between CSRS and FERS. If phased 
retirement is unattractive to an employee, then the employee is under 
absolutely no obligation to enter into it.
    OPM also received several questions about how changes in an 
employee's ``high-three'' average pay would be addressed during phased 
retirement. Upon entry into phased retirement, OPM will compute the 
``phased retirement annuity'' using the three highest consecutive 
average pay years the employee had accrued up until that point. During 
phased retirement, if a new high-three average pay were to accrue, it 
would be reflected in the computation of the composite annuity. At full 
retirement, the ``phased retirement annuity'' portion of the employee's 
annuity would not change; but, the ``fully retired phased component'' 
portion would take the new average pay into account. Therefore, a new 
high-three average pay achieved during phased retirement would only 
affect the portion of the total (composite) annuity (i.e., the ``fully 
retired phased component'' of the composite annuity), but not the 
portion of the composite annuity consisting of the ``phased retirement 
annuity.''
    Two commenters noted that it appeared that OPM had made an error in 
describing the computation of a phased retirement annuity in the 
Benefits and Computation section of the supplementary information. We 
agree. The statement should have read ``[w]hile 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, multiplied by the ``phased 
retirement percentage'' (i.e., 50 percent).''
    OPM received a few comments concerning the methodology we will 
employ in applying the required offset to CSRS Offset annuities based 
on the employee's entitlement to Social Security benefits. Upon entry 
into phased retirement, the offset will be computed by first 
determining the offset amount that would have applied had the employee 
fully retired instead electing phased retirement and then multiplying 
that offset amount by the phased retirement percentage. This

[[Page 46616]]

adjustment is made from the monthly rate of the phased retirement 
benefit. When the composite annuity is computed, a new offset amount 
will be determined as if the employee had retired for the first time 
and that amount will be applied to the total composite monthly annuity. 
See 5 CFR 831.1741(c) and 831.1742(c)(2). The offset amount applied to 
the phased retirement annuity will not be factored in to the 
computation of the composite annuity. See 5 CFR 831.1742(a)(1).

831.1742(b)(2) and 848.502(b)(2); Deemed Rate of Basic Pay

    One union asked OPM to consider allowing overtime pay earned under 
19 U.S.C. Sec.  267(a) to be considered in base pay for the purposes of 
computing the composite retirement annuity. We decline to make the 
requested change. The phased retirement statute requires phased 
retirees to be deemed to be full-time for the purpose of determining 
basic pay for either life insurance or the composite annuity. The law 
also limits the pay subject to retirement deductions based on this 
concept of full time. As a result, hours worked above and beyond a 40-
hour work schedule will not be considered basic pay for either life 
insurance or the composite annuity.

831.1742(b)(3) and 848.502(b)(3); Crediting Sick Leave

    Several commenters questioning how employees will be credited for 
their unused sick leave in the computation of the composite annuity 
received at final retirement. The commenters appear to be concerned 
that OPM is not correct in using division where multiplication might be 
expected. However, the statute expressly addresses this issue. The 
division of unused sick leave is appropriate. The formula is designed 
to ensure that employees receive full credit for their unused sick 
leave balance in the computation of the composite annuity. The unused 
sick leave balance is credited in the fully retired phased component of 
the composite annuity calculation before that component gets multiplied 
by the working percentage. Without any adjustment made to the unused 
sick leave balance, the value of the unused sick leave in the composite 
annuity would be proportionally reduced when the fully retired phased 
component gets multiplied by the working percentage. Dividing the 
unused sick leave balance by the working percentage and using the 
result in the computation of the fully retired phase component of the 
composite annuity ensures that the appropriate credit for the unused 
sick leave is retained in the annuity after the fully retired phased 
component is multiplied by the working percentage.
    For example, if a regular CSRS employee separates for retirement 
with 6 months of unused sick leave credit (1,044 hours) and a high-3 
average pay of $80,000, the value of the unused sick leave credit would 
equal $800 ($80,000 x 2 percent x 6/12). If a CSRS phased retiree with 
a working percentage of 50 percent separates for full retirement with 6 
months of unused sick leave credit (1,044 hours) and a high-3 average 
pay of $80,000, the value of the unused sick leave credit without any 
adjustment would equal $400 ([$80,000 x 2 percent x 6/12] x 50 
percent), which is $400 less than the value that should be attributed 
to the unused sick leave credit. Dividing the sick leave credit by the 
working percentage and using the result in the fully retired phased 
component would result in 12 months credit (2,088 hours) for unused 
sick leave (6 months divided by 50 percent equals 12 months; 1,044 
hours divided by 50 percent equals 2,088 hours). The resulting value of 
the unused sick leave in the composite annuity, after applying 12 
months credit for the unused sick leave in the fully retired phased 
component, equals $800 ([$80,000 x 2 percent x 12/12] x 50%), the full 
value that should be attributed to the unused sick leave credit.
    This analysis applies equally to the FERS computation. If a FERS 
employee retires at age 61 with a high-3 average pay of $80,000 and 6 
months unused sick leave credit, the value of that unused sick leave 
credit would be $400 ($80,000 x 1% x 6/12). To ensure that a phased 
retiree with a working percentage of 50 percent separating at age 61 
with a high-3 average pay of $80,000 and 6 months unused sick leave 
credit would get $400 credit for the unused sick leave, divide the sick 
leave credit by the working percentage and use the result (6 months 
divided by 50 percent equals 12 months) in the computation of the fully 
retired phased component ([$80,000 x 1% x 12/12] x 50% = $400).
    Several employees requested that we consider allowing the use of 
unused sick leave in both the phased retirement annuity component and 
the fully retired phased component. OPM cannot make the suggested 
change. Under Sec. Sec.  8336a and 8412a, of title 5, United States 
Code, unused sick leave is available for use in the annuity computation 
only upon an employee's entry into full retirement.

831.1761-831.1763 and 848.701-848.703; Death Benefits and Lump-sums

    We received one comment from an employee organization which noted 
that Sec. Sec.  848.701 through 848.703 did not appear to have 
equivalent CSRS sections. The organization suggested that OPM fix this 
perceived oversight as an equitable consideration. We would direct the 
employee organization to Sec. Sec.  831.1761 through 831.1763 which are 
the corresponding CSRS sections to the FERS sections they cited. No 
changes to the regulations are required.

 831.1771; Reemployment of an Individual Who Has Separated From Phased 
Employment

    One agency commented that the first sentence in Sec.  831.1771(b) 
was difficult to read. We agree and have modified the sentence for 
clarity. The word ``reemployment'' has been substituted for the words 
``the employment'' and the term ``upon reemployment'' has been 
substituted for ``upon employment''.

831.1781 and 848.901; Mentoring

    Many comments addressed the necessity of requiring an employee in 
phased retirement to spend 20 percent of work time in mentoring 
activities. One agency commented that the regulations should allow an 
agency and the employee to determine the number of mentoring hours 
collaboratively instead of requiring mentoring 20 percent of the time. 
The authorizing statute clearly requires that not less than 20 percent 
of hours worked must consist of mentoring. Therefore, OPM cannot adopt 
this suggestion.
    One union and several individual commenters remarked that a more 
specific definition of mentoring should be included in the regulations. 
The same union also commented that mentoring should be defined as peer 
mentoring. Mentoring can encompass a wide range of activities that 
allow for the transfer of knowledge and skills from one employee to 
others. To provide agencies with the maximum amount of flexibility in 
meeting the mentoring requirement we have purposefully included a broad 
definition of mentoring so that employees and managers would have 
options in choosing mentoring activities that would best fit an 
agency's needs.
    Several commenters suggested that the regulations should include 
specific criteria for a establishing a formal mentoring program as well 
as procedures for monitoring compliance with the mentoring requirement. 
Participation in a formal mentoring

[[Page 46617]]

program is just one of many ways that an employee in phased retirement 
could meet the mentoring requirement. In some instances, other forms of 
mentoring that are not a part of a formal mentoring program would be 
appropriate. Therefore, OPM declines to adopt this suggestion.
    Some commenters also indicated that agencies should be encouraged 
to use best practices when assigning mentoring activities. While OPM 
does encourage agencies to use best practices and any other available 
resources when implementing the mentoring requirement, such information 
is outside the scope of this rule. A professional organization inquired 
if a phased retiree could meet the mentoring requirement by 
participating as volunteer mentor for students in school or community 
programs while on leave or during other non-work periods. While we 
appreciate the efforts of all federal employees who participate in 
school and community volunteer activities during non-work periods, such 
volunteer efforts will not count toward the mentoring requirement. The 
mentoring requirement can only be met when an employee spends 20 
percent of paid working hours in mentoring activities.

838.242(b); Court Orders and Service Computation

    One agency and one union noticed that our amendment to Sec.  
838.242(b) omitted a reference to how OPM will credit unused sick leave 
under FERS in computing an annuity subject to a court order. We agree 
and we have made the change. The sentence now reads as follows: 
``Unused sick leave is counted as ``creditable service'' on the date of 
separation for an immediate CSRS or FERS annuity.''

848.501 and 848.502; Phased Retirement and Composite Annuities Under 
FERS

    Several commenters inquired as to how OPM plans to apply the 1.1 
percent computation that applies to FERS annuitants who separate from 
service after reaching at least age 62 with at least 20 years of 
service to phased retirees during phased retirement and again at full 
retirement. Because the 1.1 percent annuity computation is predicated 
on the eligible FERS employee having reached at least age 62 with at 
least 20 years of service, OPM will apply it to both the phased 
retirement annuity and the composite annuity as appropriate. Under 5 
U.S.C. 8412a(c)(1), OPM must compute the phased retirement annuity 
using the appropriate amount of annuity payable under 5 U.S.C. 8415 as 
if, on the date on which she enters phased retirement, the FERS 
employee had separated from service and retired under section 8412(a) 
or (b). For example, a FERS employee who is otherwise eligible to 
receive the 1.1 percent annuity computation at retirement would, upon 
entry into phased retirement, have her annuity computed using the 1.1 
percent annuity computation. However, a FERS employee who enters phased 
retirement prior to reaching age 62 would not receive the 1.1 percent 
annuity computation in her phased retirement annuity. If she later 
fully retires after reaching at least age 62 and meets the eligibility 
requirements, under 5 U.S.C. 8412a(f), she would receive the 1.1 
percent annuity computation in the fully retired phased component of 
her composite annuity; the phased retirement component of her composite 
annuity would be based on the original 1.0 percent annuity computation, 
updated by cost-of-living adjustments.

848.504; Phased Retirees Are Not Eligible for the Annuity Supplement

    Several commenters, including a few agencies, employee 
organizations and unions objected to the requirement in the regulations 
that FERS covered phased retirees would be ineligible for the FERS 
annuity supplement under 5 U.S.C. 8421 and asked OPM to modify the 
rule. Others noted that it would be a disincentive to FERS covered 
employees to enter phased retirement without OPM also authorizing 
payment of the FERS annuity supplement. One commenter suggested, 
therefore, that OPM should pay 50 percent of the FERS annuity 
supplement to remedy this issue. OPM cannot modify the rule to pay the 
FERS annuity supplement during phased retirement because 5 U.S.C. 
8412a(j) specifically states that FERS-covered phased retirees are not 
eligible to receive it.

Summary of Changes

    Based on the comments OPM received, we made four changes to the 
regulatory text. A new paragraph (e) was added to Sec. Sec.  831.1713 
and 848.203, respectively. Section 831.1771(b) was edited for clarity: 
In the first sentence, ``reemployment'' has been substituted for ``the 
employment'' and ``upon reemployment'' has been substituted for ``upon 
employment''. Section 838.242(b) was modified to include the words 
``and FERS''. No other changes were made.

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 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, 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.

[[Page 46618]]

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.
Katherine Archuleta,
Director.
    Accordingly, OPM is amending 5 CFR parts 581, 582, 831, 838, 841, 
842, 843, 870, and 890 and adding 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 by adding 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 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 by revising the definition of ``applicant for 
retirement'' and adding the definitions of ``full retirement status'' 
and ``phased retiree'' in alphabetical order to read as follows:


Sec.  831.402  Definitions.

    In this subpart:
    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.
* * * * *

[[Page 46619]]


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 new paragraph (d).
    The revision and addition read as follows:


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 by revising the definition of ``full-time 
service'' in paragraph (b) to read 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--
    (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.

[[Page 46620]]

    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.  831.1721-1723.
    (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 
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.  
831.1721-1723;
    (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

[[Page 46621]]

existing agreement, by entering into a new written agreement meeting 
the requirements of this paragraph, before the expiration of the 
agreement currently in effect.
    (e) An agency must establish written criteria that will be used to 
approve or deny applications for phased retirement before approving or 
denying applications for phased retirement.


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 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.

[[Page 46622]]

    (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 5 CFR part 831.

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 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

[[Page 46623]]

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 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

[[Page 46624]]

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 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

[[Page 46625]]

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) whose entitlement 
to a composite retirement annuity terminates under 5 U.S.C. 8344 due to 
reemployment, is an employee effective upon reemployment. 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 annuity'', ``employee 
annuity'', ``gross annuity'', ``net annuity'', ``retiree'', and ``self-
only annuity'';
0
b. Add the definitions of ``composite retirement annuity'', ``phased 
retiree'', ``phased retirement annuity'', ``phased retirement status,'' 
and ``retirement'' 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 831 or 5 CFR 848.
    Gross annuity means the amount of monthly annuity payable to a 
retiree or phased retiree after reducing the self-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 means the amount of monthly annuity payable to a 
retiree or phased retiree after deducting from the gross annuity any 
amounts that are--
    (1) Owed by the retiree to the United States;
    (2) Deducted for health benefits premiums under 5 U.S.C.8906 and 5 
CFR 891.401 and 891.402;
    (3) Deducted for life insurance premiums under 5 U.S.C. 8714a(d);
    (4) Deducted for Medicare premiums;
    (5) 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;
    (6) 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
    (7) Already payable to another person based on a court order 
acceptable for processing or a child abuse judgment enforcement order.
    Unless the court order expressly provides otherwise, net annuity 
also

[[Page 46626]]

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 means a retirement-eligible employee who--
    (1) 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
    (2) Has not entered full retirement status;
    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 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.

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 or FERS annuity. The unused 
sick leave of

[[Page 46627]]

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). 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 division of a 
phased retirement annuity and then recomputed for division of the 
composite retirement annuity under Sec. Sec.  831.1742 and 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.
* * * * *

[[Page 46628]]

    (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 5 CFR 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:

Model Paragraphs

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.
    ] 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.

[[Page 46629]]

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
    ]] 201-211 General award of employee annuity.
    ] 201 * * *
* * * * *

]] 212-217 Award of phased retirement annuity or composite retirement 
annuity.

    A court order may include an award directed at (1) phased 
retirement annuity payable to a phased retiree, to address the 
possibility that an employee will enter phased retirement status; (2) 
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 (3) 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

[[Page 46630]]

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 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

[[Page 46631]]

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), 
adding paragraph (b), and revising paragraph (c) 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) * * *
    (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 revising paragraph (a)(1) introductory 
text, redesignating paragraph (b) as paragraph (c), by and 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);
0
b. Redesignate paragraphs (c)(6) through (11) as paragraphs (c)(7) 
through (12), and
0
c. Add new paragraph (c)(6).
    The additions read as follows:


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.  838.104 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.

[[Page 46632]]

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 by revising the definition of ``full-time 
service'' to read as follows:


Sec.  842.402  Definitions.

    In this subpart--
    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:


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.
848.503 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 a 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.

[[Page 46633]]

    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.
    (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.  848.301-302.
    (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-
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

[[Page 46634]]

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.
    (e) An agency must establish written criteria that will be used to 
approve or deny applications for phased retirement before approving or 
denying applications for phased retirement.


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 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

[[Page 46635]]

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--
    (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.

[[Page 46636]]

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 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 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 (1) 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 (2) the phased 
retirement percentage for the phased retiree.


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, 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 for military service performed prior to 
entering phased retirement status must complete such a

[[Page 46637]]

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 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.

    (a) For the purpose of 5 U.S.C. chapter 84, subchapter IV--
    (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.  
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 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:

[[Page 46638]]

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. 2014-18681 Filed 8-7-14; 8:45 am]
BILLING CODE 6325-38-P