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[House Report 112-535]
[From the U.S. Government Publishing Office]

112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-535

======================================================================

 
                 FEDERAL EMPLOYEE PHASED RETIREMENT ACT

                                _______
                                

 June 15, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Issa, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 4363]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Oversight and Government Reform, to whom 
was referred the bill (H.R. 4363) to amend title 5, United 
States Code, to allow Federal employees to continue their 
public service while partially retired, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Committee Statement and Views....................................     2
Section-by-Section...............................................     4
Explanation of Amendments........................................     6
Committee Consideration..........................................     7
Application of Law to the Legislative Branch.....................     7
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     7
Statement of General Performance Goals and Objectives............     7
Federal Advisory Committee Act...................................     7
Unfunded Mandate Statement.......................................     7
Committee Estimate...............................................     7
Budget Authority and Congressional Budget Office Cost Estimate...     8
Changes in Existing Law Made by the Bill as Reported.............    13
Additional Views.................................................    23

    The amendment is as follows:
  At the end of the bill, add the following:

SEC. 3. CONTRIBUTIONS TO THRIFT SAVINGS FUND OF PAYMENTS FOR ACCRUED OR 
                    ACCUMULATED LEAVE.

  (a) Civil Service Retirement System.--Section 8351(b)(2) of title 5, 
United States Code, is amended by adding at the end the following:
  ``(D)(i) A qualified phased retiree may, in addition to any 
contributions otherwise allowable, contribute to the Thrift Savings 
Fund by direct transfer any part of any amount otherwise payable to 
such retiree for accumulated and current accrued annual or vacation 
leave under section 5551 or 5552.
  ``(ii) For purposes of this subparagraph, the term `qualified phased 
retiree' means a phased retiree (as defined by section 8336a) who has 
completed at least 1 year of service as such a retiree.''.
  (b) Federal Employees' Retirement System.--Section 8432(a) of title 
5, United States Code, is amended by adding at the end the following:
  ``(4)(A) A qualified phased retiree may, in addition to any 
contributions otherwise allowable, contribute to the Thrift Savings 
Fund by direct transfer any part of any amount otherwise payable to 
such retiree for accumulated and current accrued annual or vacation 
leave under section 5551 or 5552.
  ``(B) For purposes of this paragraph, the term `qualified phased 
retiree' means a phased retiree (as defined by section 8412a) who has 
completed at least 1 year of service as such a retiree.''.
  (c) Regulations.--The Executive Director of the Federal Retirement 
Thrift Investment Board shall prescribe regulations to carry out the 
amendments made by this section.
  (d) Effective Date.--The amendments made by this section shall take 
effect 1 year after the date of the enactment of this section, or upon 
such earlier date as may be established by the Executive Director of 
the Federal Retirement Thrift Investment Board under the regulations 
prescribed under subsection (c).

                     Committee Statement and Views

                          PURPOSE AND SUMMARY

    Under current law, Federal agencies may offer part-time 
employment to retirement-eligible workers, but the employee may 
not begin receiving accrued pension benefits. As a result, most 
experienced Federal employees elect to retire. The purpose of 
H.R. 4363, the ``Federal Employee Phased Retirement Act,'' is 
to provide agency managers with an additional tool for 
retaining valuable knowledge and expertise--a tool that also 
gives Federal employees greater flexibility in planning their 
careers and retirements.
    H.R. 4363 provides the Office of Personnel Management (OPM) 
the authority to establish a phased retirement program for 
Federal employees. The bill allows Federal employees to retire 
from a portion of their full time employment and receive a 
prorated pension for that service. During phased retirement, 
Federal employees would work 20 to 80 percent of their full-
time schedule and continue to receive a pro-rated salary and 
pension credit for the time worked. At least 20 percent of the 
time worked must be used to mentor, unless the individual is 
employed by the U.S. Postal Service. When the phased retiree 
fully retires, their annuity would be adjusted, increasing the 
employee's lifetime retirement income.

                  BACKGROUND AND NEED FOR LEGISLATION

    Approximately 550,000 full-time career Federal Government 
employees and U.S. Postal Service employees are currently 
eligible to retire.\1\ These retirement-eligible employees 
represent approximately one quarter of the nearly 2.4 million 
full-time Federal Government and postal employees. More 
employees will become retirement eligible in the coming years.
---------------------------------------------------------------------------
    \1\http://www.washingtonpost.com/local/politics/how-many-Federal-
and-postal-employees-are-eligible-to-retire/2011/05/19/
AFusIP7G_story.html
---------------------------------------------------------------------------
    This potential ``brain drain'' represents a significant 
cost and concern for the American public. First, many of these 
employees have decades of experience and institutional 
knowledge, and their retirements could significantly impact the 
government's ability to serve the public. Second, upon 
retirement, these former employees will start drawing from 
their generous pension programs and the government will seek to 
hire their replacements.
    Currently, Federal employees face one of three choices upon 
reaching retirement age:
    1. Voluntarily retire and collect an annuity based on the 
pension computation formula.
    2. Continue to work full-time, in most cases increasing the 
number of service years used in calculating their pension.
    3. Voluntarily retire and return to Federal employment as a 
reemployed annuitant. Unless the employee meets certain 
requirements, their salary will be reduced by the amount of 
annuity paid for the period of reemployment.
    Most long-serving Federal employees elect retirement, where 
they can begin receiving their pension.
    In its September 2010 legislative proposal, OPM requested 
phased retirement authority to improve the government's 
capacity to ``retain and share institutional knowledge.''\2\ 
H.R. 4363 encompasses OPM's recommendation, and allows agencies 
to offer phased-retirement to individuals nearing retirement. 
Individuals would reduce their employment while continuing to 
earn additional retirement benefits, pro-rated for the actual 
hours worked. Individuals opting for phased retirement receive 
only part of their annuity, resulting in lower annuity outlays 
from the Civil Service Retirement and Disability Fund. These 
same individuals would continue to make employee contributions 
to the retirement fund for their part-time service. The 
individual's income during partial retirement would be between 
full retirement and full employment. At full retirement, the 
individual would be appropriately compensated for the value of 
both full-time and part-time service, with a pension greater 
than if they had fully retired at the time of transition to 
phased retirement. Non-postal phased retirees would be required 
to spend a portion of their time mentoring other employees, 
subject to a waiver.
---------------------------------------------------------------------------
    \2\http://www.opm.gov/news_events/congress/proposals/
Hiring_Reform.pdf
---------------------------------------------------------------------------
    As part of the Committee's effort to better align Federal 
employee benefits with the private sector, H.R. 4363 allows 
phased retirees to deposit lump-sum payments for unused annual 
leave into their Thrift Savings Plan (TSP) accounts. These 
contributions would be subject to the existing Internal Revenue 
Service (IRS) annual contribution limits. For 2012, this limit 
is $17,000.

                          LEGISLATIVE HISTORY

    The Civil Service Retirement Act of 1920 (P.L. 66-215) 
established pension benefits for civilian Federal employees. 
Federal civilian employees hired on or after January 1, 1984, 
were required to participate in Social Security (pursuant to 
the Social Security Amendments of 1983, P.L. 98-21), which 
contributed to the development of the Federal Employees' 
Retirement System (FERS).\3\
---------------------------------------------------------------------------
    \3\See the Federal Employees' Retirement Act of 1986, P.L. 99-335.
---------------------------------------------------------------------------
    On March 14, 2012, the Senate passed S. 1813, a bill to 
reauthorize Federal-aid highway and highway safety construction 
programs. The bill included a provision to allow phased 
retirements.

                           Section-by-Section

Section 1. Short title

    Establishes the short title of the bill as the ``Federal 
Employee Phased Retirement Act.''

Section 2. Phased retirement authority

    Section 2(a) makes changes to chapter 83 of title 5, United 
States Code, necessary to authorize phased retirement under the 
Civil Service Retirement System (CSRS).
    Subsection (a) of 5 U.S.C. 8336a defines the terms that are 
used in the new section. Individuals subject to mandatory 
retirement, such as law enforcement, firefighters, nuclear 
materials couriers, air traffic controllers, customs and border 
protection officers, or members of the Capitol Police or 
Supreme Court Police, may not elect phased retirement.
    Subsection (b) allows agencies to offer phased retirement 
to retirement-eligible employees, subject to OPM regulations. 
Subsection (b)(1) establishes the conditions under which a 
Federal employee, with the concurrence of the head of the 
employing agency, can enter phased retirement. It requires that 
the employee be employed on a full-time basis for the three 
year period prior to entering phased retirement status.
    Subsection (b)(2)(A)-(C) requires that the phased retiree 
be appointed to a position for which the working percentage is 
50 percent. The Director of OPM may establish other phased 
employment working percentages not less than 20 percent and not 
more than 80 percent of a work period. The employee's working 
percentage may not change during phased retirement.
    Subsection (b)(2)(D)(i)-(iii) requires that phased retirees 
spend a minimum of 20 percent of their working hours mentoring 
unless exempted by OPM regulations. Phased retirees serving in 
the United States Postal Service are exempt from the mentoring 
requirement.
    Subsection (b)(3)(A) prevents phased retirees from serving 
in more than one position at a time. Subsection (b)(3)(B) 
allows employees to transfer to another position as long as the 
transfer does not result in a change in the working percentage.
    Subsection (b)(4) limits retirement-eligible employees to 
one working percentage election.
    Subsection (b)(5) prevents phased retirees from selecting 
alternative forms of annuity (such as lump-sum credit) under 
section 5 U.S.C. 8343a.
    Subsection (c) deals with the computation of a phased 
retirement annuity. Subsection (c)(1) calculates the phased 
retirement as 100 minus the working percentage multiplied by 
the amount payable under normal retirement.
    Subsection (c)(2) requires that the phased retirement 
annuity be paid in addition to the basic pay for the position 
to which a phased retiree is appointed during phased 
employment.
    Subsection (c)(3) applies cost-of-living adjustments to 
phased retirement annuities in the same manner as full 
retirement annuities under section 5 U.S.C. 8340.
    Subsection (c)(4) prohibits phased retirement annuities 
from being subject to reduction for any form of survivor 
annuity, computation of any survivor annuity, or court order 
requiring a survivor annuity to be provided to any individual. 
Phased retirement annuities are still subject to court orders 
providing for division, allotment, assignment, execution, levy, 
attachment, garnishment, or other legal process on the same 
basis as other annuities.
    Subsection (c)(5) clarifies the rules for depositing 
refunds of service credit.
    Subsection (c)(6) requires any deposit, or election of an 
actuarial annuity reduction in lieu of a deposit, be made at or 
before the time the employee enters phased retirement. The 
subsection also establishes rules for service credit if the 
phased retiree dies in service.
    Subsection (c)(7) makes clear the phased retirement annuity 
begins on the date on which the individual enters phased 
employment.
    Subsection (c)(8) prohibits unused sick leave from being 
used in the computation of the retirement annuity.
    Subsection (d) provides that basic pay, not in excess of 
the full-time rate of pay for the position, be used when 
calculating the final annuity.
    Subsections (e) and (f) address what happens when a phased 
retiree elects to fully retire. Subsection (e) allows a phased 
retiree to enter full retirement at any time at which time the 
phased retiree shall be entitled to a composite retirement 
annuity. The composite annuity consists of (1) the amount of 
the phased retirement annuity on the date the individual fully 
retires (before any reduction for redeposit) plus (2) the 
percentage of work the employee completed during phased 
retirement, multiplied by the amount of annuity that would have 
been payable if the individual had remained employed full-time 
instead of entering phased retirement (before any reduction for 
survivor annuity or unpaid redeposit). The sum of these two 
amounts would be adjusted for any required reductions for 
survivor annuity or unpaid redeposit under 5 U.S.C. 8334(d)(2).
    Subsection (g) allows a phased retiree to return to a full-
time work schedule under such procedures and conditions as the 
Director of OPM may provide and with the concurrence of the 
head of the employing agency. The subsection makes clear that 
the phased retirement annuity ends, and the phased retirement 
period is treated as part-time employment.
    Subsection (h) states that, for purposes of survivor 
annuity benefits, the death of a phased retiree shall be deemed 
to be the death in service of an employee, and the phased 
retirement period will be treated as a period of part-time 
employment.
    Subsection (i) makes clear that phased retirees are not 
considered part-time employees, and thus not subject to the 
part-time employment conditions under 5 U.S.C. 3401.
    Subsection (j) makes phased retirees ineligible for 
disability retirement.
    Subsection (k) establishes the date the phased retiree 
enters full retirement status as the date of retirement for 
purposes of determining a survivor annuity.
    Subsection (l) provides that a phased retiree is considered 
to be an employee for purposes of the Thrift Savings Plan and 
for voluntary retirement contributions under CSRS.
    Subsection (m) makes clear that a phased retiree is not 
subject to salary withholding for receiving an annuity.
    Subsection (n) deems a phased retiree to be receiving basic 
pay at the rate of a full-time employee in the same position 
for purposes of the Federal Employees' Group Life Insurance 
Program.
    Section 2(b) makes changes to chapter 84 of title 5, United 
States Code, necessary to authorize phased retirement under 
FERS. New section 8412a of title 5 contains provisions that 
parallel the provisions of new 5 U.S.C. 3336a with respect to 
CSRS. Subsection 8412a(j) prevents a phased retiree from 
receiving a FERS supplemental annuity.

Section 3. Contributions to Thrift Savings Fund of payments for accrued 
        or accumulated leave

    Section 3 provides that a qualified phased retiree 
(including postal employees and employees of the Postal 
Regulatory Commission) may contribute in any pay period any 
part of any payment that the employee or Member receives as a 
lump-sum payment for accumulated and accrued annual or vacation 
leave upon separation or entering active duty. The term 
qualified phased retiree means a phased retiree who has 
completed at least one year of service.

                       Explanation of Amendments

    Mr. Cummings offered an amendment that cost savings from 
H.R. 4363 be used towards the unfunded liability created by the 
Civil Service Retirement and Disability Fund. The amendment was 
defeated by voice vote.
    Mr. Cummings offered an amendment that surplus retirement 
contributions are returned to the U.S. Postal Service. Mr. 
Cummings withdrew the amendment.
    Mr. Lynch offered an amendment to allow Federal employees 
to deposit all or part of the lump-sum payment they receive for 
unused annual leave into their Thrift Savings Plan account. The 
amendment was modified to apply only to phased retirees (to 
make the amendment germane) and to incorporate Mr. Issa's 
second-degree amendment to require individuals to complete at 
least one year of service as a phased retire in order to 
qualify as eligible to make a lump sum deposit. The amendment 
was agreed to by voice vote.

                        Committee Consideration

    On April 18, 2012, the Committee met in open session and 
ordered reported favorably the bill, H.R. 4363, as amended, by 
voice vote, a quorum being present.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to the terms and conditions of 
employment or access to public services and accommodations. 
This bill provides OPM the authority to establish a phased 
retirement program for Federal employees. Legislative branch 
employees and their families, to the extent that they are 
otherwise eligible for the benefits provided by this 
legislation, have equal access to its benefits.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandate Reform Act, P.L. 104-4) requires a statement as to 
whether the provisions of the reported include unfunded 
mandates. In compliance with this requirement the Committee has 
received a letter from the Congressional Budget Office included 
herein.

                         Earmark Identification

    H.R. 4363 does not include any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 4363. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for H.R. 4363 from the Director of 
Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 17, 2012.
Hon. Darrell Issa,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4363, the Federal 
Employee Phased Retirement Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Amber G. 
Marcellino.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 4363--Federal Employee Phased Retirement Act

    Summary: H.R. 4363 would allow eligible federal employees 
to enter into a phased retirement, during which they continue 
to work part time while drawing a partial salary and a partial 
civil service retirement annuity. The bill also would allow 
participating employees to contribute to their Thrift Savings 
Plan (TSP) accounts any payment received at retirement for 
accumulated and accrued annual leave.
    CBO estimates that enacting the legislation would decrease 
direct spending by $427 million and increase revenues by $24 
million over the 2013-2022 period. Pay-as-you-go procedures 
apply because enacting the legislation would affect direct 
spending and revenues. Implementing H.R. 4363 would decrease 
employer contributions to retirement accounts, thus reducing 
discretionary spending for those activities; such reductions in 
spending would be subject to future appropriation actions 
consistent with the bill.
    H.R. 4363 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 4363 is shown in the following table. 
The impact of this legislation falls within nearly all 
functions of the budget.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             By fiscal year, in millions of dollars--
                                         ---------------------------------------------------------------------------------------------------------------
                                            2013     2014     2015     2016     2017     2018     2019     2020     2021     2022   2013-2017  2013-2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDINGa

Estimated Budget Authority..............       -9      -26      -45      -54      -53      -52      -50      -49      -46      -42      -187       -427
Estimated Outlays.......................       -9      -26      -45      -54      -53      -52      -50      -49      -46      -42      -187       -427

                                                                  CHANGES IN REVENUESb

Estimated Revenues......................        1        2        3        4        4        4        3        3        1       -1        14         24

                                NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES

Impact on Deficits......................       -9      -28      -48      -58      -57      -55      -54      -51      -47      -41      -201       -451

                                                      CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level...........        0       -2       -3       -3       -3       -3       -2       -1        0        1       -11        -15
Estimated Outlays.......................        0       -2       -3       -3       -3       -3       -2       -1        0        1       -11        -15
Memorandum:
    Reduction in Offsetting Receipts            0        2        3        3        3        3        2        1        0        1        11        15
     Resulting from Lower Employer
     Contributionsc.....................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office and staff of the Joint Committee on Taxation.
aFor direct spending, negative numbers indicate a decrease in the deficit.
bFor revenues, positive numbers indicate a decrease in the deficit.
cEmployer contributions are intragovernmental transactions that do not affect the deficit; positive numbers indicate a decrease in receipts.

    Basis of estimate: For the estimate, CBO assumed that about 
1,000 federal employees per year--a mix of employees in the 
Civil Service Retirement System (CSRS) and the Federal 
Employees Retirement System (FERS)--would enter into phased 
retirement for a period of three years before fully 
retiring.\1\ During phased retirement, employees would move 
from a full-time to a part-time work schedule while also 
drawing a partial retirement benefit. Such employees would 
continue to make contributions toward retirement and their 
employing agencies would also continue their corresponding 
contributions toward retirement on behalf of those employees. 
To be eligible to participate in phased retirement, employees 
must be eligible for full retirement.
---------------------------------------------------------------------------
    \1\The estimated number of participants is based on assumptions 
used by the Office of Personnel Management for their evaluation of this 
proposal.
---------------------------------------------------------------------------
    Because participants in phased retirement would draw a 
lower retirement benefit than they would have if they had fully 
retired, CBO estimates that direct spending would be reduced by 
$427 million over the 2013-2022 period.
    In addition, CBO estimates that H.R. 4363 would increase 
revenues by $24 million over the 2013-2022 period. For this 
estimate, CBO assumed that any employees who enter phased 
retirement would have otherwise retired and that they would 
have been replaced by FERS employees. Most CSRS employees pay a 
rate of 7.0 percent of salary towards retirement, while most 
FERS employees currently pay a rate of 0.8 percent. As a 
result, more contributions would be collected from a CSRS 
employee remaining employed while in phased retirement than 
would have been collected from a replacement employee covered 
by FERS. However, the same contributions would be collected 
from a FERS employee who remained employed while in phased 
retirement as would have been collected from a replacement 
employee covered by FERS--except for a small decrease in 
revenues in later years because of the implementation of 
revised annuity contribution rates for employees hired after 
January 1, 2013.\2\ Any participating agency's total 
expenditures for salaries were assumed to remain the same as 
under current law.
---------------------------------------------------------------------------
    \2\Under provisions of the Middle Class Tax Relief and Job Creation 
Act of 2012 (Public Law 112-96), future federal employees in FERS will 
eventually contribute 2.3 percent of their salary towards retirement. 
CBO has incorporated that scheduled increase in its estimate of this 
bill.
---------------------------------------------------------------------------
    Because the disparity in rates for CSRS and FERS employees 
also affects the amount of employer contributions that agencies 
must pay on behalf of their employees, H.R. 4363 would decrease 
discretionary spending for those activities by $15 million over 
the 2013-2022 period, CBO estimates. However, this bill--or any 
legislation that would reduce the funds available for a 
particular discretionary program--would only reduce projected 
total appropriations if the caps on discretionary spending were 
also lowered. Without a reduction in the caps, CBO assumes 
funding for other discretionary programs would fill the gap 
created by any specific reduction or savings.
    H.R. 4363 would allow federal employees who participate in 
phased retirement and who are eligible to make contributions to 
the TSP to contribute to it any payment received for 
accumulated annual leave. Such contributions would be subject 
to the annual limits that otherwise apply--annual contributions 
are currently limited to $17,000 for individuals ages 49 or 
younger and $22,500 for individuals ages 50 or older.
    Because income taxes are deferred on contributions to 
regular (non-Roth) TSP accounts, and earnings within the 
accounts would not be taxable, the anticipated increase in 
contributions would initially result in lower revenues from 
income taxes. The staff of the Joint Committee on Taxation 
estimates that the legislation would reduce revenues by an 
insignificant amount over the 2013-2022 period.
    Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in the 
following table.

  CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 4363 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM  ON APRIL 18, 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2013    2014    2015    2016    2017    2018    2019    2020    2021    2022   2013-2017  2013-2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       NET INCREASE OR  DECREASE (-) IN THE DEFICIT

Statutory Pay-As-You-Go Impact Statutory Pay-As-        -9     -28     -48     -58     -57     -55     -54     -51     -47     -41      -201       -451
 You-Go Impact....................................
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: H.R. 4363 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal Spending: Amber G. 
Marcellino; TSP Contributions: Joint Committee on Taxation; 
Impact on State, Local, and Tribal Governments: Elizabeth Cove 
Delisle; Impact on the Private Sector: Paige Piper/Bach.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                      TITLE 5, UNITED STATES CODE

           *       *       *       *       *       *       *
PART III--EMPLOYEES

           *       *       *       *       *       *       *

SUBPART G--INSURANCE AND ANNUITIES

           *       *       *       *       *       *       *

                         CHAPTER 83--RETIREMENT

                    SUBCHAPTER I--GENERAL PROVISIONS

Sec.
8301. Uniform retirement date.
     * * * * * * *

                SUBCHAPTER III--CIVIL SERVICE RETIREMENT

     * * * * * * *
8336a. Phased retirement.
     * * * * * * *

                SUBCHAPTER III--CIVIL SERVICE RETIREMENT

Sec. 8331. Definitions

  For the purpose of this subchapter--
          (1) * * *

           *       *       *       *       *       *       *

          (30) the term ``air traffic controller'' or 
        ``controller'' means--
                  (A) * * *
                  (B) a civilian employee of the Department of 
                Transportation or the Department of Defense who 
                is the immediate supervisor of a person 
                described in section 2109(1)(B); [and]
          (31) ``customs and border protection officer'' means 
        an employee in the Department of Homeland Security (A) 
        who holds a position within the GS-1895 job series 
        (determined applying the criteria in effect as of 
        September 1, 2007) or any successor position, and (B) 
        whose duties include activities relating to the arrival 
        and departure of persons, conveyances, and merchandise 
        at ports of entry, including any such employee who is 
        transferred directly to a supervisory or administrative 
        position in the Department of Homeland Security after 
        performing such duties (as described in subparagraph 
        (B)) in 1 or more positions (as described in 
        subparagraph (A)) for at least 3 years[.]; and
          (32) ``Director'' means the Director of the Office of 
        Personnel Management.

           *       *       *       *       *       *       *

Sec. 8336a. Phased retirement

  (a) For the purposes of this section--
          (1) the term ``composite retirement annuity'' means 
        the annuity computed when a phased retiree attains full 
        retirement status;
          (2) the term ``full retirement status'' means that a 
        phased retiree has ceased employment and is entitled, 
        upon application, to a composite retirement annuity;
          (3) the term ``phased employment'' means the less-
        than-full-time employment of a phased retiree;
          (4) the term ``phased retiree'' means a retirement-
        eligible employee who--
                  (A) makes an election under subsection (b); 
                and
                  (B) has not entered full retirement status;
          (5) the term ``phased retirement annuity'' means the 
        annuity payable under this section before full 
        retirement;
          (6) the term ``phased retirement percentage'' means 
        the percentage which, when added to the working 
        percentage for a phased retiree, produces a sum of 100 
        percent;
          (7) the term ``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;
          (8) the term ``phased retirement status'' means that 
        a phased retiree is concurrently employed in phased 
        employment and eligible to receive a phased retirement 
        annuity;
          (9) the term ``retirement-eligible employee''--
                  (A) means an individual who, if the 
                individual separated from the service, would 
                meet the requirements for retirement under 
                subsection (a) or (b) of section 8336; but
                  (B) does not include an employee, described 
                in section 8335, after the date as of which 
                such employee is required to be separated from 
                the service by reason of such section; and
          (10) the term ``working percentage'' means the 
        percentage of full-time employment equal the quotient 
        obtained by dividing--
                  (A) the number of hours per pay period to be 
                worked by a phased retiree as scheduled in 
                accordance with subsection (b)(2); by
                  (B) the number of hours per pay period to be 
                worked by an employee serving in a comparable 
                position on a full-time basis.
  (b)(1) With the concurrence of the head of the employing 
agency, and under regulations promulgated by the Director, a 
retirement-eligible employee who has been employed on a full-
time basis for not less than the 3-year period ending on the 
date on which the retirement-eligible employee makes an 
election under this subsection may elect to enter phased 
retirement status.
  (2)(A) Subject to subparagraph (B), at the time of entering 
phased retirement status, a phased retiree shall be appointed 
to a position for which the working percentage is 50 percent.
  (B) The Director may, by regulation, provide for working 
percentages different from the percentage specified under 
subparagraph (A), which shall be not less than 20 percent and 
not more than 80 percent.
  (C) The working percentage for a phased retiree may not be 
changed during the phased retiree's phased retirement period.
  (D)(i) Not less than 20 percent of the hours to be worked by 
a phased retiree shall consist of mentoring.
  (ii) The Director may, by regulation, provide for exceptions 
to the requirement under clause (i).
  (iii) Clause (i) shall not apply to a phased retiree serving 
in the United States Postal Service. Nothing in this clause 
shall prevent the application of clause (i) or (ii) with 
respect to a phased retiree serving in the Postal Regulatory 
Commission.
  (3) A phased retiree--
          (A) may not be employed in more than one position at 
        any time; and
          (B) may transfer to another position in the same or a 
        different agency, if the transfer does not result in a 
        change in the working percentage.
  (4) A retirement-eligible employee may make only one election 
under this subsection during the retirement-eligible employee's 
lifetime.
  (5) A retirement-eligible employee who makes an election 
under this subsection may not make an election under section 
8343a.
  (c)(1) Except as otherwise provided under this subsection, 
the phased retirement annuity for a phased retiree is the 
product obtained by multiplying--
          (A) the amount of an annuity computed under section 
        8339 that would have been payable to the phased retiree 
        if, on the date on which the phased retiree enters 
        phased retirement status, the phased retiree had 
        separated from service and retired under section 8336 
        (a) or (b); by
          (B) the phased retirement percentage for the phased 
        retiree.
  (2) A phased retirement annuity shall be paid in addition to 
the basic pay for the position to which a phased retiree is 
appointed during phased employment.
  (3) A phased retirement annuity shall be adjusted in 
accordance with section 8340.
  (4)(A) A phased retirement annuity shall not be subject to 
reduction for any form of survivor annuity, shall not serve as 
the basis of the computation of any survivor annuity, and shall 
not be subject to any court order requiring a survivor annuity 
to be provided to any individual.
  (B) A phased retirement annuity shall be subject to a court 
order providing for division, allotment, assignment, execution, 
levy, attachment, garnishment, or other legal process on the 
same basis as other annuities.
  (5) Any reduction of a phased retirement annuity based on an 
election under section 8334(d)(2) shall be applied to the 
phased retirement annuity after computation under paragraph 
(1).
  (6)(A) Any deposit, or election of an actuarial annuity 
reduction in lieu of a deposit, for military service or for 
creditable civilian service for which retirement deductions 
were not made or refunded shall be made by a retirement-
eligible employee at or before the time the retirement-eligible 
employee enters phased retirement status. No such deposit may 
be made, or actuarial adjustment in lieu thereof elected, at 
the time a phased retiree enters full retirement status.
  (B) Notwithstanding subparagraph (A), if a phased retiree 
does not make such a deposit and dies in service as a phased 
retiree, a survivor of the phased retiree shall have the same 
right to make such deposit as would have been available had the 
employee not entered phased retirement status and died in 
service.
  (C) If a phased retiree makes an election for an actuarial 
annuity reduction under section 8334(d)(2) and dies in service 
as a phased retiree, the amount of any deposit upon which such 
actuarial reduction shall have been based shall be deemed to 
have been fully paid.
  (7) A phased retirement annuity shall commence on the date on 
which a phased retiree enters phased employment.
  (8) No unused sick leave credit may be used in the 
computation of the phased retirement annuity.
  (d) All basic pay not in excess of the full-time rate of pay 
for the position to which a phased retiree is appointed shall 
be deemed to be basic pay for purposes of section 8334.
  (e) Under such procedures as the Director may prescribe, a 
phased retiree may elect to enter full retirement status at any 
time. Upon making such an election, a phased retiree shall be 
entitled to a composite retirement annuity.
  (f)(1) Except as provided otherwise under this subsection, a 
composite retirement annuity is a single annuity computed under 
regulations prescribed by the Director, equal to the sum of--
          (A) the amount of the phased retirement annuity as of 
        the date of full retirement, before any reduction based 
        on an election under section 8334(d)(2), and including 
        any adjustments made under section 8340; and
          (B) the product obtained by multiplying--
                  (i) the amount of an annuity computed under 
                section 8339 that would have been payable at 
                the time of full retirement if the individual 
                had not elected a phased retirement 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 or reduction 
                based on an election under section 8334(d)(2); 
                by
                  (ii) the working percentage.
  (2) After computing a composite retirement annuity under 
paragraph (1), the Director shall adjust the amount of the 
annuity for any applicable reductions for a survivor annuity 
and any previously elected actuarial reduction under section 
8334(d)(2).
  (3) A composite retirement annuity shall be adjusted in 
accordance with section 8340, except that subsection (c)(1) of 
that section shall not apply.
  (4) In computing a composite retirement annuity under 
paragraph (1)(B)(i), the unused sick leave to the credit of a 
phased retiree at the time of entry into full retirement status 
shall be adjusted by dividing the number of hours of unused 
sick leave by the working percentage.
  (g)(1) Under such procedures and conditions as the Director 
may provide, and with the concurrence of the head of the 
employing agency, a phased retiree may elect to terminate 
phased retirement status and return to a full-time work 
schedule.
  (2) Upon entering a full-time work schedule based upon an 
election under paragraph (1), the phased retirement annuity of 
a phased retiree shall terminate.
  (3) After the termination of a phased retirement annuity 
under this subsection, the individual's rights under this 
subchapter shall be determined based on the law in effect at 
the time of any subsequent separation from service. For 
purposes of this subchapter or chapter 84, at time of the 
subsequent separation from service, the phased retirement 
period shall be treated as if it had been a period of part-time 
employment with the work schedule described in subsection 
(b)(2).
  (h) For purposes of section 8341--
          (1) the death of a phased retiree shall be deemed to 
        be the death in service of an employee; and
          (2) the phased retirement period shall be deemed to 
        have been a period of part-time employment with the 
        work schedule described in subsection (b)(2).
  (i) Employment of a phased retiree shall not be deemed to be 
part-time career employment, as defined in section 3401(2).
  (j) A phased retiree is not eligible to apply for an annuity 
under section 8337.
  (k) For purposes of section 8341(h)(4), retirement shall be 
deemed to occur on the date on which a phased retiree enters 
into full retirement status.
  (l) For purposes of sections 8343 and 8351, and subchapter 
III of chapter 84, a phased retiree shall be deemed to be an 
employee.
  (m) A phased retiree is not subject to section 8344.
  (n) For purposes of chapter 87, a phased retiree shall be 
deemed to be receiving basic pay at the rate of a full-time 
employee in the position to which the phased retiree is 
appointed.

           *       *       *       *       *       *       *

Sec. 8351. Participation in the Thrift Savings Plan

  (a) * * *
  (b)(1) * * *
  (2)(A) * * *

           *       *       *       *       *       *       *

  (D)(i) A qualified phased retiree may, in addition to any 
contributions otherwise allowable, contribute to the Thrift 
Savings Fund by direct transfer any part of any amount 
otherwise payable to such retiree for accumulated and current 
accrued annual or vacation leave under section 5551 or 5552.
  (ii) For purposes of this subparagraph, the term ``qualified 
phased retiree'' means a phased retiree (as defined by section 
8336a) who has completed at least 1 year of service as such a 
retiree.

           *       *       *       *       *       *       *

            CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM

                    SUBCHAPTER I--GENERAL PROVISIONS

Sec.
8401. Definitions.
     * * * * * * *

                      SUBCHAPTER II--BASIC ANNUITY

     * * * * * * *
8412a. Phased retirement.

           *       *       *       *       *       *       *

SUBCHAPTER II--BASIC ANNUITY

           *       *       *       *       *       *       *

Sec. 8412a. Phased retirement

  (a) For the purposes of this section--
          (1) the term ``composite retirement annuity'' means 
        the annuity computed when a phased retiree attains full 
        retirement status;
          (2) the term ``full retirement status'' means that a 
        phased retiree has ceased employment and is entitled, 
        upon application, to a composite retirement annuity;
          (3) the term ``phased employment'' means the less-
        than-full-time employment of a phased retiree;
          (4) the term ``phased retiree'' means a retirement-
        eligible employee who--
                  (A) makes an election under subsection (b); 
                and
                  (B) has not entered full retirement status;
          (5) the term ``phased retirement annuity'' means the 
        annuity payable under this section before full 
        retirement;
          (6) the term ``phased retirement percentage'' means 
        the percentage which, when added to the working 
        percentage for a phased retiree, produces a sum of 100 
        percent;
          (7) the term ``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;
          (8) the term ``phased retirement status'' means that 
        a phased retiree is concurrently employed in phased 
        employment and eligible to receive a phased retirement 
        annuity;
          (9) the term ``retirement-eligible employee''--
                  (A) means an individual who, if the 
                individual separated from the service, would 
                meet the requirements for retirement under 
                subsection (a) or (b) of section 8412; and
                  (B) does not include--
                          (i) an individual who, if the 
                        individual separated from the service, 
                        would meet the requirements for 
                        retirement under subsection (d) or (e) 
                        of section 8412; but
                          (ii) does not include an employee, 
                        described in section 8425, after the 
                        date as of which such employee is 
                        required to be separated from the 
                        service by reason of such section; and
          (10) the term ``working percentage'' means the 
        percentage of full-time employment equal to the 
        quotient obtained by dividing--
                  (A) the number of hours per pay period to be 
                worked by a phased retiree as scheduled in 
                accordance with subsection (b)(2); by
                  (B) the number of hours per pay period to be 
                worked by an employee serving in a comparable 
                position on a full-time basis.
  (b)(1) With the concurrence of the head of the employing 
agency, and under regulations promulgated by the Director, a 
retirement-eligible employee who has been employed on a full-
time basis for not less than the 3-year period ending on the 
date on which the retirement-eligible employee makes an 
election under this subsection may elect to enter phased 
retirement status.
  (2)(A) Subject to subparagraph (B), at the time of entering 
phased retirement status, a phased retiree shall be appointed 
to a position for which the working percentage is 50 percent.
  (B) The Director may, by regulation, provide for working 
percentages different from the percentage specified under 
subparagraph (A), which shall be not less than 20 percent and 
not more than 80 percent.
  (C) The working percentage for a phased retiree may not be 
changed during the phased retiree's phased retirement period.
  (D)(i) Not less than 20 percent of the hours to be worked by 
a phased retiree shall consist of mentoring.
  (ii) The Director may, by regulation, provide for exceptions 
to the requirement under clause (i).
  (iii) Clause (i) shall not apply to a phased retiree serving 
in the United States Postal Service. Nothing in this clause 
shall prevent the application of clause (i) or (ii) with 
respect to a phased retiree serving in the Postal Regulatory 
Commission.
  (3) A phased retiree--
          (A) may not be employed in more than one position at 
        any time; and
          (B) may transfer to another position in the same or a 
        different agency, if the transfer does not result in a 
        change in the working percentage.
  (4) A retirement-eligible employee may make only one election 
under this subsection during the retirement-eligible employee's 
lifetime.
  (5) A retirement-eligible employee who makes an election 
under this subsection may not make an election under section 
8420a.
  (c)(1) Except as otherwise provided under this subsection, 
the phased retirement annuity for a phased retiree is the 
product obtained by multiplying--
          (A) the amount of an annuity computed under section 
        8415 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 section 8412 
        (a) or (b); by
          (B) the phased retirement percentage for the phased 
        retiree.
  (2) A phased retirement annuity shall be paid in addition to 
the basic pay for the position to which a phased retiree is 
appointed during the phased employment.
  (3) A phased retirement annuity shall be adjusted in 
accordance with section 8462.
  (4)(A) A phased retirement annuity shall not be subject to 
reduction for any form of survivor annuity, shall not serve as 
the basis of the computation of any survivor annuity, and shall 
not be subject to any court order requiring a survivor annuity 
to be provided to any individual.
  (B) A phased retirement annuity shall be subject to a court 
order providing for division, allotment, assignment, execution, 
levy, attachment, garnishment, or other legal process on the 
same basis as other annuities.
  (5)(A) Any deposit, or election of an actuarial annuity 
reduction in lieu of a deposit, for military service or for 
creditable civilian service for which retirement deductions 
were not made or refunded, shall be made by a retirement-
eligible employee at or before the time the retirement-eligible 
employee enters phased retirement status. No such deposit may 
be made, or actuarial adjustment in lieu thereof elected, at 
the time a phased retiree enters full retirement status.
  (B) Notwithstanding subparagraph (A), if a phased retiree 
does not make such a deposit and dies in service as a phased 
retiree, a survivor of the phased retiree shall have the same 
right to make such deposit as would have been available had the 
employee not entered phased retirement status and died in 
service.
  (6) A phased retirement annuity shall commence on the date on 
which a phased retiree enters phased employment.
  (7) No unused sick leave credit may be used in the 
computation of the phased retirement annuity.
  (d) All basic pay not in excess of the full-time rate of pay 
for the position to which a phased retiree is appointed shall 
be deemed to be basic pay for purposes of sections 8422 and 
8423.
  (e) Under such procedures as the Director may prescribe, a 
phased retiree may elect to enter full retirement status at any 
time. Upon making such an election, a phased retiree shall be 
entitled to a composite retirement annuity.
  (f)(1) Except as provided otherwise under this subsection, a 
composite retirement annuity is a single annuity computed under 
regulations prescribed by the Director, equal to the sum of--
          (A) the amount of the phased retirement annuity as of 
        the date of full retirement, including any adjustments 
        made under section 8462; and
          (B) the product obtained by multiplying--
                  (i) the amount of an annuity computed under 
                section 8412 that would have been payable at 
                the time of full retirement if the individual 
                had not elected a phased retirement and as if 
                the individual was employed on a full-time 
                basis in the position occupied during the 
                phased retirement period and before any 
                adjustment to provide for a survivor annuity; 
                by
                  (ii) the working percentage.
  (2) After computing a composite retirement annuity under 
paragraph (1), the Director shall adjust the amount of the 
annuity for any applicable reductions for a survivor annuity.
  (3) A composite retirement annuity shall be adjusted in 
accordance with section 8462, except that subsection (c)(1) of 
that section shall not apply.
  (4) In computing a composite retirement annuity under 
paragraph (1)(B)(i), the unused sick leave to the credit of a 
phased retiree at the time of entry into full retirement status 
shall be adjusted by dividing the number of hours of unused 
sick leave by the working percentage.
  (g)(1) Under such procedures and conditions as the Director 
may provide, and with the concurrence of the head of employing 
agency, a phased retiree may elect to terminate phased 
retirement status and return to a full-time work schedule.
  (2) Upon entering a full-time work schedule based on an 
election under paragraph (1), the phased retirement annuity of 
a phased retiree shall terminate.
  (3) After termination of the phased retirement annuity under 
this subsection, the individual's rights under this chapter 
shall be determined based on the law in effect at the time of 
any subsequent separation from service. For purposes of this 
chapter, at the time of the subsequent separation from service, 
the phased retirement period shall be treated as if it had been 
a period of part-time employment with the work schedule 
described in subsection (b)(2).
  (h) For purposes of subchapter IV--
          (1) the death of a phased retiree shall be deemed to 
        be the death in service of an employee;
          (2) except for purposes of section 8442(b)(1)(A)(i), 
        the phased retirement period shall be deemed to have 
        been a period of part-time employment with the work 
        schedule described in subsection (b)(2) of this 
        section; and
          (3) for purposes of section 8442(b)(1)(A)(i), the 
        phased retiree shall be deemed to have been at the 
        full-time rate of pay for the position occupied.
  (i) Employment of a phased retiree shall not be deemed to be 
part-time career employment, as defined in section 3401(2).
  (j) A phased retiree is not eligible to receive an annuity 
supplement under section 8421.
  (k) For purposes of subchapter III, a phased retiree shall be 
deemed to be an employee.
  (l) For purposes of section 8445(d), retirement shall be 
deemed to occur on the date on which a phased retiree enters 
into full retirement status.
  (m) A phased retiree is not eligible to apply for an annuity 
under subchapter V.
  (n) A phased retiree is not subject to section 8468.
  (o) For purposes of chapter 87, a phased retiree shall be 
deemed to be receiving basic pay at the rate of a full-time 
employee in the position to which the phased retiree is 
appointed.

           *       *       *       *       *       *       *

SUBCHAPTER III--THRIFT SAVINGS PLAN

           *       *       *       *       *       *       *

Sec. 8432. Contributions

  (a)(1) * * *

           *       *       *       *       *       *       *

  (4)(A) A qualified phased retiree may, in addition to any 
contributions otherwise allowable, contribute to the Thrift 
Savings Fund by direct transfer any part of any amount 
otherwise payable to such retiree for accumulated and current 
accrued annual or vacation leave under section 5551 or 5552.
  (B) For purposes of this paragraph, the term ``qualified 
phased retiree'' means a phased retiree (as defined by section 
8412a) who has completed at least 1 year of service as such a 
retiree.

           *       *       *       *       *       *       *

                            ADDITIONAL VIEWS

    As co-sponsor, along with Chairman Darrell Issa and 
Subcommittee Chairman Dennis Ross, of H.R. 4363, the Federal 
Employee Phased Retirement Act, I strongly support this 
legislation, as ordered reported by the Committee on April 18, 
2012.
    In light of the many bills introduced in this Congress 
attacking the pay and benefits of our middle class federal 
workers, it is noteworthy that Committee members on both sides 
of the aisle were able to come together to support this pro-
federal workforce and good government bill. This bill is a win-
win for our dedicated civil servants and for the federal 
government and the American people. The legislation would allow 
our federal employees to continue to serve the public while 
they transition to retirement at the end of their careers. The 
federal government and the American public would also benefit 
through cost savings and the efficient transfer of knowledge 
from one generation of federal workers to another.
    I appreciate the Committee's bipartisan approval of the 
amendment I offered to allow phased retirees to deposit lump-
sum payments for unused annual or vacation leave into their 
Thrift Savings Plan accounts upon separation. However, I 
strongly believe that this option should be expanded and made 
available to all federal employees as well as members of our 
armed forces. I will continue to work with my colleagues to 
support and advance legislation that would help all federal 
civilian and military personnel achieve their retirement 
savings goals.
                                                  Stephen F. Lynch.

                                  
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