Older Workers: Federal Agencies Face Challenges, but Have Opportunities to Hire and Retain Experienced Employees
Published: 2008-04-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The federal workforce, like the nation's workforce as a whole, is aging. As experienced employees retire, they leave behind critical gaps in leadership and institutional knowledge, increasing the challenges government agencies face in maintaining a skilled workforce. We and others have emphasized the need to hire and retain older workers as one part of a comprehensive strategy to address expected labor shortages. The Office of Personnel Management (OPM), as the government's central personnel management agency, is responsible for helping agencies manage their human capital. The Chairman of the Senate Special Committee on Aging asked GAO to discuss (1) the age and retirement eligibility trends of the current federal workforce, (2) the strategies federal agencies are using to hire and retain older workers, and (3) our observations on how these strategies position federal agencies to engage and retain older workers. To address these objectives, we analyzed demographic data from OPM's Central Personnel Data File, and interviewed officials at OPM and selected federal agencies. OPM is taking action to address past recommendations related to better assisting agencies in using personnel flexibilities. GAO is making no new recommendations at this time.
section_title: What GAO Found
paragraphs: Governmentwide, about one-third of federal career employees on board at the end of fiscal year 2007 are eligible to retire between now and 2012. Many of these workers are concentrated in certain agencies. For example, nearly half of employees on board at the end of fiscal year 2007 at the Departments of Housing and Urban Development and Transportation, and at the Agency for International Development and the Small Business Administration, will be eligible to retire by 2012. The proportion of workers eligible to retire is also expected to be high in certain occupations, including those considered mission critical, such as air traffic controllers and customs and border protection agents, where more than half of the employees will be eligible at that time. Retirement eligibility will be especially pronounced among the agencies' executives and supervisors--over 60 percent of career executives are projected to be eligible by 2012. Federal agencies have a variety of flexibilities at their disposal to help them recruit and retain older workers, including using temporary hires to address short-term needs and rehiring retired federal workers. However, we found that agencies have not always been aware of the full range of available flexibilities. One agency we reviewed--the Social Security Administration--is particularly at risk of losing a substantial portion of its workforce to retirement and has used a variety of strategies to hire and retain older workers, including offering recruitment, retention, and relocation bonuses. Other agencies, such as the Environmental Protection Agency, have developed alternative approaches to attract experienced workers to meet their mission needs. Moreover, certain governmentwide flexibilities, such as flexible and part-time schedules, while not focused directly toward older workers, are particularly attractive to them. Overall, the federal government already has a number of characteristics that appeal to all employees and is making progress toward becoming a model employer of older, experienced workers. For example, federal employees can telecommute, work flexible hours, and receive health and retirement benefits that older workers find especially attractive. OPM and Congress are taking steps to minimize some challenges that agencies face, but opportunities for improvement remain. For example, OPM has developed online decision support tools to provide agencies with guidance on how to use available hiring flexibilities and retention strategies. Congress has legislation pending that incorporates OPM's proposals to enhance agencies' ability to hire and retain older workers by giving agencies the authority, without OPM approval, to rehire retirees without penalty. Agencies have a shared responsibility to pursue the full range of flexibilities and authorities available and to communicate this information within their own agencies. Collectively, these measures will help make federal agencies more competitive in the labor market for all demographic groups.

section_title: Letter
paragraphs: Like the nation’s workforce as a whole, the federal workforce is aging and  ever larger proportions are nearing retirement eligibility. When they retire,  these older, experienced workers may leave behind critical gaps in  leadership, skills, and institutional knowledge. At the same time, the rate  of growth for the pool of younger workers is declining, and by 2025 overall  labor force growth is expected to be only one-fifth of what it is today and  much less than the projected growth in the number of retirees. As a result,  the federal government and other employers may face increased  competition in hiring skilled workers, and unless they develop effective  retention strategies, employers will need to look more aggressively for  workers with the right skills to meet their needs.
Historically, the federal government has faced challenges hiring and  retaining talented workers in key fields, and the looming retirement wave  in federal agencies will only exacerbate these challenges. Older,  experienced workers represent a large and underutilized national  resource. Many experts maintain that older workers offer competitive  advantages to employers because they often possess management and  organizational skills that can be used in a variety of settings, and they  bring to the job knowledge, experience, and productive work habits. In  addition, today’s older workers are better educated and healthier, and are  expected to live longer than previous generations. As the nation’s largest  employer, the federal government is well positioned to serve as a role  model for other employers. As with private sector employers, efforts  directed at recruiting, engaging, and retaining a diverse workforce,  including older workers, may serve to make the federal government a  more competitive and productive employer overall.
Because of this committee’s continuing interest in older workers, we are  especially pleased to be here today to discuss work that we have  conducted at your request. In this work, we examined federal government  efforts to tap the pool of older workers to meet its workforce needs. As  requested, our testimony today, will discuss (1) the age and retirement  eligibility trends of the current federal workforce; (2) the strategies federal  agencies are using to recruit, hire, and retain older workers; and (3) our  observations on how these strategies position federal agencies to engage  and retain older workers.
To describe demographic trends relating to the retirement eligibility and  aging of the federal workforce, we analyzed information on the 24 Chief  Financial Officer Act (CFO) agencies from the Office of Personnel  Management’s (OPM) human resource reporting system, the Central  Personnel Data File (CPDF). Based on our previous work, we have  determined that the CPDF is sufficiently reliable for the informational  purpose of this testimony. In reviewing strategies federal agencies use to  recruit, hire, and retain older workers, we interviewed officials in selected  agencies, including the Departments of Agriculture, Housing and Urban  Development (HUD), Labor, and State, as well as the Internal Revenue  Service (IRS), Environmental Protection Agency (EPA), Nuclear  Regulatory Commission (NRC), and the Social Security Administration  (SSA). We chose these agencies because they had relatively large  proportions of employees who were eligible to retire or because they were  implementing different approaches to hiring and retaining older workers.  In addition, we interviewed officials at OPM to obtain their perspective on  government retirement trends, and how agencies can address them. For  the purposes of this testimony, we define an older worker as an employee  aged 55 or over. We conducted our work from November 2007 to April  2008 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence we obtained provides a reasonable basis for our findings  and conclusions. See appendix I for a detailed discussion of our scope and  methodology.
In summary, the large proportion of federal workers who are eligible to  retire now and will be in the near future presents challenges and  opportunities for federal agencies. While the proportion of older workers  eligible to retire varies across agencies, four agencies—Small Business  Administration, the Agency for International Development, HUD, and the  Department of Transportation—are well above the governmentwide  average of 33 percent. Proportions of workers eligible to retire are  projected to be especially high in certain occupations and in key  leadership positions—64 percent of career executives are projected to be  eligible by 2012. These trends underscore the importance of strategic  workforce planning. As the government’s human capital leader, OPM is  responsible for helping agencies develop their human capital management  strategies. Federal agencies have a range of flexibilities and authorities  available that they may use to hire, engage, and retain workers. While only  one of these flexibilities is largely focused on older workers—one that  allows agencies to rehire retirees without offsetting the annuity—many,  such as flexible and part time work schedules, are particularly appealing  to older workers. One agency we reviewed—the Social Security  Administration—is particularly at risk of losing a substantial portion of its  workforce—at a time when it will experience unprecedented growth in  demand for services. To deal with these losses, SSA has largely focused on  using governmentwide authorities, including paying recruitment and  retention bonuses for hard-to-fill positions and providing workplace  flexibilities, such as flexible work schedules and alternative work sites.  Other federal agencies are developing alternative approaches to hire and  engage older workers. For example, the State Department maintains  databases with information on retirees’ skills and experience that it uses  to identify individuals who may be able to assist when special needs arise,  such as to provide tsunami relief for Indonesia. Overall, the federal  government is making progress toward becoming a model employer of  older, experienced workers. While there remain opportunities for  improvement, OPM and the Congress are taking action to minimize the  challenges agencies face in hiring and retaining older, experienced  workers.
subsections: section_title: Background
paragraphs: The percentage of older workers—those age 55 and older—is growing  faster than that of any other age group, and they are expected to live and  work longer than past generations. Labor force participation for this  cohort has grown from about 31 percent in 1998 to 38 percent in 2007. In  contrast, labor force participation of workers under age 55 has declined  slightly. (See fig. 1.)
Many factors influence workers’ retirement and employment decisions,  including retirement eligibility rules and benefits, an individual’s health  status and occupation, the availability of health insurance, personal  preference, and the employment status of a spouse. The availability of  suitable employment, including part-time work or flexible work  arrangements, may also affect the retirement and employment choices of  older workers.
As the government’s human capital leader, OPM is responsible for helping  agencies develop their human capital management systems and holding  them accountable for effective human capital management practices. One  such practice is strategic workforce planning, which addresses two critical  needs: (1) aligning an organization’s human capital program with its  current and emerging mission and programmatic goals, and (2) developing  long-term strategies for acquiring, developing, and retaining staff to  achieve these goals. In developing these strategies, we have reported that  leading organizations go beyond a succession-planning approach that  focuses on simply replacing individuals. Rather they engage in broad,  integrated succession planning and management efforts directed to  strengthening both current and future organizational capacity. In  implementing its personnel policies, the federal government is required to  uphold federal merit system principles in recruiting, engaging, and  retaining employees. Among other provisions, the merit system principles  require agencies to recruit and select candidates based on fair and open  competition, as well as treat employees fairly and equitably. Federal  agencies can recruit skilled or experienced workers, many of whom tend  to be older, to fill positions requiring demonstrated expertise.
OPM is also responsible for administering retirement, health benefits, and  other insurance services to government employees, annuitants, and  beneficiaries. It develops implementing regulations when Congress makes  new options available to federal employees and often takes the lead in  advocating for new legislative options.
We and others have highlighted the need to hire and retain older workers  to address the challenges associated with an aging workforce. In so doing,  we have called upon the federal government to assume a leadership role in  developing strategies to recruit and retain older workers. At our  recommendation, Labor convened a task force composed of senior  representatives from nine federal agencies and issued its first report in  February of this year. The report provides information on strategies to  support the employment of older workers, strategies for businesses to use  that leverage the skills of an aging labor pool, individual opportunities for  employment of older workers, and legal and regulatory issues associated  with work and retirement. While the task force’s focus was the private  sector, some of the strategies it identified are relevant for federal agencies  as well, for example, providing flexible work arrangements and  customized employment options that include alternative work schedules  and part time work.
section_title: The Growing Number of Retirement Eligible Employees in the Federal Workforce Highlight the Importance of Strategic Workforce Planning
paragraphs: As we and other organizations have previously reported, the federal  workforce is aging, with an increasing number of employees eligible to  retire. Many of the workers who are eligible to retire in the 24 CFO  agencies are in executive and supervisory positions, as well as in mission- critical occupations. These trends point to the importance of strategic  workforce planning to help agencies forecast, with greater precision, who  might retire, when they might retire, and the impact of their retirement on  an agency’s mission, and, using this information, develop appropriate  strategies to address workforce gaps.
The percentage of older workers and workers nearing retirement eligibility  varies across the federal government, with some agencies employing more  such workers than others. For example, as shown in figure 2, the  percentage of career federal employees in the 24 CFO agencies age 55 or  older ranged from about 9 percent at the Department of Justice to about  38 percent at the Small Business Administration and Department of  Housing and Urban Development in fiscal year 2007.
Importantly, about than one-third of federal workers will be eligible to  retire over the next 5 years. Thirty-three percent of federal career  employees on board as of the end of fiscal year 2007 will be eligible to  retire during fiscal years 2008 through 2012. In comparison, about 20  percent of federal career employees on board as of the end of fiscal year  1997 were projected to be retirement-eligible during fiscal years 1998  through 2002.
Many workers projected to become retirement eligible by 2012 are  concentrated in certain agencies. As figure 3 shows, the agency rates range  from a low of 20 percent at the Department of Homeland Security (DHS)  to a high of 46 percent at four agencies—the Agency for International  Development (AID), the Department of Housing and Urban Development,  the Small Business Administration (SBA), and the Department of  Transportation (Transportation).
Estimated retirement eligibility rates will also likely vary at the component  level—that is, by bureau or unit. Thus, even those agencies that have  relatively low overall percentages of retirement eligible employees may  have components that have higher percentages of retirement-eligible staff,  which, in turn could affect the accomplishment of mission tasks and  strategic goals for agency components and for the agency as a whole.
Certain occupations have particularly high rates of workers eligible to  retire. As shown in figure 4, 50 percent or more of the workers in 24 of the  315 occupations with 500 or more staff we reviewed are eligible to retire  by 2012. Several of these occupations, such as air traffic controllers,  customs and border protection interdiction agents, and administrative law  judges are considered mission critical. Federal law requires mandatory  retirement at specified ages for some occupations, such as air traffic  controllers who must retire at age 56.
Retirement eligibility will be especially pronounced among the agencies’  executives and supervisors (see fig. 5). Of the approximately 7,200 career  executives as of the end of fiscal year 2007, 64 percent are projected to be  retirement eligible by 2012, up from 41 percent in 2008. For supervisors  who are not career executives, 45 percent will be eligible to retire by 2012.
Although most federal employees do not retire immediately upon  becoming eligible, the increasing number of employees becoming  retirement eligible in the near future points to the need for agencies to  examine how these trends will affect them. In so doing, agencies should  take into account location, occupation, and grade level of potential  retirees, and develop appropriate succession planning strategies, which  may include retaining older, experienced workers, to address the likely  impact. At the same time, it will be important for agencies to consider  their organization’s strategic goals and the critical skills and competencies  needed to meet future program outcomes, and to develop strategies to  address any gaps in the number, skills, and competencies needed to  achieve those outcomes.
section_title: Federal Agencies Have a Variety of Options Available to Hire and Retain Older Workers, but Some Federal Practices Make It Difficult to Use These Options
paragraphs: Federal agencies have a range of flexibilities at their disposal to help them  engage and retain mission critical staff, including older, experienced  workers. SSA, an agency that stands to lose a relatively large proportion of  its experienced workforce in the upcoming retirement wave, is using many  of the available governmentwide flexibilities to address workforce  shortages. Some other federal agencies have developed alternative  approaches that facilitate hiring and retaining older workers to meet their  workforce needs. Despite the availability of recruitment, retention, and  other flexibilities, agencies still face human capital challenges. In our past  work, we found that agencies are not always able to make full use of  available flexibilities, in part because they did not fully understand them.
subsections: section_title: OPM’s Human Capital Policies and Guidance Are Aimed at Attracting and Retaining a Diverse Workforce
paragraphs: As the government’s human capital leader, OPM sets human capital  policies for federal agencies. In many cases, OPM serves as the gatekeeper  by approving or disapproving an agency’s request to use some hiring  authorities or other flexibilities. Other authorities do not require OPM’s  approval. While only one of the available flexibilities is largely focused on  older workers—dual compensation waivers—many, such as flexible and  part time work, are particularly appealing to older workers.  OPM does not  specifically target older workers in its policies. Instead, efforts are focused  on workers who possess the right skills and experience to meet agencies’  workforce needs, without regard to age.
Governmentwide Hiring Authorities. Under existing rules and regulations,  agencies have the authority to use a number of different approaches to  hire workers, including older workers, without obtaining OPM approval.  Among other approaches, they include using  temporary appointments for short-term needs;  temporary assignees from state and local governments, colleges and  universities, Indian tribal governments, and qualified not-for-profit  agencies under the Intergovernmental Personnel Act (IPA);    commercial recruiting firms and nonprofit employment firms;   consultants for temporary or intermittent employment;   contractual arrangements: commercial temporary help for brief periods  of time, and contracts for services, as long as the contracts follow  federal procurement regulations.
Agencies can also use additional hiring authorities by obtaining OPM’s  approval or by notifying OPM on a case-by-case basis of their intent. These  include the following:    Dual compensation waivers to rehire federal retirees—OPM may grant  waivers allowing agencies to fill positions with rehired federal  annuitants without offsetting the salaries by the amount of the  annuities. Agencies can request waivers on a case-by-case basis for  positions that are extremely difficult to fill or for emergencies or other  unusual circumstances. Agencies can also request from OPM a  delegation of authority to grant waivers for emergencies or other  unusual circumstances. These waivers by their nature are largely for  older workers;    Special authority to hire for positions in contracting— agencies can  rehire federal annuitants to fill positions in contracting without being  required to offset the salaries. Agencies are required only to notify and  submit their hiring plans to OPM;    On-the-spot hiring without competition—this may be used in  circumstances where (1) public notice has been given and (2) OPM has  determined there is a severe shortage of candidates or a critical hiring  need, such as in certain medical or information security occupations,  or occupations requiring fluency in Middle Eastern languages;    Veterans’ recruitment appointment—agencies may hire certain  veterans without competition to fill positions up to the GS-11 level or  for disabled veterans at any level;    Enhanced annual leave computation—agencies may credit relevant  private sector experience when computing annual leave amounts.
Flexible Schedules and Workplaces. Flexible schedules and workplaces are  often extremely important to older workers. For example, some research  indicates older workers want to set their own hours and to be able to take  time off to care for relatives when needed. In addition, older workers  nearing retirement may prefer a part-time schedule, for example, as a means  to retire gradually. Federal agencies have work schedule flexibilities that they  can provide to their workers without prior approval from OPM. These include    Part-time schedules—allow employees to work on a part-time basis;  however, part-time work late in a career may result in a lower  retirement annuity and may affect other benefits.
Flexible work schedules—allow full-time or part-time employees to  determine their hours of work within established parameters or modify  the typical work schedule of 8 hours a day, 5 days per week by, for  example, permitting schedules of 10 hours per day, 4 days per week.
Alternative work sites—allow employees to work from home or  outside the traditional office.
Compensation Flexibilities. Agencies also have authority to provide  additional compensation to employees. These include    giving recruitment, relocation, and retention incentives to employees; raising the pay rate of critical positions in an agency (requires OPM  approval after consultation with OMB);    providing certain eligible physicians allowances of up to $30,000 per  year. This flexibility requires OMB approval; and    using special rates, premium pay, and other compensation flexibilities  to recruit and retain specified health care employees, under a  delegation agreement with OPM.
section_title: A Case Study: How One Agency Uses Available Flexibilities to Address a Looming Retirement Wave
paragraphs: One of the agencies we reviewed—the Social Security Administration  (SSA)—is particularly at risk of losing a substantial portion of its  workforce at a time when it will experience unprecedented growth in  demand for its services. SSA faces looming shortages particularly in some  mission critical positions, despite enhancing its human capital planning  efforts. The agency is experiencing service delays, even at current staffing  levels. For example, SSA had over 750,000 disability claims awaiting a  decision at the hearing level at the end of January 2008, leading to an  average waiting time in fiscal year 2008 of almost 500 days. These backlogs  could increase in the future, given SSA’s demographic profile. Indeed,  according to SSA’s data, about 40 percent of its current workforce will be  eligible to retire by 2012, and by 2017 that proportion will grow to more  than half. The prospects for hiring new employees to replace retirees over  this timeframe remains unclear. According to SSA officials, while the fiscal  year 2008 budget provided sufficient funding to allow SSA to replace all of  the employees that leave—and to add additional employees in some  areas—budgetary constraints have prevented the agency from hiring  enough new workers in the past and future hiring will depend upon the  resources available. Even when SSA can hire, the agency faces stiff  competition from the private sector, especially for jobs in the accounting,  legal, and information technology fields.
The potential impact of retirements varies across the agency and will  affect occupations SSA deems critical. By 2012, the proportion of those  eligible to retire will generally range from 25 percent to 59 percent across  such occupations. However, the proportion of administrative law judges  eligible to retire is far higher—about 86 percent will be eligible by 2012  and nearly all by 2017. Moreover, SSA stands to lose a substantial portion  of its leadership staff. Of its 138 Senior Executive Service (SES) members,  62 percent are now eligible to retire and nearly 80 percent will be eligible  by 2012. Of the over 6,000 supervisors, nearly 39 percent are currently  eligible to retire and 57 percent could retire by 2012.
SSA has increasingly used information technology solutions in an effort to  improve its human capital management. For example, to better understand  where to place its human capital emphasis, SSA has developed an  approach that uses historical data to project future retirements. The model  projects who is likely to retire, and SSA uses these projections to estimate  gaps in mission-critical positions and to identify regional and headquarters  components most affected. With these estimates the agency develops  action plans focused on recruiting and hiring, retention, and staff  development. SSA has also developed user-friendly automated tools to  help job applicants complete the applications process. This system keeps  both applicants and managers advised of where the application is in the  process.
SSA has used a variety of strategies to hire and retain older workers, some  of which include the human capital flexibilities available to all federal  agencies. For example, SSA offers recruitment, relocation, and retention  bonuses to individuals with needed skills and considers an employee’s  private sector experience when computing annual leave status. The  agency also offers workplace flexibilities, such as alternative work sites  and flexible work schedules, seminars on dependent care for elderly  family members and children, and learning opportunities such as  midcareer and pre-retirement seminars. In addition, SSA provides the  options of a phased retirement program—allowing employees to work on  a part time basis during the years immediately prior to retirement—and a  trial retirement program—allowing workers to return to work within a  year of retiring if they repay the annuity they’ve received. However, SSA  officials told us that the programs have been rarely used because of the  financial penalty workers would face.
Under a delegation of authority from OPM, SSA has used dual  compensation waivers to hire experienced retirees to fill staffing shortages  in critical areas when these shortages constituted an emergency. From  November 2000 through December 2006, SSA used this authority to rehire  nearly 1,300 federal annuitants who were knowledgeable and proficient at  processing complex, difficult workloads and who needed little or no  training to fill mission critical workforce gaps. This waiver authority  expired in 2006 and was not renewed. However, SSA has been granted a  waiver to reemploy administrative law judges to help reduce the disability  hearings backlog. In addition, SSA was granted a waiver to rehire federal  annuitants to provide relief in areas affected by hurricanes Katrina and  Rita. SSA officials reported that when they have been allowed to use dual  compensation waivers, their experiences were extremely positive.
Beyond using existing flexibilities, SSA has developed recruitment efforts  that reach out to a broader pool of candidates, some of whom are older  workers. For example, SSA began recruiting retired military and disabled  veterans in 2002 because of its commitment to helping veterans. SSA is  also beginning to reach out to older workers in order to achieve its  diversity goal of attracting a multigenerational workforce. These steps  have included developing recruiting material featuring images of older and  younger workers.
section_title: Other Federal Agencies Have Developed Alternative Approaches to Hire and Engage Older Workers to Meet Their Workforce Needs
paragraphs: In addition to SSA, we interviewed officials in several other agencies and  learned that some have developed their own approaches to hiring and  engaging older workers.
Identifying and recruiting retirees with critical skills by using  technology. The Department of State has developed two databases to  match interested Foreign Service and Civil Service retirees with short- term or intermittent job assignments that require their skill sets or  experiences. One database—the Retirement Network, or RNet— contains a variety of information, including individuals’ job  experiences, foreign language abilities, special skills, preferred work  schedule, and favored job locations. To identify individuals with  specific skill sets, officials match information from RNet with another  database that organizes and reports all available and upcoming short- term job assignments. For instance, in 2004, the agency identified  current and retired employees familiar with Sumatra’s culture and  language and sent many of them to Indonesia to help with the tsunami  relief efforts. According to officials, this technology has allowed them  to identify individuals with specialized skills and specific job  experience within hours. Before these systems were in place, the  search for specific individuals would have taken days or weeks, and  even then, the list of individuals would have been incomplete. Because  different personnel rules apply to Foreign Service and Civil Service  positions, the agency typically brings Civil Service retirees on as  contractors—nonfederal employees without any reduction to earnings  or annuities—and may hire Foreign Service retirees as federal  employees who may earn their full salaries and annuities.
Hiring older workers through nonfederal approaches. The  Environmental Protection Agency (EPA) has designed a program that  places older workers (55 years and over) in administrative and  technical support positions within EPA and other federal and state  environmental agencies nationwide. Instead of hiring older workers  directly into the government as federal employees, EPA has  cooperative agreements with nonprofit organizations to recruit, hire,  and pay older workers. Under these agreements, workers are  considered program enrollees, not federal employees. EPA’s Senior  Environmental Employment (SEE) program started as a pilot project in  the late 1970s, and was authorized by the Environmental Programs  Assistance Act in 1984. According to EPA, many SEE enrollees come  from long careers in business and government service, offer valuable  knowledge, and often serve as mentors to younger coworkers.  Depending on their skills and experience, program enrollees’ wages  vary, starting at $6.92 per hour and peaking at $17.29 per hour. Using  the SEE program as a model, the Department of Agriculture’s Natural  Resources Conservation Service (NRCS) recently developed a pilot  project called the Agriculture Conservation Enrollees/Seniors (ACES)  program. Officials from both EPA and NRCS told us that their  programs are crucial in helping agencies meet workload demands and  providing older workers with valuable job opportunities.
Partnering with private firms to hire retired workers. In partnership  with IBM and the Partnership for Public Service, the Department of the  Treasury is participating in a pilot project that aims to match the talent  and interest of IBM retirees and employees nearing retirement with  Treasury’s mission-critical staffing needs. Working together, the three  organizations are designing a program that intends to send specific  Treasury job opportunities to IBM employees with matching skill sets  and experience; help create streamlined hiring processes; provide  career transition support, such as employee benefits counseling and  networking events; and encourage flexible work arrangements.  Officials are developing the pilot project within existing  governmentwide flexibilities that do not require special authority from  OPM. As one official suggested, designing such a project may reveal the  extent to which existing federal flexibilities allow new ways of hiring  older workers.
Engaging older workers through mentoring. Three of the agencies we  spoke with are in the beginning stages of formalizing mentoring  programs, recognizing that mentoring relationships help pass down  knowledge to less experienced workers as well as engage older  workers. According to one official at NRC, fostering mentoring  relationships is essential for his agency. Not only do these relationships  help to transfer knowledge to less experienced workers, they also help  senior-level staff build strong professional relationships with junior  employees.
section_title: Several Challenges Exist to Hiring and Retaining Older Workers in the Federal Government
paragraphs: Despite the availability of recruitment, retention, and other flexibilities,  agencies still face human capital challenges. In our past work, we found  that agencies were not always able to make full use of available  flexibilities, in part because they did not fully understand the range of  flexibilities at their disposal and did not always educate managers and  employees on the availability and use of them. In addition, we found that  inadequate funding and weak strategic human capital planning contributed  to the limited use of these flexibilities. Moreover, OPM did not take full  advantage of its ability to share information about when, where, and how  the broad range of flexibilities are being used and should be used to help  agencies meet their human capital management needs.
Several federal hiring procedures can also pose challenges and make it  difficult for the federal government to compete with private sector employers.  Cumbersome federal hiring procedures can make it difficult for older  workers, as well as all other applicants, to get a federal job. Recently, the  Partnership for Public Service reported that older workers face a number of  challenges to getting a federal job. Many of the issues they raise affect  applicants of all age groups. For example, for many of the jobs open to the  public, too little time was allowed between the time the job was announced  and the deadline for submitting a complete application. For this and other  reasons, a majority of older workers they surveyed thought that applying for a  federal job is difficult. To address the cumbersome and complicated federal  hiring process, the report recommended that federal agencies publicize  federal jobs beyond the internet, make federal job announcements and the  application process more user-friendly, and keep applicants informed of their  application status.
Furthermore, the dual compensation rule, which requires annuitants’  salaries to be offset by the amount of the annuities they receive, can create  a financial disincentive for retirees wishing to return to federal service.  Unless federal agencies receive authority to grant waivers of this rule,  retired federal workers—unlike private sector or military retirees—would  be working for reduced rates of pay. Other rules make it difficult to use  flexibilities. For example, federal employees close to retirement may face  reductions in the monthly retirement benefit if they choose to work part- time—or use a phased retirement approach—near the end of their careers.
section_title: Federal Employment Has a Number of Attributes Attractive to Older Workers
paragraphs: Overall, the federal government is making progress toward becoming a  model employer of older, experienced workers. Research has identified  characteristics of work environments that older workers value that can  serve as a model for federal agencies as they seek to hire and retain older  workers. While there remain opportunities for improvement, OPM and  Congress are taking action to minimize the challenges faced in hiring and  retaining older, experienced workers.
subsections: section_title: OPM and Congress Are Taking Steps to Minimize Challenges
paragraphs: As we discussed earlier, individual agencies have strategies that they can  use to address some challenges to employing older workers, but actions  from OPM, as the government’s human capital leader, and Congress play  pivotal roles in changing the landscape of rules regarding federal  employment.
OPM has taken steps to provide agencies with guidance on how to use  available flexibilities and authorities. For example, in the fall of 2005, OPM  put a hiring flexibilities decision support tool online to assist agencies in  assessing which flexibilities would best meet their needs. This Hiring  Flexibilities Resource Center provides in-depth information on a variety of  flexibilities, including Direct Hire and Excepted Service. In January 2008,  OPM updated its handbook on federal flexibilities and authorities, also  online, which provides more information on both recruiting and retention  strategies agencies can use to promote the positive aspects of the federal  government. Responding to past findings about the length of time it takes  to hire new employees, OPM has established a strategic goal to improve  recruitment and retention, including faster hiring, hiring more veterans,  rehiring annuitants, and faster application processing.
OPM has also encouraged federal agencies to consider a broad spectrum  of employees as they seek to meet workforce needs. According to OPM,  federal human capital managers are facing increasing competition in  attracting and retaining talent. To meet this challenge, OPM has developed  a new approach, called the Career Patterns initiative, for bringing the next  generation of employees into federal positions. In its Career Patterns  guidance to agencies, OPM identifies, among other things, scenarios that  describe the particular characteristics of 10 types of individuals, including  students, new professionals, experienced professionals, and retirees who  could help broaden the pool of potential employees for federal jobs.
OPM has also recently proposed legislation to Congress that would  enhance agencies’ ability to hire and retain older workers. One proposal  would give agencies the authority to grant dual compensation waivers  without having to obtain OPM approval. The proposal calls for a yearly  and lifetime limitation on how many hours an individual can be  reemployed. A second proposal would increase the ability of employees to  work on a part time basis during their pre-retirement years by changing  the way the CSRS annuities based on part time services are computed.
Congress has taken action to address the retirement risks in selected  occupations. For example, in 2006, Congress enacted legislation allowing  federal agencies to hire federal retirees to fill acquisition-related positions  without requiring annuity offset. The authority to use this provision  expires on December 31, 2011. Agencies are required to consult with OPM  and OMB in developing their plans for reemploying annuitants in  acquisition-related positions and to submit their plans to OPM. OPM  officials indicated that they have reviewed and approved 9 agencies’ plans  for consistency with the statutory criteria for reemploying annuitants in  those positions. In addition, bills incorporating OPM’s proposals related to  dual compensation waivers and part time employment are currently  pending in Congress.
section_title: Federal Employment Already Has a Number of Characteristics Appealing to Older Workers and Other Employees
paragraphs: Although the availability of flexibilities generally varies by agency,  agencies already have the authority to offer a number of the flexibilities  and practices older workers find appealing in an employer. For example,  AARP—one of the largest interest groups for individuals age 50 and  older—developed criteria to evaluate an organization’s performance in  recruiting, engaging, and retaining this cohort and has, since 2001, used  these criteria to identify the best employers for workers over 50. Features  of these criteria, as described by AARP, overlap with many of the  flexibilities that federal employment offers. Their availability and usage in  the federal government are shown in table 1.
One area where the government is particularly strong is the availability of  health benefits. Federal agencies offer health benefits and pay a sizable  portion of the cost. Health insurance may be an especially attractive  recruitment and retention tool to older workers since employees generally  need only 5 years of federal service with health insurance while employed  to carry that benefit into retirement. The federal government also offers  retirement benefits and life insurance, and provides the opportunity for  employees to purchase long-term care insurance.
In other areas, agencies generally have the authority to offer a particular  practice, but their actual usage varies by agency depending on the  agency’s needs, the nature of the work and other factors. For example,  with respect to alternative work arrangements, the federal government  offers a number of programs that help employees balance their personal  and professional responsibilities, including telecommuting, part time  employment, and flexible schedules.
section_title: Concluding Observations
paragraphs: A looming retirement wave could result in a possible “brain drain” for  federal agencies unless they employ effective succession planning  strategies—strategies that include hiring younger workers as well as  retaining older workers who possess needed talents and skills and who  can share these talents and skills with the next generation. Importantly,  the government already has a number of tools in its human capital tool kit  that provide agencies with flexibility they need to recruit and retain older  workers. Moreover, federal employment offers a range of benefits and  employment flexibilities, such as the availability of part-time employment  that can make these jobs particularly attractive to older workers, as well  as all demographic groups.
Still, while the federal government is making progress toward becoming a  model employer of older workers, opportunities for improvement remain.  First, our demographic analysis shows that while the federal workforce is  aging, and an increasing number of employees will become eligible for  retirement in the coming years, these trends will have varying degrees of  impact within particular agencies. As a result, it will be important for  agencies to fully understand and forecast the implications of these trends  so they can implement timely and appropriate succession strategies.  Second, as certain federal agencies have developed alternative approaches  to hire and engage older workers, it will be important for agencies to share  lessons learned from these practices governmentwide. And third, despite  the availability of employment flexibilities and practices that allow  employees to balance their professional and personal responsibilities,  individual agencies do not always take advantage of them.
Consequently, it is incumbent upon OPM to continue to work with federal  agencies to help ensure they have (1) the flexibilities they need to attract  and retain a diverse workforce that includes older workers; (2) the  awareness of these flexibilities, as well as guidance and technical  assistance needed to implement them; and (3) mechanisms to share best  practices and lessons learned in attracting and retaining older workers.  Becoming a model employer is a shared responsibility and it will be  important for agencies to, among other actions, take advantage of  available flexibilities and guidance on their use and communicate this  information throughout the agency. Collectively, these measures will help  make federal agencies more competitive in the labor market for all  demographic groups.
Mr. Chairman, Ranking Member, and Members of the Committee, this  concludes our prepared statement. We would be pleased to respond to any  questions that you may have.
section_title: Contact and Staff Acknowledgments
paragraphs: For questions regarding this testimony, please call Barbara D. Bovbjerg,  Director, Education, Workforce, and Income Security at 202-512-7215 or  Robert N. Goldenkoff, Director, Strategic Issues at 202-512-6806. Other  individuals making key contributions to this statement include Dianne J.  M. Blank and Belva M. Martin, Assistant Directors; Nicholas Alexander;  Jessica Botsford; Clifton G. Douglas, Jr.; Karin Fangman; Cheri L.  Harrington; Isabella Johnson; Mary Y. Martin;  Rachael C. Valliere;  Kathleen D. White; and Greg Wilmoth.
section_title: Appendix I: Scope and Methodology
paragraphs: Our objectives were to describe (1) the age and retirement eligibility  trends of the current federal workforce; (2) the strategies federal agencies  are using to recruit, hire, and retain older workers; and (3) our  observations on how these strategies position federal agencies to engage  and retain older workers.
subsections: section_title: Demographic Trends
paragraphs: To describe demographic trends relating to the retirement eligibility and  aging of the federal workforce, we analyzed information on the 24 CFO  agencies from OPM’s human resource reporting system, the Central  Personnel Data File (CPDF). We analyzed data on the age, retirement  eligibility, occupations, projected retirement rates, and other  characteristics of the career federal workforce. We used the following  variables: agency, occupation, date of birth, service computation date, pay  plan/grade, and supervisory status. All these variables were 97 percent or  more reliable. Using the CPDF information, we analyzed the age  distribution of career federal employees at CFO agencies by age groupings  (under 40, 40-54, and 55 and over). We also analyzed the percentage of  career federal employees on board at the end of fiscal year 2007, who  would be eligible to retire from fiscal years 2008 to 2012, and the  percentage of workers eligible to retire in occupations where the  retirement rates exceeded the governmentwide average. As a proxy for  those occupations that may be at risk due to high retirement eligibility  rates, we selected occupations with 500 or more employees as of the end  of fiscal year 2007 that exceeded the governmentwide rate of 33 percent by  50 percent or more. For this report, we defined older workers as those 55  and older.
section_title: Strategies Available to Federal Agencies to Hire and Retain Older Workers
paragraphs: To address this objective, we reviewed strategies available to federal  agencies to hire and retain older workers through governmentwide hiring  authorities and other flexible arrangements, we interviewed officials at  OPM and other selected federal agencies, including Labor, and we  reviewed previous GAO work relating to older workers and federal human  capital strategies. We also reviewed relevant laws, literature on hiring and  retaining older workers, and documents on federal human capital  flexibilities. As a case study, we selected the Social Security  Administration (SSA), to describe the strategies that one federal agency  has taken to hire and retain older workers. We selected SSA because it is  at high risk of losing a large proportion of mission-critical employees and  because it risks losing these employees at the same time the need for its  services will peak.
We interviewed human capital officers at selected agencies to collect such  information as:  the extent to which agency officials think they will be affected by  retirements over the next decade;  the information agencies have used and presently use to guide the  identification of the probable effects of retirement and how agencies  determine appropriate courses of action;    strategies that have been taken or will be taken regarding recruiting,  hiring, and retaining older workers; and    characteristics and scope of these strategies, including human capital  authorities or special legislation regarding flexibilities that are available  to them.
To identify and describe alternative strategies, we performed a literature  search and conducted interviews with government and private sector  experts. The strategies that we describe were developed by the  Departments of Agriculture, HUD, and State, the Internal Revenue Service  (IRS), Environmental Protection Agency (EPA), and Nuclear Regulatory  Commission (NRC). We selected these strategies because they were  developed internally to met specific agency needs but could be used  elsewhere in the government.
section_title: Observations on How Strategies Position Federal Agencies to Engage and Retain Older Workers
paragraphs: To address this objective, we reviewed previous GAO work and conducted  interviews with federal officials at OPM and selected agencies and experts  at AARP and other organizations that serve older individuals to determine  how the federal government is progressing toward becoming a model  employer. We chose the AARP criteria for selecting the best employers for  workers over age 50 to compare to characteristics of federal employment  because of its exclusive focus on older workers.
We conducted our work from November 2007 to April 2008 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on our  audit objectives.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.