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Federal Phased Retirement & How It Impacts Alternate Payees

In most divorces, retirement splits are relatively straightforward: Retirement accounts and benefits are split based on a calculation determined by the court or an agreement of both parties. For federal employees, the process is a little more involved.

And in 2014, the federal government threw another wrench into the retirement benefits split for federal employees with the introduction of phased retirement.

What Is Phased Retirement?

In some federal agencies, employees are eligible to receive half of their pension benefits while also working part-time and drawing a salary. 

This option isn’t available to every federal employee, and an employee must meet certain conditions to qualify for phased retirement, such as:

  • Meeting age and service level requirements, which vary slightly based on the agency
  • Be employed in participating government agencies
  • Be approved for phased retirement

A person on phased retirement works half-time, receiving regular salary for work done, and also receives monthly payouts of half their allotted pension benefits.

Phased retirement allows the federal worker to remain active in their position while still having more free time to volunteer, pursue passions, or travel. The agency benefits by maintaining the employee who has years of experience in the agency, allowing them to mentor and train younger, less experienced workers.

How Does Phased Retirement Affect Pension Benefits for the Employee?

For the federal employee, phased retirement allows them to draw half their monthly payout amount along with their salary.

For example, if a federal employee is entitled to $2,000 per month in federal benefits, and works half time at a job that would pay a monthly salary of $3,000, they receive $1,000 in pension benefits and $1,500 in pay for a total monthly payment of $2,500.

Once a retiree goes out of phased retirement and into full retirement, they are entitled to their full monthly pension payout.

How Does Phased Retirement Affect Pension Benefits for the Alternate Payee?

When you divorce but are still entitled to some portion of your former spouse’s retirement benefits, you are called an alternate payee.

Your pension payments under phased retirement mirror those of the employee. For example, if you are entitled to 50% of your former spouse’s pension benefits, and they are entitled to $2,000 per month in full retirement or $1,000 in phased retirement, you receive half that amount. 

If your former spouse is on phased retirement, you will receive $500 per month. Once your former spouse enters full retirement, that amount goes up to $1,000 per month.

Your former spouse’s income from working under phased retirement is still subject to the normal calculations if you receive child support or alimony.

Experienced Federal Pension Division Attorney in Maryland

Navigating the federal pension landscape during and after a divorce can be confusing. At the Law Office of Laura N. Venezia, we have years of experience working with the federal employees and their former spouses who live in the Washington, D.C., area. Our team can help explain the division of retirement benefits, as well as how phased retirement may impact the amount you receive. Schedule a consultation today!