Author: Ray Kirk, Ph.D., Federal Benefits Specialist
Over the course of a career many Federal employees work a part-time schedule for some period of time. Are you considering working a part-time schedule? It could be for a few months, a few years, or your entire career. Have you wondered what effect a part-time schedule has on your retirement and insurance benefits?
This article will review the impacts of working part time on retirement eligibility requirements and insurance benefits while you are working. It will also discuss the retirement annuity calculation for someone who has part-time service and the insurance benefits in retirement. Part-time employment is considered to be regularly scheduled work from 16 to 32 hours per week (or between 32 and 64 hours per pay period in the case of a flexible or compressed work schedule). A person working under a Phased Retirement arrangement is not considered a part-time employee and has different benefits provisions.
WHILE YOU ARE WORKING
Retirement eligibility. Your eligibility to retire is not affected by working a part-time schedule. All of the retirement provisions have a time requirement known as Service Credit (e.g. Minimum Retirement Age and 30 years of service). Service Credit is calculated based on calendar time. For example, working half-time for a 7-month period gets you 7 months of Service Credit; the same as if you had worked full time for that period. The NITP e-News article Understanding Service Computation Dates – Not So Simple provides more information on understanding Service Credit.
Insurance benefits. You are eligible to enroll in a plan under the FEHB program. The Federal government pays a portion of the total cost of health insurance, and you pay the remainder. If you are part time, the government’s contributions are prorated based on your official tour of duty. This will result in you paying a higher premium than a full-time employee. For example, if you are a full-time employee enrolled in the Blue Cross Basic Family plan, the government would pay $714.23 per pay period, and you would pay $303.61 per pay period. If you were working a half-time schedule, the government would pay $357.12 per pay period, and you would pay $660.72 per pay period.
Part-time employees are eligible for leave accrual and life insurance coverage on a prorated basis. A half-time employee will receive 2 hours of Sick Leave per pay period and accrue Annual Leave at half the rate of a full-time employee. The maximum amount of Annual Leave you can carry over (240 hours for most employees) is not affected by your work schedule.
Since FEGLI life insurance options are based on your salary, working part time will reduce the amount of life insurance you can elect.
The dental, vision, Flexible Spending Account, and Federal Long Term Care Insurance programs are not affected by work schedule as they are fixed dollar amounts with no government contributions.
WHEN YOU RETIRE
Retirement benefits. Working part-time at any stage of your career will impact the calculation of your retirement benefits.
FERS Calculation. FERS annuity benefits are prorated based on total civilian work hours. First, the basic FERS annuity calculation formula is computed. The high-3 average salary calculation uses the full-time rates of basic pay for the position. In other words, the calculation uses “deemed” full-time rates; the rates the employee would have received if the service had been full-time. After the annuity is calculated, it is multiplied by a Proration Factor. The Proration Factor is calculated by taking the total actual time worked over your entire career and dividing it by the number of full-time hours that could have been worked for all periods of civilian and military service creditable under FERS. For example, if an employee worked half-time over their entire career, the Proration Factor would be 0.5. If a person worked half-time for two years during a 30-year career, the Proration Factor would be approximately 0.97. The Proration Factor would be the same if those 2 years of part-time were the first two years, years 11 and 12, or the last two years of the employee’s career.
CSRS Calculation.
If all of a CSRS employee’s part-time service is prior to April 7, 1986, it will have no effect on the annuity calculation.
The basic annuity of a CSRS employee who has any part-time service on or after April 7, 1986, is the sum of two separate computations.
- The high-3 average pay for the pre-April 7, 1986 service, is computed using any period of 3 consecutive years including service performed after April 6, 1986. This will produce the highest average pay based on actual rates paid. This high-3 average pay is used with the pre-April 7, 1986, Service Credit in the CSRS annuity formula.
- The post-April 6, 1986, portion of the annuity is calculated the same way as the FERS calculation using deemed rates of pay in the high-3 calculation and post-April 6, 1986, Service Credit. This portion of the annuity is prorated using the total actual time worked post-April 6, 1986, dividing it by the number of full-time hours that could have been worked post-April 6, 1986.
The components are combined to calculate the annuity.
Insurance benefits. Retired part-time employees are eligible to continue health, dental, vision, life insurance and Federal Long Term Care Insurance programs based on the same eligibility requirements as retired full-time employees. The government share of the health insurance premiums is not prorated for retired part-time employees. Retired part-time employees receive the same government contributions to their insurance benefits as full-time retirees.
Working part-time is a good option for many employees to help balance work and family life. The article gives you information you need to help decide if it is the best option for you.
Dr. Ray Kirk is a retired Federal employee with over 40 years of Federal Service, 34 years of which were with the Office of Personnel Management. He was the Manager of the Benefit Officers Training and Development in Retirement Services for the last 12 years of his career. Dr. Kirk was a Federal Benefits instructor for NITP from 2014 through 2022 and continues to be affiliated with NITP providing webinars, newsletters, and special projects.
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