Making Sense of a Mess: Phased Retirement Policies and Practices in the United States

Abstract

SUMMARY Phased retirement programs represent one important and attractive way to increase flexibility for older workers, while simultaneously benefiting organizations that are worried about the loss of staff and expertise that will occur as the Baby Boom generation moves into retirement. Yet phased retirement advocates have often been baffled by the various intersecting employment laws adopted to protect older workers and their pensions. We describe the legal and regulatory barriers related to supplementing part-time wages with defined benefit pension benefits, as well as other legal concerns. Recent regulatory developments have clarified when phased retirement (with pension supplements) is permissible and what would constitute a compliant phased retirement program for the Internal Revenue Service. However, there are still some regulatory and practical questions that make it difficult to predict whether phased retirement will be widely adopted in the near future.