Federal agencies are now competing for talent in a cut-throat seller’s market exacerbated by historically low unemployment and overheated worker demand, and that condition is likely to persist. To compound the problem, federal agencies are handcuffed to the past, competing for that talent from traditional sources—mostly younger, post-Millennial applicants for entry-level career positions. They’re also using tools (like pay and benefits), procedures and assumptions that are woefully out of date. And they are hampered by the relatively low opinion that many of those same younger recruits have of federal service, both generally and as a prospective career choice.
The net result is that too many agencies find themselves with key positions that remain unfilled for months (or in some cases, forever), or perhaps even worse, filled by unqualified or under-qualified job seekers, especially those that are just looking for one of those ‘cushy’ government jobs. Ironically, many of these vacancies are being fueled by a massive number of retirements from the very agencies—like the Internal Revenue Service, the Centers for Disease Control and Prevention, Social Security Administration, Federal Aviation Administration, Veterans Affairs Department and others—that are desperate to back-fill them. Yet, those very same retirees are also potential recruits, but for a civil service system that rejects them as a source of talent.
Why this irony? And more importantly, what can be done about it?
With the support of the Hewlett Foundation and the Democracy Fund, the Convergence Center for Policy Resolution brought together a group of civil service experts (including us) to answer these questions. And at the risk of stating the obvious, we concluded that most of those same agencies are forced—by that same obsolete federal civil service system—to neglect an increasingly large and well-qualified talent source: those of their own employees who are (or will soon become) retired, and who, if asked, would come back in a nanosecond, but for the financial penalty that they’d have to pay.
The Problem: The “Annuity Offset” Rule
These former public servants could be and should be a significant source of talent, coming as they do with a proven public service motivation and the requisite basic (and in many cases, advanced) skills for successful post-retirement employment. But most agencies do not even consider them a recruiting source—except of course, as individual part-time mentors, or worse, high-priced contractors—because of an archaic, mid-20th century rule that actively discourages them from returning to work: The so-called “annuity offset” rule.
By law, the pay of federal retirees who come back to work as civil servants is decreased by the amount of their annuity, often reducing their net pay down to a relatively meager amount (in some cases, below minimum wage), and substantially less than what the annuitants could earn as reemployed contractors or elsewhere in the private sector.
For example, if a federal retiree earning a $50,000 annuity under one of the government’s retirement systems goes back to work for an agency for a $75,000 annual paycheck, his or her new government salary is reduced by that $50,000 annuity. Thus, the reemployed annuitant gets paid just $25,000, below the minimum wage for federal employees, for doing a job that ordinarily pays $75,000.
Unless it is waived (see below), this offset applies regardless of the retiree’s reemployed capacity, whether it’s in a job that closely resembles the one they held immediately before retirement, or one that is completely different, even if it’s in a different agency. And to belabor the point, nothing stops those formers from coming back as contractors or consultants, with costs that may be higher and are certainly far less visible, but that’s another matter altogether.
It’s no wonder that federal retirees don’t usually come back as re-employed annuitants. It’s also why agencies don’t recruit them. Conversely, it’s just too easy for federal retirees to stay home, or if they do want to continue to work for Uncle Sam, to come back as a much higher priced contractor or consultant. But if federal agencies are to take full advantage of this talent source, the biases and disincentives that discourage them must be eliminated, or at least mitigated.
Blanket Exemptions, Reserve Corps and Waivers
So, what’s the answer? The Defense Department found one way. It confronted this problem years ago (primarily from a retiring military standpoint) and upon petitioning Congress for relief, got it in spades. Now, the entire Defense Department is exempted by law from the annuity offset. And it hasn’t resulted in widespread abuses, in part because the…
Read More: Federal Retirees Could Be a Great Talent Source, If Only It Were Easier to Bring