HR29 Voluntary Phased Retirement Program

POLICY'S INITIAL DATE: May 22, 1997 
THIS VERSION EFFECTIVE: January 14, 2025

Contents:

• Purpose
• Eligibility
• Parameters
• Application/Agreement
• Approval
• Cross References

PURPOSE:

Voluntary Phased Retirement enhances succession planning and is intended to meet the needs of a full-time faculty or staff employee who would like to transition into full-time retirement while the campus, college, or administrative unit is able to achieve its objectives. The college, campus, or administrative unit must evaluate the proposal and determine if it meets the needs of both the employee and department. If approved by the college, campus, or administrative unit, a full-time faculty or staff employee will have a gradual work commitment reduction over a defined period of time at a corresponding reduced compensation level.  

ELIGIBILITY:

Full-time faculty or staff employees must meet one of the following criteria: 

1. Meets the definition of retirement under policy HR54 by the end of the Voluntary Phased Retirement, or
2. Meets the age requirement for full Social Security retirement benefits, as defined by the Social Security Administration, by the end of the Voluntary Phased Retirement and has a minimum of five (5) years of continuous full-time employment prior to beginning the Voluntary Phased Retirement. 

PARAMETERS:

Voluntary Phased Retirement  must follow these parameters:

1. The salary of each full-time employee participating in the Voluntary Phased Retirement is prorated based on the employee's FTE. Employees who accrue time will continue to accumulate sick, vacation, and holiday time according to their reduced work commitment.
2. Participants in the Penn State Alternate Retirement Plan (TIAA) may begin accessing retirement accumulations prior to full retirement. A balance of 1% must be maintained in an individual's retirement account during phased retirement. Participants should consult with a personal tax advisor to consider the tax implications (if any) of accessing retirement funds. Participants in the State Employees Retirement System (SERS) or the Pennsylvania State Employee Retirement System (PSERS) cannot withdraw retirement funds until full retirement commences.
3. Participants will continue to receive employer contributions to their retirement plan based on their reduced service and salary. Those who are members of the SERS and PSERS will earn reduced service credit in proportion to the percent reduction in work commitment. Penn State Alternate Retirement Plan (TIAA) participant contributions will be based on their reduced salary.
4. If an employee's application is approved, the employee can participate in a Voluntary Phased Retirement between six (6) months minimum and thirty-six (36) months maximum. If an employee is approved to participate in a Voluntary Phased Retirement for less than thirty-six (36) months, a one-time extension may be granted to extend the Voluntary Phased Retirement up to the maximum thirty-six (36) months. No employee may be on a Voluntary Phased Retirement for a total period longer than thirty-six (36) months.  
5. The program is to be operated within the approved budget for each college, campus, or administrative unit. Strategic planning and the department's financial and academic capacity to support the request should be strongly considered.
6. If a proposal is not approved, the employee may submit a request in a subsequent year.
7. Once approved, the employee's agreement to participate is irrevocable and may not be rescinded; however, an employee on a phased retirement may request to accelerate the retirement date. Participation in a phased retirement does not guarantee continued employment. Employees remain subject to all University policies and practices, and the University may terminate a phased retirement, consistent with other University policies and practices applicable to the employee's position.
8. Healthcare, dental, vision, and accidental death & dismemberment (AD&D) insurances are retained during the phased retirement at the regular, employee contribution rate. In addition, optional age-graded life-insurance, short-term disability (STD), and long-term disability (LTD) coverage will be continued based on the reduced salary. 

APPLICATION/AGREEMENT:

After preliminary approval from their manager and Unit Human Resources, the applicant must complete a Phased Retirement Application and Agreement. The application must include:

• Proposed start date;
• Length of the phased retirement;
• The percent of reduction in the work responsibilities in each year of the phased retirement and the corresponding reduction in compensation;
• The type of work assignments in each period phased retirement; and
• The perceived benefit of the program to the college, campus, or administrative unit. 

APPROVAL:

All Voluntary Phased Retirement applications must be approved by the manager, unit leadership, dean, or chancellor. 

For academic and academic administrator appointments, the application must be submitted for final approval to the Senior Vice Provost. 

All phased retirement programs must be submitted to Penn State Benefits for final eligibility approval and documentation purposes. 

CROSS REFERENCES:

HR54 - Continuation of Group Insurance after Age 60, Age 65, and after Retirement or Death 

Social Security Retirement Benefits 

HR29 Phased Retirement Application, Agreement, and Written Proposal