The most recent of these studies estimated that only 11 percent of  men and 6 percent of women in the Early Baby Boomer cohort gradually  retired from their full-time career jobs. Formal Phased Retirement Programs Are Not Common, with Larger Employers and Those with Technical and Professional Workforces More Likely to Offer Them

		Phased Retirement Programs Are Not as Common as Informal Arrangements, and the Number of Programs Remained Steady in Recent Years

While no nationally representative data on the prevalence of phased  retirement exist, one large study we reviewed and experts we interviewed  indicated that formal phased retirement programs are relatively  uncommon. Nine of the 16 experts we  interviewed explained that industries with skilled workers or with labor  shortages have motivation to offer formal phased retirement programs in  part because their workers are hard to replace. Designing Phased Retirement Programs Can Be Challenging, According to Experts, Employers, and Publications, but Some Employers Report Benefits in Doing So

		Key Cited Challenges to Designing a Phased Retirement Program Include Compliance with IRC Nondiscrimination Provisions and Employment-related Discrimination Laws

Employers face potential challenges in complying with various laws and  regulations when designing a phased retirement program, according to  experts and employers we interviewed and the publications we  reviewed. Of large employers, 71 percent agreed that “regulatory  complexities and ambiguities involving federal tax and age discrimination  laws impact their organization’s ability to offer a phased retirement  program,” according to a small MetLife study of employers with 1,000 or  more workers. These provisions  generally prohibit a qualified plan from discriminating in favor of highly  compensated employees. However, health care coverage was provided for both full-time and  phasing workers by all eight of the employers we interviewed who offered  phased retirement. Appendix I: Objectives, Scope, and Methodology

This report examines (1) the recent trends in the labor force participation  of older workers, (2) the extent to which employers have adopted phased  retirement programs and what type of employers offer them, and (3) what  challenges and benefits, if any, exist to the design and operation of  phased retirement programs. To describe the recent trends in labor force participation of older workers,  we analyzed nationally representative data from the Current Population  Survey (CPS) and the Health and Retirement Study (HRS), two datasets  with information about the labor force participation of older workers. For example, we used HRS to estimate the percentage  of older workers that can reduce their work hours, that plan to reduce  their work hours as they transition to retirement, that would like to reduce  hours even if their pay is also reduced, and the percentage that are partly  retired. For example, it asks about workers’ plans for retirement and  work patterns. To inform all sections of this report, we reviewed relevant federal laws  and regulations and conducted a literature review regarding the  prevalence of phased retirement programs in the United States. We also interviewed 16 experts on the topic of phased retirement. We conducted semi-structured interviews with 9 employers  that offered or considered offering phased retirement programs.
Why GAO Did This Study

As the large baby boomer generation retires, the workforce will lose much of their knowledge and experience. Encouraging phased retirement, in which older workers reduce their work hours with their current employer to transition into retirement, has been cited by retirement experts as one way to mitigate this loss. GAO was asked to review the work patterns of older Americans and phased retirement programs.
In this report, GAO examines (1) recent trends in the labor force participation of older workers, (2) the extent to which employers have adopted phased retirement programs and what type of employers offer them, and (3) what challenges and benefits, if any, exist in designing and operating phased retirement programs.
GAO analyzed data from two nationally representative surveys, the Health and Retirement Study (2004-2014) and the Current Population Survey (2005-2016); reviewed relevant federal laws and regulations; conducted a literature review; and interviewed 16 experts on retirement and 9 employers who offer or considered offering phased retirement programs. While phased retirement programs exist in both the private sector and government, this report focuses on private sector programs.

What GAO Found

Participation of older workers in the labor market has increased in the last decade, according to GAO analysis. Further, most individuals ages 61 to 66 who were still working maintained a full-time work schedule. However, although about a quarter of workers in this age group had planned to reduce hours as they transitioned to retirement, fewer than 15 percent subsequently reported being partly retired or gradually retiring from their career jobs.
While no nationally representative data on the prevalence of phased retirement exist, GAO's review of studies and interviews with retirement experts indicate that formal phased retirement programs are relatively uncommon. Of those that are offered, they are more common among employers with larger or technical and professional workforces, such as education, consulting, and high-tech, according to studies GAO reviewed (see table). Nine of 16 experts GAO interviewed explained that industries with skilled workers or with labor shortages are motivated to offer phased retirement because their workers are hard to replace.
Formal phased retirement programs present design and operational challenges for employers, including compliance with provisions and laws related to discrimination, according to publications GAO reviewed and experts and employers GAO interviewed. For example, in one study GAO reviewed, 71 percent of large employers agreed that regulatory complexities and ambiguities involving federal tax and age discrimination laws impact their ability to offer phased retirement programs. Experts and employers said programs that target highly skilled workers, who are often highly paid, could violate rules that allow for favorable tax treatment that generally prohibit qualified pension plans from favoring highly compensated employees. Despite these challenges, most employers GAO interviewed who reported having phased retirement programs found them beneficial. For example, eight of the nine employers GAO interviewed said they were able to address various design and operational challenges and cited program benefits related to worker retention, knowledge transfer, transition into retirement, and workforce planning.

What GAO Recommends

GAO is not making recommendations in this report.