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Phased retirement can be a good workforce planning tool. However, barriers make it virtually impossible to design any formal phased retirement programs that are compliant with current laws and regulations and workable for all companies within all industries. This article reviews two types of barriers. The first type is those arising from current laws and regulations, such as those applying to employee benefits, age discrimination, anticutback rules and nondiscrimination standards. The second type is issues within a company that impede implementation of formal phased retirement programs, such as the structure of jobs, the type of employees and the company organization. The author concludes that retail, financial services and health care industries are generally better suited for offering formal phased retirement arrangements than companies in other industries, and new regulations must replace current ones in order to provide employers with more flexibility in designing phased retirement programs.
INTRODUCTION
Phased retirement is broadly defined as a gradual reduction of a worker's hours and work effort as he or she approaches full retirement from a long-term employer. This is unlike traditional retirement in which a worker leaves the employer permanently and goes directly into full retirement. Many analysts argue that phased retirement programs benefit companies by helping preserve human capital and lower training costs. They also benefit workers, who find phased retirement a more satisfying alternative to going straight into full retirement, starting a new career with another employer, or remaining on the current job and continuing to meet its stressful demands. Phased retirement is also seen as good public policy if it encourages people to work longer and be more productive, which in turn leads to older Americans becoming better prepared financially when they are ready to stop working completely.
Although many employers and employees alike have expressed interest in phased retirement programs, only a few employers provide formal, broad arrangements (Watson Wyatt Worldwide, 2004). Researchers and policy analysts have already shown how current U.S. regulations make phased retirement difficult to implement and use along with other benefit programs, as will be explained in more detail below. However, regulations only partly explain the difficulty. Even if current regulations were not an issue, some employers would not implement broad phased retirement programs because they feel that...