Flexible Work Arrangements, Phased Retirement, and Self-Employment

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Flextime, part-time, flex-place, telecommuting, and job-sharing are examples of alternative work arrangements that appeal to workers of all ages. Part-time and part-year employment arrangements can make it easier for younger and older workers to combine paid work and caregiving responsibilities. These arrangements may also enable people with health problems or disabilities to remain at work.

Retiree reemployment programs and phased- or partial-retirement programs can help extend working lives. The Pension Protection Act of 2006 allows employers to make pension distributions to people age 62 and older who continue to work. The Internal Revenue Service has proposed regulations to establish standards for bona fide phased-retirement programs. But removing impediments to phased retirement may require changes to the tax code and other laws, such as the Employee Retirement Income Security Act and the Age Discrimination in Employment Act. Also, workers must be fully informed of the effect of phased-retirement programs on eligibility for and accrual of health and pension benefits.

The lack of adequate and affordable health insurance, which most workers and their dependents obtain through their employers, can impede workplace flexibility, discourage entrepreneurship, and thwart labor-force mobility, particularly among older workers. The changes made by the Patient Protection and Affordable Care Act should provide additional options for individuals to purchase affordable health insurance.

Many older workers are interested in becoming self-employed after retiring. In fact 15 percent of baby boomers say they expect to go into business for themselves when they retire. Yet moving into self-employment at an older age can be risky, especially if it involves investing savings or pension distributions. Older workers need assistance as well as greater access to credit if their entry into self-employment is to succeed.

Flexible Work Arrangements, Phased Retirement, and Self-Employment: Policy

Alternative work arrangements

Public and private employers should provide more flexible work options, such as alternative work schedules, flextime, telecommuting, job-sharing, bridge jobs, phased retirement with prorated compensation and benefits, and retiree reemployment programs.

Legislation relating to alternative work arrangements must be monitored to ensure that workers’ rights are protected.

Phased or partial retirement

Barriers to the adoption and acceptance of phased-retirement programs should be eliminated.

Employers should adopt phased-retirement programs that encourage employees to stay in the workforce beyond the time they would normally plan to retire and that protect the adequacy of their pension and retirement benefits until they do fully retire.

Phased-retirement options must be voluntary for employees, be designed to protect workers’ benefits both during phased retirement and after full retirement, and not undermine the long-term retirement security of workers who choose to participate. Employers must fully inform workers about the potential impact of phased retirement on benefit arrangements.

Public and private agencies should educate employers about successful partial-retirement programs (involving such options as job-sharing, part-time work, and progressive reduction of work hours) and about how to resolve legal issues, and reconcile these programs with company policies.


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Federal and state policymakers should work to eliminate barriers to self-employment, which include lack of access to capital, technical assistance, and training.

The Small Business Administration and Departments of Labor and Commerce should coordinate programs designed to assist individuals in their efforts to become self-employed.