Army Materiel Command

Congress is debating proposed legislation that would encourage more early retirements during the reduction of civilian employees at the Defense Department. This briefing report studies the retirements experienced by the Army Materiel Command as part of its 1990 reduction in force, during which specific authority was given to allow early retirements. GAO (1) determines the extent to which early retirements may have helped avoid involuntary separations in that instance, (2) identifies the main factors that differentiated employees who took early retirements in that reduction in force from those who did not, and (3) obtains insights on retirement-eligible employees' reactions to hypothetical retirement incentives. GAO also obtained the views of employees already eligible for standard retirement at the time of the Army Materiel Command's reduction in force.

GAO found that: (1) a combination of events, including the Persian Gulf War, caused AMC to curtail its original plans to reduce its work force through 4,144 involuntary separations, 7,771 demotions, and 1,254 voluntary early retirements; (2) by October 1990, AMC had reduced its work force through 940 early retirements, 181 involuntary separations, and 1,882 attrition actions such as voluntary separation, standard retirement, and death; (3) although 11 percent of the AMC work force was eligible for early retirement, the 2 percent that chose to do so would have provided little assistance in avoiding the originally planned large number of involuntary separations; (4) financial security, funds expected from the sale of a home, retirement law expectations, health concerns, family member pressure, and job satisfaction were the most influential factors in employees' decisions to retire; (5) such external factors as the economic recession, the Persian Gulf War buildup, and speculation about more favorable retirement benefits may have discouraged some employees from taking early retirement; (6) incentives that could have encouraged eligible employees to take early retirement included decreased annuity penalties for those retiring before age 55, salary bonuses, and pay for unused sick leave; and (7) those employees who took early retirement stated that they would not have done so if an alternative annuity option had been eliminated or if cost-of-living adjustments had been delayed.