STRS Ohio Phased Retirement Program

What Phased Retirement Looks Like

Phased retirement programs at Ohio public universities let faculty step down gradually instead of retiring outright. You reduce your Full-Time Equivalency — teaching fewer courses, attending fewer committees, maintaining a reduced research load — while continuing to earn a salary, accumulate STRS Ohio service credit, and keep your employer-provided benefits.

These programs are voluntary and institution-specific. Ohio State, Ohio University, the University of Akron, and several community colleges offer their own versions with different eligibility criteria, FTE reduction schedules, and participation windows. Some allow a phased period of one to three years. Others have more rigid timelines. The university sets the terms; STRS Ohio is not involved in designing or approving phased retirement agreements.

The FAS Calculation Risk

For Defined Benefit Plan members, the most significant financial risk of phased retirement is its effect on your Final Average Salary. Your FAS is the average of your five highest years of Ohio public earnings. If your reduced FTE drops your salary below what you earned in prior full-time years, the phased years may not enter the five-highest calculation at all — which is fine. But if the phased years displace one of your higher-earning years because you did not have five full years of high earnings before entering the program, your FAS shrinks and your pension shrinks with it.

Run the math before you sign anything. List your annual earnings for the past ten years. Identify which five years will form your FAS at full-time salary. Then model what happens if you phase for two or three years — do any phased-year earnings creep into the top five? If the answer is yes, you need to know the dollar impact on your monthly pension before agreeing.

STRS Ohio counselors can generate benefit estimates showing your projected pension under different retirement dates and salary scenarios. Request one estimate assuming you retire at full-time salary, and another assuming you complete two years of phased retirement first. The difference tells you the lifetime cost of phasing.

Service Credit During Phased Retirement

Phased retirement reduces your FTE and can reduce your STRS Ohio service credit. For college and university employees whose credit is calculated using FTE, credit is based on workload averaged over two semesters; a full year requires an average workload above 66% of FTE. This can slow your progress toward eligibility thresholds and reduce the total service credit multiplied by 2.2% in your benefit formula.

If you are at 30 years of credit and need 32 for an unreduced benefit, a two-year phased period at 50% FTE under the FTE method would add about one year of credit — leaving you at 31 years at the end of the phased period instead of 32. You would still need to work an additional year or purchase credit to reach the unreduced threshold.

Combined Plan members face a proportional reduction on both sides: the DB portion accrues less service credit, and the DC portion receives lower contributions because contributions are salary-based.

Health Care Eligibility Timing

For service retirements effective on or after Aug. 1, 2023, STRS Ohio health care coverage requires at least 20 years of total service credit. The minimum is 15 years for retirements effective Jan. 1, 2004, through July 1, 2023; before Jan. 1, 2004, there is no minimum for coverage, but 15 years are required for a subsidy. If you are close to the applicable threshold when you enter phased retirement, the slower credit accrual rate could push your health care eligibility date further out.

During the phased period itself, your employer typically continues to provide health insurance — that is one of the benefits of phasing instead of retiring outright. But once you fully retire at the end of the phased period, you transition to STRS Ohio health care if eligible, or to COBRA or marketplace coverage if you fall short of the applicable threshold.

ARP service by itself does not qualify a faculty member for STRS Ohio health care. A separate residual STRS Ohio DB or Combined Plan benefit may qualify if the member meets the requirements for that benefit. ARP members phasing into retirement should confirm whether they have a separate STRS Ohio benefit and a health care plan for the post-retirement years.

Who Benefits Most From Phasing

Phased retirement makes the most financial sense for faculty who have already locked in their FAS — meaning their five highest earning years are already behind them and further full-time work would not improve the calculation. In that case, phasing lets you ease your workload, maintain benefits, and continue earning salary without sacrificing pension income.

Faculty who are still in their peak earning years, or who need more service credit to clear an eligibility threshold, should weigh the convenience of phased retirement against the pension income it costs. Continuing at full FTE for one or two more years might produce a higher lifetime pension than phasing provides in work-life flexibility.

The STRS Ohio Retirement Guide includes worksheets for comparing full-time retirement against phased retirement scenarios — modeling the FAS impact, service credit accrual difference, and total lifetime pension value under each path.

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