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Larry Kupper was 68 when he shifted into half-time work for half-time pay at the University of North Carolina at Chapel Hill. Kupper, an alumni distinguished professor of biostatistics, had started his teaching career there 37 years earlier, and he was ready for a change.

“I was ready, at this time in my life, to do some other things, and I got tired of doing some of the things I had been doing for over 30 years,” he said. Now Kupper is spending his increased free time working on his seventh book and learning to cook.

While still an active faculty member, he was able to turn over running a program that helps graduate students get doctorates in biostatistics to a younger colleague. “It means a lot to her, and I was getting tired of it,” he said. “I think it’s a win-win situation.”

That’s a phrase that comes up often in descriptions of phased retirement. But if it is a win-win situation, why has this option been so slow to take off?

Despite provisions in the Pension Protection Act of 2006 that were supposed to make it easier to offer phased retirement—which allows workers to cut back hours without sacrificing pension benefits—relatively few companies have adopted it.

“Phased retirement is currently akin to motherhood and apple pie—win-win for everybody,” said Allen Steinberg, a principal and senior consultant in the human resources firm Hewitt Associates’ retirement and financial management practice. “That said, it is relevant only for employers who are seeing potential shortages of experienced workers.”

Hewitt recently surveyed more than 140 midsize to large employers and found that only 5 percent have formal phased retirement programs. While not many consider it a major need now, three times as many said it might be valuable in five years as the exodus of boomers from the workplace increases.

One company facing that future now is Public Service Enterprise Group (PSEG), an energy company headquartered in Newark, N.J. After a proposed takeover of PSEG by Exelon Corp. was abandoned in the wake of regulatory concerns, the company found itself with a shortage of talent in the executive ranks because so many officers had left in anticipation of the merger or after it was called off.

“We were looking for officers, and upper management was looking for ways to retain skills and experience,” said Charles L. Miracola, PSEG’s manager of corporate benefits. So the company launched a phased retirement program, which allows employees to work up to 24 hours a week for a year and still draw retirement benefits. Miracola said that the program has helped with transitions and with training replacements. The company also allows retired workers to be rehired, usually for projects, without sacrificing benefits. So far the program applies only to nonunion employees.

The Hewitt survey mentioned what companies said were several possible impediments to adopting phased retirement plans, including legal and regulatory barriers, company culture, lack of support from senior leadership, and manager resistance. But at PSEG, management supported the plan to help it rebuild its executive ranks, Miracola said.

Phased retirement at the University of North Carolina has been in place since 1998, said Kitty McCullom, vice president for human resources and university benefits officer for UNC. About 698 faculty members have taken advantage of the plan. About 20 to 30 percent of those eligible for retirement opt instead for the reduced workload each year.

Colleges and universities have been early adopters of phased retirement. After the passage of the Pension Protection Act in 2006, it looked as if they might soon have company. The Pension Protection Act for the first time allowed employers to let workers 62 and older to take distributions from traditional pensions and to continue working. For instance, a worker who was entitled to guaranteed monthly pension payments could draw a portion of the benefit while continuing to work reduced hours.

After the passage of the PPA, the IRS requested public comment about the implementation of the new law, which left at least some employers unsure what the rules would be and unwilling to adopt phased retirement until they become clearer. “The IRS merely asking the question ‘How should this be administered?’ raised questions in the minds of employers,” said Bill Miner, consulting actuary with Watson Wyatt. “If the IRS is asking how to administer the PPA, how are plan sponsors to know how to administer it?”

Constructing a workable and fair approach to phased retirement is harder than it seems, according to Chai Feldblum, a Georgetown University law professor who is codirector of Workplace Flexibility 2010, part of the Alfred A. Sloan Foundation’s National Initiative on Workplace Flexibility. For one thing, she said, there are concerns that it might be used not to keep people working longer but to cut their hours and pay, despite existing protections against age discrimination.

And not everyone is convinced that phased retirement is a good idea. Alicia H. Munnell, director of the Center for Retirement Research at Boston College (CRR), is not a fan, as you might expect from someone whose recently published book, cowritten by colleague Steven A. Sass, is titled Working Longer: The Solution to the Retirement Income Challenge.

Munnell points to a recent National Bureau of Economic Research working paper that reported that while some people who otherwise would have retired continue working through a phased retirement, others (who would have kept working full time rather than retiring) reduced their hours. As a result, phased retirement may not result in a net gain in workforce participation, despite the fact that it’s been promoted as a solution to the decline in the workforce as more boomers start retiring.

A CRR study found “no evidence that workers who retire gradually are happier than those who retire cold turkey.” Other previously identified factors, such as the worker’s control of the retirement decision, were more important, according to the study.

Munnell and Sass advocate for working longer, if possible. They suggest that postponing retirement by two to four years could help workers secure a more financially secure retirement, both by increasing Social Security benefits and allowing more time to save for retirement.

“The big goal should be keeping people working longer and educating people on the skills and strengths of older workers rather than fighting this battle,” Munnell said.

Martha M. Hamilton, formerly with the Washington Post, writes a regular column, Your Financial Future, for AARP Bulletin Today. If you have decided to delay retirement because of the current economic crisis and are willing to be quoted by name in a column, please e-mail Bulletinmoney@aarp.org and put Martha Hamilton in the subject line.