Your Buyout Can Be Less Than $25,000

By on January 19, 2012 in Current Events, Retirement with 50 Comments

Your buyout can be less than $25,000.

The buyout (VSIP, or Voluntary Separation Incentive Pay) is payable for resignation/retirement from specified jobs within certain agencies only with approval from the Office of Personnel Management (OPM). It is calculated the same way severance pay is calculated, with an important difference: severance pay can be as much as a full year’s salary, while the VSIP money is capped at $25,000.

To understand how the buyout pay can be less than $25,000, you need to know how it is calculated. The basic amount is one week’s pay for each of the first 10 years of Federal civilian (not military) service, plus two weeks’ pay for each year above 10. Each 3 months = one quarter of a year’s payment, with service rounded down to the nearest quarter.

Age bonus. The age bonus is 10% of the basic amount for each full year over 40, with the same 3-month proration (i.e., 2.5% of the basic amount for each quarter).

Here are four examples for an employee making $60,000 annually (weekly = $1,149.97):

Age Years Basic Amount Age Bonus Total
26 4.25 $4,887 0 $4,887
36 14.5 $21,850 0 21,850
41 19.75 $33,924 $3,392 $25,000 MAX
46 24 $43,699 $26,219 $25,000 MAX

 

Note: one week’s pay is: (annual salary / 2,087) * 40

So, be advised: it is possible for the buyout to be less than $25,000. Clearly, once an employee hits 40, the number increases faster!

To get a fast, accurate calculation, go to fedbens.us and click no. 2 on the menu.

Ref: opm.gov/oca/pay/HTML/severance_pay.asp

© 2016 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.

About the Author

Robert Benson served 35 years in various Federal agencies, as both a management analyst and IT specialist. He is a graduate of Northwestern University.

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