Buyouts, Early Outs and Federal Employees

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By on April 20, 2017 in Agency News, Human Resources with 0 Comments

fersImage of a green road sign with two arrows going in different directions with word 'buyout' underneath

For those who follow news regarding the federal workforce, news of a buyout and a continuing hiring freeze at the Environmental Protection Agency (EPA) is not a big surprise.

EPA has been cited as a target for changing priorities within the federal government with the Obama administration departing and the Trump administration assuming the reins of government.

A memo distributed to EPA employees this week (below) referenced a directive from the Office of Management and Budget (OMB) on plans for reforming the federal government. Some agencies, including EPA, are likely to be reducing the size of their federal workforce

Employees at the agency have some time to prepare for change. Reducing a substantial number of employees in a federal agency does not happen quickly. Some employees will start seeking employment elsewhere. Some will retire. Some will probably take a buyout.

Ultimately, there may be a reduction in force (RIF) at the agency to change the composition of the workforce to reflect the change in agency priorities. Planning and implementing a RIF takes considerable time and effort. A RIF will not occur at EPA in the very near future.

The odds of having a long career at EPA are diminished. But, for some employees searching for a silver lining in recent events at the agency, there is the possibility of a buyout or an early retirement in your future.

Buyouts at EPA

The federal government’s term for a buyout is a “Voluntary Separation Incentive Payment (VSIP)”.  The amount of a buyout is the lesser of $25,000 or the amount of severance pay to which an employee would be entitled based on their length of service. Normally the $25,000 is the smaller amount.

The memo to EPA employees states:

The OMB guidance also requires all agencies to begin taking immediate actions on near-term workforce reductions. In light of this guidance, we will begin the steps necessary to initiate an early out/buy out (VERA.VSIP) program. Our goal its to complete this program by the end of FY 2017.

So, if the agency is successful, this aspect of reducing the workforce at EPA will be completed by the end of the fiscal year.

There are strings attached to a buyout. An employee who accepts a buyout will have to re-pay the amount if that person returns to the government either as an employee or on a personal services contract within five years of receiving the buyout.

How Much Money in a Federal Buyout?

Some readers are under the impression that the amount of a buyout has been increased to $40,000 instead of $25,000. This impression stems from legislation passed in December 2016.

The Secretary of Defense has been given legislative authority to spend up to $40,000 (instead of $25,000) as Voluntary Separation Incentive Pay. The authority expires on September 30, 2018.

The possibility of a $40,000 buyout currently applies to employees in the Department of Defense (DoD). This is because the National Defense Authorization Act, which passed in December 2016, provides authority to that agency to approve buyouts of up to $40,000. The authorization for the DoD buyout amount is in effect until September 30, 2018. (See New Buyout Max at DoD; Will Other Agencies Follow?)

By the way, this is the first change in the VSIP amount since 1993.

This authorization for a higher amount only applies to employees in DoD. Limiting the buyout amount to DoD only could change in budget negotiations in Congress on the fiscal year 2018 budget or it could be approved by Congress at an earlier time.

No doubt, the negotiations on federal spending will be hot and tense this year. Predicting how these negotiations will play out is largely speculation.

An Early Out For Some EPA Employees?

The EPA memo also refers to a VERA. VERA refers to a Voluntary Early Retirement Authorization. It is sometimes just called an “early out.”

A VERA can impact an entire agency or just a portion of an agency. If a re-organization only impacts a portion of an agency, it will be limited to that part of the organization.

If an early out is offered, be prepared to make a quick decision. There is usually a short time period to accept the offer and to be off the agency payroll. This option, if offered, is usually restricted to employees who meet specific criteria. An employee:

  • Must have 20 years of service
  • Be at least 50 years old, or
  • Have 25 years of service regardless of age.

The federal retirement systems are complex. If you are an employee who is affected and deciding whether to take an early out, check with your servicing human resources office before making a decision. Generally, an employee under the older CSRS retirement system will see a penalty of 2% per year for being under 55 years old. Cost of living adjustments (COLAs) will still apply though.

A FERS employee will not face a reduction in pension payments. However, cost-of-living-adjustments will usually not begin until the new retiree turns 62.

Bottom Line

Significant change is stressful and chaotic. It may also provide opportunities for those who think seriously about their future and their options.

My advice: Focus on the opportunities that may be presented. Getting angry and worrying about events beyond your control are likely to be counter-productive and lead to missing chances for taking a different career path.

2017-04-17 EPA Buyout Memo

© 2017 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47

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