Proposal to Raise Max Buyout to $40,000 for Federal Employees

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By on October 5, 2017 in Pay & Benefits with 0 Comments
Senator James Lankford (R-OK) giving a speech

Senator James Lankford (R-OK)

Senator James Lankford (R-OK) has introduced a bill in the Senate (S. 1888) that will appeal to a number of federal employees. Following in the footsteps of the National Defense Authorization bill last year, Lankford has proposed raising the maximum buyout offer to $40,000.

The current level is $25,000. Congress set the Voluntary Separation Incentive Payment (VSIP) limit at $25,000 in 1993. It has not gone up since that time.

Under the proposal, the amount of buyouts would be increased each year based on the Consumer Price Index.

The Lankford bill has been referred to the Senate Homeland Security and Governmental Affairs Committee. From there, it is likely to be referred to the full Senate for consideration after the Committee’s mark-up process.

Legislation Follows Trump Administration Proposal

The Trump Administration sent a proposal to Congress in July to raise the VSIP limit.

A buyout is a payment used for “increasing voluntary attrition in agencies that are downsizing or restructuring,” It is often used as an alternative to running a reduction-in-force (RIF). A RIF is a complex, time-consuming, bureaucratic procedure that comes with appeal rights and will take up a significant amount of time and money in any agency that runs a RIF of any size.

A buyout is the lesser of $25,000 or the severance pay the employee would be due if laid off — as a practical matter, it’s usually the former. The payment is taxable, reducing its value typically to under $20,000, and employees who accept one generally must repay the full amount if they return to government employment within five years.

VSIP Offers Are Usually Limited

A VSIP is commonly referred to as a buyout.

There are basic eligibility requirements for buyouts. Eligibility criteria for those who will be offered a buyout are established by an agency in any buyout plan before it is approved and implemented.

A buyout is not an employee entitlement. The eligibility criteria will be restricted to allow an agency to meet its goals in reducing overhead costs or restructuring the workforce in some way.

A buyout plan describes the general categories of employees that may be offered a VSIP. Factors may include specific organizations, geographic locations, occupational categories, grade levels or retirement eligibility.

For those that do qualify, the extra money with time limits attached can speed up a person’s decision making process and the extra money can make the decision to leave federal service more attractive.

Buyouts Can Be Quicker, Less Expensive

In agencies that may need to downsize their workforce due to mission changes or changes in the federal budget, the possibility of taking a buyout, especially if the amount is raised, can be an attractive offer and is a quicker, less expensive way of reducing employment levels compared to other alternatives.

S. 1888

© 2019 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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