Update: OPM did issue a buyout offer to most federal employees on January 28.
Reducing the Size of Government and Buyouts
With the 2024 election over and done, there is more uncertainty for federal employees. If you work for the Department of Education, the Environmental Protection Agency, or the Department of Energy, you might be more concerned than if you worked for an agency in Treasury or the Department of Defense.
A hiring freeze was enacted very quickly in the second Trump term. Agency DEI programs have been eliminated—at least on paper, although it appears some strong DEI supporters are working in agencies to change the names and hide those who are still working. Additionally, Schedule F is now back, and transferring many employees into federal jobs without the protection provided for career employees is now a strong possibility.
How to Reduce the Size of the Federal Workforce
Will federal employment be reduced? That is the goal of the administration.
The Office of Personnel Management has told agencies to send information in very quickly on how many probationary employees are in each agency. The request does not spell out why they want this information but locating employees who can be terminated quickly and efficiently is probably at the top of the list of reasons.
Reduction-in-force regulations protect federal employees, and there are procedures already in place that regulate early outs and buyouts. If you or your agency are endangered, you may be offered an early out and/or a buyout.
The average age of federal employees is about 47. The federal workforce is older than the overall U.S. labor force. Employees under 30 represented just over 7% of the federal workforce, but constituting nearly 20% of the employed U.S. labor force in 2023. Additionally, over 42% of federal employees were over 50, compared to nearly 33% of the U.S. labor workforce.
An older workforce means many employees might benefit from programs designed to offer incentive payments to employees to leave government service. That has been a pattern followed by agencies in the past. These payments cost money but save the time and expense of handling the inevitable appeals and complaints filed by employees who are forced out through a reduction-in-force or other available means of discouraging continued employment with Uncle Sam’s civilian army of employees.
Early Outs and Buyouts: Are These Attractive to You?
Early Out
Here is a summary of how an Early Out would likely work. Keep in mind, to my knowledge, this is not an offer now being made to federal employees. If or when a decision is made to offer these incentives, the requirements may differ. The requirements may vary between agencies. This is how earlier programs have worked, and it will likely be the same or very similar if this approach is used to reduce the size of the federal government.
An early out is officially called a Voluntary Early Retirement Authorization (VERA) and is usually offered to employees affected by a re-organization. The early out may cover all agency employees if a re-organization affects the entire agency. If, on the other hand, it affects only some parts of an agency, it might cover only those working where the re-organization is taking place.
VERAs are generally offered for a specific period (a “window”). A window for offering VERA limits the number of applications or adjusting deadlines based on how many employees the agency wants to see leave the agency. Employees who accept an early out must quickly be removed from the agency’s employment rolls.
To be eligible for an early out, an employee must have 20 years of service and have reached the age of 50, or have 25 years of service regardless of age. This would apply to CSRS and FERS retirement systems, although CSRS ended about 40 years ago.
A FERS employee would probably not have a reduction in pension payments, but would not begin earning cost-of-living-adjustments (COLAs) until turning 62 in most instances.
Previously, agencies had to request VERA approval from OPM unless they have delegated authority (e.g., DoD has had this authority in the past). The approval from OPM typically specifies a time period during which early retirement offers can be made. Agencies can establish specific windows for offering VERA, limiting the number of applications or adjusting deadlines based on organizational needs
Some questions that anyone who is thinking of taking an early out should ask are:
- Can I afford to live on the amount I will get as an early-out pensioner?
- How much in future pension benefits will I be giving up if I take an early out?
- If I cannot afford to live on my pension, what can I do to supplement my pension income?
- Do I have the skills needed to do whatever I need to do to bring in the extra income?
- Are there actual opportunities in my area where I can make enough money using the skills I have?
Buyout
A buy-out is technically a Voluntary Separation Incentive Payment (VSIP). It may be offered with an early out. The amount of the buyout may vary. In the past, it has been $25,000 or up to $40,000 or severance pay based on the length of an employee’s service.
Usually, the amount offered is the smaller amount. Employees accepting a buy-out will have to re-pay it if they return to the government either as an employee or on a personal services contract within five years.
In the past, Defense employees, due to a provision in the National Defense Authorization Act, were entitled to the lesser of $40,000 or the severance to which they are entitled. That may not be the case, particularly since DoD is not an agency likely to be hit with the reductions that may be required in other agencies.
Here is some free advice: Some people accepting an early out or buyout offer focus on not liking where they are now working. This is especially true if they have not given enough thought to the implications of their decision.
You should consider whether you would want to take an early out or buyout before it is offered. Consider all the pros and cons without feeling the pressure of making a decision before the offer of a buyout or early out is about to close.