FEDweek

Higher Buyout Amount Seen as Greater Lure for Federal Employees

Raising the standard maximum for buyout offers to federal employees from $25,000 to $40,000 has been touted by both the Obama and Trump administrations as a way to spur more employees to leave voluntarily during agency downsizing or reorganization so that agencies can avoid having to conduct RIFs.

A Senate committee is set to start in motion the process of boosting the amount with approval of a bill (S-1888) that further would adjust the payments for inflation annually afterward.

When first seeking the higher amount last year, the Obama administration argued that the $25,000 maximum had become an insufficient lure for employees to resign or retire. “While $25,000 was considered an appropriate amount to induce employees to voluntarily separate in 1993, it cannot possibly provide the same incentive in current dollars. Employees are clearly influenced by prevailing economic conditions when making financial decisions,” that request said.

The amount would have to be more than $47,000 to keep up with inflation or more than $42,000 to keep up with salary growth since then, it added, saying it settled on $40,000 as an amount rounded down from the lesser amount. That request sought a higher amount government-wide, but Congress last year approved it only for DoD.

The Trump administration’s original request this year did not go into the same level of detail but did note how long the general amount has been unchanged, and noted that the cost of buyouts is paid from the same agency overhead accounts that pay federal employee salaries. Then in repeating its request in advance of a recent Senate vote on a separate bill, the White House said the increase would “improve the attractiveness and utility of buyouts as a workforce reshaping tool.”

Despite that request, the Senate did not attach the general boost to that bill but rather has turned to handling the issue as a freestanding measure.

Buyout payments are taxable, reducing the take-home amount commonly to around $18,000 depending on the individual’s tax status. Increasing the pre-tax amount to $40,000 would raise the average take-home amount to perhaps something over $30,000. None of the proposals have included projections of how much the boost would increase the acceptance rate.