VERAs and VSIPs in Your Future?

Now that the change in administrations is here, it’s a foolish employee who doesn’t recall what Mr. Trump talked about when running for office, and think about what that might mean for their agency in general and their job in particular.

Therefore, this is a good time to be thinking about two authorities that an affected agency can use to either reduce the size of its workforce or reshape it while, at the same time, reducing the impact on its employees: the Voluntary Early Retirement Authorities (VERA) and the Voluntary Separation Incentive Program (VSIP).

Neither early outs nor buyouts are employee entitlements. An agency is only allowed to offer them when they will permit it to meet its specific staffing needs. Therefore, unless an agency is undergoing a major downsizing, offers will be targeted at those positions, grades, occupations and geographic areas where changes are needed.

VERAs allow employees with the right combination of age and service to retire early: at age 50 with 20 years of service or at any age with 25 years of service. However, there are different rules that apply to CSRS and FERS employees who meet the age and service criteria.

Under CSRS, your annuity will be reduced by 1/6 percent for every month you are under age 55. That’s 2 percent per year. On the other hand, you will be able to receive annual cost-of-living-adjustments (COLAs) on your annuity, regardless of the age at which you retire.

Under FERS, the usual 5 percent per year penalty for retiring before age 62 (60 if you have 20 years of service) will be waived. You’ll also be eligible for a special retirement supplement (SRS) that approximates the Social Security benefit you earned while a FERS employee; however, unless you are a law enforcement officer, firefighter or air traffic controller, the SRS won’t begin until you reach your minimum retirement age (MRA). In either case, your annuity won’t be increased by COLAs until you reach age 62. FYI: COLAs are never paid on the SRS.

If you will have a CSRS component in your FERS annuity, it will be subject to CSRS rules.

A VSIP – or buyout – can be offered to any employee, not just someone who meets the age and service requirements for a VERA. Instead, to be eligible for a buyout, an employee’s position must be specifically flagged for elimination in the agency’s strategic plan.

The amount of the buyout must be equal to the lesser of the employee’s severance pay calculation or a dollar amount—for older/longer term/higher paid employees, the severance entitlement almost certainly would work out to more than the threshold. That amount typically is $25,000, although in some cases the amount has been set lower; this mainly happened with buyouts at the Postal Service several years ago.

Also, under the Defense budget passed late in 2016, DoD can offer up to $40,000. That boost is widely seen as a precedent for similar increases government-wide, but that would take new legislation and that would be unlikely in the short-term future. If you’re non-DoD and you’re thinking about whether you could or would go if offered a buyout, it’s best to use $25,000 as the number. (And note: even if you’re DoD, the law allows the higher amount but doesn’t require it.)

Would that be enough to entice you to leave, maybe accompanied by an early retirement offer? That’s a personal decision but one that is worth spending some time now pondering. These offers typically come on short notice and allow only a short time for employees to decide—a couple of months, even a matter of weeks—and once the agency gets the number of acceptances it wants, it closes the window.

Be prepared.