Retirement & Financial Planning Report

Those who take buyout offers from the government as an incentive to resign or retire probably know that the payments–generally up to $25,000, pre-tax; DoD has authority to pay up to $40,000–come with strings attached. But many of those who are offered, or who already took, the payments, don’t seem to realize how extensive those strings are.

While provisions vary, the general rule is that individuals are required to repay the entire amount of a buyout if they were to accept any paid employment with the federal government within five years after separating. This applies in general to all government jobs, including those in the U.S. Postal Service. Employment under a personal services contract with the government also generally is subject to the requirement for repayment, although employment as an employee of a contractor is not.


The repayment would have to be completed before the individual’s first day of work in the new position. What’s more, the required repayment is for the full, pre-tax amount; since taxes typically take $7,000 or so from a $25,000 buyout for example, that effectively means losing that much money.

The Office of Personnel Management can waive the repayment at the request of the agency head if the individual possesses unique abilities and is the only qualified applicant available for the position. Repayment typically can also be waived in situations involving emergencies that threaten life or property. However, waivers are designed to be limited and rare, and buyout recipients thinking about returning to the government should not count on getting such an exception.