Retirement & Financial Planning Report

Although buyouts, also known as voluntary separation incentive payments, have not been used widely in recent years, the authority still does exist and it’s worth the effort to understand something about them in order to be prepared if one should come along.

Often paired with early retirement offers, agencies may offer buyouts for a designated period to avoid involuntary separations resulting from RIFs, reorganizations, and transfers-of-function. Making an offer is at the agency’s discretion—you have no right to demand one—and even if it wants to, certain government-wide rules apply.

To be eligible for a buyout, you must be serving in an appointment without time limit, have been employed by the federal government for at least three years, be in a position your agency has targeted, and get an okay from your agency to accept the offer.

You won’t be eligible for a buyout if you are:
• a reemployed annuitant;
• an employee with a disability such that you are or would be eligible for disability retirement;
• someone who:
–  has previously received a buyout
–  was paid, or is to be paid, a student loan benefit within 36 months of separation
–  received, or will receive, a recruitment or relocation incentive, within 24 months of separation
–  received, or will receive, a retention incentive within 12 months of separation.

Assuming that you qualify for a VSIP, and your agency approves your accepting it, it would be the lesser of the amount of severance pay you’d be entitled to if you were RIF’d, or an amount up to a dollar maximum ($40,000 at DoD, $25,000 elsewhere).

For longer-term/older/higher-paid employees, the dollar maximum almost always applies because the severance pay entitlement would be higher.

Since leaving your agency to take a VSIP is a voluntary action, you wouldn’t be eligible for both severance pay and the VSIP. You also would be ineligible for various other benefits that would apply if you were to be RIF’d, such as job placement assistance.

Before you accept a VSIP, you also need to understand that with rare exception, you can’t return to the government for five years. If you do, you’ll have to repay the gross—that is, pre-tax—amount of the VSIP before your first day of reemployment.

Five Reasons You Should Not Wait for a Buyout

The Strings Attached to Buyouts

Eligibility Conditions for Buyouts

In Depth: Early out, buyout, reduction in force (RIF)

FERS Retirement Guide 2022