Retirement & Financial Planning Report

Many federal employees say they would readily take a buyout incentive payment if offered, but accepting one should not be a snap decision. Buyouts come with several important restrictions.

A buyout taker must repay the entire (pre-tax) amount of the incentive to the agency which paid the buyout if the employee accepts employment with the government of the United States or under a personal services contract within five years of separating with the incentive. The direct rehiring restriction applies to quasi-governmental bodies such as the U.S. Postal Service as well as to part-time and temporary positions. A “personal services contract” generally includes consulting-type arrangements but not employment with a company under contract to the agency. Definitions vary from agency to agency, so check the specific provisions in advance.

Accepting a buyout offer also means giving up rights that would have accrued to the employee by staying with the agency through a reduction-in-force. These include the standard severance pay entitlement as well as various forms of reemployment assistance. Buyout takers generally are deemed ineligible for unemployment compensation benefits. However, they may continue federal life and health insurance under the same terms as anyone resigning or retiring without a buyout.

Also, if you have received a buyout and are found to be eligible for disability retirement later, you are then responsible for repaying the entire amount of the buyout to the agency that paid the buyout to you.

Read more on federal employee buyouts at ask.FEDweek.com