Buyouts, Early Outs Become More Expensive

In what amounts to a somewhat minor discouragement for agencies to offer buyout or early retirement incentives, OPM has spelled out to agencies a policy newly in effect in fiscal 2012 requiring them to reimburse it for the costs of processing retirement applications from employees who receive such incentives.

The language was contained in an omnibus spending bill funding most agencies that was enacted in late 2011 but was retroactive to last October 1. It applies to incentives commonly known as VERA (Voluntary Early Retirement Authority) or VSIP (Voluntary Separation Incentive Payments) or any other form of monetary separation incentive, OPM said in a memo to agencies.

“The average unit cost of processing annuity cases under this requirement is calculated to be $107.62 per annuitant,” OPM said, adding that it intends to issue further detailed guidance on the requirement.

Many agencies offered one or both types of incentives to parts of their workforces during 2011 and more are expected to offer them during the current fiscal year, due to tight budget allocations. Most recently, GSA, Agriculture and the Air Force have offered both.

The processing reimbursement requirement will add only slightly to the cost for agencies of getting employees off the payroll sooner than would have happened otherwise. However, it could benefit OPM substantially at a time when it is already struggling with a backlog of retirement applications and long processing times.