Congress Proposes Buyout Increases for Federal Employees

Almost immediately after the inauguration in January, the Trump administration made its intentions to streamline operations clear. Federal agencies across all levels of government will be reviewed, and instances of unnecessary positions or overstaffed teams will be adjusted.

While this “trimming of the fat,” is good news for citizens who want their government to be efficient, some federal employees worry about their jobs and how they will survive if their position is suddenly made redundant.

To solve this problem, Congress has proposed buyout increases for managers to offer their staff and ease the transition process.

What Does the Bill Entail?

In late September, Sen. James Lankford (R-Okla.) introduced a bill that would increase the maximum employee buyout in the Voluntary Separation Incentive Payment (VSIP) from $25,000 to $40,000.

As of mid-November, this bill has yet to be introduced to the Senate floor or voted on, and it’s still in the Homeland Security and Governmental Affairs committee. The House has not presented its own bill for buyout increases for federal staff.  

This bill (S-1888) would approve the first increase to the VSIP program since 2002 when it was first launched. However, it won’t be the last. Along with this dramatic buyout increase, the maximum payment amount would be tied to the Consumer Price Index (CPI) and adjusted for inflation every year.  

What Do Buyout Increases Mean for Employees?

Agencies across the federal government are facing reductions in force (RIFs), leaving many workers uncertain about their jobs. While many of these employees would qualify for severance pay, VSIPs can offer more support and make the decision to terminate an employee mutual. Volunteers come forward to leave the company instead of managers selecting employees to get cut.   

Not every employee that agrees to a VSIP will receive the full $40,000, but the overall buyout increase creates a lot more flexibility for employers that previously could only offer $25,000. Even if most employees only receive $30,000, they’re still better off than they would have been before this bill.

Unplanned employment termination is never easy, especially for parents who need to support their children and families. These buyouts make leaving a little easier and voluntary by incentivizing people to at least consider accepting employment termination.

Why Do Senators Want Buyout Increases?

Despite earlier debates surrounding benefits cuts, S-1888 was actually proposed by a Republican senator, meaning there’s potential for this bill to garner bipartisan support if members of Congress focus on providing care for federal employees.   

The bill is a response to two factors. The first is adjusting the average cost of living for employees who choose this program. Federal employees could live comfortably on $40,000 for a year and maybe even longer if they needed more time to look for work, prepare for retirement, or enter the next stage in their career through education.

The next reason is the increase of expected employees who are going to leave the federal government in the next few years. Federal News Radio reports that the Environmental Protection Agency cut 8% of its workforce this year and offered buyouts to 1,200 employees.

If federal agencies are in for steep cuts over the next few years, then these buyout increases could make the process smoother as agencies decide who to keep and who to let go.  

What Are VSIP and VERA?

The VSIP program has been mentioned multiple times in regards to buying out employees, but VERA is a plan that other workers might choose instead. Knowing the differences can help you make the best choice.

VSIP or Voluntary Separation Incentive Payment is an incentive program to encourage employees to leave their agencies. By receiving a lump sum (in this case $40,000), interested employees can choose to leave their positions and find other work.

For an employee to qualify for a VSIP, they must have been employed by the federal government continuously for at least three years. Additional limitations, like employees that accept relocation incentives or student debt and loan repayments, may disqualify some candidates from VSIP.  

VERA or Voluntary Early Retirement Authority allows agencies that are going through restructuring or downsizing to lower the age requirements and qualifications for retirement. Employees are able to receive their annuities earlier than planned, helping them financially when they leave their current positions. This increases the number of employees who are eligible for retirement and helps federal organizations cull their workforce.

To qualify for part of the VERA program, federal employees must be at least 50 years old with 20 years in Federal Service or any age with 25 years of federal service. Additional restrictions may apply depending on the agency, position, or buyout offer.

Find Out This Means for You

If your agency is considering reducing its staff or you think you might qualify for VSIP or VERA, talk to one of our specialists today. The team at MyFedBenefits can review your financial situation and make sure you’re comfortable, even if your time with the federal government ends sooner than you expected. Contact us today.