Will Federal Buyouts Ever Hit the $40,000 Mark?

Readers have been asking if federal buyouts will ever hit the $40,000 mark.  Thenagain, you might ask, what are federal buyouts? A federal buyout is a financial incentive paid to federal employees as an enticement for voluntary separation.

Why the $40,000 Question?

This question arises because the Department of Defence (DoD) recently increased buyout amounts to $40,000. On the other hand, the maximum buyout amounts for non-DoD employees are set at $25,000. Today, the Secretary of Defence has authority to spend $40,000 as Voluntary Separation Incentive Pay (VSIP), which will expire on September 30, 2018.

Raising Buyout Max to $40,000

A clause in the National Defense Authorization Act proposes to raise the maximum buyout amount to $40,000.  Section 1123 replaces $25,000 with $40,000 applicable to all federal employees as well as the Department of Defense employees.

 

Every year max buyout amounts increase automatically based on the Consumer Price Index (CPI). Buyout increments are determined in a manner similar to how COLA benefits for Social Security are calculated.

But What is a Buyout?

Buyouts are payments to employees who quit employment willingly in restructuring or downsizing organizations. Often, buyouts are alternatives to conducting a reduction-in-force (RIF). Typically, RIFs are complicated undertakings that may involve litigation, loss of time, and finance for any agency that seeks to downsize using a RIF.

 

Currently, employees are entitled to $25,000 or a sum equal to their severance pay if laid off. Typically, for practical reasons, it’s usually the former, though after taxes the buyout reduced to $20,000. However, you are required to repay these funds if you return to federal employment within five years.

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Limited VSIP Offers

Several factors may lead to an employee receiving a VSIP. Among these reasons is downsizing or workforce reorganization among others. However, employees must meet specific requirements for eligibility. Most often, agencies offering the buyout define the eligibility criteria for approval and implementation.

 

Even so, employees are not entitled to a buyout as eligibility is restricted to let agencies accomplish their goals. Typically, several factors determine an employee’s eligibility for a VSIP. These factors may include occupational category, place of residence, departments, retirement status, and grade levels.

 

For eligible employees, a VSIP can hasten their decision to leave or stay. On the other hand, a VSIP’s lump sum payment can be an attractive incentive to quit federal employment.

Why Use a Buyout?

Buy our provide agencies a quick and inexpensive way of reducing their workforce compared to other methods. Also, buyouts let agencies have the capacity to function within a reduced federal budget allocation.

TSP and FERS are important parts of your retirement
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But Will Congress Accept a Buyout Increase?

It is impossible to predict whether Congress will okay the proposed buyout increase. Nonetheless, it is possible that Congress will okay with these proposals. Reducing the federal workforce is a priority for the present administration. In the recent past, the federal government has frozen hiring as well as the issuance of an executive order to hasten the employee firing process. In contrast to other pending bills, Congress will pass the National Defense Authorization Act in some form. Even though a buyout increase is not guaranteed, it is possible this provision will make into law.

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