Congressman Nick Langworthy (R-NY) introduced legislation would raise the cap for federal employee “buyouts” through the Voluntary Separation Incentive Payment (VSIP) program — a tool which allows federal agencies to offer buyouts to employees who voluntarily leave government service. The proposed legislation is designed to modernize an outdated federal workforce volunteer buyout program by increasing the financial incentives for federal employees.
VSIP was first established in the 1990s, and currently federal agencies can only offer federal employees up to $25,000 if they choose to leave their position through the program. VSIP was originally intended to reduce payroll costs and avoid disruptive reductions-in-force (RIF). However, because the program’s cap has not been updated in more than 30 years, many believe it has lost its effectiveness due to inflation and rising salaries.
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If enacted, the Federal Workforce Early Separation Incentives Act (HR 7256) would increase the limit on VSIP payments, allowing agencies to offer federal employees up to six months of their salary if they agree to leave if there is approval from the head of the federal agency.
“By ending the 30-year old cap, and instead tying the retirement incentive to earned income, we will make the VSIP more fair and potentially appealing,” said Langworthy. “This legislation brings a common-sense update to a program that has been frozen in time, giving agencies a better option to reduce costs while treating federal employees fairly.”
According to a press statement from Langworthy’s office, while the updated incentives may result in modest upfront costs, Langworthy expects them to produce “significant long-term savings by reducing future payroll and retirement obligations.”
“This bill provides a respectful route to honor federal workers, while being fiscally responsible to shrink the cost of the federal workforce without resorting to layoffs or disruptions,” Langworthy said. “It gives future administrations another tool to right size government while delivering real savings for taxpayers long term.”
To read the full text of the bill, go here. More information about the current VISP program from OPM’s website is below.
Voluntary Separation Incentive Payments
The Voluntary Separation Incentive Payment Authority, also known as buyout authority, allows agencies that are downsizing or restructuring to offer employees lump-sum payments up to $25,000 as an incentive to voluntarily separate. When authorized by the Office of Personnel Management (OPM), an agency may offer VSIP to employees who are in surplus positions or have skills that are no longer needed in the workforce who volunteer to separate by resignation, optional retirement, or by voluntary early retirement, if approved. By allowing employees to volunteer to leave the Government, agencies can minimize or avoid involuntary separations through the use of costly and disruptive reductions in force (RIFs). Agencies such as the Department of Defense that have been granted agency-specific VSIP authority are not required to seek OPM approval for their use of this option.
When an agency has received approval from OPM to offer VSIPs, any employee (as defined in 5 U.S.C. 2105) who meets these general eligibility requirements may receive an offer. The employee must:
- Be serving in an appointment without time limit;
- Be currently employed by the Executive Branch of the Federal Government for a continuous period of at least 3 years;
- Be serving in a position covered by an agency VSIP plan (i.e., in the specific geographic area, organization, series and grade);
- Apply for and receive approval for a VSIP from the agency making the VSIP offer; and
- Not be included in any of the ineligibility categories listed below.
Employees in the following categories are not eligible for a VSIP:
- Are reemployed annuitants;
- Have a disability such that the individual is or would be eligible for disability retirement;
- Have received a decision notice of involuntary separation for misconduct or poor performance;
- Previously received any VSIP from the Federal Government;
- During the 36-month period preceding the date of separation, performed service for which a student loan repayment benefit was paid, or is to be paid;
- During the 24-month period preceding the date of separation, performed service for which a recruitment or relocation incentive was paid, or is to be paid; and
- During the 12-month period preceding the date of separation, performed service for which a retention incentive was paid, or is to be paid.
Computation of Incentive Payment
An agency computes a Voluntary Separation Incentive Payment on the basis of the lesser of:
An amount equal to the amount of severance pay the employee would be entitled to receive, as computed under 5 U.S.C. 5595(c), without adjustment for any previous payment made; or
An amount determined by the agency head, not to exceed $25,000.
The amount that the employee actually receives is less than the amount determined using the above computations because of the deduction of taxes, including Federal, state, social security, and Medicare, as appropriate.
Discretionary Authority
As with any incentive, when approved by OPM, this authority is used at the discretion of the agency. Each agency must develop a VSIP plan to describe why the program is needed, how it will be implemented, and which employees will be eligible.