[BBS file "VSIPEMP1.TXT"; "Employee's Guide to Buyouts" dated April 7, 1994.] ================================================================= THE EMPLOYEE'S GUIDE TO BUYOUTS U.S. OFFICE OF PERSONNEL MANAGEMENT FEDERAL WORKFORCE RESTRUCTURING OFFICE Version: APRIL 7, 1994 FEDERAL WORKFORCE RESTRUCTURING ACT OF 1994 PUBLIC LAW 103-226, March 30, 1994 KEY FEATURES OF INCENTIVES PROGRAM To avoid or minimize involuntary separations due to restructuring, executive branch agencies may pay voluntary separation incentive payments (VSIP) in any designated component, occupation, grade, series, and/or location to employees who voluntarily agree to resign, retire, or take voluntary early retirement (OPM must approve the agency's request for early retirement). The agency may allow employees to take buyouts through March 31, 1995. Employees may be offered an incentive only if the agency utilizes the VSIP program. The agency will then notify employees when they will have the opportunity to take the incentive. Agencies do not have to get approval from OPM to offer VSIPs. To receive a VSIP offer, an employee must-- -be serving under appointment without time limit, -have 12 months of continuous service, -not be a reemployed annuitant, -not be eligible for disability retirement, -agree to resign or retire voluntarily during a period designated by the agency, and -be in a position designated by the agency as eligible for VSIP offers. VSIPs are not available to employees separated by reduction in force (RIF). The law sets no grade, series, or age requirements for VSIP. Agencies may offer incentives to all eligible employees of the agency or only to employees in designated: -organizational units, -geographic locations, -occupational categories (including grade levels), or -any combination of these factors, but may not select individual employees on any personal basis either to receive incentives or to be excluded from receiving incentives. The VSIP amount is the lesser of $25,000 or an amount equal to the employee's severance pay entitlement. We have attached a worksheet for employees to use to estimate the amount of their VSIP. The VSIP is also subject to all applicable federal, state, and local taxes, social security, medicare, etc. The agency may delay employee separations up to March 31, 1997, to ensure performance of the agency's mission. An employee must repay the full VSIP if employed by the Government of the United States, by appointment or personal services contract, within 5 years after separation. This provision applies to employees of the Department of Defense and the Central Intelligence Agency who take VSIPs on or after March 30, 1994. -OPM may waive repayment only in cases where an individual with unique abilities is the only qualified candidate for appointment to a position. Employees must apply for separation incentive payments and must sign an agreement that the decision to resign or retire under these circumstances is entirely voluntary. The application process and the order in which applicants are selected to receive VSIPs is determined by each agency. Employees will need to contact the servicing personnel office for details. If an employee is selected to receive the voluntary separation incentive payment, these agreements will serve as a commitment to resign or retire during the window period. If employees are not selected to receive a separation incentive, they will not be bound by this commitment. [BBS Note-Guide continues on next page.] FREQUENTLY ASKED "BUYOUT" QUESTIONS (AND ANSWERS) 1. "WHAT ARE VOLUNTARY SEPARATION INCENTIVE PAYMENTS? WHY ARE FEDERAL AGENCIES OFFERING THEM?" The Administration is committed to reducing the size of the Federal workforce. On March 30, 1994, the President signed Public Law 103-226, the Federal Workforce Restructuring Act of 1994. This law allows agencies to offer Voluntary Separation Incentive Payments, (VSIPs or "buyouts") of up to $25,000 to employees who resign or retire. These payments are lump sum cash bonuses given to employees who voluntarily leave Federal service. By allowing employees to volunteer to leave the Government, agencies can minimize or avoid firing employees through the use of costly and disruptive reductions in force (RIFs). The cost of separating an employee by RIF is far greater than the cost to pay employees VSIPs to voluntarily quit. 2. "WHEN WILL MY AGENCY OFFER BUYOUTS?" The Federal Workforce Restructuring Act of 1994 authorizes the heads of Executive Branch agencies to pay voluntary separation incentives (buyouts) to eligible employees who resign or retire by March 31, 1995. Since the agency head is authorized to determine where and when to allow VSIPS, only YOUR agency can tell you where and when buyouts will be offered. OPM CANNOT ANSWER THIS QUESTION FOR YOU. 3. "DO I MEET THE AGE AND SERVICE REQUIREMENTS TO BE ELIGIBLE FOR A BUYOUT?" The law does not set any age or service requirements. However, the law does allow agencies to limit where they use incentives. Incentives can be targeted at positions in locations, organizations, and/or occupations (including grade levels), but may not be targeted at individuals. Many people believe that the "buyout" program is a RETIREMENT program. It is not. It is a program that allows federal agencies to pay separation incentives (buyouts) to ANY employee who quits or takes regular or early retirement. If your agency elects to offer buyouts to you, you will be eligible--regardless of age or length of service. If you wish to retire, you must meet the age and service requirements for retirement (see question 9). 4. "MY AGENCY IS NOT PLANNING TO USE BUYOUTS. IS THIS FAIR? DON'T I HAVE A RIGHT TO A BUYOUT?" Agencies ARE NOT REQUIRED to use or pay incentives. Incentives ARE NOT an employee right. The incentives are a management tool to help the agency reduce the workforce without having to run costly and disruptive RIFs. 5. "HOW MUCH WILL MY INCENTIVE BE? DOES EVERYONE GET $25,000?" The amount of each employee's incentive will vary. The basic formula for calculating your incentive is the same formula used for calculating severance pay. Remember, the MAXIMUM amount that any employee can receive is $25,000, (the amount you receive will be EVEN LOWER after the appropriate taxes, social security, medicare, etc. are deducted by your payroll office). You will need to contact your servicing personnel office for an exact calculation of your incentive amount. However, we have included a worksheet in this packet to help you ESTIMATE your buyout. An incentive payment is the amount of severance pay you would get, or $25,000, whichever is less. Severance pay is figured as if you would get it; you don't have to be eligible for severance pay. (Severance pay is normally only for people who separate involuntarily. Leaving Federal service with an incentive payment is a voluntary action.) The amount of severance pay would be 1 week's basic pay for each of the first 10 years of your civilian service, plus 2 weeks' basic pay for each year over 10 years. An age adjustment allowance of 10% is added for each year you are over 40. (No credit is given for military service unless the service interrupted otherwise creditable civilian service.) 6. "WHAT MAKES AN EMPLOYEE ELIGIBLE FOR A BUYOUT?" To receive a VSIP offer, an employee must-- -be serving under appointment without time limit, -have 12 months of continuous service, -not be a reemployed annuitant, -not be eligible for disability retirement, -agree to resign or retire voluntarily during a period designated by the agency, and -be in a position designated by the agency as eligible for VSIP offers. 7. "ARE POSTAL SERVICE EMPLOYEES COVERED BY THIS LAW?" No. The law specifically excludes U.S. Postal Service and Postal Rate Commission employees. 8. "ARE D.C. GOVERNMENT WORKERS WHO WERE FEDERAL EMPLOYEES COVERED BY THIS LAW?" No. This law authorizes Federal agencies in the Executive branch to pay incentives to their employees. The DC Government is not a Federal agency. 9. "DOES THE NEW LAW CHANGE ELIGIBILITY FOR RETIREMENT?" No. If you are under FERS or CSRS, you can take regular optional retirement if you are 55 with at least 30 years of service; age 60 with 20 years of service; or age 62 with 5 years. If your agency offers early retirement, you must be at least 50 with 20 years of service or have 25 years of service at any age. An employee under FERS also is eligible for an immediate annuity if he/she has 10 years of service and has reached the minimum retirement age (55 if born before 1948, and gradually increasing to 57). An employee under CSRS must meet the 1-out-of-last-2 years coverage requirement and all employees must have at least 5 years of civilian service. 10. "WHAT DOES AN "APPOINTMENT WITHOUT TIME LIMITATION" MEAN?" An employee on an appointment with a time limit works only until a specified date and then goes off the rolls. The employing agency sets the ending date when it hires the individual and/or when it extends the appointment. For example, temporary and term employees serve with a time limit, so they are not eligible for an incentive payment. Career and career-conditional employees and permanent employees in the excepted service have no limit so they are eligible. 11. "I RETIRED FROM THE MILITARY BUT AM NOW A CIVILIAN EMPLOYEE. CAN I APPLY FOR A SEPARATION INCENTIVE?" Yes, if you are otherwise eligible. The agency will figure the incentive payment only on the basis of your civilian service. 12. "WHEN IS THE EARLIEST I CAN LEAVE WITH AN INCENTIVE PAYMENT? WHEN IS THE LATEST?" Your agency can set windows for buyouts at any time through March 31, 1995. The agency may also delay your separation with an incentive payment to no later than March 31, 1997, if your job is essential for continuing operations. See your personnel office for details on when windows will be available for you to apply. 13. "IF I MEET ALL THE REQUIREMENTS, DO I AUTOMATICALLY GET AN INCENTIVE PAYMENT IF I LEAVE? WHAT IF MY AGENCY GETS MORE REQUESTS FOR INCENTIVE PAYMENTS THAN ARE NECESSARY TO MEET ITS REDUCED STAFFING TARGETS. HOW WILL IT DECIDE WHICH REQUESTS TO APPROVE?" You are eligible to apply for an incentive payment if you meet all the requirements set by the law and your agency. Agencies may exclude certain jobs or units from the incentive payment offer. (See your agency for a list.) In handling applications, the agency must use a fair and objective method to determine the order in which applications will be approved (for example, order of separation date, order of receipt of completed applications, seniority, etc.). 14. "WHEN WILL I RECEIVE MY INCENTIVE PAYMENT? WILL IT BE ALL AT ONCE (LUMP SUM) OR MONTHLY? IS IT TAXABLE?" The agency will send you the incentive payment as soon as possible after the date of your separation but cannot guarantee a specific date. First, the agency must resolve any leave errors, salary offsets, and employee debts to the Government. It is also subject to garnishment for alimony and child support. The incentive payment is taxable. You will receive it as a lump sum (less Federal income tax withholding, applicable State and local taxes, and FICA/Medicare taxes). 15. "DO I HAVE TO MAKE A COMMITMENT TO LEAVE IF I ACCEPT AN INCENTIVE PAYMENT?" Yes. Your agency will ask you to sign an agreement saying that in exchange for an incentive payment you agree to resign or retire on a specific date. If employees could change their minds, the agency might not be able to meet its downsizing goal. 16. "WHAT DOES THE INCENTIVE PAYMENT AGREEMENT SAY?" The agreement says that you agree to leave by a certain date in return for the incentive payment. It also says that if you accept an incentive payment, you will not be eligible for reemployment with the Federal government, in either a temporary or permanent status, or on a personal services contract for 5 years following the effective date of your separation--unless you repay the full amount of the incentive payment. Waivers are allowed only in rare cases. 17. "WHAT RIGHTS AND BENEFITS WOULD I BE GIVING UP TO TAKE AN INCENTIVE PAYMENT TO RETIRE OR RESIGN RATHER THAN WAITING TO BE SEPARATED IN A RIF?" o Placement assistance; o Taking a job in Government within next 5 years without paying back the incentive payment; o Full amount of severance pay (if eligible); o Discontinued Service Retirement (if eligible); and the option of a lump-sum refund of retirement contributions (available to employees separated involuntarily through September 29, 1994). 18. "MAY I TAKE A DISCONTINUED SERVICE RETIREMENT, THE LUMP-SUM REFUND OF RETIREMENT CONTRIBUTIONS, AND AN INCENTIVE PAYMENT?" No. Incentives are paid to employees who leave voluntarily. Discontinued Service Retirement is based on an involuntary separation. The lump-sum refund is available only to employees who have a critical medical condition or are separated involuntarily no later than September 29, 1994. 19. "IF I LEAVE WITH AN INCENTIVE PAYMENT, CAN I TAKE A JOB IN ANOTHER FEDERAL AGENCY? AM I ELIGIBLE FOR PLACEMENT ASSISTANCE?" If you retire or resign with an incentive payment, you may not take a job with the Federal government for 5 years following the day of your separation--unless you pay back the full amount of the incentive payment. This prohibition covers any kind of employment (for example, permanent, temporary, expert, consultant, reemployed annuitant) as well as personal services contracts. Repayment may be waived but only in those rare cases where an individual is the only qualified applicant for a job and the agency head requests the waiver from OPM. If OPM waives the repayment and you are reemployed, you may not move out of that position--unless you repay the incentive payment or unless OPM approves another waiver. You are not entitled to placement assistance because employees volunteer to leave Federal service with an incentive payment. Placement assistance is for employees who are involuntarily separated. 20. "CAN THE AGENCY DELAY MY SEPARATION UNTIL AFTER THE "WINDOW" AND STILL GIVE ME AN INCENTIVE PAYMENT WHEN I LEAVE?" Generally, to receive an incentive payment, the effective date of your resignation or retirement must be during the agency's window period. However, the agency may extend individuals in certain positions or whole groups of positions for any period up through March 31, 1997, to ensure the performance of the agency's mission. 21. "HOW WILL THE AGENCY DECIDE WHICH EMPLOYEES TO DELAY?" Each agency can set its own policy on which positions they will need to ensure the agency's mission. Check with your personnel office to find out how your agency will be handling the option. 22. "CAN I TURN DOWN MY AGENCY'S REQUEST THAT I STAY ON FOR AN ADDITIONAL PERIOD AND LEAVE NOW AND STILL GET THE INCENTIVE PAYMENT?" Agencies may approve the incentive payment for certain employees contingent on their staying to finish essential activities. These activities must be to ensure the agency's mission. If you are such an employee, you could still resign at any time, or take early retirement during the early retirement window, or take regular retirement if you are eligible, but you may not get the incentive payment if you left before the date the agency set. 23. "LEAVING FEDERAL SERVICE WITH THE INCENTIVE PAYMENT IS SUPPOSED TO BE VOLUNTARY. IF I'M ELIGIBLE BUT DON'T CHOOSE TO LEAVE, CAN MY AGENCY RETALIATE BY MOVING ME TO ANOTHER POSITION?" Incentives are for voluntary separations. Coercion is prohibited. However, after the window closes, an agency may find it necessary to move some remaining employees to other positions. Also, later restructuring could mean the agency would have to reassign or even separate employees. To take these actions agencies would have to follow requirements of law, regulation, and applicable negotiated procedures. 24. "IF I DECLINE AN OFFER OF AN INCENTIVE, CAN I BE RIFed?" Coercing an employee to take a buyout is prohibited. However, even if an agency uses buyouts, it is possible that buyouts will not result in a sufficient number of voluntary separations and the agency may need to carry out a RIF. A buyout offer does not protect the employee from RIF. VOLUNTARY EARLY RETIREMENT 1. "WHO IS ELIGIBLE FOR EARLY RETIREMENT?" OPM can authorize an agency to offer early retirement to eligible employees. The agency can exclude employees in certain jobs that are critical to the agency's operation. (See your agency for a list.) The agency may change this list before the early retirement window closes. Unless you are excluded because your job is on the above list, you are eligible for early retirement as follows: o If you are under the Civil Service Retirement System (CSRS), you must have served in a position covered by the CSRS for at least l year out of the 2 years immediately before retirement. o If you are under FERS, this rule does not apply. At least 5 years must be civilian service, whether you are retiring under CSRS or FERS. o You must be at least 50 with 20 years of service or have 25 years of service at any age. o You must be serving under other than a temporary appointment; o You must have been on the agency's rolls at least 30 days before the agency requested authority from OPM and you served continuously since that date without a break in service. 2. "WHAT DOES THE EARLY RETIREMENT "WINDOW" MEAN?" Each agency sets a window, or period of time, during which eligible employees can take early retirement. Normally, this coincides with the window during which buyouts will be offered. If you want to retire early, you would separate during the agency's window. You must turn in your application as soon as possible to make sure you can retire during the window. If your agency offers you an incentive payment contingent on your staying beyond the window to finish essential work, you do not have to retire during the window, but you must apply during the window period. 3. "CAN ANYONE WHO IS ELIGIBLE AND WHO APPLIES FOR EARLY RETIREMENT BE ASSURED OF RETIRING EARLY?" Just as it does with buyouts, the agency may set a limit on the number of early retirements it offers. This number should take care of all the employees who want to retire early and whose jobs are not essential to the agency's continued operations. If the agency receives more applications than it needs, the agency must use a fair objective method to make decisions (for example, order of separation date, order of receipt of completed applications, seniority, etc.). 4. "IF I TAKE EARLY RETIREMENT, IS MY ANNUITY REDUCED?" CSRS employees who retire under the voluntary early retirement authority will have a reduction in their annuity of 2 percent per year for each year they are under age 55. (The reduction is 1/6 of 1 percent for each full month.) This is a permanent reduction in annuity. Employees with only FERS service will not have their annuities reduced unless retiring under the MRA+10 provision before age 62. Employees with both CSRS and FERS service will have a reduction only for the CSRS portion of their service. Special rules apply to the calculation of annuities of employees who have part-time service after 1986. The personnel office can give you more details. 5. "IF I TAKE EARLY RETIREMENT, WHAT HAPPENS TO MY UNUSED SICK LEAVE?" CSRS employees will receive service credit for any unused sick leave in determining their annuity (but they must meet eligibility requirements for retirement before the sick leave is added.) FERS employees do not receive credit. Employees who were previously under CSRS but who transferred to FERS will receive credit for either the amount of sick leave at the time of the transfer to FERS, or at the time of retirement--whichever is less. 6. "CAN I CONTINUE HEALTH AND LIFE INSURANCE INTO RETIREMENT?" If you retire on an immediate annuity and if you have been enrolled (or covered as a family member) in a plan (not necessarily the same plan) under the Federal Employees Health Benefits program from (a) the 5 years of service immediately preceding retirement, or (b) from service since your first opportunity to enroll or, ( c) continuously for the full period or periods of service beginning with the enrollment which became effective no later than December 31, 1964. Also, your annuity must be sufficient to cover your share of the premiums. 7. "WHAT FORMS DO I NEED TO APPLY FOR EARLY RETIREMENT WITH AN INCENTIVE PAYMENT AND WHERE DO I GET THEM? Your personnel office will provide these forms to you. You will sign: (1) an application for retirement, and (2) an incentive payment agreement. [BBS Note-Guide continues on next page.] VSIP COMPUTATION WORKSHEETS- The following are samples for use in ESTIMATING the amount of your buyout. The actual calculation formula is quite complicated and technical. The samples are intended to allow an employee to figure the approximate amount of the buyout they may receive. OPM is not responsible for the accuracy of the results that this worksheet may give you. If you want a more accurate calculation, you will have to contact your personnel office. EXAMPLE OF VSIP COMPUTATION WORKSHEET line 1.Salary at time of separation (GS-14/10)= $73,619 line 2.Weekly Rate (line 1 divided by 52)=$1,415.75 line 3.Years of Service (see A and B below)18 A. If your length of service is LESS THAN 10 years, enter your length of service on line 3a. B. If your length of service is MORE THAN 10 years: 1) enter your length of service: 18 2) subtract 10 from your length of service: - 10 = 8 3) multiply the result, in this case, 8, by 2: = 16 +10 4) add 10 to the amount listed in 3). 26 5) enter this total on line 3a. This is the factor for your adjusted years of service and tells you approximately the number of weeks of severance pay you would be entitled to. line 3a. Adjusted Years of Service 26 line 4.Basic Severance Pay (multiply amount in line 2 by number on line 3a--Adjusted Years of Service) = $36809.50 line 5.Age Adjustment Factor (if your age is above 40, look your age up on the "AGE TABLE AND FACTORS" chart attached. Enter the "factor" number shown.) Age = 52 years. Factor = 2.20. Line 6. Severance Pay Amount Multiply line 4 by line 5 factor (38809.50 X 2.20) = $80,980.90 6a. If line 6 exceeds line 1, enter amount on line 1. The amount of severance pay will be = 73,619 Line 7. Buyout Amount If line 6a exceeds $25,000, enter $25,000 OR If line 6a does not exceed $25,000, but is more than line 1, enter amount on line 1. YOUR BUYOUT AMOUNT: = $25,000 [BBS Note-Guide continues on next page.] VSIP COMPUTATION WORKSHEET line 1.Salary at time of separation =_________ line 2.Weekly Rate (line 1 divided by 52) =_________ line 3.Years of Service (see A and B below) _________ A. If your length of service is LESS THAN 10 years, enter your length of service on line 3a. B. If your length of service is MORE THAN 10 years: 1) enter your length of service: ___ 2) subtract 10 from your length of service:-10 ___ 3) multiply the result by 2: ___ +10 4) add 10 to the amount listed in 3). ___ 5) enter this total on line 3a. This is the factor for your adjusted years of service and tells you approximately the number of weeks of severance pay you would be entitled to. line 3a. Adjusted Years of Service ____________ line 4.Basic Severance Pay (multiply amount in line 2 by number on line 3a--Adjusted Years of Service) = _________ line 5.Age Adjustment Factor (if your age is above 40, look your age up on the "AGE TABLE AND FACTORS" chart attached. Enter the "factor" number shown.) Age = _______years and _______months. Factor = _______ Line 6. Severance Pay Amount Multiply line 4 by line 5 factor $_________ 6a. If line 6 exceeds line 1, enter amount on line 1. The amount of severance pay will be $_________ Line 7. Buyout Amount If line 6a exceeds $25,000, enter $25,000 OR If line 6a does not exceed $25,000, but is more than line 1, enter amount on line 1. YOUR BUYOUT AMOUNT: $_________ [BBS Note-Guide continues on next page.] AGE TABLE AND FACTORS Yrs. Factor Yrs. Factor Yrs. Factor Mos. Mos. Mos. 40 3-5 1.O25 48 4-8 1.850 56 9-11 2.675 40 6-8 1.050 48 9-11 1.875 57 0-2 2.700 40 9-11 1.075 49 0-2 1.900 57 3-5 2.725 41 0-2 1.100 49 3-5 1.925 57 6-8 2.750 41 3-5 1.125 49 6-8 1.950 57 9-ll 2.775 41 6-8 1.150 49 9-ll 1.975 58 0-2 2.800 41 9-ll 1.175 50 0-2 2.000 58 3-5 2.825 42 O-2 1.200 50 3-5 2.025 58 6-8 2.850 42 3-5 1.225 50 6-8 2.050 58 9-ll 2.875 42 6-8 1.250 50 9-11 2.075 59 0-2 2.900 42 9-11 1.275 51 0-2 2.100 59 3-5 2.925 43 0-2 1.300 51 3-5 2.125 59 6-8 2.950 43 3-5 1.325 51 6-8 2.150 59 9-11 2.975 43 6-8 1.350 51 9-ll 2.175 60 0-2 3.000 43 9-11 1.375 52 0-2 2.200 60 3-5 3.025 44 0-2 1.400 52 3-5 2.225 60 6-8 3.050 44 3-5 1.425 52 6-8 2.250 60 9-11 3.075 44 6-8 1.450 52 9-11 2.275 61 0-2 3.100 44 9-11 1.475 53 0-2 2.300 61 3-5 3.125 45 0-2 1.500 53 3-5 2.325 61 6-8 3.150 45 3-5 1.525 53 6-8 2.350 61 9-11 3.175 45 6-8 1.550 53 9-11 2.375 62 0-2 3.200 45 9-11 1.575 54 0-2 2.400 62 3-5 3.225 46 0-2 1.600 54 3-5 2.425 62 6-8 3.250 46 3-5 1.625 54 6-8 2.450 62 9-11 3.275 46 6-8 1.650 54 9-11 2.475 63 0-2 3.300 46 9-11 1.675 55 0-2 2.500 63 3-5 3.325 47 0-2 1.700 55 3-5 2.525 63 6-8 3.350 47 3-5 1.725 55 6-8 2.550 63 9-11 3.375 47 6-8 1.750 55 9-11 2.575 64 0-2 3.400 47 9-11 1.775 56 0-2 2.600 64 3-5 3.425 48 0-2 1.800 56 3-5 2.625 64 6-8 3.450 48 3-5 1.825 56 6-8 2.650 64 9-11 3.475 [BBS Note-End of Guide.]