Federal Government Offering Early Retirement and Buyouts Rather Than Laying Off Employees
Q: I am contemplating retiring under a Voluntary Early Retirement Authority (VERA)/Voluntary Separation Incentive Payment (VSIP) authorization that expires Sep. 30, 2011. I realize I will take a two year, one month penalty. My question is, as a CSRS retiree, if I return to employment outside of the federal government, what is the maximum percentage of earnings I can make without affecting my annuity?A: Whether you get a job in or out of the federal government, there wouldn’t be any limit on the amount of money you can earn after you retire. However, if you returned to work for the federal government, one of two things would happen: Either your annuity would be terminated and you’d receive the full salary of your new position or your full salary would be offset by the amount of your annuity.
Source: CSRS retirement, Federal Times, July 11, 2011
More Government Workers Quitting Voluntarily, More Private Sector Workers Getting Fired
July 11, 2011
And while there was no good news in Job Openings, there was some bad news in Total Separations which increased by over 200K sequentially from 3.833 MM to 4.059 MM. And for the first time since late 2010, the separations rates (defined to include voluntary quits, involuntary layoffs and discharges) rose to 3.1%, the same as the hires rate. Should the separations rate (especially if driven by involuntary departures) surpass the hires rate it will likely portend another period of NFP weakness ahead.
What is most surprising is that contrary to conventional wisdom, the voluntary quits level among government workers increased from 38% to 41% of total, while the layoffs and discharges level dropped from 44% to 38%, which means that government workers were not "let go" -- they left voluntarily. This throws a bit of a wrench in generic interpretations of the surge in the government component of the unemployment rate.
What is worse is that the quits rate in the Private employment stayed flat at 50%, while the layoff and discharges rate increased from 42% to 44%. Ironically, it is Private workers who are getting fired more, while it is government workers who are quitting voluntarily [Editor's Note: buyouts, perhaps?; see following article].
Monthly big picture summary:
Drilling down into the key Separations number:
Drilling down into the key Separations number:
The quits rate can serve as a measure of workers’ willingness or ability to change jobs. In May, the quits rate was essentially unchanged for total nonfarm (1.5 percent), total private (1.7 percent), and government (0.6 percent). (See table 4.) Although the number of quits rose from 1.5 million in January 2010 (the most recent trough) to 2.0 million in May 2011, the number remained below the 2.8 million quits when the recession began in December 2007.
The number of quits (not seasonally adjusted) in May 2011 was higher than 12 months earlier for total nonfarm, total private, and government. Several industries experienced a rise in the number of quits over the year, and federal government experienced a decline. In the regions, the number of quits rose in the South but was little changed in the other three regions. (See table 8.)
The layoffs and discharges component of total separations is seasonally adjusted only at the total nonfarm, total private, and government levels. The layoffs and discharges rate was little changed in May for total nonfarm, total private, and government. The number of layoffs and discharges for total nonfarm was 1.8 million in May, up slightly from the recent low point of 1.5 million in January 2011, but still well below the peak of 2.5 million in February 2009. (See table B below.)
The layoffs and discharges level (not seasonally adjusted) was essentially unchanged over the 12 months ending in May for total nonfarm and total private. The level decreased over the year for federal government, returning to a more typical level after a large number of layoffs in May 2010 of temporary Census workers. The number of layoffs and discharges was steady in the regions. (See table 9.)And looking at relative contributions:
The total separations level is influenced by the relative contribution of its three components—quits, layoffs and discharges, and other separations. The percentage of total separations attributable to the individual components has varied over time at the total nonfarm level, but for the majority of the months since the series began in December 2000, the proportion of quits has exceeded the proportion of layoffs and discharges. Other separations is historically a very small portion of total separations; it has rarely been above 10 percent of total separations.
The proportions of quits and layoffs and discharges were last equal in November 2010. Since then, the proportion of quits has trended upward, again exceeding the proportion of layoffs and discharges, which has trended downward. In May, the proportion of quits for total nonfarm was 49 percent and the proportion of layoffs and discharges was 44 percent. The proportions were similar for total private with 50 percent quits and 44 percent layoffs and discharges. For government, the proportions were 41 percent quits and 38 percent layoffs and discharges. (See table C below.)
Full report
Is a Voluntary Early Retirement (VERA) from the Federal Government in Your Future?
July 26, 2011Dennis Damp @ Federal Retirment - When I attained 25 years service at age 44 I felt a great sense of relief. I knew that with 25 years of creditable service I would at least be eligible for an early retirement and I could apply for a VERA and VSIP if offered. The FAA received VERA authority in the mid 1990s during a major reorganization and I applied for the option and was denied. My position was not included in the initial offer. I was a little apprehensive when I first applied and my wife had major reservations because my annuity would have been a fraction of what it would have been at age 55.
First and foremost, look before you leap if offered a VERA. Determine if you can afford to retire and determine what you will do to occupy your time after you leave. I applied knowing that I had another full time job waiting for me with my publishing business.
Many agencies applied for and received early out authority recently for select groups of employees. The list is growing and includes the USPS, Department of Agriculture, Department of Energy, Government Printing Office (GPO), the Smithsonian Institute, Department of Defense, and the list keeps growing in light of the fiscal crisis that we find ourselves in.
VERA and VSIP programs allow federal agencies that are reorganizing or downsizing to offer early outs rather than lay employees off through a Reduction in Force (RIF). Agencies find it far easier to offer early outs to those who wish to leave than to lay federal employees off. Early outs provide more cost savings than RIF’s because younger employees subject to layoffs generally receive lower pay and benefits than the senior employees that would be eligible for early retirement.
Agencies often offer Voluntary Early Retirement Authority (VERA) to employees without a Voluntary Separation Incentive Payment (VSIP). In this case you can retire early and receive benefits however no incentive payment of up to $25,000 is offered for you to do so. To apply for an early out employees must be at least age 50 with 20 years of service or any age with 25 years of creditable service. If you are offered an early out, with or without a buyout, thoroughly understand the program and its impact on your finances, benefits, annuity, and retirement before applying.
If you apply and your VERA is approved you must leave by the date specified. This tends to play havoc with plans to sell back the maximum amount of accrued annual leave or the ability to round out your sick leave to an even month by the date of departure. Also, pay close attention to the CSRS penalty that may apply. If the CSRS employee is under age 55, this calculation is reduced by one-sixth of one percent for each full month he/she is under age 55 (i.e. 2% per year). There isn’t a penalty for FERS service.
The FERS Social Security Supplement applies under VERA for those who are at their MRA when they retire up to age 62. However, if the retiree goes back to work the Social Security earnings limit applies and for each dollar earned over $14,160 in 2011 your supplement is reduced by $1.00.
Those employees under the special 20 year retirement system, LEO, FF, ATC and NWC, can apply for a VERA if offered. If you don’t have 20 years vested in the special 20 year retirement system they will not receive the enhanced retirement benefits. With less than 20 years in the covered services their annuity would be based on the regular retirement formula. Many under LEO, FF, ATC and NWC have regular federal civil service time as well. For example, if an air traffic controller (ATC) is age 53 and has 24 years of creditable service for retirement, but only completed 17 years of ATC covered service, the controller’s retirement would be based on the regular retirement formula because he hadn’t completed 20 years under the ATC system.
So close but so far away… A site visitor’s agency was offering early outs however he was just a few months shy of the required 25 years of service. He wanted to apply his accrued annual leave to his service date to qualify. Unfortunately, annual leave can only be used with RIFs or a discontinued service retirement when an employee is involuntarily separated or has a redirected reassignment outside of their commuting area.
Military credits can be used to qualify for a VERA… You need a minimum of 5 years of civilian service to be eligible for a civilian retirement annuity. However, after the 5 years is met, the military service is creditable towards years of service for all the other voluntary retirement eligibility requirements: MRA +10; MRA +30; 60 years old with 20 years of service; and the VERA requirements – age 50 with 20 years of service or any age with 25 years of service. Review all eligibility requriements for FERS and CSRS retirement.
One major consideration, especially for those leaving in their 40s and 50s, is what you will do when you retire. Most will look for other employment and it is important to stay active and involved. Go to our Jobs Center to find employers that are specifically looking for retired feds with experience. Many companies seek out retired federal workers because of their extensive experience in many areas. Explore your options before you sign on the dotted line, especially since you will more than likely need supplemental income with an early retirement. Our job listings consolidate national listings for all occupations and in all sectors.
Complete details for VERA and VSIP programs:
What is the employee coverage in an early out?
Voluntary Early Retirement offers apply to employees covered under both the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) . When an agency has received VERA approval from OPM, an employee who meets the general eligibility requirements may be eligible to retire early. The employee must:
- Meet the minimum age and service requirements -
- At least age 50 with at least 20 years creditable Federal service, OR
- Any age with at least 25 years creditable Federal service;
- Have served in a position covered by the OPM authorization for the minimum time specified by OPM (usually 30 days prior to the date of the agency request);
- Serve in a position covered by the agency's VERA plan; and
- Separate by the close of the early-out period.
D-Day for Buyouts Fast Approaching
June 9, 2011Federal News Radio - What do federal buyouts and buffaloes have in common?
They were once plentiful, then almost disappeared and are now making a comeback.
The Government Printing Office is the latest federal operation, and the first legislative branch agency this year, to offer employees the chance to take regular or early retirement and receive a buyout worth $25,000, before deductions. GPO's buyout pool is small and localized. It has 2,200 employees, mostly in the DC area, and wants to eliminate 330 positions. A buyout on that scale in a much larger operation would impact a huge number of employees. Also, it is a sign of the times and an indicator that more buyouts (called VSIPs) are coming to more federal operations.
The giant Agriculture Department is offering targeted buyouts to 544 employees in several operations. Early-retirement will be available to a much larger group of workers department-wide.
During an early-out, VERA in government lingo, employees can qualify for immediate annuities if they are at least age 50 with 20 years of service, or at any age if they have 25 years of federal/military service. The value of an immediate (as opposed to deferred) annuity is that the retiree can keep their health insurance for life.
The Justice Department's Anti-Trust Division kicked off the buyout season this year, followed by the Federal Trade Commission, a large but targeted buyout ($20,000 max spread over two years) in the U.S. Postal Service, and the Smithsonian Institution.
Many workers would love to have the option to take early retirement IF accompanied by a buyout.
Data indicates that early-outs are popular when coupled with a buyout, but that relatively few people take early retirement without a cash sweetener.
Interest in buyouts is high goverment-wide. That's especially true in giant, high-burnout operations like Defense, Social Security Administration, the Internal Revenue Service and the VA. Air Force's Materiel Command is considering buyouts.
Politicians and political appointees who are increasingly concerned about the deficit are looking at the salary and benefits of government workers, including military personnel. Defense is looking at pay and benefits for civilian and military people, and especially at the high-cost to the government of military health benefits.
Unfortunately for federal workers looking for clues, HR offices are often the last to know when a buyout is being seriously considered or about to be announced. But keep watching this space because, when they do come through, most employees will have a short take-it-or-leave it decision period.
Offer One-time Early Retirement and Buyout for CSRS Employees
July 2010
The President's Save Award - I would suggest that all departments of the Federal Government offer all (no exceptions) current employees in the CSRS pension plan a one time (never to be offered again) early out retirement option with a one-time incentive bonus (40% of their base salary). These employees would have been continuously employed by since Jan 1, 1984, and have a minimum of 25 years of Federal Service towards this pension (actually 26 years). I would add that these new retirees would not (ever) be allowed to return to Civilian Federal Service as a term of this agreement.
The benefits are numerous.
I am not in the CSRS program; I am in the FERS program. I have a long way to go. This just makes sense to me.
The President's Save Award - I would suggest that all departments of the Federal Government offer all (no exceptions) current employees in the CSRS pension plan a one time (never to be offered again) early out retirement option with a one-time incentive bonus (40% of their base salary). These employees would have been continuously employed by since Jan 1, 1984, and have a minimum of 25 years of Federal Service towards this pension (actually 26 years). I would add that these new retirees would not (ever) be allowed to return to Civilian Federal Service as a term of this agreement.
The benefits are numerous.
- This will move a number of employees into a fixed cost (pension) to the government.
- Many of these individuals are senior staff, and are near the top of the pay scale (expensive).
- Replacement staff (new hires) could likely be brought in at up to half of the cost of the current employee cost. This lower payroll cost plus the bonus to the retiree would likely cost offset within the first two to three years.
- Most new retirees will be replaced by their direct subordinate, opening career advancement (or hope for it) within the ranks of the Federal Government. I am tired of seeing excellent employees leave for the private sector due to poor career progression (stagnation).
- New retirees would receive almost 50% (minimum) of their current salary per CSRS calculators.
- This would hopefully move most CSRS members into retirement, thus lightening the workload for all HR departments.
- Many jobs would be created, helping get people working in permanent, career track positions.
- New retirees could return to work in the private sector (clearly not entry level jobs) if they chose to.
- New retirees that chose to return to work could achieve (or complete) “40 good quarters” towards SSI benefits. (The Windfall Elimination Provision does have an SSI offset, but does not preclude a person from receiving those benefits.)
- Allowing new retirees the ability to continue to contribute (non-matching) to TSP as part of the “one time offer”. (Not sure on this one, but it sounds nice).
I am not in the CSRS program; I am in the FERS program. I have a long way to go. This just makes sense to me.
