Is a VSIP Right for You?

Last month, the EPA announced its intent to offer buyouts (known in the federal government as Voluntary Separation Incentive Payments, or VSIPs) as part of its plan to shrink its workforce. Other federal agencies may follow suit, and whether you work at the EPA or another federal agency that might be looking to cut employees, it’s important to know whether a buyout is right for you before the offer is on the table, especially because buyouts are often offered for only a limited period of time and can be made first-come, first served. Here are a few things to think about while you make your decision.

1. Am I eligible for the buyout? It’s up to OPM to grant permission to an agency to offer VSIPs, but generally, to be eligible an employee must not be in a time-limited appointment, must be currently employed in the executive branch, must have been with the executive branch for a continuous period of at least three years, and must not meet the ineligibility criteria (you can read more about that here).
2. How much will I get? By law, non-defense VSIPs are capped at the lesser of $25,000 or your severance pay allowance (if you’re interested in knowing how your severance pay allowance would be calculated, check out5 CFR §550.707.) That $25,000 is pre-tax, so you’ll likely pay at least a few thousand dollars on that amount, depending on your tax bracket. That said, when you know how much you’ll make based on the buyout vs. severance, if the latter will net you more, you might be better off remaining in place, but only if you think your position would be eliminated in a Reduction in Force (RIF). Choosing to remain in place can be a gamble, especially if you’re unhappy in federal employment or just want a career change.
3. Am I financially ready to take a buyout (close to retirement): Let’s say you’re close to retirement and are leaning toward taking a buyout. Look at your finances, including any retirement accounts, pensions, and Social Security payouts you are eligible for. Then look at your current spending habits and determine whether, based on your current income vs. your income in retirement, you’re better off remaining in place or taking the buyout. When you’re calculating your retirement payouts, don’t forget to figure in any state and federal taxes that you may need to pay on withdrawals.
4. Am I financially ready to take a buyout (new to federal service): Now, let’s say you’re relatively new to federal service, you aren’t satisfied in your current position, and a VSIP opportunity comes along. If you’re looking for a career change, taking a VSIP might be right for you, because a RIF could result in a far lower payout, if your position is eliminated. But, as I’ll note in #5, you cannot return to federal service for five years, so if you’re interested in simply moving to a different agency or a new position, staying put is probably your best bet. If you are far from retirement and choose a VSIP buyout, be sure to determine where your government skills would fit in the private sector before you make a decision (it isn’t always an easy conversion). Have some prospects lined up, update and clean up your resume, and start reaching out to your networks to see what’s available for you. And be sure that you have enough in emergency savings to cover any living expenses during a potential gap in employment.
5. Can I come back if I change my mind? Not really. If you take a buyout, you need to wait a full five years before returning to federal service. If you’re hired back before then, you’ll need to repay the full, pre-tax buyout amount on the day of your return (unless you can get a waiver from OPM, but those are pretty rare so don’t count on it).
6. Are you actually ready to retire or change careers? Putting your finances aside, are you mentally prepared to enter a new phase of your life? Does the idea of not having that 9-5 make you feel a bit squeamish? Have you made plans for what retirement will look like for you? Or, if you need to remain employed, do you actually want to go job hunting again? Do you know what you want to do? Are there certain skills you need to hone and can you take classes to beef up your resume? Consider making a pro and con list regarding your feelings about the buyout and what you need to do to make it work for you.

There are many things to consider before taking a buyout. It can be a great opportunity to move into a new field or to spend a couple extra years in retirement. But you must be sure you are prepared – both mentally and financially – before you accept the offer.

Are buyouts coming to your agency? What are you thinking about before you decide whether to take it? Tell us in the comments below!