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Voluntary Separation Incentive Payment


What is a Voluntary Separation Incentive Payment?

A Voluntary Separation Incentive Payment (VSIP), also referred to as a buy-out, is a lump-sum payment made to eligible employees who separate through resignation, optional retirement, or early retirement. As reflected in its official title, a decision to take a VSIP must be voluntary.

What authority does Commerce have to offer VSIPs?

Under the Homeland Security Act (P.L. 107-296), the Office of Personnel Management (OPM) can grant VSIP authority to an agency to enable it to complete its personnel or workload changes with a minimal disruption to its organization. Based on an agency’s request, OPM gives the agency the authority to offer VSIPs.

Who will be offered VSIPs?

All employees who receive an employee notice (announcing that a VSIP period will be offered) and who meet the below requirements are eligible to apply.

Eligible employees must:

  • Serve under an appointment without time limitation;
  • Be currently employed with the Federal government for a continuous period of at least three years, without a break in service of four or more days; and
  • Must be willing to separate by the date that is contained in the employee notice.

If any of the following applies, an employee is ineligible for a VSIP:

  • Reemployed annuitant under the Civil Service Retirement System (CSRS), the Federal Employees Retirement System (FERS), or another retirement system for employees of the Government.
  • Eligible for disability retirement under CSRS, FERS or another retirement system for employees of the Government.
  • In receipt of a decision notice of involuntary separation for misconduct or unacceptable performance.
  • Previously received a VSIP from the Federal Government.
  • On transfer employment with another organization and are covered by statutory reemployment rights.
  • Received a student loan repayment benefit during the last 36 months; a recruitment or relocation bonus during the last 24 months; or a retention bonus during the last 12 months.

How is the dollar amount of a VSIP computed?

The VSIP payment is equal to the amount that employees would be entitled to receive as severance pay, or an amount not to exceed $25,000. Severance pay is paid for involuntary separations. Since leaving the agency to take a VSIP is a voluntary action, employees are not eligible for both severance pay and VSIP.

What is the repayment requirement for a VSIP?

It is important for employees to understand that if they take a VSIP, they cannot return to work for the Federal government for 5 years. If they do return before that time, they must repay the gross amount of the VSIP before their first day of reemployment. To illustrate this point, if an employee receives a $25,000 VSIP, taking home $18,000 after taxes and withholdings, the employee must repay the entire $25,000 before reporting to work at Commerce or the new agency. Employees are also responsible for settling the overpayment of money withhold (i.e., state and local taxes, FICA) with the proper agency after repayment is made.

Can the repayment requirements be waived?

The Homeland Security Act gave OPM the authority to waive the repayment requirements under limited circumstances. To qualify, the individual must possess unique abilities and be the only qualified applicant available for the position. In the case of an emergency involving a direct threat to life or property, the individual must have skills directly related to resolving the emergency and must serve on a temporary basis only so long as the individual’s services are required by the emergency.

How is the Voluntary Early Retirement Authority related to the VSIP?

The Voluntary Early Retirement Authority (VERA), also referred to as an early-out, and VSIP are two difference types of incentives that can be used to offset the impact of involuntary separations or reorganizations. A VERA allows an employee to opt to retire before meeting the normal age and years of service requirements. A VSIP is a lump-sum payment made to eligible employees who voluntarily separate through resignation, optional retirement, or early retirement.  Depending on individual circumstances, some employees may be eligible for, and receive, either or both incentives.