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Severance Pay

Fact Sheet: Severance Pay

Description

Severance pay under 5 U.S.C. 5595 is authorized for covered full-time and part-time employees who are involuntarily separated from Federal service and who meet other conditions of eligibility.

Eligibility for Severance Pay

To be eligible for severance pay, an employee must be employed by an agency covered by 5 U.S.C. 5595, serving under a qualifying appointment, have a regularly scheduled tour of duty, have completed at least 12 months of continuous service, and be removed from Federal service by involuntary separation for reasons other than inefficiency (that is, unacceptable performance or conduct).

Ineligibility for Severance Pay

An employee is not eligible for severance pay if he or she—

is serving under a nonqualifying appointment;
declines a reasonable offer of assignment to another position;
is serving under a qualifying appointment in an agency scheduled to be terminated by law or Executive order within 1 year after the date of the appointment unless the appointment is effected within 3 calendar days after separation from a qualifying appointment (see 5 CFR 550.704(b)(3) for additional information.);
is receiving injury compensation under 5 U.S.C. chapter 81, subchapter I (unless compensation is received concurrently with pay);
is eligible upon separation for an immediate annuity (as defined in 5 CFR 550.703) from a Federal civilian retirement system or from the uniformed services; or
holds a position for which the rate of basic pay is fixed at an Executive Schedule (EX) rate or has a rate of basic pay in excess of the official rate of pay for EX level I.

The employing agency must determine whether an employee was provided a reasonable offer, as defined in 5 CFR 550.703.

Qualifying Appointments

The following appointments are qualifying appointments for severance pay eligibility:

A career or career-conditional appointment in the competitive service or the equivalent in the excepted service;
A career appointment in the Senior Executive Service;
An excepted appointment without time limitation, except under Schedule C or an equivalent appointment made for similar purposes;
An overseas limited appointment without time limitation;
A status quo appointment, including one that becomes indefinite when the employee is promoted, demoted, or reassigned;
A time-limited appointment in the Foreign Service, when the employee was assigned under a statutory authority that carried entitlement to reemployment in the same agency, but this right of reemployment has expired; and
A time-limited appointment (or series of time-limited appointments by the same agency without any breaks in service) for full-time employment that takes effect within 3 calendar days after the end of a qualifying appointment.

Nonqualifying Appointments

The following types of appointments are nonqualifying appointments and do not convey eligibility for severance pay:

An appointment at a noncovered agency (see the definition of agency in 5 U.S.C. 5595(a)(1) and 5 CFR 550.703; see also 5 U.S.C. 5595(a)(2)(vii));
An appointment in which the employee has an intermittent work schedule;
A Presidential appointment;
An emergency appointment;
An excepted appointment under Schedule C or an equivalent appointment made for similar purposes;
A noncareer appointment in the Senior Executive Service or an equivalent appointment made for similar purposes; and
A time-limited appointment (except for a time-limited appointment that is qualifying because it is made effective within 3 calendar days after separation from a qualifying appointment and involves full-time employment), including—
- A term appointment;
- An overseas limited appointment with a time limitation;
- A limited term or limited emergency appointment in the Senior Executive Service, as defined in 5 U.S.C. 3132(a), or an equivalent appointment made for similar purposes;
- A Veterans Readjustment Appointment; and
- A Presidential Management Fellows appointment.

12 Months of Continuous Employment

To be eligible for severance pay, an employee must have completed at least 12 months of continuous service by the date of separation. This continuous service may consist of one or more civilian Federal positions held over a period of 12 months without a single break in service of more than 3 calendar days. The positions held must have been under one or more qualifying appointments; one or more nonqualifying temporary appointments that precede the current qualifying appointment; or an appointment to a position in a nonappropriated fund instrumentality of the Department of Defense or the Coast Guard that precedes the current qualifying appointment in the Department of Defense or the Coast Guard, respectively.

Resignations and Involuntary Separation

If an employee expects to be involuntarily separated and resigns, the employee is considered to have been involuntarily separated if he or she resigns after receiving a specific written notice that he or she will be involuntarily separated by a particular action effective on a particular date; or a general written notice of reduction in force or transfer of functions which—

Is issued by a properly authorized agency official;
Announces that the agency has decided to abolish, or transfer to another commuting area, all positions in the competitive area by a particular date (no more than 1 year after the date of the notice); and
States that, for all employees in that competitive area, a resignation following receipt of the notice constitutes an involuntary separation for severance pay purposes.

However, a resignation is not considered an involuntary separation if the specific or general written notice is canceled before the separation (based on that resignation) takes effect. Resignations under any other circumstances are voluntary separations and do not carry entitlement to severance pay.

Computation of Severance Pay Fund

An employee's severance pay fund may consist of two parts: the basic severance pay allowance and an age adjustment allowance, if applicable.

Basic Severance Pay Allowance

The basic severance pay allowance is computed as follows —

One week of pay at the rate of basic pay for the position held by the employee at the time of separation for each full year of creditable service through 10 years;
Two weeks of pay at the rate of basic pay for the position held by the employee at the time of separation for each full year of creditable service beyond 10 years; and
Twenty-five percent of the otherwise applicable amount for each full 3 months of creditable service beyond the final full year (where the otherwise applicable amount is 1 week’s basic pay if total service is less than 10 years and 2 weeks’ basic pay if total service is more than 10 years).

The weekly rate of basic pay for employees with variable work schedules is determined based on the weekly average for the last position held by the employee during the 26 biweekly pay periods immediately preceding separation. The regulations at 5 CFR 550.707(b) provide specific instructions on calculating the weekly rate for various types of variable work schedules, including part-time work and seasonal work. For information on how to calculate the approximate amount of severance pay for employees with non-variable work schedules, please see the Severance Pay Estimation Worksheet.

Age Adjustment Allowance

The basic severance pay allowance is augmented by an age adjustment allowance consisting of 2.5 percent of the basic severance pay allowance for each full 3 months of age over 40 years.

Example

At the time of separation, an employee—

has a rate of basic pay of $1,500 per week;
has creditable service of 20 years, 4 months (where 4 months yields one full 3-month period—that is, one quarter-year period); and
is 45 years and 8 months old (where 8 months yields two full 3-month periods—that is two quarter-year periods).

Basic Allowance:

first 10 years × $1,500 =	$15,000
10 additional full years × 2 × $1,500 =	$30,000
1 quarter-year × 25% × 2 × $1,500 =	$750
Total Basic Allowance	$45,750

Age Adjustment Allowance:

5 years over 40 =	20 quarter-years
Additional 8 months =	2 quarter-years
22 quarter-years × 2.5% × $45,750 =	$25,162.50

Total Severance Pay Fund:

$45,750 + $25,162.50 =

$70,912.50 (47.275 weeks)

Rate of Basic Pay

Rate of basic pay means the rate of pay fixed by law or administrative action for the position held by the employee, including, as applicable:

Any locality payment under 5 CFR part 531, subpart F, or similar payment under other legal authority;
Special rate supplement under 5 CFR part 530, subpart C, or similar payment or supplement under other legal authority;
Standby duty premium pay under 5 U.S.C. 5545(c)(1);
Administratively uncontrollable overtime pay under 5 U.S.C. 5545(c)(2);
Law enforcement availability pay under 5 U.S.C. 5545a;
Straight-time pay for regular overtime hours for firefighters under 5 U.S.C. 5545b (as provided in 5 CFR 550.1305(b));
Night differential for prevailing rate employees under 5 U.S.C. 5343(f); and
An overtime supplement for regularly scheduled overtime within a Border Patrol agent's regular tour of duty under 5 U.S.C. 5550 (as required by 5 U.S.C. 5550(d)(1)(A)).

Rate of basic pay does not include additional pay of any other kind. (See definition of rate of basic pay in 5 CFR 550.703.)

Lifetime Limitation

An employee may not receive a total of more than 52 weeks of severance pay during his or her lifetime.

Creditable Service for Computing Severance Pay

The following types of service are creditable for computing an employee's severance pay:

Civilian service as an employee (as defined in 5 U.S.C. 2105), excluding time during a period of nonpay status that is not creditable for annual leave accrual purposes under 5 U.S.C. 6303(a) (See Effect of Extended Leave Without Pay (LWOP) (or Other Nonpay Status) on Federal Benefits and Programs);
Service performed with the United States Postal Service or the Postal Regulatory Commission;
Military service (including active or inactive training with the National Guard) and other service in the uniformed services that interrupts Federal civilian service when performed by an employee who returns to Federal civilian service through the exercise of a restoration right provided by law, Executive order, or regulation;
Service performed by an employee of a nonappropriated fund instrumentality of the Department of Defense or the Coast Guard and who moves to a civilian position with the Department of Defense or the Coast Guard, respectively, without a break in service of more than 3 days; and
Service performed with the government of the District of Columbia by an individual first employed by that government before October 1, 1987, excluding service as a teacher or librarian of the public schools of the District of Columbia.

Accrual and Payment of Severance Pay

Severance pay accrues on a day-to-day basis following the recipient's separation from Federal employment. Severance payments must be made at the same pay period intervals that salary payments would be made if the recipient were still employed. The amount of the severance payment is computed using the recipient's rate of basic pay in effect immediately before separation. Severance payments are subject to appropriate deductions for income and Social Security taxes. Severance payments are the responsibility of the agency employing the recipient at the time of the involuntary separation that triggered the current entitlement to severance pay. The regulations at 5 CFR 550.709 provide more details on the accrual and payment of severance pay.

Reemployment and Termination or Suspension of Severance Pay

Severance pay terminates when the severance pay fund is exhausted.

If an individual who is receiving severance pay accepts a position with the Federal Government or the government of the District of Columbia, he or she is no longer eligible for severance pay, and severance pay is terminated—unless employed under a nonqualifying time-limited appointment (see next paragraph). The employing agency must then record on the appointment document the number of weeks of severance pay the individual has received. If the employee again becomes entitled to severance pay, the agency from which the employee is involuntarily separated must recompute the severance pay allowance on the basis of all creditable service and the individual’s current age. The agency must deduct the number of weeks for which severance pay previously was received from the number of weeks it would take to exhaust the recomputed allowance.

If an individual entitled to severance pay is employed by the Federal Government or the government of the District of Columbia under a nonqualifying time-limited appointment, severance pay is suspended during the life of the appointment but resumes (without being recomputed) when the employee separates from the nonqualifying time-limited appointment. The resumed severance payments are the responsibility of the agency that originally separated the individual involuntarily.

References

Questions

Agencies are responsible for the administration of severance pay for their employees and establishing their own HR policies based on regulations and statutes. Therefore, if you are an employee, timekeeper, supervisor or other agency official, or union representative, you should contact your servicing HR office for assistance with any questions you may have. If you are a component HR office, you should contact your agency headquarters office for assistance. If your HR chain of command needs assistance answering your question, inquiries should be directed to OPM through the headquarters HR policy office.