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Buyout Basics

As federal agencies continue to look for ways to cut costs, more and more employees are faced with a choice to retire early from government service or take advantage of buyout incentives.

The Education Department is among the agencies considering whether to offer buyouts to employees to help reshape their workforces amid budget pressures. The Government Printing Office earlier this month announced plans to downsize, while the Agriculture Department is offering early outs to most employees and buyouts for 544 positions. The Smithsonian Institution and U.S. Postal Service also have voluntary separation packages.

Federal agencies have two options for reducing staffing levels before starting layoffs. An early out, also called voluntary early retirement, usually is offered if an agency is undergoing reorganization and plans to cut jobs and employee pay. Voluntary separation incentive payments, or buyouts, allow agencies that are downsizing or restructuring to offer employees up to $25,000 as an incentive to leave their positions. The Office of Personnel Management must authorize both options before an agency can offer them to employees.

John Grobe, president of consulting firm Federal Career Experts, advises employees considering an early out or buyout to think carefully about what they are going to do next. Workers should have a realistic idea of what jobs and rates of pay are available outside federal service and recognize how far $25,000 will go. Employees also should research how their decision will affect their Federal Employees Health Benefits Plan and life insurance, he said.

"Always focus much more on where you're going to than where you're coming from," Grobe said. "Don't let a bad boss or unhappiness with pay push you into a decision you might later regret."

Take our quiz to see if you're prepared for a potential buyout or early-out option at your agency.

1. Is anyone eligible for an early out? What about a buyout?

A. Any employee in an agency offering these options can apply for them.

B. Workers must meet specific age and service criteria to retire early, but most can take advantage of incentive payments.

C. Employees must be at or near retirement age to participate in an early out or a buyout.

2. Will my annuity payments decrease if I take voluntary early retirement?

A. The early-out option has no impact on annuity benefits.

B. Civil Service Retirement System beneficiaries will be penalized if they are under age 55, but pensions for those under the Federal Employees Retirement System will not change.

C. All employees will see a reduction in their retirement benefits.

3. Can I come back to federal service after I take a buyout?

A. No. A buyout is the end of your government career.

B. Yes. In fact, you can reapply the next day if you change your mind.

C. Yes, but you may have to pay back that $25,000.

Click here for the answers.

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