Would More Generous Buyouts Trigger Long-Rumored Retirement Wave?

Unions oppose potential first increase in VSIP cap since program’s inception.

Federal workforce observers said that given the ongoing uncertainty about employees’ pay and benefits, a proposed increase to the amount agencies can offer workers to retire early could be a boon to the White House’s goal of shrinking the government’s footprint.

The Office of Management and Budget confirmed Tuesday that the Trump administration has asked Congress to expand governmentwide a Defense pilot program boosting the cap on civilian employee Voluntary Separation Incentive Payments from $25,000 to $40,000. 

The House's fiscal 2018 National Defense Authorization Act (H.R.2810), which will be up for a vote later this week, does not include the provision, requested last month by the Pentagon, but it does extend the pilot program until 2021. The NDAA is often used as a vehicle for implementing governmentwide personnel changes.

Tammy Flanagan, a consultant who advises federal employees on retirement issues, said more generous buyout offers could be a deal clincher for employees considering early retirement as a result of ongoing budget uncertainty and proposed cuts to retirement benefits and the federal workforce as a whole.

“The things that were in the president’s [fiscal 2018] budget proposal, like threatening to change retirement, has a lot of employees in panic, and they’re getting ready to pull the trigger and walk out if those changes take effect,” Flanagan said. “So if Congress says, ‘Hey, we’ll downsize these budgets, but offer early retirement with better buyouts,’ a lot of people might say, ‘I better get it while the getting’s good and before things do change.’ ”

For their part, federal employee unions opposed the proposal. Randy Erwin, national president of the National Federation of Federal Employees, said Tuesday that while the buyout cap should be updated, it should not be part of a larger effort to shed workers from the federal payroll.

American Federation of Government Employees President J. David Cox said federal agencies need more resources to fulfill their missions, and they shouldn’t look to pay employees to leave early.

“Government as it stands is brutally understaffed. We need more workers processing veterans’ benefits claims, not less,” he said. “We need more border patrol agents and correctional officers to keep our communities safe, not less. We should be spending time finding ways to improve, not degrade vital federal resources.”

But Flanagan said that despite the VSIP cap having not seen an update since it was enacted in 1993, she does not think that deterred many employees from taking a buyout.

“[The $25,000 cap] didn’t really stop downsizing efforts—agencies were keeping up with their goals without increasing it,” she said.

She warned that just because an agency has access to higher buyout caps, that doesn’t mean officials necessarily will employ them to achieve workforce reductions.

“You have to remember, that an agency’s budget has to be able to pay it off,” Flanagan said. “The money’s not coming from Congress -- it’s from the agency itself.”