SEVERANCE PAY
Description
Severance pay is authorized for 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 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 (i.e., 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 within 1 year after the date of the appointment; is receiving injury
compensation under 5 U.S.C. chapter 81, subchapter I; or is eligible upon
separation for an immediate annuity from a Federal civilian retirement system or
from the uniformed services. 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
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• 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
CFR 550.703);
• 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), including—
o A term appointment;
o An overseas limited appointment with a time limitation;
o 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;
o A Veterans Readjustment Appointment; and
o 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.
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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 consists of—
• 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.
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,
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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.
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, annual premium pay
for standby duty, law enforcement availability pay, straight-time pay for regular
overtime hours for firefighters, night differential for prevailing rate employees,
locality payments, and special rate supplements. 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);
• Service performed with the United States Postal Service or the Postal
Rate Commission;
• Military service, including active or inactive training with the National
Guard, when performed by an employee who returns to 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.
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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
If an individual entitled to severance pay later 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. 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
5 U.S.C. 5595
5 CFR part 550, subpart G
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