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Severance Pay

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What Is It

Severance pay is a cash payment to an employee who is involuntarily separated from Federal employment and who meets the conditions of eligibility.

Who Gets It


To be eligible for severance pay, an employee must be full-or part-time (i.e., have a regularly scheduled tour of duty) have a regularly scheduled tour of duty, be serving under a qualifying appointment, have completed at least 12 months of continuous service, and be involuntarily separated from the Federal service. An employee who is eligible for an immediate annuity may not receive severance pay.

A "qualifying appointment" means a career or career-conditional appointment, a career SES appointment, an excepted appointment without time limitation (except under Schedule C or an equivalent appointment for similar purposes). Time limited appointments, unless they follow qualifying appointments within three calendar days, are not "qualifying" for purposes of this definition.

"Continuous service" means the employee must not have had a break in service of more than 3 calendar days between qualifying appointments.
"Involuntarily separated" means the employee resigns or is separated after receiving a specific notice of separation or after receiving a general notice of reduction in force or transfer of function.

"Eligible for an immediate annuity" means at time of separation the employee fulfills either the CSRS or FERS retirement age and service requirements for an immediate annuity.

An "immediate annuity" is one that begins to accrue within 30 days of the employee’s separation from Federal employment.

The specific age and service requirements under each retirement system are:

Optional Retirement

CSRS

FERS

Any age with 25 years service*

Any age with 25 years service*

Age 50 with 20 years service*

Age 50 with 20 years service*

Age 55 with 30 years service

Minimum retirement age (55-57) with 30 years service

Age 60 with 20 years service

Minimum retirement age with at least 10 years service

Age 62 with 5 years service

Age 60 with 20 years service

 

Age 62 with 5 years service


* Under an early retirement authority, or the special provisions for law enforcement officers and firefighters

Discontinued Service Retirement

CSRS

FERS

Any age with 25 years service

Any age with 25 years service

Age 50 with 20 years service

Age 50 with 20 years service


Severance pay fund computation.
(Application software to compute severance pay is available to human resources offices. A sample worksheet at the end of this Section illustrates the rules of computation.) An employee's basic severance pay fund consists of:

  • A basic severance allowance
  • An age adjustment allowance

Basic severance allowance equals

One week's pay (use most recent rate) for each year of service up to and including 10 years, plus two weeks pay (use most recent rate) for each full year of service over 10.

Age adjustment allowance equals

Ten percent of basic severance allowance for each year the employee is over 40 years of age at the time of separation (2.5 percent of the basic severance allowance for every full 3 months the employee's age is over age 40).

Limitations

Severance pay is paid out biweekly at the employee's rate of pay before separation. Total severance pay is limited to 52 weeks of pay. If an employee is reemployed before exhausting the 52 weeks, and becomes eligible for severance pay again, the severance fund will be recomputed based on creditable service and current age and paid out for the period of the 52 weeks remaining to the employee.

References
5 U.S.C. 5595
5 CFR 550, Subpart G

Example - Severance Pay Worksheet

Employee name: Ginger Brendsel

Date of birth: 42-02-23

Service computation date: 73-10-05

Date of separation: 94-08-20

Total service at separation: 20yrs 10mos 15days

Age at time of separation YRS: 52 MOS: 5 DAYS: 27

Years and no. of quarters over 40 at separation YRS: 12 QTRS: 1

Locality rate per pay period: $2,461.60/1230.80wkly

Grade and annual rate: GS-13/10 /$64,218 /LOCALITY PAY

1. Basic severance allowance:

1,230.80(1 week's salary) X 10 YRS = $12,308

ADD 2461.60 (2 weeks salary) X 10 3/4 (Total Yrs Service less 10) = $26,462.20

TOTAL $12,308 +$26,462.20 =$38,770.20

2. Age allowance:

TOTAL (from above) X .10 X YRS and QTRS over 40

$38770.20 X .10 X 12.25 = $47,493.50

TOTAL of 1+2 $38,770.20 + $47,493.50 = $86,263.70

Payable severance fund (52 weeks at the biweekly rate): $64,218




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