It goes without saying that there’s a lot going on in the federal government right now that directly affects federal employees.
While this administration is trying to reshape and reduce the size of the federal workforce, there’s been a variety of resignation and early retirement offers mixed in with the looming threat of layoffs, RIFs, and being placed on administrative leave.
One common method of encouraging workers to leave is called a VSIP.
What is VSIP?
VSIP – or Voluntary Separation Incentive Payment – is a lump sum payment of up to $25,000 to encourage employees to leave their job.
This offer isn’t always available. It’s used for times like now, when agencies are trying to reduce numbers without introducing layoffs and firings.
If you accept a VSIP you could get up to $25,000 dollars, but there are some significant drawbacks:
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- If you accept the payment but then return to work in the federal government within 5 years – even as a contractor – you’ll have to pay back the full amount of money you received before your first day on the job
- Accepting a severance package means letting go of a regular paycheck. After your lump sum runs out you’ll have to find additional income somewhere, and the job market can be difficult
- Accepting could also damage your retirement savings and end your healthcare coverage
A Better Long-Term Option
If you’ve already been thinking about leaving, another option would be Federal Disability Retirement. This benefit is for federal workers with at least 18 months of service under FERS who have a mental or physical health condition that stops them from completing their duties.
For example, a worker with Post Traumatic Stress Disorder may develop the inability to focus at work because of their symptoms. This could be a condition which would qualify them for Federal Disability Retirement.
If approved, this benefit would go a long way to securing your financial health as well as supporting your medical conditions. It would offer:
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- Continued health and life insurance benefits
- A monthly paycheck
- Continued years of service until age 62
- The ability to get another job in the private sector that works for you
Typically, applying for both Disability Retirement and VSIP isn’t very helpful.
If you’re in the process of applying for Federal Disability Retirement and accept a VSIP, know this: a Federal Disability Retirement approval means you’ll have to pay back the VSIP money in full.
Also, taking a resignation before Disability Retirement isn’t recommended, as it can complicate your case.
If you think you would qualify for Disability Retirement, it’s important to consider which is the better option:
VSIP
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- Offers you the chance to get out of the federal government now
- Offers up to $25,000 paid as a lump sum
- If accepted, you’d need to stay out of federal government work for 5 years, or risk having to pay the incentive back in full
- Can’t be combined with Federal Disability Retirement
- Doesn’t offer long term pay or benefits
Federal Disability Retirement
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- Allows you to retire with just 18 months of service – even if you haven’t reached a specific age
- Monthly payments
- Continued health and life coverage
- You keep building your retirement
- You get to pursue another job in the private sector
- If you’re approved for Disability Retirement and you’ve already taken a VSIP, you’d need to pay back the incentive money
We Can Help
This can be a challenging choice to make, especially on your own.
But don’t risk missing out on years of security by making a choice without knowing all your options.
Call us today for a free consultation and we’ll point you in the right direction. Your long-term health and financial security are worth it!
