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Is A Voluntary Early Retirement (VERA) in Your Future?

Posted By Dennis Damp On In ANNUITIES / ELIGIBILITY,BENEFITS / INSURANCE,EMPLOYMENT OPTIONS,ESTATE PLANNING,FINANCE / TIP,RETIREMENT CONCERNS,SOCIAL SECURITY / MEDICARE,UNCATEGORIZED | Comments Disabled
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Updated 2/10/2024

When I attained 25 years of service at age 44, I felt a great sense of relief. I knew that with 25 years of creditable service [2] I would at least be eligible for an early retirement, and I could apply for a VERA and VSIP if offered.

The FAA received VERA authority in the mid 1990s during a major reorganization and I applied for the option and was denied. My position was not included in the initial offer. I was a little apprehensive when I first applied, and my wife had major reservations because my annuity would have been a fraction of what it would have been at age 55.

First and foremost, look before you leap if offered a VERA. Determine if you can afford to retire [3] and determine what you will do to occupy your time [4] after you leave. I applied knowing that I had another fulltime job waiting for me with my publishing business.

Voluntary Early Retirement Authority (VERA)

VERA provides agencies the option to offer voluntary early retirement when restructuring as well as when downsizing. The voluntary early retirement provisions are the same under the Civil Service Retirement System (CSRS [5]) and the Federal Employees Retirement System (FERS) [6].

The use of VERA is an option for increasing voluntary attrition in agencies that are undergoing substantial organizational change (e.g., reduction in force, reorganization, reshaping, delayering).

Besides providing an incentive for employees to voluntarily retire or resign to avoid potential reduction in force (RIF) actions, the agency may also offer VERA to employees in safe positions that could then provide placement opportunities for employees occupying surplus positions.

Voluntary Separation Incentive Payments (VSIP)

The Voluntary Separation Incentive Payment (VSIP or buyout) Authority allows agencies to offer lump-sum payments to employees who are in surplus positions or have skills that are no longer needed in the workforce, as an incentive to separate.

Under VSIP, agencies may pay up to $25,000, or an amount equal to the amount of severance pay an employee would be entitled to receive, whichever is less. Employees may separate to accept VSIP by resignation, optional retirement, or by voluntary early retirement, if authorized.

VSIPs are an option for increasing voluntary attrition in agencies that are downsizing or restructuring. Besides providing an incentive for employees to voluntarily retire or resign to avoid potential reduction in force actions, the agency may also offer VSIP to employees in safe positions that could then provide placement opportunities for employees holding surplus positions.

Overview & Eligibility

VERA and VSIP programs allow federal agencies that are reorganizing or downsizing to offer early outs rather than lay employees off through a Reduction in Force (RIF). Agencies find it easier to offer early outs to those who wish to leave than to layoff federal employees.

Early outs reduce the potential for RIF’s because younger employees subject to layoffs generally receive lower pay and benefits than the senior employees that would be eligible for early retirement.

Agencies often offer Voluntary Early Retirement Authority (VERA) to employees without a Voluntary Separation Incentive Payment (VSIP). In this case you can retire early and receive benefits however no incentive payment of up to $25,000 is offered for you to do so.

To apply for an early out employees must be at least age 50 with 20 years of service or any age with 25 years of creditable service. If you are offered an early out, with or without a buyout, thoroughly understand the program and its impact on your finances [7], benefits [8], annuity [9], and retirement [10] before applying.

If you apply and your VERA is approved, you must leave by the date specified. This tends to play havoc with plans to sell back the maximum amount of accrued annual leave or the ability to round out your sick leave to an even month by the date of departure.

Pay close attention to the CSRS penalty that may apply. If the CSRS employee is under age 55, this calculation is reduced by one-sixth of one percent for each full month he/she is under age 55 (i.e. 2% per year).  There isn’t a penalty for FERS service.

The FERS Social Security Supplement

The FERS Social Security Supplement [11] applies under VERA for those who are at their MRA when they retire up to age 62. However, if the retiree goes back to work, the Social Security earnings limit applies. In 2024, you can earn up to $22,320 without having your Social Security benefits withheld. But beyond that point, you’ll have $1 in benefits withheld per $2 of earnings.

The limit is much higher if you’ll be reaching your Full Retirment Age (FRA) in 2024. In that case, you can earn up to $59,520 without having benefits impacted. From there, you’ll have $1 in Social Security withheld per $3 of earnings.

Early Retirement Positions

Those employees under the special 20-year retirement system [12], LEO, FF, ATC and NWC, can apply for a VERA if offered. If you don’t have 20 years vested in the special 20-year retirement system you will not receive the enhanced retirement benefits. With less than 20 years in the covered services their annuity would be based on the regular retirement formula.

Many under LEO, FF, ATC and NWC have regular federal civil service time as well. For example, if an air traffic controller (ATC) is age 53 and has 24 years of creditable service for retirement, but only completed 17 years of ATC covered service, the controller’s retirement would be based on the regular retirement formula because he hadn’t completed 20 years under the ATC system.

So close but so far away… A site visitor’s agency was offering early outs however he was just a few months shy of the required 25 years of service. He wanted to apply his accrued annual leave to his service date to qualify. Unfortunately, annual leave can only be used with RIFs or a discontinued service retirement when an employee is involuntarily separated or has a redirected reassignment outside of their commuting area.

Military credits can be used to qualify for a VERA

You need a minimum of 5 years of civilian service to be eligible for a civilian retirement annuity.  However, after the 5 years is met, the military service is creditable towards years of service for all the other voluntary retirement eligibility requirements: MRA +10; MRA +30; 60 years old with 20 years of service; and the VERA requirements – age 50 with 20 years of service or any age with 25 years of service. Review all eligibility requriements [13] for FERS and CSRS retirement.

One major consideration, especially for those leaving in their 40s and 50s, is what you will do when you retire. Most will look for other employment and it is important to stay active and involved. Go to our recently updated Jobs Center to find employers that are specifically looking for retired feds with experience, including links to the top 68 federal contractors [14].

Many companies seek out retired federal workers because of their extensive experience in many areas. Explore your options before you sign on the dotted line, especially since you will more than likely need supplemental income with an early retirement. Our job listings consolidate national listings for all occupations and in all sectors.

Complete details for VERA and VSIP programs:

Helpful Resources:

Learn more about your benefits [25], employment [26], travel [27], and financial planning issues [28] on our site and visit our Blog frequently at https://fedretire.net [29] to read all forum articles.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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