PERMISS

Voluntary Separation Incentive Pay (VSIP)

WHAT IS IT?

VSIPs (also know as buyouts) are payments of up to $25,000 paid to encourage permanent employees to resign or retire. Eligible employees may separate from service voluntarily (either by retirement or resignation) to avoid or minimize the need for involuntary separations due to RIF or workforce restructuring. Section 9902(i) of title 5,U.S.C., as enacted by section 1101 of the National Defense Authorization Act of FY 04, Public Law 108-136, provides authority for the Secretary of Defense to establish a permanent downsizing and restructuring VSIP program.

Under 9902(g) of title 5, United States Code, the Department of Defense may not authorize the payment of VSIP to more than 25,000 employees in a fiscal year. This limitation does not apply to VSIP payments related to closure or realignment of a military installation according to the Defense Base Closure and Realignment Act of 1990.

VSIP is not an employee entitlement. It is a management tool used to encourage designated civilian employees to separate voluntarily from Federal service.

WHEN ARE BUYOUTS OFFERED?

Generally in DOD, activities must offer buyouts to their employees at least 30 days before they issue RIF notices (does not include BRAC nor NAF VSIPs).

WHO IS ELIGIBLE FOR A BUYOUT?

Employees are eligible for VSIP provided they are (1) U.S. citizens as defined by 5 U.S.C. 9902(g) and NAF employees, (2) serving under an appointment without time limitation and (3) have been continuously employed by the Department of Defense for at least 12 months. Re-employed annuitants are not eligible for a buyout.

ARE EMPLOYEES RECEIVING SPECIAL SALARY RATES ELIGIBLE FOR BUYOUTS?

No, employees receiving special salary rates are not eligible for VSIP unless a waiver is approved by the delegated official authorized to approve VSIPs.

CAN AN EMPLOYEE WHO DECLINES A TOF RECEIVE A VSIP?

Employees who decline an offer of a position due to a Transfer of Function (TOF) are not eligible for a VSIP. The rationale for this determination is that it is contrary to the intent of the law to pay an incentive to an employee to leave Federal service when s/he has declined an offer of continued equivalent employment, even if that employment is outside of the commuting area. The employee declining the transfer will be separated through adverse action, not RIF procedures.

CAN ANY ELIGIBLE EMPLOYEE RECEIVE A VSIP?

VSIP is not an automatic entitlement for employees. Approval of VSIP applications is contingent upon managementís ability to identify how civilian reductions can be minimized and cost savings achieved through the use of VSIP authority. These decisions will be made locally. Approval of an incentive is limited to situations that clearly show it will avoid or minimize the need for involuntary separations related to workforce reductions or restructuring.

WHAT HAPPENS IF THE NUMBER OF APPLICANTS EXCEEDS BUYOUT OFFERS?

When the number of employees applying for VSIP exceeds the offers available, applications within that group shall be processed in order of seniority using the leave service computation date (LVSCD).

WHO APPROVES VSIP?

The Assistant Secretary of the Army (Manpower and Reserve Affairs) redelegated VSIP authority (excluding Senior Executive Service positions) to the Commanders of the Army Commands, the Commanders of the Army Service Component Commands, the Commanders/Superintendent of the Direct Reporting Units, and the Administrative Assistant to the Secretary of the Army. This authority may be redelegated no lower than the local commander or activity head.

WHAT IS THE INCENTIVE AMOUNT?

The separation incentive is the lesser of:

VSIP is calculated using the severance pay formula in title 5, United States Code (U.S.C.), Section 5595(c). Using this formula, any severance pay previously received must be deducted from the employees lifetime entitlement. The final VSIP amount is equal to $25,000 or the amount of severance pay the employee would be entitled to using this formula, whichever is less.

HOW IS THE SEPARATION INCENTIVE PAID?

It is paid in either a lump sum or in installments.

ARE THERE ANY RESTRICTIONS ASSOCIATED WITH THE RECEIPT OF VSIP?

Yes, there are restrictions on re-employment and requirements to repay the VSIP if re-employed.

- Former Federal employees who return to work for the government after receiving a VSIP may be required to repay an amount equal to the VSIP amount received, including Federal taxes that were withheld.

- An employee who takes a DOD or other Agency VSIP on or after March 30, 1994, must repay the incentive if he or she returns to the Federal Government as an employee (including nonappropriated fund instrumentalities), or under a personal services contract, within five years unless a waiver is granted by the applicable waiver granting authority.

- A DOD employee who takes a VSIP may not be reemployed by DoD in any capacity for a 12-month period beginning on the effective date of the employee's separation. The Secretary of Defense may approve exception on a case-by-case basis. (Waivers may also result from the existence of a national emergency).

Servicing Civilian Personnel Advisory Centers (CPACs) are required to inform prospective VSIP takers of these reemployment limitations and repayment requirements. CPACs must also inform incentive takers of the repayment requirements before they are offered employment within DOD. If a VSIP taker is re-employed, the Civilian Personnel Operations Center must contact its supporting Defense Finance and Accounting Office, or other so that repayment procedures can be initiated. This requirement applies even if the VSIP was paid by another Federal agency; DOD is still responsible for collecting the repayment and forwarding it to the appropriate Federal Agency. Conversely, other Federal agencies are responsible for collecting repayments and forwarding them to DOD when they reemploy our former incentive takers.

WHAT CONSTITUTES A PERSONAL SERVICES CONTRACT FOR REPAYMENT PURPOSES?

The following is an excerpt from Title 48, Code of Federal Regulations, Section 37.104 that defines and describes personal services contracts.

(a) A personal services contract is characterized by the employer-employee relationship it creates between the Government and the contractor's personnel. The Government is normally required to obtain its employees by direct hire under competitive appointment or other procedures required by the civil service laws. Obtaining personal services by contract rather than by direct hire, circumvents those laws unless Congress has specifically authorized acquisition of the services by contract.

(b) Agencies shall not award personal services contracts unless specifically authorized by statute (e.g., 5 U.S.C. 3109) to do so.

(c)(1) An employer-employee relationship under a service contract occurs when, as a result of

(i) the contract's terms or

(ii) the manner of its administration during performance, contractor personnel are subject to the relatively continuous supervision and control of a Government officer or employee. However, giving an order for a specific article or service, with the right to reject the finished product or result, is not the type of supervision or control that converts an individual who is an independent contractor (such as a contractor employee) into a Government employee.

(2) Each contract arrangement must be judged in the light of its own facts and circumstances, the key question always being: Will the Government exercise relatively continuous supervision and control over the contractor personnel performing the contract? The sporadic, unauthorized supervision of only one of a large number of contractor employees might reasonably be considered not relevant, while relatively continuous Government supervision of a substantial number of contractor employees would have to be taken strongly into account.

(d) The following descriptive elements should be used as a guide in assessing whether or not a proposed contract is personal in nature:

(1) Performance on site.

(2) Principal tools and equipment furnished by the Government.

(3) Services are applied directly to the integral effort of agencies or an organizational subpart in furtherance of assigned function or mission.

(4) Comparable services, meeting comparable needs, are performed in the same or similar agencies using civil service personnel.

(5) The need for the type of service provided can reasonably be expected to last beyond one year.

(6) The inherent nature of the service, or the manner in which it is provided reasonably requires directly or indirectly, Government direction or supervision of contractor employees in order to:

(i) Adequately protect the Government's interest;

(ii) Retain control of the function involved; or

(iii) Retain full personal responsibility for the function supported in a duly authorized Federal officer or employee.


(e) When specific statutory authority for a personal service contract is cited, obtain the review and opinion of legal counsel.

(f) Personal services contracts for the services of individual experts or consultants are limited by the Classification Act. In addition, the Office of Personnel Management has established requirements which apply in acquiring the personal services of experts or consultants in this manner (e.g., benefits, taxes, conflicts of interest). Therefore, the contracting officer shall effect necessary coordination with the cognizant civilian personnel office.

The DoD 1400.25-M, SC1702.Subchapter 1702, Voluntary Separation Programs can be found at http://www.cpms.osd.mil/care/vsipvera.aspx.

Content last reviewed: 1/30/2009-EAH

Related Topics