Severance Pay

Severance pay under 5 U.S.C. 5595 is authorized for covered 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 employed by an Agency covered by
5 U.S.C. 5595, 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 (that is, unacceptable performance or conduct).

Refer to the Office of Personnel Management (OPM) OPM Fact Sheet on severance pay for a list of qualifying and non-qualifying appointments. The OPM Fact Sheet also defines 12 months of continuous service, resignations and involuntary separations.

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 Pay Fund

The severance pay fund is the total amount an employee is entitled to receive and consists of two parts: the basic severance pay allowance and an age adjustment allowance, if applicable.

Basic Severance Pay Allowance

The basic severance pay allowance is computed as follows:

• 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-three months of creditable service beyond the final full year (where the otherwise applicable amount is one week’s basic pay if total service is less than or equal to 10 years, and two weeks’ basic pay if total service is more than 10 years).

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-three months of age over 40 years.

Lifetime Limitation 

An employee may not receive a total of more than 52 weeks of severance pay during his or her lifetime.

Termination of Severance Pay

Severance payments terminate when the severance pay fund is exhausted.

Reemployment and Termination or Suspension of Severance Pay 

If an individual who is receiving severance pay accepts a position with the Federal Government or the Government of the District of Columbia under a qualifying appointment:

• The individual is no longer eligible for severance pay, and severance payments are stopped.
• The employing Agency must record on the appointment document the number of weeks of severance payments the individual 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 based on all creditable service and the individual’s current age.
• The Agency must deduct the number of weeks for which severance payments were previously 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 non-qualifying, time-limited appointment:

• Severance payments are suspended during the life of the appointment.
• Severance pay resumes (without being recomputed) when the employee separates from the non-qualifying, time-limited appointment.
• The resumed severance payments are the responsibility of the Agency that originally separated the individual involuntarily.

Computing Estimated Severance Payments in the National Finance Center's (NFC) Payroll/Personnel System (PPS)

OPM provides a Severance Pay Estimation Worksheet that can be used by an employee to calculate a severance pay estimate, an example of a severance pay calculation, and a table providing the age adjustment factors used in severance pay computations for employees more than 40 years old.

NFC PPS provides Information/Research Inquiry System (IRIS) Program IR135, Severance Pay Computation, which allows the Agency to project the severance payment amount an employee would receive when entitled to severance payments.

The following fields are used to project severance payment amounts. The fields are initially populated with data based on the information stored in IRIS. When this data is incorrect, process the appropriate personnel action to correct the data. Some fields allow the user to change or edit the data, others do not. Changes to fields are temporary and not stored in IRIS Program IR135, Severance Pay Computation. The system reverts to the data in the database when the user exits the screen.

Note: Although the system generates data for the severance pay projections, the official information used to calculate the severance pay resides on the Standard Form (SF) 50s in the Official Personnel Folder.

Field	Definition	Editable
Separation Date	Defaults to current date. Enter the effective date of the employee’s separation.	Yes
Prior Severance Weeks and Days	The number of weeks/days the employee received prior severance payments. Enter the number of weeks and days the employee previously received severance pay. If the employee did not receive prior payments, leave this field blank.	Yes
Alternator-P/T Pay Period Worked/Yr	Defaults to data in the database. The number of pay periods the employee worked part-time tour of duty hours and the part-time hourly rate. Complete this field for all part-time employees even when the employee was part time for the whole year.	Yes
HRS Worked/WK	Defaults to data in the database. The number of hours the employee was scheduled to work each pay period while on a part-time work schedule. Complete this field for all part-time employees.	Yes
HRLY Rate	Defaults to data in the database. The hourly part-time rate for the employee. Complete this field for all part-time employees.	Yes
Date of Birth	Defaults to the employee's date of birth in the database.	No
Age at Separation Years and Months	Generated based on the employee’s birth date. Used to calculate the age adjustment allowance.	No
Creditable Service (SCD LV Date)	Defaults to the service computation date (SCD) leave (LV) in the database. 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 Regulatory Commission. Military service (including active or inactive training with the National Guard) and other service in the uniformed services that interrupts Federal civilian service when performed by an employee who returns to Federal civilian service through the exercise of a restoration right provided by law, Executive Order, or regulation. Service performed by an employee of a non-appropriated 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 three days. 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.	No
Less Noncreditable SVC YRS and MTHS	Years and months of non-creditable service generated from the dates of non-creditable service entered in the NonCred Svc Dates From and To fields.	No
= Years and Months	Total years and months of service for which the employee is entitled to receive severance pay. Generated by subtracting the years and months of non-creditable service from the years and months of creditable service.	No
Rate at Date of Separation Weekly and Bi-Weekly	Rate of basic pay on the day of separation. Generated based on the base pay per annum.	No
Base-Pay Per Annum	Defaults to data in the database. The projected annual salary. See definition of rate of basic pay in 5 CFR 550.703. 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, refer to OPM Severance Pay Estimation Worksheet.	Yes
Basic Severance Allowance	The amounts used to calculate basic severance allowance: 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. Twenty-five percent of the otherwise applicable amount for each full-three months of creditable service beyond the final full year (where the otherwise applicable amount).	No
Age Adjustment Allowance	The amounts used to calculate the age adjustment allowance: 2.5 percent of the basic severance pay allowance for each full-three months of age over 40 years.	No
NonCred Svc Dates From and To	The dates of any non-creditable service. The dates are converted to years and months and displayed in the Less Noncreditable SVC portion of the Creditable Service field. Enter the dates of non-creditable service for the employee. When the employee did not have prior non-creditable service, leave this field blank.	Yes
Basic Severance Allowance	Generated	No
Age Adjustment Allowance	Generated	No
Total Severance Pay	Generated	No
Prior Severance Pay Adjustment	Generated	No
Total Severance Pay Allowable	Generated and after verification, entered on the personnel action in Remark N22, Entitled to ($) severance pay fund to be paid at the rate of ($) per week over (number) weeks beginning (date). This amount is also entered on Document Type 128, Severance Pay.	No
Biweekly Pay	Generated by dividing the Total Severance Pay Allowable by the number of pay periods. After verification, used to calculate the rate of severance paid per week required in Remark N22, Entitled to ($) severance pay fund to be paid at the rate of ($) per week over (number) weeks beginning (date) on the personnel action. This amount is also entered on Document Type 128.	No
Periods @ With A Balance Of	Generated and after verification, entered as the number of weeks required in Remark N22, Entitled to ($) severance pay fund to be paid at the rate of ($) per week over (number) weeks beginning (date) on the personnel action.	No
To Be Paid In A Final Payment	Generated	No

 

Processing Severance Payments in NFC PPS

No actual severance payments are made based on the IRIS computation. Severance payments are made based on the processing of:

• The separation personnel action to establish entitlement to Severance Pay.
• Document Type 128 in either EmpowHR or the Web-based Entry, Processing, Inquiry, and Correction System (EPIC Web) to start the severance payments.

Personnel Action

Most often, severance pay is paid to an employee as the result of a reduction in force; however, there are other scenarios where the employee may be entitled to severance pay.

Note: Remark Code N22, Entitled to ($) severance pay fund to be paid at the rate of ($) per week over (number) weeks beginning (date), must be added and completed on the personnel action when the employee is entitled to severance pay.

The total amount of severance pay, rate of severance pay per week, and the number of weeks of severance pay entered into Remark N22 are calculated using IRIS Program IR135. The data is found in the Total Severance Pay Allowable, Total Severance Biweekly Pay, and Number of Pay Periods Severance Payments fields.

Document Type 128 in EPIC Web and EmpowHR

To start severance payments, enter Document Type 128, in either EmpowHR or EPIC Web. The total amount of severance pay and rate or amount of severance per pay period are calculated using IRIS Program IR135. The data is found in the Total Severance Pay Allowable and Total Severance Biweekly Pay fields. Severance payments are subject to appropriate deductions for income and Social Security taxes. All salary withholdings such as financial allotments, charitable contributions, TSP, etc., cease when the separation action processes and the employee receives the final salary payment.

When an employee separates in the middle of a pay period, the first payment is a partial payment. If a late action is processed, the first payment may include multiple payments. Enter the first severance payment amount only if it differs from the severance per pay period amount; otherwise, leave blank.

Correcting Severance Pay

To correct the amounts of the severance pay fund and the rate per week process in EPIC or EmpowHR:

• A history correction package to correct Remark Code N22, Entitled to ($) severance pay fund to be paid at the rate of ($) per week over (number) weeks beginning (date) on the separation personnel action.
• Document Type 128 with Transaction Code Correct.

NFC PPS does not retroactively adjust payments based on the corrected amounts.

Suspending or Terminating Severance Pay

If an individual who is receiving severance pay accepts a position with the Federal Government or the Government of the District of Columbia:

• The individual is no longer eligible for severance pay and severance payments stop if the employee is hired under a qualifying appointment.
• Severance payments are suspended during the life of the appointment if the employee is hired under a non-qualifying, time-limited appointment.

To terminate severance pay, enter Document Type 128, in either EmpowHR or EPIC Web with Transaction Code Stop. After severance pay is terminated in NFC PPS, it can no longer be paid in the automated system.

Restarting Severance Payments in the Web-based Special Payroll Processing System (SPPS Web)

If the employee, under a qualifying appointment, again becomes entitled to severance pay:

• The Agency from which the employee is involuntarily separated under a qualifying appointment must:
  • Recompute the severance pay allowance based on all creditable service and the individual’s current age.
  • Deduct the number of weeks for which severance payments were previously received from the number of weeks it would take to exhaust the recomputed allowance.
• The Agency from which the employee is involuntarily separated must resume severance pay (without being recomputed) when the employee separates from the non-qualifying, time-limited appointment.

To continue paying severance after terminating the payments in the automated system, enter a request for manual payment in SPPS Web. SPPS Web allows Agencies to enter, process, calculate, and disburse severance payments for employees who have a database record. The manual payment request must be submitted weekly until the employee is no longer entitled to severance pay.

Verifying Severance Pay

IRIS Program IR134, Severance Payment, displays severance pay information. Information displayed includes the total dollar amount of the severance fund, biweekly and initial severance payment amounts, the dollar amount of the severance fund balance, the date severance pay begins, the accounting distribution appropriation code for the fiscal year, and the sub-level code.