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October 24, 1996
OMB BULLETIN NO. 97-02
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES
SUBJECT: Voluntary Separation Incentives for Employees of
Certain Federal Agencies
1. Purpose and Overview. Section 663 of the Treasury, Postal
Service, and General Government Appropriations Act, 1997 (Public
Law 104-208; September 30, 1996) (the Act) authorizes most
Executive branch agencies to provide voluntary separation
incentives (buyouts) to minimize the need for involuntary
separations that might otherwise be required for downsizing and
restructuring the agencies. The Act requires each agency that
uses buyouts to reduce its full-time equivalent employment (FTE)
by one for each buyout separation.
Buyouts under the Act are authorized for separations by
retirement or resignation that occur on or after October 1, 1996
and before December 31, 1997. No delayed separations are
permitted. The buyout payment is the lesser of the amount based
on an employee's severance pay calculation or an amount to be
determined by the agency head that cannot exceed $25,000. In
addition, agencies will pay into the retirement fund 15% of the
final basic pay of any employee who receives a buyout and is
covered by the Civil Service Retirement System (CSRS) or Federal
Employees' Retirement System (FERS). Should a buyout recipient
be reemployed, including employment under a personal services
contract, in the Government within 5 years of separation, the
entire buyout payment must be repaid before their first day of
employment. There is no authority for waivers of repayment in
2. Coverage. Generally, all Executive agencies not otherwise
authorized in the Act or other legislation to conduct buyouts at
any time during Fiscal Year 1997 are covered by the Section 663
authority and the guidance in this OMB Bulletin. Excluded
agencies with buyout authority under other legislation will
receive separate guidance from OMB, if required.
3. Attachment A provides guidance on agency implementation of
the Act's buyout program, including:
-- definitions for key terms and provisions in the Act;
-- required agency plan for use of buyout authority
(referred to in the Act as "Agency Strategic Plan");
-- required reduction in agency employment levels; and
-- reporting requirements.
4. Attachment B is a copy of Section 663 from the Act.
5. The content of this OMB Bulletin does not cancel or
otherwise amend OMB guidance on Section 5 of the Federal
Workforce Restructuring Act of 1994 (FWRA) (Public Law 103-226;
March 30, 1994) contained in OMB Bulletin 94-04, dated April 18,
6. Contact. Questions regarding this Bulletin should be
directed to the agency's OMB representative with primary
responsibility for the account or program. The Office of
Personnel Management will provide further human resources
management guidance and assistance to agencies, as well as
instructions on payments to the retirement fund and on reporting
Franklin D. Raines
[Note: Attachment B, Section 663 of the Treasury-Postal
Appropriations Act of 1997 is not included in this file.]
OMB Bulletin No. 97-02
Voluntary Separation Incentives for Employees
of Certain Federal Agencies
Section 663 of the Treasury, Postal Service, and General
Government Appropriations Act, 1997
(Public Law 104-208; September 30, 1996)(the Act)
a. Employee - An employee (as defined in section 2105 of
title 5, U.S.C.) under the Act must have been continuously
employed for at least 3 years in order to be potentially eligible
for a buyout. This is unlike the buyout authority in the Federal
Workforce Restructuring Act (FWRA) which required only a minimum
of 12 months of current continuous employment. Further, the Act
disallows buyout payments to the following categories of
employees, including some not excluded in FWRA:
-- an employee who, during the previous 24 months,
received a recruiting or relocation bonus, or within 12
months of the separation date received a retention
-- an employee completing an additional period of service
(not to exceed March 31, 1997) to satisfy the
requirements for a deferred buyout payment under FWRA;
-- an employee in receipt of a specific notice of
involuntary separation for misconduct or unacceptable
-- an employee who previously received any buyout payment
by the Federal Government and has not repaid such
-- a reemployed annuitant;
-- an employee who is or would be eligible for disability
-- an employee with statutory reemployment rights on
transfer to another organization.
b. Agency - The Act specifically excludes from the term
"agency" (defined as Executive agency in section 105 of title 5,
U.S.C.) any agency that is authorized by any other provision of
the Act or any other Act (except the Department of Transportation
Appropriations Act, 1997) to provide voluntary separation
incentive payments during all, or any part of, Fiscal Year 1997.
Therefore, the agencies excluded from offering buyouts under
the Act are the Departments of Agriculture and Defense, Central
Intelligence Agency, Smithsonian Institution, Agency for
International Development, the National Aeronautics and Space
Administration, the Railroad Retirement Board (RRB) and the
Office of the Inspector General of the RRB. These agencies'
buyout programs are governed by other legislation. Separate
guidance will be issued by OMB to excluded agencies, if required.
c. Strategic Plan - Before an agency may obligate any
resources for buyouts, the Act requires the agency to submit its
buyout plan to the House and Senate Committees on Appropriations
and the Committee on Governmental Affairs of the Senate and the
Committee on Government Reform and Oversight of the House of
Representatives. The Act requires that the plan outline the
intended use of the buyouts and include a proposed organizational
chart for the agency once the buyout separations have been
completed. The plan must identify:
-- the positions and functions to be reduced or
eliminated, identified by organizational unit,
geographic location, occupational category, and grade
-- the number and amounts of voluntary separation
incentive payments to be offered; and
-- a description of how the agency will operate without
the eliminated positions and functions.
The Act's use of the term "strategic plan" is not a
reference to strategic plans under the Government Performance and
Results Act (GPRA). However, agency buyout plans are expected to
support the objectives of the agency's strategic plan.
2. OMB Review of Agency Plans for Use of Buyouts.
Agencies that intend to use the buyout authority shall
submit to their OMB representative a draft of the plan or plans
for buyout use prior to it being submitted to the Congress. In
addition to the above cited content requirements, the information
submitted should include:
-- the timing of buyout offers and scheduled separation
-- where appropriate, the maximum dollar amount of buyout
payments if determined by the agency head to be less
than $25,000; and
-- an estimate of the savings to be achieved in the fiscal
year(s) following the planned buyout separations.
The agency's plan or plans may be submitted at any time and
will be reviewed and acted on generally within 10 working days.
3. Reduction in Agency Full-Time Equivalent Employment.
A one-for-one reduction in an agency's funded positions,
measured on an FTE basis, is required for each employee who
separates by retirement or resignation with a buyout payment.
Generally, the reductions are from department-wide totals, but
may, in special situations acceptable to OMB, come from only the
department's separate component undergoing downsizing.
For buyout separations under this Act, the required FTE
reduction will be measured as the change from the agency's actual
FTE usage in Fiscal Year 1996 to the actual FTE usage in Fiscal
Year 1998. To the extent known at that time, the President's
Fiscal Year 1998 Budget should reflect the impact of any planned
buyout separations in the FTE estimates for Fiscal Years 1997 and
Example: If the agency's actual FTE use in Fiscal Year 1996
was 1,000 and the agency plans to have 100 buyout
separations under the Act, the agency's estimate
of FTE usage for 1998 shown in the President's
1998 Budget, and the resulting actual FTE usage in
Fiscal Year 1998, cannot exceed 900 FTE.
Agency heads are responsible for ensuring compliance with
the Act's requirement for FTE reductions. OMB will monitor
monthly FTE reports against the agency's plan for use of buyouts
and may direct corrective action, including a freeze on agency
hiring, should it appear at any time that agency-wide FTE
reductions will not be sufficient to offset buyout separations by
the end of Fiscal Year 1998.
4. Additional Agency Contribution to the Retirement Fund
For each employee covered under the Civil Service Retirement
System (CSRS) or the Federal Employees' Retirement System (FERS)
who is paid a buyout, the agency will pay into the retirement
fund an amount equal to 15% of that employee's final basic pay.
Final basic pay is defined in the Act. This payment to the
retirement fund is the amount determined by the Congressional
Budget Office as the required offset to meet the "pay-as-you-go"
(PAYGO) requirement in the Budget Enforcement Act of 1990. The
Office of Personnel Management (OPM) will advise agencies on the
procedures for making these payments.
5. Reporting Requirements.
Although the Act does not include specific reporting
requirements, OMB has asked OPM to gather information on buyout
activity under the Act. This data will be needed to meet
Congressional and other information requirements. Agencies will
be asked by OPM to submit quarterly reports that provide, at a
-- the number of employees who received buyouts under the
Act for each type of separation involved and for each
-- the average amount of the buyouts that were paid;
-- the average grade or pay level of the employees who
received buyouts; and
-- other information that OMB and OPM may require.
In addition, OMB offices will review agency implementation
of buyout plans to monitor accomplishment of planned FTE
reductions and restructuring of the agency. Agencies are advised
to maintain current data on accomplishments in relation to the
agency's buyout plan.
OPM will issue separate guidance on reporting requirements
under the Act. OPM currently collects information on buyout
separations under FWRA that have been deferred to not later than
March 31, 1997. Agencies are reminded to ensure that information
is accurately maintained and reported to distinguish between
buyouts under FWRA and the new authority in the Act.