Federal Severance Pay Guide
Everything federal employees need to know about severance pay: eligibility requirements, calculation formula, age adjustment, and what happens to your benefits after involuntary separation.
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What is Federal Severance Pay?
Federal severance pay is a benefit provided to eligible employees who are involuntarily separatedfrom federal service through no fault of their own. It's authorized under 5 U.S.C. 5595 and provides financial support during the transition to new employment.
52
Maximum weeks of pay
2.5%
Per quarter over age 40
12 mo
Minimum service required
Common situations that qualify for severance pay:
- Reduction in Force (RIF): Agency downsizing or reorganization
- Agency closure: Entire office or agency shut down
- Position elimination: Your specific job is discontinued
- Transfer of function: You decline to relocate with your position
Eligibility Requirements
To receive severance pay, you must meet ALL of the following criteria:
✓
At least 12 months continuous civilian service
Service doesn't need to be in current position, just continuous federal civilian employment.
✓
Involuntarily separated
RIF, agency closure, position elimination, or declining relocation when transfer of function occurs.
✗
NOT declining a reasonable offer
If offered another federal position of similar grade/pay and you decline, you may lose eligibility.
✗
NOT separating for cause or performance
Removal for misconduct, unacceptable performance, or resignation in lieu of removal disqualifies you.
✗
NOT immediately eligible for retirement
If you qualify for immediate retirement (including FERS MRA+10 with reduction), you don't receive severance.
How Severance is Calculated
Federal severance pay is based on your weekly rate of basic pay and years of creditable service.
Basic Formula
Years 1-10 of service:1 week per year
Years beyond 10:2 weeks per year
Partial years:25% per full quarter
Maximum:52 weeks
Example Calculation
A GS-12 Step 5 employee in DC (annual salary $110,846) with 15 years and 6 months of service:
Weekly pay:$110,846 ÷ 52 = $2,131.65
First 10 years:10 × $2,131.65 = $21,316.50
Years 11-15:5 × 2 × $2,131.65 = $21,316.50
6 months (2 quarters):2 × 0.5 × $2,131.65 = $2,131.65
Base severance:$44,764.65 (21 weeks)
Age Adjustment
If you're over 40 at separation, your severance is increased by 2.5% for each full quarter-yearyou are over age 40. This recognizes that older workers may face greater challenges finding new employment.
| Age at Separation | Quarters Over 40 | Age Adjustment |
|---|---|---|
| 40 | 0 | 0% |
| 42 | 8 | 20% |
| 45 | 20 | 50% |
| 50 | 40 | 100% |
| 55 | 60 | 150% |
| 60 | 80 | 200% |
Important: Even with age adjustment, the total severance cannot exceed 52 weeks of basic pay.
Payment Schedule
Severance pay is generally paid on the same schedule as regular pay—biweekly, on normal pay dates. It is not paid as a lump sum unless specifically authorized by law.
Payment Duration
If you receive 26 weeks of severance, you'll receive biweekly payments for 26 weeks (about 6 months) after your separation date. Each payment equals your regular biweekly pay amount, subject to taxes.
Tax Withholding
Severance pay is treated as supplemental wages for tax purposes:
22%
Federal income tax (flat rate for supplemental wages)
6.2%
Social Security (up to wage base)
1.45%
Medicare
State income tax varies by jurisdiction. Your actual tax liability may differ from withholding based on your total income and filing status for the year.
What Happens to Your Benefits
FEHB (Health Insurance)
- • Coverage continues for 31 days after separation at no cost
- • You can extend coverage up to 18 months through Temporary Continuation of Coverage (TCC)
- • TCC cost: 102% of the full premium (your share + government share + 2% admin fee)
- • Alternative: COBRA through spouse's employer or ACA marketplace
FEGLI (Life Insurance)
- • Coverage continues for 31 days after separation
- • You can convert to an individual policy within 31 days
- • Conversion is at commercial rates (typically higher than FEGLI)
TSP (Thrift Savings Plan)
- • Your TSP balance remains yours
- • You can leave it in TSP, transfer to IRA, or withdraw
- • No contributions during severance pay period (not on payroll)
Annual Leave
- • Unused annual leave is paid out as lump sum at separation
- • This is in addition to severance pay
- • Subject to taxes like regular wages
Reemployment Rules
Critical Rule
Reemployment by the federal government or DC government immediately terminates severance payments. You must repay any severance received after your reemployment date.
- Federal reemployment: Severance stops immediately, regardless of position type
- DC government: Same rule applies as federal
- Temporary federal appointments: May suspend (not terminate) severance; payments may resume after temporary appointment ends
- Private sector: Does NOT affect severance payments
- State/local government: Does NOT affect severance payments
- Contractor position: Does NOT affect severance (even if working at same agency)
Frequently Asked Questions
How is federal severance pay calculated?↓
Severance pay equals 1 week of basic pay for each year of service up to 10 years, plus 2 weeks for each year beyond 10. An age adjustment adds 2.5% for each full quarter over age 40. The total is capped at 52 weeks of pay.
Who is eligible for federal severance pay?↓
You must have at least 12 months of continuous civilian service, be involuntarily separated (RIF, agency closure, etc.), not be declining a reasonable offer, not be separating for misconduct or poor performance, and not be immediately eligible for retirement.
How are partial years of service counted?↓
Partial years are credited in full 3-month quarters. Each quarter adds 25% of the applicable weekly amount: 25% of 1 week before 10 years of service, or 25% of 2 weeks after 10 years.
Is federal severance pay taxed?↓
Yes, severance pay is treated as supplemental wages. Federal tax is withheld at 22% flat rate. Social Security (6.2%) and Medicare (1.45%) taxes also apply. State tax varies by jurisdiction.
What happens to FEHB after separation?↓
FEHB coverage continues for 31 days after separation. You can extend coverage up to 18 months through Temporary Continuation of Coverage (TCC), but you pay 102% of the full premium (employee + government share).
What happens if I get rehired by the federal government?↓
Reemployment by the federal government or DC government terminates severance payments immediately. You must repay any severance received after reemployment. Private sector employment does not affect severance.
Related Calculators & Guides
Severance Pay Calculator
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FERS Retirement Calculator
Compare retirement vs severance options
Leave Calculator
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GS Pay Calculator
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FEHB Guide
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FERS Retirement Guide
Comprehensive retirement planning