What’s meant by a buyout, or voluntary separation incentive payment?
A buyout, also called a voluntary separation incentive payment (VSIP), generally is offered to encourage eligible employees to separate voluntarily through resignation, early retirement, or regular retirement, during an agency downsizing or restructuring. As a practical matter, buyout offers commonly are coupled with early retirement offers.

A buyout is a lump-sum payment equivalent to an employee’s severance pay entitlement, generally up to a maximum of $25,000. However, payments are taxable for purposes of federal withholding, Medicare, applicable state and local taxes, and Social Security for those covered by that system.

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