Reductions in Force and Furloughs

Chapter 9: Section 1

Reductions in Force and Furloughs

General Rules and Procedures

An agency is required to use reduction-in-force (RIF) procedures when an employee is faced with separation or downgrading because of a reorganization, lack of work, a shortage of funds, insufficient positions available, or the exercise of certain re-employment or restoration rights. RIF rules are at 5 CFR 351.

The agency decides whether a RIF is necessary, and if so when it will take place and what jobs will be abolished. However, the abolishment of a position does not always require the use of RIF procedures. The agency may reassign an employee without regard to RIF procedures to a vacant position at the same grade and pay, regardless of where the position is located. See Retirement Benefits in RIFs in this section.

An agency must follow specific procedures to determine which employees will be affected by a RIF. Employees compete for retention on the basis of:

• type of appointment (tenure);
• veterans’ preference;
• total length of civilian and creditable military service; and
• performance ratings.

In the first round of a RIF competition, the agency applies the four retention factors to a competitive level to identify which employee has the lowest retention standing. In the second round, the agency again applies the factors, this time to determine whether a released employee has a bump or retreat right to a position in a different competitive level that is held by an employee with even lower retention standing.

Competitive Areas and Levels

Competitive Area—A competitive area is the area that will be used as the geographical and organizational limits within which employees compete for retention. A competitive area may consist of all or part of an agency. The minimum competitive area is an organization in a local commuting area that is separate from other agency organizations because of differences in operation, work function, staff, and personnel administration. A local commuting area usually includes one population center in which employees live and reasonably travel back and forth to work. The regulations do not define a mileage standard for local commuting area. Instead, the agency must determine what is reasonable for a specific geographic location.

At its option, an agency may establish a competitive area larger than the minimum standard. The regulations do not set a maximum size of a competitive area.

An inspector general activity covered by the Inspector General Act of 1978 is always defined as a separate competitive area.

If an agency wants to redefine a competitive area within 90 days of the RIF effective date, the agency must obtain OPM’s approval for the change.

Competitive Levels—Each competitive level includes positions with the same grade, classification series, and official tour of duty (such as full-time, part-time, seasonal, or intermittent). All positions in a competitive level must have interchangeable qualifications, duties, and responsibilities. The agency establishes a competitive level based on official position descriptions, not on the employees’ personal qualifications.

The agency establishes separate competitive levels for positions filled as part of a formally designated trainee or developmental program, for positions filled on competitive service appointments, and for positions filled on excepted service appointments.

The agency places two similar positions (same grade, classification series, work schedule, etc.) in the same competitive level when the position descriptions for the two positions show that an employee in either one of the positions needs no more than 90 days to be able to perform the key tasks of the other position.

The agency does not include competitive service employees with temporary appointments in the competitive level because these employees serve at the will of the agency. The agency includes excepted employees with temporary appointments of one year or less in the competitive level only after the employee completes more than one year of current continuous service under the same type of appointment.

Pay Banding Situations—Competitive areas or levels cannot be established for pay banded positions separate from those not under pay banding.

Retention Registers, Competitive Service

After grouping interchangeable positions into competitive levels, the agency applies the retention factors—tenure, veterans’ preference, length of service, and performance—in establishing separate “retention registers” for each competitive level that may be involved in the RIF. The agency lists each employee on the retention register in the order of the employee’s relative retention standing after applying those factors.

Tenure—Employees are ranked on a retention register in three groups according to their types of appointment. Group I is for career employees who are not serving a probationary period. Group II is for career employees who are serving a probationary period and career-conditional employees. Group III consists of employees serving under term and similar non-status appointments.

Retention registers for excepted service positions use similar tenure groups.

Veterans’ Preference—Each of the tenure groups is divided into three subgroups reflecting entitlement to veterans’ preference. A retired member of the Armed Forces is considered to be a veteran for RIF purposes only if the Armed Forces retired pay is directly based on a combat-incurred disability or injury, or for members retired below the rank of major (or equivalent) who are not disabled veterans if the retirement is based on less than 20 years of active service or in other limited situations.

Subgroup AD includes eligible veterans with a compensable service-connected disability of 30 percent or more. Subgroup A includes eligible veterans not included in Subgroup AD. Subgroup B includes non-veterans and veterans not eligible for preference.

Length of Service—Employees are ranked by their service dates within each subgroup. Their service dates reflect total federal service, civilian and creditable military service, and additional service credit for certain performance ratings. A retired member of the Armed Forces with 20 or more years of military service who is not eligible for veterans’ preference under the RIF regulations receives retention credit only for Armed Forces service during a war, or service performed in a campaign or expedition for which the individual received a badge. Additionally, an employee may not receive dual retention service credit for service performed on active duty in the Armed Forces that was performed during concurrent civilian employment as a federal employee.

Credit is allowed for non-appropriated fund (NAF) service if the employee moved, without a break in service of more than three calendar days, from a NAF position to an appropriated fund position within the Defense Department.

Performance—Employees may receive additional service credit for performance based on the average of their last three actual performance ratings of record received during the four-year period prior to the date the agency issues RIF notices or freezes ratings before issuing RIF notices.

An employee is given additional service credit based on the mathematical average of the value of the employee’s last three annual ratings, rounded in the case of a fraction to the next whole number. If an employee received more than three annual ratings during the four-year period, the three most recent annual ratings are used. If an employee received fewer than three annual ratings during the four-year period, the actual ratings received are averaged and rounded up to a whole number. Employees who have received no ratings of record are given performance credit based on the most frequently assigned performance rating in their agency or organization.

When all employees in the competitive area have ratings earned under the same type of performance rating pattern, then the standard formula for assigning performance credit is:

  • 20 additional years for an Outstanding rating;
  • 16 additional years for an Exceeds Fully Successful rating; and
  • 12 additional years for a Fully Successful rating.

The agency does not give any additional service credit for performance ratings below Fully Successful or equivalent.

For example, an employee with three years of service has one Outstanding rating of record (20), and two Exceeds Fully Successful (16) ratings of record would receive additional RIF service credit based on the three actual ratings of record: 20 + 16 + 16 = 52, divided by 3 = 17.3, rounded up to 18 years of additional retention credit for performance. This additional credit is added to the employee’s other service for RIF purposes.

If an agency has employees in a competitive area who have performance ratings of record under more than one summary rating pattern, at its option the agency may provide different amounts of additional retention service credit for employees who have the same summary level, but are under different patterns. The range of additional service credit is from 12 to 20 years.

Excepted Service

Retention registers for excepted service positions (see Types of Appointments in Chapter 8, Section 1) use similar tenure groups to those for competitive service positions but the two are separate.

An employee with an excepted service appointment has no “bump” or “retreat” (see below) assignment rights under the RIF regulations. However, an agency may elect to provide its excepted employees with RIF assignment rights to other excepted positions under the same appointment authority. See Retirement Benefits in RIFs in this section.

SES RIF Procedures

Before an agency conducts a RIF that will affect Senior Executive Service members, it must have a plan that explains how its RIF procedures work and how the agency will determine who is affected. The agency defines the area of competition; it may be the full agency or a major component of the agency. The agency’s career SES members in the competitive area are organized on retention registers, based on performance and other factors, as set out in the agency plan. Individuals with the lowest retention standing are identified for RIF (Note: For RIF purposes, “agency” means a Cabinet department, or an independent establishment. For example, the Department of Defense is one agency, with Army, Navy, and Air Force being components within that agency.)

Executives identified for RIF are entitled to placement in any SES position (for which qualified) in the agency. Since “agency” refers to Cabinet department or independent establishment, this right cannot be restricted to jobs in an organizational component, regardless of the competitive area established for the RIF. If there is no such position, the agency head certifies that fact, in writing, to OPM. The individual is then entitled to OPM placement assistance. The agency must continue to try to place the individual in the agency during the OPM priority placement period.

The executive is entitled to two notices. The first notice advises that he/she has been released from the retention register and cannot be placed in the agency. This notice must be given at least 45 days before removal from the SES. This usually occurs at the time the agency refers the executive to OPM for placement assistance. The second is a one-day notice before the removal date, which is given after OPM notifies the agency that the placement effort was unsuccessful.

If OPM cannot place the executive in an SES position in another agency, the original agency removes the executive from the SES and places him/her in a vacant GS-15 position in the agency. If no GS-15 vacancy exists, the agency must create one. Executives removed from the SES as a result of RIF are entitled to appeal to the Merit Systems Protection Board on the competitive procedures used by the agency. If eligible, the executive may take discontinued service retirement in lieu of placement at GS-15.

Employee Release Order

Employees are released from a competitive level in the inverse order of their retention standing, beginning with the employee with the lowest standing on the retention register. In other words, all employees in Group III are released before employees in Group II, and all employees in Group II are released before employees in Group I. Within the subgroups, all employees in Subgroup B are released before those in Subgroup A, and all workers in Subgroup A are released before those in Subgroup AD.

However, an agency may not release a competing employee from a competitive level while retaining in that level an employee with a specific limited appointment, specifically limited temporary or term promotion, or an employee who has received a written decision that removes or demotes the employee from the competitive level.

RIF Notices and Records

An agency must give each non-SES employee at least 60 days specific written notice before he or she is released for a RIF action. In unforeseeable circumstances, an agency may, with OPM approval, give an employee 30 rather than 60 days specific written notice of a RIF action.

In the RIF notice, the agency must include the employee’s competitive area, competitive level, subgroup, service date, and last three annual performance ratings of record received during the last four years; the place where the employee may inspect the regulations and records; the reasons for proceeding out of order in retaining a lower-standing employee in the same competitive level; information on career transition and placement programs; a severance pay estimate; information on unemployment benefits and dislocated worker programs; the option to authorize release of employment information to potential employers; and the employee’s right to grieve or appeal the agency’s decision.

Employing agencies are required to provide employees and their designated representatives with access to retention records showing how the employee was selected for release. By regulation, an agency cannot meet its obligation to provide this information by giving the employee a sanitized retention record with all the pertinent information blocked out. In addition, employees are entitled to see any agency records that detail their bump-and-retreat rights (see below). Also, agencies must keep all records relating to a RIF for at least one year after the date the agency issues RIF notices.

Rights to Other Positions

Competitive service employees in Groups I and II who are released from their competitive level and have current performance ratings of at least “minimally successful” are entitled to an offer of assignment, if they have “bumping” or “retreating” rights to an available position in the same competitive area. Among other requirements, the position must last at least three months, be one for which the employee is qualified, have a pay rate no higher than that of the employee’s present position, have the same type of work schedule, and, in the case of a retreating employee, be no more than five grades below the employee’s current position. Employees in Group III have no rights to another job.

An employee with an excepted service appointment has no assignment rights under the RIF regulations. However, an agency may elect to provide its excepted employees with RIF assignment rights to other excepted positions under the same appointment authority.

Promotion potential is not a consideration in filling a position under the RIF regulations. A RIF offer may have less, more or the same promotion potential as the released employee’s present position.

Bumping—“Bumping” means displacing an employee in a lower tenure group, or in a lower subgroup within the released employee’s own tenure group. Although the released employee must be qualified for the job, it may be a job he or she never held. At its option, the agency may consider employees’ total service in determining an employee’s bumping rights. This option provides the first offer to the otherwise eligible released employee with the most service.

Retreating—“Retreating” means displacing an employee with less service within the released employee’s own tenure group and subgroup. The position must also be the same position or essentially identical to a position held by the released employee in a federal agency on a permanent basis. An employee with a current annual performance rating of “minimally successful” only has retreat rights to positions held by employees with the same or lower rating. The position may be up to five grades (or appropriate grade intervals) below the position from which the employee was released.

Grade Intervals—The agency determines the grade limits of a released employee’s assignment rights on the basis of the position the employee holds on the RIF effective date, regardless of how the employee progressed to the position. For example, an employee released from a GS-11 position that progresses GS-5-7-9-11 has potential bump and retreat rights to available positions from GS-11 through GS-5.

Use of Vacant Positions

An agency is not required to offer vacant positions in a RIF, but may choose to fill all, some, or none of the vacancies.

When an agency chooses to fill a vacancy with an employee reached for release from the competitive level by RIF, the agency must consider the relative retention standing of all the released employees. For example, the agency must offer a position to the released employee in the highest group and subgroup before offering a position to an employee in a lower group and subgroup. This is consistent with a bump offer to an occupied position.

The agency is not required to consider total service in offering positions to employees in the same group and subgroup unless the employee with the most service also formerly held the position on a permanent basis. This is consistent with a retreat offer of an occupied position.

The agency satisfies a released employee’s right to RIF assignment rights if the agency offers the employee a vacant position at the grade to which the employee has bump or retreat rights.

An agency may choose to waive qualifications in offering an employee RIF assignment to a vacant position. However, the agency may not waive a minimum educational requirement. (An agency may never waive qualifications requirements in offering assignment to an occupied position.)

An agency may make a RIF offer of a vacant position to a released employee only if the vacancy is in the same competitive area, and within three grades (or grade intervals) of the employee’s present position.

When an agency chooses to fill a vacancy with an employee reached for a RIF action, it must follow subgroup retention standing. A RIF offer of assignment to a vacant position can only be in the same competitive area, and must be within three grades (or grade-intervals) of the employee’s present position. The agency may offer employees reassignments or voluntary changes to lower-graded positions in other competitive areas in lieu of RIF.

RIF Appeals and Grievances

An employee who has been separated, downgraded, or furloughed for more than 30 days by RIF has the right to appeal in writing to the Merit Systems Protection Board (MSPB), if the employee believes the agency did not properly follow the RIF regulations. The appeal must be filed during the 30-day period beginning the day after the effective date of the RIF action. MSPB’s review of agency action is limited to the written record unless MSPB determines that there are facts in dispute. See Appeal Procedures in Chapter 10, Section 3.

An employee in a bargaining unit covered by a negotiated grievance procedure that does not exclude RIF actions must use the negotiated grievance procedure. The employee may not appeal to the MSPB unless the employee alleges the action was based upon discrimination. The time limits and procedures for filing a grievance are set in the collective bargaining agreement. See Negotiated Grievance Procedures in Chapter 8, Section 6.

Grounds for a challenge may include, but are not limited to:

  • improper retention of another employee in a lower subgroup;
  • insufficient advance notice given (agencies must give a minimum 60-day written notice unless OPM has granted permission for a 30-day notice);
  • inadequate reasons or failure to give reasons for regulatory exceptions;
  • denial of right to examine the regulations or to inspect the retention registers and related records;
  • excessive restriction of the competitive area;
  • improper tenure groups assigned;
  • violation of veterans’ preference;
  • error in computing a service computation date; or
  • failure to comply with agency RIF administrative procedures.

If MSPB rules in favor of the employee, the agency must restore the employee to the job that the employee was separated from or should have been assigned. The agency usually is required to give back pay to the affected employee.

Further information about RIFs is at www.opm.gov/policy-data-oversight/workforce-restructuring/reductions-in-force.

Transfer of Function

A transfer of function takes place when a continuing function moves to another organization, or when the entire organization moves to another geographic location. A “function” is always a clearly identifiable activity of the agency’s mission, consisting of substantial authorities, powers, and duties.

Not every organizational relocation of work is a transfer of function. A transfer of function takes place only when, after the transfer, the gaining organization undertakes a new class of activity. (For example, when an agency realigns geographic boundaries so that an installation performing a particular function begins to handle that function for a broader geographic area, no transfer of function occurs. Instead, the gaining organization simply assumes responsibility for another part of the same function or class of activity, but with different geographic boundaries.) Also, no transfer of function takes place when activities, assignments, or functions shift within an organization; this is a “reorganization.”

If the transfer of function will require the losing organization to have a reduction in force, the competing employees in the function must be given the opportunity to transfer with the function instead of being separated or downgraded by RIF in the losing organization. This is the only situation in which employees have the right to transfer with their function—when the alternative in the losing organization is separation or downgrading. An employee properly identified with a function to be transferred who refuses to transfer may be separated by adverse action procedures.

If the transfer of function results in the identification of more employees than the gaining organization needs to perform the function and the employee cannot be retained in the losing organization, the gaining organization may be required to have a RIF. In this situation, the employees coming in with the function have a right not only to compete among themselves for retention in the function, but also to compete with employees already in the organization. In other words, the gaining organization must treat the incoming employees as its own in the RIF. Employees separated under these circumstances go on the re-employment priority list of the gaining organization rather than the losing organization.

Agencies use two methods to identify employees with a transferring function: Method One must be used to identify each position to which it is applicable. Method Two is used to identify positions and employees only when Method One is not applicable.

Method One specifies that employees are identified with a transferring function if they perform the function during at least half of their work time, or if the function they perform includes their grade-controlling duties.

Method Two applies to employees who perform the function during less than half of their work time and are not otherwise covered by Method One. Under Method Two, the losing organization must determine the number of positions needed to perform the transferring function. To determine which employees are identified for transfer, the losing organization must establish a RIF-style retention register that includes the name of each employee who performed the function. Competing employees listed on the retention register are identified for transfer in the inverse order of their retention standing. If for any retention register this procedure would result in separation or demotion by RIF at the losing organization of any employee with higher retention standing, the losing organization must identify employees on that retention register for transfer in the order of their retention standing.

The losing organization may permit other employees to volunteer for transfer with the function in place of employees identified under Methods One or Two. However, these other employees may be transferred only if no employee identified under Methods One or Two is separated or demoted solely because a volunteer transferred in place of him or her to the gaining organization.

In a transfer involving a geographic relocation, there is no advantage to employees in saying they will move with the activity when they know they will not. However, unless they are sure that they will not move, they should accept the offer of transfer. This assures them a job in the new location, but it does not keep them from looking for a job in their current area. An employee may later change an initial acceptance without penalty if the employee declines before the transfer of function’s effective date.

An employee may not file an appeal to the Merit Systems Protection Board based solely on a transfer of function issue. However, an employee who is reached for separation or demotion because of a reduction in force or an adverse action after declining transfer may raise transfer of function as an issue in that appeal.

Employees who decline to transfer with their function are not placed on the agency re-employment priority list, but they may be entitled to placement through the Career Transition Assistance Plan (CTAP) and the Interagency Career Transition Plan (ICTAP) if they are career or career-conditional employees. See Section 2 of this chapter.

Employees whose permanent duty station changes and who start working in a different pay area receive the locality pay applicable to that area. Their pay may increase or decrease depending on how the rates at the new duty station compare with those of the former duty station.

After receiving a separation notice, the employee becomes eligible for most of the benefits available to an employee who receives a notice of reduction in force separation. An employee may not file an appeal to the Merit Systems Protection Board based solely on a transfer of function issue. However, an employee who is reached for separation or demotion because of a reduction in force or an adverse action after declining transfer may raise transfer of function as in issue in that appeal.

RIF-Related Benefits

Grade and Pay Retention—Employees who are placed in a lower graded position in their agency as a result of RIF procedures are eligible to retain the same grade for two years. The employee must have completed at least 52 consecutive weeks at a higher grade than that of the position to which he or she was demoted. Employees who are downgraded after receiving a specific RIF notice and take a lower-graded position offered by management are eligible for grade retention on the same basis as an employee who was actually downgraded by a RIF action.

The employee’s retained grade is considered for most purposes (including pay and pay administration, retirement, life insurance, eligibility for training, promotions, and within-grade increases) as the grade of the position the employee holds after downgrading because of RIF. However, in any subsequent RIF the employee competes for retention based on the lower grade. For example, an employee who holds a GS-12 position and is downgraded because of a RIF to a GS-9 position is still considered a GS-12 for most purposes, but for a subsequent RIF, would compete as a GS-9.

After grade retention expires, you will be eligible for indefinite pay retention, even if you are downgraded because of a RIF but don't meet the 52-week eligibility for grade retention. If your former rate of basic pay fits in the pay range for the lower-graded position, you will be placed in the lower pay range without a reduction in pay, and pay retention will cease. If your former rate of basic pay is greater than the maximum rate of the pay range for the new position, your former rate will be continued as a retained rate (not to exceed 150 percent of the maximum rate for the grade in which you have been placed). You will then receive 50 percent of any adjustments (e.g., annual salary increases) in the maximum rate for the lower (reduced) grade until that maximum rate equals or exceeds your higher (retained) rate. At that point, pay retention will cease.

If you are on a temporary or term appointment at the time of a RIF, grade and pay retention will not apply.

Also see Grade and Pay Retention in Chapter 1, Section 4.

Re-Promotion Priority—Agencies can give priority consideration to the re-promotion of employees who have been downgraded involuntarily to positions up to their former grade level.

Severance Pay—Severance pay is available to most individuals who have served at least 12 months continuously and are separated by a RIF, provided that they have not refused to accept a position within two grades of their current level in the same commuting area, are not eligible for an immediate annuity for either federal or Armed Forces service, and are not receiving any type of injury compensation benefits.

The severance benefit is computed at the rate of one week’s pay for each year of service prior to separation. After ten years of service, an employee receives two weeks of pay for each additional year. For each year the employee is over age 40, an additional 10 percent of severance pay is received. The maximum is one year’s salary. Severance benefits generally are paid out at regular pay intervals.

Also see Chapter 1, Section 8.

Unemployment Compensation—The unemployment insurance program for federal employees is administered by the Department of Labor through state governments. Separated employees should file a claim for benefits at their state employment service office or their unemployment insurance claims office, where they also can register for work. Employees must bring their Social Security card, official notice of separation or non-pay status (Standard Form 50), and notice about unemployment insurance (Standard Form 8). Payments such as an annuity, incentive pay, lump sum annual leave, or workers’ compensation may affect eligibility for unemployment compensation. The applicable state employment security agency makes that determination. Also see Chapter 5, Section 7.

Unused Leave—All civilian employees eligible for annual leave are entitled to receive a lump-sum payment for accumulated and accrued annual leave upon separation from federal service.

Under 5 CFR 351.606(b), certain employees who are being involuntarily separated through no fault of their own have the option of using accumulated annual leave in order to remain on the agency’s employment rolls beyond the RIF effective date in order to reach initial eligibility for retirement; and/or continuance of Federal Employees Health Benefits program coverage into retirement. Eligible employees are put on annual leave status beyond the scheduled separation date, up to the date they first become eligible for immediate retirement or for continuation of health benefits into retirement, or both. Sick leave may not be used to extend employment for this purpose.

There is no payment for unused sick leave. However, employees who are separated from the federal government are entitled to have their sick leave re-credited if they are re-employed in the federal service. For policies on crediting unused sick leave as time served toward retirement benefits, see Credit for Unused Sick Leave in Chapter 3, Section 3.

Voluntary RIFs—Voluntary reduction in force authority allows DoD employees who are unaffected by a RIF to volunteer for separation so that employees who would otherwise be separated by RIF may be retained. RIF volunteers get some, but not all, of the benefits applying to those separated involuntarily in a RIF. Also see Voluntary RIFs, under Department of Defense RIF and Placement Benefits, below.

Reinstatement Rights—Former career or career-conditional federal employees may be reinstated to positions in the federal service noncompetitively—that is, without getting on a civil service list of eligibles again—under certain conditions. See Reinstatement Rights in Section 1 of Chapter 8.

Health Insurance in RIFs

After separation, employees not eligible for an immediate annuity continue to be covered by their Federal Employees Health Benefits insurance for 31 days at no charge. They can enroll for an additional 18 months as long as they pay both the employee and employer share of the premiums, plus 2 percent for administrative costs. See Temporary Continuation of Coverage in Chapter 2, Section 1.

The Defense Department continues to pay the employer share of FEHB premiums, plus the administrative charge, for 18 months on behalf of its employees separated by RIF, as described in Department of Defense RIF and Placement Benefits, below in this section.

Employees who are eligible for an immediate annuity may continue their enrollment in the FEHB, if they have been continuously enrolled or covered as a family member for the five years of service immediately preceding the commencing date of annuity payments, or for all service since the first opportunity to enroll. The Office of Personnel Management has granted pre-approved waivers of this requirement for certain employees who retire during a period when agencies are authorized to use buyout and/or early retirement authority as commonly is allowed during RIFs; certain special rules apply to the Defense Department. See FEHB Coverage After Retirement in Chapter 2, Section 1.

Life Insurance in RIFs

Separated employees are covered free by the Federal Employees’ Group Life Insurance program for 31 days. Employees who are separated and are not eligible for an immediate annuity may convert all or part of their life insurance to an individual policy without having to take a medical examination. The employee pays the entire cost of the conversion policy. The conversion must be made within 31 days after the effective date of the RIF or within 30 days after receiving the notice from the employing office about the right to convert, whichever is later. See Federal Employees’ Group Life Insurance in Chapter 8, Section 5.

Employees who retire on an immediate annuity are eligible to continue their Basic life insurance as well as all three types of optional insurance, if they have it. At retirement, employees can elect a percentage of Basic coverage they wish to retain after age 65. Retirees must have been insured for the Basic coverage during the entire period the coverage was available or for the last five years of service immediately preceding the starting date of annuity payments. See Life Insurance in Retirement in Chapter 2, Section 2.

Other Insurance in RIFs

Under the Federal Long-Term Care Insurance Program, anyone currently enrolled upon separation, with or without eligibility for retirement, can remain enrolled by continuing to pay the premiums. Retirees can arrange to have the premiums deducted from their annuities or can pay the premiums directly; other separated persons must pay the premiums directly. Retirees, along with their spouses and certain family members, can initially enroll after retirement, but those separated without eligibility for an annuity may not enroll unless they are otherwise eligible—for example, by being the spouse of an eligible employee or retiree. See Eligibility in Chapter 2, Section 3.

Under the Federal Employees Dental and Vision Insurance Program, those separating with eligibility for an immediate annuity can continue an enrollment or, if not enrolled, can enroll at the next open season. Those separating without entitlement to an immediate annuity may not continue a current enrollment or enroll, unless they are otherwise eligible. (Note: Federal Employees Retirement System employees who retire on a Minimum Retirement Age +10 years of service (MRA+10) annuity and who elect to postpone receipt of their annuity lose FEDVIP coverage upon separation from service but can re-enroll within 60 days of when they start receiving their annuity.) See Eligibility in Chapter 2, Section 4.

Retirement Benefits in RIFs

An employee facing a RIF who meets age and service requirements for voluntary retirement may choose to retire at any point in the process.

Discontinued Service Retirement—Both the Civil Service Retirement System and Federal Employees Retirement System provide for immediate retirement with reduced age and service requirements for employees who are involuntarily separated (other than for cause on charges of misconduct or delinquency) and who have not declined a reasonable job offer.

Once employees receive official notice that they will be involuntarily separated, they may then retire, and are not required to wait until the action has been taken. However, if the notice is rescinded prior to the employee’s retirement, the right to retire also terminates.

To be eligible for a discontinued service retirement, an employee must be at least age 50 with 20 years of creditable service, or be any age with 25 years of service. Under CSRS, the annuity is reduced by 2 percent for each year the individual is under age 55. There is no age reduction under FERS, but the employee is not eligible for the Special Retirement Supplement (payable under FERS until age 62 in lieu of Social Security benefits), until attainment of the Minimum Retirement Age (55 to 57, depending upon year of birth). See Discontinued Service Retirement in Chapter 3, Section 5.

Early Voluntary Retirement—If OPM, responding to the request of an agency head, determines that an agency is undergoing a major RIF or reorganization that will result in a significant number of employees losing their jobs or having their pay reduced, it may authorize early retirement for employees during a limited period. (Note: The Defense Department does not need OPM’s permission to offer early retirement.) The eligibility and computation factors are the same as those of discontinued service retirement, above. See Chapter 3, Section 5.

Deferred and Postponed Annuities—Under both FERS and CSRS, separating employees who do not meet the requirements for an immediate annuity but who have at least five years of creditable civilian service are entitled to a deferred annuity, as long as they don’t take a refund of their retirement contributions. Under both systems, this deferred annuity can commence at age 62. Under FERS, it can begin at age 60 if the former employee has 20 years of service.

Under FERS only, employees who have at least 10 years of creditable service may elect to retire under the MRA+10 provision and receive a reduced annuity. The reduction is 5 percent for each year the employee is under 62 when the annuity commences. However, they can postpone the receipt of the annuity to a later date to reduce or eliminate the age penalty, commencing at any time from minimum retirement age until age 62. See Computing Deferred Retirement Benefits in Chapter 3, Section 4.

Refund of Retirement Contributions—Separated employees who are not eligible for an immediate annuity may elect to withdraw their retirement contributions in a lump sum or may leave those contributions in the retirement fund. For considerations involved in this decision, see Retirement—FERS or Retirement—CSRS in Chapter 8, Section 5.

Thrift Savings Plan

All employees who separate from federal service, including those separated involuntarily by a RIF, have TSP options including: a life annuity (if the account balance is at least $3,500), a single payment, a series of monthly payments, a combination of those options, a partial withdrawal, transfer of account balance to an individual retirement account or other qualified retirement plan, or leaving the account with the TSP. (Note: If you have an account balance of less than $200, you are subject to an automatic cash-out.)

If you leave your money in the TSP when you separate, you are required to exercise your payout options by withdrawing your account in a single payment or begin receiving monthly payments (or convert your account into an annuity) by April 1 of the year following the year you reach age 70 1⁄2. If over age 70 1⁄2 at separation, you must start receiving a payout by April 1 of the year following your separation from federal service.

If you leave federal service before the year in which you attain age 55 and withdraw the TSP account in a single payment or a series of monthly payments not based on the IRS life expectancy tables, you may be assessed a 10 percent early withdrawal tax penalty on all direct payments received before age 59 1⁄2. There is no early withdrawal penalty if you separate in the year, or after the year, you become age 55. Special considerations apply to those who have both traditional and Roth balances. See Chapter 6, Section 4.

Furloughs

Furloughs are mandatory periods of leave without pay. Most furloughs are covered by adverse action procedures. The total number of days that any employee may be furloughed under adverse action procedures may not exceed 30 calendar days if consecutive, or 22 workdays if discontinuous (for example, one day a week for a specified number of weeks). Employees must be given at least 30 days advance written notice, except in the case of “unforeseeable circumstances.” Employees are entitled to appeal the action to the Merit Systems Protection Board, or grieve under an applicable negotiated grievance procedure.

Longer furloughs invoke RIF procedures (see above). An employee reached for a continuous RIF furlough generally does not have assignment rights to a position held by another employee who is not affected by the furlough unless the furlough extends for 90 or more consecutive days. Also, an employee reached for a discontinuous RIF furlough action does not have assignment rights to another position.

Agencies have flexibility in scheduling required furlough days, subject to any applicable collective bargaining requirements.

Further information on various special considerations including certain differences between administrative, or “save money” furloughs, and emergency, or “shutdown” furloughs, is at www.opm.gov/policy-data-oversight/pay-leave/furlough-guidance.

Note: When an employee’s pay is not sufficient to permit all deductions, agencies follow a standard order of priority in making deductions; see a July 30, 2008 memo at www.chcoc.gov/transmittals.

Retirement—Retirement coverage continues without cost to the employees on consecutive furloughs of 30 days or less. On discontinuous furloughs, the coverage continues but contributions by the employee are adjusted in proportion to the basic salary received during each pay period.

In general, retirement annuity benefits will not be affected. Since both the Civil Service Retirement System and the Federal Employees Retirement System allow for credit of up to six months of nonpay status in a calendar year, furlough days generally will count toward the total amount of creditable service. Likewise, although there is a loss of actual pay during the furlough period, a furlough does not result in a change in the rate of basic pay and therefore does not affect a high-3 salary computation.

Health Insurance—Your Federal Employees Health Benefits program coverage will continue as long as your salary is sufficient to withhold premiums. Your agency also will continue paying its share.

If your pay is insufficient to cover your FEHB premiums during a pay period, you may opt to pay the premiums directly to your payroll office, incur a debt, or terminate coverage. If you choose to incur a debt, you must agree to pay in full and make arrangements to have the debt collected from your pay once you return to a full pay status. If you terminate coverage, you may reenroll within 60 days after the end of the first pay period in which your pay becomes sufficient to cover the premium. If you don’t reenroll within 60 days, you must wait for the next open season to enroll or until you experience another qualifying life event.

Life Insurance—Federal Employees’ Group Life Insurance coverage continues during both consecutive and discontinuous furloughs. There is no cost to the employee during consecutive furloughs, but employees on discontinuous furloughs are assessed premiums if the salary during the pay period is sufficient to cover deductions.

If your pay is insufficient to cover your FEGLI premiums, you may opt to pay the premiums directly to your payroll office or terminate some or all coverage. If you elect to terminate coverage, your coverage will be reinstated when your pay again becomes sufficient to allow premium withholdings. If you opt to make premium payments directly to your payroll office and fail to make payments on time, coverage will be cancelled and will not be reinstated when your pay becomes sufficient.

Federal Dental and Vision Insurance Program—FEDVIP coverage continues so long as you continue to pay the premiums. When FEDVIP premiums cannot be withheld during a pay period due to insufficient pay, payments will accrue and, once you return to full pay status, your payroll office will collect premiums for twice the biweekly amount for as long as is needed to make up any missed premium deductions. If funds are insufficient to pay premiums for three or more consecutive pay periods, you will be billed directly and you must pay the bill within the designated time in order to continue coverage.

Federal Long Term Care Insurance Program—FLTCIP coverage continues so long as you continue to pay the premiums; you may wish to arrange for direct billing if you are paying premiums through payroll withholding and your pay would be insufficient. See Premiums in Chapter 2, Section 3 for policies regarding missed payments.

Flexible Spending Accounts—FSA withholdings and reimbursement of eligible expenses continue so long as your salary is sufficient to pay them. If an insufficient salary prevents the deduction of your allotment, reimbursements for eligible health expenses will not be made, but you will continue to be reimbursed for dependent care expenses up to the balance in that account as long as the expenses incurred allowed you (or your spouse, if married) to work, look for work, or attend school full-time. Once you return to sufficient pay, your allotment will restart and the remaining balance due on your account will be recalculated to coincide with the remaining pay periods to match your annual election amounts. Reimbursement of health care expenses will also resume.

Thrift Savings Plan—The impact of a furlough on TSP payroll withholdings depends on whether the employee is investing on a biweekly dollar amount basis or on a percentage of salary basis. In the former, so long as pay for that pay period is sufficient to make that investment, withholdings remain the same, as do the agency matching contributions for FERS employees (their automatic 1 percent of salary agency contributions for them are reduced proportionately to their reduction in pay, however, since those contributions are based on that percentage even if the employee invests according to a dollar amount).

For percentage of salary investors, the investment is based on the pay actually received during the pay period (for FERS employees, all agency contributions also are reduced proportionately). Employees who are furloughed may change between a percentage of salary investment to a dollar amount investment and may change the level of their withholdings. While in unpaid status they generally may take out financial hardship withdrawals, if they qualify otherwise. Those with existing loans must stay current on their payments or risk having a taxable distribution declared, and new loans may be taken out only under more limited circumstances. See Chapter 6, Section 3.

Leave—A furloughed employee may not substitute paid time off for furlough time. Annual and sick leave accrual is not affected unless the employee reaches a total of 80 hours of unpaid leave in a leave year. The employee will not earn annual and sick leave in the pay period in which that 80-hour accumulation is reached. If the employee again accumulates 80 hours of nonpay status, he or she will again not earn leave in the pay period in which that new 80-hour total is reached.

Injury Compensation—Federal workers who are injured while on furlough are not eligible for Federal Employees Compensation Act benefits, which are paid only for injuries incurred while performing official duties. For the impact of furloughs on those already receiving injury compensation, see General Rules and Procedures in Chapter 5, Section 5.

Unemployment Compensation—While on furlough, federal employees may become eligible for unemployment benefits under state policies of the employee’s duty station. You must report any earnings during a period for which you are claiming unemployment benefits; your benefit may be reduced and even eliminated. If you fail to report earnings, you may be determined to have been overpaid benefits and be required to repay your state. Employees who receive back pay for furlough time, which may happen after a “shutdown” type furlough, must repay any unemployment compensation benefits received. See Chapter 5, Section 7.

Outside Work—Persons on furlough remain federal employees and therefore standards of ethical conduct and restrictions on outside employment continue to apply. In addition to government-wide policies, rules specific to an agency or occupation also may require prior approval of, or may prohibit, certain types of outside employment. See Chapter 10, Section 5.

Learn more about furloughs in 1105 Media Inc.’s book How to Manage Your Federal Job Furlough. Please call (800) 989-3363 for ordering information.

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