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Federal personnel manual system
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United States -- Office of Personnel Management
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Vols for 1979- issued by: Office of Personnel Management.
General Note:
Description based on: 410-19 (Aug. 22, 1977); title from caption.
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Latest issue consutled: 292-23 (No. 3, 1983); title from caption.

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Office of Personnel Management

Federal Personnel Manual System
FPM Bulletin

FPM Bulletin 550-68

Bulletin No. 550- 68 Washington, D. C. 20415
June 21, 1989
SUBJECT: Severance Pay

Heads of Departments and Independent Establishments:

An Information Notice on Changes to Federal Personnel
Regulations Is Attached to This Bulletin
This Notice Must Be Posted in a Prominent Place

1. The Director of the Office of Personnel Management (OPM) is required to take steps to ensure
that OPM regulations that apply to individuals or organizations outside OPM are posted in offices
of Federal agencies maintaining copies of Federal personnel regulations [5 USC 1103(b)(2)(A)].
2. To carry out this responsibility. OPM issued regulations under Part 110 of 5 CFR that require
agencies to (a) make available for review on request the regulatory material that appears as
attachment I to this bulletin; and (b) complete and post the notice (attachment 2) in a prominent
3. Completion of the notice requires insertion of the room number where the regulations are
available for review.
4. Individuals who wish to make comments on regulations or notices should address them to the
OPM official whose mailing address is listed on the reprint of Federal Register material in
attachment 1 of this bulletin.
5. The public comment period on proposed regulations begins when they are published in the
Federal Register or made available for public inspection at the Office of the Federal Register in
Washington, D.C. Sometimes delays in distribution may result in posting notices on proposed
regulations being received at agency field offices near the end of the comment period of a
regulation. In other cases, the attached posting notice may convey information about a final
regulation and no comments will be sought. In either case, the attached notice must still be
posted. The purpose of the material is to provide notice rather than to solicit comment
6. There is no maximum number of days that the attached notice must remain posted; each agency
or office is free to make this determination. However, we suggest 10 working days as a minimum.
The basic requirement is that their sufficient opportunity for interested individuals to receive
adequate notice of changes i sonnel regulations.

JUL 10 1901 --0m'
SConstance Homer

Attachments (2) Fp,,.-. '

Inquiries: Personnel Systems and Oversight Group,
Pay and Leave Administration Division
Code: 550, Pay Administration (General)
Distribution: Basic FPM and FPM Supplement 990-2
Bulletin Expires: July 20, 1990

Pay and Performance Management,
(202) 632-5056

.'- Norm CiP *J0.



Attachment 1 to FPM Bulletin 550-68
Page 1 of 4 pages


Proposed Rules Fedal R L*-r
Vol. M, No. 103
Wednesday. May 31, 1980

This section of the FEDERAL REGISTER
contains notices to the ptlic of the
proposed Issuance of rules and
regulations. The purpose of these notices
is to give Interested person ans
oppeunlty to participate in the e
making pror to the adoption of the final

5 CFR Part 550
RMI 8206-AC41
Pay Administration (General);
Severance Pay
AGENCy: Office of Personnel
ACTIon: Proposed rulemaking.
sUMMARY: The Office of Personnel
Management (OPM) is proposing
regulations to change the conditions
under which Federal employees are
entitled to severance pay when they are
Involuntarily separated from Federal
service. Several events have made it
desirable to propose changes in our
severance pay regulations: (1)
Privatization s a major initiative
designed to reduce deficit spending and
to restore the Federal Government to its
appropriate role in the marketplace. To
promote this initiative and to facilitate
the transfer of Federal employees to
private contractors, we are proposing a
change in the severance pay regulations
that would permit a separated employee
to receive severance pay when he or she
separates and accepts employment from
the contractor assuming the Federal
function that resulted in the employee's
separation: (2) The Omnibus Budget
Reconciliation Act of 182 changed the
conditions under which employees can
receive discontinued service retirement
annuity. To reestablish the parallel
between discontinued service retirement
and severance pay, we are proposing to
apply like eligibility requirements (with
one or two exceptions) to these two
separate benefits. (3) Recent court
decisions require a change related to
employees involuntarily separated from
temporary appointments that follow
permanent appointments.
DAT: Comments must be received on or
before July 31,1989.
ADDREs: Send or deliver written
comments to Barry E. Shapiro. Deputy

Assistant Director for Pay Programs.
Personnel Systems and Oversight
Group. Office of Personnel Management,
Room 3353, 1900 E Street NW.
Washington. DC 20415.
Jan B. Karicher, (202) 632-5056.
Severance pay provides financial
assistance to Federal employees who
are involuntarily separated without
eligibility for immediate retirement
benefits. This pay is intended to be a
form of temporary financial insurance.
not an extension of the Federal career or
of the full financial rewards of that
career. (In addition to receiving
severance pay, separated employees
who had life insurance and health
benefits coverage before separation can
continue these without charge for 31
days after their separation. After 31
days, employees have the option of
converting Federal coverage to private
coverage. They may do this regardless
of their physical condition at the time of
conversion and without any waiting
periods or restrictions for pre-existing
medical conditions.)
Our proposed regulations would make
the following major changes In the
severance pay provisions:
(1) Privatization. In 1967 the
severance pay regulations were revised
in a manner that prohibits the payment
of severance pay to an employee who is
involuntarily separated due to
contracting out of a Federal function if
the employee (1) accepts or declines a
reasonable offer of employment with the
contractor made no later than the date
of separation, or (2) accepts any job
with the contractor within 90 days of
separation. We have become
increasingly aware of situations in
which qualified separated Federal
employees in receipt of severance pay
are refusing contract employment until
expiration of the 90-day restriction
period in order that they may receive
their severance pay. As a result,
contractors who are required to offer
contract positions to qualified separated
Federal employees often are not able to
fully staff the contract operation with
qualified employees during the crucial
conversion period.
To alleviate this problem, and to make
contracting out more attractive to
affected Federal employees. OPM is
proposing to remove the contract
employment restriction appearing in

I 550.701(b)(6) of Title 5, Code of
Federal Regulations, as well as two
similar restrictions in paragraphs (b)(5)
and (7) of that section, concerning public
non-Federal and non-appropriated fund
employment. The removal of these
restrictions should encourage Federal
employees to accept employment
offered by private contractors by
providing them with an additional
financial incentive. This, in turn, should
facilitate the smooth transfer of
operations to thepi'ivate sector.
To assist in developing statistical
information on the proposed change in
contract procedures, we are also
proposing a new section of the
regulations that would require agencies
to keep records of the number of
separated employees who receive
severance pay each fiscal year, the
amount paid, and the total number of
separated employees who go to work for.
the contractors that assume their
Federal functions (I 550.713).
(2) Eligibility for severance pay. Prior
to 1982, eligibility requirements were the
same for severance pay and for
discontinued service retirement (DSR) in
that employees were eligible unless they
declined an offer of Federal employment
at the same grade or pay level .
However, under Pub. L 97-253, the
eligibility requirements for DSR were
changed. Now, employees who are
otherwise eligible for DSR cannot
receive an annuity if they decline a
"reasonable offer of another position."
A reasonable offer for DSR is an offer of
a position:
(a) In the employee's agency
(including an agency to which the
employee and the function are
transferred in a transfer of functions);
(b) In the employee's commuting area;
(c) Of the same tenure; and
(d) Not more than the equivalent of
two grades or pay levels below the
employee's current grade or pay level.
regardless of whether the employee is
eligible for grade or pay retention under
5 CFR Part 536 or some other authority.
At present, employees can receive
severance pay if they have not declined
an offer of an "equivalent position" with
the Federal Government. "Equivalent
position" is currently defined in 5 CFR
550.701(b)(2) as a position of like
seniority, tenure, and pay other than a
retained rate. "Therefore, as a result of
the change in law, an offer of a position
two grades lower with grade or pay

Attachment 1 to FPM Bulletin 550-68
Page 2 of 4 pages


Federal Register / Vol. 54. No. 103 / Wednesday, May 31. 1989 / Proposed Rules

retention may be a "reasonable offer"
for DSR purposes, but not an
"equivalent position" for severance pay
purposes. To reestablish parallel
eligibility criteria, we propose to replace
the term "equivalent position" with
"reasonable offer." "Reasonable offer"
would have the se meaning for
severance pay purposes as it has for
discontinued service retirement
purposes (1 550.703).
(3] Severance pay after temporary
employment Under section 5595(a)(2)(11)
of title 5. United States Code, an
employee separated from a temporary
appointment can receive severance pay
only if the temporary appointment
follows a permanent appointment with
no more than a 3-day break in service.
The current regulations allow temporary
employees to receive severance pay
only if they are involuntarily separated
from a temporary appointment made no
more.than S days after involuntary
separation from a permanent
On December 9, 198, the U.S. Claims
Court. in the case of Sulivan v. United
States, 4 CLCL t.70, ruled that the
regulations contradict the law. The court
noted specifically that separation from
the permanent appointment does not
have to be involuntary for the temporary
employee to be eligible for severance
pay if involuntarily separated from the
subsequent temporary appointment. The
U.S. Court of Appeals for the Federal
Circuit (742 F.2d 28) affirmed the
Claims Court ruling on September 6,
The proposed definition of "qualifying
appointment" (5 550.703) would make
the regulations match the law.
(4) Exclusion of Schedule C and
equivalent oppointrents. The proposed
regulations clarify that the exclusion of
Schedule C appointees from severance
pay also applies to individuals
appointed under equivalent
appointments of a confidential or policy
determining character, where the
incumbent serves at the will of a Federal
official. (For example, executive
directors of Presidential Advisory
Councils, who serve at the will of the
In addition to proposing the major
revisions summarized above, we have
made several editorial revisions to
clarify severance pay entitlements. For
example, we have defined "immediate
annuity." "inefficiency." "nonqualifying
appointment" "qualifying appointment."
and "representative rate," and we have
changed the order of existing provisions.

E.O. 2291. Federal Regulation
I have determined that this is not a
major rule as defined under section l(b)
of E0. 12291. Federal Regulation.
Regulatory Flexibility Act
I certify that this regulation will not
have a significant economic impact on a
substantial number of small entities.
since it applies only to separated
Federal employees.
Lst of Subjecs in 5 CFR Part mg
Government employees and Wages.
US. Office of Personnel Managemet.
Constance Humr.
Accordingly, OPM Is proposing to
revise Subpart G of Part 550 of Tile ,5
Code of Federal Regulations, to read as

50.701 Introductloa.
m0.702 Coverage.
8070 Defintious.
50.70 ElIgbility for severance pay.
550705 Criteria fr meeting the requirement
for 12 months continuous employment.
5s0.06 Criteria for meein the requirement
for involuntary separation.
680707 Computation of severance pay.
708 Creditable service.
650.700 Payment of severance pay.
50o.71 Suspenon of severance pay.
80.711 Terminaton o evence pay
550.12 Reemploymenmt credit of service.
=50713 Records.
Authdoty: a U.SC. mas S.11257.
Subpart a-Severance Pay
S550.701 dtroduction.
This subpart contains regulations of
the Office of Personnel Management to
implement the provisions of 5 U.SC.
5595.These regulations authorize
severance pay for employees who are
involuntarily separated from Federal
service and who meet other conditions
of eligibility.
I 50.70 Cverage.
Except as provided in I U.&C.
5595[a)(2)(i) through (viii) this subpart
applies to each full-time or part-time
employee; that is, an employee with a
regularly scheduled tour of duty, who is
serving under a qualifying appointment
as defined in 5 550.70
1 s50o. Denitmone
In this subpart

"Agency" means an agency as defined
in 5 U.S.C. 595(a][). except the
government of the District of Columbia.
"Commuting area" means the
geographic area that normally is
considered one area for employment
purposes. It includes any population
center (or two or more neighboring ones)
and the surrounding localities where
people live and reasonably can be
expected to travel back and forth daily
to work.
"Employee" means an employee as
defined in 5 US.C. 55s5(aX2 except am
individual employed by the govenmen
of the District of Columbia.
"Immediate annuity" means benefits
under a Federal civilian or military
retirement system that r payable upon
separation or will begin to accue withtl
0 day after separation.
"Inefficiency" means unacceptable
performance or conduct that leads to a
separation under Part 4 or a7 of thi
chapter or an equivalent procedure.
"Involuntary separation" means a
separation initiated by an agency
against the employee's will and without
his or her consent for reason other than
"Nonqualifying appointment" mans
any appointment with an lntermittea
work schedule and the follow
appointment regardless of wk :
(a) A Presidential appointmen
(b) An emergency appolatmet;
(c) A limited or noncareer exectlve
assignment under Part 305 of this
chapter or the equivalent
(d) An excepted appointment under
Schedule C or n equivalent
appointment made for similar pmpose
(e) A temporary appointment pending
establishment of a register (TAPER) '
(I) An overseas limited appointeat
with a time limitation, unless it is
effected within 3 calendar days o
separation from a qualifying
(g) A noncarer, limited term. or
limited emergency appointment n the
Senior Executive Service as defined in 5
U.SC. 3152(a) or an ivalent
appointment made for similar pupaoes.
unless it is affected within 3 calender
days of separation from a qualifying
appointment and
(h) A time-limited appointment that
takes effect more than 3 calendar days
after the end of one or more qualifying
"Qualfying appointment" means-
(a) A career or careeronditional
appointment in the competitive service
or the equivalent in the excepted

Attachment 1 to FPM Bulletin 550-68
Page 3 of 4 pages
Federal Rogister / Vol. 54. No. 103 / Wednesday, May 31. 1989 / Proposed Rules 23217

(b) An excepted appointment without
time limitation, except under Schedule
(c) An overseas limited appointment
without time limitation.
(d) A status quo appointment
including one that becomes indefinite
when the employee Is promoted.
demoted. or reassigned:
(e) A time-limited appointment in the
Foreign Service, when the employee was
assigned under a statutory authority that
carried entitlement to reemployment in
the same agency, but this right of
reemployment has expired;
(f) An appointment under the
Executive Assignment System with
career or career conditional tenure;
(8) A career appointment in the Senior
Executive Service, or
(h) A time-limited appointment that
takes effect within 3 calendar days after
the end of one or more of the qualifying
appointments listed in paragraphs (a)
through (g). of this section.
"Rate of basic pay" means the rate of
pay fixed by law or administrative
action for the position held by an
employee. Including annual premium
pay for standby duty under 5 U.S.C.
5545(c)(1) and night differential for
prevailing rate employees under 5 U.S.C.
5343(f). but not including additional pay
of any other (ind.
"Reasonable offer" means the offer of
a position that meets al the following
la) The offer is In writing;
(b) The employee meets established
qualification requirements; and
(c) The offered position is-
(1) In the employee's agency,
Including an agency to which the
employee is transferred with his or her
function in a transfer of functions
between agencies
(2) Within the employee's commuting
area. unless geographic mobility was a
condition of employment:
(3) Of the same tenure and work
schedule (that is, part-time or full-time);
(41 Not lower than two grade or pay
levels below the employee's conret
grade or pay level without
consideration of grade or pay retention
under Part 536 of this chapter or other
authority. In movements between pay
schedules or pay systems, the
representative rate of the offered
position must not be lower than that of
the grade or pay level that is two grades
below the current position on (he same
pay schedule as the current position.
"Representative rate" means the
fourth rate of the grade of a position
under the General Schedule. including
the fourth rate of the corresponding
grade of the General Schedule in the

case of a position under the
Performance Management and
Recognition System established by
chapter 54 of title 5, United States Code;
the single rate for CS-18; the employee's
rate under the Senior Executive Service;
or the rate designated as representative
of the position by the agency
responsible for establishing and
adjusting the schedule.
"Severance pay fund" means the total
severance pay to which an employee is
entitled during a single entitlement
under 5 U.S.C. 5595. It includes a basic
severance pay allowance and, where
applicable, an age adjustment
allowance, as computed under 550.707.
S550704 Egibilty for semrance pay.
(a) To be eligible for severance pay,
an employee must-
(1) Be serving under qualfyn
(2) Have completed at least 12 months
continuous service, as described in
I 550.705; and
(3) Be removed from Federal service
by involuntary separation.
(b) An employee is not eligible for
severance pay if he or she-
(1) I serving under a nonqualifying
(2) Declines a reasonable offer.
(3) Accepted a qualifying appointment
in an agency scheduled by law or
Executive order to be terminated within
less than 1 year from the date of the
appointment, unless on the date of
separation the termination has been
postponed to a date more than 1 year
after the date of the appointment;
(4) Is receiving injury compensation
under subchapter I of chapter 81 of title
5. United States Code, unless the
compensation is being received
concurrently with pay or is the result of
someone else's death: or
(5) Is eligible upon separation for an
immediate armnuity from a Federal
civilian retirement system or from the
uniformed services. Such an employee s
ineligible even if allor part of the
annuity Is offset by payments from a
non-Federal retirement system the
employee elected instead of Federal
civilian retirement benefits or disability
benefits received frm the Veterans
I S0.Ms5 Crtdssor meefng se
requirement 12 ,mmUnths onam0s

(a) The requirement for t2 monmls
continuous employment is met ifon the
date of separtion.an employee has
held one or more civilian Federal
positions over a period of 12 months
without a single break In service of more

than 3 calendar days. The positions held
must have been under-
(1) One or more qualifying
appointments; or
(2) One or more non-qualifying
temporary appointments that precede
the current qualifying appointment
(b) When a break in service that is
covered by severance pay interrupts
otherwise continuous Federal
employment the entire period is
considered continuous service.
(c) The period during which an
employee receives continuation of pay
or compensation for an Injury on the job
under chapter 81 of title 5. United States
Code. is considered continuous Federal
Ss50.706 Criteria for meeting the
requirement for involuntary sepraton.
(a) Employees who resign because
they expect to be involuntarily
separated are considered to have been
involuntarily separated if they resign
after receiving-
(1) Specific written notice that they
will be involuntarily separated, and the
notice of separation is not cancelled
before the resignation Is effected: or
(2) A general notice of reduction in
force or transfer of function that
announces that all positions in the
competitive area will be abolished or
transferred to another commuting area.
(b) Except for resignations under the
conditions described in paragraph (a) of
this section, all resignations are
volntary separations and do not carry
entitlement to severance pay.
S650.76 Computation of everance pay.
(a) Basic severance pay allowance.
Except as provided In paragraph (b) of
this section, the basic severance pay
allowance consists of the following:
(1) 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 years;
(2) 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
(3) Twenty-five percent of the
otherwise applicable amount for each
full 3 months of creditable service
beyond the final full year,
(b) Basic severacepay alowanefor
employees with variable woa
schedules rres ofpay. The basic
severance pay allowance is computed
on the basis of the average rate of basic
pay for the last position held during the
26 biweekly pay periods immediately

Attachment 1 to FPM Bulletin 550- 68
Page 4 of 4 pages


Federal Register / Vol. 54, No. 103 / Wednesday, May 31, 1989 / Proposed Rules

preceding separation for an employee in
a position-
(1) In which the work schedule
regularly varies from full-time to part-
time throughout the year,
(2) In which the rate of annual
premium pay for standby duty varies
throughout the year: or
(3) Under a prevailing rate schedule in
which the work schedule regularly
alternates between a day shift and a
night shift throughout the year.
(c) 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 3 months of age over forty
S550.708 Creditable service.
The following types of service are
creditable for computing an employee's
severance pay under 1 550.707:
(a) Civilian service performed by an
(b) Service performed with the United
States Postal Service or the Postal Rate
Commission; and
(c) Military service, including active
or inactive training with the National
Guard, when performed by an employee
who returns to civilian service through
the exercise of a restoration right
provided by law, Executive order, or
I 550.709 Payment of severance pay.
(a) Each severance payment must be
equal to the employee's rate of basic
pay, less taxes and Medicare, and, when
appropriate, contributions under the
Federal Insurance Contributions Act
(FICA). Payment must be made at the
same pay period intervals salary would
be paid if the employee were still
employed. The final payment may be a
partial payment consisting of that
portion of the severance pay fund
remaining from the employee's
immediate entitlement or the balance of
the 52-week lifetime limitation.
(b) When an employee receives
severance pay as the result of
separation from a qualifying temporary
appointment (that is, a temporary
appointment effected within 3 days of
separation from a qualifying permanent
appointment), severance pay will be
aid in an amount equal to the rate of
asic pay received at the time of
separation from the qualifying
temporary appointment
(c) When an employee is in a nonpay
status Immediately before separation,
basic pay is the pay the employee would
have received If he or she had been in a
pay status when separated.

S550.710 Suspension of severance pay.
(a) When an individual receiving
severance pay is given one or more
nonqualifying temporary appointments,
the severance pay is suspended on the
day of the appointment. Severance pay
begins again when the employee
separates from the nonqualifying
temporary appointment.
(b) When an individual is given a
temporary appointment before
severance payments begin, the
severance payments do not begin until
the employee is separated from the
temporary appointment.
(c) When a seasonal employee is
hired under a temporary appointment,
severance pay is suspended. Severance
payments begin again after separation
from the temporary appointment
J 550.711 Termination of severance pay
Entitlement to severance pay ends
(a) An employee is appointed to the
Federal Government under a qualifying
(b) The severance pay fund is
exhausted; or
(c) The employee has received 52
weeks of severance pay.
3 550.712 Reemployrment; recredt of
(a) When a former employee is
reemployed, the employing agency shall
record on the appointment document the
number of weeks of severance pay
recieved (including partial weeks).
[b) If an employee again becomes
entitled to severance pay, the agency in
which entitlement arises shall compute
the severance pay allowance on the
basis of all creditable service and
current age and deduct from the number
of weeks it would take to exhaust the
allowance the number of weeks for
which severance pay previously was
1 550.713 Records.
Agencies shall maintain records, by
fiscal year, of the number of employees
who receive severance pay and the total
amount of severance pay paid. When
entitlement to severance pay arises as
the result of contracting a Federal
function to a private contractor, the
affected agency also shall record the
number of separated employees who go
to work for the contractor within 90
days of the effective date of the
contracL The Office of Personnel
Management may require agencies to
report such information to the Office.
[FR Doc. Be-124 Filed S-3-Sa 845 am]
S CJJNO m ons -41

_ I_ ___

Attachment 2 to FPM Bn. 550- 68

United States
Office of

Notice of Proposed Changes
to Title 5 of the
Code of Federal Regulations

The Office of Personnel Management has issued proposed regulations on severance pay.

These regulations would accomplish the following:

(1) Eliminate the requirement that employees have to be involuntarily
separated from a permanent appointment before receiving a temporary
appointment to be eligible for severance pay upon involuntary sepecation
from a temporary appointment.

(2) Eliminate the current restrictions that prohibit the payment of
severance pay to employees who accept comparable employment with a
contractor, public non-Federal organization, or non-appropriated fund
instrumentality at the time one of these organizations assumes a Federal
function, or who accepts any employment with one of these organizations
within 90 days of the transfer date.

(3) Replace the term and definition of "equivalent position" with that
of "reasonable offer" to bring eligibility requirements for severance pay
in line with those for discontinued service retirement.

You can review a copy of the complete text of the regultions in the roam shown below. The U.S. Office of
Personnel Management would like to hear any comments you may have. Please send them to arrive by the
date shown below to the address indicated.

Location ofcomplete text:

Notce xpres:


DI te coenmmt to ar e:


S6e cOmmt to: Barbara L. Fiss, Assistant
Director for Pay and Performance Management,
Personnel Systems and Oversight Group,
Office of Personnel Management, Room 7H28,
1900 E Street, N.W.
Wasehinrrt-rn nV lnAA1

The Director of the Ofce of Personnel Magement (OPM) is required to take steps to esue that OPM
regulations which apply to individual or organizations outside OPM ore posted in Federal agencies main-
taining copies of the Federal personnel regulations (5 USC I103(b)(2)(A). This notice, which should be
posted in a prominent place, carries out that regulation

0W rilam i *a

eU. S.GOVERNMENT PRINTING OFFICE: 1989-240-594:80148

l 111 II lll illlll
3 1262 08342 696

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