Federal Government Severance Packages: When Unused Vacation and Time In Service Becomes a Gold Mine

Hear ye, hear ye:  The federal government DOES NOT have severance packages for its employees who leave the federal government.

There used to be the trend that people wouldn’t leave their job until they retire. Amazingly, in the federal government, there is still this belief that one should remain employed until that person retires. This is mostly due to the fact that should you retire at your retirement age, you will be covered by the federal government health plan. But why should anyone hold out on living life for a health plan? God forbid but you could die before you even become a beneficiary of your federal government health plan.

There is a big difference when you lose or leave (quit) the federal government versus the private sector. First, the federal government does not provide severance pay or packages. The best that you can do or hope for is that you have enough unused vacation that you can cash out when you leave.

For example, the federal government allows for you to carry no more than 240 hours of leave which equals to about 5 weeks of leave.  When you first start working for the federal government, you earn four hours of leave each pay period for the first three years then after than six hours of leave for the next twelve years, until you get to fifteen years of service. Once you get to 15 years of service, then you can earn 8 hours of leave per pay period. The difference between six and eight hours of leave is tremendous. Going from six hours to eight hours of leave accumulation helps you to rack up the vacation fast.

One thing that federal government employees do is they will often have what it known as “use or lose” which means just like it sounds. If you don’t use any vacation in excess of 240 then you lose it. This is probably why you see so many seasoned federal employees taking a lot of vacation especially around the holidays. It is not uncommon for someone from the federal government to start their vacation around Thanksgiving and you may not see them again until after the first of the year.

I am a hoarder of “wealth” by nature. I tend to hoard money and I try to hoard things that can bring me wealth. I calculated how much my unused vacation would earn me in 11 years (my glory retirement). It’s a good amount of money so for the past two years, I have kept a 240 hour balance of my vacation. And if I leave the federal government prior to my 30 years of service I would have a nice chunk of change.  In fact, this amount would allow me to live for seven months. All my bills paid. BUT REMEMBER, I also do not have a lot of expenses. I have a modest car and I downsized my house.

If you are a federal government employee who does not foresee yourself staying with the federal government for the rest of your life I would strongly suggest you start accumulating your 240 hours and just bank it.  It may come in handy some day. Also, given the fact that so long as you have been employed for five years, and ten years respectively in the federal government (which will be explained further below), you are considered vested in your pension and can request a deferred annuity when you leave the federal government. This means you don’t have to stay 30 years to get that pension. You can stay as long as you are vested and when you are fed up you can get out and move onto something else.

If you leave before your 30 years, you can submit a request for a deferred annuity. You are eligible for a deferred annuity if you meet one of the following age and service requirements:

1. If you have completed at least five years of creditable civilian service, then you are eligible for a deferred annuity beginning the first day of the month after you reach age 62. (This means that any military service DOES NOT count towards your pension annuity)
2. If you have completed at least 10 years of creditable service, including five years of civilian service, then you are eligible for deferred annuity beginning the first day of the month you reach your minimum retirement age. (This means your military service DOES count towards your pension annuity)

You only have to work for the feds for a minimum of five years to get a pension. Clearly, the amount of your pension will depend your salary but you will get some extra money when you either 1. hit age 62 or 2. reach your minimum retirement age  of which the earliest may be age 55 and depends upon your birth date.

As a person who has been employed with the federal government for almost 20 years I often think about a second career. I have invested in my thrift savings plan, which is equivalent to a 401 (k) plan for the private sector, so I haven’t just been doing nothing with my money. I feel good knowing that if I should ever decide to leave I will still be in a good position for myself.

A lot of people do not complete 30 years with a company.  However, if you can get a federal government job and stay for five or ten years, it may be well worth the investment.