Tag: opm

Does termination affect a federal employee’s retirement benefits?

federalworkerrightsLeave a comment

As the Trump administration seeks to downsize the federal government, some employees may be assessing their potential financial situation in the event of termination. Retirement benefits are an important part of the picture.

Fortunately, for the vast majority of employees, termination has no negative effect on retirement benefits, at least once those benefits are vested. (We discuss vesting timelines below.) This remains true even if the employee is accused of misconduct. There are a few narrow exceptions, discussed at the end of this post.

Some caveats before we go further: Federal retirement rules are complicated. For advice specific to your situation, consider consulting a union, attorney, or other expert. The discussion below applies to most federal employees covered by the Federal Employees’ Retirement System (FERS), which took effect in 1987. We do not discuss less common benefits such as the annuity supplement.

Federal employee retirement benefits

Federal employees generally receive three types of retirement benefits: (1) participation in the thrift savings plan, (2) an annuity based on salary and years of service, and (3) social security. We now discuss each.

Thrift savings plan

Federal employees are immediately vested in the thrift savings plan as to their own contributions and the agency’s matching contributions. This means the employee is entitled to keep those funds regardless of what may happen with their employment.

As to the agency’s 1% automatic contribution, an employee becomes vested after working in the government for three years, or two years for some narrow categories of employees.

For more details, see here and page 5 here.

An employee’s benefits under the thrift savings plan are not affected by termination, once the employee is vested.

Annuity

There are several paths through which a federal employee can become entitled to an annuity. Under most of these paths, it does not matter whether the employee was terminated or left government voluntarily.

First, an employee can choose to immediately start receiving an annuity if they fall into any of these categories:

In these categories, an employee’s eligibility is not affected by termination.

Certain categories of employees may be entitled to a full annuity earlier than set forth above. These include law enforcement officers, firefighters, CBP officers, and air traffic controllers, who become eligible after 25 years of service, or after 20 years of service at age 50. 5 USC 8412(d)(1) and 8412(e).

In addition, as a general matter, employees who are involuntarily terminated can retire early after 25 years of service, or after 20 years of serve at age 50, with some exceptions. 5 U.S.C. 8414(b).

However, for these categories of employees, the employee may lose the right to retire early if removed “for cause on charges of misconduct or delinquency.” 5 USC 8412(d)(1) and 8412(e); 5 U.S.C. 8414(b). But this does not affect the employee’s eligibility for regular retirement as described above. We discuss further at the end of the post.

Social security

Social security benefits are not affected by termination.

The situations in which termination affects retirement benefits

There are rare cases in which termination may affect retirement benefits.

First, if you are terminated before you are vested, then your benefits may be affected. As noted above, employees are typically vested after three years of service for the TSP and five years of service for an annuity. However, you always remain entitled to your own TSP contributions and the government’s matching contributions, even if you are terminated with less than three years of service.

Second, in certain cases, employees may lose the right to retire early if removed for misconduct. However, this limitation does not apply if you have reached normal retirement milestones (like age 60 with 20 years of service). Also, it does not apply to employees separated for performance issues or due to a reduction in force. Further, there are legal options for challenging an accusation of misconduct affecting retirement benefits.

Third, employees may lose retirement benefits if convicted of certain serious crimes such as espionage (5 USC 8312), and in other similar situations (5 USC 8313, 8314).

Finally, different rules may apply to foreign service officers, employees of the VA covered by Title 38, workers hired into the government before 1987, and other limited categories of employees.

For updates on issues affecting federal workers, follow our Bluesky page.

-Danny Rosenthal and Charlotte Schwartz, attorneys at James & Hoffman.

Deferred resignation: where things stand with one day left

Danny RosenthalLeave a comment

UPDATE February 6, 2025: Today’s deadline for accepting deferred resignation has been suspended by a federal judge in Massachusetts. OPM has been directed to notify employees of this development. A further hearing will occur next week.

Nearly every day since OPM announced the deferred resignation program, the administration has issued a new document or email seeking to sweeten the deal and convince more employees to resign. With one day until the February 6 deadline, where do things stand?

For one thing, the program was finally challenged in court. Several unions of federal employees argue that OPM violated the Administrative Procedure Act, which requires agencies to follow certain procedures and avoid arbitrary action. The unions say that the program violates the Act because OPM failed to adequately explain the program, provided inconsistent information, made promises it may be unable to keep, and for other reasons. The unions do not appear to ask for the program to be permanently ended, but argue that it should be suspended (or the February 6 deadline should be extended) while OPM attempts to develop an adequate legal justification and explanation for the program.

The suit was filed was filed in Massachusetts, where two of the plaintiff unions are headquartered. It has been assigned to Judge George O’Toole, a Clinton appointee.

The other major development is that OPM issued a formal agreement to govern deferred resignation. Soon after, OPM revised the agreement to address obvious legal deficiencies, while adding a cover memo attempting to assure employees the agreement is legally binding. The quick revision of the agreement is another sign of the sloppiness of the program.

It’s worth taking a close look at OPM’s argument that the agreement is binding, which appears at the bottom of page 1 and continues onto page 2 of the memo. There are several notable aspects of this section.

First, OPM asserts that the agreement is binding in the sense that, “were the government to backtrack on its commitments, an employee would be entitled to request a rescission of his or her resignation.” Even assuming this is true, it falls far short of genuine enforceability. OPM is not saying here that employee would be entitled to recoup the promised benefits if the administration violates the agreement, but merely that employees could rescind their resignation and come back to work. But that option may not be available if, for example, the employee has taken another job. And it’s unclear what would happen if an employee’s position was eliminated after the employee resigned.

Second, OPM cites two legal cases in footnotes, but those cases do not appear to fully support the administration’s claims. For example, OPM cites one case to bolster its statement that “separation
agreements entered into between an agency and its employees are legally binding.” But that case does not involve an employee successfully enforcing a separation agreement against the government. Rather, in that case, employees entered a separation agreement and then sought to withdraw and rescind their resignations. The agency denied withdrawal, relying on a provision stating that withdrawal could only occur upon proof of extreme hardship. The court found the limitation on withdrawal binding on the employee, ruling for the government.

In other words, the case finds only that an agency can hold an employee to the employee’s decision to resign–not that an employee can hold an agency to the promises in a separation agreement.

And the text of the OPM’s deferred resignation agreement does not resolve questions about enforceability. Paragraph 10 of the revised agreement states that agencies can rescind the agreement in their “sole discretion … which shall not be subject to review at the Merit Systems Protection Board (MSPB) or any other forum.” This suggests the agency can decide at any time to revoke the agreement, and the employee can do nothing about it.

Likewise, Paragraph 13 of the revised agreement sets forth a very broad waiver of any legal action related to the worker’s employment or the deferred resignation program. The plain language of this provision appears to make it impossible for an employee to pursue legal action to enforce the agreement. (It also bars the employee from pursuing any other legal action stemming from their employment, like a claim for sexual harassment or improper pay.)

For more information on the legal viability and enforceability of the program, we recommend Nick Bednar’s two detailed analyses at Lawfare. We also recommend that employees consult an attorney if they are thinking of accepting the offer. Updates on the lawsuit challenging the program may be posted on our Bluesky account.

-Danny Rosenthal, partner at James & Hoffman

Does the new FAQ on “deferred resignation” change anything?

Danny RosenthalLeave a comment

Not really.

Earlier today, OPM revised its FAQ page regarding the “deferred resignation” program. OPM then emailed the new content to federal employees. The new FAQ page is accessible here. For comparison, the original FAQ page is archived here. Our original analysis of the “deferred resignation” program is here.

OPM is obviously trying to make the program sound more appealing. For instance, the original page said that in “rare cases,” employees would have to continue working after agreeing to resign. Now, in response to a question about whether employees will have to work, OPM simply says “no.”

Likewise, OPM originally acknowledged that agency policies might prevent employees from taking another job prior to their resignation dates. Now, in response to a question about whether employees may get another job, OPM enthusiastically responds, “absolutely!” (This is followed by an assertion that public sector jobs are less productive than private sector jobs.)

And in another attempt to sell the program, the new page says: “You are most welcome [to] stay at home and relax or to travel to your dream destination [after accepting deferred resignation]. Whatever you would like.”

Notably, however, OPM has not published any new formal memos effectuating these changes. OPM’s prior memo remains in effect. It states that employees will be placed on administrative leave after resigning, but makes an exception where agencies decide that the employee needs to continue working to transition their duties. The memo does not waive any agency policies or regulations regarding outside work. It does not guarantee employees the opportunity to go on vacation. It does not establish that employees are protected from termination or RIF after accepting deferred resignation.

Meanwhile, the closest thing to an official description of the program remains the original email to employees and the “deferred resignation letter” set forth in the email. That email has not been retracted or amended.

And OPM has said nothing further to explain the legal basis for the program or how employees can enforce the promises the administration is making. On that point, Nick Bednar has published a helpful discussion of the legal issues raised by the program.

Workers could certainly use the new FAQ page to push back if a manager takes a stance contrary to the FAQ (for example, requiring an employee to work after accepting deferred resignation). On the other hand, a manager could plausibly respond that the FAQ is not an official statement of policy.

The bottom line is that the revised FAQ does not seem to represent a real change to the program, but rather a new strategy for advertising it. Or perhaps a more accurate label would be false advertising.

-Danny Rosenthal, partner at James & Hoffman

When are federal government employees entitled to time-and-one-half overtime pay?

federalworkerrightsLeave a comment

Many federal employees are entitled to time-and-one-half overtime pay under the Fair Labor Standards Act (FLSA). But federal agencies do not always comply with the law. This post will provide a list of questions to consider if you’re not sure whether you should be getting paid time-and-one-half.

1. Are you designated as exempt from the FLSA? If so, is your designation legally correct?

Under the law, some employees are “exempt” from the FLSA. Exempt employees may include supervisors, professional employees such as lawyers and doctors, and some employees who perform administrative functions such as accounting and HR.

On your SF-50, box 35 states whether you are exempt (E) or non-exempt (N). This information may also be on leave and earnings statements.

If you are non-exempt from the FLSA, you are entitled to time-and-one-half overtime pay. If you are exempt, then you are not covered by the FLSA.

But sometimes, federal agencies incorrectly designate people as exempt. These mistakes may arise because HR officials have misconceptions about what makes an employee exempt. For instance, some agencies wrongly assume that all employees above a particular pay grade, like GS-12, must be exempt. In other cases, coding errors may occur even when the agency recognizes that employees should be non-exempt.

Therefore, even if you are classified as exempt, you should consider whether that classification is incorrect. More information is available here.

If your position is correctly designated as exempt from the FLSA, you might still have a right to some form of overtime compensation, depending on your pay grade and other factors.

2. Is the work compensable?

Even for non-exempt employees, there can be questions about whether the employee is entitled to pay for certain activities. For example, employees may spend time answering calls or responding to emails on the weekend, but supervisors might discourage them from reporting that time on their time sheets.  

Generally speaking, for a non-exempt employee, all work is “compensable” if the employer knows about it or allows it to occur. Employees should be paid for this work.

There are several categories in which federal agencies sometimes fail to pay employees for compensable work. These include time on work travel, which is sometimes compensable depending on the circumstances; time attending training; time performing work during meal breaks; and time responding to emails and calls after hours and on weekends as referenced above.

3. Did you voluntarily choose to receive compensatory time?

In some cases, employees receive compensatory time for overtime work instead of pay. However, for non-exempt employees, the agency must provide the employee a choice between pay and comp time. In fact, the law states that compensatory time can be granted only if the employee requests it. See 5 U.S.C. 5543.

In other words, if you are a non-exempt employee and you have not voluntarily chosen to receive compensatory time, you should get time-and-one-half overtime pay.

For more information, including citations to statutes, regulations, and OPM documents, visit our page on pay and overtime.