You’ve been eyeing the exit. Maybe you’ve got twenty years in the civil service, or perhaps you’re just burnt out on the red tape and want to transition to the private sector while the market is still hot in 2026. Then you hear the rumors: your agency is restructuring. You wait for the Voluntary Separation Incentive Payment (VSIP) offer—the "buyout"—to land in your inbox. But it doesn't. Or worse, you apply and get a cold, formal letter stating your request for a federal employees buyout denied.
It’s a gut punch.
Most people think buyouts are a right or a reward for long service. They aren't. They are strictly a business tool used by the federal government to downsize or reshape the workforce without resorting to the "R" word: RIF (Reduction in Force). If your agency can function without you, but they don't need to lose your specific role to meet budget targets, they aren't going to pay you $25,000 to $40,000 to walk away. It's that simple, and honestly, that frustrating.
The Cold Reality of VSIP Approval
A buyout isn't about you. It’s about the "position." This is the fundamental disconnect that leads to so many people feeling slighted when their application is rejected. Under the rules governed by the Office of Personnel Management (OPM), an agency must prove that the buyout will help them avoid a RIF, restructure for better efficiency, or eliminate a "surplus" or "skill mismatch."
If you are a high-performer in a "mission-critical" occupation—think cybersecurity, specialized engineering, or certain healthcare roles within the VA—you are almost guaranteed to have your federal employees buyout denied. Why? Because the government spent thousands recruiting you and they can't afford to let your institutional knowledge walk out the door, even if the agency as a whole is cutting costs.
They want the "dead wood" to leave. They want the overstaffed administrative layers to shrink. If you're the person actually keeping the lights on, you’re stuck.
Budgetary Math and the $40,000 Cap
For years, the buyout cap was stuck at a measly $25,000, which, after taxes, barely covered a used car. While the National Defense Authorization Act eventually bumped that to $40,000 for many agencies, it’s still not a windfall. Agencies have to pay this out of their own pockets. If the Chief Financial Officer looks at the quarterly projections and sees a shortfall, the first thing they do is cancel the VSIP authority.
You might see your coworker in a different department get the check while you get a "denied" stamp. It feels personal. It’s usually just a spreadsheet error or a line item veto from a manager who doesn't want to lose their head count.
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Why Your Application Actually Failed
There are usually three big reasons a buyout goes south.
First, the "Surplus" Factor. If your agency is hiring for your same job series in another city, they can't legally justify paying you to leave. OPM looks at this closely. It’s hard for a director to say "we have too many HR specialists" while simultaneously posting ten HR specialist jobs on USAJOBS.
Second, timing. Buyout windows are often incredibly short. Sometimes they're open for only 30 days. If you miss the window by five minutes, or if your HR liaison sits on the paperwork, you're out of luck. There is very little room for appeal once the window closes.
Third, the "Re-employment" trap. If you told your boss you plan on coming back as a contractor in six months, you’ve basically killed your chances. The law generally requires you to pay back the entire gross amount of the buyout if you return to federal service within five years. If the agency suspects you're just gaming the system to switch to a higher-paying contract role doing the same job, they’ll deny you to avoid the headache.
Management Discretion: The "Black Box"
Agencies have "wide latitude." That's a fancy way of saying they can pick and choose based on criteria that feel totally arbitrary. They might offer buyouts only to those at a Grade 14 or above. Or only to people in the Denver field office. If you don't fit the specific demographic they are trying to "attrit," you’re staying put.
The Difference Between VERA and VSIP
It's easy to get these confused. VERA is Voluntary Early Retirement Authority. It lets you retire early without the usual age and service requirements. VSIP is the actual cash—the buyout.
Sometimes you get both. Sometimes you get neither.
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A common reason for a federal employees buyout denied is that the employee applied for VERA but didn't realize the agency hadn't authorized the cash incentive (VSIP) to go with it. You get to retire early, sure, but you don't get the check. It’s a bitter pill to swallow when you were counting on that money to bridge the gap until your TSP withdrawals start.
What Happens After a Denial?
If you've been denied, you have to pivot. Most people just mope and go back to their desks, but there are actual strategies to handle the fallout.
Request the Specific Criteria: Agencies are supposed to have a written plan for who gets a buyout. Ask for it. If they didn't follow their own plan, you might have a grievance through your union (if you’re bargaining unit) or an appeal through the Merit Systems Protection Board (MSPB), though MSPB appeals on buyouts are notoriously difficult to win because the program is "voluntary."
Look for the "Shadow RIF": If they denied your buyout because they "need" you, but then they start stripping your responsibilities or making your life miserable, they might be trying to get you to quit for free. This is a common tactic. Don't fall for it. If they need you, make them pay for that need through your salary and benefits.
Re-evaluate the "Five Year Rule": Honestly, if you were only staying for the $40,000, you might want to run the numbers again. If a private sector firm is offering you a $20,000 raise, you’ll make up that denied buyout in two years. Don't let the lack of a "parting gift" keep you in a job that makes you miserable.
How to Position Yourself for the Next Round
Buyouts usually come in waves. If you missed this one, another might come in the next fiscal year.
Stop being "indispensable" in the wrong ways. If you are the only person who knows how to run a 30-year-old legacy database, they will never let you leave. Start cross-training others. Document your processes. Make it easy for a manager to imagine the office functioning without you.
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Also, keep an eye on the agency’s "Strategic Human Capital Plan." These are public documents. They tell you exactly which jobs the agency thinks are obsolete. If your job is on that list, you are a prime candidate for the next VSIP. If your job is listed as a "high-growth area," stop waiting for a buyout. It isn't happening.
Navigating the Union and HR
If you're part of a union like AFGE or NTEU, go talk to your steward immediately after a denial. Sometimes, the agency skips a step in the "negotiated implementation" of the buyout plan. If the union can prove the agency played favorites—giving buyouts to the "friends of the Director" while denying others in the same role—they can file a formal grievance. It won't always get you the cash, but it puts pressure on HR to be more transparent in the next round.
Don't expect HR to be your friend here. Their job is to protect the agency's budget. If they can get you to retire without paying you $40,000, they’ve done their job perfectly.
Actionable Steps for the Denied Federal Employee
If your request was just rejected, do not sign any further retirement paperwork until you do these three things:
- Verify the Budget Code: Ask HR specifically if the denial was due to "funding unavailability" or "loss of essential skills." If it's funding, that might change in the next fiscal quarter. If it's skills, you know where you stand.
- Check the VERA eligibility: If you were denied the cash (VSIP) but still want to leave, see if the VERA (early retirement) still stands. Sometimes the "early out" is approved even if the money isn't. Weigh the long-term value of your pension starting early against the loss of the one-time payment.
- Update your Private Sector Resume: A buyout denial is often the universe telling you that you're too valuable for your current pay grade. If the government won't pay you to leave, see if a competitor will pay you to arrive.
The federal buyout system is a clunky, bureaucratic mess. It isn't a "thank you" for your years of service; it's a cold, hard calculation of FTE (Full-Time Equivalent) costs. Once you stop taking the denial personally, you can start making a move that actually benefits your bank account. If the government won't give you the "golden handshake," it's time to build your own.
Start by calculating your "breakeven" date. If you stay in your current GS-grade for another 12 months, will you earn more in salary and pension accrual than the $40,000 (pre-tax) you just lost? Usually, the answer is yes. Use that 12-month window to plan an exit on your own terms, rather than waiting for a federal incentive that may never come.