Federal Severance Pay Calculator (5 U.S.C. § 5595)
One week per year for the first ten, two weeks after that, an age adjustment over 40, and a 52-week lifetime cap. The formula is public. The eligibility rule is the part that surprises people.
The short answer
Severance is one week of basic pay per year through 10 years plus two weeks per year beyond 10, with 25% added for each full three months of service beyond the last full year, then increased by 2.5% for each full three months of age over 40. The lifetime maximum is 52 weeks. Employees eligible for an immediate annuity — including many VERA cases — receive no severance at all.
Basic pay only — locality pay is included; overtime is not.
Enter salary, service and age to calculate the 5 U.S.C. § 5595 amount.
Estimate only. Agency payroll is the authority on creditable service and the pay rate. Full-time employees need at least 12 months of continuous service and an involuntary separation for reasons other than inefficiency. Employees eligible for an immediate annuity on separation — including many VERA and early-retirement cases — are not eligible for severance pay.
The formula in plain steps
| Step | Rule |
|---|---|
| 1. Base weeks | 1 week for each full year through 10, then 2 weeks for each full year beyond 10. |
| 2. Partial year | Add 25% of the otherwise applicable amount for each full 3 months beyond the last full year. |
| 3. Age adjustment | At age 40 or older, add 2.5% of the basic allowance for each full 3 months of age over 40. |
| 4. Cap | Total may not exceed 52 weeks of basic pay over a lifetime. |
| 5. Eligibility | At least 12 months of continuous service; involuntary separation for reasons other than inefficiency; not eligible for an immediate annuity. |
How it is taxed
- • Treated as wages, not as a retirement distribution.
- • Subject to federal income tax withholding, Social Security and Medicare.
- • Reported on Form W-2 for the year paid.
- • Supplemental wages are commonly withheld at a flat 22% federal rate — that is withholding, not your final liability.
- • Not eligible for rollover into the TSP or an IRA.
- • State income tax treatment varies; some states do not withhold automatically.
What it does to the annuity
Nothing directly — and that is the point. Severance does not add creditable service, does not raise the high-three average, and does not count toward the years needed for retirement eligibility.
- • If you are eligible for an immediate annuity, you are ineligible for severance — the two paths exclude each other.
- • If you are reemployed later, OPM and your agency's reemployment rules decide whether any severance must be repaid or offset.
- • Severance does not change your FERS or CSRS annuity computation.
If the severance has to carry you
Severance is paid in installments at the same pay period as your salary, not as one lump sum. That changes the budgeting question: the health coverage and TSP decisions happen while the payments are still arriving.
Common questions
What is the federal severance pay formula?＋
Under 5 U.S.C. § 5595, basic severance pay is one week of basic pay for each full year of service through 10 years, plus two weeks for each full year beyond 10. Add 25% of the otherwise applicable amount for each full three months of service beyond the last full year. If you are 40 or older, increase the basic amount by 2.5% for each full three months of age over 40. The total cannot exceed 52 weeks of pay over a lifetime.
How many weeks of severance pay can I get?＋
The lifetime cap is 52 weeks of basic pay, including the age adjustment. The unadjusted formula can produce more than 52 weeks for long service at an older age, which is why the cap is applied last.
Is federal severance pay taxable?＋
Yes. Severance pay is treated as wages: it is subject to federal income tax withholding, Social Security and Medicare tax, and reported on Form W-2. Most supplemental wage payments are withheld at a flat 22% federal rate, but withholding is not your final tax — the payment is included in ordinary income on your return.
Can I roll severance pay into my TSP or an IRA?＋
No. Severance pay is wages, not a distribution from a retirement plan, so it is not an eligible rollover distribution. The rollover rules apply to TSP withdrawals and other qualified plan distributions, not to severance.
Does severance pay count toward my retirement?＋
No. Severance is not creditable service. It does not increase your annuity and does not count toward the years needed for retirement eligibility. If you return to federal service, your agency's reemployment rules determine whether any severance must be repaid — ask HR before you sign anything.
Who is not eligible for severance pay?＋
An employee who is eligible for an immediate annuity on separation — including many VERA and early-retirement cases — is not eligible. So are employees who decline a reasonable offer of continued employment, separate for inefficiency, or do not meet the 12-month continuous-service requirement. Severance and early retirement are alternatives, not a package.
Is a buyout the same as severance pay?＋
No. A voluntary separation incentive payment (buyout) is a separate authority with its own eligibility, amount and repayment rules. Severance pay under § 5595 applies to involuntary separations for reasons other than inefficiency. Check which authority your agency is using before comparing offers.
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By Alyssa Xu, Founder & Editor.
Reviewed by Gavin YE, Technical Director, ClearRules Labs.
Page last reviewed 2026-10-20