Federal Severance Pay: Important Information on Unemployment Benefits for Federal Employees Affected by Recent Reductions in Force - Unemployment Insurance

The Maryland Department of Labor (MD Labor) understands that recent reductions in force (RIF) in the federal government have been an extremely challenging experience for all affected workers, and we are here to support.

We know this sudden job loss is difficult, and MD Labor is committed to providing information and resources to help you through the transition.

Severance pay and your unemployment benefits in Maryland

Some federal employees impacted by federal agency reductions in force may be receiving severance pay as part of separation. It is important to understand how this severance pay will affect your eligibility for unemployment insurance (UI) benefits in Maryland so you can make an informed decision on if and when to apply.

Under Maryland’s current unemployment insurance laws and regulations, severance pay is treated as deductible income against unemployment benefits. This means you cannot receive unemployment benefits in any week that your severance pay covers if your severance pay is equal to or greater than the unemployment benefit amount for that week.

Instead, your unemployment payments will most likely be delayed until after your severance expires. If the severance amount for a given week is less than the unemployment amount for that week, you may receive a reduced unemployment payment for that week.

Most claimants receive a weekly benefit amount of $430. This means that if your severance is $430 per week or over, you will not be able to collect unemployment benefits in the same week.

See Our FAQ for more information on UCFE and Visit Here for more information on severance pay.

Important things to consider before filing for unemployment benefits

Given the way severance pay affects unemployment insurance, consider the following prior to filing for unemployment.

No Immediate Benefits: If you file while receiving severance pay greater than the weekly unemployment benefit, you will not receive payments for the weeks covered by your severance. Your claim would be opened, but you would not receive benefits during the severance period due to the income offset. In other words, an early application will result in $0 benefits until your severance is done.
Premature Benefit Clock Start: When you file an initial unemployment claim, you start a “benefit year” clock. Filing too early could cause your benefit eligibility period to expire earlier than needed. Maryland unemployment benefits are available for a limited number of weeks (up to the maximum allowed, generally around 26 weeks) within a one-year timeframe. If you start your claim too early, that one-year clock (your benefit year) could begin ticking while you are not able to collect benefits due to your ongoing severance payments. By the time your severance period ends and you can actually receive unemployment payments, you will have used up part of that year with no payouts. This could potentially shorten the window of time in which you can receive your allotted weeks of benefits.

When to file your unemployment claim

The best time to file for unemployment insurance depends on the amount and duration of your severance package. Mark the date when your severance coverage ends—this might be the day after your final paycheck, or the end of the number of weeks that your severance was intended to cover.

Important: Unemployment claims in Maryland cannot be backdated to your layoff date to cover weeks when you were receiving severance. Benefits generally begin from the week you file. This is why timing your filing is crucial—in most circumstances you want to file as soon as you are eligible, but not before.

Example One: You separated from federal employment effective June 2, 2025 however you are ineligible for severance pay. The best date for you to file for unemployment benefits is June 3, 2025.

Here’s why: You have no severance payments to offset benefits, so there is no reason to wait. You’ll get the most benefits by filing immediately.

Example Two: You had an annual salary of $80,000, separated from federal employment effective June 2, 2025, and began receiving biweekly severance payments equal to your salary. Your severance is calculated to last for 28 weeks, and your weekly severance amount is greater than the your weekly unemployment benefit amount of $430. You will not be able to collect unemployment benefits at the same time you are collecting severance. The best time for you to file an unemployment benefits claim is, most likely, immediately after your severance pay has ended.

Here’s why: A benefit year is 52 weeks and you can only receive 26 weeks of benefits during that timeframe. If you file immediately after you are terminated, the clock on your benefit year will begin to tick while you are receiving $0 per week in unemployment insurance benefits and instead getting severance payments. At the end of those 28 weeks, you will only have 24 weeks left in your benefit year. If you had waited till your severance was completed, you would have 26 paid weeks left in your 52 week benefit year.

Example Three: You had an annual salary of $80,000. Your last day worked is June 30, 2025 (the end of Calendar Quarter 2 of 2025) and you receive 52 weeks of severance in an amount above your weekly unemployment insurance benefit amount. Severance ends Monday, June 29, 2026, but you wait until Wednesday, July 1, 2026 (the first day of Calendar Quarter 3 of 2026) to file for benefits. Based on your filing date, you are not eligible to receive unemployment benefits, but you likely would have been eligible if you had filed a day earlier on June 30, 2026.

Here’s why: To collect unemployment benefits, you must have sufficient earnings across at least 2 calendar quarters within the previous 15 months. Usually, the period Maryland Unemployment looks at to determine if you have sufficient earnings is the first 4 of the last 5 completed calendar quarters. If you file Tuesday, June 30, 2026 in this scenario, the first 4 of the last 5 completed calendar quarters preceding this date will include Q1, Q2, Q3, and Q4 of 2025. You had wage earnings in Q1 and Q2 so you would probably have sufficient earnings to qualify. But if you wait until July 1, 2026, then the first 4 of the last 5 completed calendar quarters would include Q2, Q3, Q4 2025, and Q1, 2026. You earned wages only in Q2 of 2025 but none of the other quarters, therefore you do not have sufficient earnings across 2 calendar quarters and do not qualify.

How to prepare while you wait

Though it is likely better to wait to file for UI until your severance has ended, there are constructive steps you can take now to prepare for a smooth unemployment filing process:

Gather Your Documentation: Make sure you have all your necessary paperwork readily available. This includes your RIF notice or separation letter, any documentation of your severance package, and your SF-50 (Notification of Personnel Action) or equivalent, which shows your federal employment status and separation. Having these documents on hand will help when filling out your unemployment application, as you’ll need to provide information about your former employment.
Collect Required Personal Information: Be prepared with personal information you’ll need for the UI claim. This typically includes your Social Security number, address, contact information, and details about your employment history. For federal employees, you might be asked for your agency’s identification details (for instance, the federal agency code or payroll information; the Standard Form 8 (SF-8) given to you by your agency, if provided, contains some of this info). Compile these details now so that the application process will be faster.
Learn About the Process: Take a little time to review the Maryland Department of Labor’s information on how to file for unemployment and what to expect. Our website has a Claimant FAQ and a guide to unemployment insurance that explains the steps in plain language. Understanding how weekly certifications, job search requirements, and payments work will make you more confident when you start your claim.
Begin Your Job Search: While not directly related to filing your claim, starting to look for new employment or taking advantage of career services now can be beneficial. Maryland’s American Job Centers, Professional Outplacement Assistance Center (POAC) and the Maryland Workforce Exchange offer free reemployment services such as resume workshops, job listings, and training opportunities. You can also upload your resume to Civic Match, a nonprofit that helps state and local governments recruit and retain talent. Engaging with these services can help you get a head start on finding your next position. Plus, once you do file for unemployment, you will be required to actively seek work, so it helps to already have this routine in motion.

By completing the above steps during your severance period, you’ll be well-prepared to file your unemployment claim at the right time and avoid any last-minute snags. Preparation will make the process smoother and quicker when you become eligible for benefits.

If you are having trouble figuring out the right time to file, you may want to contact an attorney with experience in unemployment insurance law. If you need help finding such an attorney, contact the local bar association in the county in which you live, or Baltimore City.

We are here to help you

Please remember that the Maryland Department of Labor is ready to help you during this difficult transition. We recognize that losing your job is stressful and can feel overwhelming. Our goal is to make sure you receive the support and benefits you need when the time is right.

If you have questions about Maryland unemployment insurance, you can contact our Division of Unemployment Insurance personalized assistance at 667-207-6520 (Monday to Friday, 8:00 a.m. to 4:00 p.m, select option #9) or visit our website for additional information and FAQs.

Maryland is grateful for your service, and we stand ready to assist you in your next steps.