Federal Employment Reduction Assistance Act of 1996

Federal Employment Reduction Assistance Act of 1996 - Authorizes the head of an agency to submit a plan to the Director of the Office of Management and Budget to pay voluntary separation incentives to employees of the agency who agree to separate from the agency by retirement or resignation.

(Sec. 4) Provides that a voluntary separation incentive payment be paid in a lump sum after the employee's separation and be equal to the lesser of: (1) the amount the employee would have been entitled to receive (without adjustment for any previous payment); or (2) if the employee separates during a certain fiscal year, according to a specified payment amount for such fiscal year, from FY 1996 through FY 2000.

(Sec. 5) Prescribes that an individual who has received a voluntary separation incentive payment and accepts any subsequent employment with the Government within five years after the date of separation shall be required to repay, prior to the first day of employment, the entire amount of the incentive payment to the agency that paid the incentive payment. Provides for waiver of repayment if the individual involved possesses unique abilities and is the only qualified applicant for the position.

(Sec. 6) Requires that an agency make a contribution to the Civil Service Retirement and Disability Fund in an amount equal to 15 percent of the final basic pay of each agency employee to whom a voluntary separation incentive has been paid.

(Sec. 7) Mandates the reduction of total full-time equivalent employment in each agency by one for each employee receiving a voluntary separation payment. Requires that the President take appropriate action to ensure that functions involving more than ten full-time equivalent employees are not converted to contracts except in cases in which a cost comparison demonstrates that such contracts would be to the advantage of the Government. Provides for the preceding two clauses to be waived upon a determination by the President that the existence of a state of war or other national emergency, or the existence of an extraordinary emergency so requires.

(Sec. 8) Mandates certain reports.

Makes technical amendments to the Federal Workforce Restructuring Act of 1994.

(Sec. 9) Modifies requirements regarding the order of retention in a voluntary participation in a reduction in force.

(Sec. 10) Provides for continued health insurance coverage for separated employees.