Department of Veterans Affairs Employment Reduction Assistance Act of 1996

Department of Veterans Affairs Employment Reduction Assistance Act of 1996 - Authorizes the Secretary of Veterans Affairs to submit to the Director of the Office of Management and Budget a plan to pay voluntary separation incentives to employees of the Department of Veterans Affairs. Provides for the determination and payment of incentive payments to such employees. Requires repayment of the entire payment if such former employee accepts employment with the Government within five years of the date of separation, with an authorized waiver by the appropriate official.

Requires an agency to contribute to the Civil Service Retirement and Disability Fund an amount equal to 15 percent of the final basic pay of each agency employee to whom an incentive has been paid.

Mandates the reduction of total full-time equivalent employees in each agency by one for each employee receiving an incentive payment, allowing a waiver of such reduction by the President in periods of war or national or extraordinary emergencies.

Requires: (1) the Department to submit quarterly reports to the Office of Personnel Management (OPM) concerning individuals receiving such payments; and (2) OPM to submit annual reports to specified congressional committees on such information.

Authorizes the Secretary to release volunteering employees in a reduction in force within the Department (currently, only the Secretaries of Defense or a military department are so authorized). Extends all such authority through FY 2000.

Provides for continued health insurance coverage for employees separated before October 1, 2001.