Sick Leave Credit: The Details

By Tammy Flanagan

March 26, 2010

Last week's column on crediting sick leave toward the basic retirement benefit under the Federal Employees Retirement System sparked quite a few comments and requests for more details. Let's take a closer look at the subject.

Some readers weren't impressed with the value of the credit. Here are two examples:

It's true that the additional retirement benefit gained from crediting a day of unused sick doesn't compare to the value of a day of salary. But it's better than no credit at all. Here are some interesting facts that I found in a 2004 Congressional Research Service report:

"Until 1969, CSRS employees forfeited any unused sick leave at the time of their retirement. At that time, the Civil Service Commission (now the Office of Personnel Management) estimated that about half of all retiring federal employees had zero sick leave balances, and the other half had an average of about 44 days (352 hours) of sick leave that were forfeited at retirement. Also, a House Post Office and Civil Service Committee report noted that retiring employees used an average of 40 days (320 hours) of sick leave during their last year of employment.

"In 1969, Congress enacted legislation (P.L. 91-93) to permit CSRS employees to receive service credit for unused sick leave in the computation of their retirement annuities. … This change in policy was expected to reduce federal employees' use of sick leave and to grant limited recognition to those who prudently utilized their sick leave. In 1986, the General Accounting Office (now the Government Accountability Office) examined the implementation of this change in policy, and reported that employees who retired in 1984 and 1985 had significantly higher sick leave balances than employees who retired in 1968, before the law was changed."

Isn't it interesting to see how history repeats itself? By the way, don't forget that federal agencies can require employees to submit evidence of illness before approving sick leave.

Who Gets Credit?

Some readers were not sure exactly who is eligible to receive the credit for leftover sick leave:

To be eligible to credit your unused sick leave toward your FERS retirement benefit, you must be eligible for an immediate annuity -- that is, one that begins within 30 days of your separation from federal service. It is not limited to employees with 20 years of service. An immediate annuity is payable to employees who retire at 62 with as little as five years of service, or at 60 with 20 years. The annuity also is available for employees who retire under FERS with a reduced annuity at the minimum retirement age (55-57) with at least 10 years of service.

The law allowing credit for unused sick leave passed on Oct. 28, 2009. It was not made retroactive, so those who retired prior to its enactment will not receive credit for their unused sick leave.

If an employee working under a part-time appointment qualifies for immediate retirement, he or she can credit unused sick leave in the same manner as other FERS employees. Part-time service is treated as full time for eligibility purposes -- but not for computation of benefits.

Re-employed annuitants (retirees) who have their salaries offset by the amount of their retirement benefit can have their retirement benefits recomputed if they are re-employed for a minimum of five years and have paid retirement contributions. Those who are re-employed with retirement coverage for at least one year qualify for a supplemental annuity benefit added to their original retirement. Annuitants who are eligible for recomputed or supplemental annuities are eligible for credit of their unused sick leave. But annuitants who are re-employed under special authority in which they continue to receive retirement benefits do not earn additional benefits and will not receive credit for unused sick leave.

In addition to these questions, many people wanted the details on converting hours of sick leave to service to figure out exactly how much their monthly benefit would increase. I'll cover that in next week's column.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Monday mornings at 10 a.m. ET on or on WFED AM 1500 in the Washington metro area.

By Tammy Flanagan

March 26, 2010