Sick Leave Credit: The Calculations

In my last two columns (March 19 and March 26) I've looked at the new policy that allows employees covered under the Federal Employees Retirement System to get credit for unused sick leave toward their basic retirement benefit. This week, as promised, I'll finish up the subject with some details on converting hours of sick leave to service to show exactly how much a typical retiree's monthly benefit will increase.

Let's start with the basics. Once an employee's retirement date is decided, the service computation date is subtracted from the retirement date to determine the amount of service the employee has toward retirement eligibility. Then, the unused sick leave is converted to additional service and added to the employee's length of creditable service to determine the years and months of service that will be used to compute the retirement benefit.

Here's a chart that makes it easy to convert hours of unused sick leave into additional service:

Let's assume Casey is retiring on April 2, 2010, with 33 years and 18 days of total federal service, along with 1,800 hours of sick leave. Using the chart above, you can convert those hours to months and days of additional service. (Note that 1,800 is between 1,797 and 1,803 on the chart. In such cases, you should use the higher amount in your calculations.)

Here is how Casey's service will be factored:

Length of service for eligibility: 33 years, 18 days
Unused sick leave: 10 months, 11 days
Total: 33 years, 10 months, 29 days

Casey will have his retirement computed on 33 years and 10 months of service. The 29 days will be lost unless he changes his retirement date to Saturday, April 3. By adding an additional day of service in the computation of the retirement benefit, Casey can gain an extra month of service. (Remember, 30 days equals a month of service.) FERS

Let's say Fred retired March 31, 2010, with 23 years and 16 days of service. He had a balance of 1,800 hours of unused sick leave. (It accrued through March 27. Since Leave Period 8 ends on April 10, no leave would have accrued for that period). Under the new policy, the value of Fred's hours of sick leave will be reduced by 50 percent, to 900 hours. That converts to five months and six days of additional service.

Here is how Fred's service will be factored:

Length of service for eligibility: 23 years, 16 days
Unused sick leave: 5 months, 6 days
Total: 23 years, 5 months, 22 days

Fred will have his retirement computed on 23 years and five months of service. The 22 days will not be used to calculate the benefit. These days are equivalent to 128 hours of unused sick leave.

As in Casey's example, Fred could have changed his retirement date to gain an additional month of service. That would have required working an additional eight days, because all FERS retirements (except disability and discontinued service retirements) commence on the first day of the month. But I would have advised him not to do that. By retiring March 31, Fred will be entitled to his first FERS retirement benefit for the month of April. If he retired April 8, his first retirement benefit wouldn't be paid until May. He would have lost the retirement compensation for April 9 to April 30.

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 federalnewsradio.com or on WFED AM 1500 in the Washington metro area.