Until late last year, FERS employees in the twilight of their careers were faced with a dilemma: “What should I do about my sick leave?” If I use it up (“burn it”) during the year or so prior to retirement, I will be cheating. But if I am honest about it, then I will lose something of real value—the sick leave will simply vanish at retirement. What should a FERS employee do?
Fortunately, Congress passed and the President signed into law, a bill to remedy this situation. (See President Signs Defense Bill: Includes Credit for Sick Leave and Abolishes NSPS)
FERS employees now receive credit for their sick leave, at retirement.
Here is how this works
When a FERS employee retires, he or she receives 1% of his high-three salary for each full year of service, and one-twelfth of 1% for each month.
At retirement, the sick leave balance used for his annuity is reduced by half. Then, for each 348 hours of sick leave, one month is added to his service time. Beginning in 2014, the hours will no longer be reduced by half; instead, the employee will be credited at the rate of one month for 174 hours.
Here is an example
- Frank has a high-three of $74,287 and a sick leave balance of 1,292 hours. First, the 1,292 hours are reduced by half, to 646.
- The 646 is then divided by 174 and rounded down to the nearest whole number (646 / 174 = 3.71, rounded = 3).
- This equates to three additional months of service, or 0.25% of the high-three.
- One quarter of 1% times $74,287 = $185.71.
- The $185.71 is then divided by twelve to arrive at the exact increase in Frank’s monthly annuity: $15.47.
A person with the identical figures as Frank, retiring on/after January 1, 2014, will see an increase of $30.94, because the sick leave balance will no longer be halved.
What happens to the “leftover” sick leave?
In Frank’s case this amounts to 124 hours. Unfortunately, it is lost, unless…if the leftover service time, combined with the leftover sick leave hours, is equal to or greater than one month, then Frank gets credit for one additional month.