http://www.myfederalretirement.com

Guide to FERS Sick Leave Credit:
Understanding How Unused Sick Leave Is Used In the Calculation of a FERS Annuity
Edward A. Zurndorfer, Certified Financial Planner

On Oct. 28, 2009, President Obama signed the National Defense Authorization Act.

The new law contains several retirement changes that will affect federal

employees.

One change that takes effect immediately will allow those employees covered

by the Federal Employees Retirement System (FERS) to credit their unused sick

leave in the calculation of their FERS annuity.

Until the passage of this law, only those employees covered by the Civil

Service Retirement Systems (CSRS) and CSRS-Offset could receive credit for their

unused sick leave hours in the computation of their CSRS annuities. But FERS

employees who retired would forfeit all of their unused sick leave.

This column discusses how unused sick leave will be added to the

service time of those FERS-covered employees who will be retiring starting

October 28, 2009. 

Readers should note that the information presented in this column is

based on the unused sick leave regulations that currently apply to CSRS and

CSRS-Offset employees. Until the Office of Personnel Management (OPM) issues

final regulations for FERS employees, the information presented in this column

is preliminary and tentative. But there is little reason to believe that OPM

will have a different set of regulations regarding the treatment of unused sick

leave for retiring FERS employees and for retiring CSRS

employees.  

From Oct. 28, 2009 and through Dec. 31, 2013, retiring FERS-covered employees

will add 50 percent their unused sick leave at the time of retirement

to their service time for the purpose of calculating their FERS annuity. FERS

employees retiring on or after Jan. 1, 2014 will add all of their unused

sick leave at the time of retirement in the calculation of their FERS

annuity. Besides the 50 percent limitation that applies between now and Dec. 31,

2013, there is no limit as to how much sick leave will be used in the annuity

calculation. Note that unused sick leave (as well as unused annual leave) credit

cannot be used to calculate the retiring employee's high-three average

salary. 

Sick leave is earned in hours. A full time employee normally accrues four

hours of sick leave each pay period. A FERS annuity is calculated based on years

and months of total service. It is useful and important to review the rules

regarding how the Office of Personnel Management (OPM) converts sick leave

(earned in hours) to months and days of service.

All employees should note that unused sick leave credit is used only in the

computation of the retirement annuity benefit. Unused

sick leave cannot be used to establish retirement eligibility as the

following example illustrates. 

Joan, age 60, has 19 years and 4 months of service. Joan would like to

retire Jan. 30, 2010 when she will have 19 years and 7 months of federal service

and 6 months of unused sick leave. Since Joan will not have 20 years of federal

service as of Jan. 30, 2010, she will have to wait until at least April 30, 2010

to retire. At that time, Joan will have 20 years and 0 months of service and 6

months of unused sick leave. Since Joan is retiring before Dec. 31, 2013, she

will receive credit for 50 percent of her unused sick leave, or 3 months. Joan's

FERS annuity will then be calculated based on 20 years and 3 months of service.

OPM uses the following procedure to convert unused sick leave in hours into

months and days. According to OPM, there are 30 days in a month and 12 months in

a year, or 360 days per year. Full time employees work 2,087

hours per year. 2,087 hours divided by 360 days per year equals a conversion

factor of 5.797 hours of unused sick leave equates to one day of

service. 

OPM has a sick leave conversion chart that will convert unused sick leave

hours into months and days of service. To download the chart (1 page

PDF) href="http://www.myfederalretirement.com/public/Unused_Sick_Leave_2087_Hours_Chart.pdf"

target=_blank>click here.  

For example, from the sick leave chart 765 hours of unused sick leave equates

to 4 months and 12 days of service. 

The sick leave conversion chart does not list every number between 0 and

2,087 -- there are gaps. An employee has to use the next number "up" if a figure

on the chart does not correspond exactly to the total hours of unused sick leave

credited to the employee at the time of retirement.

Here is an example:

An employee has 1,400 hours of unused sick leave at retirement. "1,400

hours" does not appear on the chart but. "1,397 hours and "1,403 hours" do

appear. The employee would use "1,403 hours" to determine the amount of service

to be added in the computation of the annuity. The 1,403 hours of unused sick

leave equates to 8 months and 2 days of service.

The following worksheet should be used by retiring FERS employees -

effective immediately - and through Dec. 31, 2013.



If a FERS-covered employee retires at anytime

after Dec. 31, 2013, the full amount of unused sick leave will be added to the

total service time.

The following examples illustrate:

Example 1. Ann, age 60, retired Oct. 31, 2009 with 25 years, 6 months and

13 days of total FERS service. Her unused sick leave balance at the time of

retirement is 1,202 hours.




     

The FERS annuity will be calculated on years and months of service. Any

amount less than a month -- such as the 27 days in the previous example -- will

not be counted in the FERS annuity calculation.

Example 2. Same as Example 1, except that Ann retires on Oct. 31, 2014

with 1,672 hours of unused sick leave.




*32 days equals 1 month and 2 days.
**

16 months equals 1 year and 4 months

The FERS annuity will be calculated based on 31 years and 4 months of

service.

Finally, there is the question of unused sick leave for those employees who

transferred to FERS from CSRS and who will be receiving both a CSRS and a FERS

annuity, based on years of service in both retirement systems. Under the old

law, "Trans" FERS employees received credit only towards the CSRS component of

their retirement benefit for the lesser number of unused sick leave hours

either:

  1. on the day of transfer to FERS or;

  2. on the day of retirement. Although OPM has not given guidance for these

    appears, it would appear that under the new law any sick leave not used for the

    CSRS annuity component would be creditable for the FERS annuity component.

OPM should in the near future issue official guidance rules for the treatment

of unused sick leave for all FERS employees.

Posted: 3/19/2010

About the Author

Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in

Silver Spring, Maryland. He is also a registered representative with

Multi-Financial Securities Corporation (Branch A9X), member FINRA/SIPC, also

located in Silver Spring, Maryland

Copyright © 2007-2014 My Federal Retirement. All Rights Reserved. Reproduction without permission prohibited.