Back when I started as a federal employee, you lost all of your sick leave upon retirement.
Not surprisingly, a lot of my coworkers were mysteriously sick on Fridays. However, everything changed in 2009 when Congress passed the “National Defense Authorization Act for Fiscal Year 2010”, Public Law 111-84. This bill allowed sick leave to count towards federal employees retirement annuities.
Are you a federal employee trying to figure out if and how much your sick leave will count towards your retirement? If so, I’ve got you covered. In this post I answer when sick leave counts towards federal retirement and how you can calculate its effect on your annuity.
Table of contents
- What happens to sick leave for federal employees upon retirement?
- Understanding sick leave and federal retirement eligibility
- Example calculations for a FERS annuity
- Federal employee sick leave retirement calculator
Please do not confuse my personal blog for financial advice, tax advice or an official position of the U.S. Government. This post may contain affiliate links. If you make a purchase after clicking on a link, I get a small percentage of the sale at no additional cost to you.
What happens to sick leave for federal employees upon retirement?
As I said before, Public Law 111-84 changed everything for federal employees. The bill states that a federal employee’s sick leave increases their federal length of service upon retirement. However, there are some catches:
- Sick leave does not count towards your retirement eligibility (more on this later)
- Years of service in the annuities are only calculated to the nearest month.
While these caveats sound simple, I have seen so much confusion among federal employees about how the government treats sick leave in retirement. Additionally, for many years, I could not understand the math behind the years of service calculation and sick leave. Hopefully, by the end of this post you will be an expert on this topic and can use my calculator to run as many simulations as your heart desires.
Do I lose my sick leave when I retire or separate from the federal government?
No. You do not lose your sick leave when you retire. The government adds your to your credible years of service in your annuity calculation. If you have no idea what “credible years of service in your annuity calculation” means, check out my tutorial post on how federal retirement works.
When you retire, the government will add up your your federal service. If you are a FERS employee, you can calculate your earned FERS annuity by multiplying 1% (or 1.1% if over age 62), by your length of service, by the average of your highest 3 years of salary.
Depending on how long you work for the government, you could easily have 1-12 months of sick leave built up by the time you retire. If you are exceptionally healthy, your unused sick leave could bump up your pension by a percent (or perhaps more) of your salary each year in retirement.
Does the federal government pay out my sick leave upon retirement?
No. The government does not write you a check for all of your unused sick leave upon retirement. While it would be amazing if they paid you your full hourly rate for each hour of unused sick leave, that is not the case. However, the government does provide some incentive to not abuse sick leave.
How does unused sick leave affect my FERS annuity?
For FERS employees the annuity is calculated as:
1% x (years of service) x (average of your 3 highest years of salary)
Therefore, if you had 30 years of credible service and 6 months of unused sick leave, the government would give you credit for 30.5 years of service in the annuity calculation. If you want to optimize your retirement, you should know that the government only gives credit for full months of service. Therefore, unless you have calculated your years of service down to the day, not all of your unused sick leave will count towards your retirement.
Understanding sick leave and federal retirement eligibility
The most important fact to understand about sick leave is that it cannot be used to make you eligible for retirement. For example, if you are 58 years old, have 29 years of service and 1 year of unused sick leave, you cannot retire with an MRA+30 retirement.
In other words, sick leave only increases your annuity calculation if you are already eligible for an immediate annuity.
If you are unsure of what it means to qualify for an immediate annuity, you can check the above chart (or my full post on when federal employees can retire). You qualify for an immediate annuity at age 62 with 5 years of service, age 60 with 20, or your MRA with either 30 or 10 years of service. The difference between the MRA+30 and MRA+10 retirement eligibility is that the government reduces your annuity under MRA+10 by 5 percent a year for each year you are under 62.
Unless you have met any of the above criteria, unused sick leave will not change your annuity calculations.
What happens to my sick leave if I take an early retirement as a federal employee?
What happens to your sick leave depends upon which type of early retirement from the federal government you take.
A deferred retirement means that you quit before you reach your MRA. In that case, your sick leave does not increase your FERS annuity. The OPM website is vague about postponed annuities and VERA. However, as I understand Chapter 50 of the FERS/CSRS handbook, I believe that sick leave is counted for these other types of “early” retirement. Note- if this is your plan, *definitely* talk to your HR department and get them to run a retirement calculation for you. (And for heaven’s sake, don’t trust any blogger to plan your own retirement.)
What happens to my sick leave if I quit my federal job?
If you quit your federal job, your sick leave goes into suspended animation. The government does not pay out your sick leave upon separation. However, you don’t lose your sick leave either. Instead, the government records your sick leave balance when you leave. If you ever return to a government job, they will recredit you the sick leave hours you didn’t use in your previous government job.
Example calculations for a FERS annuity
So- how do you calculate how sick leave affects federal employee’s annuities? OPM’s Chapter 50 provides some great example calculations. I’ve provided my own here for your reference. Here’s a few things you should know
- Please do not take my calculation as official human resources advice. You can do your own math but have your human resources department double check your math. (Also just a reminder my website is not affiliated with the US Government).
- The length of service calculations assume
- 12 months in a year
- 30 days in a month (see the Section 50A2.1-3 of the handbook for all of these weird implications)
- 360 days in a year
- When subtracting days and months, you must “borrow” 30 days” from a month and “12” months from a year.
- When adding sick leave, always round up to the next highest day.
- Finally, when calculating the length of service, add a day before subtracting.
So let’s say we have an employee Steve who started on August 11th, 1990 retired on July 9th, 2021 with 270 hours of unused sick leave. I calculated that Steve earned 31 years, 0 months for his length of service in the annuity calculation. I even showed my work
To get to that result, I subtracted 08/11/1990 from 07/10/2021 using the OPM math. I ended up with 30 years, 10 months and 29 days. (Just 1 day short of getting an extra 1/12 of a percent tacked onto the annuity). Then I looked up 270 hours of sick leave on the chart in section 50C1.1-1 of the handbook. This would round up to 272 hours which is equal to 1 month, 17 days.
Adding 1 month and 17 days to the length of service, you get 31 years, 0 months, and 6 days. Since the government does not include days in the length of service, Steve earned 31 years and 0 months of credible service.
Federal employee sick leave retirement calculator
Did that last section give you a headache? Don’t worry, I created an AWESOME Google Sheet just for you.
The spreadsheet is amazing and will calculate the length of service based off of your service computation date, retirement date, and your sick leave balance. It does all of the math so you don’t have to.
The spreadsheet is 100% free to people on my mailing list. If you want the federal employee sick leave calculator (and all of its awesome power) just smash the subscribe button below.
In summary, unused sick leave increases federal employee’s retirement annuity. I presented some example calculations to help you understand how it works. However, if I were you, I’d just use the calculator I made (free to subscribers). If you found this post useful, please email it to your coworkers, post it on LinkedIn, or for heaven’s sake, become a subscriber.
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