We’ve reached the point when the No FERS Employee Retires in 2013 Act takes effect.
What’s that? Somehow you never heard of that law?
Okay, that wasn’t its actual name. The real title of the law was the fiscal 2010 National Defense Authorization Act. That bit about no FERS employee retiring in 2013 is just how a piece of that law, passed in late 2009, quickly came to become known.
In that provision, Congress addressed a difference between FERS and CSRS that had long bugged FERS employees: unlike in CSRS, those retiring under FERS generally could not have their unused sick leave time credited as time served in their retirement benefit calculations.
Note the qualifier "generally"; like many federal retirement provisions, there were exceptions. One was that certain nurses of VA were eligible for crediting of unused sick leave. The other was that FERS employees with a CSRS component in their annuities would get credit toward the CSRS portion of the amount they had to their credit when they joined FERS, or the amount at retirement, whichever was less.
Still, for the large majority of FERS employees, sick leave crediting was not allowed, and proposals were raised for many years to change that. The fairness issue aside, there is ample evidence that FERS people have been burning off sick leave in their runup to retirement. This hampered productivity, not to mention the career risk for the employees who put in for dubious leave and the managers who approved it, having to know what was going on.
Further, there never was a good explanation of why, when FERS was created in the mid-80s, the drafters of the law decided not to allow sick leave crediting. Even those involved in writing the law and putting it into effect could not say definitively.
It could merely have been an oversight, or it could have been a conscious decision to hold down FERS payouts enacted by people who hadn’t learned from the past. The CSRS crediting policy had been created two decades before to stop the same kind of sick leave burnoff that the FERS no-crediting policy ended up producing.
In the absence of any definitive record of why the FERS law was crafted in that way, there was no strong original intent argument against sick leave crediting for FERS calculations. But there was a cost argument against it.
Naturally, the solution was a compromise. Instead of full crediting immediately, the 2009 law provided that for retirements from its effective date — October 28 of that year, as it turned out — through calendar 2013, only half crediting is allowed for FERS employees apart from those limited exceptions. Starting with retirements in 2014 and beyond, full crediting will be allowed for everyone.
And that is how the law got its nickname. The thinking was that the lure of the extra sick leave crediting probably wouldn’t affect the timing of a FERS employee wishing to retire from late 2009 through 2012, because 2014 was just too far off into the future. But it would make those looking at a retirement in 2013 think about sticking it out through the year and retiring in 2014 instead. Anecdotally, at least, some employees have just that in mind.
Now that the decision point is at hand, the question is whether a delay really is worth it. Many might be disappointed. The difference in many cases will be a nice little add-on to the benefit, but not the life-changer that they seem to be counting on.
Let’s say, for the sake of working with round numbers, that your high-3 will be $70,000 and that you have 30 years of service. If you’re under age 62, each year of service is worth 1 percentage point of your high-3, meaning an annual FERS annuity of $21,000.
You earn four hours of sick leave per pay period, 106 hours per year. Therefore, a long-term employee who uses sick leave only moderately could well accumulate a year’s worth or more over a career. A year’s worth of unused sick leave credit if you retired in 2014 would boost that to $21,700; half-credit if you retired this year would increase it half as much, to $21,350.
To get an exact read, you’ll need to plug in your own high-3 and years and months of actual service; remember, a full month beyond a full year is credited proportionately. You’ll also want to get a firm number on how much sick leave you have now, plus how much you might have to your credit at various points, and how that will translate into months of service credit time. Also, note that for retirement crediting purposes, a full month’s worth of sick leave is 174 hours, and that any time beyond a full month’s worth, when added to any actual working days beyond a full month, is dropped.
Do the calculations, with the help of an online federal retirement calculator if necessary. Be sure to isolate the effect of additional sick leave crediting from the other factors that could increase your annuity by delaying – such as more actual service time or an increase in your high-3. In many cases, the sick leave factor could well make a difference in the range of only several hundred dollars a year.
Will federal employee really make life plans around that amount of money? The year ahead of us will tell if the No FERS Employee Retires in 2013 Act lives up to its billing.