Last week I wrote about sick leave, the gift that keeps on giving. I noted that it is provided to federal employees at a rate of 4 hours per pay period and that it can be used for a number of purposes, including physician or dental appointments, when you are physically or mentally ill, or attending to the health needs of family members. But the key point I made is that once you meet the age and service requirements to retire, your unused sick leave will increase the amount of your annuity.

For those under CSRS, as I explained then, all unused sick leave time is fully creditable toward an annuity. For those under FERS, things are more complicated.

Traditionally, FERS employees were barred from getting any credit for their unused sick leave when they retired unless they fell into one of the narrow exceptions described below. That changed when Public Law 111-84 was enacted. FERS people retiring between the effective date of that law (October 28, 2009) and December 31, 2013, get half-credit for unused sick leave. Those who retire on or after January 1, 2014, will get full credit.

If you retire on or after January 1, 2014, a year’s worth of sick leave will translate into a 1 percentage point increase in your FERS annuity; 1.1 percentage points if you are at age 62 or older with at least 20 years of service at retirement.

Say you retire in 2014 or later with a high-3 of $70,000 and 30 years of service. If you retire under age 62, your annual FERS annuity would be $21,000. Adding a year of sick leave credit would increase it to $21,700. If you retire with those 30 years of service at age 62 or later, your annual annuity would be $23,100. Adding a year of sick leave credit would increase it to $23,870.

Retiring before January 1, 2014, would cut those increases in half.

Thus, if you are considering retiring in the in the next few years, you might want to start doing some calculations to determine whether the increase in annuity makes it worthwhile for you to wait until 2014. First, firm up how much unused sick leave you currently have to your credit. Then, project how much more you might build up until various potential target retirement dates.

To find out how much your unused sick leave is worth as retirement credit, you need to understand how it will be converted into months and years of service when you retire. The exact amount of credit you’ll get depends on whether you have any days of actual service that don’t equal a full month. Retirement annuities are calculated using only full years and full months of service. Therefore, any leftover days will be converted to retirement hours and added to those unused sick leave hours. For retirement purposes, all days are 5.797+ hours long, with 174 hours equaling a month and 2,087 equaling a year. Any days that don’t add up to a full month are dropped.

As I mentioned last week in discussing unused sick leave crediting for CSRS employees, unlike annual leave, there is no limit on how much unused sick leave you can accumulate. Since you get 104 hours of sick leave a year (4 hours for each of 26 pay periods), you would accumulate a year’s worth in 20 years of service, if you didn’t use any of it. Of course, it’s a very rare person who uses no or virtually no sick leave. But, if you used a third of your available sick leave, which is a very reasonable usage rate, over a 30-year career you still would come out with that year’s worth.

The exceptions mentioned above are these: If you are a FERS employee who will have a CSRS component in your annuity, any sick leave hours up to the number you had when you transferred to FERS will be credited to your CSRS annuity portion and computed under CSRS rules. Any sick leave hours above that number will be credited to your FERS annuity and computed under FERS rules. Also, a special rule allowing for full FERS crediting for registered nurses in the Veterans Health Administration predates the 2009 change in law. (I told you this is complicated.)

As with CSRS retirees, while sick leave can be used to increase your annuity, it can’t be used to make you eligible to retire. It can only be added after you meet the age and service requirements to do so.

Further, sick leave credit won’t be retroactively given to you if you retired before October 28, 2009 nor will it be given to you if you leave the government and later apply for a deferred annuity. On the other hand, if you return to work for the government, sick leave hours that didn’t count toward your annuity will be re-credited to your sick leave account.