Since full-time employees accrue 13 days of sick leave per year starting immediately on employment (part-time employees accrue it proportionate to their working time) there’s a very good chance you will have some, maybe a lot, of unused sick leave to your credit when you retire. Although you won’t get a lump-sum payment for unused sick leave, like you would for your unused annual leave, those hours can increase your annuity, potentially by a great deal.
When you retire, unused sick leave will be converted into retirement months. If you retire under CSRS, each month’s worth of unused sick leave will increase your annuity by 1/6 of 1 percent (.1667 percent). If you have a full year it will be increased by 2 percent.
If you are a FERS retiree, each month of sick leave will increase your annuity by 1/12 of 1 percent (.0833 percent), each year by 1 percent. If you retired at age 62 or later with at least 20 years of service, the multiplier would be increased from 1 percent to 1.1 percent.
For retirement purposes, all days are 5.797+ hours long. OPM gets that figure by dividing 2,087 — the number on work hours in a year — by 360. Why 360? That’s because annuity payments are based on 12 30-day months. Therefore, an annuity month is approximately 174 hours long.
What happens to unused sick leave time beyond the last full month you are credited with? It is converted to retirement days and added to any hours you actually worked beyond the last full month—after converting them to retirement days under the same formula. Together, they may add up to another month of credit, or maybe not. After that calculation, any days beyond the last full month are discarded.
A couple of important things to note.
If you are a long-service CSRS employee who would hit the maximum initial annuity of 80 percent of your high-3 salary, credit for unused sick leave is not subject to that limit; that is, it would allow your starting annuity to exceed that limit.
If you are a FERS employee who will have a CSRS component in your annuity, any sick leave hours up to the maximum number you had when you transferred to FERS will be credited to your CSRS annuity. Any sick leave hours above that will be credited to your FERS annuity.
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 have met the age and service requirements to do that. That’s true even if you are a FERS employee who retires under the MRA+10 provision and defers the receipt of your annuity to a later date to reduce or eliminate the 5 percent per year age penalty.
If you leave government before you are eligible to retire and later apply for a deferred annuity, you won’t get any credit for your unused sick leave. With one exception, if you return to work for the government later, those unused sick leave hours will be restored. Here’s the exception: If you are hired into a position where you can receive both your annuity and the full salary of your position, you won’t get any credit for that sick leave (or any that you earned while on the job) when you once again retire. That’s because, by law, your annuity won’t be recomputed to include that new period of service.