FEDweek

How Furloughs (Mainly Don’t) Affect Retirement Calculation

With furloughs due to sequestration under way in many agencies and due to start soon in others—most notably, the Defense Department—many employees are wondering about the potential impact on their retirement benefits of the unpaid days off.

However, for the most part, furloughs will not affect an annuity benefit, according to OPM guidance. That applies to both components of the benefits determination, the highest three years of consecutive salary and creditable service time.

Both CSRS and FERS allow service credit for up to six months of nonpay status in any calendar year, OPM said. Similarly, the high-3 salary, is based on an employee’s rate of basic pay, not on actual salary received.

"If a period of nonpay status (such as a furlough) that is creditable for retirement occurs during the 3-year period used to compute the high-3 average salary, the loss of actual pay during that nonpay status period generally would have no effect on the high-3 computation," it says.

There could be an implication for leave accumulation, though: An employee’s accumulation of sick and annual leave is affected once unpaid leave during a leave year exceeds 80 hours; in the pay period in which that number is reached, no leave is accumulated. If unpaid leave reaches an additional 80 hours—which would happen for employees furloughed for the maximum 22 days—no leave is accumulated in that pertinent pay period, either.

That is a consideration only if furloughs exceed 10 days. That is not the case at most agencies imposing furloughs, although it would apply at DoD, for example, which plans 11 starting in July and has held out some hope of reducing the number if its budget allows later in the fiscal year.