The amount of that payment is based primarily on your rate of basic pay plus any locality pay or similar geographic adjustments, but includes other things. Image: Burdun Iliya/Shutterstock.com
By: Reg JonesIf you leave government, you’ll receive a lump-sum payment for all your accrued annual leave. That’s true whether you resign, go on active military duty, or retire. That lump-sum payment represents all the days you would have worked if you had remained on the payroll. (FYI: Holidays are counted as workdays when making that projection.)
The amount of that payment is based primarily on your rate of basic pay plus any locality pay or similar geographic adjustments.
And it may include other types of pay, such as administratively uncontrollable overtime, supervisory differentials, regularly scheduled overtime pay under the Fair Labor Standards Act, non-foreign area cost-of-living allowances and post differentials, and foreign area post allowances
Because your unused annual leave is projected forward as if you were still on the payroll, if any pay increases occur before your leave runs out, they will be paid at the higher rate.
Also because the annual leave payment is projected forward, if you are reemployed by the federal government before the end of the lump-sum leave period, you must refund that portion of the payment that represents the period between the date of your reemployment and the end of the lump-sum pay period. Those hours will then be re-credited to you.
Several deductions are taken from a lump-sum payment: federal income taxes and state income taxes (if your state has them), Medicare taxes, and Social Security (FICA) taxes (for those under FERS). However, no deductions will be taken out for such things as health and life insurance premiums or TSP contributions.
Not included are such things are allowances that are paid for such things as retaining you in government service, such as retention incentives and physicians comparability allowances. And there are others, too. So the best way to determine if some form of pay is included is to compare what you are receiving in your paycheck with the amount that is being deducted from it for retirement contributions.
For non-SES and non-foreign area employees, the maximum number of hours for which a lump-sum payment will be made is 240 hours – the maximum amount of leave that one can carry over from one year to the next – plus any leave accumulated during the year before retiring. The latter could approach 208 hours (8 hours x 26 pay periods).
FYI: If you are wondering whether your unused annual leave could be used to increase your length of service or your high-3 in your retirement benefit calculation, the answer to both is no. You’ll just have to be content with the check you receive. And if you leave with the maximum number of hours, that will be a pretty penny.
Former head of retirement and insurance policy at the Office of Personnel Management, and longtime FEDweek contributor, Reg Jones is known throughout the federal workforce community as an authority on pay and benefits.
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