Expert's View

For those employees who have been waiting for a conjunction of the planets or a lucky roll of the dice before deciding when to retire, this may be the sign you’ve been looking for: The 2021 leave year ends at close of business on January 1, 2022 and the new leave year begins the following day.

When can you retire?
If you are a FERS employee, you can retire on December 31, be on the annuity roll on January 1, and receive a lump sum payment for every hour of unused annual leave you have to your credit. However, unless you completed 80 hours before you retire, you won’t get credit for any annual leave you would have earned during that final pay period.

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If you are a CSRS employee you can retire as late as January 3 and be on the annuity roll in January; however, there are two downsides if you leave any later than the end of business on January 1. First, any annual leave you have to your credit that exceeds the annual leave carryover limit will be lost. Second, your first month’s annuity will be reduced by 1/30th for every day you aren’t on the annuity roll.

What about cost-of-living increases?
If you are covered by CSRS, you’ll be entitled to a cost-of-living increase in January 2023. That COLA will be based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, because you retired at the end of the year, that first COLA will only be 11/12ths of what it would have been if you had retired at the end of November. If you are a FERS employee, you won’t be entitled to any COLA until you reach age 62, unless you are a special category employee, e.g., a firefighter or law enforcement officer.

If you are a FERS retiree, you’ll be receive that first reduced COLA in January 2023. However, the COLA you receive may be smaller than that provided to CSRS employees. If the CPI-W is 2 percent or less, you’ll receive the same COLA as a CSRS retiree; however, if it increases between 2 and 3 percent, your COLA will only be 2 percent. If the increase is over 3 percent, you’ll receive a COLA that is 1 percent lower than that received by CSRS retirees. That may not be fair, but it’s the law.

What happens to my annual leave?
Whether you are a CSRS or a FERS employee, every hour of annual leave you have to your credit will be paid to you in a lump sum, nearly all of which will be at the new hourly rates that will go into effect on January 2, 2022—annual raises are paid starting with the first full pay period of a new year. What that raise will be has yet to be determined but the odds are that it will be better than those experienced in the recent past.

What happens to my sick leave?
Any unused sick leave you have will be added to your actual service and – if you have enough of it – used to increase your annuity. To give you an idea of what that leave will be worth, on average 174 hours equals 1 month, 1,044 hours equals 6 months, and 2,087 hours equals a full year, and so on. The more unused sick leave you have the greater the increase in your annuity will be.

For CSRS retirees, a year of sick leave will increase your annuity by 2 percent. For FERS retirees, it will increase it by 1 percent, unless you retire at age 62 or later with at least 20 years of service. In that case, each year of unused sick leave will increase your annuity by 1.1 percent.

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