FERS and Sick Leave

The House recently passed HR-1256, the Family Smoking Prevention and Tobacco Control Act. So, what’s that to you? I’ll tell you. Hidden within that monster bill are several provisions affecting federal employee retirement benefits. I know it makes no sense; but since members of Congress no longer pay any attention to the rule prohibiting the addition of non-germane amendments to a bill, such odd bedfellows have become commonplace. (If it’s any consolation, similar provisions are included in HR-1804, which also passed the House.)

The amendment I’ll write about today allows FERS employees to get credit for unused sick leave when they retire. Since the creation of the Federal Employees Retirement System in 1987, they haven’t been eligible for such credit. It’s just one of those differences that make the two systems distinct from each other.

Time for a little history. The granting of credit for unused sick leave to Civil Service Retirement System employees didn’t occur until 1969 following a study by the U.S. Civil Service Commission (now OPM), which revealed that about half of all retiring federal employees had zero sick leave balances, with the remainder having an average of only 352 hours. A follow-up study by the House Post Office and Civil Service Committee revealed that retiring employees burned up an average of 320 hours – that’s 40 days — during their last year on the job.

In 2004, the Congressional Research Service studied the use of sick leave by CSRS and FERS employees and discovered, to no one’s surprise, that CSRS employees retire with significant balances and FERS employees with far lower ones. The reason for the difference in sick leave use is obvious. CSRS employees can substantially increase the value of their annuities by saving it up. For example, a full year of sick leave – 2,087 hours – will increase a CSRS annuity by nearly 2 percent.

If the bill becomes law, the effect on FERS annuities would be smaller because the formula used to compute them is less generous. A year’s worth of unused sick leave would increase a FERS annuity by exactly 1 percent (1.1 percent if the employee retired at age 62 or later with at least 20 years of service).

Will this provision become law? It’s too early to tell. There is no similar provision in the Senate tobacco bill, which has yet to be passed by that house of Congress. If it were to pass the Senate, differences between the two bills would have to be hammered out by the conferees from both houses. And there is no companion bill in the Senate to HR-1804.