Reg Jones Expert's View

In a surprising turn of events, a bill introduced by Congressman Jim Moran to pay FERS employees for their unused sick leave when they retire was revised and attached to a bill that passed the House and was sent to the Senate. Moran’s original bill didn’t give credit for unused sick leave below a certain level and placed a cap on the total amount of money that could be paid to a retiree. The new bill would instead increase a retiree’s service credit and, thus, increases his annuity. That would give FERS retirees the same kind of retirement credit that is now enjoyed by CSRS employees.

To keep the cost down, during the first three years after enactment, a retiring FERS employee would be given credit only for 75 percent of his unused sick leave. Beginning with the fourth year (and from that point forward), retiring FERS employees would get credit for 100 percent of their unused sick leave.

This provision has two high hurdles to overcome before it becomes law. First, there isn’t any companion provision in the Senate bill. Therefore, the Senate negotiators in the conference committee would have to be persuaded to add this non-germane provision to their bill. Second, if both the House and Senate agreed, they’d have to overcome the President’s objections to the bill to which it is attached, which he has threatened to veto.

Supposing that the sick leave credit provision did make it into law, what effect would it have on FERS employees? First, and foremost – and what convinced House members to vote for it – would be a reduction in what many are calling FERS flu. That’s the unjustified use of sick leave by FERS employees during their last several years before retiring, thus reducing productivity.

The rationale for using up that leave is obvious. Why save more than you’ll need in an emergency if you’ll lose it when you retire? On the other hand, if you get credit for being an honest custodian of your sick leave benefit and gain some value from saving it, you’re more likely to do so. For retiring FERS employees, the financial gain would look like this. During the first three years, you’d credit for three-quarters of your unused leave. So, if you had 232 hours, you’d get credit for 174, which would increase your service time by one month. After the third year you’d get full credit for every unused hour.

You can check out the dollar value to you of that unused sick leave by using the standard FERS annuity formula: 1 percent x your highest three years of average salary x your years and full months of service. Each month of additional service would produce an annuity increase of slightly more than six-tenths of a percent. It would be a little more than an additional eight-tenths of a percent beginning for those who retired in year four after enactment and after.