Retirement & Financial Planning Report

You’ll receive a lump-sum payment for annual leave to your credit when you separate from the federal service for retirement or other reasons (or enter on active duty in the armed forces). As a rule, it will equal the pay you would have received had stayed on the employment rolls until all that leave ran out.

Many federal employees become sparing in their use of annual leave later in their careers so that they can get maximum benefit from those payouts. While generally the maximum that can be carried from one leave year to the next is 240 hours (30 days) there is no limit on how many hours can be cashed in.

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That’s why many carry the maximum into their last working year then are able to cash in not only that but what they earned but didn’t use in their last year of working—again, so long as they retire before the start of the next leave year. Many aim to use that money as a cushion during the period after retirement—which can be months—when they receive only lesser “interim” payments until their annuity calculation is finalized (when government makes up the difference).

To figure out how much you are due in that lump-sum payment, your agency will multiply your hours on unused annual leave by your hourly rate of pay, plus any other types of pay that you would have received while on annual leave.

This includes:
• Rate of basic pay
• Locality pay or other similar geographic adjustment
• Within-grade increase, but only if the waiting period was met on the day you separate
• Across-the-board annual adjustments
• Administratively uncontrollable overtime (AUO) pay, availability pay, and standby duty pay
• Night differentials for wage system employees only
• Regularly scheduled overtime pay under the Fair Labor Standards Act, if you were on an uncommon tour of duty
• Supervisory differentials
• Nonforeign area cost of living allowances and post differentials
• Foreign area post allowances

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.

Note: If you are reemployed by the federal government, you’ll have to refund that portion of the lump-sum payment that represents the period between the date you were reemployed and the expiration of the lump-sum payment period. Once you paid back that money, your agency will recredit those annual leave hours to you.

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