Retirement & Financial Planning Report

There are many reasons a federal employee may go on leave without pay, including for military service, personal or family medical reasons, inability to work while waiting for a decision on either worker’s compensation or disability retirement, and others. And of course there have been instances of partial shutdowns putting employees on unpaid leave status involuntarily.

In any of those situations, questions commonly arise regarding the impact on creditable service for various purposes.

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If you are a career employee, the first 30 calendar days of each non-pay period is considered creditable service. If you are a probationary employee, you get credit only for 22 workdays.

Time spent in a non-pay status is considered to be creditable service for meeting time-in-grade requirements for promotion; however, the crediting rules are different for within-grade increases. For GS employees, only two work weeks in a non-pay status is creditable toward the waiting period for steps 2, 3 and 4; four work weeks for advancement to steps 5, 6 and 7; and six work weeks to steps 8, 9 and 10. For wage system employees, it’s one work week for advancement to step 2, 3 work weeks to step 3, and four work weeks to steps 4 and 5.

As a rule, if you take no more than six months of LWOP in any calendar year, you’ll get credit for that time for both retirement and reduction-in-force retention purposes. And you won’t have to make a deposit to the retirement fund to get that credit. On the other hand, any period of LWOP that exceeds six months in a calendar year isn’t creditable, and you can’t make a deposit to get credit for it.

The rules are different if you are called to active duty. As a result, all the time you are away from your job would be creditable service but only if you make a deposit to the retirement fund for that time. The deposit equals a percentage of your basic military pay, not including allowances or differentials.

Health and life insurance–If you are enrolled in the Federal Employees Health Benefits (FEHB) program, your enrollment will continue for a maximum of 365 days. The government will not only pay its part of your premiums but it will also advance money from your future earnings to pay your part of the costs, unless you prefer to pay them on a pay-as-you-go basis. With one exception, any coverage you have under the Federal Employees’ Group Life Insurance (FEGLI) program will be treated the same way. The difference is that you won’t be required to pay anything for that coverage.

Annual and sick leave–You won’t earn any annual or sick leave for a pay period in which you reach a total of 80 hours of LWOP. However, you will earn annual and sick leave during the following pay periods until you once more accumulate 80 hours of LWOP. Then your ability to earn sick or annual leave will end. If you are a part-time employee, the amount of leave you earn will be proportionately less.

Severance pay–Any time spent on LWOP is fully creditable for the 12-month continuous employment period needed to qualify for severance pay. However, when computing your actual severance payment, any time in a non-pay status that isn’t creditable for leave accrual will be excluded.

Thrift Savings Plan–Since investments in the Thrift Saving Plan can only be made from your salary, if you are on LWOP, you won’t be able to make your investments into your TSP account during that time. If you have an existing loan, payments can be suspended for up to one year or, if you were called to active duty, until you are back on the job. In either case, interest on your loan will continue to accumulate. FYI: While on LWOP you won’t be able to take out a new loan.

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