The Retirement Value of Unused Sick Leave

The original purpose of sick leave was to allow employees to be absent from work either because of physical or mental illness that resulted in their being incapable of performing their duties or because they needed time off to receive medical, dental or optical exams or treatment. Since then, the reasons for which sick leave may be used have expanded.

For example, during and after giving birth to a child both federally employed parents are entitled to use up to 12 weeks of accrued sick leave for medical appointments, hospitalization, and recovery. And they may use the same amount for purposes related to the adoption of a child.

While it was previously the policy that an employee who has been exposed to a communicable disease can use sick leave when his presence would jeopardize the health of others, that authority has been extended to allow an employee to use up to 104 hours of sick leave to provide care for a family member who has been exposed to a communicable disease, even before it is clear if the family member has contracted the disease.

Also, up to 26 weeks of sick leave during a single 12-month period may be substituted for unpaid Family and Medical Leave Act leave when an employee uses it to provide care for a spouse, son, daughter, parent, or next of kin who is a covered service member with a serious injury or illness.

These authorities raise decision points for many federal employees, since sick leave, if left unused, counts as time served toward the calculation of retirement benefits. The time always has been fully creditable for CSRS employees. Starting in 2014, unused sick leave will be fully creditable under FERS.

Unused sick leave can be more valuable than it appears on its face, due to the way the calculation works. Thus, an employee with 260 days worth of unused sick leave would gain a full year of service credit. Many long-time employees have built up this much or far more, since employees get 13 days of sick leave a year.

Under CSRS, every year of service credit beyond 10 is worth an additional 2 percent of their high-3 salary for life. Under FERS, a year is worth an additional 1 percent (1.1 percent for those retiring at 62 or after with at least 20 years of service. Thus, employees eligible to use sick leave under these new policies, especially if they are near retirement, might want to consider using annual leave instead—or, in some cases, unpaid leave. The increase in annuity is permanent, and over a lifetime the amount could be substantial, especially when inflation increases are considered.

Unused sick leave however cannot be cashed in for a dollar amount at retirement (which is what happens with unused annual leave) nor can it be counted as service time for purposes of determining retirement eligibility. Also, any days of service, counting both actual service and unused sick leave, left over after calculation of full months, are dropped.