FERS employees are permitted to add unused-sick-leave balance to credible years of service. This is important because determining years of service is one of the three components used to calculate a federal pension. In short, additional days of sick leave can increase total credible service and thereby increase a FERS annuity. When considering federal retirement, it is crucial to choose a retire date that meets all the needs of the individual—including maximizing benefits. Choosing a retire date that allows for the most sick-leave accrual can add real dollars to the FERS pension.
Sick Leave in the Pension Calculation
A FERS annuity is calculated based on three components: high three, a percent multiplier, and total credible service. For more on high three and the percent multiplier, see Your High-Three Estimate in our FERS Calculator. The third component, total credible service, typically includes total years of service for which retirement contributions were made, but also includes unused-sick leave. This means that the sick-leave balance remaining at retirement will be used to lengthen the total credible-service portion of the FERS annuity calculation. It’s important to note that sick leave is not a one-for-one conversion, so one day of sick leave does not equal one additional day of credible service. One day of sick leave is about six additional hours of credible service.
For individuals to determine how much additional years of service their credible sick leave will add to their pension, the following steps should be taken.
- Determine current sick-leave balance, which is typically located on a Leave and Earnings Statement.
- Take the sick-leave balance and apply it to the Credit for Unused Sick Leave Conversion Chart published at opm.gov.
These two steps will show how many months and days can be added to credible years of service.
What about Annual Leave?
Sick leave and annual leave are treated differently for federal retirees. While sick leave is added to total credible service, annual leave is not. Rather than increase total credible service, annual leave will be paid out in a lump sum payment. The annual leave payment is simply equal to the total annual leave balance multiplied by an employee’s hourly rate. Both the hourly rate and annual-leave balance can typically be found on an employee’s leave and earnings statement.