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Obama OKs FERS sick leave credit

Nov. 15, 2009 - 06:00AM   |  
By TIM KAUFFMAN   |   Comments
(PO1 Chad J. McNeeley / Navy)

Federal employees under the Federal Employees Retirement System will receive credit for their unused sick leave in their retirement calculations, under a provision President Barack Obama signed into law last week.

The measure, which was included in the 2010 Defense Authorization Act, takes effect immediately. However, employees will get credit for only half of their banked sick leave if they retire before Jan. 1, 2014. Those who retire after then will get 100 percent of their unused leave credited toward their annuities.

The change puts FERS employees on par with employees covered under the older Civil Service Retirement System, who have always received credit for their unused sick days.

Federal management associations lobbied hard for the change, arguing that many FERS employees take excessive leave late in their careers to take advantage of the benefit while they have it.

"There is a benefit now to retain that sick leave instead of to use it as you earn it," said Dick Oppedisano, national secretary of the Federal Managers Association.

By removing the incentive to use sick leave, managers will be better able to ensure they have enough employees on hand each day to handle workloads, Oppedisano said.

The Office of Personnel Management has estimated that employees taking excessive sick leave cost the government $68 million a year in lost productivity.

Pat Niehaus, labor relations officer at Travis Air Force Base in Northern California, said managers there have found it hard to discipline employees for taking excessive sick leave because of the disparity between the two retirement systems.

"A lot of supervisors find it hard to tell their employees they can't use their sick leave when they're going to lose it," Niehaus said.

The delay in providing employees with their full sick leave credit until 2014 likely will encourage some employees to delay their retirement until then.

A 54-year-old information technology analyst at a Veterans Affairs Department facility in Minnesota said he'll probably do just that. The analyst, who asked not to be identified, said he will be eligible to retire in July 2013 and already has 1,665 hours of unused sick leave. He'll probably stay on for the additional six months now, he said.

"It would be worth it to work until January 2014 to get the full advantage, since I do have such a large amount," he said.

However, other employees who are ready to retire now say they aren't likely to delay their plans just to get the full sick leave credit even if it means they won't get any credit at all.

Employees who retire now but delay receiving their benefits until years later, under a deferred or delayed retirement, will not get any credit for their unused sick leave. The new law gives the credit only to those employees who take an immediate annuity. CSRS employees who take a deferred retirement also don't receive any credit for unused sick leave, an OPM spokesman said.

Joseph Tong, who works in the U.S. Postal Service's Office of the Inspector General, said he intends to retire by the end of next year, once he's reached the minimum retirement age of 56, and delay applying for his retirement benefits for several more years so he can retain his health insurance and then receive a full annuity.

Because Tong won't be receiving an immediate annuity, he won't get credit for any of his 1,700 hours of unused sick leave. But Tong said the additional pension isn't worth him working longer than he wants. He said he invested wisely in the Thrift Savings Plan, which will represent a larger portion of his retirement savings than the government pension.

"This does not change my plans," Tong said. "I still will take early retirement, and give up the sick leave accumulated."

Indeed, the change won't make a substantial difference in most employees' pension checks. The Congressional Budget Office estimates the average FERS employees will gain an additional three months of service toward their pension calculation, which would increase their retirement checks by an average of $150 a year.

Take, for example, a 60-year-old employee who has an average annual salary of $80,000 with 25 years of service. The employee would receive an annual annuity of $20,000, or $1,667 monthly, without any credit for unused sick leave. If the employee retires after Dec. 31, 2013, with 2,087 hours of sick leave, which equals an additional year of service, the employee would earn an extra $800 annually. That would equate to an extra $67 a month in the employee's pension.

Oppedisano said the real benefit will be for those employees who are just starting out in their federal careers, since they'll have decades to save their sick leave.

"Long term, it's a benefit," he said. "The younger employees now have a reason to save that sick leave."

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