Well, FERS employees, the long wait is over. Thanks to Public Law 111-84, you are entitled to get credit for your unused sick leave in your annuity calculation when you retire.
Previously, this benefit was available only to employees under the Civil Service Retirement System, not those under the Federal Employees Retirement System. There’s one hitch:You’ll get credit for only half of your unused sick leave until 2014. Still, half a loaf is better than none.
How will that benefit affect your annuity when you retire? I’ll give a few examples to illustrate that. But first I’ll explain how sick leave hours are added to your actual service when computing an annuity.
When you retire, you get credit for every year and full month of actual service. Any hours of actual service that don’t add up to a full month will be combined with any hours of unused sick leave and the total is converted to additional months of service.
You’ll receive an annuity payment at the beginning of each month that represents the benefit you earned during the preceding month. To assure that you receive 12 equal payments, each month is treated as if it were 30 days. Therefore, for annuity purposes, a year is 360 days.
To create additional months of service, 360 is divided into 2,087, the number of hours in a work year. The product is a day that equals 5.797 hours and a month that is 174 hours.
With that in mind, here are two examples to show how your annuity will be increased before and after 2014.
In both cases, you’ll need to start with your total years and months of creditable service, including any CSRS service and service for which a deposit or redeposit has been paid. The FERS portion of your annuity will be increased only by the amount of sick leave you earned while employed under FERS.
Half credit. Consider an employee retiring before 2014 at age 56 with 20 years of FERS service and 10 years of CSRS service, and with a high-three of $80,000, his average salary over his three consecutive highest-paid years. He has 1,460 hours of unused sick leave, including 1,100 earned under FERS.
The FERS annuity formula — 1 percent of the high-three, multiplied by years of FERS service — yields an annuity without the sick leave credit of $16,000 (0.01 x $80,000 x 20). Additionally, he will get credit for 550 hours — half — of his unused FERS sick leave hours. If 174 hours is considered one month, 550 hours would equal three months, with 28 hours left over and dropped. The additional three months, or one quarter year, would increase the time-in-service factor of the annuity calculation to 20.25, yielding an annuity of $16,200.
Full credit. Now consider the same scenario, but for an employee retiring in 2014 or later. He will get credit for all 1,100 hours of unused sick leave earned under FERS. Divided by the 174-hour month, that time gives him six extra months of credit, with 56 hours left over and dropped. The additional six months, or half year, would increase the time-in-service factor of the annuity calculation to 20.5, yielding an annuity of $16,400.
Note: Special category employees covered by FERS, such as law enforcement officers, firefighters and air traffic controllers, will need to substitute 1.7 percent, instead of 1 percent, as the multiplier for any years of FERS service up to 20; 1 percent is the multiplier for any additional years.
If you have a CSRS component in your annuity, you’ll need to do that computation and add the result to your FERS computation to come up with your total annuity.