Q. Will annual leave be paid under phased retirement, or will the participant maintain the same leave balance in phased retirement?
A. Because the Office of Personnel Management hasn’t addressed the subject, we’ll have to wait and see. The likely answer is that a lump-sum payment for unused annual leave wouldn’t be made when the employee retires and transitions into phased retirement. If it were, the employee would have to pay it back and, worse still, be liable for the tax due on that payment. If I’m correct, the lump-sum payment for unused annual leave — including any annual leave earned while in phased retirement — would be paid when the employee retires for good.
