Sick Leave-Turn or Burn?

Here’s a question I get all the time:

Is it better to turn in your accrued sick leave for credit, or just burn it before retirement because it’s not worth that much anyway?

Let me be straight with you up front: This article has a lot of opinion in it. Yes, there are some hard facts, but they are all presented through the lens of my own opinion. Because frankly, I don’t think there is a clear and conclusive, mathematical winner. Hence my opinion. But here’s the caveat—your opinion counts as much as mine. In fact, it counts more. Since it’s your money ultimately. So what Chris has to say, if not completely irrelevant, is not nearly as relevant as what you think is best for you.

Quick History Lesson

Prior to the 2010 Defense Authorization Act (PL 111-84), FERS employees didn’t get any credit for saved sick time at retirement. Saved up a whole year of sick leave because you were a healthy (or overly-diligent) worker for a couple of decades? The government took your application with a smile and under their breath said, “Sucker!”

This arrangement led many enterprising FERSonians to start burning sick leave toward the end of their career. The thought being, “If I’m just going to lose it, I might as well use it.” This is obviously the same rationale we still use for annual leave each December: Use it or lose it.

Some Congressmen (and probably a lot of managers) didn’t like the interruption to government service, and the non-stop hassle of trying to enforce sick leave abuse, so they created a system where we now get credit for sick leave at the end of our careers.

TURN IT IN APPROACH

What the credit is (and is not)…

There was a period of years after the law passed where there was a reduced credit, but now we get to turn in all sick leave hours for credit towards retirement. Be careful though, it’s done in a certain way. You CANNOT use the number of sick leave hours to get you to your retirement eligibility finish line.

For example, if you have 6 months left before you’re eligible to retire, and you have 6 months worth of sick leave built up, you can’t just check out right now, tack on the extra 6 months to your service time and call it good. It’s not that kind of credit. If you could actually use it to retire earlier, you’d see a LOT less sick time abuse. (Anyone in Congress listening?????)

What you CAN get is additional time added to your service time to increase your annuity percentage of your High-3.

(Remember, the FERS annuity is based on how much service time you have, converted to a percentage, and then multiplied by your average High-3 salary).

So the more sick time you have on the books, the higher the service percentage and the more money your FERS annuity is.

Calculations

So what’s the sick time worth? And how do I figure out what mine will be? Let’s walk through an example.

For every 174 hours of sick time you turn back in when you retire, OPM credits you with one extra month of serviceable credit time. Yes, that’s an odd number. That’s because OPM requires you to “buy back” all 30 days of the month with your sick time. But wait, wouldn’t 30 days be 240 hours? 30 days x 8 hours a day? That math works in the real world. In OPM world, each day for retirement purposes is 5.8 hours (rounded).

Chris, I’m already confused.

I get it. It’s almost like it’s by design, huh? Anyway, this is why there is a handy chart that converts your balance of hours into creditable time.

Back to our example, 174 hours = 1 month of service time. So, if you retire with a sick leave balance of 174 hours, OPM will add 1 month to your total FERS time. Let’s say you had 30 years and 6 months of working time. Well, now you have 30 years and 7 months of creditable time.

How much extra money is that? Depends a lot on your average High-3 but let’s show some hard numbers.

Assume your High-3 is $150,000. And you are 57 years old and retiring at your MRA. This means you’re earning 1% a year of retirement credit toward your High-3. 30 years and 6 months translates to 30.5%. Take that and multiply it by $150,000 and you’ve got $45,750 a year, or $3,813 a month.

If we add that 1 month of sick time into the equation, we are at 30 years and 7 months, or 30.58%. Multiply that by $150k and we are at $45,870, or $3,823 a month. $10 extra with the sick time compared to no sick time.

But let’s do another one since most people have more than just 1 month of sick leave after 30 years of working. And to make it interesting, let’s go to the other extreme. Let’s say you have never taken a sick day your entire career. For 30 years and 6 months you came in even with the flu and everything. You would have accumulated approximately 3,172 hours of sick leave. That would translate into an extra 1 year and 6 months of additional time. That’s a lot. So when we add that to your working time, instead of just 30 years and 6 months, you are at 32 years even (30.5 + 1.5). So instead of 30.5%, you get 32% of your High-3 $150k.

That’s a full $48,000 a year ($150,000 x 32%). Or $4,000 a month. In this case, that adds approximately $187 a month to your annuity. Refuse to take a single sick day for over 30 years, and you’ll get an extra $187 a month…before taxes. That’s about 5% extra ($187 / $4,000 = 5%).

Let’s say you’re in the 22% tax bracket and you’ve elected the 5% survivor benefit deduction. That leaves you somewhere around $137 a month extra after federal taxes and the survivor deduction, but before any state taxes (if there are any). Save sick leave for 30 years and you get $137 a month. If you’re underwhelmed by this number, you certainly aren’t alone.

Now, remember this is per month for the remainder of your life, so you have to look at it that way. And it will grow through COLA’s on it over that time. But luckily, through the wonders of math, we can put a value on that as well.

Let’s assume the following:

• You live another 30 years

• The FERS COLA rate comes back up to its long-term average of 2%

Over those 30 years, the net (before state taxes) of $137 would total around $67,000 in additional money. Over 30 years. After not taking a day of sick time in the previous 30 years. 30 years.

Other Examples

The first two were pretty much the extremes. The vast majority of you will find yourself somewhere in the middle of those two examples. So let’s look at a couple of more.

REGULAR FERS

High-3 of $85,000

Retires at MRA with 30 years and a sick leave balance of 1,800 hours.

Additional pay due to the 1,800 hours: $706 a year, or $59 a month. Before taxes.

SCE FERS

High-3 of $150,000

Retires at 53 with 23 years on and a sick leave balance of 1,600 hours.

Additional pay due to the 1,600 hours: $1,125 a year, or $94 a month. Before taxes.

Again…underwhelming numbers. But hey, at least we get something for it.

This is the TURN IT IN approach. For some people, they look at this and say, “I’d rather have the time off if this is all I get for saving up a decade or two of sick time!” For those people, they often look at certain calculators that show what sick time is “worth.”

BURN IT APPROACH

The logic fashioned by those disappointed by the sick leave credit often goes like this,

“I’m a GS-13-9 in Indianapolis. My hourly rate is $56.39. I have 1,800 hours of sick leave. That means if I take it all at my hourly rate, that’s worth over $101k (1,800 x $56.39). I’d rather have that than an extra $75 a month in retirement.”

All of that is true…technically. The problem is that burning your sick leave doesn’t really result in any extra payment to you. At least not in money. You’re getting that same amount of money whether you work 1,800 hours or take 1,800 of sick time. You are just substituting the source of the money from the “working bucket” to the “sick leave” bucket, if that analogy makes sense. If you could get your regular salary AND the value of your sick leave paid to you, then, well, no one would retire with any sick leave balance.

But that is not to say you aren’t getting a real benefit for it. You are. You are getting paid, but not having to go to work and put in the hours. To some, that is a greater benefit than getting a few extra dollars a month in retirement. Some employees would rather take it easy the last couple of years and put in 4 day work weeks, and burn their sick leave. I have known more than one employee to use all of their leave over the last year or two, as a way to sort of eeeease into retirement.

The main hurdle

Obviously, sick leave rules don’t work the same as annual leave rules. While most of you can probably take two weeks of annual leave without too much interrogation, trying to do the same with 80 hours of sick leave won’t end in the same result. Undoubtedly someone’s going to want a doctor’s note, or at minimum an explanation. So the BURN IT approach has a very large hurdle. And that is hard for me to address because every agency has its own rules and culture, and even within the agencies, different managers have different requirements. I have worked in some environments where sick leave burning the last year or two were an acceptable and rather common practice. And I’ve worked in other environments where all sorts of threats were made if an individual were to indicate they were going to start blowing through sick leave. So I can’t really offer any insight into this. I will strongly encourage you to know the rules of your particular agency. You’ll probably have to be asking someone for permission to take the leave, though. Just know that.

Before managers start sending me hate mail, understand I’m not encouraging anyone to break any rules— agency rules, OPM rules, or otherwise. But I also have been around long enough to know than an awful lot of sick leave can be taken within the rules.

You almost certainly will burn SOME sick leave.

I won’t go into great detail in this paper, but OPM adds up your total FERS time, your total military time bought back (if any), and your total sick leave balance at retirement. Those three things are added together to produce a total number of years, a total number of months, and a total number of days. You will ONLY get credit for years and whole months. Anything left over in that days column (i.e. partial months) will just disappear. You won’t get any credit for that.

There are a couple of ways to maximize your benefit given this rule. Let’s say you have 15 days left over. Remaining days. You can’t do anything to make more money with these days, but you can do a couple of things to get some time back. One, you can retire 15 days earlier. That would take the remaining days down to zero. You still get the same annuity, but you have to work 15 days less.

Or you can burn some sick time. Be careful here though. 15 days is not 120 hours (8 hours x 15 days). Remember OPM uses a different value for a sick day in retirement. 15 days of sick leave would actually only be 87 hours. (See chart). Burn more than 87 hours in this example, and you’ve eaten into your final annuity balance, and lost a month.

Back to the original question: Turn or Burn?

Frankly, I wouldn’t spend that much time on this issue. I don’t think it’s that big of a deal either way. If your retirement success or failure hinges on an extra $80 a month of sick leave credit, you’ve got bigger problems than this decision. I don’t think burning sick leave just for the sake of burning it is all that profitable either. This is yet another area in which I agree wholeheartedly with Dan Jamison’s succinct statement, “My take on this remains the same—if you’re on vacation take annual leave. If you’re sick, use sick leave” (FERSGUIDE 2021, p.39).

The exception may be during that last year of working time. If you are trying to maximize your final lump-sum annual leave check, and you can take some sick leave here and there without violating any rules, it may pay to burn sick leave instead of annual leave. Remember—you do get an actual check for any unused annual leave.

SUMMARY

Do I get credit for sick leave? In almost all cases, yes.

Can I use it to retire earlier? No.

Is it going to make or break me one way or another? I certainly hope not!

Should I burn my sick leave just to burn it before retirement? I don’t think so.

Should I come into work sick so I can maximize that final sick leave credit? I definitely don’t think so.

Should Congress change the law so that unused sick leave can be used to reach your retirement eligibility and retire earlier? Absolutely. Yes. Please do that.