.
Sick Leave: Usage Rates and Leave Balances
for Employees in Major Federal Retirement
Systems
Curtis W. Copeland
Specialist in American National Government
November 4, 2009
Congressional Research Service
7-5700
www.crs.gov
RL32596
CRS Report for Congress
P
repared for Members and Committees of Congress
c11173008
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Summary
Full-time federal civilian employees receive 13 days of sick leave each year, and may carry over
an unlimited amount of unused sick leave from year to year. At the time of retirement, employees
in the Civil Service Retirement System (CSRS) (those hired before 1984) receive credit in the
computation of their civil service retirement annuities for any unused sick leave they have at the
time of retirement. Until October 2009, employees in the Federal Employees Retirement System
(FERS) (those hired after 1983 and others who transferred to FERS) generally received no credit
for unused sick leave at the time of retirement. As a result, some believed that FERS employees
would use more of their sick leave as they approach retirement (resulting in productivity losses)
than their CSRS counterparts. The conference report for the legislation creating FERS in 1986
urged the Office of Personnel Management (OPM) to examine this issue. FERS employees
comprise an increasing percentage of the federal workforce, and by 2014 virtually all federal
employees are expected to be in FERS.
In 2004, CRS obtained data indicating that FERS retirees and FERS employees in that group who
were eligible to retire or approaching eligibility used substantially more sick leave and had much
lower sick leave balances than comparable CSRS retirees and employees. In 2006, OPM similarly
concluded that FERS employees who were eligible to retire or were nearing eligibility used more
sick leave than their CSRS counterparts, but concluded that to make sick leave creditable under
FERS would cost several times more than the potential productivity savings. In April 2008, the
Treasury Inspector General for Tax Administration concluded that the lack of compensation for
unused sick leave was causing FERS employees in the Internal Revenue Service to use more sick
leave than their CSRS counterparts.
In the 111th Congress, Representative Jim Moran introduced H.R. 958, which would permit
retiring FERS employees to receive service credit for unused sick leave. Similar provisions were
added to legislation providing the Food and Drug Administration with certain authority to
regulate tobacco (H.R. 1256), but those provisions were not included in the final legislation (P.L.
111-31). The House-passed version of the 2010 Department of Defense authorization legislation
(H.R. 2647) contained the FERS sick leave provisions, but the Senate-passed version (S. 1390)
did not. Conferees agreed to include the sick leave provisions in the final legislation, but to phase
in the service credit over four years (with 50% credit for unused sick leave until the end of 2013,
and 100% credit starting in 2014). The House agreed to the conference report (H.Rept. 111-288)
on October 8, 2009, and the Senate agreed on October 22, 2009. The President signed the
legislation on October 28, 2009 (P.L. 111-84). The amount of increase in an employee’s annuity
varies substantially based on the employee’s high-three average salary and sick leave balance at
the time of retirement, and whether they retire before or after January 1, 2014.
According to a 2004 study, all but a few state governments provided some type of compensation
to employees for unused sick leave at retirement, usually either as cash payments, service credit
in the computation of annuities, or payment of health or life insurance premiums. The states
generally limited these payments in some way (e.g., capping the number of hours of sick leave
payable).
This report will not be updated.
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Contents
Introduction ................................................................................................................................ 1
Background ................................................................................................................................ 2
Federal Sick Leave................................................................................................................ 4
CSRS and Sick Leave ........................................................................................................... 5
FERS and Sick Leave............................................................................................................ 6
Indications of Greater Sick Leave Use by FERS Employees .................................................. 7
FERS Employees Use More Sick Leave Than Their CSRS Counterparts ..................................... 8
Differences in Sick Leave Usage and Balances...................................................................... 9
OPM’s 2006 Study of Sick Leave Usage ................................................................................... 11
Analysis of the OPM Study ................................................................................................. 12
Treasury Inspector General Report ............................................................................................ 14
Sick Leave Policies in Other Organizations ............................................................................... 14
Unused Sick Leave ....................................................................................................... 15
Sick Leave Policies in State Governments ........................................................................... 16
Cash Payment Plans ...................................................................................................... 16
Service Credit Plans ...................................................................................................... 17
Insurance Plans ............................................................................................................. 17
Legislative Developments ......................................................................................................... 18
110th Congress .................................................................................................................... 18
111th Congress..................................................................................................................... 19
National Defense Authorization Act .............................................................................. 19
Effects of the Change in Policy on FERS Annuities ....................................................... 20
Figures
Figure 1. Number of FERS Employees Is Increasing ................................................................... 3
Figure 2. Number of FERS Retirement Eligibles Is Increasing..................................................... 3
Tables
Table 1. FERS Employees Used More Sick Leave than CSRS Employees as They
Approached Retirement Eligibility ........................................................................................... 9
Table 2. FERS Employees Had Lower Sick Leave Balances than CSRS Employees ................. 10
Table 3. FERS Retirees Had Lower Sick Leave Balances than CSRS Retirees .......................... 10
Table 4. OPM Study Shows FERS Employees Generally Used More Sick Leave
in 2005-2006.......................................................................................................................... 11
Table 5. Estimates of Increase in Annuities at Various Salary and Sick Leave Levels ................. 20
Table 6. Estimates of Increase in Annuities at Various Salary and Sick Leave Levels ................. 21
Table A-1. Sick Leave Policies in State Governments ................................................................ 22
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Appendixes
Appendix. State Sick Leave Policies.......................................................................................... 22
Contacts
Author Contact Information ...................................................................................................... 24
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Introduction
Pensions for nearly all federal civilian employees are provided through one of two retirement
programs—the Civil Service Retirement System (CSRS) or the Federal Employees Retirement
System (FERS).1 Most federal civilian workers hired before January 1, 1984, are covered by
CSRS, whereas those hired after that date are covered by FERS (as are employees who
voluntarily switched from CSRS to FERS during “open seasons” held in 1987 and 1998).
CSRS and FERS are similar in several respects. In both retirement systems, employees’ annuities
are a function of age, length of federal service, and final average pay.2 The normal retirement age
(without reduction of annuity) under both CSRS and FERS is 55 for employees born before 1948
who have at least 30 years of service.3 Both retirement systems also allow normal retirement at
age 60 for employees with 20 or more years of service, and 62 for employees with at least five
years of service. Also, employees in both systems receive 13 days (104 hours) of sick leave each
year, and may carry over an unlimited amount of unused sick leave from year to year. Therefore,
an employee who carries over an average of nine days (72 hours) of sick leave each year during a
30-year career would accumulate 2,160 hours of unused sick leave by the time he or she is
eligible to retire.
Until October 2009, one of the many ways in which CSRS and FERS differed was in how
accumulated sick leave was accounted for at the time of retirement. 4 In the CSRS system, retiring
employees receive service credit in the computation of their annuities for any unused sick leave
they had at the time of retirement. For example, a retiring CSRS employee with 30 years of
service and one year (2,087 hours) of accumulated sick leave would be considered to have 31
years of service for purposes of annuity computation.5 In sharp contrast, FERS retirees generally
received no service credit or other type of compensation for their accumulated sick leave.6 As a
result, some observers suggested that FERS employees would be on sick leave more frequently
than CSRS employees, particularly as they approach retirement age, thereby resulting in reduced
productivity, increased personnel costs, or both. Reports of FERS employees actually carrying out
this “use it or lose it” behavior periodically appeared in press articles.7
1 Although the federal government has many different retirement plans, CSRS and FERS are by far the largest. In this
report, “federal civilian employees” refers to those in the CSRS or FERS plans. For a more thorough discussion of
these two plans, see CRS Report 98-810,
Federal Employees’ Retirement System: Benefits and Financing, by Patrick
Purcell.
2 FERS annuities are generally smaller than in CSRS because they are only one component of the system. A more
detailed description of the two systems is provided later in this report.
3 The FERS normal retirement age increases for employees born in 1948 or later, and eventually reaches age 57 for
employees born in 1970 or later.
4 As discussed later in this report, a provision in the Department of Defense Authorization Act for 2010 (P.L. 111-84,
October 28, 2009) changed this element of FERS.
5 The congressionally mandated number of hours in a work year is 2,087. Only full years and months are counted in the
annuity computation. For example, if a full-time employee worked 30 years and had 835 hours (four months and 24
days) of accumulated sick leave at the time of retirement, the employee would be credited with 30 years and four
months of service; the 24 additional days would be dropped.
6 FERS employees who transferred from CSRS receive credit for sick leave balances at the time of the transfer or at the
time of retirement, whichever is smaller.
7 See, for example, “Sick Leave and FERS: Leave Abuse? Justifiable Cheating? Flexible Ethics?,” in
FedSmith.com,
available at http://www.fedsmith.com/articles/articles.showarticle.db.php?intArticleID=1143; and “FERS and sick
leave,”
Federal Times, April 24, 2006, p. 20.
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To discourage this phenomenon from occurring, some observers advocated changing FERS to
provide some kind of value for unused sick leave (e.g., allowing full or partial service credit to be
used in annuity calculations, or providing full or partial lump-sum cash payments for such
leave).8 For example, in April 2006, a coalition of federal management groups (the Federal
Managers Association, the Senior Executives Association, the Federal Aviation Administration
Managers Association, the National Council of Social Security Management Associations, and
the Professional Managers Association) called for a change in federal sick leave policy (e.g.,
allowing FERS employees to apply a portion of their unused leave toward post-retirement health
care policies).9 Others, however, believed that the CSRS sick leave benefit is excessively
generous, and that FERS should not replicate that generosity. Opponents of a policy change (and
even some proponents) also pointed out that use of sick leave for unauthorized reasons is
inappropriate, and that FERS employees knew (or should have known) about this policy when
they agreed to the terms of employment.10
This report provides data that CRS obtained on sick leave usage rates by many employees and
recent retirees in the CSRS and FERS retirement systems in 2003 and 2004. It also discusses a
study of federal sick leave use in 2005 and 2006 by the Office of Personnel Management (OPM),
and provides information on unused sick leave policies in private sector and other public sector
organizations (e.g., state governments). Finally, it discusses the enactment of changes to the
FERS sick leave policy. First, though, the report provides some background information on CSRS
and FERS trends and federal sick leave policies in general.
Background
As
Figure 1 below shows, because all new federal employees for more than 20 years have been
put in FERS, the number of FERS employees in the federal workforce has increased substantially,
whereas the number of CSRS employees has declined. By September 1996, more federal
employees were in FERS (818,650) than in CSRS (809,098). As of September 2007, nearly 1.3
million federal employees were in FERS, compared with about 335,000 in CSRS. At the rate of
decline in the CSRS population since 1990, by about 2014 virtually all federal employees are
expected to be in FERS.
8 For example, in testimony before the Senate Committee on Governmental Affairs on February 4, 2004, the President
of the National League of Postmasters said, “We also need to address the issue of sick leave for FERS employees.
Currently, they get no credit for unused sick leave at retirement. We need to change this rule so they could sell back
sick leave or get credit at retirement.”
9 Deborah Funk and Stephen Losey, “Sick Leave abuse: Managers prescribe cure for use-or-lose rules,”
Federal Times,
April 17, 2006, p. 1.
10 For example, in the “Sick Leave and FERS” article mentioned above, 56% of the respondents to an unscientific
survey said it was not ethical for a federal employee to use sick leave without having an authorized medical reason for
using the leave. One respondent said “If you were hired under FERS, then you should go by the rules, and the CSRS
rules are not your concern.”
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Figure 1. Number of FERS Employees Is Increasing
1,400,000
1,173,589
1,279,416
1,200,000
1,000,000
yees
800,000
lo
p
600,000
655,750
m
E
400,000
335,594
200,000
0
Sept 1990
Sept 1991
Sept 1992
Sept 1993
Sept 1994
Sept 1995
Sept 1996
Sept 1997
Sept 1998
Sept 1999
Sept 2000
Sept 2001
Sept 2002
Sept 2003
Sept 2004
Sept 2005
Sept 2006
Sept 2007
CSRS
FERS
Source: U.S. Office of Personnel Management Central Personnel Data File. Data include full-time, permanent
employees.
Figure 2 shows the number of employees who were eligible to retire (“retirement eligibles”) in
both the CSRS and FERS retirement systems from September 2000 until September 2007.
Although the number of CSRS retirement eligibles at the end of this period still exceeded the
number of FERS eligibles, the difference between the two retirement systems has been steadily
narrowing in recent years.
Figure 2. Number of FERS Retirement Eligibles Is Increasing
160,000
136,573 140,213 139,214 137,206 136,100
140,000
128,396
108,366 115,296
120,000
100,000
69,933
80,800
80,000
51,255
60,122
60,000
42,913
30,608
36,179
40,000
25,922
20,000
0
003
004
005
006
007
pt 2000
pt 2001
ept 2002
ept 2
pt 2
pt 2
pt 2
pt 2
Se
Se
S
S
Se
Se
Se
Se
CSRS
FERS
Source: U.S. Office of Personnel Management Central Personnel Data File. Data are for full-time, permanent
employees.
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Federal Sick Leave
Sick leave benefits provide paid time off while an employee temporarily cannot work due to a
non-work-related illness or injury. As noted previously, all federal civilian employees receive four
hours of sick leave each biweekly pay period, for a total of 104 hours (13 days) each year.
Employees must request sick leave within such time limits as their agencies may require, and
agencies may grant sick leave only when supported by evidence they consider administratively
acceptable. For absences in excess of three days, or for a lesser period when determined
necessary by the agency, an agency may require a medical certificate or other administratively
acceptable evidence before approving sick leave requests.
The federal sick leave program has been expanded several times, allowing the benefit to be used
for purposes other than personal medical attention. For example:
• the Federal Employees Family Friendly Leave Act of 1994 (P.L. 103-388)
permitted employees to use up to 13 days of sick leave each year to provide
medical or personal care to a family member, or to make arrangements for or to
attend the funeral of a family member.11
• the Treasury-Postal Service Appropriations Act for FY1995 (P.L. 103-329)
permitted the use of sick leave to pursue activities related to the adoption of a
child.
• in 2000, the federal sick leave program was again expanded, allowing employees
to use up to 12 weeks of sick leave per year to care for family members with a
serious health condition.12
According to OPM, federal sick-leave usage rates increased during this period—from an average
of 8.59 days of sick leave used per year in 1994 to 9.52 days in 2001. One possible explanation
for this overall increase in sick leave use could be the changes in policy that allowed additional
uses for sick leave. As explained more fully later in this report, though, another possible
explanation could be the increasing number of FERS employees who were approaching
retirement eligibility.
From time to time, Congress attempts to broaden or otherwise change federal sick leave policy
even further. For example, in the 110th Congress, one of the provisions in H.R. 2200 proposed
exempting federal employees who are undergoing medical treatment for a combat-related
disability sustained while a member of the armed forces from the requirement in the federal leave
sharing program that they exhaust their annual and sick leave before using any transferred leave.
A provision in S. 1649 in the 110th Congress would have required OPM to establish a program to
allow federal employees serving as caregivers to dependents of members of the armed forces
deployed overseas to use their sick leave in the same manner as annual leave is used. (Note: A
11 The act guaranteed full-time employees the use of five days (40 hours) of sick leave each year to care for family
members or for bereavement purposes. Employees wanting to use more than five days had been required to maintain a
sick leave balance of at least 80 hours. However, in 2006, OPM issued final regulations that removed this requirement.
See U.S. Office of Personnel Management, “Absence and Leave,” 71
Federal Register 47693, August 17, 2006.
12 Office of Personnel Management, “Sick Leave for Family Care Purposes; Final Rule,” 65
Federal Register 37234,
June 13, 2000. Until 2006, to use the full 12 weeks of leave, employees had been required to maintain a sick leave
balance of at least 80 hours. However, in 2006, OPM issued final regulations that removed this requirement. See U.S.
Office of Personnel Management, “Absence and Leave,” 71
Federal Register 47693, August 17, 2006.
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subsequent “Legislative Developments” section of this report discusses a broader proposed
change in federal sick leave policy.)
CSRS and Sick Leave
The Civil Service Retirement Act of 1920 (P.L. 66-215) created CSRS to provide pension benefits
to federal employees. CSRS is a “defined benefit” retirement plan in that the benefit is paid as a
lifelong annuity based on years of service and average salary in the last few years of employment.
CSRS employees accrue benefits equal to 1.5% of their highest three consecutive years of base
pay (often called the employee’s “high-three” pay) for their first five years of service, 1.75% of
their “high-three” pay for each year in years 6 through 10, and 2% of their “high-three” pay for
each subsequent year. Therefore, a CSRS employee who retires with 30 years of service would
receive an annuity equal to 56.25% of the employee’s “high-three” pay. CSRS annuities are
adjusted annually for inflation and are financed by contributions from both employees and the
government (although the CSRS system is currently not fully funded).13
Until 1969, CSRS employees forfeited any unused sick leave at the time of their retirement. At
that time, the Civil Service Commission (now OPM) estimated that about half of all retiring
federal employees had zero sick leave balances, and the other half had an average of about 44
days (352 hours) of sick leave that were forfeited at retirement. Also, a House Post Office and
Civil Service Committee report noted that retiring employees used an average of 40 days (320
hours) of sick leave during their last year of employment.14
In 1969, Congress enacted legislation (P.L. 91-93) to permit CSRS employees to receive service
credit for unused sick leave in the computation of their retirement annuities. This change in policy
made unused sick leave highly valuable. For example, as noted previously, an employee retiring
with 30 years of service and a year of unused sick leave would get credit for 31 years of service
for purposes of annuity computation. If this employee’s “high-three” salary was $50,000, the
additional year of service would increase his or her pre-tax retirement annuity by 2%, or $1,000
per year. Therefore, even before indexing for inflation, if the employee received the annuity for
20 years, the unused sick leave would be worth about $20,000. To pay for this and other changes
in the retirement system, the law increased employee and agency contributions to the civil service
retirement fund from 6.5% to 7.0% of pay.
This change in policy was expected to reduce federal employees’ use of sick leave and to grant
limited recognition to those who prudently utilized their sick leave. In 1986, the General
Accounting Office (GAO, now the Government Accountability Office) examined the
implementation of this change in policy, and reported that employees who retired in 1984 and
1985 had significantly higher sick leave balances than employees who retired in 1968, before the
law was changed.15 Specifically, the average sick leave balances for employees who retired in
1984 and 1985 were 38% and 46% higher, respectively, than the estimated average balance of
13 See CRS Report RL30023,
Federal Employees’ Retirement System: Budget and Trust Fund Issues, by Patrick
Purcell.
14 Cited in U.S. General Accounting Office,
Federal Workforce: Retirement Credit Has Contributed to Reduced Sick
Leave Usage, GAO/GGD-86-77BR, June 1986.
15 GAO/GGD-86-77BR. Specifically, GAO reported that retirees in 1968 had an average of 642 hours of unused sick
leave. Retirees in 1984 averaged 884 hours and retirees in 1985 averaged 940 hours—about 38% and 46% higher,
respectively, than the average retirees’ leave balance in 1968.
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1968 retirees. GAO concluded that the changes made in 1969 had “contributed to reducing the
overall usage of sick leave and increasing the unused sick leave balances of retiring federal
employees.”
FERS and Sick Leave
The Federal Employees’ Retirement System Act of 1986 (P.L. 99-335) created FERS with three
basic elements—(1) Social Security, (2) a FERS basic annuity, and (3) a thrift savings plan (TSP).
• The Social Security component is based on wages earned while a federal
employee. Employees may begin receiving reduced Social Security benefits at
age 62, but may receive a portion of that amount in the form of a FERS
supplement as early as age 55.
• The FERS basic annuity is a defined benefit plan in which employees retiring
below age 62 accrue benefits at the rate of 1% of their “high-three” average pay
per year of service. Therefore, a FERS employee retiring at age 58 with 30 years
of service will accrue a pension benefit equal to 30% of his or her “high-three”
average pay.16 Like CSRS, FERS annuities are funded by contributions from
employees and the government, but (unlike CSRS) FERS benefits must be pre-
funded according to their full actuarial costs. FERS annuitants over age 62
receive annual cost-of-living adjustments, but those adjustments may be less than
the amount of inflation.17
• The TSP is patterned after the “401(k)” savings plans available in the private
sector, and encourages employees to save for retirement by making contributions
“pre-tax” and by making interest earned on these contributions non-taxable until
they are withdrawn. The government contributes 1% of pay for all FERS
participants, and provides whole or partial matches for up to 5% of pay
contributed by FERS employees. The maximum annual employee contribution is
$16,500.18
In contrast to the approach taken with regard to CSRS employees in 1969, Congress did not
authorize FERS employees to receive service credit for unused sick leave (except for leave
carried into the system by employees who transferred to FERS from CSRS).19 The legislative
history for the 1986 act creating FERS does not explain why Congress took this approach.
However, in the conference report for the act, the conferees noted that FERS employees’ unused
sick leave generally could not be used in the computation of their annuities, and urged OPM to
examine sick leave usage by FERS employees. The conferees went on to say that they were
“concerned that without an incentive to save sick leave, the use of sick leave may substantially
16 FERS employees who have at least 20 years of service and who work until at least age 62 earn 1.1% for each year of
service. Therefore, an employee who retires at age 62 with 30 years of service will accrue a pension benefit equal to
33% of his or her “high-three” average pay.
17 For example, if the amount of inflation is more than 3%, the annuitant would receive an adjustment equal to the
amount of inflation minus 1 percentage point.
18 Employees age 50 and older can also make catch-up contributions of up to $5,500 per year. CSRS employees can
contribute to the TSP, but they receive no government matching contribution.
19 Retiring employees who transferred to FERS receive service credit for the amount of unused sick leave they had at
the time of transfer or the time of retirement, whichever is less.
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increase.”20 OPM did not conduct this study until 2006, and the study is described and analyzed
later in this report. OPM representatives told CRS that their office had not conducted the study
previously because the agency’s Central Personnel Data File does not contain data that would
allow comparison of sick leave usage rates or sick leave balances by employees in different
retirement plans.21
Indications of Greater Sick Leave Use by FERS Employees
There have been indications for some time that FERS employees may be using sick leave more
often than their CSRS counterparts, particularly as they approach retirement. As noted previously,
average sick-leave usage rates for all federal employees increased by more than 10% from 1994
to 2001 (rising from 8.59 days per year in 1994 to 9.52 days per year in 2001). One possible
explanation for this increase is the additional uses for sick leave that were allowed during that
period (e.g., to care for sick family members or to adopt a child). However, another explanation
could be the increasing numbers of FERS employees in the federal workforce and the fact that
they received no benefit for accrued sick leave at retirement. The percentage of full-time,
permanent federal civilian employees in FERS increased from about 46% in 1994 to about 62%
in 2001.22
Also, a May 2004 survey suggested that FERS employees were more likely to use sick leave as
they approach retirement than their CSRS counterparts. FPMI Solutions, Inc., a human resources
services, staffing, and training company primarily for federal agencies, conducted an unscientific
online poll of its subscribers (current and retired federal employees) regarding sick leave usage.
Of the more than 2,300 participants in the poll, 51% said they were under CSRS and 49% said
they were under FERS. Although both groups of participants said they were strongly in favor of
sick leave conservation, the groups diverged regarding sick leave use in the last year before
retirement. Whereas nearly 85% of CSRS employees and retirees said they would or did conserve
as much sick leave as possible, more than 75% of FERS employees and retirees said they planned
to use as much sick leave as possible during their last year before retirement. One respondent said
that there was “a huge incentive for CSRS and offset employees to conserve sick leave and a very
large disincentive for FERS employees to do the same.”23 Another respondent said that this
incentive structure caused “a lot of productivity to go down the drain.” However, other
respondents said that, this incentive structure notwithstanding, the use of sick leave when not sick
was morally “the wrong thing to do.”
A more scientific study of sick leave use within the Bureau of Prisons from 1994 through 2003
indicated that FERS employees in the agency were, in fact, using more sick leave than those in
CSRS, even when controlling other possible factors (e.g., race, gender, education, age, and sick
20 Committee on Post Office and Civil Service, U.S. House of Representatives, Committee Print 99-8, 99th Congress
Second Session June 12, 1986, p. 127.
21 Telephone discussions with the Confidential Assistant to the Director and Chief, Administration, Office of
Congressional Relations, OPM, May-June 2004.
22 These percentages include employees in federal retirement systems other than FERS or CSRS (e.g., employees in the
foreign service retirement system).
23 CSRS “offset” retirement generally applies to employees who had a break in service that exceeded one year and
ended after 1983, and had five years of creditable civilian service on January 1, 1987. When these employees become
eligible for Social Security benefits, their annuities will be offset by the value of the Social Security Benefit earned
during CSRS offset service.
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leave balances of employees).24 The authors concluded that the study’s findings “strongly suggest
that the apparent difference between the incentive systems in the CSRS and FERS systems
regarding the use of sick leave is translated into actual differences in behaviors of CSRS and
FERS employees.”25
FERS Employees Use More Sick Leave Than Their
CSRS Counterparts
Although OPM’s Central Personnel Data File does not contain data on sick leave usage rates by
employees in different retirement systems, those data are available from each federal agency or,
more centrally, through organizations that administer payroll functions for multiple federal
agencies. For example, the Defense Finance and Accounting Service (DFAS) administers payroll
functions for nearly 700,000 civilian employees in the Department of Defense and the Executive
Office of the President.
In 2004, CRS requested data from DFAS on sick leave usage rates and sick leave balances for
employees and retirees in the agencies they service. We focused on full-time, permanent
employees in General Schedule (GS) and Wage Grade (WG) (or equivalent) pay systems, which
included more than 500,000 employees in CSRS and FERS—about one-third of the full-time
permanent workforce outside of the Postal Service, intelligence agencies, and law enforcement.26
Our data request was essentially in two parts. First, for employees who did not retire during the
one-year period from June 1, 2003, through May 29, 2004, we requested the average number of
sick leave days used during that period and average sick leave balances as of the end of that
period for the following categories:
• employees in CSRS and (separately) employees in FERS who were “eligible to
retire” without penalty as of June 1, 2003 (i.e., at least 55 years of age and with at
least 30 years of service, or at least 60 years of age and 20 years of service, or 62
years of age and 10 years of service).27
• employees in CSRS and (separately) employees in FERS who were eligible to
retire and “almost eligible to retire” (defined as being within two years of
retirement eligibility in terms of any combination of age or service—e.g., an
employee who is 53 with 30 years of service or 55 with 28 years of service, or an
employee who is 58 with 20 years of service or 60 with 18 years of service).
• employees in CSRS and (separately) employees in FERS who were eligible to
retire and “nearing eligibility to retire” (defined as being within five years of
retirement eligibility in terms of any combination of age or service—e.g., an
24 Scott D. Camp, and Eric G. Lambert, “The Influence of Organizational Incentives on Absenteeism: Sick Leave Use
Among Correctional Workers,”
Criminal Justice Policy Review, vol. 17, no. 2 (June 2006), pp. 144-172.
25 Ibid., p. 168.
26 The GS and WG pay systems are the major white-collar and blue-collar pay systems, respectively, in the federal
government.
27 Although the minimum retirement age increases slightly for employees born after 1947, in this study CRS used age
55 consistently because the differences in eligibility were minimal.
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employee who is 50 with 30 years of service or 55 with 25 years of service, or an
employee who is 55 with 20 years of service or 60 with 15 years of service).
Second, for employees who retired during the June 1, 2003, through May 29, 2004, period, we
asked for the average number of sick leave days used per pay period when they were working and
their average sick leave balance as of their date of retirement.
Differences in Sick Leave Usage and Balances
The Defense Manpower Data Center acted as DFAS’s agent to generate the sick leave
information that we requested.28 As
Table 1 shows, the data indicated that FERS employees in the
agencies that DFAS supports who were eligible to retire or approaching eligibility generally used
more sick leave than their CSRS counterparts during the one-year period ending May 29, 2004.
The differences between the two groups were greatest for GS employees as they approached or
achieved retirement eligibility. For example, whereas FERS employees in the GS pay system who
were either eligible to retire or were within five years of retirement eligibility used only slightly
more sick leave during the year than comparable CSRS employees (89 hours versus 85 hours,
respectively), FERS employees who were eligible to retire or within two years of eligibility used
25% more sick leave than their CSRS counterparts (105 hours versus 84 hours, respectively).
FERS employees who were eligible to retire used nearly 35% more sick leave than comparable
CSRS employees (119 hours versus 89 hours, respectively). FERS employees in the WG pay
system who were eligible to retire or were within two years of eligibility also used somewhat
more sick leave than their CSRS counterparts (e.g., 139 hours versus 127 hours in the “eligible to
retire” category), but the differences between FERS and CSRS employees were not as significant
as in the GS pay system.29
Table 1. FERS Employees Used More Sick Leave than
CSRS Employees as They Approached Retirement Eligibility
Average Hours of Sick Leave Used in Previous Year
GS/Equivalent Employees
WG/Equivalent Employees
Status as of May 2004
in
in
CSRS
FERS
CSRS
FERS
Eligible to retire
89
119
127
139
Eligible or within two years of retirement
84 105
114 119
eligibility
Eligible or within five years of retirement
85 89 110 102
eligibility
Source: DFAS.
28 According to its website (http://www.dmdc.osd.mil/about.html), the Defense Manpower Data Center supports the
information requirements of the Office of the Under Secretary of Defense for Personnel & Readiness and other
members of the Department’s manpower, personnel, and training communities.
29 The number of WG employees in each of these categories was also significantly smaller than the number of GS
employees. For example, there were more than 33,000 CSRS employees in the GS system who were eligible to retire,
compared to about 5,500 WG employees in that category.
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Differences between CSRS and FERS employees were even more pronounced when considering
their average sick leave balances as of May 2004. As
Table 2 shows, FERS employees’ sick leave
balances in all three retirement eligibility categories were only about half as large as their CSRS
counterparts (and in some cases were less than half as large). The differences between FERS and
CSRS employees were about the same in both the GS and WG pay systems.
Table 2. FERS Employees Had Lower Sick Leave Balances
than CSRS Employees
Average Sick Leave Balance (in Hours) as of May 2004
Status as of May 2004
GS/Equivalent Employees WG/Equivalent Employees
CSRS
FERS
CSRS
FERS
Eligible to retire
1,364
715
804
438
Eligible or within two years of retirement eligibility 1,222
540
761
323
Eligible or within five years of retirement eligibility
934
463
604
331
Source: DFAS.
As
Table 3 shows, for employees who retired from June 2003 through May 2004, FERS retirees’
sick leave balances at the time of retirement were significantly smaller than the sick leave
balances of CSRS retirees. CSRS retirees (particularly within the GS pay system) also had lower
average days of sick leave used per pay period prior to their retirement than their FERS
counterparts.
Table 3. FERS Retirees Had Lower Sick Leave Balances
than CSRS Retirees
GS/Equivalent
WG/Equivalent
Retirees
Retirees
CSRS
FERS
CSRS
FERS
Sick Leave Balance (in Hours) at Retirement
1,029
313
537
119
Average Hours of Sick Leave Used Per Pay Period Before
7.4 9.9 10.4 10.6
Retirement
Source
: DFAS.
Some (and perhaps most) of the differences in leave balances between employees in CSRS and
FERS may be due to differences in length of service rather than their retirement systems. For
example, the DFAS data indicated that CSRS employees who were eligible to retire had an
average of nearly 34 years of service, compared with nearly 24 years of service for FERS
employees. Similarly, CSRS employees who retired averaged nearly 32 years of service,
compared with nearly 24 years of service for employees in FERS. However, differences in
longevity between these groups do not explain why FERS employees’ use of sick leave and FERS
retirees’ use of sick leave just before retirement was greater than their CSRS counterparts.
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OPM’s 2006 Study of Sick Leave Usage
In May 2006, CRS contacted DFAS in an attempt to obtain more recent data on federal
employees’ sick leave usage rates. OPM responded to CRS, indicating that it was conducting its
own study in response to a request from a Member of Congress (who had reminded OPM that
Congress had urged the agency to conduct such a study in 1986). In October 2006, OPM reported
to the Member of Congress on the results of the study, and the Member’s office shared those
results with CRS. The overall design of the study was similar to the design that CRS used in its
2004 study, but the data covered more employees. Specifically, OPM obtained sick leave use data
on full-time permanent, non-Postal Service employees from the four major federal payroll
providers: DFAS (the organization providing data to CRS in 2004), the Department of the
Interior’s National Business Center, the Department of Agriculture’s National Finance Center, and
the General Services Administration’s National Payroll System. The study focused on the amount
of sick leave used by three groups of FERS and CSRS employees between April 2005 and March
2006: (1) those already eligible to retire without penalty; (2) those “nearly eligible” to retire (i.e.,
within two years of being eligible); and (3) all other employees. OPM also examined sick leave
use by FERS and CSRS employees who had retired during this period.
Some of the OPM study’s results appear similar to the results of the earlier CRS study. As
Table 4 below shows, the OPM study indicated that FERS employees who were eligible to retire used an
average of 20.2 more hours of sick leave per year from April 2005 through March 2006 than their
CSRS counterparts. (As described in
Table 1 above, the CRS study indicated that white-collar
FERS employees who were eligible to retire used 30 hours more sick leave per year in 2003 and
2004 than their CSRS counterparts; blue-collar FERS employees who were retirement eligible
used about 12 hours more sick leave per year than similar blue-collar CSRS employees.) Among
employees who were within two years of retirement eligibility, OPM reported that FERS
employees used an average of 13.5 more hours of sick leave per year than CSRS employees. (In
the CRS study, the FERS-CSRS difference for employees eligible and nearly eligible to retire was
21 hours for white-collar employees, and five hours for blue-collar employees.) OPM reported
that there were only minor differences in leave usage rates between other FERS and CSRS
employees.
Table 4. OPM Study Shows FERS Employees Generally Used More Sick Leave
in 2005-2006
Employee
Average Hours of Sick Leave
Average Hours of Sick Leave
FERS minus
Group
Used per Year by CSRS
Used per Year by FERS
Employees
Employees
CSRS Difference
Eligible to retire
84.7
104.9
20.2
Nearly eligible
80.9 94.4 13.5
to retire
Other 75.1
73.2
-1.9
Source: OPM.
However, in one area the results of the OPM study differed substantially from the CRS study.
Among employees who had retired between April 2005 and March 2006, the OPM study
indicated that FERS employees used an average of 3.3 hours
less sick leave per year than
employees who were in CSRS (22.8 hours per pay period for FERS compared with 26.1 hours per
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pay period for CSRS).30 (In contrast, the CRS study indicated that white-collar employees in
FERS who retired in 2003 and 2004 used 2.5
more hours of sick leave per pay period than their
CSRS counterparts. For blue-collar workers the FERS-CSRS difference was 0.2 hours more per
pay period.)
OPM said it did not believe that the higher rate of sick leave use by FERS employees who were
eligible and nearly eligible to retire was solely attributable to the fact that they do not receive
retirement credit for unused sick leave. The agency said other possible explanations included
demographic differences between employees in the two retirement systems and the increased
number of ways that sick leave can be used. Nevertheless, using what it characterized as “the
unproven assumption that the entire difference in sick leave usage ... is solely attributable to the
fact that FERS employees do not receive retirement credit for unused sick leave,” OPM estimated
that the lost productivity caused by increased use of sick leave by FERS employees who were
eligible or nearly eligible to retire cost the federal government $68 million during the April 2005
through March 2006 period. OPM estimated that providing FERS employees with service credit
for unused sick leave would increase costs to the retirement fund by about $180 million annually,
and would increase the retirement fund liability by about $2 billion, amortization of which would
require annual payments of about $137 million over 40 years. In total, OPM said “to pay for
future costs and to amortize the cost of benefits based upon past service would have an annual
cost of about $317 million.” Therefore, OPM concluded that “to make sick leave creditable under
FERS would cost several times more than the potential savings.”
Analysis of the OPM Study
Several elements of the OPM study could have affected OPM’s conclusions.31 First, the reasons
that OPM suggested as alternative explanations to why FERS employees are using more sick
leave than CSRS employees can be questioned. OPM said one such reason could be the
differences in the demographic characteristics of employees in the two retirement systems (e.g.,
age differences between FERS and CSRS employees). However, these hypothesized effects can
be tested statistically, and the results of such tests in one federal organization do not appear to
support OPM’s conclusions. As noted earlier in this report, a 2005 study of employees at the
Federal Bureau of Prisons concluded that demographic differences between FERS and CSRS
employees could not explain differences in sick leave use rates between employees in the two
retirement systems.32 Instead, the authors concluded that differences in sick leave use were
directly attributable to differences in how unused sick leave is treated in the two retirement
systems. Another reason that OPM said could cause the FERS-CSRS difference in sick leave use
was the increased number of ways that sick leave can be used (e.g., for adoption of a child or to
care for a sick family member, up to specified limits). However, this seems an unlikely
explanation for FERS-CSRS differences in leave usage within the same time period, particularly
since both FERS and CSRS employees could use their sick leave for all of these purposes.
30 It is not clear how OPM determined an annual rate of sick leave usage for employees who retired in the first few
months of this one-year period.
31 CRS raised these and other issues with officials in both the OPM pay group that did the study and OPM’s office of
congressional relations in October 2006. CRS also requested the leave usage data that OPM used in its study to verify
the results of the study. Despite this and several other subsequent inquiries, as of March 2008, CRS has not received a
response from OPM.
32 Scott D. Camp, and Eric G. Lambert, “The Influence of Organizational Incentives on Absenteeism: Sick Leave Use
Among Correctional Workers.”
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Second, at least some of the data that OPM used in the study appear to be of questionable validity.
For example, OPM said that CSRS employees who had retired between April 2005 and March
2006 used 26.1 hours of sick leave per pay period, while FERS employees who retired during this
period used 22.8 hours per pay period. Because each federal pay period is 80 hours, OPM’s data
suggest that CSRS retirees were on sick leave nearly one-third of the time that they worked
during their last year of service, and FERS retirees were on sick leave nearly as much. While
these levels of sick leave use are possible, the levels seem unusually high (i.e., nearly 600 to 700
hours per year on an annual basis), and are about three times higher than the DFAS data that were
provided to CRS just two years earlier. Also, the OPM data indicated that CSRS employees (who
receive significant value for their unused sick leave) used more sick leave per pay period than
FERS employees (who receive nothing for unused sick leave)—again, counter to what the DFAS
data indicated in the CRS study, and counter to what one would expect given the current incentive
structure.
Also, OPM did not explain in any detail how it arrived at its estimates of the cost of lost
productivity, or its estimate of the cost of providing FERS employees with service credit for their
unused sick leave balances. For the lost productivity estimate, OPM said that it was a function of
the number of FERS employees eligible or nearly eligible to retire times the employees’ average
salary times the difference in the number of hours of sick leave used. OPM identified the number
of employees in each retirement system who were eligible or nearly eligible to retire, as well as
the average differences in sick leave use for each group, but did not indicate what value(s) it used
for the average salary of these employees. Based on its $68 million productivity cost estimate and
knowing the other variables, though, it appears OPM assumed an average salary of nearly $54 per
hour, or about $112,000 per year. However, OPM data on the federal workforce as a whole in
March 2006 indicate that the average salary for full-time, permanent employees was less than
$66,000 per year (or less than $32 per hour). For such employees who were ages 50 to 54 with 25
to 29 years of service (i.e., those close to retirement eligibility), the average salary was less than
$77,000 per year (or less than $37 per hour). Therefore, assuming all other factors in the equation
stayed the same (number of FERS employees eligible and nearly eligible to retire, and leave
usage patterns for employees in those groups), OPM’s estimate of the annual cost of lost
productivity for these FERS employees may be accurate.
Finally, and most notably, the only policy option that OPM appears to have considered in its study
was to give FERS employees full service credit for unused sick leave—an option that was
characterized by one retirement expert as the “most obvious—and most expensive” option.33
However, as the discussion of non-federal sick leave policies earlier in this report makes clear, a
number of other, less expensive policy options are potentially available to encourage FERS
employees to save their sick leave, including partial service credit, lump sum payments for a
portion of unused sick leave (based on either the cash value of the sick leave or the value of the
service credit), or applying all or a portion of the value of an employee’s sick leave balance to the
cost of the employee’s retirement health care premium. Had OPM considered these other options,
its conclusions regarding the economic feasibility of providing value for unused sick leave may
have been different. Different approaches and formulas might be tested with focus groups of
federal employees to determine which method yields the greatest incentive at the least cost to the
government.
33 Reg Jones, “Study compares use of sick leave under CSRS, FERS,”
Federal Times, February 21, 2005.
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On the other hand, and as suggested earlier, a completely different way to reduce sick leave use
by FERS (and CSRS) employees is to impose more stringent management policies and controls
on the use of sick leave. Or, perhaps some combination of “carrot” and “stick” approaches could
be tried. The first step, though, may be to have OPM or some other entity conduct a
comprehensive, transparent, and methodologically defensible study of federal sick leave usage
trends, with defensible estimates of the costs associated with various policy options that Congress
could consider.
Treasury Inspector General Report
On April 24, 2008, the Treasury Inspector General for Tax Administration (TIGTA) issued a
report concluding that Internal Revenue Service (IRS) employees in FERS were more likely to
use sick leave than CSRS employees, especially as they approached retirement.34 TIGTA said it
believed that “the lack of compensation for unused sick leave at retirement has contributed to the
higher amount of sick leave used by FERS employees,” and recommended that the IRS Chief
Human Capital Officer ensure that all IRS managers receive training on leave policies to increase
awareness of sick leave abuse and improve sick leave administration. The Chief Human Capital
Officer agreed with the findings, but questioned how training would resolve the issue of increased
sick leave use by FERS employees. Overall, TIGTA reported that 97,000 IRS employees took
more than 15 million hours of sick leave in 2005 and 2006, costing IRS $450 million in salary
plus lost productivity.
Sick Leave Policies in Other Organizations
According to the Bureau of Labor Statistics (BLS), 57% of workers in private industry received
paid sick leave in March 2007.35 That figure rose to 68% for full-time workers, and to 80% for
employees in management, professional, and related occupations. On the other hand, only 39% of
employees in service occupations had access to paid sick leave in 2007, and only 23% of part-
time workers. Large employers were more likely to offer sick leave; 67% of employers with at
least 100 workers offered the benefit, compared with 48% of employers with fewer than 100
workers. Other studies have indicated that the absence of sick leave can have a wide range of
negative effects on family members and coworkers.36
Other BLS data indicated that 53% of full-time employees with paid sick leave in medium and
large private establishments in 1997 were allowed to carry over unused sick leave from year to
year.37 Seventeen percent were allowed to obtain cash in exchange for unused sick days at the end
34 Treasury Inspector General For Tax Administration, “Lack of Compensation for Unused Sick Leave at Retirement
Has Contributed to Higher Use by Employees in the Federal Employees Retirement System,” Report Number 2008-30-
093, April 24, 2008, available at http://www.treas.gov/tigta/auditreports/2008reports/200830093fr.html.
35 U.S. Department of Labor, Bureau of Labor Statistics,
National Compensation Survey: Employee Benefits in Private
Industry in the United States, March 2007, Summary 07-05 (August 2007).
36 Institute for Women’s Policy Research,
No Time to Be Sick: Why Everyone Suffers When Workers Don’t Have Paid
Sick Leave, Washington, DC, June 2004.
37 U.S. Department of Labor, Bureau of Labor Statistics,
Employee Benefits in Medium and Large Private
Establishments, 1997, Bulletin 2517 (September 1999). Of the employees who were allowed to carry over unused
leave, nearly 80% faced some type of limit on the amount of leave that could be carried over, with the precise amount
varying from fewer than 10 days to more than 130 days.
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of the year. Where a cash-in provision was provided, roughly half (9%) also had a provision in
their plan allowing leave to be carried over from year to year. For 36% of employees, neither
carrying over nor cashing in of unused sick leave was allowed; any leave not used in the year it
was earned was forfeited.
BLS data indicate that all (100%) full-time employees in state and local government were
provided sick leave in 1998.38 These employees generally received a fixed number of days per
year, most commonly between 10 days and 15 days. State and local employees with sick leave
were much more likely than their private sector counterparts to be able to carry over unused sick
leave from year to year (94% versus 53% in medium and large private sector establishments),
with about 12% of state and local employees able to both carry over sick leave and receive cash
payments (compared to 9% in medium-to-large private sector firms). Only 3% of state and local
employees forfeited any unused sick leave at the end of the leave year (compared to 36% in the
private sector).
Unused Sick Leave
The BLS data did not include specific information on how unused sick leave was treated at
retirement in either the public or private sectors. However, some surveys of public sector
organizations’ personnel policies did contain that information. For example, according to a 2002
survey of 428 agency members of the International Personnel Management Association, 58% of
the agencies cashed out sick leave at retirement, 45% offered cash for unused sick leave, 11%
converted sick leave to vacation time, 9% converted sick leave to insurance at retirement, and 3%
converted sick leave to disability insurance.39 In some cases, though, the agencies limited the
amount of sick leave that employees could carry over from year to year or limited the amount
payable at retirement.40
Federal regulations sometimes provide compensation for unused sick leave at retirement for non-
federal employees. For example, employees in federal Fishery Management Councils may
accumulate unused sick leave without limit (with Council approval), and “distributions of
accumulated funds for unused sick leave may be made to employees upon his or her retirement,
or to his or her estate upon his or her death, as established by the Council.”41 Police officers,
firefighters, and teachers in the District of Columbia who retire on an immediate annuity receive
service credit for unused sick leave.42
38 U.S. Department of Labor, Bureau of Labor Statistics,
Employee Benefits in State and Local Governments, 1998,
Bulletin 2531 (December 2000).
39 Reported in “Sick Leave Abuse: A Chronic Workplace Ill?,”
Public Management, 84 (June 1, 2002), p. 32.
40 Surveys conducted by other organizations confirm these findings. For example, a 1995 survey of more than 2,600
cities and nearly 900 counties conducted by the International City-County Management Association indicated that
nearly half of the local governments (49.6%) paid employees for unused sick leave, and 13.3% permitted conversion of
sick leave to vacation leave. See E.R. Moulder and G. Hall,
Employee Benefits in Local Government, Special Data
Issue (Washington, D.C: International City and County Management Association, 1995), reported by Soonhee Kim,
“Administering Family Leave Benefits and New Challenges for Public Personnel Management: The New York State
Experience,”
Review of Public Personnel Administration, 18 (Summer 1998), pp. 42-57.
41 50 CFR 600.120(d). Fishery Management Councils were created by the Magnuson-Stevens Fishery Conservation and
Management Act to manage living marine resources up to 200 miles offshore.
42 Department of the Treasury, “Federal Benefit Payments Under Certain District of Columbia Retirement Plans,” 65
Federal Register 77500, 77503, December 12, 2000.
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Sick Leave Policies in State Governments
In one of the most comprehensive assessments of employee benefits in state governments,
Workplace Economics, Inc., reported that as of January 1, 2004, most states provided their
employees with a fixed number of sick days per year (most commonly between 12 and 15 days),
but in several states the amount of sick leave accrual was tied to years of service, date of hire, or
both. For example, in Hawaii, state employees hired before July 2, 2001, accrue 21 days of sick
leave per year, but employees hired after that date accrue 15 days per year for the first nine years
of employment and 21 days per year thereafter. Most states placed no limit on the amount of sick
leave that could be accumulated; those that did (nine states) most often limited accumulated leave
to between 90 and 150 days.
The Workplace Economics, Inc., study also indicated that 45 states provided some form of
compensation for unused sick leave at retirement.43 However, in May 2009, CRS determined that
one additional state (Maine) also provided compensation for unused sick leave. These 46 states’
compensation plans generally fell into three categories:
• states that provided employees with a cash payment for some portion of their
unused sick leave,
• states that provided service credit for the leave in the computation of retirement
annuity, or
• states that used the unused sick leave to fund some type of health or life
insurance for retirees.
The type and amount of compensation provided varied substantially within these three categories,
and in some cases the states provided employees with options across the categories (e.g., allowing
employees to choose either service credit for annuities or health insurance payments), or provided
more than one form of compensation. For example, in Nevada, employees were paid for unused
sick leave of more than 30 days to a maximum of $8,000. In addition, Nevada state employees
could receive compensation for 50% of the hours in a special sick leave account as either a lump
sum payment, advanced payment of an insurance premium, or to purchase additional service
credit.44
Cash Payment Plans
In 28 states, retirees were provided a cash payment for a portion of their unused sick leave. In
each of these states, the size of the payment was limited in some way—for example, paying
employees for a percentage of their final sick leave balance (most commonly 25% or 50%),
capping the number of days or hours of sick leave payable or the size of the payment itself, or
calculating the size of the payment based on a formula. In many cases, the states used a
combination of these or other factors in determining the amount payable. For example:
43 The five states that the study said provided no compensation for unused sick leave were Alaska, Indiana, Maine,
Oregon, and Vermont. In Vermont, though, a limited number of employees are covered by a retirement plan in which
50% of unused sick leave is added to an employee’s average final compensation. Also, CRS determined in May 2009
that Maine provides up to three months of service credit for unused sick leave at the time of retirement.
44 After accruing 90 days of sick leave, Nevada state employees could carry over 50% of unused sick leave each year in
a special account to be used for long-term illnesses.
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• In Virginia state employees were paid for 25% of their unused sick leave with the
amount of the payment capped at $5,000.
• In New Hampshire employees were paid for 33% of their unused sick leave up to
40 days.
• Arkansas used a combination of a formula and a cap on the size of the payment:
employees with less than 50 days of unused sick leave on the date at retirement
received no payment, employees with 50 to 59 days were paid for 50% of their
sick days at 50% of their salary, with the scale gradually rising to where
employees with 80 to 120 days of unused sick leave received payment for 80% of
their sick days at 80% of their salary. The maximum payment for unused sick
leave was $7,500.
In some states, other limits were placed on whether and, if so, how much compensation would be
provided to their employees for unused sick leave. For example, in Illinois, unused sick leave
earned by state employees from January 1, 1984, through December 31, 1997, was paid at 50% of
its value at separation. In Michigan, only retiring employees hired before October 1, 1980, were
compensated; they received payment for 50% of their unused sick leave based on their last rate of
pay.
Service Credit Plans
In 15 states, employees received service credit for unused sick leave in computing retirement
benefits (as is currently done for CSRS employees in the federal government), but several states
placed conditions or limits on the use of sick leave in this manner. For example, in Georgia,
unused sick leave could be used to compute retirement benefits only if the combined balance of
sick and annual leave at retirement totaled 120 hours. In Oklahoma, a maximum of one year
service credit was allowed, but any credited service of six months or more was rounded up to a
full year. In South Carolina, employees could convert up to 90 days of sick leave to retirement
service credits, thereby adding up to 4.5 months of service time in calculating the size of their
annuity. In Maine, retiring employees could receive up to three months of service credit for
unused sick leave.
Insurance Plans
In seven states, the value of some portion of unused sick leave could be credited toward retiree
health or life insurance premiums. For example, in Utah, retirees could use unused sick leave to
purchase health insurance, with eight hours of sick leave equal to one month of individual
coverage. As in the previous categories of compensation, states often placed limits on the use of
sick leave in this manner. For example, in Idaho, half of the monetary value of unused sick leave
earned since July 1, 1976, or 600 hours (whichever is smaller), could be used to pay the retiree’s
premiums for group health programs.
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Legislative Developments
110th Congress
On March 10, 2008, Representative Jim Moran introduced H.R. 5573, which would have
compensated employees under FERS and the Foreign Service Retirement System for a portion of
their unused sick leave at the time of retirement. Specifically, the legislation would have
permitted employees45 who satisfied the age and service requirements for immediate or early
retirement in those systems to receive a lump-sum payment equal to 15% of the hourly rate of
their basic pay for each hour of unused sick leave balance over 500 hours, with the total payment
capped at $10,000. For example, an employee with a salary of $75,000 (i.e., $35.90 per hour) and
a sick leave balance of 1,250 hours at the time of retirement could have received about $4,000 for
her unused sick leave in excess of 500 hours (i.e., 750 hours times $35.90 per hour times 0.15 =
$4,039). The legislation indicated that the payment “shall be payable by the agency from which
the employee was separated,” and “shall be considered pay for taxation purposes only” (e.g., not
for purposes of calculating an employee’s “high three” average salary in determining her
pension). H.R. 5573 was referred to the House Committee on Oversight and Government
Reform’s Subcommittee on the Federal Workforce, Postal Service, and the District of Columbia,
but saw no further action during the 110th Congress.
Representatives from the Federal Managers Association supported the measure, saying it would
discourage many federal employees from taking unnecessary sick days.46 The bill was also
supported by the National Treasury Employees Union as “a reasonable and welcome step to
correct some of the disparity in treatment for FERS retirees.”47 However, one FMA local
president said the bill did not go far enough, and that “People are going to keep burning their
leave until [Congress] provides a better program.”48 An OPM official reportedly remained
cautious about whether differences in sick leave usage rates between FERS and CSRS employees
would be addressed by the legislation.49
On July 30, 2008, the House of Representatives passed the Family Smoking Prevention and
Tobacco Control Act (H.R. 1108), and the legislation was referred to the Senate on August 1,
2008. Section 407 of the bill, as amended, would have permitted FERS employees to receive
service credit in the computation of their annuities for any unused sick leave they had at the time
of retirement—just as CSRS employees are currently able to do (although FERS employees
45 The bill defines “employee” to mean an employee as defined in 5 U.S.C. 2105, and also includes employees of the
U.S. Postal Service and the Postal Regulatory Commission, but does not include a congressional employee as defined
in 5 U.S.C. 2107.
46 Stephen Losey, “FMA praises bill to credit unused sick leave at retirement,”
Federal Times, Mar. 11, 2008, available
at http://www.federaltimes.com/index.php?S=3417468.
47 See http://www.nteu.org/PressKits/PressRelease/PressRelease.aspx?ID=1231 for the NTEU press release.
48 Brittany Ballenstedt, “Legislation would allow more feds to cash out sick leave at retirement,”
Government
Executive, Mar. 10, 2008, available at
http://www.governmentexecutive.com/story_page.cfm?articleid=39484&dcn=todays_most_popular.
49 For example, she said FERS has more women than CSRS, and women may use more sick leave than men because of
family responsibilities. Stephen Barr, “Bill Would Give Retirees Partial Pay for Unused Sick Leave,”
Washington Post,
Mar. 11, p. D04, available at http://www.washingtonpost.com/wp-dyn/content/article/2008/03/10/
AR2008031002708.html.
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would have received only a 1% increase in their annuities for each additional year of service, not
the 2% that CSRS employees receive). To phase in the program, those who retired in the first
three years after the bill was enacted would have received credit for only 75% of their unused
sick leave. Representative Moran reportedly said that the bill would cost $70 million in the first
five years, and $337 million in the first 10 years.50 The Federal Managers Association and the
National Treasury Employees Union expressed support for the bill.51 However, neither H.R. 1108
nor the related Senate bill (S. 625, which did not contain the sick leave provision) was enacted
before the end of the 110th Congress.
111th Congress
On February 10, 2009, Representative Moran introduced H.R. 958, which would permit FERS
employees to receive service credit in the computation of their annuities for any unused sick leave
they had at the time of retirement. Although similar in that respect to Section 407 of H.R. 1108 in
the 110th Congress, H.R. 958 does not have the phase-in provision that was in the previous
legislation. The proposed legislation, which was referred to the House Committee on Oversight
and Government Reform, would apply to any FERS employee who retires under a basic or early
retirement annuity after the date of enactment. Several federal employee organizations (e.g., the
American Federation of Government Employees, Federally Employed Women, and the National
Association of Active and Retired Federal Employees) immediately announced their support for
the legislation.
Similar provisions were included in H.R. 1256, the Family Smoking Prevention and Tobacco
Control Act, which was introduced by Representative Henry Waxman on March 3, 2009, and was
reported by both the House Committee on Energy and Commerce and the House Committee on
Oversight and Government Reform on March 26, 2009. In the Energy and Commerce committee
report on the legislation, the Congressional Budget Office estimated that an average of about
three months would be added to employees’ length of service, which was estimated to increase
the average retirement benefit by about $150 per year. As a result, aggregate spending was
estimated to increase over the 2010 through 2019 period by about $600 million.52 On April 2,
2009, H.R. 1256 was passed by the House and received in the Senate. The next day it was placed
on the Senate legislative calendar. However, the FERS sick leave provisions were not included in
the final legislation (P.L. 111-31).
National Defense Authorization Act
The House-passed version of the National Defense Authorization Act for FY2010 (H.R. 2647)
contained the FERS sick leave provisions, but the Senate-passed version (S. 1390) did not.
According to press accounts, on October 7, 2009, House and Senate conferees agreed to include
the sick leave provisions in the final legislation, but to phase in the service credit over four years
(with 50% credit for unused sick leave until December 31, 2013, and 100% credit starting on
50 Stephen Losey, “Credit for Unused Sick Leave May Be On the Way,”
Federal Times, August 3, 2008.
51 Louis C. LaBrecque, “Federal Employees Would Receive Credit for Unused Sick Leave Under House-Passed Bill,”
Government Employee Relations Report, August 5, 2008, p. 875.
52 U.S. Congress, House Committee on Energy and Commerce,
Family Smoking Prevention and Tobacco Control Act,
report to accompany H.R. 1256, 111th Cong., 1st sess., H.Rept. 111-58, part 1 (Washington: GPO, 2009), p. 23.
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January 1, 2014).53 On October 8, 2009, the House of Representatives agreed to the conference
report (H.Rept. 111-288) to H.R. 2647, which contained the FERS sick leave provision in Section
1901 of the General Provisions.54 The Senate agreed to the conference report on October 22,
2009, and the President signed the legislation on October 28, 2009 (P.L. 111-84).
Effects of the Change in Policy on FERS Annuities
The amount of increased annuity that FERS employees will receive as a result of this change in
policy depends on three factors: (1) the amount of unused sick leave they have at the time of
retirement, (2) their “high-three” average salary at the time of retirement, and (3) whether they
retire before or after January 1, 2014.
Table 5 below provides estimates of the increase in annuity
at various high-three average salaries for employees who retire before 2014. For example, a
FERS employee with a high-three average salary of $80,000 and a sick leave balance at
retirement of 1,000 hours would receive an increase in his or her annuity of about $192 per year.55
With a FERS annuity of $24,000 per year ($80,000 times 0.1 times 30),56 the $192 represents an
annuity increase of about 0.8%. Over a 20-year retirement, the 1,000 hours of unused sick leave
represents at least $3,840 in additional income ($192 per year times 20 years).57
Table 5. Estimates of Increase in Annuities at Various Salary and Sick Leave Levels
(retirement before 2014)
500 Hours of
1,000 Hours of
1,500 Hours of
2,000 Hours of
High-Three
Unused Sick
Unused Sick
Unused Sick
Unused Sick
Average Salary
Leave
Leave
Leave
Leave
$40,000 $48 $96 $144 $192
$60,000 $72 $144 $216 $288
$80,000 $96 $192 $288 $384
$100,000
$120 $240 $360 $479
$120,000
$144 $288 $431 $575
$140,000
$168 $336 $503 $671
$160,000
$192 $384 $575 $767
Source: CRS.
Notes: Service credit for unused sick leave is provided only for ful months, but employees may add to their sick
leave service credit through regular service to reach an additional month. For example, an employee with 500
hours of sick leave would be eligible for two months and 26 days of service credit, but the employee could work
an additional four days to reach three months. The estimates in the table assume employees will do so.
53 Alex M. Parker and Alyssa Rosenberg, “Compromise Defense policy measure advances retirement reforms,”
Government Executive, October 7, 2009, available at http://www.govexec.com/dailyfed/1009/100709ar1.htm.
54 See http://www.congress.gov/cgi-lis/cpquery/R?cp111:FLD010:@1(hr288).
55 This estimate is derived by multiplying the high-three average salary of $80,000 times 0.01 (until age 62, FERS
employees earn an additional 1% of their high-three average salary for each additional year of service) times 0.479 (the
proportion that 1,000 hours is of a full work year of 2,087 hours) times 0.5 (the 50% credit for unused sick leave until
2014).
56 This estimate assumes that the employee has exactly 30 years of service under FERS and retires before the age of 62.
57 This figure does not include any cost of living adjustments that may be provided during the retirement period.
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Table 6 provides estimates of the increase in annuity at various high-three average salaries for
employees who retire after 2014. For example, a FERS employee with a high-three average salary
of $80,000 and a sick leave balance at retirement of 1,000 hours would receive an increase in his
or her annuity of about $383 per year.58 With a FERS annuity of $24,000 per year ($80,000 times
0.1 times 30),59 the $383 represents an annuity increase of about 1.6%. Over a 20-year retirement,
the 1,000 hours of unused sick leave represents at least $7,660 in additional income ($383 per
year times 20 years).60
Table 6. Estimates of Increase in Annuities at Various Salary and Sick Leave Levels
(retirement after 2014)
500 Hours of
1,000 Hours of
1,500 Hours of
2,000 Hours of
High-Three
Unused Sick
Unused Sick
Unused Sick
Unused Sick
Average Salary
Leave
Leave
Leave
Leave
$40,000 $96 $192 $287 $388
$60,000
$144 $288 $431 $575
$80,000
$192 $383 $575 $767
$100,000
$240 $479 $719 $958
$120,000
$288 $575 $862
$1,150
$140,000 $335 $671 $1,006 $1,342
$160,000 $383 $767 $1,149 $1,533
Source: CRS.
Notes: Service credit for unused sick leave is provided only for ful months, but employees may add to their sick
leave service credit through regular service to reach an additional month. For example, an employee with 500
hours of sick leave would be eligible for two months and 26 days of service credit, but the employee could work
an additional four days to reach three months. The estimates in the table assume employees will do so.
58 This estimate is derived by multiplying the high-three average salary of $80,000 times 0.01 (until age 62, FERS
employees earn an additional 1% of their high-three average salary for each additional year of service) times 0.479 (the
proportion that 1,000 hours is of a full work year of 2,087 hours).
59 This estimate assumes that the employee has exactly 30 years of service under FERS and retires before the age of 62.
60 This figure does not include any cost of living adjustments that may be provided during the retirement period.
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Appendix. State Sick Leave Policies
Unless otherwise indicated, the following information on sick leave policies in state government
is drawn from the
2004 State Employee Benefits Survey, published by Workplace Economics, Inc.
The data are as of January 1, 2004. Where more than one accrual rate or maximum accumulation
is listed, the rate depends on length of service or other factors. An asterisk (*) indicates that there
are additional or qualifying details in the survey. For example, in Colorado, employees are
generally limited to 45 days maximum leave accumulation, but employees hired before July 1,
1988, are limited to their accrual as of that date plus 45 days.
Table A-1. Sick Leave Policies in State Governments
Annual
State
Maximum
Accrual
Rate
Accumulation
Payment for Unused Sick Leave at Retirement
Alabama
13 days
150 days
Cash payment for 50% of leave balance.
Alaska
15
days
No
limit
None.
Arizona
12 days
No limit
Retiree may select cash payment or deposit funds into
fund to pay future health premiums as fol ows: 25% of
hourly rate for 500 to 749 hours; 33% of hourly rate for
750 to 999 hours; 50% hourly rate for 1,000 to 1,500
hours.
Arkansas
12 days
120 days
Cash payment, to a maximum of $7,500, as fol ows: less
than 50 days, no payment; 50-59 days, 50% of days at
50% of salary; 60-69 days, 60% of days at 60% of salary;
70-79 days, 70% of days at 70% of salary; 80-120 days,
80% of days at 80% of salary.
California
12 days
No limit
Service credit used to determine retirement benefits.
Colorado
80 hours
45 days*
Cash payment for 25% of leave balance.
Connecticut
15 days
No limit
Cash payment for 25% of leave balance, not to exceed
60 days’ pay.
Delaware
15 days
No limit
Cash payment for 50% of leave balance, up to 90 days.
Florida
13 days
No limit
Cash payment for 25% of leave balance.
Georgia
15 days
90 days
Service credit used to determine retirement benefits,
but only if 120 days of combined unused sick leave and
forfeited sick and annual leave.
Hawaii
15 days/ 21
No limit
Service credit used to determine retirement benefits.
days*
Idaho
12 days
No limit
Value of 50% of sick leave used to pay retiree’s
premiums for group health insurance.
Illinois
12 days
No limit
Cash payment for 50% of sick leave, but only if earned
from 1/1/84 through 12/31/97.
Indiana
9
days
No
limit
None.
Iowa
18 days
No limit
Cash payment to maximum of $2,000.
Kansas
12 days
No limit
Cash payment as follows: 8 years of service and 100 days
accumulated, 30 days pay; 15 years and 125 days, 45
days pay; 25 years and 150 days, 60 days pay.
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Annual
State
Accrual
Maximum
Rate
Accumulation
Payment for Unused Sick Leave at Retirement
Kentucky
12
days/22
No limit
Service credit used to determine retirement benefits.
days/ 32
days
Louisiana
No limit
Partial payment based on actuarial calculation.
Maine
12 days
120 days
Service credit used to determine retirement benefits. A
maximum of three months service credit is allowed.a
Maryland
15 days
No limit
Service credit used to determine retirement benefits.
Massachusetts 15 days
No limit
Cash payment for 20% of sick leave.
Michigan
13 days
No limit
Cash payment for 50% of sick leave, but only if hired
before 10/1/80.
Minnesota
13 days
No limit
Cash payment for 40%of sick leave, but only for
mandatory retirement or employees with 10 years of
service or age 65 or older.
Mississippi
12
days/ No limit
Service credit used to determine retirement benefits.
10.5 days/
7.5 days
Missouri
15 days
No limit
Service credit used to determine retirement benefits
(with every 168 hours credited as one additional month
of service).
Montana
12 days
No limit
Cash payment for 25%of sick leave.
Nebraska
12days/14
No limit
Cash payment for 25%of sick leave.
days/18 days
Nevada
15 days
No limit*
Cash payment for excess over 30 days to a maximum of
$8,000. Also, any leave in special leave account may be
taken as cash payment, insurance payment, or to
purchase service credit.
New
15 days
90 days/105 days/ Cash payment for 33% of sick leave, up to 40 days.
Hampshire
120 days
New Jersey
15 days
No limit
Cash payment for 50%of sick leave, up to $15,000.
New Mexico
12 days
No limit
Cash payment for up to 400 hours of sick leave if hours
previously cashed in on annual basis exceeds 600 hours.
New York
8 days/
200
days/1,500
Up to 165 days may be used as service credit to
10 days/
days
determine retirement benefits, and up to 200 days may
13 days
be used to pay for health insurance during retirement.
North
12 days
No limit
Service credit used to determine retirement benefits.
Carolina
North Dakota 12 days
No limit
Cash payment for 10% of sick leave after 10 continuous
years of service.
Ohio
10 days
No limit
Cash payment for 50% of sick leave.
Oklahoma
15 days
No limit
Service credit used to determine retirement benefits. A
maximum of one year credit is allowed, with six months
or more rounded up to one year.
Oregon
12
days
No
limit
None.
Pennsylvania
13 days
300 days
Cash payment for up to 163 days of sick leave, paid
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Annual
State
Accrual
Maximum
Rate
Accumulation
Payment for Unused Sick Leave at Retirement
under certain full retirement situations.
Rhode Island
104 hours
125 days
Cash payment for 40-hour employees as fol ows: 50% of
total from 468 hours to 720 hours; 75% of total from
721 hours to 1,000 hours. For 35-hour or non-standard
employees, 50% of total from 390 hours to 630 hours;
75% of total for 631 hours to 875 hours
South
15 days
195 days
Service credit used to determine retirement benefits. A
Carolina
maximum of 90 days (4.5 months service time) credit is
allowed.
South Dakota
14 days
No limit
Cash payment for 25% of sick leave (for those with 7
years of service) to a maximum of 480 hours.
Tennessee
12 days
No limit
Service credit used to determine retirement benefits,
with one month of service credit for every 20 days of
sick leave.
Texas
12 days
No limit
Service credit used to determine retirement benefits,
with one month of service credit for every 160 hours
(or fraction thereof) of sick leave.
Utah
13 days
No limit
Retiree may use 25% of sick leave to purchase health
insurance (eight hours sick leave buys one month of
individual coverage)
Vermont
6 days/
No limit
Generally none, although a limited number of employees
12 days/18
are covered by a contributory retirement plan in which
days/ 21
50% of unused sick leave is added to their average final
days
compensation.
Virginia
8 days/
No limit
Cash payment for 25% of sick leave (for those with 5
10 days/15
years of service) to a maximum of $5,000.
days
Washington
12 days
No limit
Cash payment for sick leave hours over 480 hours at
25% of current salary.
West Virginia
18 days
No limit
Service credit used to determine retirement benefits or
converted to credit for health insurance.
Wisconsin
16.25 days
No limit
Sick leave converted to credits to pay group health
insurance.
Wyoming
12 days
No limit
Cash payment for 50% of sick leave, to a maximum of
480 hours.
a. Information obtained by CRS from the Maine Bureau of Human Resources in May 2009.
Author Contact Information
Curtis W. Copeland
Specialist in American National Government
cwcopeland@crs.loc.gov, 7-0632
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