financial planner Stephen Zelcer

Federal Sick Leave: What you need to know.

Read the video transcript:

Welcome back. I wanna continue the thoughts about sick leave. Last video we spoke about how sick leave could extend your service. I wanna hone in a little bit further with sick leave and see if there’s any other benefits we could extract from it. Now, as a little bit of backdrop, sick leave only applies to your pension calculation.

However, sick leave cannot make you eligible to retire. So for example, let’s say somebody is retiring at minimum retirement age MRA, which for most people’s age, 57, in order to retire with a full pension at MRA you need 30 years of service. Imagine a person has 29 years of service and they have one year of sick leave.

One year of sick leave would be 2087 hours. If you have 2087 hours, that equals one year of sick leave, which could be added to your total service. So this person who is MRA for age 57, they have 29 years of service and one year sick leave. Do they have the 30 years needed to retire? And the answer is no they do not. Because the sick leave does not count for eligibility. Sick leave is not gonna make you eligible to retire. All sick leave does is it impacts your computation. So instead of getting 29 years of service, you can have 30 years of service computed in your pension, but you have to be eligible to retire in order for the sick leave to be added into the computation of your pension.

Sick leaves not gonna make you eligible to retire. All sick leave is going to do is impact the computation. So for example, somebody who has 29 years of service and one year sick leave, they are not eligible to retire. So their sick leaves not gonna help them in that situation if they were already eligible.

So for example, if they had 30 years of service and one year sick leave, [00:02:00] then their pension computation would not be based on 30 years, but rather based on 31 years. The sick leave only helps for computation. The sick leave does not make you eligible. So with that backdrop in mind, let’s ask another scenario.

Imagine a person has 19 years of service and one year of sick leave. Will they be eligible for the 1.1? Yeah, so again, a person who is in the FERS retirement system for each year of service, they get 1% of their high three average salary. Somebody with 15 years, they would get 15 years times 1% per year of their high three average salary said that equals 15% of their high three average salary.

Somebody who has 20 years, however, and they’re aged 62, when they retire, 62 or older. They will get 1.1% of their high three average salary for each year of service. Again, you have to be age 62 and also have 20 years plus when you retire again, you have to be age 62 plus and also have 20 years or more when you retire in order to be eligible for the 1.1.

So a person who is age 62 and they have 20 years of service, instead of getting 1% of their high three average salary for each year, which will be 20 years times 1% is 20%. In this case, they’d be eligible for 1.1% of their average salary, of their high three average salary for each year of service. So 20 years times 1.1 equals 22% of their high three average salary.

So the scenario I want to capture is somebody who has 19 years of service. And they have one year of sick leave and they are age 62. Will they get the 1.1 computation in their pension?  Now you may think, well, Stephan, you just told us that sick leave is not gonna make you eligible to retire. So the same way, sick leaves not gonna make you eligible to retire.

Sick leaves should not make you eligible for the 1.1 computation. But one second. Remember, sick leave does not make you eligible to retire. It only impacts the computation,

This person who is aged 62 with 19 years of service is the sick leave making them eligible to retire. No, they were already eligible to retire somebody who is age 62. All they need is five years of service to be eligible to retire. This person at 62 has 19 years of service, so they are already eligible to retire even without the sick leave.

All the sick leave is doing in this situation is impacting the computation. Instead of the computation being 1% per year, they are now getting 1.1% per year. So that’s good news. Somebody who has less than 20 years of service, but they have enough sick leave to bring them up to the 20 year mark, they will get 1.1% computation based upon that sick leave.

That’s another creative use, another creative application of your unused sick leave. I hope you guys enjoyed this video. Don’t forget to subscribe and stay tuned for more content

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