A Sick Leave Remedy

Federal employees hired since 1984 could be just months away from being able to cash out their unused sick leave at retirement.

Last week, the House passed a measure that would allow workers covered by the Federal Employees Retirement System (generally those hired in 1984 or later) to apply their leftover sick leave toward their retirement annuity. The measure seeks to correct a disparity between FERS and the older Civil Service Retirement System, under which employees receive credit for unused sick leave.

The good news is the provision -- introduced by Rep. Henry Waxman, D-Calif., as part of a larger bill (H.R. 1108) called the Family Smoking Prevention and Tobacco Control Act -- is more generous than a similar benefit proposed by Rep. James Moran, D-Va., in March.

Waxman's measure would give FERS employees retiring during the next three years credit for 75 percent of their accrued sick leave. Those retiring later would be able to count all their unused leave.

Moran's legislation would offer a one-time payment of up to $10,000 for any sick leave remaining at retirement. Some employees criticized the offer, noting that it still would not put them on equal footing with their colleagues in CSRS.

"We are truly encouraged that this bill goes even further than [Moran's] originally proposed legislation," said Darryl Perkinson, president of the Federal Managers Association.

Moran spokesman Austin Durrer said on Tuesday that the changes were necessary to comply with pay-go rules, which require offsets for spending over prescribed limits.

The measure passed by the House "spreads out the payments," Durrer said. "The budget scoring is only for a 10-year window. Payments in the out years are not counted in the legislation for pay-go purposes."

Granting FERS employees the proposed sick leave benefit is estimated to cost $70 million over five years and $337 million over 10 years. Offsetting those costs would rely on another provision of the tobacco bill that would add a Roth 401(k) option for participants in the Thrift Savings Plan, a congressional aide said last week.

The Congressional Budget Office said in a report in July that a Roth offering in the TSP would increase revenues by an estimated $157 million over five years and $1.3 billion over 10 years.

"Establishing a Roth contribution program would result in some TSP participants electing to contribute after-tax income to their retirement plan rather than contributing pre-tax amounts, thereby boosting income tax revenues," CBO said.

The Senate must pass the bill, and then the chambers will have to work out differences in the two versions. After the conference committee reaches agreement, each chamber must pass the final version and President Bush will have to sign it.

The Senate plans to consider its version of the tobacco bill in September. That version does not address FERS sick leave, but Durrer said he is still optimistic.

"The fact that our provision is in the House version makes it so that when it goes to conference, we're in a good position to retain it," Durrer said.

There is one other potential hang-up: A statement issued by the White House last week indicated that President Bush's advisers would recommend he veto the bill, noting that it would create new taxes and mandate additional responsibilities for the Food and Drug Administration.

FERS employees might not want to start hoarding their sick leave just yet.