When the Sum in a Lump Sum Payment Falls Short

For the past couple of weeks, we’ve been looking at issues around the end of the leave year and lump sum payments for unused annual leave. This week, we’ll hear from two readers who retired at the end of 2021 and discovered their payments weren’t what they thought they would be. 

The crux of the issue is that some employees who retired at the end of 2021 initially were paid for their unused annual leave at the 2021 pay rate. Then, after payroll systems were updated with 2022 rates, most of them got an additional payment later.

Here’s one email I got from a retiree whose payroll as an employee was handled by the Defense Finance and Accounting Service, following up on a message they had sent earlier: 

I finally got resolution to my lump sum payment issue. On April 7, I received a DFAS check for the balance of the hourly rate owed (2021 vs 2022 rates). No prior emails from anyone in the process, and the [leave and earnings statement] says nothing about the adjustment. It's frustrating that no explanation or apologies were documented. I guess the lesson learned is that the system is not designed with the appropriate caveats/data to ensure the retiree gets the correct lump sum. It is up to the retiree to take action.

Other recent retirees haven’t been so lucky—at least not yet. I also recently received this email: 

I thought I would share my recent retirement odyssey with you. I retired from my federal agency at the close of business Dec. 31, 2021. At that time I had 540 hours of annual leave accrued. I am Title 9, so my maximum leave accrual is relatively high. I was reimbursed for that leave on Jan. 21, 2022. The payout amount was computed using my final 2021 salary. My understanding of the federal policy was that at least some of that leave should have been paid out at the new 2022 salary increase. My local payroll tech filed a ticket on my behalf with DFAS in this regard. Their ruling was that since I was not an employee on Jan. 1, 2022, that the pay increase did not apply to me. This is despite supplying the local payroll folks with all the regulations and at least one of your past articles that talked about annual leave being paid out at the salary that the employee would have been paid had they been employed during those leave hours—projected forward. I have asked my senator's office for help in rectifying the situation, but so far they have had no response from OPM or DFAS.

I’m hopeful that this situation will be resolved, and that the retiree will receive a supplemental lump sum payment soon. 

The official federal policy on lump sum payments is pretty clear: 

The lump-sum leave period is the employee’s annual leave projected forward for all work days the employee would have worked if he or she had remained in federal service, including holidays (even though they are typically non-workdays)... The lump-sum payment will be adjusted to reflect the increased rate on and after the effective date of the pay schedule adjustment… lump-sum payments for all covered federal employees must include any general pay adjustment and locality pay adjustment that becomes effective during the employee’s lump-sum leave period. 

The lesson is to pay close attention to the checks you receive early in your retirement and raise issues with your agency’s payroll provided if necessary.