If you have a client retiring under the CSRS (Civil Service Retirement System) with unused sick leave … or you have a client whose employed soon to be ex-spouse is employed under CSRS, there may be many thousands of dollars on the table that you haven’t thought about.
Typically, even a professional actuary-based valuation of the employee’s pension is not going to look into this little ‘gotcha’ … unused sick leave. Each fedral Employee accrues sick leave at the rate of 13 days per year … normally 4 hours per pay period. The hours of unused sick leave an employee may have saved up can’t be cashed in for money. And if the employee in question is under FERS, those hours are essentially good for nothing except taking time off in the event of sickness. But if you are working with a CSRS member, it’s an important matter to decide how to account for and handle sick leave in the employee’s account at the time of filing for divorce (or at any other time the couple’s assets are ‘frozen’ for valuation). It’s not uncommon at all for an employee to have 6 months or even a year’s worth of accumulated sick leave. Unlike annual leave which has a cap or ceiling on accumulation, unused sick leave just builds and builds.
If it has no cash value, though, why would an attorney or valuator care? The answer is easy. In the CSRS this accumulated sick leave is added to the employee’s actual time in service to figure the years and months of service upon which the employee’s annuity is based. If an employee has, for example, 2000 hours of sick leave at the time the divorce is filed and the employee then decides to arbitrarily just “burn” the sick leave during the six months or so that the divorce proceedings take, the employee’s retirement annuity may be more than a percent lower than it would have been.
Doesn’t the government itself control the abuse of sick leave? Well, on paper and by law they certainly do, but in practicality this control is often not all that precise. An employee can easily take a couple days every week or so without arousing the supervisor’s suspicions and invoking any tighter level of control. It’s really the business of the attorneys and the divorcing couple to look into this on their own, because once the hours are “burned”, they are gone and they can’t be recovered after the fact by court order or any other common remedy.
See the chart at: http://www.opm.gov/fers_election/facts/ri83-8.htm
For the complete picture on how unused sick leave is computed. Note that only entire month’s worth of hours count, so there’s no need to try to control things too closely. It’s to both party’s advantage, though, to make an informed decision as to how many hours of sick leave are expected to be in the employee’s account at retirement time.
Disclaimer: As with all information you read on this web site, remember I an not an attorney, nor actuary, nor personnel specialist. If you’ve read this far through a post this boring I can almost guarantee you need a professional … seek one.