Background
The Office of Personnel Management (OPM), under Director Scott Kupor, is modernizing federal HR as part of President Trump’s transformation effort. Recently, OPM has revised administrative leave policy, revised hiring practices, and employee performance plans. There is an area that OPM should consider improving as part of the federal employee benefits. Specifically, OPM should consider improving the sick leave benefits offered to federal employees. This whitepaper proposes three improvements:
- Ability to donate sick leave.
- Addition of year-end cash-out option.
- Addition of separation of government cash-out option.
Ability to Donate Sick Leave
Current Policy:
Many federal agencies do not allow federal employees to donate sick leave to colleagues that may need it. Instead, federal employees can donate annual leave to other federal employees for medical-related matters through a formal donation request process.
Proposed Change:
Allow federal employees to donate sick leave to those federal employees with medical-related matters. Those medical-related matters would be similar to the current annual leave donation policy. The difference is that sick leave would be included as an option for donating to those federal employees in need of leave.
Similar to current annual leave donation policy, there could be a limit on the number of sick leave that a federal employee can donate within the calendar year.
What Are the Potential Benefits:
- Expands colleague support for those with limited leave balance, while reducing potential stress.
- Federal employees with enough leave balance have a new option to donate.
- Federal employees with large sick leave balances can donate to others instead of carrying a large balance.
- Potential recipients gain flexibility without depleting future sick or annual leave balances through advance leave requests.
Year-End Cash-Out Option
Current Policy:
Many federal employees carry large sick leave balances that could be counted toward retirement as part of the year-in-service calculation. However, there is no policy in place that allows for federal employees to cash-out sick leave hours at the end of the calendar year. In many cases, there are federal employees who accumulated sick leave balances that exceed 2,000 hours over the years.
On the federal employees’ annual benefits statement, there is no reference about the cash value of the accumulated sick leave. However, there is information on the document regarding the cash value of annual leave that a federal employee has accumulated if they were to separate from the federal government.
Proposed Changes:
Allow federal employees to cash out sick leave at end of the calendar year.
Include cash value of accumulated sick leave balance in federal employees’ annual benefits statements.
Implementation:
- Establish a threshold for sick leave hours that a federal employee can cash-out within the calendar year.
- Similar to the current November deadline for submitting Use or Lose annual leave, set the deadline for when federal employees can opt to cash-out sick leave.
- New option allows for federal employees to 1) use sick leave OR 2) cash-out sick leave. It should be noted that a third option could be available as federal employees could donate sick leave to other federal employees (see previous section about donating sick leave).
- Federal employees who elect the cash-out option will have the allocated sick leave transferred to an electronic payment to avoid potential double-dipping of sick leave.
- On the annual benefits statements, include the cash value of the accumulated sick leave balance in the same manner as the cash value of accumulated annual leave balance.
What Are The Potential Benefits:
- Federal employees retain value from earned sick leave instead of losing it entirely due to separation or waiting until retirement when it counts towards years-in-service.
- Minimizes potential administrative burden to restore sick leave if the federal employee return to government service.
- Provides more flexibility in options for the federal employee.
- Further modernizes the federal workforce benefits that aligns with presidential mandates.
- Better aligns the sick leave policy with the annual leave policy.
- Provides federal employees with a complete overview of their sick leave balances when considering years-in-service calculation or cash-out.
Cash-Out Option At Separation From Government Service
Current Policy:
Many federal employees carry large sick leave balances that could be counted toward retirement as part of the year-in-service calculation. However, there is no policy in place that allows for federal employees to cash-out sick leave hours when they separate from government service. In many cases, there are federal employees who accumulated sick leave balances that exceed 2,000 hours over the years.
On the federal employees’ annual benefits statement, there is no reference about the cash value of the accumulated sick leave. However, there is information on the document regarding the cash value of annual leave that a federal employee has accumulated if they were to separate from the federal government.
Proposed Changes:
Allow federal employees to cash out sick leave balance when they separate from government service due to other opportunities or retirement.
Include cash value of accumulated sick leave balance in federal employees’ annual benefits statements.
Implementation:
- New option allows for federal employees to 1) count sick leave towards years-of-service, 2) lump sum cash-out at separation from government, or 3) blend of option 1 and 2 with appropriate allocation between the two options.
- Federal employees who elect the cash-out option will have the allocated sick leave transferred to an electronic payment to avoid potential double-dipping of sick leave.
- On the annual benefits statements, include the cash value of the accumulated sick leave balance in the same manner as the cash value of accumulated annual leave balance.
What Are The Potential Benefits:
- Federal employees retain value from earned sick leave instead of losing it entirely at separation.
- Provides more flexibility in options for the federal employee.
- Further modernizes the federal workforce benefits that aligns with presidential mandates.
- Better aligns the sick leave policy with the annual leave policy.
- Provides federal employees with a complete overview of their sick leave balances when considering years-in-service calculation or cash-out.
Conclusion
These three policy changes align with OPM’s broader modernization efforts and deliver immediate value to federal employees. By expanding sick leave donation eligibility, creating a cash-out option, and including sick leave cash valuation in the annual federal benefits statements, OPM can improve the sick leave policy for federal employees. In addition, OPM can reduce administrative burdens, while providing 21st-century benefits flexibility to a modern federal workforce.
We recommend that OPM consider implementing these changes as part of ongoing benefits modernization. Ideally, it would be advantageous to OPM and the administration to execute these changes before the end of calendar year 2025 as part of the reopening of the federal government.
Please email us at info@ccompliancegroup.com for questions, comments, concerns, or need for clarification about improving federal employee sick leave benefits.