OPM regs clear up lump sum confusion
If you are uncertain about how much money your unused annual leave is worth at retirement, you're not alone. The Office of Personnel Management isn't so sure, either. Fortunately, OPM has taken steps to change this situation with governmentwide regulations concerning lump sum payments to compensate employees for unused annual leave (see Federal Register; July 8, 1999; Vol. 64, No. 130).
Government agencies must make a lump sum payment for annual leave when an employee leaves federal service or enters active duty in the armed forces and elects to receive a lump sum payment. Because federal agencies have not handled lump sum payments consistently, OPM recently decided to issue final governmentwide regulations governing lump sum distributions.
The calculation of lump sum payments has become complicated since the introduction of locality pay rates. Agencies must wrestle with questions regarding what rate should be used to calculate a lump sum for leave accumulated in different geographic locations. Should it be the pay rate for the location where the leave was calculated or the pay rate that is applicable to the employee's present job?
Another complexity enters the picture if the value of accumulated leave is calculated for a period that spans two pay rates. That can occur if an employee leaves at the end of the year and a pay raise goes into effect shortly after the employee leaves.
Development of one set of rules is intended to ensure that employees are aware of the lump sum payment policy and are familiar with their rights to receive payment for unused annual leave when they separate from federal service.
Some of OPM's initial ideas have been changed in the final regulations. For example, the proposed regulations originally said an agency must not make a lump sum payment for accumulated or accrued annual leave to an employee determined to be in a continuing employment program under which the employee is required to work a mixed tour of duty (i.e., the employee works full time or part time for a limited portion of the year and intermittently for the remainder). The proposed regulations required the agency to hold any accrued leave in abeyance during the time the employee is working intermittently and to re-credit the annual leave when the employee returns to full- or part-time employment.
Several agencies objected to this provision, claiming that requiring an agency to hold leave in abeyance results in leave being available for use during periods of part-time and full-time employment when the agency needs its employees at work the most. Agencies also said that mission requirements, staffing needs and sources of available funds varied greatly from one organization to another and that agencies needed greater flexibility than a one-size-fits-all approach permits.
OPM relented, and the final regulations allow agencies to decide for themselves how to handle situations involving employees working intermittent tours of duty.
Also under the proposed OPM regulations, an employee transferring to a position to which leave cannot be completely transferred, such as a position in the U.S. Postal Service, the losing agency would hold in abeyance the annual leave that could not be transferred. The agency would then re-credit the annual leave that had been held in abeyance once the worker is re-employed in a position to which the employee's accumulated and accrued annual leave may be transferred.
There were objections to this provision because it would require agencies to set up recordkeeping systems to keep track of such leave. Therefore, OPM's final regulation requires agencies to make a lump sum payment in such cases.
In the final regulations, OPM stated that overtime pay must be included in a final lump sum payment and provided guidance on how to calculate overtime pay. This gets complicated because there are a number of methods that can be used to calculate overtime, depending on the agency and the circumstances. For example, firefighters and air traffic controllers are governed by specific regulations.
Also, if an employee who receives a lump sum payment comes back onto the federal payroll, the employee is expected to refund the lump sum payment because the employee is not entitled to it. The new regulations allow repayment to be made in installments.
Agencies also are provided specific instructions on how to restore annual leave when an employee takes a lump sum payment for unused annual leave and then comes back to work for Uncle Sam. When an employee refunds a lump sum payment, the annual leave covered by that refund must be made immediately available to the employee.
Frankly, I never gave much thought to this topic but can see how it could lead to confusion. OPM should have established a uniform set of procedures for handling lump sum payments long ago. I cannot help but think that many employees have been shortchanged. I hope the new regulations will lead to lump sum consistency throughout the federal government.
--Bureaucratus is a retired federal employee who contributes regularly to Federal Computer Week.