Human Resources Division
Pay & Leave Information
Frequently Asked Questions
Lump-Sum Payments for Annual Leave
August 30, 1999
Q&A On Lump-Sum Payments for Annual Leave
Effective September 7, 1999, the Office of Personnel Management issued
final regulations creating a uniform Governmentwide policy for calculating
lump-sum payments for annual leave. These regulations do not significantly
affect how REE currently makes lump-sum payments. The following questions
and answers cover key portions of the regulations and provide guidance
on unusual lump sum payment situations.
Eligibility
1. When are employees eligible for a lump-sum payment for annual
leave?
A lump-sum payment for accumulated and accrued annual leave is required
when employees separate or retire from the Federal service; die; or
transfer to positions not covered by subchapter I of chapter 63 of
title 5, United States Code (Governmentwide leave statutes), and their
accumulated and accrued annual leave cannot be transferred.
A lump-sum payment may or may not be required in the following situations:
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Entrance On Duty Into Armed Forces
An employee who enters on active duty in the armed
forces may elect to receive a lump-sum payment for accumulated and
accrued annual leave or may request to have the annual leave remain
to his or her credit until return from active duty. However, we
must make a lump-sum payment for restored annual leave when the
employee enters active duty. We may not recredit the restored leave
when the employee returns to Federal service.
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Transfer To A Public International Organization
An employee who transfers to a position in a public
international organization under 5 U.S.C. 3582 may elect to retain
accumulated and accrued annual leave to his or her credit at the
time of transfer or receive a lump-sum payment for such annual leave.
However, we must make a lump-sum payment for restored annual leave
when the employee transfers to the public international organization.
We may not recredit the leave under these circumstances.
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Transfer To Excepted Service Appointment
An employee who transfers to a position excepted
from subchapter I of chapter 63 of title 5, United States Code,
by 5 U.S.C. 6301(2) (x)-(xiii) (e.g. a member of the SES who accepts
a Presidential appointment) does not receive a lump-sum payment
upon appointment to the new position. The accumulated and accrued
annual leave is held in abeyance for recredit when the employee
is subsequently reemployed, without a break in service, in a position
to which his or her accumulated and accrued annual leave may be
transferred.
2. In addition to the situations discussed in Q1 above, are there
other REE employees who may be ineligible for a lump-sum payment for
annual leave?
Yes. REE employees who retire and are immediately reemployed (Federal
position) on the next work day are not entitled to a lump-sum payment
because this is not a separation from Federal service. If an annuitant
would like to receive the full lump-sum payment, he or she would have
to be off the rolls for the entire lump sum leave period (see Q4).
In addition, REE staff who hold two Federal part-time appointments
and earn annual leave in both positions are not entitled to a lump-sump
payment if they separate from one position. Instead, their leave is
transferred via the SF-1150, Record of Leave, to the second Federal
position.
3. Are students eligible for a lump-sum payment for annual leave
when they return to school?
Students who resign are entitled to a lump-sum payment. Students
who work full- or part-time and use leave without pay while attending
classes do not receive a lump-sum payment. In addition, we keep a
record of any fractional periods of creditable service (also called
"carryover hours") for leave accrual purposes. The fractional
periods are recredited to the student's leave account upon return
to a part- or full-time work schedule. Note: Only students who serve
under an appointment of 90 calendar days or more and have a regularly
scheduled tour of duty earn annual leave.
Lump-Sum Leave Period
4. What is the "lump-sum leave period"?
[Amended 12/30/99] The lump-sum leave period is the annual leave
projected forward for all workdays employees would have worked if
they had remained in Federal service, including holidays (even though
they are typically nonworkdays) until the expiration of the their
accumulated and accrued annual leave. A lump-sum payment must equal
the pay an employee would have received had he or she remained in
the Federal service until the expiration of the accumulated and accrued
annual leave to the employee's credit. We must project the lump-sum
period leave beginning on the first workday (counting any holiday)
occurring after the date the employee becomes eligible for a lump-sum
payment and counting all subsequent workdays and holidays until the
expiration of the period of annual leave. The period of leave used
for calculating the lump-sum payment must not be extended by any holidays
which occur immediately after the date the employee becomes eligible
for a lump-sum payment. An employee is not entitled to pay for a holiday
which immediately follows the last workday represented by the lump-sum
payment (47 Comp. Gen. 147).
[Amended 12/30/99] For example, an employee with a regularly scheduled
tour of duty of 8 a.m. to 4:30 p.m., Monday through Friday, separates
on October 4, 1999, with an annual leave balance of 216 hours. The
annual leave is projected from October 5, 1999, to November 10, 1999,
inclusive. The lump-sum includes payment for the holiday on October
11, 1999 (Columbus Day). The lump-sum would not include payment for
the holiday on November 11, 1999 (Veterans Day),because in this example,
Veterans Day immediately follows the last workday represented by the
lump-sum payment.
Note: A lump sum period is not extended by compensatory time off,
credit hours, or time off given as an award.
Lump-Sum Calculations
5. How are lump-sum payments for annual leave calculated?
We calculate a lump-sum payment by multiplying the number of hours
of accumulated and accrued leave by the employee's applicable hourly
rate of pay, including the types of pay listed under Q6 below.
For example, if an employee earning $10 per hour has 100 hours of
accumulated and accrued annual leave at the time of separation, we
calculate the lump-sum payment as follows:
100 (annual lv. hrs) x $10 (hourly rate of pay) = $1,000 (lump-sum
before applicable taxes)
The USDA National Finance Center (NFC) performs this calculation
based on the AD-581, Lump-Sum Leave or Compensatory Time Payments,
submitted by REE.
The lump-sum payment must equal the pay an employee would have received
had he or she remained in the Federal service until expiration of
the period of annual leave, excluding any differential under 5 U.S.C.
5925 (certain post differentials) and any allowance under 5 U.S.C.
5928 (danger pay allowance). The lump-sum payment must also be adjusted
to reflect the increased pay rate on and after the effective date
of a pay schedule adjustment.
See REE Policies and Procedure 402.6, Leave, Appendices B and C,
for detailed instructions on how to initiate payment of a lump-sum
for annual leave and other types of leave.
6. Is "use or lose" and/or restored annual leave included
in the projected lump sum leave period?
Yes. An employee must receive a lump-sum payment for accumulated
and currently accrued annual leave to which he or she is entitled
on the date of separation. This includes all "use or lose'' and
restored annual leave to the employee's credit on the date of separation.
Annual leave that has not yet been forfeited must be included in a
lump-sum payment.
7. How are lump-sum payments for annual leave for retirees handled?
The AD-581, Lump-Sum Leave or Compensatory Time Payments, should
be sent to the HRD Southern Services Branch, Retirements and Benefits
Staff, to avoid delays in processing.
8. How is the lump-sum payment calculated for a reemployed annuitant?
We compute the lump-sum payment using the annuitants' full pay rate
without any reductions by the amount of their annuities.
9. What is "pay" for lump-sum calculation purposes?
The following is considered "pay" for lump-sum payment
purposes:
1. An employee's rate of basic pay, including any
special salary rate, locality rate of pay, and/or a continued or retained
rate of pay.
2. Any statutory adjustments in pay or any general
system-wide increases in pay that become effective during the lump-sum
leave period. We must adjust the lump-sum payment to reflect the increased
rate on and after the effective date of the pay adjustment.
3. For Federal Wage System (FWS) employees, we must
include in the lump-sum payment the scheduled rate of pay and any
applicable adjustments in rates that become effective during the lump-sum
leave period. We must adjust the lump-sum payment to reflect the increased
prevailing rate on and after the effective date of the rate adjustment.
4. A within-grade increase (WGI) if the employee has
met the requirements to receive a WGI prior to the date the employee
becomes eligible for a lump-sum payment.
5. Night differential under 5 U.S.C. 5343(f) (covers
FWS employees only) for nonovertime hours at the percentage rate received
by an FWS employee for the last full workweek immediately prior to
separation, death, or transfer.
6. A supervisory differential based on the percentage
rate (or dollar amount) received by the employee for the pay period
immediately prior to the date the employee became eligible for a lump-sum
payment.
7. A cost-of-living allowance and/or post differential
in a nonforeign area under 5 U.S.C. 5924 if the employee's official
duty station is in the nonforeign area when he or she becomes eligible
for a lump-sum payment.
8. A post allowance in a foreign area under 5 U.S.C.
5924 (1) if the employee's official duty station is in the foreign
area when he or she becomes eligible for a lump-sum payment.
A lump-sum payment may not include any pay other than that listed
above.
Deductions
10. What deductions are taken from a lump-sum payment for annual
leave?
Federal taxes are withheld--depending on the employee's selection--at
either the 28% Federal flat tax rate or at the NFC database tax rate
for that individual. Employees should select the withholding rate
to apply. This is particularly true for employees who retire in mid-year
and will fall into a lower tax bracket due to reduced income in the
year of separation. Note: Taxes on lump-sum annual leave payments
are withheld only on pay subject to Federal tax withholding.
In addition, the lump-sum payment is subject to commercial garnishment,
garnishment for child support and/or alimony, and administrative offset
for recovery of debts to the Federal Government.
11. What deductions are not taken from a lump-sum payment for annual
leave?
A lump-sum payment is not subject to deductions for retirement under
the Civil Service Retirement System or the Federal Employees' Retirement
System, health benefits under the Federal Employees Health Benefits
program, life insurance under the Federal Employees' Group Life Insurance
program, and savings under the Thrift Savings Plan.
Refunds of Lump-Sum Payments
12. When is a refund of a lump-sum payment for annual leave required?
An employee who is reemployed in the Federal service prior to the
end of the period covered by the lump-sum payment must refund an amount
equal to the payment covering the period between the date of reemployment
and the expiration of the lump-sum period. (See Q4.) The refund is
based on the pay used to compute the lump-sum payment, e.g., an employee
who received a lump-sum payment based on the pay for a GS-9 position
must refund the lump-sum payment based on the same GS-9 pay, even
if he or she is reemployed at a lower or higher grade level. The refund
is deposited in the U.S. Treasury to the credit of the REE agency
involved.
13. What is the time limit on refunds of lump-sum payments for
annual leave?
The lump-sum refund must be paid in full within 1 year after the
date of reemployment.
14. Are refunds of lump-sum payments for annual leave required
of Federal employees who are reemployed in a temporary appointment
of less than 90 days?
Yes. If an annuitant is reemployed in the Federal Government prior
to the expiration of the lump-sum period in a temporary appointment
of less than 90 days, he or she must refund an amount equal to the
pay covering the period between the date of reemployment and the expiration
of the lump-sum period. In addition, the reemploying agency must recredit
to the reemployed annuitant an amount of leave equal to the leave
represented by the refund, and the employee may use the recredited
leave during the temporary appointment.
15. Is there a requirement for refunding restored annual leave
and recrediting it to employees' leave accounts?
No. Restored annual leave is not included in a lump-sum refund. Further,
we must subtract restored annual leave from the lump-sum leave period
if an employee is reemployed prior to the expiration of the lump-sum
leave period. Finally, we may not recredit restored annual leave to
an employee if the employee is reemployed prior to the expiration
of the lump-sum leave period.
Miscellaneous
16. How are transfers to positions under different leave systems
handled?
In such cases, the leave will be credited by the receiving agency
on an adjusted basis, and in an amount not exceeding the aggregate
which employees in the receiving agency are permitted to accumulate.
The untransferable leave will be held by the losing agency for recredit
to the employee in the event of the employee's return (without a break
in service of more than 52 continuous calendar weeks) to the leave
system under which it was earned.
17. May an employee earn leave for the period covered by the lump-sum
payment?
No. An employee may not earn leave for the period covered by a lump-sum
payment.
18. What if the amount of annual leave to be recredited is more than
the maximum annual leave limitation for the new position?
Contact the HRD, REE Policy Branch, Pay and Leave Staff. The staff
will assist you in the determining the employee's new maximum annual
leave limitation and provide advice on administering the new ceiling.
19. Where can I find the OPM regulations on lump-sum payments for
annual leave?
The proposed and final regulations are on the OPM Homepage (www.opm.gov)
under archived Federal Register notices dated July 29, 1997 (62 FR
40475) and July 8, 1999 (64 FR 36763), respectively. This Q&A
will be posted on the HRD Homepage at:
20. What is the effective date of the new lump-sum payment for
annual leave regulations?
As indicated in the introduction, the new regulations apply only
to lump-sum payments made on or after September 7, 1999. The regulations
may not be applied retroactively.
21. Where should I direct questions on lump-sum payments for annual
leave?
Your servicing personnel management specialist can answer such questions.
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