Sick and annual leave: converting hours to service credit
Your two big leave balances are treated in opposite ways at retirement. Unused sick leave is converted to extra service credit that raises your FERS pension. Unused annual leave is not credited at all; it is paid to you as a lump sum of cash.
9 min read · By RetireCiv Editorial · Updated June 20, 2026
Two kinds of leave, two different fates
Federal employees often lump their leave together, but sick and annual leave meet very different ends at retirement. Knowing which is which changes how you manage both in your final years.
Unused sick leave is converted into extra creditable service. OPM adds it to your years of service when it computes your pension, so a big sick-leave balance means a bigger annuity for life.
Unused annual leave goes the other way. It is never added to your service. Instead, you are paid a lump sum of cash for it when you separate, based on your pay rate.
So one balance boosts your monthly pension forever, and the other becomes a one-time check. The map below shows where each one lands.
One balance boosts your monthly pension for life. The other becomes a one-time check.
Does my unused sick leave increase my FERS pension?
Yes. Unused sick leave is converted to extra creditable service and added to your years of service when OPM computes your annuity. More years in the formula means a higher pension for the rest of your life. It is not paid out as cash; its whole value is the boost to your monthly check.
What happens to my unused annual leave?
It is paid to you as a lump sum. When you separate, OPM pays you for your unused annual leave at your hourly rate of pay. It does not add to your service or your pension. Think of it as a final paycheck for hours you earned but never took.
Why are sick and annual leave treated so differently?
The rules reflect what each type of leave is for. Sick leave is meant to protect you while working, so unused hours reward your service by adding to the pension. Annual leave is earned time off, so unused hours are simply paid back to you in cash. The result is one boosts the pension, the other is a check.
Sick leave becomes service credit
Under FERS, your unused sick leave is a real asset, not a use-it-or-lose-it balance. It converts to additional creditable service when you retire.
The credit is generous. For retirements on or after January 1, 2014, 100 percent of your unused sick leave counts. Every hour you banked is added to your service, with nothing held back.
That extra service flows straight into the pension formula. Your annuity is your High-3 times your multiplier times your years of service, and sick leave makes those years a little longer.
There is a reason this rewards good habits. An employee who rarely burned sick leave can add months, sometimes more than a year, of service at retirement, simply by having saved it.
How much of my sick leave counts under FERS?
All of it. For FERS retirements on or after January 1, 2014, 100 percent of your unused sick leave is credited toward your service in the pension computation. Earlier rules credited only part of it, but that phase-in is over. Today every unused hour you carry into retirement adds to your creditable service.
Does sick leave get paid out like annual leave?
No. Sick leave is never paid as cash. Its entire value at retirement is the service credit it adds to your pension. That is why an employee planning to retire generally should not burn through a sick-leave balance in the final stretch: doing so trades a permanent pension boost for nothing.
What if I leave federal service without retiring?
Then the sick-leave credit is lost. The conversion to service applies only when you retire on an immediate annuity. If you resign or take a deferred retirement, your unused sick leave is forfeited and adds nothing to your pension. The credit rewards staying through to retirement.
The conversion: 2,087 hours is a year
The conversion runs on a fixed schedule. A full work year is 2,087 hours, and 174 hours of sick leave equal one month of service credit. OPM publishes a chart that turns any hour balance into years, months, and days.
Walk through an example. Say a federal employee named Ray retires with an example 1,044 hours of unused sick leave. Divided by 174, that is six months of extra service credit added to his pension. (Figures are illustrative; see our assumptions.)
Those months stack on top of your real service. The graphic shows the idea: your years of service form the base, and sick leave adds a slice on top, all of which the pension formula counts.
The credit is rounded down to whole months and days using the chart, so a balance is never wasted, but it also is not rounded up. Every 174 hours is another month of pension-boosting service.
How are sick-leave hours converted to service credit?
OPM uses a fixed chart based on a 2,087-hour work year. In round terms, 174 hours of sick leave equal one month of additional service credit. Your full balance is converted to years, months, and days, then added to your service for the pension computation. The chart rounds to whole days, so almost none of a balance is wasted.
How much pension is a year of sick leave worth?
Roughly 2,087 hours of sick leave add a full year of service. In the FERS formula, an extra year is your High-3 times your multiplier, often about 1 percent of your High-3 in additional annuity, every year for life. A large sick-leave balance can add a meaningful, permanent amount to your monthly check.
Is the sick-leave credit rounded up or down?
It is converted precisely to years, months, and days using OPM’s chart, then any leftover partial day is dropped. So the credit is effectively rounded down to whole days, not up. You get credit for nearly all of your balance, but you cannot round a small balance up to a full month. Every 174 hours is one clean month.
What sick-leave credit does not do
Sick-leave credit is powerful, but it has firm limits. It boosts the size of your pension, and that is all. It cannot help you reach retirement sooner.
It does not count toward eligibility. The law bars sick leave from establishing your right to an annuity, so it cannot get you to the years of service you need to retire. You must already qualify on your real service first.
It does not count in your High-3 either. Sick leave is excluded from the average-salary calculation, so it never changes the salary figure your pension is built on. It only lengthens the years term.
And as covered earlier, it applies only if you retire. Put together, sick leave makes a pension you already qualify for a bit larger, but it cannot create eligibility you have not earned.
Does sick leave count toward retirement eligibility?
No. Sick leave cannot be used to establish title to an annuity, meaning it does not count toward the years of service you need to be eligible to retire. You have to reach your eligibility milestone, such as 30 years at your MRA, on actual service. Sick leave only adds to the computation after you already qualify.
Does sick leave change my High-3?
No. Unused sick leave is excluded from the average-salary computation, so it has no effect on your High-3. It does not represent pay, so it cannot raise the salary figure. Sick leave works on only one part of the formula: it lengthens your years of service, leaving your High-3 untouched.
Can sick leave help me retire earlier?
Not directly. Because it does not count toward eligibility, sick leave cannot move up the date you become eligible to retire. It also is not credited unless you retire on an immediate annuity. Its value is entirely in making the pension you have already qualified for larger, not in getting you to the finish line sooner.
Annual leave is paid as cash
Annual leave follows a completely different path. At separation, OPM pays you a lump sum for your unused annual leave, calculated at your hourly rate of pay.
The payment projects forward. It generally equals the pay you would have received if you had stayed on the job and used the leave, so a final raise or locality bump can be reflected in it.
There is a ceiling to watch. Most employees can carry over only 240 hours of annual leave from one leave year to the next, and anything above that "use-or-lose" limit is forfeited if not used in time.
The table sums up the contrast. Sick and annual leave differ on every line that matters: one builds your pension, the other pays you cash.
Sick leave vs. annual leave at retirement
| At retirement | Sick leave | Annual leave |
|---|---|---|
| Boosts your pension | Yes, as service credit | No |
| Paid as cash | No | Yes, a lump sum |
| Counts toward eligibility | No | No |
| Has a use-or-lose cap | No | Yes, the carryover limit |
How is my unused annual leave paid at retirement?
As a single lump sum. OPM pays you for your unused annual leave at your hourly rate when you separate, projecting the hours forward as if you had stayed and used them. It is a one-time cash payment, separate from your pension, and it does not add to your service.
Is there a limit on how much annual leave I can carry?
Yes. Most employees may carry over a maximum of 240 hours of annual leave into the next leave year. Hours above that "use-or-lose" ceiling are forfeited if you do not use them by the deadline. Higher limits apply to some overseas and senior positions. The lump-sum payout is based on the balance you actually carry to separation.
Can I boost my annual-leave payout before retiring?
Within the carryover rules, the payout reflects the balance you carry to separation and your pay rate at that time. Some retirees time their exit to capture accrued leave or a final raise. Unlike sick leave, though, saving annual leave does not help your pension; it only changes the size of the one-time check.
Planning your leave before retirement
The practical takeaway is simple: in your final years, treat sick and annual leave differently. They reward opposite behavior.
Protect your sick leave. Because every 174 hours adds a month of pension for life, burning sick leave shortly before retiring trades a permanent benefit for a few days off. Use it when you genuinely need it, not to run down the balance.
Manage annual leave to the cash. Since it pays out at your rate, keep an eye on the use-or-lose ceiling so you do not forfeit hours, and remember the payout reflects your pay at separation.
Leave is one piece of the retirement picture. To see how your service, including sick-leave credit, shapes your pension and your readiness, run your free readiness score.
Should I use up my sick leave before I retire?
Generally no, if you are close to retiring. Unused sick leave converts to service credit that raises your pension for life, so spending it down late usually costs more than it is worth. Use sick leave when you are genuinely sick, but avoid draining the balance just to use it. A large balance is a real retirement asset.
How should I handle annual leave near retirement?
Keep it within the carryover limit so you do not forfeit hours, and know that whatever you carry to separation is paid out in cash at your hourly rate. Some retirees time their departure to capture a final raise in the payout. Unlike sick leave, banking annual leave does not help your pension, only the size of the lump sum.
How do I see what my sick leave adds to my pension?
Model your full service, including the sick-leave credit, against your retirement target. Our free readiness score brings your pension, TSP, and Social Security together so you can see how more years of service, from real work or from sick leave, change your projected income. It turns the conversion into a concrete number.