Sick and Annual Leave for Active Employees
The information on this webpage applies to those employees hired before September 1, 2022. Those hired after September 1, 2022 (Group 4), cannot use unused sick and unused annual leave for retirement or insurance eligibility.
If you retire directly from state employment, you can get service credit for both your unused sick and annual leave. ERS figures both of these accounts separately. The first 160 hours of leave gives you one month of service credit. Additional fractions of 160 hours are counted as full months of service credit.
You can earn more than 12 months of unused sick and annual leave, but this gives you an idea of how many months you can get. Your online retirement estimator includes sick and annual leave. Most agencies report this information to ERS so that we can figure it into your estimate. If your agency doesn’t report unused sick and annual leave to ERS, contact us to speak to a retirement counselor for a better idea of your retirement monthly payment (annuity) and eligibility.
Getting paid for your annual leave
A perk of retiring directly from state employment is, you can get service credit for your unused sick and annual leave. Your unused sick leave is not paid at retirement, regardless of what retirement group you are in. You can use it towards your retirement eligibility and annuity, depending on your retirement group. You’ll want to contact your benefits coordinator for information on receiving this payment. If you get paid in a lump sum, a percentage of the payment will be taken out for taxes. Some soon-to-be retirees have a two- or three-month supply of annual leave. Remember, taking this much money upfront can push you into a higher tax bracket for the year, depending on your situation. A tax advisor can give you more information.
If you’re not retiring directly from state employment, you won’t get credit for any annual and sick leave you accumulated while working for the State of Texas.
| Hours of leave | Months of service credit |
|---|---|
| 160 hours | 1 month |
| 161-320 hours | 2 months |
| 321-480 hours | 3 months |
| 481-640 hours | 4 months |
| 641-800 hours | 5 months |
| 801-960 hours | 6 months |
| 961-1,120 hours | 7 months |
| 1,121-1,280 hours | 8 months |
| 1,281-1,440 hours | 9 months |
| 1,441-1,600 hours | 10 months |
| 1,601-1,760 hours | 11 months |
| 1,761-1,920 hours | 12 months |
Save taxes on an annual leave lump sum payment
You may defer all or part of your annual leave lump-sum payment into a Texa$averSM 401(k) / 457 Program account when you retire or leave state employment. You won’t pay income tax on that money until you withdraw it. Social Security and Medicare taxes will still be deducted. You can open a Texa$aver account while you’re employed by the State, but you can also open one right before you retire. That way, you can put it in a tax-free account and save on taxes.
Tell your benefits coordinator, HR office and/or Payroll office that you want to defer your annual leave to your Texa$aver account when you go through the exit process. HHS Enterprise employees should contact the HHS Employee Service Center.
Active TRS members transferring service to ERS for retirement
You’re not eligible to convert your annual and sick leave to ERS service credit because you wouldn’t be retiring from a position in an ERS agency. Your survivors, however, can use your sick and annual leave to determine eligibility for the Death Benefit Plan in the event of your death (ERS retirement Groups 1, 2, and 3).
Using unused sick and annual leave in your retirement
Employees hired before September 1, 2009 can use unused sick and annual leave to reach retirement eligibility and increase their monthly retirement payment.
Employees hired September 1, 2009 through August 31, 2013, can use unused sick and annual leave towards their monthly retirement payment but not eligibility.
Employees hired September 1, 2013 through August 31, 2022, can use unused sick leave towards their retirement monthly payment and not retirement eligibility. Unused annual leave can be used either towards their monthly retirement payment or received in a lump-sum payment from their agency.
Review the chart below to see how your unused leave work towards your retirement.
| Retirement Group | Apply unused leave to retirement eligibility? | Apply unused leave to increase amount of annuity? | Receive unused leave as lump-sum payout? |
|---|---|---|---|
| Group 1 | Sick leave: Yes Annual leave: Yes | Sick leave: Yes Annual leave: Yes | Sick leave: No Annual leave: Yes |
| Group 2 | Sick leave: No Annual leave: No | Sick leave: Yes Annual leave: Yes | Sick leave: No Annual leave: Yes |
| Group 3 | Sick leave: No Annual leave: No | Sick leave: Yes Annual leave: Yes, if you do not choose to get lump-sum payment | Sick leave: No Annual leave: Yes, if you do not choose to apply it to increasing your monthly annuity payment |
Example #1 for an employee hired before September 1, 2009
Seth has 75 hours of unused annual leave and 225 hours of sick leave.
- 225 hours of unused sick leave divided by 160 = 1.406; rounds to 2
- 75 hours of unused annual leave is not enough for at least one month of service credit. He needs 160 hours for the first month of service credit.
- Seth will receive two months of service credit at retirement that will increase his annuity and help him meet retirement eligibility.
Example #2 for an employee hired September 1, 2009 through August 31, 2013
Susie has 322 hours of unused annual leave and 159 hours of sick leave.
- 159 hours of unused sick leave is not enough for at least one month of service credit. She needs 160 hours for the first month of service credit.
- 322 hours of unused annual leave divided by 160 = 2.013; rounds to 3.
- Susie will receive three months of service credit at retirement that will increase her annuity and help her meet retirement eligibility.
Example #3 for an employee hired September 1, 2013 through August 31, 2022
Sam has 160 hours of unused sick leave and 200 hours of unused annual leave.
- 160 hours of unused sick leave will give him one month of service credit. The one month will be used to increase his annuity.
- 200 hours of unused annual leave is divided by 160 = 1.25; rounds to 2.
- Sam will receive three months of service credit at retirement, if he chooses not to receive a lump sum payment for his unused annual leave. If he chooses to receive a lump sum payment for his annual leave, he will have one month of service credit at retirement.