This file was prepared for electronic distribution by the inforM staff. Questions or comments should be directed to inform-editor@umail.umd.edu. Leave-Sharing Programs What Are Leave-Sharing Programs "When federal employees become severely ill, they can use both annual and sick leave and request up to thirty days of advanced sick leave from their agencies. Once all leave options are exhausted, unless they are eligible for disability retirement benefits, they may either request leave without pay or quit the government. In cases where constant care for a terminally ill child or spouse is necessary, the options are the same. The choices can be extremely difficult, and the financial impact of a major medical problem or family emergency without any income or health insurance coverage can be devastating for federal workers and their families. Leave sharing will provide a humanitarian solution to this problem by allowing employees to continue receiving both pay and benefits while attending to their own illness or that of a family member." -75 Legislative history for the Federal Employees Leave Sharing Act of 1988 With the above words, the U.S. Senate began its background explanation of why the Federal Employees Leave Sharing Act of 1988 was necessary. The Senate report went on to describe how "Federal employees have no short-term disability coverage as such and must rely on sick leave alone for short-term illnesses and the disability provisions [of the retirement systems] for long-term illnesses." Given this situation, the Senate report concluded that, "In the absence of a short-term disability plan, leave sharing will close the gap in the federal worker's current disability insurance coverage for personal medical emergencies. It can also be used to allow employees to attend to seriously or terminally ill spouses and dependents." When passed, the Federal Employees Leave Sharing Act actually included two different leave-sharing programs--the main one being the leave-transfer program, and the second one being a limited pilot program involving leave banks. Both of these programs were made temporary (sunsetting in 1993), 5 years after the date the act was passed. The heart of the leave-transfer initiative is its direction to OPM to establish a program under which, if one employee has a medical emergency, other employees can donate their annual leave to that person, so that he or she does not suffer a loss of income during the emergency. As used in this law, a "medical emergency" is defined to mean "a medical condition of an employee or a family member of an employee that is likely to require the prolonged absence of such employee from duty and to result in a substantial loss of income to such employee because of the unavailability of paid leave." -76 Turning to the leave bank program, it differs from leave-transfer in that employees gain protection against emergency leave needs by participating in an insurance-type arrangement, rather than depending on the generosity of fellow employees. Under this approach, Federal employees can insure themselves against personal or family medical emergencies by setting aside a minimum amount of their own leave into the leave bank in advance of any emergency. Then, if the need should arise and they have exhausted their own leave resources, they can request a grant from the "bank." Assuming that the leave bank's stockpile of leave has not been depleted, they receive the leave they need. The law directs OPM to establish a demonstration project to test leave banks in at least three agencies. Impact of Programs In its questionnaire, the Board posed several queries to agencies about the leave bank and leave-transfer programs. While the responses we received were incomplete, the data we did receive were still quite impressive--for example, over 22,000 employees have donated leave to their coworkers. Over 8,000 employees were the recipients of this generosity, using an average of 4 to 5 weeks of donated leave each. From these results, it is apparent that there is a substantial need among Federal employees for some form of short-term disability coverage beyond current sick leave provisions. Similarly, it is apparent that Federal employees feel a responsibility to help coworkers faced with emergency medical problems, and have responded with heart-warming generosity. According to Department of Army calculations, almost 500,000 hours of annual leave have been donated in that department alone! From the point of view of agencies, this arrangement appears quite workable. As table 9 below shows, almost all agencies felt that the leave-transfer program adequately meets employee needs for short-term disability insurance: Table 9 Number of agencies choosing the indicated response to: "How adequately does the leave transfer program serve as a short-term disability insurance fringe benefit for your agency's employees?" 11 Very adequately 9 Moderately 0 Minimally 0 Not at all 2 Don't know/Can't judge Cost Issues The leave-transfer program has been structured so that the net cost to the Government should be very small. Under some scenarios, in fact, it could be almost free (other than for administrative overhead). This is because the Government is relying on the generosity of some of its employees, in order to provide a benefit to certain other employees, rather than paying for the program itself. The way it has done this is to impose limitations on what leave can be donated. Specifically: * Restrictions are applied in the amount and timing of annual leave donations, to minimize the possibility that employees will donate leave that they would have forfeited anyway (i.e., "use or lose" leave); and * Leave donors are prohibited from donating sick leave, which saves the Government money if the leave donor never becomes sick enough to use that leave for him or her self. This is because sick leave cannot be converted into cash when an employee resigns from Government service (nor, except for Civil Service Retirement System members, do employees get any credit in retirement computations for unused sick leave), while annual leave can be converted to cash. Under an earlier limited experiment with a temporary leave-transfer program in 1987, donations of annual leave and sick leave were permitted. In this experiment, which involved a total of three employees Governmentwide, several thousand Federal employees offered to donate leave to the needy individuals. According to OPM, in the 1987 experiment: ... when leave donors were given the choice of donating annual or sick leave, the majority of donors chose to donate sick leave... The results support precluding the donation of sick leave under a voluntary leave transfer program, given that the transfer of sick leave under such a program would result in a significant net cost to the Government. The cost of including sick leave in a leave transfer program is a consequence of the fact that the work force does not use much of the sick leave available to it. In addition, more than 72 percent of the total amount of annual leave donated in all three cases was in excess of the employee's annual leave ceiling at the time of donation. It is not possible to determine how much of this leave actually would have been forfeited at the end of the leave year. Nevertheless, the use by a leave recipient of any annual leave that otherwise would not have been used by the leave donor represents a net cost to the Government. The result convinces us of the need for a limitation on the donation of annual leave that otherwise would become subject to forfeiture. -77 From our perspective, leave-transfer benefits represent something of a "mixed blessing." On the one hand, it is evident that Federal employees want and need additional short-term disability protection. It is also clear that agencies view the leave-transfer program as a success story, and are happy to have it as part of their benefits package. More-over, leave-transfer has the added benefit of being available to any employee who has a family emergency, whether anticipatable or not. This contrasts with leave banks, which only benefit those who have the foresight to join them ahead of time. On the other hand, there are two concerns which make it less clear to us that leave-transfer is the best way to provide this protection. First, for employees who may need additional leave in a time of personal or family difficulty, leave-transfer offers no reliability--while their fellow employees would probably offer leave to them, they have no guarantee that this will happen. Thus, leave-transfer is potentially conditional, or situational, in operation. Our second concern centers around the appropriateness of the funding mechanism for leave-transfer. While the Federal Government is not unique in offering a leave-transfer program, it still seems unusual for the country's largest employer to be offering a fringe benefit to some of its employees which is funded by other employees. We wonder whether this approach to short-term disability protection really represents the image that the Federal Government wants to present to current and prospective employees. Given that agencies apparently did not share these concerns (as none raised them in their questionnaire responses), we are hesitant to overemphasize the concerns relative to the benefits which leave- transfer is generating. Therefore, we believe a balanced perspective on leave-transfer is appropriate--as a minimum, as long as agencies and their employees are happy, there need be no rush to replace a "free" (albeit potentially unreliable) benefit with one which would cost the Government money. Looking ahead, a more proactive response could involve development of some type of short-term disability insurance benefit which the Government would contract for (in order to secure group rates), but which the employees would pay for all the costs of the insurance. This might supplement existing leave-sharing programs, since disability insurance covering an employee would probably not protect against medical emergencies affecting other family members, and according to OPM, roughly 17 percent of leave-transfer requests have involved family members. Finally, if at some point competitive job market pressures dictate an employer-funded benefit, the Government can always act to provide whatever may be needed at that time.