Some years have one extra pay period than most, learn how it impacts your federal benefits.
Thanks to the mathematical nature of a 365-day calendar year, and biweekly pay periods, every now and then there are 27, instead of 26 pay periods, in a single year. However, depending on what payroll service your agency utilizes, it’s not the same year for all agencies. You have to check with your HR department to find out when you’re next calendar year with 27 pay periods will be. Other than getting an additional paycheck in a year, the impact it has on federal benefits is minuscule, and is mostly handled on the back end. However, when it comes to TSP contributions and annual leave, there are some items federal employees need to consider.
Why It Occurs
There are 14 days per pay period and when you divide the number of days in a year (365.25 to account for leap years) by 14, the answer is slightly over 26. It is actually around 26.0892, and because of that .0892 remainder, which represents less than 10% of a single pay period, federal agencies experience a calendar year with 27 paychecks every 14 years or so, after all of the fractional periods have accumulated enough. But what year this occurs is not government-wide, and because it happens less than once per decade, is often overlooked.
If a federal employee is trying to get their full match from the government, while also contributing the maximum annual amount to their TSP, in a calendar year with 27 paychecks, they need to adjust the equation that calculates what amount is to be contributed each pay period. For most years, simply take the amount of the annual TSP contribution limit (plus the catch-up contribution limit, if they’re at least 50 years old) and divide it by 26. For the seldom years with an extra paycheck, the annual maximum TSP contribution amount is divided by 27.
The amount of annual leave earned each year is dependent on how many years of service a federal employee has under their belt:
|Years of Service||Biweekly Amount, Annual Leave||Annual Amount, Annual Leave|
|0-2||4 hours||104 hours|
|3-14||6.154 hours||160 hours|
|15+||8 hours||208 hours|
When there is an extra pay period, there is additional annual leave earned. Adding the middle column and the last column above would be the amount of annual leave accrued. (For instance, 208 + 8 additional hours = 216 for those with 15 years of service or more.) What does not change with an extra paycheck, in terms of annual leave, is the maximum carry-over amount allowed. 240 hours of annual leave is what can be carried over into the following calendar year no matter how many pay periods were in the prior year. This does mean if a fed retires at the end of one of these atypical years, they could possibly cash out with 456 hours of accrued annual leave instead of the usual maximum of 448, and this, in turn, boosts the lump sum they receive slightly.
Thinking about retiring from the federal government? Meet with a ChFEBC℠ (Chartered Federal Employee Benefits Consultant)
Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.