Milwaukee County’s sick-day accrual atypical
Are benefits offered by Milwaukee County really comparable to the private sector?
Not quite. Even though County Executive Tom Ament suggested the similarity when discussing the county’s generous pay-out provision for unused sick leave – one aspect of the current turmoil stemming from revelations of potentially huge pension benefit payouts for county employees.
You’re not alone if your firm doesn’t pay retiring employees for all the sick days they didn’t take, a local benefits expers says. Most firms aren’t as generous as government agencies when it comes to such benefits. And even among government agencies, Milwaukee County’s new plans are seen as generous, the expert says.
Ament’s comments on the supposed commonality of sick leave payouts came at a recent press conference, where he off-handedly remarked that the county’s new sick pay accruals were similar to what’s done in the private sector.
The comment was meant to dismiss, to some extent, the payouts due to long-time county employees who are allowed to carry over unused sick days ad infinitum.
Ament’s belief doesn’t jibe with what local and national benefits experts have encountered in their dealings with local and national private-sector companies.
Milwaukee County employees used to be able to get paid for 400 hours of unused sick time and 1/16th of any hours beyond that. Under the new rules passed in November 2000, employees hired before 1994 (excluding elected officials) may collect a lump sum for 100% of their accrued sick time at the rate they were earning when they retire. According to calculations made by the Milwaukee Journal Sentinel, some employees would receive in excess of $100,000.
And unlike the much ballyhooed pension payments, the sick-pay accruals would come out of each department’s current budget. More than 100 county workers have checked into retiring now with the thought of getting the generous benefits before the county board can change the package. The resulting retirements could force county departments to operate with short staffs meaning diminished service to county residents or increased property taxes to cover shortfalls or both.
New wrinkle
On Jan. 22, the Internal Revenue Service ruled that Milwaukee County could pay sick-leave accruals through its pension fund if recipients choose to roll the money over into individual retirement accounts. No income taxes would be due on the money until withdrawn from the accounts and the employees and county would not have to pay Social Security taxes on the accruals, which have been estimated to be in excess of $16 million dollars.
The county board of supervisors would have to amend an ordinance to make the IRA-rollover option feasible. The county asked the IRS for the ruling in September 2001.
The real world
In the private sector, employers in Wisconsin rarely offer the ability to carry over unused sick days. Most companies have a "use-it-or-lose-it" policy.
"Certainly there are very few, if any [sick pay plans], that I’m aware of — I would say none that I’m aware of — that would act in the same way that’s been described at the county in the private sector," one local benefits expert, whose company handles businesses from 10 employees to the largest in the state, said. "We have other public sector clients that do similar things, but in the private sector, it’s unheard of.
"Typically you use your sick days or you forfeit them. And the most they’ll let you do, typically, is maybe roll over five days in a year," the executive continued. "But that’s five days at any given time that you can roll over from year to year — you can’t keep building on that five — it’s just a total of five in any given year. But that’s even outside the norm. The norm on sick days is you use ’em or you lose ’em."
And the public sector clients have nothing close to Milwaukee County’s plan, the executive clarified. In the public sector domain, which includes state and local governments and school districts, "I think they will allow the accrual of days, but I think most of them have a cap that is lower than what you’re seeing out at the county."
Employee benefits giant Hewitt Associates, of Lincolnshire, Ill., completed a study in fall of 2000 titled "Managing Time Off 2000-2001" that confirms that the majority of companies surveyed (all termed as "large companies" by Hewitt) also have a use-it-or-lose-it policy on sick days.
Twenty-two percent of the 520 responding companies provide a specific number of days; 14% offered discretionary days; 10% provide sick days based on length of service; 8% had sick days covered under their short-term disability plans; 7% had a paid-time-off bank (e.g., personal days and sick days are lumped together); 5% of the companies had no sick days; 3% had unlimited sick days; and 5% had sick days allotted based on the medical condition of the employee. Twenty-six percent of the surveyed companies said they accrued a specific number of days per year.
The same Hewitt study revealed that the average number of accrued sick days was 9.3 with a maximum of 18 per year. For those companies providing a specific number of sick days per year, the average was 10.8 with a maximum of 180.
February 1, 2002 Small Business Times, Milwaukee
