How is unused sick leave converted to defined benefit OPEB treated in terms of accrued liabilities?

Unused sick leave converted to defined benefit Other Post-Employment Benefits (OPEB) is not accrued as part of compensated absences because it is treated differently than typical paid time off, such as vacation or annual leave.

When employees accrue sick leave, it often does not get paid out in the same manner as vacation days at separation from service. Instead, under defined benefit OPEB plans, unused sick leave can be converted into additional retirement benefits, contributing to future OPEB obligations rather than being recognized as an immediate liability. This distinction means that while sick leave can enhance OPEB benefits in the future, it does not fit within the typical expectation for compensated absences, which would be accounted for as liabilities that are owed to employees at their reporting dates.

Recognizing unused sick leave as an accrued liability would imply that the governmental entity has a current obligation to pay that amount out, which does not align with how OPEB liabilities are structured in terms of recognizing future benefits rather than current compensation. Therefore, it is clear that unused sick leave converted to defined benefit OPEB should not be accrued as part of compensated absences.