Bill Proposes Turning Unused Sick Leave Into Medical Savings Benefits

By: Eoghan Olkeriil Ngirudelsang

NGERULMUD, Palau (Jan. 19, 2026) — A bill introduced in the Senate last week would allow government employees to convert a portion of their unused sick leave into healthcare benefits by crediting its value to their Medical Savings Fund upon retirement.

Senate Bill No. 12-48, introduced Tuesday by Sen. Kuartei, proposes amending Title 33 of the Palau National Code, which governs public employment. The measure would allow 50% of the value of accumulated sick leave to be credited to a retiring employee’s Medical Savings Account, to be used for healthcare costs such as medical bills or prescription medicines.

Kuartei said the bill is intended to reward productivity and encourage healthy lifestyles among government workers.

“This bill is to incentivize and reward productivity and those government employees who take care of their health,” Kuartei said during the session.

Under current regulations, government employees earn sick leave that accumulates over time if unused. However, any remaining sick leave is forfeited upon retirement, with no compensation or payout provided to the employee.

Kuartei noted that the current system can disadvantage employees who rarely take sick leave. He offered an example in which one employee may frequently take sick leave and still receive full daily wages, while another employee who maintains good health accumulates sick leave that ultimately expires without benefit.

“This is an earned benefit,” Kuartei said. “Employees should receive some form of benefit from sick leaves at the end of their career.”

He emphasized that while the proposal does not provide direct monetary compensation, the credited value would still benefit retirees by helping cover healthcare expenses through their Medical Savings Fund.

During the Senate session, Sen. Melairei proposed expanding the bill to include employees who retire due to medical reasons, rather than limiting eligibility to those who retire after reaching the mandatory age.

Sen. Whipps also suggested extending the concept to the private sector, allowing businesses with earned sick leave policies to participate in a similar program if they choose.

Kuartei explained that the proposal limits the credit to 50% of the value of unused sick leave to prevent potential abuse of the policy, such as employees continuing to work while ill in order to accumulate maximum benefits.

The bill passed its first reading and will proceed through the legislative process for further consideration.

Reader Reaction | Have Your Say

A Senate proposal would allow government employees to convert 50% of unused sick leave into Medical Savings Fund credits upon retirement, rather than losing those earned benefits.

Lawmakers say the measure could reward healthy work habits and ensure sick leave benefits are used for healthcare. Others raise questions about fairness, workplace health, and long-term costs.

What do you think?

• Should unused sick leave be treated as an earned benefit rather than a use-it-or-lose-it policy?
  
  
• Is crediting 50% of sick leave value to a Medical Savings Fund the right balance, or should it be higher or lower?
  
  
• Should employees who retire for medical reasons also qualify for this benefit?
  
  
• Should similar programs be offered in the private sector, or limited to government employment?
  
  
• Could this policy encourage healthier lifestyles — or create pressure to work while sick?
  
  

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