[Federal Register: December 6, 2004 (Volume 69, Number 233)]
[Rules and Regulations]
[Page 70355-70367]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de04-1]
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Rules and Regulations
Federal Register
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[[Page 70355]]
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Parts 317, 352, 359, 451, 530, 531, 534, and 575
RIN 3206-AK34
Senior Executive Service Pay and Performance Awards; Aggregate
Limitation on Pay
AGENCY: Office of Personnel Management.
ACTION: Final rule.
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SUMMARY: The Office of Personnel Management (OPM) is issuing final
regulations to establish a performance-based pay system for the Senior
Executive Service (SES) and a higher aggregate limitation on pay for
SES members and employees in senior-level and scientific or
professional positions. These regulations prescribe the criteria for
the administration of rates of basic pay and performance awards under
the SES performance-based pay system and the rules for applying the
aggregate limitation on pay.
DATES: The regulations are effective on December 6, 2004.
FOR FURTHER INFORMATION CONTACT: Jo Ann Perrini by telephone at (202)
606-2858; by FAX at (202) 606-0824; or by e-mail at
pay-performance-policy@opm.gov.
SUPPLEMENTARY INFORMATION: The Office of Personnel Management (OPM) is
issuing final regulations to establish a performance-based pay system
for the Senior Executive Service (SES) and a higher aggregate
limitation on pay for SES members and employees in senior-level (SL)
and scientific or professional (ST) positions. In these regulations, we
interchangeably use the terms ``SES members'' and ``senior executives''
to mean members of the Senior Executive Service. In addition, we refer
to SL/ST employees as ``senior professionals.''
The new SES pay system assures a clear and direct linkage between
performance and pay, a cornerstone of the President's Management
Agenda. For those agencies with senior executive performance appraisal
systems certified under 5 CFR part 430, subpart D, the new SES pay band
provides a broad range of rates (a minimum rate of $104,927 and a
maximum rate of $158,100 in 2004) within which agencies may set pay
based on the senior executive's individual performance, contribution to
the agency's performance, or both, as determined under a rigorous
performance management system. In addition, agencies with applicable
certified performance appraisal systems may apply a higher aggregate
limitation on pay up to the Vice President's salary ($203,000 in 2004)
for their senior executives and senior professionals.
On January 13, 2004, OPM issued interim regulations to establish
the new SES performance-based pay system (69 FR 2048). The interim
regulations are available at http://frwebgate1.access. gpo.gov/cgi-bin/
waisgate.cgi? WAISdocID=764393445783+15+0+0& WAISaction=retrieve. In
those interim regulations, OPM established the structure of the SES
rate range, rules for conversion to the new pay system, and the
criteria for providing pay adjustments to SES members on or after the
first pay period beginning on or after January 1, 2004 (January 11,
2004). The 60-day comment period ended on March 15, 2004. We received
comments from two agencies, one individual, and an executive
association.
On July 29, 2004, OPM issued proposed regulations to prescribe
rules for establishing and adjusting SES rates of basic pay, paying
performance awards to senior executives, and applying the aggregate
limitation on pay if an agency receives certification of an applicable
performance appraisal system under 5 U.S.C. 5307(d) (69 FR 45536). The
proposed regulations are available at http://frwebgate2.
access.gpo.gov/cgi-bin/waisgate.cgi?WAISdocID= 764180215293+2+0+0&
WAISaction=retrieve. The 30-day comment period ended on August 30,
2004. We received comments from a Member of Congress, six Federal
agencies, two individuals, and an executive association.
In this final rule document, OPM will address the comments received
on both the interim regulations on conversion to the SES pay system and
the proposed regulations on the administration of SES pay and
performance awards. We received no comments on the proposed changes in
the regulations on the aggregate limitation on pay (5 CFR part 531,
subpart B).
Minimum SES Rate of Basic Pay
Under Sec. 534.406(a) of the interim regulations (and Sec.
534.403(a) of the proposed regulations), OPM established the minimum
rate of basic pay in the SES rate range at an amount equal to the
minimum rate of basic pay under 5 U.S.C. 5376 for senior-level
positions (excluding locality-based comparability payments under 5
U.S.C. 5304). One commenter recommended that OPM establish a higher
minimum rate of basic pay in the SES rate range, since the current
minimum rate ($104,927) is less than the rate for GS-15, step 3
(including locality pay), in the Washington, DC, area. The commenter is
concerned that the current minimum SES rate of basic pay does not take
into account that SES members are no longer entitled to locality pay.
In addition, the commenter suggested that setting the minimum rate at
this low rate does not give an agency the latitude it needs to set pay
upon appointment to the SES at a level that is commensurate with the
duties and responsibilities of an SES position. Under 5 U.S.C. 5382,
the minimum rate of basic pay for the SES rate range may not be less
than the minimum rate of basic pay (excluding locality pay) payable
under 5 U.S.C. 5376. In establishing the new SES open-range pay band,
OPM determined that it would be most beneficial to agencies and
employees to ensure the widest rate range possible under the new
performance-based pay system. Agencies may choose to consider the
applicable locality payment when setting the rate of basic pay of a
senior executive upon initial appointment to the SES.
Prohibition on Reducing an SES Member's Rate of Basic Pay for 1 Year
Consistent with section 1125(c)(2) of the National Defense
Authorization Act for Fiscal year 2004 (Public Law 108-136, November
24, 2003), Sec. 534.406(b)(2) of the interim
[[Page 70356]]
regulations (and Sec. 534.406(b) of the proposed regulations)
prohibits agencies from reducing a senior executive's rate of basic
pay, including any applicable locality payment, below the rate that was
in effect on November 24, 2003, for 12 months following the effective
date of the new SES pay system (January 11, 2004). A commenter believes
OPM's regulations establish a more restrictive limitation on reductions
in SES rates of pay than does the controlling statute. The commenter
believes section 1125(c)(2) prohibited only reductions in the discrete
SES pay levels (ES-1, ES-2, etc.) and applicable locality payments, but
did not prohibit reductions in pay based on performance or conduct. We
disagree. Section 1125(c)(2) specifically prohibits any reduction in
pay resulting from the amendments made by section 1125(a), which
establishes the minimum and maximum rates of the SES rate range and
requires each senior executive to be paid at one of the rates within
that rate range. Section 1125(c)(2) provides that the rates of pay for
senior executives under the new performance-based SES pay system, which
became effective on January 11, 2004, may not be reduced for 1 year
after that date.
Conversion to New SES Pay System
Section 534.406(b)(3) of the interim regulations (and Sec.
534.406(c) of the proposed regulations) states that only certain SES
members in positions that have geographic mobility requirements and who
are assigned outside the contiguous 48 States and the District of
Columbia to a position overseas or in Alaska, Hawaii, Guam and the
Commonwealth of the Northern Mariana Islands, Puerto Rico, the U.S.
Virgin Islands, or other U.S. territories and possessions as of the
first day of the first pay period beginning on or after January 1,
2004, will be converted to a new rate of basic pay that equals their
current rate of basic pay, plus the amount of locality pay authorized
for the applicable locality pay area upon reassignment to a position in
the 48 contiguous States or the District of Columbia. Any pay increase
resulting from conversion to the new SES pay system for these SES
members is not considered a pay adjustment under Sec. 534.404(c) for
the purpose of limiting an agency's flexibility to adjust pay more than
once during a 12-month period.
Two commenters requested that OPM revise Sec. 534.406(b)(3) to
remove the limitation that only certain SES members subject to a
geographic mobility requirement may receive this entitlement to a pay
increase upon reassignment to the 48 contiguous States or the District
of Columbia. The commenters believe the limitation unfairly penalizes
employees who accepted an assignment outside the 48 contiguous States
without a geographic mobility requirement, since all SES members, by
definition, must be mobile and accept reassignment upon management
request. We agree and have revised Sec. 534.406(b)(3) (now Sec.
534.406(c)), accordingly. Since this rule applies to any reassignment
to the 48 contiguous States effective on the first day of the first pay
period beginning on or after January 1, 2004 (January 11, 2004),
agencies may need to correct the rate of basic pay for those SES
members who were reassigned to the 48 contiguous States after January
11, 2004, and before the effective date of these final SES pay
regulations.
We also have revised Sec. 534.406(c) to clarify that the
conversion rule applies only for the senior executive's initial
reassignment to the 48 contiguous States, not for each subsequent
reassignment to the 48 States, and we have deleted an unnecessary
reference to Sec. 534.403(a)(2).
Adjusting SES Rates of Pay
Several commenters recommended that OPM revise the regulations to
ensure that those senior executives performing at the fully successful
or higher level receive a periodic increase in pay to account for their
good performance and to protect their salaries against inflation. The
commenters noted that the removal of locality pay for senior executives
eliminated any ability to account for market forces or comparability as
part of the pay-setting process for senior executives. The commenters
fully support the notion that the highest performers should receive the
highest salaries, but believe the new SES pay system must include
consideration of economic realities to allow employees who are
successfully meeting their performance expectations to maintain their
relative position in the rate range.
To address these concerns, we have added a new Sec. 534.404(b)(4)
to allow an agency to increase the rate of basic pay of a senior
executive who meets or exceeds his or her performance expectations on
the effective date of an increase in the minimum or maximum rate of
basic pay of the SES rate range by an amount that does not exceed the
amount necessary to maintain the senior executive's relative position
in the SES rate range, with the following two exceptions. First, a pay
increase may not be provided to a senior executive whose rate of basic
pay is at or below the rate for level III of the Executive Schedule if
such an increase would cause the senior executive's rate of basic pay
to exceed the rate for level III of the Executive Schedule unless the
senior executive has received an annual summary rating of outstanding
for the most recently completed appraisal period and the agency head or
designee approves the increase. Second, a pay increase may not be
provided to a senior executive whose rate of basic pay is above the
rate for level III of the Executive Schedule unless the senior
executive has received an annual summary rating of outstanding for the
most recently completed appraisal period and the agency head or
designee approves the increase. However, in the case of a senior
executive whose rate of basic pay is above the rate for level III of
the Executive Schedule and who has been rated below outstanding, but
above fully successful, for the most recently completed appraisal
period, the agency head or designee may approve such a pay increase in
limited circumstances, such as for an exceptionally meritorious
accomplishment. A pay increase made to allow a senior executive to
maintain his or her relative position in the rate range is not an
entitlement and is not considered a pay adjustment for the purpose of
applying the 12-month rule in Sec. 534.404(c).
A commenter recommended that OPM allow agencies to delegate
throughout the organization (e.g., to bureau heads) the authority to
approve rates of basic pay higher than the rate for level III of the
Executive Schedule and to make exceptions to the 12-month rule. We
disagree. We believe it is necessary to ensure that the agency official
who is held responsible for the assessment of an agency's performance
and oversight of an agency's senior executive appraisal process, as
prescribed in 5 CFR 430.404(a)(5) and (6), should also be held
responsible for ensuring that pay determinations reflect and recognize
both individual and organizational performance.
Additional Increases in Rates for the Executive Schedule
In the Preamble to the proposed regulations, OPM solicited the
views of commenters on a proposal to allow an additional pay increase
during a 12-month period to address situations where the rates of pay
for levels II and III of the Executive Schedule are increased after an
agency has already granted pay increases to its senior executives
following the SES performance appraisal period. Agencies would be
permitted, at their discretion, to grant an additional pay increase to
a
[[Page 70357]]
senior executive whose rate of basic pay is equivalent to the maximum
rate for the applicable SES rate range (i.e., level II or level III of
the Executive Schedule) when the applicable maximum rate is increased,
and the pay increase would not be considered a pay adjustment for the
purpose of applying the 12-month rule. Seven commenters fully supported
this proposal. One commenter objected to this proposal because it did
not promote pay differentiation based on performance. We disagree with
this objection since the proposed additional pay increase is directly
associated with the initial pay increase, which was based on
performance. We have added a new Sec. 534.404(f)(2) to allow an agency
to provide an additional pay increase to a senior executive whose rate
of basic pay is equal to the rate for level II or III when the
applicable maximum rate is increased and becomes effective after an
agency has already granted a pay increase to the senior executive.
Federal agencies recommended that OPM clarify and simplify the
rules for increasing a senior executive's rate of basic pay as a result
of increases in the rates of pay for the Executive Schedule. If an
agency believes an additional pay increase is warranted for a senior
executive as a result of an increase in the rates of pay for the
Executive Schedule under Sec. 534.404(f)(1) (when there is an
additional increase in the rates for the Executive Schedule in a
calendar year and that increase becomes effective on the same date as
prescribed in 5 U.S.C. 5318) and Sec. 534.404(f)(2) (when there is an
increase in the rates of pay for the Executive Schedule after an agency
has already granted pay increases to its senior executives following
the performance appraisal period), the agency may grant such a pay
increase without regard to whether the employee had received a pay
adjustment during the previous 12-month period. We have revised Sec.
534.404(c)(3) to state that any determination to provide an additional
pay increase under Sec. 534.404(f) is not considered a pay adjustment
for the purpose of applying the 12-month rule in Sec. 534.404(c).
Setting Pay Upon Initial Appointment to the SES
One commenter recommended that agencies be required to provide
senior executives with a pay increase upon initial appointment to the
SES. The commenter believes that entry into the SES is a distinct honor
and should guarantee a pay raise for those joining this elite group of
civil servants. We believe OPM's regulations provide agencies with
broad discretionary authority to set pay upon initial appointment to
the SES. Under Sec. 534.404(a), an agency may set the rate of basic
pay of a newly appointed SES member at any rate within the SES rate
range, subject to the limitation on setting pay above the rate for
level III of the Executive Schedule. The agency must determine the
appropriate rate of pay based on the nature and quality of the
individual's experience, qualifications, and accomplishments as they
relate to the requirements of the SES position, as well as the
individual's current responsibilities.
Setting Pay Upon a Break in Service
Under Sec. 534.404(i)(1) of the proposed regulations, if a former
SES member has had a break in service of 30 days or less, the employing
agency must set his or her rate of basic pay upon reappointment to the
SES at a rate at least equal to the employee's former SES rate of basic
pay. Two commenters opposed this requirement because it unduly limits
an agency's discretion to set pay based on the scope and level of
responsibility of the new position. We agree. We have revised Sec.
534.404(i)(1)to state that if there has been a break in SES service of
30 days or less, the senior executive's rate of basic pay may be set at
any rate within the SES rate range (without regard to whether the
employee received a pay adjustment during the previous 12-month
period), but not higher than the employee's former SES rate of basic
pay. Where there has been a break in service of 30 days or less, the
agency head or designee who performs the functions described in 5 CFR
430.404(a)(5) and (6) (including the Inspector General, where
applicable) may approve a higher rate than the senior executive's
former rate of basic pay, if warranted.
Under Sec. 534.404(i)(2) of the proposed regulations, we address
the reinstatement of an individual who was serving under a Presidential
appointment requiring Senate confirmation. In the final regulations, we
are clarifying this paragraph to state that if the individual elected
to remain subject to the SES pay provisions while serving under a
Presidential appointment, his or her SES rate may be adjusted upon
reinstatement to the SES, whether in the agency where the individual
held the Presidential appointment or in another agency, if at least 12
months have elapsed since the employee's last SES pay adjustment. If
fewer than 12 months have elapsed since the employee's last SES pay
adjustment, an authorized agency official may approve an additional pay
increase under Sec. 534.404(c)(4) if the additional pay increase is
warranted. Any pay adjustment must be made in accordance with
paragraphs (b), (d), and (e) of Sec. 534.404 and the agency's plan for
adjusting SES rates of pay established under paragraph (g) of that
section.
Setting Pay Upon Reassignment or Transfer
Under Sec. 534.404(c)(4)(ii) of the proposed regulations, an
authorized agency official may approve an additional increase in pay
during a 12-month period if the agency head or designee determines that
the increase is needed because the senior executive is being reassigned
to a position with substantially greater scope and responsibility. A
commenter recommended that OPM broaden this exception to include
situations where an additional pay increase is needed to recruit a
senior executive from a position in another agency. We agree and have
revised Sec. 534.404(c)(4)(ii) to permit an agency to provide an
additional pay increase during a 12-month period if the agency head or
designee determines that a pay increase is needed to recruit a senior
executive with superior leadership or other competencies from a
position in another agency.
Section 534.404(c)(4)(iii) permits an agency to provide an
additional pay adjustment during a 12-month period to a senior
executive who is critical to the mission of the agency and is likely to
leave the agency in the absence of a pay increase. A commenter
recommended that OPM require an agency to document the justification
for an additional pay increase. We agree and have revised Sec.
534.404(c)(5) to require an agency to provide written documentation
approving any exception to the 12-month rule under Sec. 534.404(c)(4).
Agency Plan for Setting and Adjusting SES Rates
Federal agencies requested additional guidance on the criteria they
should establish to ensure that decisions on setting and adjusting SES
rates of basic pay are based on individual performance and/or
contributions to the agency's performance. To address these concerns,
we have revised Sec. 534.404(g)(1) to require agency plans to specify
the criteria that will be used to set and adjust a senior executive's
rate of basic pay to ensure that individual pay rates or pay
adjustments, as well as their overall distribution within the SES rate
range, reflect meaningful distinctions within a single performance
rating level (e.g., the higher
[[Page 70358]]
the employee's relative performance within a rating level, the higher
the pay adjustment) and/or between performance rating levels (e.g., the
higher the rating level, the higher the pay adjustment). In addition,
we suggest that agencies may wish to consider the senior executive's
broad scope of authority and level of responsibility and his or her
personal accountability for the success (or failure) of an agency's
programs.
A commenter requested that OPM's regulations require agencies to
provide for transparency in the processes for making pay decisions and
disclose information about the operation of the SES performance
management system. We have revised Sec. 534.404(g) to require
transparency in the processes for making pay decisions, while assuring
confidentiality. The commenter also recommended that OPM require
agencies to provide summary information concerning performance ratings
and annual salary adjustments for senior executives, the percentage of
senior executives who received bonuses, and the range of bonus awards
granted. We do not believe this additional reporting requirement is
needed, since under 5 CFR 430.405(g), agencies with certified
performance appraisal systems are required to provide this information
annually to OPM.
Section 5382 of title 5, United States Code, requires that an SES
member will be paid at one of the rates within the SES rate range,
based on individual performance, contribution to the agency's
performance, or both, as determined under a rigorous performance
management system. Federal agencies requested guidance on the
difference between individual performance and contribution to agency
performance, since individual performance directly leads to
contributing to an agency's performance. We believe the intent of the
legislation is that a senior executive's pay rate may be determined
based on an accomplishment that he or she attained through individual
performance and/or an accomplishment attained through the management of
his or her staff which contributes to the agency's performance.
Reductions in Pay
A commenter opposed the proposed rule in Sec. 534.404(j), which
would allow an agency to reduce a career SES member's rate of basic pay
by up to 10 percent based on performance or conduct. The commenter
stated that one of the purposes of the SES is to help maintain
consistency of the civil service during political change and that the
authority to reduce a senior executive's rate of basic pay by up to 10
percent may be misused to affect or influence a desired politically
motivated decision. The commenter is concerned that the authority to
reduce pay by 10 percent may violate the merit systems principle that
employees be protected against arbitrary action or coercion for
partisan political purpose under 5 U.S.C. 2301(b)(8)(A)). The commenter
noted that while the reduction procedure has elements of due process
within an agency, no appeal outside the agency, such as to the Merit
Systems Protection Board (MSPB), is allowed. The commenter recommended
that OPM reduce the maximum reduction in pay to 5 percent, comparable
to the former regulatory limitation on reductions in pay of one SES pay
level, which worked successfully prior to implementation of the new SES
pay system.
The commenter believes that if a senior executive deserves a pay
reduction of 10 percent, he or she can be removed from the SES, with
the limited protections provided by law. The commenter recommends that
if OPM truly believes a 10 percent reduction in pay is necessary to
manage the SES, OPM should make any reduction in pay greater than 5
percent fully appealable to MSPB or delay an agency's authority to
reduce pay for SES members for 1 year following issuance of OPM's final
rule, consistent with Congress' prohibition against reducing the pay of
an SES member for the first year after the effective date of the new
SES pay system. The commenter believes that before senior executives
experience the threat or possibility of a 10 percent pay reduction,
they should be under new performance plans and the new performance
management system for a full year.
The new SES pay system provides greater opportunities for higher
rates of basic pay and larger pay adjustments, and with these
opportunities come greater risks. We believe it is necessary to provide
agencies with the authority to reduce basic pay up to 10 percent.
Therefore, we made no changes in the regulations.
A commenter recommended that we add a statement to Sec.
534.404(j)(2) that a reduction in pay is not an appealable action under
5 U.S.C. 7543 (removal and suspensions for more than 14 days for
misconduct, negligence of duty, malfeasance, or failure to accept a
directed reassignment). We agree and have added the statement to Sec.
534.404(j)(2).
Pay Increase To Prevent Falling Below Minimum SES Rate
Under Sec. 534.406(a) of the interim regulations (and Sec.
534.403(a) of the proposed regulations), an SES member may not receive
a rate of basic pay that is less than the minimum rate of the SES rate
range. To preclude the possibility that an SES member's pay might fall
below the minimum rate of the SES rate range, we have revised the
regulations at Sec. 534.404(c)(3) to provide that an increase in pay
necessary to ensure that an SES member's rate of basic pay remains
within the SES rate range is not considered a pay adjustment for the
purpose of applying the 12-month rule in Sec. 534.404(c).
Involuntary Removal From the SES
Federal agencies requested guidance on how to set pay for a career
SES member who is receiving a rate of basic pay equivalent to the rate
for level III of the Executive Schedule ($145,600 in 2004) and who is
involuntarily removed from the SES based on a less than fully
successfully performance rating. Under 5 U.S.C. 3594 and 5 CFR part
359, subpart G, a career SES employee who is involuntarily placed in a
position outside of the SES at the GS-15 or equivalent level as the
result of removal for less than fully successful performance is
entitled to receive basic pay at the highest of--(1) the rate of basic
pay in effect for the position in which he or she is being placed, (2)
the rate of basic pay currently in effect for the position the
appointee held in the civil service immediately before being appointed
to the SES, or (3) the rate of basic pay in effect for the appointee
immediately before removal from the SES. An employee who is placed in a
General Schedule (GS) position under the provisions of 5 U.S.C. 3594
and 5 CFR part 359, subpart G, is not subject to the GS basic pay
limitation of level V of the Executive Schedule, as provided in 5
U.S.C. 5303(f). Upon appointment to a GS position, the employee is
entitled to receive a locality payment at the rate applicable in the
locality pay area in which the employee's GS position is located,
subject to 5 U.S.C. 5304(g)(1), which limits GS basic pay plus locality
pay to the rate for level IV of the Executive Schedule.
In the case of an employee whose SES rate of pay was equal to the
rate for level III of the Executive Schedule, his or her current SES
rate of basic pay of $145,600 is the highest applicable rate, and he or
she is entitled to that saved rate. Since the employee's rate of basic
pay exceeds the limitation on GS basic
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pay plus locality pay (level IV of the Executive Schedule), he or she
may not receive a locality payment. Under 5 U.S.C. 3594, the employee
also is entitled to 50 percent of any increase in the maximum rate of
basic pay for the GS grade to which he or she is placed until the saved
rate is equal to or lower than the maximum rate of pay for that grade,
at which time the employee's pay is set at that maximum rate.
If the saved pay provisions under 5 U.S.C. 3594 are not applicable,
the agency may exercise the use of pay retention as provided in 5
U.S.C. 5363 and 5 CFR part 536 in situations where an SES member moves
to a GS position and the movement is caused or influenced by a
management action.
Additional Payments
In the Preamble to the proposed regulations, OPM advised agencies
to review any determination to provide additional payments (e.g.,
retention allowances) to senior executives based on the senior
executive's rate of basic pay, since a senior executive's rate of basic
pay now includes locality payments. We remind agencies that under 5
U.S.C. 5754 and OPM's regulations at 5 CFR 575.306(a), retention
allowances are expressed as a percentage of basic pay. If an employee's
rate of basic pay is increased (e.g., as a result of including a
locality payment in the senior executive's rate of basic pay upon
conversion to the new SES pay system), the dollar amount of his or her
retention allowance will automatically increase unless the agency takes
action to reduce the retention allowance percentage in order to retain
the previous dollar value. An agency must process an SF-50 (810 action)
each time the percentage of a retention allowance changes.
Executive Level Positions in Temporary Organizations
Under 5 U.S.C. 3161(d), the rate of basic pay for executive
positions appointed to temporary organizations may not exceed the
maximum rate of basic pay established for the SES, including any
locality-based comparability payment provided under 5 U.S.C. 5304.
Under 5 U.S.C. 5382, the maximum rate of basic pay for SES members is
the rate for level III of the Executive Schedule, unless the employee
is covered by a certified performance appraisal system as provided in 5
U.S.C. 5307(d), in which case the maximum rate of basic pay is the rate
for level II of the Executive Schedule. Since senior executives in
temporary organizations are not covered by the SES performance
appraisal certification provision in 5 U.S.C. 5307(d), these executives
do not have access to a rate higher than the rate for level III of the
Executive Schedule. Therefore, we have revised Sec. Sec. 534.303 and
534.304 to state that the maximum rate of basic pay for executives and
certain senior staff in temporary organizations is the rate for level
III of the Executive Schedule. Executives in temporary organizations
are not entitled to locality pay, since SES members are no longer
eligible for locality-based comparability payments as a result of the
amendments made to 5 U.S.C. 5304(h).
Miscellaneous
We have added definitions of relative performance and performance
expectations in Sec. 534.402, consistent with the definitions in Sec.
430.402; we have indicated throughout the regulations in part 534, as
appropriate, the authority of an agency's Inspector General for setting
and adjusting rates of pay for senior executives in the Office of the
Inspector General; and we have removed subpart C of 5 CFR part 359
(Removal from the Senior Executive Service), since section 1321 of the
Homeland Security Act repealed SES recertification requirements and
subpart C is no longer needed.
Pay Adjustments for SES Members Without Supervisors
A commenter recommended that OPM develop a new pay system to allow
a higher maximum rate of basic pay for senior executives who do not
have a superior within their agencies who can evaluate their
performance (e.g., senior executives in small agencies where political
appointments have not occurred) and for Inspectors General. This
recommendation is beyond the scope of these regulations. Legislation
would be needed to provide a higher maximum rate of basic pay to these
employees.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because they
will apply to only Federal agencies and employees.
E.O. 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with E.O. 12866.
List of Subjects in 5 CFR Parts 317, 352, 359, 451, 530, 531, 534,
and 575
Administrative practice and procedure, Decorations, medals, awards,
Government employees, Law enforcement officers, Reporting and
recordkeeping requirements, Hospitals, Students, and Wages.
Office of Personnel Management.
Kay Coles James,
Director.
0
The interim rule published January 13, 2004, at 69 FR 2048 is adopted
as final with the changes set forth below, and OPM further amends 5 CFR
chapter I as follows:
PART 359--REMOVAL FROM THE SENIOR EXECUTIVE SERVICE; GUARANTEED
PLACEMENT IN OTHER PERSONNEL SYSTEMS
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1. The authority citation for part 359 continues to read as follows:
Authority: 5 U.S.C. 1302 and 3596, unless otherwise noted.
Subpart C--[Removed and Reserved]
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2. Subpart C (Sec. Sec. 359.301--359.304) is removed and reserved.
PART 451--EMPLOYEE AWARDS
Subpart A--Agency Awards
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3. The authority citation for part 451 continues to read as follows:
Authority: 5 U.S.C. 4302, 4501-4509; E.O. 11438, 12828.
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4. In Sec. 451.101 paragraph (d), remove the reference ``534.403'' and
add the reference ``534.405'' in its place, and add a new paragraph (e)
to read as follows:
Sec. 451.101 Authority and coverage.
* * * * *
(e) An agency may grant performance-based cash awards (i.e., on the
basis of a rating of record) under the authority of 5 U.S.C. 4505a and
the provisions of this part to eligible non-GS employees who are
covered by 5 U.S.C. chapter 45 and this part, and who are not otherwise
covered by an explicit statutory authority for the payment of such
awards, including 5 U.S.C. 5384 (SES performance awards).
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5. In Sec. 451.104(a)(3), remove the reference ``534.403'' and add the
reference ``534.405'' in its place.
PART 530--PAY RATES AND SYSTEMS (GENERAL)
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6. The authority citation is revised to read as follows:
Authority: 5 U.S.C. 5305 and 5307; E.O. 12748, 56 FR 4521, 3
CFR, 1991 Comp., p. 316.
Subpart B also issued under secs. 302(c) and 404(c) of the
Federal Employees Pay Comparability Act of 1990, Public Law 101-509,
104 Stat. 1462 and 1466, respectively.
[[Page 70360]]
Subpart C also issued under sec. 4 of the Performance Management
and Recognition System Termination Act of 1993, Public Law 103-89,
107 Stat. 981; and sec. 1322 of the Chief Human Capital Officers Act
of 2002, Public Law 107-296, 116 Stat. 2297 (5 U.S.C. 5307).
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7. Revise subpart B to read as follows:
Subpart B--Aggregate Limitation on Pay
Sec.
530.201 Purpose.
530.202 Definitions.
530.203 Administration of aggregate limitation on pay.
530.204 Payment of excess amounts.
530.205 Records.
Subpart B--Aggregate Limitation on Pay
Sec. 530.201 Purpose.
This subpart establishes regulations for limiting an employee's
aggregate annual compensation. An employee's aggregate compensation
received in any given calendar year may not exceed the rate of pay for
level I of the Executive Schedule or the rate payable to the Vice
President at the end of the calendar year, whichever is applicable to
the employee based on the certification status under 5 CFR part 430,
subpart D, of the performance appraisal system covering that employee.
These regulations must be applied in conjunction with 5 U.S.C. 5307.
Sec. 530.202 Definitions.
In this subpart:
Agency means an executive agency as defined at 5 U.S.C. 105.
Aggregate compensation means the total of--
(1) Basic pay received as an employee of the executive branch or as
an employee outside the executive branch to whom the General Schedule
applies;
(2) Locality payments under 5 U.S.C. 5304; continued rate
adjustments under 5 CFR part 531, subpart G; or special pay adjustments
for law enforcement officers under section 404 of the Federal Employees
Pay Comparability Act of 1990 (Public Law 101-509);
(3) Premium pay under 5 U.S.C. chapter 53, subchapter IV;
(4) Premium pay under 5 U.S.C. chapter 55, subchapter V;
(5) Incentive awards and performance-based cash awards under 5
U.S.C. chapters 45 and 53;
(6) Recruitment and relocation bonuses under 5 U.S.C. 5753;
(7) Retention allowances under 5 U.S.C. 5754 and extended
assignment incentives under 5 U.S.C. 5757;
(8) Supervisory differentials under 5 U.S.C. 5755;
(9) Post differentials under 5 U.S.C. 5925;
(10) Danger pay allowances under 5 U.S.C. 5928;
(11) Post differentials based on environmental conditions for
employees stationed in nonforeign areas under 5 U.S.C. 5941(a)(2);
(12) Physicians' comparability allowances under 5 U.S.C. 5948;
(13) Continuation of pay under 5 U.S.C. 8118;
(14) Lump-sum payments in excess of the aggregate limitation on pay
as required by Sec. 530.204; and
(15) Other similar payments authorized under title 5, United States
Code, excluding--
(i) Overtime pay under the Fair Labor Standards Act of 1938, as
amended, and 5 CFR part 551;
(ii) Severance pay under 5 U.S.C. 5595;
(iii) Lump-sum payments for accumulated and accrued annual leave
upon separation under 5 U.S.C. 5551 or 5552;
(iv) Back pay awarded to an employee under 5 U.S.C. 5596 because of
an unjustified personnel action;
(v) Student loan repayments under 5 U.S.C. 5379; and
(vi) Nonforeign area cost-of-living allowances under 5 U.S.C.
5941(a)(1).
Aggregate limitation means the limitation on aggregate compensation
received in any given calendar year as established by 5 U.S.C. 5307.
For an executive branch employee (including employees in Senior
Executive Service positions paid under 5 U.S.C. 5383 and employees in
senior-level or scientific or professional positions paid under 5
U.S.C. 5376), a General Schedule employee in the legislative branch, or
General Schedule employee in the judicial branch (excluding those paid
under 28 U.S.C. 332(f), 603, and 604), the limitation on aggregate
compensation is equal to the rate for level I of the Executive Schedule
in effect at the end of the applicable calendar year. For an employee
in a Senior Executive Service position paid under 5 U.S.C. 5383 and an
employee in a senior-level or scientific or professional position paid
under 5 U.S.C. 5376 covered by an applicable performance appraisal
system that has been certified under 5 CFR part 430, subpart D, the
limitation on aggregate compensation is equal to the total annual
compensation payable to the Vice President under 3 U.S.C. 104 at the
end of a calendar year.
Basic pay means the total amount of pay received at a rate fixed by
law or administrative action for the position held by an employee,
before any deductions. Basic pay includes night and environmental
differentials for prevailing rate employees under 5 U.S.C. 5343(f) and
5 CFR 532.511. Basic pay excludes additional pay of any other kind,
including locality payments under 5 U.S.C. 5304.
Discretionary payment means a payment an agency has discretion to
make or not to make to an employee. A retention allowance under 5
U.S.C. 5754 and an extended assignment incentive under 5 U.S.C. 5757
are discretionary payments. However, other payments that are
preauthorized to be made to an employee at a regular fixed rate each
pay period are not discretionary payments.
Employee has the meaning given that term in 5 U.S.C. 2105.
Estimated aggregate compensation means the agency's projection of
the aggregate compensation an employee actually would receive during a
calendar year but for application of the aggregate limitation to future
payments. This projection must be based upon known factors. Estimated
aggregate compensation includes--
(1) The total amount of basic pay the employee will receive during
the calendar year;
(2) Any lump-sum payment of excess amounts from a previous calendar
year, as described in Sec. 530.204;
(3) The total amount of nondiscretionary payments the employee
would be entitled to receive during the calendar year; and
(4) The total amount of discretionary payments the employee would
be authorized to receive during the calendar year.
Sec. 530.203 Administration of aggregate limitation on pay.
(a) Except as provided in paragraph (b) of this section, no
executive branch employee or General Schedule employee in the
legislative branch (or General Schedule employee in the judicial
branch, excluding those paid under 28 U.S.C. 332(f), 603, and 604), may
receive any allowance, differential, bonus, award, or other similar
cash payment under title 5, United States Code, in any calendar year
which, in combination with the employee's basic pay (whether received
under title 5, United States Code, or otherwise), would cause the
employee's aggregate compensation to exceed the rate for level I of the
Executive Schedule on the last day of that calendar year (i.e., the
aggregate limitation).
(b)(1) Subject to paragraph (b)(2) of this section, an employee in
a Senior Executive Service position paid under 5 U.S.C. 5383 and an
employee in a
[[Page 70361]]
senior-level or scientific or professional position paid under 5 U.S.C.
5376 may not receive any allowance, differential, bonus, award, or
other similar cash payment under title 5, United States Code, in any
calendar year which, in combination with the employee's basic pay,
would cause the employee's aggregate compensation to exceed the rate of
pay for level I of the Executive Schedule.
(2) An employee covered by a performance appraisal system that has
been certified under 5 CFR part 430, subpart D, may not receive any
allowance, differential, bonus, award, or other similar cash payment
under title 5, United States Code, in any calendar year which, in
combination with the employee's basic pay, would cause the employee's
aggregate compensation to exceed the total annual compensation payable
to the Vice President under 3 U.S.C. 104 on the last day of that
calendar year (i.e., the aggregate limitation).
(3) An agency must make corrective actions as provided in
paragraphs (g) and (h) of this section if the agency underestimated or
overestimated an employee's aggregate compensation in a calendar year
as a result of receiving or losing certification of its applicable
performance appraisal system under 5 CFR part 430, subpart D.
(c) The aggregate limitations described in paragraphs (a) and (b)
of this section apply to the aggregate compensation an employee
actually received during the calendar year without regard to when the
compensation was earned.
(d) When an agency authorizes a discretionary payment for an
employee, the agency must defer any portion of such payment that, when
added to the estimated aggregate compensation the employee is projected
to receive, would cause the employee's aggregate compensation during
the calendar year to exceed the applicable aggregate limitation. Any
portion of a discretionary payment deferred under this paragraph must
be available for payment as provided in Sec. 530.204. Special rules
apply to the authorization and payment of a retention allowance, which
may not be deferred. (See 5 CFR 575.306(b) and 575.307(a).) A retention
allowance must be reduced or terminated before deferring any other type
of discretionary payment, as long as the other discretionary payment is
required to be paid within the current calendar year under a mandatory
personnel policy or has been officially approved by an authorized
agency official for payment within the current calendar year. When a
discretionary payment is authorized but not required to be paid in the
current calendar year, an agency official's decision to set the payment
date in the next calendar year is not considered a deferral under this
paragraph.
(e) An agency may not defer or discontinue nondiscretionary
payments for any period of time to make a discretionary payment that
would otherwise cause an employee's pay to exceed the applicable
aggregate limitation. An agency may not defer or discontinue basic pay
under any circumstance.
(f) If, after an agency defers discretionary payments as required
by paragraph (d) of this section, the estimated aggregate compensation
to which an employee is entitled exceeds the applicable aggregate
limitation, the agency must defer all nondiscretionary payments (other
than basic pay) as necessary to avoid payments in excess of that
limitation. An agency must defer all nondiscretionary payments at the
time when otherwise continuing to pay such payments would cause an
employee's estimated aggregate compensation for that calendar year to
exceed the applicable aggregate limitation. An agency must pay any
portion of a nondiscretionary payment deferred under this paragraph at
a later date, as provided in Sec. 530.204.
(g)(1) If an agency determines that it underestimated an employee's
aggregate compensation at an earlier date in the calendar year, or the
aggregate limitation applicable to the employee is reduced during the
calendar year, the sum of the employee's remaining payments of basic
pay may exceed the difference between the aggregate compensation the
employee has actually received to date in that calendar year and the
applicable aggregate limitation. In such cases, the employee will
become indebted to the Federal Government for any amount paid in excess
of the applicable aggregate limitation. The head of the agency may
waive the debt under 5 U.S.C. 5584, if warranted.
(2) To the extent that any excess amount is attributable to amounts
that should have been deferred and would have been payable at the
beginning of the next calendar year, an agency must extinguish the
excess amount on January 1 of the next calendar year. As part of the
correction of the error, the agency must deem the excess amount to have
been paid on January 1 of the next calendar year (when the debt was
extinguished) as if it were a deferred excess payment, as described in
Sec. 530.204, and must consider this deemed deferred excess payment to
be part of the employee's aggregate compensation for the new calendar
year.
(3) To the extent that any excess amount is attributable to
retention allowances that the agency inadvertently did not reduce or
terminate under 5 CFR 575.307(a), the employee will become indebted to
the Federal Government for any amount attributable to retention
allowance payments that were paid in excess of the applicable aggregate
limitation. The head of the agency may waive the debt under 5 U.S.C.
5584, if warranted.
(h) If an agency determines that it overestimated an employee's
aggregate compensation at an earlier date in the calendar year, which
caused the agency to defer payments unnecessarily under this section,
or the aggregate limitation applicable to the employee is increased
during the calendar year, the agency may make appropriate corrective
payments to the employee during the calendar year, notwithstanding
Sec. 530.204.
Sec. 530.204 Payment of excess amounts.
(a) An agency must pay the amounts that were deferred because they
were in excess of the aggregate limitation (as described in Sec.
530.203) as a lump-sum payment at the beginning of the following
calendar year, except as otherwise provided in this section. This
payment is part of the employee's aggregate compensation for the new
calendar year.
(b) If a lump-sum payment under paragraph (a) of this section
causes an employee's estimated aggregate compensation to exceed the
aggregate limitation in the current calendar year, an agency must
consider only the employee's basic pay that is expected to be paid in
the current year in determining the extent to which the lump-sum
payment may be paid. An agency must defer all other payments, as
provided in Sec. 530.203, in order to pay as much of the lump-sum
excess amount as possible. Any payments deferred under this paragraph,
including any portion of the lump-sum excess amount that was not
payable, are payable at the beginning of the next calendar year, as
provided in paragraph (a) of this section.
(c) If an employee transfers to another agency, the gaining agency
is responsible for making any lump-sum payment required by paragraph
(a) of this section. The previous employing agency must provide the
gaining agency with documentation regarding the employee's excess
amount, as provided in Sec. 530.205. The previous employing agency
must provide a fund transfer equal to the total cost of the lump-sum
[[Page 70362]]
payment to the gaining agency through the Department of the Treasury's
Intra-Governmental Payment and Collection System. If an employee leaves
Federal service, the employing agency is responsible for making the
lump-sum payment to the employee as provided in paragraph (d) of this
section.
(d) An agency must pay any excess amount regardless of the calendar
year limitation under the following conditions:
(1) If an employee dies, the employing agency must pay the entire
excess amount as part of the settlement of accounts, in accordance with
5 U.S.C. 5582.
(2) If an employee separates from Federal service, the employing
agency must pay the entire excess amount following a 30-day break in
service. If the individual is reemployed in the Federal service within
the same calendar year as the separation, any previous payment of an
excess amount must be considered part of that year's aggregate
compensation for the purpose of applying the aggregate limitation for
the remainder of the calendar year.
Sec. 530.205 Records.
An agency must maintain appropriate records to administer this
subpart and must transfer such records to any agency to which an
employee may transfer. An agency must make such records available to
any agency that may employ the employee later during the same calendar
year. An agency's records must document the source of any deferred
excess amount remaining to the employee's credit at the time of
separation from the agency. In the case of an employee who separates
from Federal service for at least 30 days, the agency records also must
document any payment of a deferred excess amount made by the agency
after separation.
PART 534--PAY UNDER OTHER SYSTEMS
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8-9. The authority citation for part 534 is revised to read as follows:
Authority: 5 U.S.C. 1104, 3161(d), 5307, 5351, 5352, 5353, 5376,
5382, 5383, 5384, 5385, 5541, 5550a, and sec. 1125 of the National
Defense Authorization Act for FY 2004, Public Law 108-136, 117 Stat.
1638 (5 U.S.C. 5304, 5382, 5383, 7302; 18 U.S.C. 207).
Subpart C--Basic Pay for Employees of Temporary Organizations
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10. Section 534.303 is revised to read as follows:
Sec. 534.303 Basic pay for executive level positions.
Rates of basic pay for executive level positions of temporary
organizations may not exceed the rate for level III of the Executive
Schedule.
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11. Section 534.304(c) is revised to read as follows:
Sec. 534.304 Basic pay for staff positions.
* * * * *
(c) Notwithstanding the limitations in paragraphs (a) and (b) of
this section, the rate of basic pay and locality-adjusted rate of basic
pay for a senior staff position of a temporary organization may, in a
case determined by the head of a temporary organization to be
exceptional, exceed the maximum rates established under those
paragraphs. However, the higher payable rates may not exceed the rate
for level III of the Executive Schedule.
Subpart D--Pay and Performance Awards Under the Senior Executive
Service
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12. Section 534.401 is revised to read as follows:
Sec. 534.401 Purpose.
This subpart contains the rules for setting and adjusting rates of
basic pay and granting performance awards for members of the Senior
Executive Service (SES), as provided by 5 U.S.C. 5382, 5383, and 5384.
An agency must set and adjust the rate of basic pay for an SES member
on the basis of the employee's performance and/or contribution to the
agency's performance, as determined by the agency through the
administration of its performance management system(s) for senior
executives. These regulations must be read in combination with
applicable statutes and with the regulations for the approval of an SES
performance management system under 5 CFR part 430, subpart C, and
certification of an SES performance appraisal system under 5 CFR part
430, subpart D.
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13. Section 534.402 is revised to read as follows:
Sec. 534.402 Definitions.
In this subpart--
Agency means an executive agency or military department, as defined
by 5 U.S.C. 105 and 102.
Authorized agency official means the head of an agency or an
official who is authorized to act for the head of the agency in the
matter concerned. The agency's Inspector General is the authorized
agency official for senior executive positions in the Office of the
Inspector General, consistent with the requirements in section 3(a) of
the Inspector General Act of 1978.
Outstanding performance means performance that substantially
exceeds the normally high performance expected of any senior executive,
as evidenced by exceptional accomplishments or contributions to the
agency's performance.
Performance expectations means the critical and other performance
elements and performance requirements that constitute the senior
executive performance plans (as defined in Sec. 430.303).
PRB means Performance Review Board, as described in Sec. 430.310.
Rate of basic pay means the rate of pay fixed by law or
administrative action for the senior executive, within the established
SES rate range or, in the case of a senior executive entitled to pay
retention, the employee's retained rate of pay, excluding any
applicable locality-based comparability payments under 5 U.S.C. 5304,
but before any deductions and exclusive of additional pay of any other
kind.
Relative performance means the performance of a senior executive
with respect to the performance of other senior executives, including
their contribution to agency performance, where appropriate, as
determined by the application of a certified performance appraisal
system under 5 CFR part 430, subpart D.
Senior executive means a member of the Senior Executive Service
(SES) paid under 5 U.S.C. 5383.
SES rate means a rate of basic pay within the SES rate range
assigned to a member of the SES under Sec. 534.403(a).
SES rate range means the range of rates of basic pay established
for the SES under 5 U.S.C. 5382 and Sec. 534.403(a).
Sec. Sec. 534.403 and 534.405 [Redesignated as Sec. Sec. 534.405 and
534.408]
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14. Redesignate Sec. Sec. 534.403 and 534.405 as Sec. Sec. 534.405
and 534.408, respectively.
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15. Add new Sec. 534.403 to read as follows:
Sec. 534.403 SES rate range.
(a) SES rate range. (1) On the first day of the first applicable
pay period beginning on or after January 1, 2004, the minimum rate of
basic pay of the SES rate range is set at an amount equal to the
minimum rate of basic pay under 5 U.S.C. 5376 for senior-level
positions (excluding any locality-based comparability payment under 5
U.S.C. 5304). The minimum rate of basic pay for the SES rate range will
increase
[[Page 70363]]
consistent with any increase in the minimum rate of basic pay for
senior-level positions under 5 U.S.C. 5376. An SES member may not
receive less than the minimum rate of the SES rate range. Except as
provided in paragraph (a)(2) of this section, the maximum rate of basic
pay of the SES rate range is set at the rate for level III of the
Executive Schedule. An SES member's rate of basic pay must be set at
one of the rates within the SES rate range based on the senior
executive's performance and/or contribution to the agency's
performance.
(2) The maximum rate of basic pay of the SES rate range is set at
the rate for level II of the Executive Schedule for senior executives
in an agency who are covered by a performance appraisal system that
makes meaningful distinctions based on relative performance, as
certified by the Office of Personnel Management (OPM), with concurrence
by the Office of Management and Budget (OMB), under 5 U.S.C. 5307(d)
and 5 CFR part 430, subpart D. A senior executive's rate of basic pay
may not exceed the maximum rate of the applicable SES rate range,
except as provided in Sec. 534.404(h)(2). The applicable maximum rate
of basic pay for the SES rate range will increase with any increase in
the rate for levels II or III of the Executive Schedule under 5 U.S.C.
5318.
(3) Rates of basic pay higher than the rate for level III of the
Executive Schedule but less than or equal to the rate for level II of
the Executive Schedule generally are reserved for those senior
executives who have demonstrated the highest levels of individual
performance and/or made the greatest contributions to the agency's
performance, as determined by the agency through the administration of
its performance appraisal system for senior executives, or, in the case
of newly-appointed senior executives, those who possess superior
leadership or other competencies, consistent with the agency's
strategic human capital plan.
(b) Suspension of certification of performance appraisal system. A
senior executive whose rate of basic pay is higher than the rate for
level III of the Executive Schedule may not suffer a reduction in pay
because his or her agency's applicable performance appraisal system
certification is suspended under 5 CFR 430.405(h). The senior executive
will continue to receive his or her current SES rate and is not
eligible for a pay adjustment until the senior executive is assigned to
a position that would allow the employee to receive a pay adjustment or
until certification of the employing agency's applicable performance
appraisal system is reinstated under 5 CFR part 430, subpart D. The SES
rate of pay is not considered a retained rate of pay for the purpose of
applying 5 U.S.C. 3594 and 5 CFR part 359, subpart G, or 5 U.S.C. 5363
and 5 CFR 536.104.
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16. Section 534.404 is revised to read as follows:
Sec. 534.404 Setting and adjusting pay for senior executives.
(a) Setting pay upon initial appointment to the SES. An authorized
agency official may set the rate of basic pay of an individual at any
rate within the SES rate range upon initial appointment to the SES,
subject to the limitation on the maximum rate of basic pay in Sec.
534.403(a). Rates of basic pay above the rate for level III of the
Executive Schedule but less than or equal to the rate for level II of
the Executive Schedule generally are reserved for those newly appointed
senior executives who possess superior leadership or other
competencies, as determined by the agency as part of its strategic
human capital plan. In setting a new senior executive's rate of basic
pay, an agency must consider the nature and quality of the individual's
experience, qualifications, and accomplishments as they relate to the
requirements of the SES position, as well as the individual's current
responsibilities.
(b) Adjusting the pay of SES members. (1) An authorized agency
official may adjust (increase or reduce) the rate of basic pay of a
senior executive consistent with the agency's plan for setting and
adjusting SES rates of basic pay under paragraph (g) of this section.
(2) A senior executive who receives an annual summary rating of
outstanding performance must be considered for an annual pay increase,
subject to the limitation on the maximum rate of basic pay in Sec.
534.403(a).
(3) An agency may provide a pay increase to allow a senior
executive to advance his or her relative position within the SES rate
range only upon a determination by the authorized agency official that
the senior executive's individual performance and/or contributions to
agency performance so warrant. In assessing a senior executive's
performance and/or contribution to the agency's performance, the
authorized agency official may consider such things as unique skills,
qualifications, or competencies that the individual possesses, and
their significance to the agency's performance, as well as the senior
executive's current responsibilities. Senior executives who demonstrate
the highest levels of individual performance and/or make the greatest
contributions to the agency's performance, as determined by the agency
through the administration of its performance appraisal system, or, in
the case of newly-appointed senior executives, those who possess
superior leadership or other competencies, as determined by the agency
as part of its strategic human capital plan, must receive the highest
rates of basic pay or pay adjustments.
(4)(i) On the effective date of an increase in the minimum or
maximum rate of basic pay of the SES rate range under Sec.
534.403(a)(1) or (2), an authorized agency official may increase the
rate of basic pay of a senior executive who meets or exceeds his or her
performance expectations by an amount that does not exceed the amount
necessary to maintain the senior executive's relative position in the
SES rate range, except as provided in paragraph (b)(4)(ii) and
(b)(4)(iii) of this section. A pay increase made under this paragraph
is not considered a pay adjustment for the purpose of applying Sec.
534.404(c).
(ii) A pay increase under paragraph (b)(4)(i) of this section may
not be provided to a senior executive whose rate of basic pay is at or
below the rate for level III of the Executive Schedule if such an
increase would cause the senior executive's rate of basic pay to exceed
the rate for level III of the Executive Schedule unless the senior
executive has received an annual summary rating of outstanding for the
most recently completed appraisal period and the agency head or
designee who performs the functions described in 5 CFR 430.404(a)(5) or
(6) (including the Inspector General, where applicable) has approved
the increase in pay.
(iii) A pay increase under paragraph (b)(4)(i) of this section may
not be provided to a senior executive whose rate of basic pay is above
the rate for level III of the Executive Schedule unless the senior
executive has received an annual summary rating of outstanding for the
most recently completed appraisal period and the agency head or
designee who performs the functions described in 5 CFR 430.404(a)(5) or
(6) (including the Inspector General, where applicable) has approved
the increase in pay. However, in the case of a senior executive whose
rate of basic pay is above the rate for level III of the Executive
Schedule and who has been rated below outstanding, but above fully
successful, for the most recently
[[Page 70364]]
completed appraisal period, the agency head or designee who performs
the functions described in 5 CFR 430.404(a)(5) or (6) (including the
Inspector General, where applicable) may approve such a pay increase in
limited circumstances, such as for an exceptionally meritorious
accomplishment.
(5) A senior executive who receives a summary rating of less than
fully successful may not receive an increase in pay for the current
appraisal period.
(6) An authorized agency official may reduce the rate of basic pay
of a senior executive for performance and/or disciplinary reasons,
consistent with the restrictions on reducing the rate of basic pay of a
career senior executive in paragraph (j) of this section and in Sec.
534.406(b).
(c) 12-month rule. (1) An authorized agency official may adjust
(i.e., increase or reduce) the rate of basic pay of a senior executive
not more than once during any 12-month period. However, an agency may
make a determination to provide an additional pay increase under
certain conditions as prescribed in paragraph (c)(3) and (4) of this
section without regard to whether the senior executive has received a
pay adjustment during the previous 12-month period.
(2) The following pay actions are considered pay adjustments for
the purpose of applying this paragraph:
(i) The setting of an individual's rate of basic pay upon initial
appointment or reappointment to the SES under paragraphs (a) and (i)(1)
of this section and upon reinstatement to the SES under paragraph
(i)(2)(ii) of this section; and
(ii) Any adjustment (increase or reduction) in an SES rate of basic
pay granted to a senior executive, except as provided in paragraph
(c)(3) of this section.
(3) The following pay actions are not considered pay adjustments
for the purpose of applying this paragraph:
(i) The conversion of senior executives to the new SES pay system
under Sec. 534.406 and the conversion of other employees to equivalent
senior executive positions;
(ii) A determination by an authorized agency official to make a
zero adjustment in pay after reviewing a senior executive's annual
summary rating;
(iii) A zero adjustment in pay made during the 12-month period
preceding the first day of the first applicable pay period beginning on
or after January 1, 2004, caused by the former limitation on basic pay
plus locality-based comparability payments under 5 U.S.C. 5304(g)(2)
for a senior executive who was granted an increase in his or her rate
of basic pay that did not result in an actual increase in pay;
(iv) A determination to provide an additional pay increase under
paragraph (f) of this section when there is an increase in Executive
Schedule rates of pay;
(v) A determination to provide a pay increase under paragraph
(b)(4) of this section to allow a senior executive to maintain his or
her relative position in the SES rate range; and
(vi) An increase in pay equivalent to the minimum amount necessary
to ensure that a senior executive's rate of basic pay does not fall
below the minimum rate of the SES rate range.
(4) An authorized agency official may approve increases in a senior
executive's rate of basic pay more than once during a 12-month period
if the agency head or designee who performs the functions described in
5 CFR 430.404(a)(5) or (6) (including the Inspector General, where
applicable) determines that--
(i) The senior executive's exceptionally meritorious accomplishment
significantly contributes to the agency's performance;
(ii) A pay increase is necessary to reassign a senior executive to
a position with substantially greater scope and responsibility or to
recruit a senior executive with superior leadership or other
competencies from a position in another agency;
(iii) The retention of the senior executive is critical to the
mission of the agency and the senior executive would be likely to leave
the agency in the absence of a pay increase; or
(iv) Such action conforms to an otherwise applicable executive
appraisal and pay adjustment cycle (e.g., in the case of a senior
executive who was appointed to an SES position within the past 12
months or a senior executive who was transferred to an SES position
from an agency with a different senior executive appraisal and pay
adjustment cycle within the past 12 months).
(5) An authorized agency official must provide written
documentation approving an exception under paragraph (c)(4) of this
section. Any pay adjustment made as a result of a determination under
paragraph (c)(4) of this section is considered a pay adjustment for the
purpose of applying Sec. 534.404(c) and begins a new 12-month period.
(d) Adjustments in pay prior to certification of applicable
performance appraisal system. An authorized agency official may adjust
a senior executive's rate of basic pay converted under Sec. 534.406 on
the first day of the first applicable pay period beginning on or after
January 1, 2004, or on any date thereafter prior to obtaining
certification under 5 CFR part 430, subpart D, but only up to the rate
for level III of the Executive Schedule. The authorized agency official
may provide an increase in pay if warranted under the conditions
prescribed in paragraph (b) of this section and the senior executive is
otherwise eligible for such an increase (i.e., he or she did not
receive a pay adjustment under Sec. 534.404(c) during the previous 12-
month period). An adjustment in pay made under this paragraph is
considered a pay adjustment for the purpose of applying Sec.
534.404(c).
(e) Adjustments in pay after certification of applicable
performance appraisal system. In the case of an agency that obtains
certification of a performance appraisal system for senior executives
under 5 CFR part 430, subpart D, an authorized agency official may
increase a covered senior executive's rate of basic pay up to the rate
for level II of the Executive Schedule, consistent with the limitation
on increasing pay above the rate for level III of the Executive
Schedule in Sec. 534.403(a)(2). The authorized agency official may
provide an increase in pay if warranted under the conditions prescribed
in paragraph (b) of this section and the senior executive is otherwise
eligible for such an increase (i.e., he or she did not receive a pay
adjustment under Sec. 534.404(c) during the previous 12-month period).
An adjustment in pay made under this paragraph is considered a pay
adjustment for the purpose of applying Sec. 534.404(c).
(f) Effect of increase in Executive Schedule rates of pay. (1) If
there is an additional increase in the rates for the Executive Schedule
in a calendar year, and if that increase becomes effective on the first
day of the first pay period beginning on or after January 1 (i.e., the
date prescribed in 5 U.S.C. 5318), an agency may review any previous
determination to adjust the pay of a senior executive that was made
effective on or after the effective date of the first increase in the
rates for the Executive Schedule to determine whether, and to what
extent, an additional pay increase may be warranted for senior
executives based on the same criteria used for the previous
determination. If the agency determines that an additional pay increase
is warranted, that increase must be made effective as of the effective
date of the previous pay increase and is not considered a pay
[[Page 70365]]
adjustment for the purpose of applying Sec. 534.404(c).
(2) If there is an increase in the rates of pay for the Executive
Schedule under 5 U.S.C. 5318 after an agency has already granted pay
increases to its senior executives following the applicable performance
appraisal period, an agency may review any previous determination to
increase the pay of a senior executive whose rate of basic pay is
equivalent to the rate for level II (if covered under a performance
appraisal system that is certified) or level III (if covered under a
performance appraisal system that is not certified) when the applicable
maximum rate is increased to determine whether, and to what extent, an
additional pay increase may be warranted for the senior executive based
on the same criteria used for the previous determination. The
determination to provide an additional pay increase must be approved
and made effective as of the effective date of increases in the
Executive Schedule under 5 U.S.C. 5318 (i.e., the first day of the
first pay period beginning on or after January 1). An additional pay
increase under this paragraph is not considered a pay adjustment for
the purpose of applying Sec. 534.404(c).
(g) Agency plan for setting and adjusting SES rate of basic pay.
Each agency must establish a plan for setting and adjusting the rates
of basic pay for SES members. Agencies must provide for transparency in
the processes for making pay decisions, while assuring confidentiality.
In developing its plan for setting and adjusting SES rates, an agency
may consider the senior executive's broad scope of authority and level
of responsibility and his or her personal accountability for the
success (or failure) of an agency's programs. The agency's plan must
require that any decisions to adjust pay must reflect meaningful
distinctions among senior executives based on individual performance
and/or contribution to agency performance and must include--
(1) The criteria that will be used to set and adjust a senior
executive's rate of basic pay to ensure that individual pay rates or
pay adjustments, as well as their overall distribution within the SES
rate range, reflect meaningful distinctions within a single performance
rating level (e.g., the higher the employee's relative performance
within a rating level, the higher the pay adjustment) and/or between
performance rating levels (e.g., the higher the rating level, the
higher the pay adjustment);
(2) The criteria that will be used to set and adjust a senior
executive's rate of basic pay at a rate that exceeds the rate for level
III of the Executive Schedule if the applicable agency performance
appraisal system has been certified under 5 CFR part 430, subpart D;
(3) The designation of the authorized agency official who has
authority to set and adjust SES rates of pay for individual senior
executives, subject to the requirement that the agency head or designee
who performs the functions described in 5 CFR 430.404(a)(5) and (6)
(including the Inspector General, where applicable) must approve any
determination to set a senior executive's rate of basic pay higher than
the rate for level III of the Executive Schedule and must approve any
determination to increase a senior executive's rate of basic pay more
than once in any 12-month period; and
(4) The administrative and management controls that will be applied
to ensure compliance with applicable statutes, OPM's regulations, the
agency's plan, and, where applicable, the certification requirements
set forth in 5 CFR 430, subpart D, and the limitation on the maximum
rate of basic pay in Sec. 534.403(a).
(h) Setting pay upon transfer. (1) An authorized agency official
may set the pay of a senior executive transferring from another agency
at any rate within the SES rate range, subject to the limitation on the
maximum rate of basic pay in Sec. 534.403(a) and the restrictions on
reducing the pay of career senior executives in paragraph (h)(2) of
this section (upon transfer to an agency whose applicable performance
appraisal system is not certified) and in Sec. 534.406(b) (for 12
months following the effective date of the new SES pay system). If pay
is set at the same SES rate the senior executive received in his or her
former agency, the action is not considered a pay adjustment for the
purpose of applying Sec. 534.404(c).
(2) A senior executive whose rate of basic pay is higher than the
rate for level III of the Executive Schedule may not suffer a reduction
in pay as a result of transferring to an agency where the maximum rate
of basic pay for the applicable SES rate range is equal to the rate for
level III of the Executive Schedule. The senior executive will continue
to receive his or her current SES rate and is not eligible for a pay
adjustment until the senior executive is assigned to a position that
would allow the employee to receive a pay adjustment or the employing
agency's applicable performance appraisal system is certified under 5
CFR part 430, subpart D. The SES rate of pay is not considered a
retained rate of pay for the purpose of applying 5 U.S.C. 3594 and 5
CFR part 359, subpart G, or 5 U.S.C. 5363 and 5 CFR 536.104.
(i) Setting pay following a break in SES service. (1) General. Upon
reappointment to the SES, an authorized agency official may set the
rate of basic pay of a former senior executive at any rate within the
SES rate range, subject to the limitations in Sec. 534.403(a), if
there has been a break in SES service of more than 30 days. If there
has been a break in SES service of 30 days or less, the senior
executive's rate of basic pay may be set at any rate within the SES
rate range (without regard to whether the employee received a pay
adjustment during the previous 12-month period), but not higher than
the senior executive's former SES rate of basic pay. Where there has
been a break in service of 30 days or less, the agency head or designee
who performs the functions described in 5 CFR 430.404(a)(5) and (6)
(including the Inspector General, where applicable) may approve a
higher rate than the senior executive's former rate of basic pay, if
warranted. Setting a rate of basic pay upon reappointment to the SES is
considered a pay adjustment under Sec. 534.404(c).
(2) Reinstatement from a Presidential appointment requiring Senate
confirmation. The following provisions apply to a former career senior
executive who is reinstated under 5 CFR 317.703:
(i) If the individual elected to remain subject to the SES pay
provisions while serving under a Presidential appointment, his or her
SES rate may be adjusted upon reinstatement to the SES, whether in the
agency where the individual held the Presidential appointment or in
another agency, if at least 12 months have elapsed since the employee's
last SES pay adjustment. If fewer than 12 months have elapsed since the
employee's last SES pay adjustment, an authorized agency official may
approve an additional pay increase under Sec. 534.404(c)(4) if the
additional pay increase is warranted. Any pay adjustment must be made
in accordance with paragraphs (b), (d), and (e) of this section and the
agency's plan for adjusting SES rates of pay in paragraph (g) of this
section.
(ii) If the individual did not elect to remain subject to the SES
pay provisions while serving under a Presidential appointment, his or
her SES rate may be set upon reinstatement to the SES at any rate
within the SES rate range, subject to the limitations in Sec.
534.403(a).
(iii) Setting a rate of basic pay upon reinstatement to the SES
under paragraphs (i)(2)(i) and (ii) of this
[[Page 70366]]
section is considered a pay adjustment for the purpose of applying
Sec. 534.404(c).
(j) Restrictions on reducing the pay of career senior executives.
(1) An authorized agency official may reduce a career senior
executive's SES rate of basic pay by not more than 10 percent for
performance or disciplinary reasons, subject to the restriction on
reducing the pay of career senior executives in Sec. 534.406(b) or
setting pay below the minimum rate of the SES rate range in Sec.
534.403(a).
(2) The SES rate of basic pay of a career senior executive may be
reduced without the employee's consent by the senior executive's agency
or upon transfer of function to another agency only--
(i) If the senior executive has received a less than fully
successful annual summary rating under 5 CFR part 430, subpart C, or
has otherwise failed to meet the performance requirements for a
critical element as defined in 5 CFR 430.303; or
(ii) As a disciplinary or adverse action resulting from conduct-
related activity, including, but not limited to, misconduct, neglect of
duty, or malfeasance.
(3) Prior to reducing a career senior executive's rate of basic
pay, the agency must provide the senior executive with the following:
(i) Written notice of such reduction at least 15 days in advance of
its effective date;
(ii) A reasonable period of time, but not less than 7 days, for the
senior executive to respond to such notice orally and/or in writing and
to furnish affidavits and other documentary evidence in support of that
response;
(iii) An opportunity to be represented in the matter by an attorney
or other representative;
(iv) A written decision and specific reasons for the pay reduction
at the earliest practicable date after the senior executive's response,
if any; and
(v) An opportunity to request, within 7 days after the date of that
decision, reconsideration by the head of the agency, whose
determination with respect to that request will be final and not
subject to further review.
(4) Reductions in pay under paragraph (j) of this section are not
appealable under 5 U.S.C. 7543.
0
17. In newly redesignated Sec. 534.405, revise paragraphs (a)(2)(i),
(b), (c), and (f) to read as follows:
Sec. 534.405 Performance Awards.
(a) * * *
(2) * * *
(i) A former SES career appointee who elected to retain award
eligibility under 5 CFR part 317, subpart H. If the rate of basic pay
of the individual is higher than the maximum rate of basic pay for the
applicable SES rate range, the maximum rate of that SES rate range is
used for crediting the agency award pool under paragraph (b) of this
section and the amount the individual may receive under paragraph (c)
of this section.
* * * * *
(b)(1) The total amount of performance awards paid during a fiscal
year by an agency may not exceed the greater of--
(i) Ten percent of the aggregate career SES rates of basic pay for
the agency as of the end of the fiscal year prior to the fiscal year in
which the award payments are made; or
(ii) Twenty percent of the average annual rates of basic pay for
career SES appointees of the agency as of the end of the fiscal year
prior to the fiscal year in which the award payments are made.
(2) In determining the aggregate career SES rates of basic pay and
the average annual rate of basic pay as of the end of FY 2003 for the
purpose of applying paragraph (b) of this section, agencies must use
the annual rate of basic pay, plus any applicable locality-based
comparability payment under 5 U.S.C. 5304 or special geographic pay
adjustment established for law enforcement officers under section
404(a) of the Federal Employees Pay Comparability Act of 1990 (Pub. L.
101-509), which the SES appointees were receiving at the end of FY
2003.
(c) The amount of a performance award paid to an individual career
appointee may not be less than 5 percent nor more than 20 percent of
the appointee's SES rate of basic pay as of the end of the performance
appraisal period.
* * * * *
(f) Performance awards must be paid in a lump sum except in those
instances when it is not possible to pay the full amount because of the
applicable aggregate limitation on pay during a calendar year under 5
CFR part 530, subpart B. In that case, any amount in excess of the
applicable aggregate limitation must be paid at the beginning of the
following calendar year in accordance with 5 CFR part 530, subpart B.
The full performance award, however, is charged against the agency
bonus pool under Sec. 534.405(b) for the fiscal year in which the
initial payment was made.
0
18. Section 534.406 is revised to read as follows:
Sec. 534.406 Conversion to the SES pay system.
(a) On the first day of the first applicable pay period beginning
on or after January 1, 2004, agencies must convert an existing SES rate
of basic pay for a senior executive to an SES rate of basic pay that is
equal to the employee's rate of basic pay, plus any applicable
locality-based comparability payment under 5 U.S.C. 5304 which the
senior executive was receiving immediately before that date, except as
provided in paragraph (b) of this section. The newly converted rate is
the senior executive's SES rate of basic pay. An agency's establishment
of an SES rate of basic pay for a senior executive under this paragraph
is not considered a pay adjustment for the purpose of applying Sec.
534.404(c).
(b) An SES member's rate of basic pay, plus any applicable
locality-based comparability payment under 5 U.S.C. 5304 to which the
employee was entitled on November 24, 2003, may not be reduced for 1
year after the first day of the first applicable pay period beginning
on or after January 1, 2004. If an SES member's rate of basic pay, plus
any applicable locality-based comparability payment under 5 U.S.C. 5304
to which the employee was entitled on November 23, 2003, is higher than
the rate in effect immediately prior to the first day of the first
applicable pay period beginning on or after January 1, 2004, the agency
must use the higher rate for the purpose of converting SES members to
the SES pay system.
(c) An SES member who is assigned to a position outside the 48
contiguous States and the District of Columbia to a position overseas
or in Alaska, Hawaii, Guam or the Commonwealth of the Northern Mariana
Islands, Puerto Rico, the U.S. Virgin Islands, or other U.S.
territories and possessions as of the first day of the first applicable
pay period beginning on or after January 1, 2004, will be converted to
a new rate of basic pay that equals the senior executive's current rate
of basic pay, plus the amount of locality pay authorized under 5 U.S.C.
5304 for the applicable locality pay area upon the employee's initial
reassignment to a position in the 48 contiguous States or the District
of Columbia. The adjustment will be prospective, not retroactive, and
it will not be considered a pay adjustment for the purpose of applying
Sec. 534.404(c). If the senior executive's rate of basic pay did not
exceed the rate for level III of the Executive Schedule while assigned
to a position outside the 48 contiguous States or the District of
Columbia, upon initial reassignment to a locality pay
[[Page 70367]]
area the senior executive's converted rate of basic pay may not exceed
the rate for level III of the Executive Schedule. The newly converted
rate is the senior executive's SES rate of basic pay.
(d) On the first day of the first applicable pay period beginning
on or after January 1, 2004, a law enforcement officer (LEO), as
defined in 5 CFR 531.301, who is a member of the SES will have his or
her rate of basic pay, plus any applicable special geographic pay
adjustment established for LEOs under section 404(a) of the Federal
Employees Pay Comparability Act of 1990 (Pub. L. 101-509) to which he
or she was entitled immediately before that date, converted to a new
SES rate of basic pay. The newly converted rate is the senior
executive's SES rate of basic pay, and any pay adjustments approved on
or after January 11, 2004, must be computed based on the senior
executive's converted rate of basic pay. Conversion to a new SES rate
of basic pay is not considered a pay adjustment for the purpose of
applying Sec. 534.404(c).
0
19. Section 534.407 is added to read as follows:
Sec. 534.407 Pay computation and aggregate compensation.
(a) Except as provided in paragraph (b) of this section, pay for
members of the SES must be computed in accordance with 5 U.S.C.
5504(b).
(b) To determine the hourly rate of pay for members of the SES,
divide the annual SES rate of basic pay by 2,087 and round to the
nearest cent, counting one-half cent and over as a whole cent. To
derive the biweekly rate, multiply the hourly rate by 80.
(c) Senior executives are subject to the applicable aggregate
limitation on pay in 5 CFR part 530, subpart B.
0
20. In newly redesignated Sec. 534.408, in the last sentence of
paragraph (b) remove the word ``subject'' and add in its place the word
``subpart.''
PART 575--RECRUITMENT AND RELOCATION BONUSES; RETENTION ALLOWANCES;
SUPERVISORY DIFFERENTIALS
0
21. The authority citation for part 575 continues to read as follows:
Authority: 5 U.S.C. 1104(a)(2), 5753, 5754, 5755 and 5757; Pub.
L. 107-273, 116 Stat. 1780; secs. 302 and 404 of the Federal
Employees Pay Comparability Act of 1990 (FEPCA) (Pub. L. 101-509),
104 Stat. 1462 and 1466, respectively; E.O. 12748, 3 CFR, 1992 Comp.
p. 316.
Subpart C--Retention Allowances
0
22. In Sec. 575.306, paragraph (b) is revised to read as follows:
Sec. 575.306 Payment of retention allowance.
* * * * *
(b) The head of an agency may not authorize a retention allowance
for an employee if or to the extent that such an allowance, when added
to the employee's estimated aggregate compensation, as defined in 5 CFR
530.202, would cause the aggregate compensation actually received by
the employee during the calendar year to exceed the applicable
aggregate limitation on pay under 5 CFR part 530, subpart B, at the end
of the calendar year.
* * * * *
0
23. In Sec. 575.307, paragraph (a) is revised to read as follows:
Sec. 575.307 Reduction or termination of retention allowance.
(a) The agency must reduce or terminate the authorized amount of a
retention allowance to the extent necessary to ensure that the
employee's estimated aggregate compensation, as defined in 5 CFR
530.202, does not exceed the applicable aggregate limitation on pay
under 5 CFR part 530, subpart B, at the end of the calendar year.
* * * * *
[FR Doc. 04-26728 Filed 12-1-04; 5:03 pm]
BILLING CODE 6325-39-P