[Federal Register: July 29, 2004 (Volume 69, Number 145)]
[Proposed Rules]
[Page 45535-45546]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29jy04-34]
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Part VI
Office of Personnel Management
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5 CFR Parts 451, 530, et al.
Senior Executive Service Pay and Performance Awards and Aggregate
Limitation on Pay; Proposed Rule
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Parts 451, 530, 534, and 575
RIN 3206-AK34
Senior Executive Service Pay and Performance Awards and Aggregate
Limitation on Pay
AGENCY: Office of Personnel Management.
ACTION: Proposed rule.
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SUMMARY: The Office of Personnel Management (OPM) is issuing proposed
regulations to implement statutory provisions that establish a new
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. 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: Comments must be received on or before August 30, 2004.
ADDRESSES: Send or deliver comments to Donald J. Winstead, Deputy
Associate Director for Pay and Performance Policy, Office of Personnel
Management, Room 7H31, 1900 E Street, NW., Washington, DC 20415-8200;
by FAX at (202) 606-0824; or by e-mail at
pay-performance-policy@opm.gov.
FOR FURTHER INFORMATION CONTACT: Jo Ann Perrini by telephone at (202)
606-2858; by FAX at (202) 606-0824; or by email at
pay-performance-policy@opm.gov.
SUPPLEMENTARY INFORMATION: The Office of Personnel Management (OPM) is
issuing proposed regulations to implement two statutory provisions that
strengthen the linkage between the performance and pay of an agency's
Senior Executive Service (SES), senior-level (SL), and scientific or
professional (ST) employees. The new SES performance-based pay system
requires agencies to make decisions on setting and adjusting rates of
basic pay for SES members based on individual performance and/or
contribution to the agency's performance as determined under a rigorous
performance management system. OPM, jointly with the Office of
Management and Budget (OMB), also is issuing regulations to prescribe
the criteria and procedures for obtaining certification of an agency's
performance appraisal system(s) for SES members and SL/ST employees.
Agencies must receive certification of their performance appraisal
systems to use the higher base pay limitation for SES members and to
use the higher aggregate limitation on pay for SES and SL/ST employees.
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.''
On January 13, 2004, OPM issued interim regulations to establish
the new SES performance-based pay system (69 FR 2048). 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 applicable pay
period beginning on or after January 1, 2004 (January 11, 2004, for
most employees). OPM has issued additional guidance on the SES pay
system at http://www.opm.gov/oca/compmemo/index.asp. In these proposed
regulations, we are prescribing 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).
New SES Performance-Based Pay System
Section 1125 of Public Law 108-136 (November 24, 2003) amended 5
U.S.C. 5382 to establish a new performance-based pay system for the SES
that has an ``open-range'' pay band. Each member of the SES will be
paid at one of the rates within the SES rate range. In the interim
regulations issued on January 13, 2004, OPM established the minimum
rate of basic pay for the SES rate range at the rate of basic pay
(excluding locality payments) payable under 5 U.S.C. 5376 for senior-
level positions ($104,927 in 2004). OPM established the maximum rate of
basic pay for the SES rate range at the rate for level III of the
Executive Schedule ($145,600 in 2004). These proposed regulations
establish the maximum rate of basic pay for the SES rate range at the
rate for level II of the Executive Schedule ($158,100 in 2004) for
those agency senior executive performance appraisal systems that have
been certified by OPM, with OMB concurrence, in accordance with 5
U.S.C. 5307 and OPM's regulations at 5 CFR part 430, subpart D. To
receive certification, an agency must demonstrate that the applicable
performance appraisal system makes meaningful distinctions based on
relative performance.
The minimum rate of basic pay for the SES rate range will increase
consistent with any increase in the minimum rate of basic pay for
senior-level positions under 5 U.S.C. 5376, and the maximum rate of
basic pay for the SES rate range will increase with any increase in the
rates for levels II and III of the Executive Schedule. Section
534.404(f) allows agencies to review an initial determination to adjust
a rate of basic pay and grant an additional increase, if warranted, to
a senior executive if there is an additional increase in the rates for
the Executive Schedule that is made effective on the first day of the
first pay period beginning on or after January 1 of that year. Such
additional adjustments in pay must be made effective as of the
effective date of the initial determination to adjust the senior
executive's rate of basic pay.
Conversion to the New SES Pay System
On January 13, 2004, OPM issued interim regulations on conversion
to the new SES pay system. In these proposed regulations, we have
revised Sec. 534.406 to further clarify the rules for converting
senior executives to the new system. Generally, upon conversion to the
new SES pay system, an SES member was entitled to a new rate of basic
pay equal to the existing rate of basic pay plus any applicable
locality payment to which the employee was entitled immediately before
the first day of the first applicable pay period beginning on or after
January 1, 2004 (January 10, 2004, for most employees). However, under
section 1125(c)(2) of Public Law 108-136, 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 (January
11, 2004, for most employees). 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 24, 2003, is higher
than the rate in effect on January 10, 2004, the agency must use the
higher rate for the purpose of converting the SES member to the SES pay
system.
On January 11, 2004, certain SES members who were assigned to
positions that have geographic mobility requirements and who were
assigned outside the 48 contiguous States and the District of Columbia
continued to receive their rate of basic pay in effect on January 10,
2004, or, if higher, the
[[Page 45537]]
rate of basic pay in effect on November 23, 2003. However, upon
reassignment to a position in the 48 contiguous States or the District
of Columbia, these employees are entitled to have their rates of basic
pay converted to a new SES rate of basic pay that equals their current
rate of basic pay, plus the amount of locality pay authorized under 5
U.S.C. 5304 for the applicable locality pay area. A senior executive
who is reassigned to a locality pay area is not automatically entitled
to a rate of basic pay that is higher than the rate for level III of
the Executive Schedule. 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, the senior executive's converted rate of basic pay may not
exceed the rate for level III of the Executive Schedule upon
reassignment to a locality pay area. Of course, an agency may choose to
consider the applicable locality payment when setting or adjusting the
rate of basic pay of a senior executive who transfers to a position
within the 48 contiguous States, but whose position is not subject to a
geographic mobility requirement.
On January 11, 2004, an SES law enforcement officer (LEO) continued
to receive 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 on January 10, 2004, or, if higher, his
or her rate of basic pay plus the LEO special geographic pay adjustment
in effect on November 23, 2003. On March 3, 2004, the President issued
Executive Order 13332, which increased General Schedule rates of pay
and locality-based comparability payments effective on the first day of
the first applicable pay period beginning on or after January 1, 2004
(January 11, 2004, for most employees). As a result, the remaining LEO
special geographic pay adjustment in Boston was terminated as of
January 11, 2004, because a higher locality pay percentage now applies
to LEOs. Agencies must correct the rate of basic pay for SES law
enforcement officers in Boston and base any pay adjustments approved on
or after January 11, 2004, on the senior executive's newly
reconstructed rate of basic pay. (See http://www.opm.gov/oca/compmemo/2004/2004-05.asp.
) The newly reconstructed rate is the senior executive
LEO's rate of basic pay.
Setting and Adjusting Rates of Pay for SES Members
The new subpart D in 5 CFR part 534 prescribes the rules for
setting and adjusting rates of basic pay and granting awards to SES
members. Section 534.404(g) requires agencies to establish a plan for
setting and adjusting rates of basic pay for their senior executives.
The agencies' plans may establish policies on the minimum increase in
pay that may be offered to current employees upon initial appointment
to the SES. An agency may set and adjust a senior executive's rate of
basic pay at any rate within the applicable SES rate range, based on
individual performance and/or contribution to the agency's performance,
as determined under a rigorous performance management system. In this
regard, agencies may consider any unique skills, qualifications, or
competencies that the individual possesses, and their significance to
the agency's mission, as well as the individual's current
responsibilities. Agencies must ensure that only those senior
executives who have demonstrated the highest levels of individual
performance and/or made the greatest contributions to the agency's
performance or, in the case of newly-appointed senior executives, those
who possess superior leadership or other competencies, receive the
highest rates of basic pay and pay adjustments.
Setting rates of basic pay higher than level III of the Executive
Schedule. 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 should be reserved for those senior
executives who have demonstrated the highest levels of individual
performance and/or made the greatest contributions to agency
performance, as determined by the agency through the administration of
its applicable 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. For example, rates of pay higher than the
rate for level III of the Executive Schedule should be reserved for a
senior executive with an exceptionally meritorious accomplishment, for
a senior executive who is assigned to a position with substantially
greater scope and responsibility, or for a senior executive who is
critical to the mission of the agency. In all cases, setting pay above
the rate for level III of the Executive Schedule must be approved by
the agency head or designee who performs the functions described in 5
CFR 430.404(a)(5) and (6) (oversight of senior executive appraisal
process and communication of performance assessment and evaluation
guidelines).
Setting pay upon initial appointment to the SES. Upon initial
appointment to an SES position, an authorized agency official may set
an SES member's rate of basic pay at any rate within the SES rate range
consistent with the restrictions on setting pay above the rate for
level III of the Executive Schedule. The authorized agency official
must determine the new senior executive's appropriate rate of basic 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.
Adjusting SES rates of basic pay. A senior executive who receives
an annual summary rating of outstanding must be considered for an
annual pay increase. A senior executive who receives a summary
performance rating of less than fully successful may not receive an
increase in pay for the current performance appraisal period. Subject
to the 1-year prohibition in 5 U.S.C. 5382(c) on reducing a senior
executive's rate of basic pay (see Sec. 534.406(b)), an authorized
agency official may reduce a senior executive's rate of basic pay for
performance and/or disciplinary reasons. Such a reduction in pay for a
career senior executive may not exceed 10 percent (compared to the
former limitation on reductions in pay of one SES rate, or
approximately 5 percent of basic pay). Any pay reduction may be
appealed to the head of the agency. The agency head's decision is final
and non-reviewable.
12-Month rule. Generally, an authorized agency official may adjust
(i.e., increase or reduce) the rate of basic pay of a senior executive
not more than once in any 12-month period. The setting of pay upon
initial appointment or reappointment to the SES and adjusting an SES
rate of basic pay are considered pay adjustments for this purpose.
However, under Sec. 534.404(c)(4), an authorized agency official may
approve an increase in a senior executive's rate of basic pay more than
once during a 12-month period where the head of an agency or designee
who performs the functions described in 5 CFR 430.404(a)(5) and (6)
determines that an additional increase is warranted (1) for an
exceptionally meritorious accomplishment, (2) for a senior executive
who is reassigned to a position with substantially greater scope and
responsibility, (3) for a senior
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executive who is critical to the mission of the agency and who would be
likely to leave the agency in the absence of a pay increase, or (4) to
align a senior executive with the agency's senior 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).
OPM recognizes that as the rate of basic pay for levels II and III
of the Executive Schedule are increased, the maximum rate of the SES
rate range for an SES performance appraisal system also increases,
which disadvantages agencies that have already granted pay increases to
their senior executives following their SES performance appraisal
periods. We therefore solicit the views of commenters on a proposal to
establish an additional exception to the 12-month rule that would
permit agencies, at their discretion, to grant an additional pay
increase to a senior executive whose rate of basic pay is equivalent to
the rate for level II or level III when the applicable maximum rate is
increased and becomes effective after an agency has already granted a
pay increase to the senior executive. An additional pay increase under
this circumstance would not be considered a pay adjustment for the
purpose of applying the 12-month rule.
Adjustments in pay prior to certification of performance appraisal
system(s). Section 534.404(d) authorizes agencies to increase a senior
executive's rate of basic pay 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 of the agency's
performance appraisal system(s) for senior executives under 5 CFR part
430, subpart D, an agency may increase a senior executive's rate of
basic pay up to the rate for level III of the Executive Schedule where
the individual's performance and/or contributions so warrant and the
senior executive is otherwise eligible for such a pay increase (i.e.,
he or she did not receive a pay adjustment during the previous 12-month
period). On January 20, 2004, the Director of OPM delegated to the
heads of agencies the authority to make limited exceptions to the 12-
month rule. (See http://www.opm.gov/oca/compmemo/2004/2004-04.asp.)
Because we are proposing to provide agencies, in these regulations,
with authority to make exceptions to the 12-month rule under certain
conditions, the Director of OPM intends to withdraw this delegated
authority upon issuance of final regulations on SES pay and performance
awards. An adjustment in pay prior to certification is considered a pay
adjustment for the purpose of applying Sec. 534.404(c).
Adjustments in pay after certification of performance appraisal
system(s). Section 534.404(e) authorizes an agency that receives
certification of its performance appraisal system(s) for senior
executives under 5 CFR part 430, subpart D, to increase a senior
executive's rate of basic pay up to the rate for level II of the
Executive Schedule if warranted and the senior executive is otherwise
eligible for such a pay increase (i.e., he or she did not receive a pay
adjustment during the previous 12-month period). In Sec.
534.404(c)(4), OPM has provided agencies with authority to make
exceptions to the 12-month rule under certain limited conditions.
Agencies must comply with the limitations in Sec. 534.403(a)(2) for
setting a senior executive's rate of basic pay higher than the rate for
level III of the Executive Schedule and reserve these higher rates of
pay for those senior executives who have demonstrated the highest
levels of individual performance and/or made the greatest contributions
to the agency's performance or, in the case of a newly-appointed senior
executive, those who possess superior leadership or other competencies.
A post-certification adjustment in pay is considered a pay adjustment
for the purpose of applying Sec. 534.404(c).
No reduction in pay upon transfer to another agency or suspension
of certification. 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 transfer from an agency with a maximum
SES rate of basic pay equal to the rate for level II of the Executive
Schedule to an agency with a maximum SES rate of basic pay equal to the
rate for level III of the Executive Schedule (Sec. 534.404(h)(2)) or
as the result of a decision to suspend certification of the applicable
performance appraisal system under 5 CFR part 430, subpart D (Sec.
534.403(b)). The senior executive will continue to receive his or her
current SES rate and is not eligible for a pay increase until the
employing agency's applicable performance appraisal system is
certified.
Setting rates of basic pay following a break in SES service. Upon
reappointment to the SES, an agency may set the rate of basic pay of a
former senior executive at any rate within the SES rate range 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 must be set at a rate at least equivalent to the
employee's former SES rate of basic pay.
Performance Awards. As a result of the implementation of the new
SES performance-based pay system, the limit on the total amount of
performance awards that may be granted in a fiscal year and the actual
amount of an individual performance award that may be granted will be
greater than in the past, since both are derived from an SES rate of
basic pay that now includes any applicable locality payment. To
determine the total amount of performance awards that may be granted in
FY 2004, agencies must include any applicable locality payments in
effect at the end of FY 2003 for the purpose of applying the
limitations in Sec. 534.405(b)(1) and (2).
Additional Payments. Agencies must review any determination to
provide additional payments to a senior executive that are calculated
based on the senior executive's rate of basic pay (e.g., retention
allowances and extended assignment incentives). As a result of
conversion to the new SES pay system, a senior executive's rate of
basic pay has increased significantly to include locality payments.
Payments that are calculated based on a senior executive's rate of
basic pay also may have increased significantly.
Aggregate Limitation on Pay
Higher aggregate limitation on pay for senior executives and senior
professionals. Section 1322 of the Chief Human Capital Officers Act of
2002 (Pub. L. 107-296, Title XIII, November 25, 2002) added a new
paragraph (d) to 5 U.S.C. 5307 that permits agencies with certified
appraisal systems for their senior executives and senior professionals,
as applicable, to apply a higher annual aggregate limitation on pay to
those employees. The higher annual aggregate limitation on pay is
equivalent to the total annual compensation payable to the Vice
President, under 3 U.S.C. 104, on the last day of the applicable
calendar year ($203,000 in 2004). Agencies that are not covered by the
performance appraisal system requirements set forth in 5 U.S.C.,
chapter 43, but which are subject to the aggregate limitation in 5
U.S.C. 5307, also must have a certified appraisal system in order to
apply the higher aggregate limitation on pay to their senior executives
and senior professionals.
Agencies without certification must continue to apply an annual
aggregate
[[Page 45539]]
limitation on pay equivalent to the rate for level I of the Executive
Schedule ($174,500 in 2004). The level I aggregate limitation also
continues to apply to (1) other employees covered by 5 U.S.C. 5307; (2)
employees paid under the Executive Schedule established under 5 U.S.C.,
chapter 53, subchapter II; and (3) equivalent categories of employees
whose pay is linked directly to a rate of pay under the Executive
Schedule. In addition, section 1322 of the Act increases the annual
aggregate limitation on pay for judicial branch employees paid under 28
U.S.C. 332(f), 603, and 604. It also authorizes the Director of the
Administrative Office of the United States Courts to prescribe
regulations to implement the higher annual aggregate limitation on pay.
The law requires the regulations of the Administrative Office of the
United States Courts to be consistent with OPM's and OMB's regulations
regarding certification.
Definitions. In Sec. 530.202, we have revised the definition of
aggregate compensation to clarify that it excludes student loan
repayments under 5 U.S.C. 5379 and nonforeign area cost-of-living
allowances under 5 U.S.C. 5941(a)(1). We have added a definition of
aggregate limitation to avoid repeated extended references to the two
statutory limitations--i.e., the limitation in effect at the end of the
calendar year that is equal to the rate for level I of the Executive
Schedule or the rate payable to the Vice President, whichever
limitation applies to the employee. Finally, we have revised the
definition of estimated aggregate compensation to clarify that the term
refers to the estimated compensation an employee would receive but for
the application of the aggregate limitation to future payments. At any
point during a calendar year, an agency may estimate the aggregate
compensation that would be received but for application of the
aggregate limitation to future payments. Excess amounts already
deferred for payment at the beginning of the next calendar year are not
considered in computing the current estimate, since those payments are
not projected to be received in the current calendar year.
Also in Sec. 530.202, we have added extended assignment incentives
authorized under 5 U.S.C. 5757 to the list of payments that are covered
by the definition of aggregate compensation and discretionary payments.
Extended assignment incentives, which were established by section 207
of Public Law 107-273 (November 2, 2002), permit the head of an
Executive agency to pay an extended assignment incentive to certain
Federal employees assigned to positions located in a territory or
possession of the United States, the Commonwealth of Puerto Rico, or
the Commonwealth of the Northern Mariana Islands.
Deferring Discretionary Payments. We have clarified Sec.
530.203(d) to require that a retention allowance must be reduced or
terminated before deferring any other discretionary payment, consistent
with 5 CFR 575.307(a). However, for a discretionary payment to be
considered deferred, its payment in the current calendar year must be
required by a mandatory personnel policy or it must have been
officially approved to be paid within the current calendar year.
Otherwise, the setting of the payment date for a discretionary payment
in the next calendar year is not a deferral under these regulations and
has no effect on the payment of retention allowances in the current
year.
Overestimating an Employee's Aggregate Compensation. In Sec.
530.203, we have added a new paragraph (h) to address situations where
an agency overestimates an employee's aggregate annual compensation for
the calendar year at an earlier point in the year and, as a result,
unnecessarily defers payments. In this case, an agency may make
corrective payments in the current calendar year rather than waiting to
make the payments at the beginning of the next calendar year.
Change in Aggregate Limitation on Pay. In Sec. 530.203(g) and (h),
we have provided rules for taking corrective actions when the aggregate
limitation is increased or decreased during a calendar year as a result
of gaining or losing certification of a senior executive performance
appraisal system.
Lump-Sum Payments in Excess of Aggregate Limitation on Pay. We have
amended Sec. 530.204(c) to require that if an employee transfers to
another agency, the gaining agency is responsible for making any lump-
sum payment in excess of the aggregate limitation. The previous
employing agency must provide the gaining agency with documentation
regarding the employee's excess amount. The previous employing agency
must provide a fund transfer equal to the total cost of the lump-sum
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 current employing agency is responsible for making
the lump-sum payment to the employee as provided in Sec. 530.204(d).
Recordkeeping. In Sec. 530.205, we have added a number of specific
recordkeeping requirements that deal with the source and payment of
deferred excess amounts, consistent with other provisions in the
regulations.
Plain Language. OPM is also taking this opportunity to revise and
reorganize part 530, subpart B, Aggregate Limitation on Pay, to improve
its readability. We also have made some substantive changes to the
regulations to assist agencies in administering them. In addition, we
have replaced the verb ``shall'' with ``must'' for added clarity and
readability. In this regard, any provision using the verb ``must'' is
intended to have the same meaning and effect as previous provisions
using ``shall.''
Extended Award Authority
The Federal Employees Pay Comparability Act of 1990 established a
specific authority to pay performance-based cash awards to employees
paid under the General Schedule (GS) (5 U.S.C. 4505a). This law
specifies that the President may extend application of this authority
to groups of employees not covered by the General Schedule at the
request of the agency head. This extension authority was delegated by
E.O. 12828 to the Director of OPM. Over the years some agencies have
incorrectly cited this law as the authority under which they pay
performance-based awards to non-GS employees. OPM is extending by
regulation the provisions of 5 U.S.C. 4505a to non-GS employees covered
by 5 U.S.C. chapter 45 and 5 CFR part 451 who are not otherwise
eligible for performance-based cash awards under another specific
statutory authority, including 5 U.S.C. 5384 (SES performance awards).
Extending this authority will avoid incorrect references and citations
and provide agencies with a specific authority to grant performance-
based cash awards to their SL/ST (and other non-GS) employees.
Recruitment and Relocation Bonuses and Retention Allowances
We have made technical amendments to the regulations on recruitment
and relocation bonuses and retention allowances in 5 CFR part 575 to
conform to the changes made to the aggregate limitation on pay in 5 CFR
part 531, subpart B.
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.
[[Page 45540]]
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 parts 451, 530, 534, 575
Decorations, medals, awards, Government employees, Law Enforcement
Officers, Reporting and recordkeeping requirements, Hospitals,
Students, and Wages.
Office of Personnel Management.
Kay Coles James,
Director.
Accordingly, OPM is proposing to amend parts 451, 530, 534, and 575
of title 5 of the Code of Federal Regulations as follows:
PART 451--EMPLOYEE AWARDS
Subpart A--Agency Awards
1. The authority citation for part 451 continues to read as
follows:
Authority: 5 U.S.C. 4302, 4501-4509; E.O. 11438, 12828.
2. In Sec. 451.101 paragraph (d), remove the reference ``Sec.
534.403'' and add the reference ``Sec. 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).
Sec. 451.104 [Amended]
3. In Sec. 451.104(a)(3), remove the reference ``Sec. 534.403''
and add the reference ``Sec. 534.405'' in its place.
PART 530--PAY RATES AND SYSTEMS (GENERAL)
4. In part 530, 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), Public Law 101-509, 104 Stat. 1462 and 1466 (5 U.S.C.
5304 note, 5305 note).
Subpart C also issued under sec. 4, Public Law 103-89, 107 Stat.
983 (5 U.S.C. 5401 note); and sec. 1322, Title XIII, Public Law 107-
296, 116 Stat. 2297 (5 U.S.C. 5307).
4a. Subpart B of Part 430 is revised 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 of the performance
appraisal system covering that employee under 5 CFR part 430, subpart
D. 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.
[[Page 45541]]
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 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
[[Page 45542]]
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
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
5. 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, Public Law 108-
136, 117 Stat. 1392.
Subpart D--Pay and Performance Awards Under the Senior Executive
Service
6. 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 systems 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.
7. 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.
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.
Senior executive means a member of the Senior Executive Service
(SES).
SES or ES rate means a rate of basic pay within the SES or ES rate
range assigned to a member of the SES under Sec. 534.403(a).
SES or ES 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]
8. Redesignate Sec. Sec. 534.403 and 534.405 as Sec. Sec. 534.405
and 534.408 respectively.
9. Add new Sec. 534.403 to read as follows:
[[Page 45543]]
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). 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).
(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.
10. 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)(2). 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) An agency may provide an increase in pay 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 and pay adjustments.
(3) 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)(2).
(4) 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.
(5) 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, except as provided in
paragraph (c)(4) of this section.
(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 prior to certification of the
applicable agency performance appraisal system as provided in paragraph
(d) of this section or after certification of the applicable agency
performance appraisal system as provided in paragraph (e) 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; and
(iii) A zero adjustment in pay made during the 12-month period
preceding
[[Page 45544]]
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.
(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) determines that--
(i) The senior executive's exceptionally meritorious accomplishment
significantly contributes to the agency's performance;
(ii) The senior executive is reassigned to a position with
substantially greater scope and responsibility;
(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) Any pay adjustment made as a result of a determination under
paragraph (b)(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
increase 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 such an increase if warranted under the conditions
prescribed in paragraph (b)(2) of this section and the senior executive
is otherwise eligible for such a pay 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)(2) of this section if the senior executive is
otherwise eligible for such a pay increase (i.e., he or she did not
receive a pay adjustment under Sec. 534.404(c) during the previous 12-
month period). The agency head or designee who performs the functions
described in 5 CFR 430.404(a)(5) and (6) may make exceptions to the 12-
month rule in paragraph (c) of this section under certain limited
conditions prescribed in paragraph (c)(4) of this section. An increase
in pay made under this paragraph is considered a pay adjustment for the
purpose of applying Sec. 534.404(c).
(f) Effect of Additional increases in Executive Schedule rates of
pay. 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
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. 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;
(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)
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)(2).
(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)(2) 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 from an agency with a maximum SES
rate of basic pay equal to the rate for level II of the Executive
Schedule to an agency with a maximum SES rate of basic pay 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
[[Page 45545]]
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 must be set at a rate at least equal to
the employee's former SES rate of basic pay. 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, unless a determination is made under Sec.
534.404(c)(4) that an 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 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.
11. 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 (Public
Law 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.
12. A new Sec. 534.406 is added 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
[[Page 45546]]
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) Certain SES members in positions that have geographic mobility
requirements and who are assigned 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 their 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 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 reassignment to a locality pay area
the senior executive's converted rate of basic pay may not exceed the
rate for level III of the Executive Schedule consistent with the
limitations in Sec. 534.403(a)(2) on increasing a senior executive's
rate of basic pay up to the rate for level II 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 (Public Law 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).
13. Section 534.407 is added to subpart D 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.
14. In newly redesignated Sec. 534.408, remove the word
``subject'' and add in its place the word ``subpart'' in the last
sentence of paragraph (b).
PART 575--RECRUITMENT AND RELOCATION BONUSES; RETENTION ALLOWANCES;
SUPERVISORY DIFFERENTIALS, AND EXTENDED ASSIGNMENT INCENTIVES
15. The authority citation for part 575 continues to read as
follows:
Authority: 5 U.S.C. 1104(a)(2), 5753, 5754, and 5755; 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
16. 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.
* * * * *
17. 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. 04-17320 Filed 7-26-04; 4:54 pm]
BILLING CODE 6325-39-P