CPM 2004-31 - December 30, 2004

MEMORANDUM FOR HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES

The President has signed an Executive order to implement the January 2005 pay adjustments. (See Attachment 1.) Section 640 of Division H of the Consolidated Appropriations Act, 2005 (Public Law 108-447, December 8, 2004), authorized a 3.5 percent overall average pay increase for General Schedule (GS) employees. This memorandum reviews relevant portions of the Executive order and provides general information on the 2005 pay adjustments for the GS and certain other pay systems and schedules.

2005 Salary Tables and Effective Date

The 2005 salary tables discussed in this memorandum can be found on the Office of Personnel Management’s (OPM’s) Web site at http://www.opm.gov/oca/payrates/index.asp. Unless otherwise noted, the 2005 rates of pay will become effective on the first day of the first pay period beginning on or after January 1, 2005 (January 9, 2005).

The General Schedule and Other Statutory Pay Systems

The Executive order provides for an across-the-board increase of 2.5 percent in the rates of basic pay for the statutory pay systems––the GS, the Foreign Service schedule, and certain schedules for the Veterans Health Administration of the Department of Veterans Affairs.

Locality Payments

The President’s Executive order establishes the amounts of the 2005 locality payments for GS employees. On December 13, 2004, the President’s Pay Agent (the Secretary of Labor, the Director of the Office of Management and Budget (OMB), and the Director of OPM) extended the 2005 locality-based comparability payments to certain categories of non-GS employees. The maximum locality rate of pay for these employees is the rate for level III of the Executive Schedule ($149,200 in 2005). By law, Executive Schedule officials and members of the Senior Executive Service (SES) and certain other equivalent pay systems are not authorized to receive locality payments.

Changes in Locality Pay Area Boundaries in 2005

The President’s Pay Agent has approved changes in the boundaries of most of the 32 locality pay areas. These changes will become effective on the first day of the first pay period beginning on or after January 1, 2005 (January 9, 2005). The new locality pay area boundaries are based on metropolitan statistical areas identified in OMB Bulletin 04-03, which is available on the Internet at: http://www.whitehouse.gov/omb/bulletins/fy04/b04-03.html. The new locality pay area boundaries also reflect new criteria for evaluating areas adjacent to a locality pay area for inclusion in the pay area. The criteria were recommended by the Federal Salary Council and appear in the Council’s recommendation letter of October 28, 2003, at http://www.opm.gov/oca/fsc/recommendation03.asp. The new locality pay area definitions are posted on OPM’s Web site at http://www.opm.gov/oca/05tables/locdef.asp.

With this memorandum, we are providing a list of the 2005 locality pay percentages for the 32 locality pay areas, as well as the net percentage increase in each area (reflecting the combined effect of the 2.5 percent across-the-board increase and the applicable increase in the locality pay percentage rate.) (See Attachment 2.) Also provided is a chart showing an example of how the 2005 locality rate and net increase is computed for an employee in the “Rest of U.S.” locality pay area. (See Attachment 3.)

2004 Annual Review of Special Salary Rates

In a separate memorandum, OPM has announced the results of the 2004 annual review of existing special salary rates. As a result of the annual review, 398 special rate schedules will be increased in tandem with the 2.5 percent increase in General Schedule rates. (See 2004 Annual Review of Special Salary Rates.)

The Senior Executive Service

On December 6, 2004, the Office of Personnel Management (OPM) issued final regulations on the administration of rates of basic pay and performance awards for members of the Senior Executive Service (SES). These final regulations also address the higher aggregate limitation on pay for SES members and employees in senior-level (SL) and scientific or professional (ST) positions covered by certified performance appraisal systems. On July 29, 2004, OPM issued regulations at 5 CFR part 430, subpart D, to establish the criteria for certifying SES and SL/ST performance appraisal systems for the purpose of obtaining access to the higher pay rates. Taken together, these two sets of regulations comprise the new SES pay-for-performance system. Information on setting and adjusting SES rates of basic pay may be found at http://www.opm.gov/oca/compmemo/2004/2004-25.asp.

With these new regulations, agencies with certified performance appraisal systems for senior executives are permitted to pay their highest-performing SES members above the rate for level III of the Executive Schedule ($149,200 in 2005)—up to the rate for level II of the Executive Schedule ($162,100 in 2005). Agencies with certified performance appraisal systems for senior executives and/or SL/ST employees must also apply a higher aggregate limitation on pay—up to the Vice President’s salary ($208,100 in 2005). Information on obtaining certification of performance appraisal systems for senior executives and SL/ST employees is available at http://www.opm.gov/oca/compmemo/2004/2004-13.asp.

Administrative Law Judges

The Executive order reflects a decision by the President to increase the rates of basic pay for administrative law judges (ALJs) by 2.5 percent (rounded to the nearest $100). The rate of basic pay for AL-1 will be $140,300. The rate of basic pay for AL-2 will be $136,600. The rates of basic pay for AL-3/A through 3/F range from $93,500 to $129,300, as shown in the table following “Administrative Appeals Judges,” below.

Administrative Appeals Judges

Under 5 U.S.C. 5372b, the rates of basic pay for administrative appeals judge (AAJ) positions must be set at a rate not less than the minimum rate of basic pay for level AL-3 and not more than the maximum rate of basic pay for level AL-3 of the ALJ pay system established under 5 U.S.C. 5372. OPM’s regulations at 5 CFR 534.603 link the structure of the AAJ pay system directly to the structure for level AL-3 of the ALJ pay system. The AAJ pay system includes six rates of basic pay—AA-1, 2, 3, 4, 5, and 6. These rates correspond to the rates of basic pay for AL-3/A, B, C, D, E, and F of the ALJ pay system, as shown in the following table:

The Executive Schedule

Under 5 U.S.C. 5318, Executive Schedule rates of pay will be increased by 2.5 percent, rounded to the nearest $100. The new Executive Schedule rates of pay will become effective on the first day of the first pay period beginning on or after January 1, 2005 (January 9, 2005).

Order for Processing Pay Actions

The general pay adjustments that take effect in January 2005 must be processed before any individual pay action (e.g., a within-grade increase or promotion) that takes effect on the same date. General pay adjustments include across-the-board increases under 5 U.S.C. 5303, increases in locality payments or other geographic adjustments, special rate increases, increases in retained rates, and increases in continued rates under 5 CFR 531.703 or 531.307. If multiple individual pay actions become effective on the date of the January 2005 pay adjustment, those actions must be processed in the order that satisfies the simultaneous action rule in 5 CFR 531.203(f).

2005 Premium Pay Caps

Under 5 U.S.C. 5547(a) and 5 CFR 550.105, GS employees and other covered employees may receive certain types of premium pay in a biweekly pay period only to the extent that the sum of basic pay and premium pay for the pay period does not exceed the greater of the biweekly rate for (1) GS-15, step 10 (including any applicable locality rate or special salary rate), or (2) level V of the Executive Schedule ($131,400 in 2005). In certain emergency or mission-critical situations, an agency may apply an annual premium pay cap instead of a biweekly premium pay cap, subject to the conditions prescribed by law and regulation.  (See 5 U.S.C. 5547(b) and 5 CFR 550.106-550.107.) We have posted the biweekly premium pay caps on OPM’s Web site at http://www.opm.gov/oca/pay/html/05GSCap.asp.

Pay Administration

We are providing examples of pay computations to assist agencies in administering the 2005 pay adjustments for GS employees. These examples are available on OPM’s Web site, as follows:

Examples of January 2005 Pay Computations – See http://www.opm.gov/oca/compmemo/2004/05PAYCOMP.ASP.

How to Compute Rates of Pay -- See http://www.opm.gov/oca/pay/HTML/computerates.asp.

How to Compute FLSA Overtime Pay -- See http://www.opm.gov/oca/pay/HTML/computeflsa.asp.

Salary Tables for 2005

The Government Printing Office will publish the “Salary Tables for 2005” book in early 2005. The salary table book will provide the 2005 salary tables, locality pay tables (including hourly rate tables), and detailed information on administering locality rates of pay, calculating rates of pay, maximum limitations on pay, and deductions for benefits. The Internal Revenue Service (IRS) Publication 15, Circular E, Employer’s Tax Guide (revised January 2005), will show the 2005 wage bracket income tax withholding tables for both single and married persons who are paid on a biweekly basis. IRS will mail Publication 15 to employers, and this publication also should be available at IRS offices in December 2004. (Call 1-800-829-3676 to order copies.) IRS publications may be downloaded from the IRS Web site at http://www.irs.gov/formspubs/index.html.

Questions

For additional information, agency Chief Human Capital Officers and/or Human Resources Directors should contact their assigned OPM Human Capital Officers. Employees should contact their agency human resources offices for assistance.

Attachment 1

Attachment 2

Attachment 3

cc: Chief Human Capital Officers
Human Resources Directors