U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

Table of Contents

IV. Premium Pay

Overview

This part provides a review of issues related to the premium pay provisions that apply to Federal LEOs and other law enforcement personnel. The vast majority of LEOs and many other law enforcement personnel are covered by the standard Governmentwide premium pay provisions established in title 5, United States Code (including provisions that reflect overtime pay entitlements under the Fair Labor Standards Act (FLSA) for covered nonexempt employees). However, separate nonstandard premium pay provisions apply to certain LEOs and other law enforcement personnel, and additional flexibility has been provided to the Federal Aviation Administration, the Transportation Security Administration, and the Department of Defense to modify premium pay entitlements generally. We recommend that OPM be given regulatory authority to establish a Governmentwide framework of premium pay rules for Federal law enforcement employees in consultation with employing agencies and with the concurrence of the Attorney General. Our findings and recommendations are summarized in more detail below.

Findings

• Some Federal agencies have been given authority to establish their own premium pay rules (e.g., the Federal Aviation Administration, the Transportation Security Administration, and the Department of Defense), while others are covered by special law enforcement premium pay provisions established in law. Such disparities in premium pay entitlements can produce confusion, administrative problems, perceptions of inequity, and staffing disruptions.
• There is a strong sentiment among agencies and law enforcement employees for consistency in premium pay entitlements. However, codifying standard premium pay rules in law is problematic. This leads to rigidity and an inability to respond to changing conditions and evolving practices in the non-Federal workforce.
• Caps on aggregate premium pay for FLSA-exempt employees serve important purposes and pending legislative proposals to bar their application to availability pay for criminal investigators would result in excessive pay increases for affected employees, produce pay inversions, and create new inequities by providing special treatment for one category of employees.
• Availability pay has certain features that are inherently complex and have resulted in anomalies that are difficult to fix in legislation.
• There are no consistent principles that determine when and how much premium pay should be creditable for retirement; instead Congress has taken an ad hoc approach that has resulted in perceptions of inequitable treatment.

Recommendations

OPM should be given regulatory authority to establish a framework of premium pay rules for Federal law enforcement employees throughout the Government, in consultation with employing agencies and with the concurrence of the Attorney General. This approach would ensure that any changes are reasonable and consider all interests. Working with Federal law enforcement agencies and the Attorney General, OPM could develop appropriate solutions to existing problems associated with premium pay caps or other premium pay provisions.

In reaching this conclusion, we considered (a) covering all law enforcement employees under a single statutory premium pay authority, (b) providing each agency with independent administrative authority to establish premium pay rules, or (c) continuing the status quo, under which agencies are covered by a patchwork of different premium pay statutes or are given broad administrative authority. We found none of these options appealing. Our recommendation balances the need for flexibility with the need for consistency. Allowing OPM to play a central, coordinating role, working closely with law enforcement agencies and the Attorney General, will result in premium pay policies that are more supportive of agency mission requirements, while still providing the kind of consistency needed to satisfy Governmentwide interests. This is particularly the case with respect to retirement credit for overtime pay, given OPM's role as administrator of the Federal civilian retirement systems.

Summary of Standard Premium Pay Provisions

The standard premium pay provisions under title 5, United States Code, are described below. For the purpose of applying premium pay rules, a "rate of basic pay" includes any applicable locality payment or special salary rate. These standard premium pay provisions apply unless the employee is covered by nonstandard provisions, as described in Section C.

Overtime Pay

FLSA-covered employees receive 1.5 times their hourly regular rate for overtime hours. FLSA-exempt employees receive 1.5 times their hourly rate of basic pay, subject to an overtime hourly rate cap. The overtime hourly rate cap is the greater of (a) 1.5 times the GS-10 step 1 hourly rate of basic pay or (b) the employee's rate of basic pay. An employee is entitled to at least 2 hours of "call-back" overtime pay or compensatory time off when the employee is required to perform irregular overtime work on a day when work was not scheduled for him or her, or when irregular overtime work requires an employee to return to the worksite on a regular workday after the employee has gone home.

Compensatory Time Off

Compensatory time off may be granted to employees for an equal amount of time spent in irregular overtime work or, for an employee under a flexible work schedule, irregular or regularly scheduled overtime work. When the compensatory time off is used, the employee is excused from his or her non-overtime regular work schedule and receives the regular rate of basic pay for that time off.

Sunday Pay

Full-time employees are entitled to 25 percent of their hourly rate of basic pay for each non-overtime hour that is part of a regularly scheduled tour that falls in whole or in part on Sunday.

Night Pay Differential

White-collar employees receive a 10 percent night pay differential for all regularly scheduled hours between 6:00 p.m. and 6:00 a.m. Blue-collar employees under the Federal Wage System receive 7.5 percent or 10 percent night differential, depending on whether the majority of hours in the work shift are between 3 p.m. and midnight or between 11 p.m. and 8 a.m.

Holiday Premium Pay

Employees are entitled to 100 percent of their hourly rate of basic pay for each non-overtime hour of work on a Federal holiday in addition to regular holiday pay; thus, the total pay on the holiday is 2 times the normal amount. Employees who are required to perform any work during basic (non-overtime) holiday hours are entitled to a minimum of 2 hours of holiday premium pay.

Premium Pay Caps

Premium pay generally may not be paid during a biweekly pay period to the extent it causes the sum of an employee's basic pay and premium pay to exceed the applicable biweekly rate for GS-15, step 10, or the biweekly rate for level V of the Executive Schedule ($128,200 in 2004), whichever is higher. An annual premium pay cap must be applied instead of a biweekly cap when OPM or the employing agency determines that an emergency involving a direct threat to life or property exists and an employee is performing work in connection with the emergency or its aftermath. Heads of agencies also have discretionary authority to approve the use of an annual premium pay cap whenever the agency determines that an employee is performing mission-critical work and that an annual cap is needed. However, certain types of regular and recurring premium pay (e.g., AUO pay and law enforcement availability pay) remain subject to a biweekly cap, even while other types of premium pay are simultaneously subject to an annual cap.

Administratively Uncontrollable Overtime (AUO) Pay

At agency discretion, certain employees (e.g., Border Patrol agents) may receive administratively uncontrollable overtime pay equal to 10-25 percent of their basic pay (subject to the biweekly premium pay cap). Most AUO recipients receive a rate of 25 percent based on working an average of at least 9 hours of irregular overtime hours per week. AUO pay may be approved for an employee who occupies a position in which the hours of duty cannot be controlled administratively and which requires substantial amounts of irregular overtime work. AUO recipients receive regular hourly overtime pay for regularly scheduled overtime hours. Also, FLSA-covered AUO recipients receive an extra half rate for irregular overtime hours in addition to AUO pay. AUO pay is treated as basic pay for retirement and life insurance purposes for LEOs only. Entitlement to retirement-creditable AUO pay is based strictly on the definition of "law enforcement officer" in the retirement laws at 5 U.S.C. 8331(20) and 8401(17).

Law Enforcement Availability Pay

Criminal investigators and certain similar law enforcement employees generally are entitled to receive law enforcement availability pay equal to 25 percent of their rate of basic pay (subject to the biweekly premium pay cap). Availability pay is compensation for (a) all irregular overtime hours, (b) any regularly scheduled overtime hours that are part of the first 2 overtime hours on any regular workday, and (c) certain non-work hours during which an employee is placed in availability status. Availability pay recipients are not covered by the FLSA. Availability pay is basic pay for purposes of retirement benefits, life insurance, and severance pay. This means it generally increases an LEO's retirement annuity by 25 percent.

Summary of Nonstandard Premium Pay Provisions

Following is a summary of the nonstandard premium pay entitlements applicable to major groups of LEOs and other law enforcement personnel. For this purpose, "nonstandard" refers to provisions authorized outside of 5 U.S.C. chapter 55, subchapter V. (See Appendix C for additional information regarding these premium pay provisions and other smaller groups with nonstandard premium pay entitlements.)

LEOs

U.S. Secret Service Uniformed Division (USSSUD) and U.S. Park Police officers receive overtime and other premium pay under the provisions established in the District of Columbia code. Officers at the lower ranks receive overtime pay at a rate of 1.5 times their rate of basic pay, and Lieutenants and above receive their rate of basic pay for each hour of overtime work. USSSUD officers are subject to a premium pay cap equal to the lesser of (a) 150 percent of the rate of basic pay for GS-15, step 1 (including locality pay), or (b) the rate for level V of the Executive Schedule.

The Transportation Security Administration (TSA) has independent authority to establish premium pay rules for its employees, including its law enforcement employees (i.e., TSA criminal investigators, as well as Federal air marshals who are detailed to the Bureau of Customs and Immigration Enforcement). However, except for premium pay for Sunday and night work, TSA is following rules that mirror the title 5 premium pay rules with respect to its LEOs. TSA employees receive 25 percent Sunday pay only for non-overtime hours that actually fall on Sunday. The TSA rule is less generous than the title 5 rule which provides 25 percent Sunday pay for each non-overtime hour that is part of a tour of duty that falls in whole or part on Sunday. TSA employees receive a 10 percent night pay differential (same as title 5 employees), except that TSA employees may not receive a night pay differential during paid leave hours. The TSA rule is less generous than the title 5 rule which provides night pay for paid leave hours during night hours, as long as the total hours of paid leave during the pay period are less than 8 hours. TSA generally follows the title 5 premium pay caps, but the agency has "grandfathered" some employees who were hired before it decided to apply those caps. Federal air marshals are entitled to retirement-creditable availability pay on the same basis as criminal investigators under the regular title 5 rules. However, their availability pay is governed by TSA rules instead of by title 5 rules.

U.S. Capitol Police officers receive overtime and other premium pay under a separate statutory authority. These officers are subject to rules that parallel the title 5 rules for night, holiday, and Sunday premium pay. Premium pay generally may not be paid during a biweekly pay period to the extent that it causes the sum of basic pay and premium pay to exceed $5,885.46 (which is the biweekly rate that corresponds to the annual rate of $153,022). Officers at the rank of Lieutenant or higher may earn compensatory time off for overtime work, but they are not entitled to overtime pay. However, the Capitol Police Chief may establish policies providing for overtime compensation for officers at the rank of Lieutenant and above, consistent with the overtime rules for USSSUD and Park Police officers.

U.S. Postal Service inspectors receive premium pay (including law enforcement availability pay) in the same manner as GS criminal investigators. Also, postal inspectors are subject to premium pay caps that mirror those in 5 U.S.C. 5547. However, the Postal Service administers these pay provisions for postal inspectors, instead of OPM. Postal Service Inspector General criminal investigators also receive premium pay (including availability pay) in the same manner as GS criminal investigators, subject to the same caps.

Certain GS-1816 immigration inspectors have duties that qualify them as LEOs and may receive overtime pay under the "1931 Act" for any inspectional work they perform. (See discussion in the next subsection on immigration inspectors who receive overtime and other premium pay under the 1931 Act provisions. The 1931 Act is the Act of March 2, 1931, 46 Stat. 1467, which is codified at 8 U.S.C. 1353a and 1353b.)

Other Law Enforcement Employees

Customs officers (currently defined to include customs inspectors and canine enforcement officers) receive overtime and other premium pay under the Customs Officer Pay Reform Amendments (COPRA), which were enacted in Public Law 103-66 (August 10, 1993). (See 19 U.S.C. 261 and 267.) These employees receive overtime pay under COPRA at the rate of 2 times the basic hourly rate–a 100-percent premium. They receive a 50-percent premium for Sunday work, which is defined as non-overtime hours on a Sunday that is not a Federal holiday. They receive a 15-percent or 20-percent premium for night work, depending on their hours/shifts based on a majority-of-hours-in-tour concept. They also receive a 100-percent premium for non-overtime work on a Federal holiday (same as title 5). Finally, these employees are entitled to "commuting time pay" equal to 3 times the employee's rate of basic pay when they are called back to work within 16 hours of their last regular shift. Under COPRA, overtime pay and other forms of premium pay have been subject to a $30,000 annual cap in recent years. COPRA overtime and premium payments are not subject to title 5 premium pay caps. (See Appendix F.)

Immigration inspectors receive overtime and other premium pay under the 1931 Act¹⁷. These inspectors receive overtime pay at the rate of 4 hours of basic pay for each 2 hours (or fraction thereof) of inspection overtime work between 5:00 p.m. and 8:00 a.m., Monday-Saturday and anytime on Sunday or a holiday. They receive overtime pay under title 5 for overtime inspection work between 8:00 a.m. and 5:00 p.m., Monday-Saturday and for non-inspection overtime work outside these hours. When performing certain inspection work on a Sunday or a holiday, immigration inspectors receive premium pay at a rate of 2 days of pay for any amount of time less than 9 hours worked–roughly a 100-percent premium plus possible credit for hours not worked. They receive a 10-percent night pay differential for work between 6:00 p.m. and 6:00 a.m. All overtime pay and 1931 Act premium pay are currently subject to a $30,000 annual cap. Overtime and premium payments under the 1931 Act are not considered in applying title 5 premium pay caps.

Nonsupervisory Postal Security Force (PSF) officers receive overtime pay under rules established by collective bargaining agreement. PSF supervisors at or below level 18 of the Postal Service Executive and Administrative Schedule are eligible for additional straight-time pay when they are authorized to work more than 8.5 hours per scheduled work day, or at any time on a non-scheduled work day. All time worked that exceeds the normal work schedule is paid at the straight time rate if the authorized work exceeds one half-hour per day. PSF supervisors receive additional straight time pay for all authorized time worked on a non-scheduled work day.

Premium Pay Issues

A review of the premium pay entitlements for law enforcement employees reveals a number of issues that must be fully considered before formulating any policy recommendations. Issues include the following:

• Should all similarly situated law enforcement employees be covered by the same premium pay provisions?
• Should premium pay rules be codified in law or should they be established under an administrative authority?
• Should premium pay be subject to caps? If caps are appropriate, should current caps be raised?
• Should the rules governing availability pay be reexamined? Should employees receiving administratively uncontrollable overtime (AUO) pay be converted to availability pay?
• Under what circumstances should premium pay be creditable as basic pay for retirement purposes?

Issue: Consistency

A central issue is whether LEOs and other law enforcement personnel should be subject to a common set of premium pay rules. Inconsistency in premium pay entitlements can produce confusion, administrative problems, and perceptions of inequity. Many agencies and law enforcement employees indicate a preference for the ideal of equal premium pay entitlements for all. However, dealing with existing inconsistencies presents challenges. OPM believes premium pay rules for law enforcement employees throughout the Government should be established under a Governmentwide framework so that consistency among similarly situated employees can more easily be achieved and so that special exceptions in entitlements or mode of payment are limited to cases where there is a compelling mission-based justification.

As discussed in Sections B and C of this part, most law enforcement employees are covered by the standard premium pay provisions in title 5, United States Code, and many of those not covered by title 5 actually have similar premium pay entitlements. In particular, premium pay entitlements among employees that have LEO status for retirement purposes are very consistent. The main groups of law enforcement employees with nonstandard premium pay entitlements are non-LEO GS-1816 immigration inspectors and GS-1890 customs inspectors. These inspectors have had special, more generous premium pay provisions for decades.

The argument for consistency can be compelling, except when special premium pay provisions can be shown to be necessary to support mission accomplishment. However, demonstrating a clear link between mission and a particular form or level of premium pay may be difficult. Frequently, the arguments made in support of special treatment are not unique to the occupation in question, but could also apply to other occupations in similar circumstances. Current inconsistencies do not necessarily reflect differences in work or mission requirements, but may be merely the result of ad hoc decisions over time. For example, the differences between night pay for white-collar employees and blue-collar employees in title 5 were the result of two separate pieces of legislation enacted at different times.

Even within title 5 premium pay, there are some special premium pay provisions for special groups of employees, such as administratively uncontrollable overtime (AUO) pay for employees who have particular types of overtime work requirements and availability pay for criminal investigators and certain other employees. However, aside from the retirement-creditability aspect (which is discussed separately below), the value of these special overtime payments does not exceed the value of regular overtime pay on an hourly basis. Differences in method of payment that do not provide significantly more generous pay may not present the same concerns about equity and consistency.

An OPM authority to administer a Governmentwide framework for premium pay will result in a consistent approach to premium pay while at the same time providing flexibility to respond to unique agency mission requirements. (See discussion of flexibility issue below.)

Issue: Flexibility

Currently, premium pay rules that apply to Federal law enforcement employees are generally codified in law. Inherently, codified rules tend to be rigid, and not easily changed. However, at times, the legislative process can produce piecemeal changes that do not fully consider Governmentwide equities and implications and create new inconsistencies. Thus, while we believe consistency is important, we do not believe consistency needs to be set in the "concrete" of statute. An alternative is the more pliable foundation of administrative regulation.

In fact, Congress has given certain agencies authority to establish their own premium pay rules administratively. In recent years, such authority has been given to the Federal Aviation Administration, the Transportation Security Administration, and the Department of Defense. Giving some agencies such flexibility, while leaving other agencies under rigid statutory rules, is problematic. We believe OPM, with the concurrence of the Attorney General, should be authorized to extend similar flexibilities to other agencies under a Governmentwide framework established and administered in close coordination with employing agencies.

If premium pay rules were established administratively, those rules could more easily be modified to address problems that arise or to keep pace with evolving practices in the non-Federal workforce. Inevitably, unanticipated circumstances or problems arise, and modifying or fine tuning of the premium pay rules will be needed. In addition, under a flexible authority, premium pay entitlements or modes of payment could be modified to address special agency mission requirements when the standard rules are not adequate.

Issue: Premium Pay Caps

Most law enforcement officers are subject to title 5 premium pay rules and thus are subject to premium pay caps-specifically, a cap on the overtime hourly rate for FLSA-exempt employees and a biweekly or annual cap on aggregate premium pay. (See description of caps in Section B.) These caps are frequently criticized; however, they serve specific purposes. Proposals to revise or eliminate these caps must be carefully scrutinized. OPM believes some modifications in current title 5 premium pay caps may be appropriate; however, due to the complexities involved and the need for flexibility to make adjustments over time, we conclude that OPM should be given regulatory authority to establish a framework of premium pay rules, including the rules related to caps, and to make modifications over time as necessary.

The title 5 overtime hourly rate cap and biweekly/annual aggregate premium pay cap are designed to reduce the value of overtime pay for FLSA-exempt employees at higher pay levels. In the private sector, FLSA-exempt employees are generally paid on a fixed salary basis, with salaries considered complete compensation for all regular and overtime hours an employee may work. In contrast, in the Federal Government, FLSA-exempt employees can receive some overtime pay at capped hourly rates until an aggregate cap is reached. In effect, overtime pay for FLSA-exempt Federal employees is phased out in stages, with employees becoming the equivalent of "salaried" at a high level of pay. In 2004, the aggregate premium pay cap (expressed in annual rates) ranges from $128,200 to $136,900 (depending on location).

In addition, the aggregate premium pay caps are essential to prevent unacceptable levels of pay compression or inversion with higher-level managers, such as members of the Senior Executive Service (SES) and Executive Schedule officials. These officials are not entitled to premium pay. Thus, even though they generally work long hours, they receive no additional compensation for work beyond the 40-hour basic workweek. Not only is there an equity issue, but also employees would face a disincentive to enter the SES ranks if accepting an SES appointment would reduce their total pay.

The problems associated with removing the aggregate premium pay cap are most visible with respect to GS criminal investigators who regularly receive a 25-percent availability pay supplement for overtime work. If availability pay were not subject to the aggregate premium pay cap, high-grade criminal investigators would continuously receive significantly higher pay than their managers and other high-level officials. For example, if availability pay were not subject to the aggregate biweekly premium pay cap, a criminal investigator at GS-15, step 10, would receive a total annualized rate of pay of $162,881 in Washington, DC (instead of $130,305 under current law), and $171,125 in San Francisco (instead of $136,900 under current law)-higher than the salary for most Members of Congress. In comparison, the maximum annual rate of basic pay for SES members is $145,600 (or $158,100 for employees covered by a certified performance system), and the top three Executive Schedule rates are $175,700 (level I - Department secretaries), $158,100 (level II - e.g., Deputy Secretaries), and $145,600 (level III - e.g., DHS Under Secretaries, FBI Director).

Even putting aside the pay compression/inversion problem, OPM does not believe such high rates are necessary to retain criminal investigators, nor are they justified based on labor market factors. At high pay levels, it is reasonable to treat FLSA-exempt employees as if they are salaried.

Legislative proposals to exclude availability pay from the biweekly cap would create new inequities, not only between high-grade criminal investigators and higher-level managers, but also between those investigators and other high-grade GS employees who may work long hours and receive little if any premium pay. In addition to the direct costs of higher availability pay, there will be eventual long-term costs as affected employees receive higher retirement annuities based on uncapped availability pay–costs which will not have been properly funded. (See Appendix D, which provides a detailed analysis of proposed bills with provisions that would eliminate caps on availability pay.)

OPM recognizes that the current aggregate premium pay cap has the effect of creating pay compression among GS employees at the highest pay levels. Pay is compressed in that employees can be entitled to different rates of basic pay, but receive the same total pay because of the cap. Again, this problem is most visible with respect to GS criminal investigators who regularly receive a 25-percent availability pay supplement. All criminal investigators whose rate of basic pay is within 25 percent of the applicable cap will receive the same total pay in any given location. The key issue is whether this pay compression can be eliminated without creating pay compression or inversion with higher-level officials. We believe that, in the case of availability pay recipients, there could be different approaches to modifying the caps that address the compression problem to some degree but avoid new inequities. We also believe that, because of the complexities involved and the need for flexibility to make adjustments over time, the most effective way to deal with these issues would be to allow OPM to adjust premium pay cap rules under a broad administrative authority.

Issue: Availability Pay Problems

Beyond the pay cap issue, there are other issues related to availability pay received by criminal investigators and certain other employees–namely, the possibility of converting recipients of pay for administratively uncontrollable overtime (AUO) work to the availability pay program and possible changes to the availability pay program. (See descriptions of availability pay and AUO pay in Section B of this part and in Appendix E.) As explained below, these availability pay issues are complex, and simple solutions are not necessarily available. Accordingly, we believe this is an area where a more flexible premium pay authority would be particularly useful.

With the enactment of the availability pay law (5 U.S.C. 5545a) in 1994, criminal investigators who had previously received AUO pay began receiving availability pay instead. Border Patrol agents and certain other law enforcement employees continued to receive AUO pay. Since almost all AUO pay recipients are paid at the maximum 25 percent rate, which is equal to the availability pay rate, and since the two types of premium pay are similar in many respects, one option is to change the availability pay law to cover certain AUO recipients. This could simplify administration and provide for more consistency in treatment. However, the following problems would remain:

• Availability pay does not provide the flexibility to reduce overtime pay and hours if work demands are reduced over time. Availability pay recipients are entitled to a fixed 25 percent supplement and must average 2 unscheduled duty hours per regular workday.
• Under current law, availability pay recipients are not covered by the FLSA. However, some AUO recipients are FLSA-covered at the full performance level. For example, Border Patrol agents generally are FLSA-covered through grade GS-12 (the first level of supervision). FLSA-covered AUO recipients receive half of the FLSA hourly regular rate for any AUO hours in addition to AUO pay. We estimate that, on average, FLSA overtime for AUO hours is worth about 10 to 12.5 percent of basic pay for those receiving AUO pay at the 25 percent rate. Assuming the statutory bar on FLSA coverage for all availability pay recipients is continued, AUO recipients who are converted to availability pay would lose this FLSA overtime pay. If AUO recipients are not converted to availability pay, then those who are FLSA-covered would continue to have more generous overtime entitlements than availability pay recipients at the same grades.

To ensure consistent treatment, any law covering Border Patrol Agents and others under the availability pay provision would have to either (a) eliminate FLSA coverage consistent with the treatment of criminal investigators or (b) provide FLSA coverage for criminal investigators receiving availability pay. The latter approach is inconsistent with the original legislation that established availability pay and would be costly and administratively burdensome. The first approach would result in a reduction in total pay for affected employees, unless this change could be made in combination with an increase in rates of basic pay. Thus, we have secondary issues as to whether an increase in the rates of basic pay is possible under the applicable system or warranted based on job value. Another alternative would be to consider modifications of the availability pay program itself, which might make a change from AUO pay to availability pay more acceptable. (See discussion below.)

While the availability pay program has generally been viewed as successful by agencies and covered employees, it is not without problems. One is the application of the biweekly aggregate premium pay cap, which has already been discussed in the preceding subsection. Other issues and problems include the following:

• Availability pay recipients are subject to a significant overtime burden. By law, they are required to work 2 hours per regular workday or 10 hours per workweek (assuming 5 regular work days).
• Some availability pay recipients believe that, on an hourly rate basis, availability pay is insufficient. (If an investigator works 10 hours per workweek for a 25-percent supplement, this equates to straight-time. However, investigators also receive availability pay during paid leave, holidays, and other paid time-off periods when no overtime work is performed. Thus, over the course of a year, it provides additional value–although probably less than time-and one-half. Also, there is additional value to the employee of a guaranteed overtime supplement that is basic pay for retirement purposes.) A related issue is that availability pay provides compensation for all irregular overtime work, with no cap on the number of irregular overtime hours. Thus, an investigator can potentially work hours far in excess of the minimum hours requirement without additional compensation, which devalues the hourly rate of compensation. At the same time, under the current availability pay program, investigators are generally given greater control over when they work overtime hours. If additional overtime hours triggered additional compensation, management officials would need to exercise greater control and oversight in order to manage their budgets.
• There is an issue regarding the appropriateness of the availability pay provisions that allow credit for certain non-work ("availability status") hours in determining an employee's average hours of unscheduled duty. While we believe the vast majority of criminal investigators are meeting the 2-hours-per-regular-workday requirement through actual work hours, the possibility of credit for nonwork hours raises equity concerns, especially if this is done inconsistently across organizations. We note that when Congress extended availability pay to Diplomatic Security special agents, it expressly barred the crediting of nonwork hours. (See 5 U.S.C. 5545a(k)(B).)
• The availability pay law is incompatible with alternative work schedules. The law was drafted based on the assumption that all criminal investigators have a standard 40-hour basic workweek consisting of five 8-hour workdays. Thus, the 2-hour daily average requirement produces a requirement of 10 hours per full workweek. Also, the 10-hour threshold rule for availability pay recipients in 5 U.S.C. 5542(d) was adopted assuming an 8-hour basic workday, so that the first 2 overtime hours are deemed to be irregular without regard to whether they were scheduled in advance of the workweek. In certain cases, agencies have sought the flexibility to cover availability pay recipients under alternative work schedules, including a basic workweek of four 10-hour days. However, the availability pay law does not provide OPM with flexibility to adjust the average hours requirement or the threshold requirement to align with such an alternative schedule. Allowing such alternative work schedules under the current availability pay law would produce inequities.
• Availability pay does present some challenges in administration, since it continues to require a distinction between regularly scheduled overtime hours and irregular overtime hours. This distinction requires a determination as to whether the hours were, or should have been, scheduled in advance of the workweek. The availability pay law does provide that the first 2 overtime hours on any regular workday, however they are scheduled, are considered irregular overtime hours, which does limit the administrative problems compared to the AUO program. However, there remains a need to designate any additional overtime hours as regularly scheduled or irregular since there are compensation consequences.

As the foregoing discussion demonstrates, these availability pay issues are complex and difficult to address through legislation. Simple solutions are not readily apparent. Accordingly, we believe that this is an area where a more flexible premium pay authority would be particularly useful.

Issue: Retirement Creditability of Premium Pay

Another important issue involves the treatment of premium pay as basic pay for retirement purposes. Congress has provided that certain types of premium pay for certain employees are retirement-creditable. To avoid inconsistencies, proposals to make premium pay creditable for retirement require very careful consideration. Because the issue is multifaceted and complicated, we believe that this is an area where it makes sense to provide OPM with flexibility to establish consistent policies regarding when premium pay should be treated as basic pay for retirement purposes and how such retirement-creditable premium pay should be administered.

As a general rule, overtime pay and other forms of premium pay are not creditable as basic pay for the purpose of computing retirement benefits and contributions to the CSRS/FERS retirement fund. (See 5 U.S.C. 8331(3) and 8401(4).) Defined benefit retirement plans use an employee's average salary to compute benefits. For example, CSRS and FERS use the average salary for the 3 consecutive years during which the employee had the highest average rate of basic pay (usually the last 3 years). In such retirement plans, it generally does not make sense to include premium pay since such premium pay may be erratic, varying from year to year. An employee could receive a windfall if premium payments are higher in the average salary period. Or, if premium payments are lower, the agency and the employee could be viewed as having made excess contributions to the retirement fund. Accordingly, defined benefit retirement plans generally use basic rates of pay that are more stable and predictable to compute retirement benefits and contributions. Of course, another important point is that including premium pay generates additional retirement costs that must be funded.

With respect to CSRS and FERS, Congress has made some exceptions to the rule that premium pay is not retirement-creditable. These exceptions primarily involve premium payments that are fixed, regular and recurring supplements that generally continue throughout the employee's career:

• Standby duty premium pay - A percentage supplement for regularly scheduled overtime work for employees who have extended regular tours of duty (e.g., emergency medical technicians who perform 24-hour shift work and may average 56-72 hours of work per week). (See 5 U.S.C. 5545(c)(1) and 8331(3)(C).)
• Firefighter overtime pay - The straight-rate portion of regularly scheduled overtime pay for firefighters with extended regular tours of duty (usually 24-hour shifts and 56-72 hours per week). (See 5 U.S.C. 5545b, especially (b)(2).)
• Administratively uncontrollable overtime (AUO) pay - A percentage supplement for irregular overtime hours that are a regular part of the job. AUO pay is retirement creditable for LEOs only. (See 5 U.S.C. 5545(c)(2) and 8331(3)(D).)
• Availability pay - A 25 percent supplement for specified overtime hours performed by criminal investigators and certain other LEOs. (See 5 U.S.C. 5545a and 8331(3)(E).)

One additional exception involves variable overtime pay for customs officers under COPRA. These customs officers generally work significant amounts of overtime over the course of a career. By law, all COPRA overtime pay is retirement-creditable up to an annual limit equal to one-half of the current statutory annual cap on COPRA overtime payments. (See 5 U.S.C. 8331(3)(G).) In recent years, the COPRA annual overtime pay cap has been fixed by Congress at $30,000; this results in a $15,000 limit on retirement-creditable overtime pay. For a customs officer at the GS-11 full performance level, $15,000 currently represents roughly 20 to 30 percent of the employee's rate of basic pay.

COPRA also required that the Secretary of the Treasury promulgate regulations to prevent "the disproportionately more frequent assignment of overtime work to customs officers who are near to retirement." Accordingly, regulations at 19 CFR 24.16(d) establish "annuity integrity" provisions that limit the amount of overtime work for customs officers within 3 years of retirement eligibility based on the employee's career-long average yearly overtime hours (unless a waiver is granted). Since customs officers have been transferred to DHS, these regulations are now the responsibility of DHS.

Because including premium pay as basic pay for retirement purposes can increase an employee's retirement annuity by a significant amount (e.g., 25 percent), it is a very attractive benefit. However, since many Federal employees work overtime hours, it is important that exceptions be limited to narrowly defined circumstances where a compelling distinction can be made. The factors to be considered include the following:

• The costs, including higher agency contributions as well as the impact on the unfunded liability of the retirement fund (since agency and employee contributions were not made in the past for premium payments that will now be used to compute future retirees' annuities);
• The extent to which affected employees earn a large amount of overtime consistently over the course of a career;
• The extent to which employees remain in the covered category of jobs throughout their career;
• The risk that making premium pay retirement-creditable would distort decision making regarding the assignment of overtime work (e.g., restrain managers from reducing overtime hours if mission demands are reduced);
• The ability to prevent employees from earning disproportionate amounts of overtime pay in the high-3 average salary period without imposing significant administrative burdens or limiting the agency's flexibility to assign work to meet mission demands;
• The availability of authority to waive overtime limitations in a manner that does not trigger unfunded retirement costs or give some employees a long-term benefit based on a temporary circumstance (cost and equity issue).

As evident from the foregoing discussion, issues related to the retirement creditability of premium pay are multifaceted and complicated, which argues for providing OPM with authority to establish policies in this area by regulation, instead of a piecemeal legislative approach. Providing OPM with authority to establish policies in this area is consistent with OPM's role as administrator of the Federal civilian retirement programs. OPM is in a position to consider and balance the interests of employees, agencies, and the retirement fund.

Premium Pay Recommendations

As indicated in Sections B and C of this part, the vast majority of Federal law enforcement employees are covered by the premium pay provisions in title 5, U.S. Code. Many other law enforcement employees who are not covered by title 5 have identical or similar premium pay entitlements. Thus, there is considerable consistency among law enforcement employees in terms of premium pay entitlements. We believe such consistency is desirable and appropriate from a public policy standpoint. We have found that agencies and law enforcement employees generally display a strong preference that premium pay rules should be similar for all similarly situated employees. Consistency can be achieved only if there is a common framework that applies to all law enforcement employees.

Mission requirements or work conditions sometimes support a different approach to the payment of a particular type of premium pay. For example, availability pay is designed to address the unique overtime work requirements faced by criminal investigators. However, when special provisions provide significantly greater benefits, they should be based on a compelling justification and a common set of principles.

Further, it is important to have the ability to adjust common premium payments over time based on experience, mission requirements, and prevailing practices in the non-Federal sector. Inevitably, unanticipated circumstances arise. For example, in Section D, we described various perceived problems associated with the current title 5 premium pay rules related to premium pay caps and availability pay.

One option is to keep the rules governing premium pay in title 5, United States Code, and make changes through legislation. Our experience, however, suggests that this is not the most effective method of making changes. Legislative changes sometimes are designed to address the interests of specific groups of employees without full consideration of the Governmentwide implications of such changes. For example, recent proposals to bar the application of the biweekly premium pay cap to availability pay (as in H.R. 466, H.R. 1676, and S. 985) do not take into account the fact that this proposal would create serious pay inversion problems between highly paid criminal investigators and members of the Senior Executive Service who are responsible for managing the work of these same investigators. (See Appendix D.)

We believe it would be appropriate to provide OPM with a flexible administrative authority to work with agencies so that premium pay rules can be more easily modified to address current needs or adjusted to correct any problems that surface. Congress has given such administrative authority to individual agencies in the past, such as the Federal Aviation Administration and the Transportation Security Administration. More recently, Congress gave OPM and the Department of Defense joint authority to waive or modify most title 5 premium pay provisions as part of the National Security Personnel System legislation (5 U.S.C. 9902).

Accordingly, OPM recommends that Congress give OPM regulatory authority to establish a framework of premium pay rules that would apply to Federal law enforcement employees throughout the Government, including those law enforcement employees in the legislative and judicial branches who are covered by CSRS or FERS. This authority would be exercised in consultation with employing agencies and with the concurrence of the Attorney General. For this purpose, "premium pay" would encompass various types of payments for work under special conditions that generally are not basic pay for any purpose (with limited exceptions for certain types of overtime pay that are basic pay for the purpose of retirement and other specified benefits). OPM premium pay regulations would establish rules governing–

• Which law enforcement employees are covered by the regulations;
• Overtime pay for FLSA-exempt employees;
• Differentials for night, Sunday, holiday, and standby work;
• Premiums for hazardous duty;
• Other special payments or differentials (e.g., for special skills or special assignments); and
• When overtime pay is creditable as basic pay for retirement purposes.

If granted this authority, OPM would also use the Chief Human Capital Officers Council as a forum for discussing possible changes in premium pay entitlements. This kind of interagency approach would help ensure that any changes are reasonable and consider all interests. Also, the concurrence of the Attorney General would be required to ensure that law enforcement mission interests are fully considered.

¹⁷On June 24, 2004, DHS issued final regulations revising the definition of "customs officer" to reflect its plan to merge the customs inspector and immigration inspector occupations into a single new occupation entitled "Customs and Border Protection Officer" (see 69 FR 35229). Under the new definition of "customs officer," which becomes effective on July 24, 2004, all employees in the new occupation will be covered by the COPRA premium pay provisions. [Back]

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