This memorandum announces the 2006 annual review of special rates authorized under 5 U.S.C. 5305 and 5 CFR part 530, subpart C. The Office of Personnel Management (OPM) authorizes special rates for specific occupations, grades, and locations to alleviate existing or likely significant recruitment or retention problems. Under 5 CFR 530.307(a), OPM may, at any time, conduct general or targeted reviews of established special rates to determine whether they should be increased, decreased, or discontinued based on staffing considerations. By this memorandum, OPM is requesting that agencies conduct a general review of special rates for the purpose of determining the special rate adjustments that should be made in January 2007 in conjunction with General Schedule (GS) rate adjustments.

OPM Review and Adjustment of Special Rates

Under 5 CFR 530.304(c), a special rate generally is computed by adding a special rate supplement (i.e., a fixed dollar amount or fixed percentage amount) to the underlying GS rate. At the time of a GS annual pay adjustment, special rate employees will receive the same adjustment in their underlying GS rate (or LEO special base rate) as other GS employees. However, OPM must make a separate determination as to whether to adjust (increase or decrease) or discontinue a special rate supplement, taking into account the circumstances and factors that led to establishing the special rate schedule. Based on the adjustment of a special rate supplement, the corresponding special rate (i.e., underlying GS rate plus supplement) may be increased, reduced, or discontinued.

We are using an exception-based approach for the annual review. Under this approach, agencies do not need to submit a certification form for each special rate schedule. Instead, agencies must submit information to OPM only if they are requesting a special rate adjustment greater than or less than the January 2007 GS annual pay adjustment under 5 U.S.C. 5303 or similar provision of law. OPM will review such agency submissions and make determinations regarding the appropriate adjustment in the affected special rate schedules. All other special rate schedules will be adjusted by the same percentage as the January 2007 GS pay adjustment.

Attachment 1 provides detailed instructions for requesting an adjustment in a special rate supplement that is greater than or less than the January 2007 GS annual pay adjustment and other information about the exception-based approach. Attachment 2 provides an index of the current special rate schedules by agency. Agencies must submit requests to OPM to adjust (increase or decrease) or discontinue a special rate supplement by October 13, 2006.

Terminated Special Rates

Under 5 U.S.C. 5305(h) and 5 CFR 530.303(d), an employee's entitlement to a special rate is eliminated if the employee is entitled to a higher rate of basic pay, such as a locality rate under 5 U.S.C. 5304. As a result of the January 2007 pay adjustment, some special rate schedules may be terminated because higher locality rates apply at all steps of each covered grade, or certain grades or steps of a special rate schedule may be discontinued because higher locality rates apply. The termination of special rates will not result in a loss in pay for any covered employees, since all affected employees will receive the higher locality rate to which they are otherwise entitled. OPM will notify agencies of any terminated special rates when we announce the results of the 2006 annual review of special rates.

Discontinued or Decreased Special Rates

If a special rate schedule (or grade of a schedule) applicable to a position is discontinued or decreased by OPM, and the employee holding the position is placed in a non-special rate position or a lower-paid special rate position, the employee is entitled to pay retention under 5 CFR 536.301(a)(8). Agencies must follow the rules in 5 CFR 536.304 to determine the employee's pay retention entitlement. (See also the Grade and Pay Retention Examples at http://www.opm.gov/oca/pay/HTML/Grade_PayRetention_EX.asp.)

We ask agency headquarters to bring any problems encountered in implementing the annual review process to our attention as they arise. You may contact the Pay and Leave Administration Group by telephone at (202) 606-2858, by fax at (202) 606-0824, or by email at pay-performance-policy@opm.govpay-performance-policy@opm.gov.

cc: Human Resources Directors

Attachments:
Attachment 1: 2006 Annual Review Instructions
Attachment 2: Data Worksheet To Be Completed By Agencies