Changes in Pay Administration Rules for General Schedule Employees, 31278-31315 [05-10793]

Agencies

• Office of Personnel Management
• Personnel Management Office

[Federal Register Volume 70, Number 103 (Tuesday, May 31, 2005)]
[Rules and Regulations]
[Pages 31278-31315]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10793]



[[Page 31277]]

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Part V





Office of Personnel Management





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5 CFR Part 294, et al.



Changes in Pay Administration Rules for General Schedule Employees; 
Interim Rule

Federal Register / Vol. 70 , No. 103 / Tuesday, May 31, 2005 / Rules 
and Regulations

[[Page 31278]]


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 294, 359, 362, 451, 530, 531, 532, 534, 536, 550, 591, 
630, 831, and 842

RIN 3206-AK88


Changes in Pay Administration Rules for General Schedule 
Employees

AGENCY: Office of Personnel Management.

ACTION: Interim rule with request for comments.

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SUMMARY: The Office of Personnel Management is issuing interim 
regulations to implement section 301 of the Federal Workforce 
Flexibility Act of 2004, which amends the rules governing pay setting 
for employees covered by the General Schedule. In particular, we are 
revising provisions related to special rates, locality rates, and 
retained rates. The statutory and regulatory changes are designed to 
correct a variety of pay administration anomalies that resulted in 
unfair pay reductions or unwarranted pay increases, to allow locality 
rates and special rates to be treated in similar ways, and to improve 
the operation of the special rates program.

DATES: Effective Date: The interim regulations are effective on May 1, 
2005.
    Comment Date: Comments must be received on or before August 1, 
2005.

ADDRESSES: Send or deliver written comments to Donald J. Winstead, 
Deputy Associate Director for Pay and Performance Policy, Division for 
Strategic Human Resources 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: Bryce Baker by telephone at (202) 606-
2858; by fax at (202) 606-0824; or by e-mail at pay-performance-
policy@opm.gov.

SUPPLEMENTARY INFORMATION: The Office of Personnel Management (OPM) is 
issuing interim regulations to revise the rules that govern pay setting 
for Federal employees covered by the General Schedule (GS) pay system. 
The interim regulations implement the amendments made by section 301 of 
the Federal Workforce Flexibility Act of 2004 (Pub. L. 108-411, October 
30, 2004), hereafter referred to as ``the Act.'' Section 301 amended 
provisions in 5 U.S.C. chapter 53 relating to the administration of 
special rates, locality rates, and retained rates. These amendments 
become effective on the first day of the first pay period beginning on 
or after April 28, 2005--i.e., May 1, 2005. Since the regulations are 
necessary to implement the statutory changes, these regulations are 
issued as interim regulations that take effect on May 1, 2005.
    The changes made by the Act and these implementing regulations are 
designed to correct a variety of pay administration anomalies that have 
produced unfair pay reductions or unwarranted pay increases for 
employees in certain situations. These anomalies resulted largely from 
the introduction of locality pay into the General Schedule pay system 
in 1994. Many of the basic pay administration rules treated special 
rates under 5 U.S.C. 5305 as rates of basic pay, but ignored locality 
rates under 5 U.S.C. 5304. A key objective of the Act and these 
regulations is to treat locality rates and special rates in similar 
ways--i.e., to put them on the same footing. This will result in pay 
rules that are more rational, consistent, and equitable. (See the 
legislative history of section 301 of Pub. L. 108-411, as documented in 
pages 17 through 22 of House Report 108-733, October 5, 2004.)
    The Act requires that, when an employee's official worksite is 
changed to a new location where different pay schedules apply, the 
employee's pay must be converted to the new pay schedules in the new 
location before processing any simultaneous pay action (other than a 
general pay adjustment). This geographic conversion requirement is 
found in 5 U.S.C. 5305(i), 5334(g), and 5363(c), as added or amended by 
the Act, and is incorporated in these interim regulations. Geographic 
conversion ensures that an employee whose official worksite is moved to 
a new location receives the same rate of pay as an employee at the same 
grade and step who was already stationed at the new location and who 
undergoes the same pay actions.
    The Act also is intended to improve the operation and effectiveness 
of the special rates program by allowing special rate determinations to 
be driven by staffing considerations rather than pay administration 
issues and by clarifying OPM's authority to review and adjust special 
rates as it determines necessary. The Act also revises the special 
rates authority in other respects. For example, the Act raises the pay 
limitation on special rates from the rate for level V of the Executive 
Schedule to the rate for level IV of the Executive Schedule. The Act 
also allows agencies to ``opt out'' of special rate schedules.
    The Act makes significant changes related to pay retention under 5 
U.S.C. 5363. Through an amendment to 5 U.S.C. 5302, locality payments 
under 5 U.S.C. 5304 will no longer be paid on top of a retained rate. 
Rather, an employee's pay retention entitlement will be derived from an 
employee's payable (highest) rate of basic pay (including any locality 
rate or special rate) before the action triggering pay retention, and 
that entitlement will be compared to the highest applicable rate range 
(including a locality rate range or a special rate range) for the 
employee's current position. If the pay retention entitlement results 
in a retained rate above the maximum rate of the highest applicable 
rate range for an employee's position, that retained rate generally 
will be increased by an amount equal to 50 percent of any increase in 
that maximum rate. A reduction in an employee's payable rate of basic 
pay resulting from conversion to a lower pay schedule in a different 
geographic area (i.e., geographic conversion) does not trigger 
entitlement to pay retention. Consistent with uncodified section 
301(d)(2) of the Act, we are issuing regulations governing the 
conversion of any existing locality-adjusted retained rate to a new 
retained rate that is equal in amount. Also, various other types of 
saved rates (i.e., rates above range maximums) are being converted to 
retained rates under 5 U.S.C. 5363.
    We are taking this opportunity to reorganize the affected 
regulations and to clarify the meaning of certain provisions. We have 
replaced the verb ``shall'' with ``must'' for added clarity and 
readability. We intend that any provision using the verb ``must'' has 
the same meaning and effect as previous provisions using ``shall.''
    We are also taking this opportunity to remove regulations that are 
obsolete. We are removing subpart C of part 531, which dealt with 
special geographic adjustments for law enforcement officers (LEOs) 
under section 404 of the Federal Employees Pay Comparability Act of 
1990. All those special geographic adjustments for LEOs have been 
surpassed by regular locality payments under 5 U.S.C. 5304. In 
addition, we are removing subpart G of part 531, which dealt with 
``continued rates''--a form of saved rates that were created under the 
old interim geographic adjustment authority. For the few employees who 
may have an existing continued rate above the applicable rate range, 
the continued rate will be converted to a retained rate under 5 U.S.C. 
5363, as described in the foregoing paragraph on pay retention changes.
    These interim regulations also include conforming changes in other 
parts of OPM's regulations, such as corrections

[[Page 31279]]

of regulatory references and revisions of the definition of ``rate of 
basic pay.''
    The remainder of this SUPPLEMENTARY INFORMATION reviews the 
significant changes made in the key affected parts and subparts of the 
regulations.

Special Rates

    We have revised and reorganized OPM's regulations on special rate 
schedules for General Schedule employees in part 530, subpart C. The 
revisions implement certain provisions in section 301 of Public Law 
108-411 and make other changes to clarify the rules governing these 
schedules. Following are the key provisions contained in the revised 
subpart C:
     A special rate is defined as consisting of a base rate 
(i.e., the GS rate or, if applicable, the law enforcement officer (LEO) 
special base rate) and a special rate supplement. A special rate 
employee is entitled to the applicable GS rate or LEO special base rate 
for his or her grade and step, just as any other GS employee. A special 
rate employee's pay entitlement differs because of the special rate 
supplement.
     The purposes for which a special rate is basic pay are 
specified in regulation. In general, a special rate is basic pay for 
the same purposes as a locality rate.
     An agency may choose to exclude its employees from 
coverage under a proposed or existing special rate schedule.
     An employee is not entitled to a special rate if he or she 
is entitled to a higher rate of basic pay under another authority 
(e.g., a locality rate or retained rate).
     A special rate may not exceed the rate for level IV of the 
Executive Schedule.
     At the time of a GS annual pay adjustment, a special rate 
employee's GS rate or LEO special base rate is adjusted. OPM determines 
whether the special rate supplement is adjusted and the amount of any 
adjusted supplement.
     Rules for converting an employee's rate of basic pay upon 
establishment, adjustment, or discontinuation of a special rate 
schedule are specified in subpart C. The conversion rules that apply to 
schedule adjustments implement 5 U.S.C. 5305(f).
    Subpart C of part 530 does not contain all the pay-setting rules 
that apply to special rate employees. Parts 531 and 536 (dealing with 
basic pay administration and pay retention, respectively) also 
implement amendments to 5 U.S.C. 5305 made by Public Law 108-411. For 
example, section 5305(i) requires that a special rate undergo a 
geographic conversion when the employee's official worksite is changed 
to a location where different pay schedules apply. This provision is 
implemented in 5 CFR 531.205. In addition, Public Law 108-411 amended 
the pay retention law (5 U.S.C. 5363(c)) to provide that a reduction in 
an employee's special rate as a result of a geographic conversion is 
not a basis for pay retention. This provision is implemented in 5 CFR 
536.303(a). House Report 108-733 (October 5, 2004) stated that section 
5363(c) was ``intended to clarify that local special rates are a 
Government tool to address a local labor market problem, not an 
employee entitlement that employees should be allowed to carry to 
another area where there is no such problem'' (page 19). This approach 
provides for consistent treatment of special rates and locality rates 
for pay retention purposes.
    House Report 108-733 (page 19) also emphasized that the amendments 
to section 5305 ``would make clear that the Government has full 
authority to adjust or not to adjust special rate schedules based on 
staffing needs.'' The House Report explained that determinations 
regarding special rate schedule adjustments are made solely under OPM's 
authority in 5 U.S.C. 5305(d). This means OPM may make determinations 
regarding the adjustment of special rate supplements based on its 
assessment of staffing needs, without regard to the percentage increase 
applied to GS rates. (Special rate employees receive the same 
adjustment in their underlying GS rate as other GS employees. Thus, 
OPM's discretion lies in adjusting the special rate supplement, which, 
for any given grade in a special rate schedule, may be a fixed-dollar 
amount or a fixed-percentage increase.) OPM may, at any time, conduct 
general or targeted reviews of existing special rate schedules and make 
adjustments in special rate supplements as it deems necessary.
    Section 530.309, ``Miscellaneous provisions,'' is patterned after a 
parallel section of miscellaneous provisions in the locality pay 
regulations at 5 CFR 531.611 (which were part of the former locality 
pay regulations at 5 CFR 531.606).

Locality Rates

    We have revised and reorganized OPM's regulations in part 531, 
subpart F, governing locality-based comparability payments under 5 
U.S.C. 5304. The revisions implement certain provisions in section 301 
of Public Law 108-411 and make other changes to clarify the rules 
governing these payments. Following are the key changes contained in 
the revised subpart F:
     The definition of scheduled annual rate of pay is revised 
to exclude any retained rate. Based on amendments to 5 U.S.C. 5302(8) 
and 5363, a retained rate is no longer supplemented by locality 
payments. Instead, a retained rate is a rate that is derived from an 
employee's payable (highest) rate of basic pay (including any locality 
payment or special rate supplement) and compared to the highest 
applicable rate range for the employee's position (including a locality 
rate range or special rate range). (See later discussion of retained 
rates in the ``Grade and Pay Retention'' section of this Supplementary 
Information.)
     Section 531.608(b) makes clear that a special rate 
employee is entitled to any applicable locality payment on the same 
basis as any other GS employee (i.e., based on the employee's 
underlying GS rate or LEO special base rate); however, if the locality 
rate exceeds the corresponding special rate, the special rate 
entitlement is terminated.
     Section 531.609 clarifies that the geographic conversion 
principle applies to the conversion of an employee's locality rate when 
his or her official worksite is changed to a new location where 
different pay schedules apply. (This is consistent with the manner in 
which locality rates have always been treated.)
     Section 531.610 lists new purposes for which a locality 
rate is considered basic pay: (1) Applying GS pay administration 
provisions to the extent provided in part 531, subpart B; (2) applying 
pay administration provisions for prevailing rate employees that use a 
GS rate of basic pay (except as otherwise provided in part 532); (3) 
applying grade and pay retention provisions in 5 CFR part 536 
(consistent with 5 U.S.C. 5361(4) and 5363, as amended); (4) computing 
recruitment, relocation, and retention incentives under 5 U.S.C. 5753 
and 5754 (consistent with OPM's authority under those amended sections 
of law); and (5) computing certain performance-based cash awards as a 
percentage of basic pay (consistent with 5 U.S.C. 4505a, which was 
amended to eliminate the prohibition on using locality rates to compute 
such awards).
    We are inviting comments on whether the final regulations should 
make a change in the treatment of locality rates in computing danger 
pay allowances and post differentials. Since August 2004, OPM 
regulations have provided that locality rates are considered basic pay 
in computing danger pay allowances and post differentials in

[[Page 31280]]

foreign areas for which the State Department has authorized danger pay 
allowances, as long as the employee's official worksite is located in a 
locality pay area (i.e., within the 48 contiguous States). (See 69 FR 
47353, August 5, 2004.) However, locality rates are not used in 
computing post differentials in other foreign areas or in nonforeign 
areas. These interim regulations retain these existing policies. We 
note that this issue has limited scope, since employees receiving 
locality rates are eligible for post differentials only when they are 
temporarily detailed (including a work assignment while in temporary 
duty travel status) to a post differential area for at least 42 
consecutive days. By law, locality pay does not apply to employees 
whose official worksite is outside the 48 contiguous States. (See 5 
U.S.C. 5304(f).)
    Under these interim regulations, in post differential areas 
(foreign and nonforeign) where danger pay allowances do not apply, 
special rates are considered basic pay in computing post differentials, 
while locality rates are not. We invite comments on whether this 
difference in treatment is appropriate.
    We also invite comments on whether we should continue to have a 
different policy for danger pay areas than for other post differential 
areas (foreign and nonforeign). Should we maintain the existing policy 
of using detailed employees' locality rates in computing danger pay 
allowances and post differentials in danger pay areas? Should we extend 
this policy to other post differential areas? If a policy determination 
is made to bar the use of locality rates in computing danger pay 
allowances or post differentials in all areas or to continue to bar the 
use of locality pay in computing post differentials in non-danger pay 
areas, should we also change the policy allowing detailed employees' 
special rates to be used in such computations so that locality rates 
and special rates are administered consistently? Commenters should 
provide specific reasons in support of their position.
    Other significant clarifying changes in subpart F of part 531 
include the following:
     In Sec.  531.607(b), we address the special hourly rate 
computations that apply to firefighters covered by 5 CFR part 550, 
subpart M.
     Throughout subpart F, we replace the term official duty 
station with official worksite. (See especially Sec. Sec.  531.602 and 
531.605.)
    In addition to using the new term official worksite, these interim 
regulations also implement changes in determining an employee's 
official worksite that OPM proposed on January 5, 2005, as part of a 
larger notice of proposed rulemaking (70 FR 1068). That proposal would 
add a new Sec.  531.605 to define the requirements for determining an 
employee's official duty station (hereafter referred to as ``official 
worksite'') for the purpose of identifying an employee's location-based 
pay entitlements, including special rate supplements and locality 
payments. The proposed regulations also addressed official worksite 
determinations for employees temporarily working at other locations and 
teleworking from an alternative worksite. We received comments on this 
part of our proposal from four agencies, one employee union, and two 
individuals.
    An agency felt that the determination of an employee's official 
worksite for pay purposes should be made by individual agencies and not 
be subject to Governmentwide regulations. We do not agree. The 
regulations provide agencies a degree of flexibility in determining an 
employee's official worksite. However, providing certain specific 
criteria in regulations is essential to ensure that agencies pay 
employees fairly and consistently, especially in situations such as 
telework arrangements.
    An agency recommended that Sec.  531.605 be revised to permit an 
agency to leave the official worksite unchanged during the temporary 
assignment of an employee to a position of record in a different 
location when relocation expenses under 5 U.S.C. 5737 are not 
authorized. The agency correctly stated that under current policy, when 
an employee is temporarily promoted or reassigned (not detailed) to a 
position in a different geographic location, the position to which 
temporarily promoted or reassigned must be the employee's position of 
record for pay purposes. (Generally, if detailed, an employee is paid 
based on his or her permanent position of record, including the 
location-based pay entitlements associated with the official worksite 
of the permanent position.) Current policy provides that the employee 
must receive the location-based pay entitlements based on the official 
worksite of the temporary position of record. The agency believes that 
if the length and/or circumstances of the temporary promotion or 
reassignment do not warrant payment of relocation benefits under 5 
U.S.C. 5737, agencies should be able to temporarily promote or reassign 
the employee to the new position of record, but leave the official 
worksite unchanged. Thus, the employee would receive the location-based 
pay entitlements for the official worksite of his or her permanent 
position.
    We believe there are some compelling arguments for changing the 
current policy regarding temporary promotions and reassignments to 
positions in a different location so that an employee's location-based 
pay entitlements are based on the official worksite of the employee's 
permanent position (unless the employee is receiving relocation 
benefits under 5 U.S.C. 5737). However, since this interim regulation 
takes effect upon publication, we are inviting comments on this 
proposed policy change so that we can fully consider all the relevant 
issues before making a change. Any change in the final regulations will 
take into account those comments.
    The employee union and two individuals felt that official worksite 
determinations for pay purposes should be based on where the employee 
works most or the majority of the time. The commenters were 
particularly concerned that Sec.  531.605(d) of the regulations would 
require agencies to designate the regular or reporting worksite as the 
employee's official worksite if the employee works at that site at 
least once a week. An agency requested that the regulations clarify 
that teleworkers must work at the reporting worksite at least once a 
week on a regular and recurring schedule and for a full workday.
    We do not agree with using a majority-of-time criterion instead of 
a once-a-week criterion for determining the official worksite of 
employees for pay purposes. The once-a-week requirement in Sec.  
531.605(d) applies only to employees working under telework 
arrangements, which we believe require special rules. Under the interim 
regulations, the regular worksite will remain the teleworker's official 
worksite, unless the employee does not regularly spend some time at the 
regular worksite. We believe the once-a-week requirement is a 
reasonable standard. In addition, requiring agencies to track the 
number of hours an employee works at different worksites each week and 
whether the employee worked a full or partial workday at the regular 
worksite would be administratively burdensome for agencies and could 
result in frequent changes in an employee's official worksite and 
locality or other pay rates. However, we have revised the proposed 
regulations to provide that the teleworker must report to the regular 
worksite at least once a week on a regular and recurring basis in order 
for the regular worksite to be the employee's official worksite.

[[Page 31281]]

    An agency recommended adding an exception to Sec.  531.605(d) to 
provide agencies with the option of designating the regular worksite as 
the official worksite of a teleworker provided the telework site is 
within the commuting area of the regular worksite. The agency was 
concerned about applying the proposed rules to a number of its 
teleworkers who work at various locations other than their established 
official worksite.
    The interim regulations revise Sec.  531.605(d) to provide that an 
employee under a telework agreement whose work location varies on a 
daily basis need not report at least once a week to the established 
official worksite of the employee's position of record (where the 
employee's work activities are based) as long as the employee is 
performing work within the locality pay area for that regular official 
worksite at least once a week on a regular and recurring basis. The 
interim regulations provide that if an employee covered by a telework 
agreement does not report to the regular official worksite or an 
alternative worksite in the same locality pay area at least once a 
week, the employee's official worksite is the location of the telework 
site (except as provided in Sec.  531.605(d)(3)). (Similar provisions 
apply in determining whether an employee's official worksite is covered 
by a special rate schedule or a nonforeign area cost-of-living 
allowance or post differential. See the definition of ``official 
worksite'' in Sec. Sec.  530.302 and 591.201.)
    An agency requested clarification as to the circumstances in which 
it would be appropriate for an agency to approve a temporary exception 
to allow a regular worksite to be the official worksite for pay 
purposes when a teleworker does not commute to the regular worksite at 
least once a week. Another commenter requested guidance on when 
agencies should reevaluate the official worksite determination in such 
temporary telework arrangements.
    Section 531.605(d)(3) of these interim regulations includes an 
example of an appropriate situation in which an agency may make a 
temporary exception to the once-a-week requirement--namely, when an 
employee is recovering from an injury or medical condition that 
prevents the employee from commuting to the regular worksite. Other 
examples include temporary emergency situations at the regular worksite 
or a critical project that requires the employee to telework 
temporarily. The interim regulations allow an authorized agency 
official to determine the temporary situations in which an exception 
may be applied. Agencies should periodically reevaluate the official 
worksite of an employee under a temporary telework arrangement.
    An agency asked for clarification on how to determine the official 
worksite of an employee who normally teleworks at an alternative site 
full time when that employee is assigned to work in a different 
location on a temporary basis. Under Sec.  531.605 of these interim 
regulations, agencies have the flexibility to change such an employee's 
official worksite to the location of a temporary work assignment or to 
keep the employee's official worksite at the location of the telework 
arrangement, depending on the nature of the assignment. Agencies may 
need to reevaluate such decisions periodically if the time spent on 
such temporary work assignments is extended. Agencies also may cancel 
the telework agreement in such situations.
    Finally, several commenters felt that regulations should address 
the tax, travel, reduction in force, and bargaining unit coverage 
implications of making official worksite determinations. Since the 
official worksite regulations apply only when determining an employee's 
location-based pay entitlements, these comments are outside the scope 
of these regulations.

General Schedule Basic Pay Setting

    We have revised and reorganized OPM's regulations on GS rate of 
basic pay determinations in part 531, subpart B. The revisions 
implement certain provisions in section 301 of Public Law 108-411 and 
make other changes to clarify the GS pay-setting rules. Following are 
the key changes contained in the revised subpart B:
     Additional terms are defined in the new Sec.  531.203, 
including highest applicable rate range, official worksite, payable 
rate, pay schedule, position of record, and special rate supplement. 
Also, the term rate of basic pay is redefined to include a locality 
rate. (Under the former regulations, locality rates were ignored in 
applying the rules in subpart B.)
     Section 531.204 describes the relationship among various 
types of rates of basic pay--including GS rates, LEO special base 
rates, locality rates, and special rates.
     Section 531.205 sets forth the geographic conversion rule, 
which is used to convert an employee's rate(s) of basic pay when his or 
her official worksite is changed to a new location where different pay 
schedules apply. (This section implements the statutory geographic 
conversion provisions in 5 U.S.C. 5305(i), 5334(g), and 5363(c).)
     Section 531.206 establishes the order of precedence for 
processing simultaneous pay actions. In particular, this section shows 
that geographic conversions must be processed after any general pay 
adjustment (related to changes in pay schedules) but before any other 
pay action (e.g., a promotion).
     Section 531.212 includes new provisions related to the 
authority to set a newly appointed employee's rate of basic pay above 
the minimum of the rate range based on superior qualifications or 
special agency needs. In particular, we make clear that this authority 
is used to set an employee's ``payable'' or highest rate of basic pay, 
including consideration of any applicable locality rate or special 
rate.
     Sections 531.213 through 531.215 establish rules for 
setting pay upon lateral reassignment or transfer, promotion, or 
demotion. Promotions and demotions must be processed after applying the 
geographic conversion rule, if applicable, and using the converted 
payable rate of basic pay as the employee's existing rate immediately 
before the promotion or demotion. Locality rates and special rates are 
considered rates of basic pay in applying these rules.
     Section 531.216 modifies the rules regarding setting pay 
for employees moving from a Department of Defense or Coast Guard 
nonappropriated fund instrumentality (NAFI) to a GS position to take 
into account locality rates. Also, the NAFI maximum payable rate rule 
is revised to take into account the geographic location where the NAFI 
highest previous rate was earned, consistent with the rules governing 
geographic conversion.
     Section 531.221 modifies the GS maximum payable rate rule, 
which allows an agency to set an employee's rate of pay based on his or 
her ``highest previous rate'' in a Federal civilian job. The modified 
GS maximum payable rate rule now takes into account locality rates when 
the employee's highest previous rate was based on a special rate or on 
a rate earned in a non-GS pay system. (Under the interim regulations, 
if an employee's highest previous rate was earned in a GS position, the 
maximum payable rate rule generally is applied using the underlying GS 
rate (or LEO special base rate), which avoids the need to apply the 
geographic conversion rule.)
     Sections 531.241 through 531.247 consolidate various 
special rules for ``GM employees''i.e., GS employees who were formerly 
covered by the Performance Management and Recognition System for 
managers and supervisors at grades GS-13, 14, and 15

[[Page 31282]]

and who may have rates of basic pay between the established GS step 
rates. Consistent with the changes made by Public Law 108-411 for other 
GS employees, GM employees' locality rates will be taken into account 
in applying the various pay-setting rules. If a GM employee is entitled 
to a special rate, the special rate is computed by adding the 
applicable special rate supplement on top of the GM employee's GS rate. 
(When pay schedules are adjusted, the GM employee's underlying GS rate 
must be redetermined using the relative position-in-range methodology 
presented in Sec.  531.244, which is the same basic methodology used in 
OPM's former regulations.)
    The use of locality rates in applying the GS pay-setting rules, 
along with the use of the geographic conversion rule when an employee's 
official worksite is changed to a new location, represent a significant 
change in GS pay administration. The geographic conversion rule 
requires that an employee's rate(s) of basic pay must first be 
converted to a corresponding rate(s) on the pay schedule that would 
apply to the employee's existing position of record if he or she were 
stationed at the new official worksite. No simultaneous change in the 
employee's position of record (defined as including grade, occupational 
series, agency, law enforcement officer status, and any other element 
that affects coverage under a pay schedule, other than the official 
worksite) or any simultaneous pay action (other than a general pay 
adjustment) is considered until after the geographic conversion. The 
converted rate(s) of basic pay resulting from the geographic conversion 
must be treated as the employee's existing rate(s) of basic pay in 
applying the next simultaneous pay action in the order of precedence. A 
reduction in an employee's payable rate of basic pay as a result of a 
geographic conversion is not a basis for pay retention, even if the 
move is involuntary. This does not represent a change in treatment of 
locality rates, but does represent a change in the treatment of special 
rates.
    The legislative history of Public Law 108-411 shows that a major 
objective of the geographic conversion rule was to provide the same pay 
result that would have occurred if the employee in question had moved 
laterally without a change in position to the new geographic location 
and then underwent a position change. House Report 108-733 (October 5, 
2004) stated that the geographic conversion rule ``would make it clear 
that an employee with the same work history as another employee will 
not have higher pay simply because he or she came from an area where 
higher pay rates applied, while also ensuring consistency between the 
treatment of locality rates and special rates'' (page 20).
    The geographic conversion rule will be particularly significant in 
terms of how it affects an employee who is promoted to a position at a 
different official worksite, where different pay schedules would apply 
to the employee's position of record before promotion. After applying 
any simultaneous general pay adjustment (as described in Sec.  
531.206), the agency must first convert the employee's rate(s) of basic 
pay to the applicable pay schedule(s) for the new official worksite, 
based on the employee's position of record (including grade) and step 
(or rate) before promotion. The resulting rate(s) of basic pay must be 
treated as the employee's existing rate(s) in processing the promotion 
action. (However, if the employee is simultaneously entitled to a 
within-grade increase or quality step increase on the same date as the 
promotion, that increase would be applied before processing the 
promotion.)
    Once the geographic conversion rule has been applied, the agency 
must follow the promotion rule in Sec.  531.214. The standard method of 
applying the promotion rule consists of the following steps:
    (1) Find the employee's existing step (or rate) in the GS rate 
range (or LEO special base rate range, if applicable) and increase that 
rate by two GS within-grade increases.
    (2) Determine the payable (highest) rate of basic pay for the step 
or rate determined in paragraph (1) by applying any applicable locality 
payment or special rate supplement.
    (3) Identify the highest applicable rate range for the employee's 
position of record after promotion and find the lowest step rate in 
that range that equals or exceeds the rate determined in paragraph (2). 
This is the employee's payable rate of basic pay upon promotion.
    The interim regulations provide for an alternate method of applying 
the promotion rule which involves (1) applying the promotion rule using 
the pay schedules that would apply to the employee's position of record 
if only the employee's grade were changed and (2) converting the 
resulting rate to the pay schedules for the actual position of record 
after promotion. This method yields a different result from the 
standard method only when there is a change in the employee's position 
of record (e.g., change in occupational series) which would cause the 
employee to have a different pay schedule and different highest 
applicable rate range at the higher grade. For example, an occupational 
series change in conjunction with a promotion could result in an 
employee becoming covered by a special rate schedule at the higher 
grade. The standard method would not provide the employee with any 
increase in pay based on movement into a special rate category. In 
contrast, the alternate method would apply the promotion rule without 
regard to the new special rate schedule and then would laterally 
convert the resulting rate to the corresponding rate on the special 
rate schedule, which would provide an increase reflecting the 
difference between the special rate schedule and the former pay 
schedule. This alternate method is consistent with the method found in 
the former special rate regulations at 5 CFR 530.306(f), which dealt 
with the promotion of an employee from a position not covered by a 
special rate schedule to a position covered by a special rate schedule. 
However, the alternate method also applies in other situations, such as 
when an employee moves from a lower-paying special rate schedule to a 
higher-paying special rate schedule.
    The objective of the alternate method is to treat an employee who 
is being directly promoted to a higher pay schedule the same as a 
similarly situated employee who is promoted and then later (in a 
separate action) reassigned to a position covered by the higher pay 
schedule. The alternate method mandatorily applies in lieu of the 
standard method whenever it produces a higher payable rate upon 
promotion. In addition, an agency may, at its sole discretion, use the 
alternate method when it produces a lower payable rate upon promotion. 
For example, if an employee is moving to a position in a different 
career field, an agency may determine that it is not appropriate to 
allow the employee's pay upon promotion to be set based on a special 
rate for the employee's former job.
    The alternate method of applying the promotion rules departs from 
the standard method after the step of determining the payable (highest) 
rate of basic pay at the lower (pre-promotion) grade that reflects an 
increase of two within-grade increases. Under the alternate method, 
that payable rate must be compared to the highest applicable rate range 
for the employee's grade after promotion based on consideration of pay 
schedules that apply to the employee's position of record before 
promotion. Any pay schedule that

[[Page 31283]]

applies solely to the employee's position of record after promotion 
would be ignored. The employee's rate of basic pay is set at the lowest 
step rate in the highest applicable rate range that exceeds the 
specified rate. Then the employee is converted to the new highest 
applicable rate range (reflecting any new pay schedule that applies 
after promotion) by setting the payable rate at the corresponding step 
rate in that range.
    To aid in understanding the alternate method, we provide an example 
using 2005 pay schedules. In this example, we are assuming that a GS-7, 
step 7, human resources specialist (occupational series GS-201) 
stationed in Atlanta, Georgia, is being promoted to a GS-9 information 
technology specialist position (occupational series GS-2210) in 
Washington, DC.

    Step A--Apply the geographic conversion rule to determine the 
rates of basic pay for the GS-7, step 7, position in Washington, DC. 
Based on the GS-7 position before promotion (including the GS-201 
occupational series), the pay schedules applicable to the employee 
in Washington, DC, would be the General Schedule and the locality 
rate schedule applicable in Washington, DC (Salary Table 2005-DCB).
    Step B--Using the underlying General Schedule, increase the GS-
7, step 7, rate by two within-grade increases, which produces the 
GS-7, step 9, rate ($38,719).
    Step C--The payable (highest) rate of basic pay for GS-7, step 
9, is the corresponding GS-7, step 9, locality rate in Washington, 
DC ($44,906).
    Step D--If the employee were promoted to a GS-9 position in the 
GS-201 human resources management series, the highest applicable 
rate range for that GS-9 position after promotion would be the GS-9 
locality rate range in Washington, DC (15.98 percent above GS 
rates). The GS-9, step 3, locality rate ($46,255) is the lowest step 
rate in that range that equals or exceeds the GS-7, step 9, locality 
rate from step C.
    Step E--Convert the GS-9, step 3, locality rate to the higher 
GS-9, step 3, special rate that applies to the employee's GS-2210 
information technology specialist position after promotion. The 
applicable special rate schedule is Table 999C. The GS-9, step 3, 
special rate on that schedule is the payable rate of basic pay upon 
promotion ($51,847). (At GS-9, a special rate in Table 999C is 30 
percent above the corresponding GS rate.)
    Step F--The standard method would have compared the GS-7, step 
9, locality rate directly to the higher GS-9 range of special rates 
and produced a rate of GS-9, step 1 ($48,607). Since the rate 
produced by the alternate method (GS-9, step 3, or $51,847) is 
greater than the rate produced by the standard method, the result of 
the alternate method is used.

    In addition to changes in subpart B of part 531 that relate 
directly to the changes made by Public Law 108-411, the interim 
regulations in Sec.  531.212 (dealing with the superior qualifications 
and special needs pay-setting authority) include some policy 
clarifications and changes beyond the immediate requirements of Public 
Law 108-411. For example, the interim regulations define what is meant 
by superior qualifications and special needs so that agencies better 
understand how this pay flexibility may be used. The interim 
regulations also expand and clarify the exceptions to the 90-day break-
in-service requirement to allow greater access to the superior 
qualifications and special needs pay-setting authority. For example, 
the interim regulations consolidate several of the former exceptions 
into a broader exception covering any temporary or time-limited 
appointment in the competitive or excepted service. If an individual 
was employed under any competitive or excepted service temporary 
appointment during the 90 days immediately preceding an appointment to 
a GS position, the agency could use the superior qualifications and 
special needs pay-setting authority. The interim regulations also 
expand the elements that can be considered in justifying the higher 
rate, allowing the use of factors other than existing pay, consistent 
with 5 U.S.C. 5333.
    We are inviting comments regarding a proposal to establish a 
regulatory time limit on the period of time from which an employee's 
highest previous rate may be drawn. Consistent with current 
regulations, the interim regulations in Sec.  531.221 (dealing with the 
maximum payable rate rule) establish no time limit regarding how long 
ago a highest previous rate was earned. We believe it would be 
reasonable to limit consideration of rates of pay earned during a 
recent time period (e.g., 5 or 10 years before the action in question). 
Even under the current regulations, an agency has discretion to set an 
employee's pay at any rate equal to or less than the maximum payable 
rate; thus, an agency could take into account the age of an employee's 
highest previous rate in exercising that discretion. The proposed time 
limit would reduce the administrative burden associated with 
identifying an employee's highest previous rate over an entire career 
and comparing the highest previous rate with pay schedules in effect 
many years ago.

General Schedule Within-Grade Increases

    We have revised OPM's regulations on within-grade increases for 
General Schedule employees in part 531, subpart D. The revisions 
implement certain provisions in section 301 of Public Law 108-411 and 
make other changes to clarify the rules governing GS within-grade 
increases.
    We have revised subpart D to exclude consideration of special 
rates. For the purpose of subpart D, the term rate of basic pay is 
defined as a GS base rate or an LEO special base rate. Subpart D deals 
with adjusting an employee's base rate in connection with within-grade 
increases. Any applicable locality payment or special rate supplement 
is paid on top of the base rate.
    We have revised the definition of equivalent increase in Sec.  
531.403 and related regulations in Sec.  531.407. We have defined 
equivalent increase as an increase in an employee's rate of basic pay, 
or an opportunity for such an increase under non-GS pay systems, 
resulting from certain events or actions listed in Sec.  531.407. The 
interim regulations no longer require that agencies add up the dollar 
value of multiple increases under non-GS pay systems in determining 
when an equivalent increase occurred, which was required under the 
former regulations at Sec.  531.407(a) and (b). The new events-based 
approach avoids the need to consider locality payments, special rate 
supplements, or other similar supplements or to apply geographic 
conversion rules in making equivalent increase determinations. We note 
that the former regulations at Sec.  531.407(d) had provided that a 
zero merit increase under the former Performance Management Recognition 
System would be treated as an equivalent increase, which is consistent 
with the events-based approach.

Grade and Pay Retention

    We have revised and reorganized OPM's regulations on grade and pay 
retention in part 536. The revisions implement certain provisions in 
section 301 of Public Law 108-411, incorporate changes OPM previously 
issued as proposed regulations, and make other changes to clarify the 
rules governing the grade and pay retention authorities under 5 U.S.C. 
chapter 53, subchapter VI. We have reorganized part 536 into four 
subparts that provide (1) general provisions relating to grade and pay 
retention, (2) rules for grade retention, (3) rules for pay retention, 
and (4) appeals and miscellaneous provisions. Except for correcting 
citations and moving former Sec.  536.308 to the grade retention 
subpart, the appeals and miscellaneous provisions formerly contained in 
5 CFR part 536, subpart C, are not revised by this interim regulation. 
(See redesignated subpart D.)

[[Page 31284]]

    The following new provisions in the revised part 536 implement 
section 301 of Public Law 108-411:
     Additional terms are defined in the new Sec.  536.103, 
including highest applicable rate range, official worksite, payable 
rate, pay schedule, position of record, and rate range. Also, the term 
rate of basic pay is redefined to include a locality rate, consistent 
with 5 U.S.C. 5361(4). (Under the former regulations, locality rates 
were ignored when applying the rules in part 536.) The definition of 
representative rate is redefined as described later in this 
Supplementary Information.
     Sections 536.206, 536.301, 536.302, 536.303, 536.304, 
536.305, and 536.308 incorporate the geographic conversion rule into 
the grade and pay retention regulations, where it is used to convert a 
rate(s) of basic pay when an employee's official worksite is changed to 
a new location where different pay schedules apply. The converted rate 
resulting from geographic conversion is treated as the employee's 
existing rate in applying the pay retention provisions. (These 
provisions implement the statutory geographic conversion provisions in 
5 U.S.C. 5305(i), 5334(g), and 5363(c).)
     Section 536.105 clarifies when agencies must compare the 
grades of positions in different pay systems using representative rates 
under the grade retention rules. This section also provides that, for 
positions located at different official worksites where different pay 
schedules apply, the geographic conversion rules must be applied before 
comparing the representative rates. In addition, the definition of 
representative rate in Sec.  536.103 is revised to mean the payable 
(highest) rate of basic pay (including any locality payment or special 
rate supplement) for the specified point in the range (e.g., GS step 4 
). The definition also provides that in comparing grades or work levels 
when one of the grades or work levels is not under a covered pay 
system, the representative rates that must be compared are the maximum 
payable rates of basic pay (including any locality payment, special 
rate supplement, or similar payment) that apply to the grade or level 
of each position. (The former regulations provided agencies with the 
flexibility to set the representative rate for positions under 
noncovered pay systems.) This revised definition of representative rate 
also must be used for making severance pay and discontinued service 
retirement reasonable offer determinations. See the definition of 
reasonable offer in Sec.  550.703 and the references in Sec. Sec.  
831.503(b)(3)(iv) and 842.206(c)(3)(iv).
     Section 536.206 modifies the rules for determining an 
employee's rate of basic pay when an employee becomes entitled to grade 
retention or becomes covered by different pay schedules during a period 
of grade retention and the order for processing such pay actions. If 
such an employee's rate of basic pay otherwise would be reduced upon 
placement in a lower-paying pay schedule (excluding a reduction that 
results from a geographic conversion), the employee is eligible for pay 
retention under 5 U.S.C. 5363 and 5 CFR part 536, subpart C, to the 
same extent as any other employee. Under the former regulations, a rate 
above the maximum rate that resulted from the application of the grade 
retention rules was not treated as a retained rate under 5 U.S.C. 5363. 
However, consistent with section 301(d)(2) of Public Law 108-411, and 
our regulatory authority in 5 U.S.C. 5365, we have revised the grade 
retention regulations to provide that the normal pay retention rules 
apply to employees with a retained grade.
     Sections 536.301 and 536.302 clarify the situations in 
which an agency must provide pay retention to an employee and the 
situations in which an agency may apply optional pay retention (after 
application of geographic conversion rules under Sec.  536.303(a)). We 
also removed the requirement in former Sec.  536.104(a)(5) that pay 
retention apply to an employee whose rate of basic pay otherwise would 
be reduced as a result of placement in a lower wage area. These changes 
are consistent with 5 U.S.C. 5363(c)(2), which provides that a 
reduction in an employee's rate of basic pay resulting from a 
geographic conversion is not a basis for entitlement to pay retention 
under 5 U.S.C. 5363.
     Section 536.301 also provides that an agency must provide 
pay retention under part 536, subpart C, to an employee whose rate of 
basic pay otherwise would be reduced (after geographic conversion) as a 
result of the application of the promotion rule in 5 U.S.C. 5334(b) and 
5 CFR 531.214 when the employee's payable rate of basic pay after 
promotion exceeds the maximum rate of basic pay of the new rate range. 
Under the former regulations, a rate of basic pay above the maximum 
rate that resulted from application of the promotion rule was not 
treated as a retained rate under 5 U.S.C. 5363 and 5 CFR part 536. This 
change is required by an amendment to 5 U.S.C. 5334(b).
     Section 536.304 modifies the rules for determining an 
employee's pay retention entitlement. In particular, the new 
regulations provide that an eligible employee is entitled to a retained 
rate if his or her rate of basic pay (including any locality payment or 
special rate, but after geographic conversion under Sec.  536.303(a)) 
exceeds the maximum rate of the highest applicable rate range for the 
new position or geographic area. The retained rate will equal the 
employee's former rate of basic pay (including any locality payment or 
special rate). This section implements 5 U.S.C. 5363(b)(1).
     Section 536.305 modifies the rules for adjusting a 
retained rate at the time of a pay schedule adjustment. Consistent with 
5 U.S.C. 5363(b)(2)(B), when a pay schedule adjustment causes the 
maximum rate of the highest applicable rate range for an employee's 
position to increase, the employee's retained rate is increased by 50 
percent of the increase in that maximum rate. If an employee's retained 
rate would fall below the maximum rate after the 50 percent increase, 
the employee's payable rate is set at that maximum rate and pay 
retention ceases to apply. The interim regulations make clear that, 
consistent with 5 U.S.C. 5363(c), the geographic conversion rule in 
Sec.  536.303(b) applies in lieu of the 50-percent adjustment rule when 
a pay schedule change is caused by a change in the location of the 
employee's official worksite. The interim regulations also make clear 
that the 50-percent adjustment rule does not apply if a pay schedule 
change is caused by a change in the employee's position of record.
     Section 536.304(b)(3) provides that, when initially 
established, a retained rate may not exceed (1) 150 percent of the 
maximum payable rate of basic pay of the highest applicable rate range 
for the grade of the employee's position of record or (2) the rate for 
level IV of the Executive Schedule. Section 536.306 provides that at no 
time may a retained rate exceed the rate for level IV of the Executive 
Schedule and that if an employee's retained rate is limited by the 
level IV rate, the employee's higher, uncapped rate is not maintained 
or used for any purpose. This level IV limitation is consistent with 
the level IV limit on locality rates under 5 U.S.C. 5304(g)(1) and 
special rates under 5 U.S.C. 5305(a)(1) for General Schedule employees 
and the level IV limitation on rates for prevailing rate employees 
under 5 U.S.C. 5373. Under amended 5 U.S.C. 5365(b), OPM is authorized 
to establish limitations on the application of pay retention provisions 
for employees in noncovered pay systems.
     Section 536.307 provides the purposes for which a retained 
rate is basic pay, consistent with 5 U.S.C.

[[Page 31285]]

5363(d). A retained rate is basic pay for many of the same purposes as 
a special rate or a locality rate. When a retained rate is not basic 
pay, the maximum rate of basic pay for the employee's grade must be 
used in place of the retained rate (e.g., for computing percentage-
based awards under 5 CFR part 451 and recruitment, relocation, and 
retention incentives under 5 CFR part 575, subparts A, B, and C).
     Section 536.309 provides the rules for converting retained 
rates in effect on April 30, 2005, to a retained rate under new 5 
U.S.C. 5363 and 5 CFR part 536, subpart C. This section covers an 
employee who on April 30, 2005, was receiving (1) a retained rate under 
5 U.S.C. 5363, (2) a rate paid under 5 U.S.C. 5334(b) or 5362 that was 
greater than the maximum rate of basic pay payable for the grade of the 
employee's position of record, or (3) a continued rate of pay under 5 
CFR part 531, subparts C or G, that was greater than the maximum rate 
of basic pay payable for the grade of the employee's position. 
Effective on May 1, 2005, the employee's new retained rate must equal 
his or her previous retained rate, including any applicable locality 
payment under 5 U.S.C. 5304.
    On May 25, 2000, OPM published proposed changes in part 536 (65 FR 
33785) regarding the applicability of grade and pay retention to 
employees moving within and between covered pay schedules (hereafter 
referred to as ``covered pay systems''). Under 5 U.S.C. 5361, a covered 
pay system includes the General Schedule; a prevailing rate schedule 
under 5 U.S.C. chapter 53, subchapter IV; or a special occupational pay 
system under 5 U.S.C. chapter 53, subchapter IX. Consistent with the 
grade and pay retention statute, the former regulations provided grade 
and pay retention benefits for employees moving between positions 
within a covered pay system and between positions under different 
covered pay systems. In addition, OPM used its regulatory authority 
under 5 U.S.C. 5365 to provide agencies with the discretionary 
authority in the former regulations to apply grade and pay retention 
provisions to employees moving from positions not under a covered pay 
system to positions under a covered pay system.
    In the regulations issued on May 25, 2000, we proposed to (1) 
provide agencies with the discretionary authority to apply pay 
retention provisions to employees moving to or within noncovered pay 
systems who would otherwise suffer a reduction in pay as a result of a 
management action and to freeze any resulting retained rate (i.e., not 
provide the normal 50 percent pay adjustment under former 5 CFR 
536.205(c)); (2) freeze the retained rate of an employee who moves from 
a noncovered pay system to a covered pay system and who receives a rate 
in excess of the maximum rate applicable to the covered pay system; and 
(3) prohibit the application of grade retention to any employee who 
moves from a noncovered pay system.
    We received comments from an agency and an employee association on 
the proposed regulations. The agency requested that OPM amend the 
regulations to provide agencies with the administrative authority to 
establish a pay adjustment mechanism for an employee on pay retention 
under a noncovered pay system as consistent as possible with the 
General Schedule mechanism in the former 5 CFR 536.205(c). The 
association suggested that we modify the regulations to allow such an 
employee to receive the reduced pay adjustment of 50 percent, as long 
as the rate of pay does not exceed the pay level previously held, or 
the maximum rate of the new position, whichever is greater.
    We revisited the proposal to provide agencies with the authority to 
apply pay retention provisions to employees moving to or within 
noncovered pay systems and have decided not to include this authority 
in the revised part 536. Agencies may continue to apply pay retention 
provisions at their discretion to employees moving from a noncovered 
pay system to a covered pay system. See new Sec.  536.102(a).
    The association also objected to our proposal to freeze the 
retained rates of employees who move from a noncovered pay system to a 
covered pay system and who receive a retained rate in excess of the 
maximum rate applicable to the covered pay system. We revisited this 
issue and have decided not to include this proposal in the revised part 
536. The revised part 536 provides that employees who move from 
noncovered pay systems to covered pay systems and receive a retained 
rate are entitled to the normal 50 percent pay adjustment under new 
Sec.  536.305. (Note that such retained rates are subject to the 
limitation under new Sec.  536.306.)
    These interim regulations retain the proposal that prohibits 
agencies from applying grade retention to an employee who moves into a 
covered pay system from a noncovered pay system. See new exclusion in 
Sec.  536.102(d). Accordingly, we are removing the rule in former Sec.  
536.203(b) for determining a retained grade for an employee who moves 
from a position not under a covered pay system to a position under a 
covered pay system. Employees entitled to grade retention immediately 
prior to the effective date of these regulations as a result of 
movement from a noncovered pay system to a covered pay system will 
remain entitled to grade retention until one of the terminating 
conditions in Sec.  536.208 applies.
    The revised part 536 contains the following additional significant 
clarifying and conforming changes regarding the coverage, eligibility, 
and applicability of grade and pay retention:
     Section 536.102 merges the coverage, applicability, and 
exclusionary provisions from the former regulations into a single 
coverage section that clarifies the employees covered by and excluded 
from the regulations, including the coverage of employees in Department 
of Defense and Coast Guard nonappropriated fund instrumentality (NAFI) 
positions. (See also new Sec.  536.202(d) for information on NAFI 
coverage.)
     Section 536.103 adds new definitions of covered pay system 
(consistent with the definition of covered pay schedule under 5 U.S.C. 
5361), employee, General Schedule, management action, and prevailing 
rate employee and revises the definitions of reduced in grade or pay at 
the employee's request (formerly demotion at an employee's request), 
reduced in grade or pay for personal cause (formerly demotion for 
personal cause), temporary promotion, and temporary reassignment to 
clarify coverage and eligibility provisions.
     Section 536.201 clarifies the conditions under which a 
movement to a lower grade is considered to be a result of reduction in 
force (RIF) procedures or a reclassification process for grade 
retention purposes, consistent with the guidance in the former Federal 
Personnel Manual.
     Section 536.203 eliminates the requirement that the 52 
weeks of service needed for optional grade retention eligibility in RIF 
situations must be in an agency as defined in 5 U.S.C. 5102, but 
requires that such service be under a covered pay system. This change 
is consistent with the new rule in Sec.  536.102(d) barring agencies 
from providing grade retention to employees moving from a noncovered 
pay system to a covered pay system.
     Section 536.205 clarifies that an employee with a retained 
grade also retains the pay system associated with that retained grade, 
even if the employee's actual position is in a different covered pay 
system.
     Sections 536.207, 536.208, and 536.308 provide that an 
employee loses

[[Page 31286]]

eligibility for or entitlement to grade and pay retention upon movement 
to a position not under a covered pay system.

SES Pay Retention

    We have revised OPM's regulations on establishing, adjusting, and 
terminating saved rates for former members of the Senior Executive 
Service (SES) who are guaranteed placement in a position covered by 
another pay system (e.g., the General Schedule pay system), as provided 
in subpart G of part 359. Under our broad regulatory authority in 5 
U.S.C. 3596, we are revising Sec.  359.705 to make changes that are 
consistent with (1) the changes made in the pay retention provisions in 
part 536 in implementing section 301 of Public Law 108-411 and (2) 
congressional intent as reflected in uncodified section 301(d)(2) of 
that Act. The significant changes made in the interim regulations are 
as follows:
     Section 359.705(c) provides that an SES saved rate may not 
be supplemented by any locality payment or other supplement. With the 
amendment of 5 U.S.C. 5302(8), locality pay is no longer paid on top of 
any kind of retained or saved rate.
     Section 359.705(g) provides for conversion of any existing 
locality-adjusted saved rate to a new saved rate of equal value on May 
1, 2005. Without such a conversion, employees might suffer a reduction 
in pay under the new rules. The saved rate will be compared to the 
highest applicable rate range (including a locality rate range or 
special rate range) for the employee's position of record.
     Section 359.705(b) provides that, in determining the 
amount of a saved rate, an agency must take into account any locality 
rate or special rate (1) currently payable for the GS position in which 
he or she is placed upon removal from the SES and (2) currently payable 
for the GS position held before placement in the SES.
     Section 359.705(d) provides that the 50-percent adjustment 
rule does not apply when an employee's rate range maximum is increased 
due to a change in the employee's official worksite. Instead, the 
retained rate will be adjusted under the geographic conversion 
authority in paragraph (e). For GS employees receiving a saved rate, 
the geographic conversion rule is the same as that used for retained 
rates under part 536 (i.e., it maintains the relative position of the 
retained rate vis-[agrave]-vis the range maximum). Also, the 50-percent 
adjustment rule does not apply when an employee's rate range maximum is 
increased as a result of a position change that caused the employee to 
become covered by a new pay schedule.
    Other changes in Sec.  359.705 are clarifications. For example, we 
have clarified that a saved rate terminates when an employee becomes 
entitled to a higher rate of basic pay--e.g., when the 50-percent 
adjustment would cause the saved rate to fall below the range maximum 
and the employee's pay is set at the range maximum.

Waiver of Notice of Proposed Rulemaking and Delayed