Changes in Pay Administration Rules for General Schedule Employees, 66143-66157 [E8-26562]

Agencies

• Office of Personnel Management
• Personnel Management Office

[Federal Register Volume 73, Number 217 (Friday, November 7, 2008)]
[Rules and Regulations]
[Pages 66143-66157]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26562]



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Rules and Regulations
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Federal Register / Vol. 73, No. 217 / Friday, November 7, 2008 / 
Rules and Regulations

[[Page 66143]]



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: U.S. Office of Personnel Management.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Office of Personnel Management is issuing final 
regulations on pay setting rules for General Schedule employees. The 
final regulations revise the interim regulations by making a number of 
technical modifications, corrections, and clarifications.

DATES: The regulations are effective on December 8, 2008.

FOR FURTHER INFORMATION CONTACT: Carey Johnston by telephone at (202) 
606-2858; by fax at (202) 606-0824; or by e-mail at pay-performance-
policy@opm.gov.

SUPPLEMENTARY INFORMATION: On May 31, 2005, the U.S. Office of 
Personnel Management (OPM) published interim regulations (70 FR 31278) 
to implement section 301 of the Federal Workforce Flexibility Act of 
2004 (Pub. L. 108-411, October 30, 2004), hereafter referred to as 
``the Act.'' On December 19, 2005, OPM corrected minor errors in the 
interim regulations (70 FR 74995). Section 301 of the Act amended 
provisions in 5 U.S.C. chapter 53 relating to the administration of 
special rates, locality rates, and retained rates. The statutory and 
regulatory changes were 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.
    The 60-day comment period ended on August 1, 2005. We received 
comments from eight agencies, one union, and several individuals. This 
Federal Register notice addresses the comments we received on the 
interim regulations and makes a number of technical revisions and 
clarifications, which are summarized below. In addition, we issued 
guidance, including examples, to address many of the questions we 
received about the interim regulations. We encourage agencies and 
employees to review these materials on OPM's Web site at https://
www.opm.gov/oca/pay/HTML/factindx.asp. We will continue to provide 
additional guidance on pay administration, as necessary.

Comment Applicable to the Effective Date

    One commenter objected to the effective date of the interim 
regulations. The commenter stated he was a manager who had to redo 
personnel actions because of the retroactive implementation of the 
rules. The commenter stated OPM should have published the rules before 
they became effective.
    Section 301(d) of the Act provided that section 301 would take 
effect the first day of the first pay period beginning on or after the 
180th day of enactment of the Act. The 180th day after enactment was 
April 28, 2005, and the first day of the first pay period following 
that date was May 1, 2005. On November 1, 2004, OPM issued a memorandum 
to agencies notifying them of changes resulting from the Federal 
Workforce Flexibility Act of 2004. (See https://www.opm.gov/oca/
compmemo/2004/2004-22.asp.) On April 25, 2005, OPM issued an additional 
memorandum to agencies notifying them of changes to special rate 
schedules and special rate entitlements resulting from the Act. (See 
https://www.opm.gov/oca/compmemo/2005/2005-06.asp.) While OPM did not 
publish interim regulations until May 31, 2005, the regulations became 
effective on May 1, 2005, in order to implement the statutory changes 
mandated by the Act. The regulations must be applied prospectively from 
that date. OPM has no authority to waive or change this statutory 
effective date.

Comments Applicable to Senior Executive Service Saved Rates

    An agency recommended that OPM revise Sec.  359.705, which provides 
the rules 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. The agency 
suggested that OPM clarify that an employee who is placed under 5 CFR 
part 359, subpart G, in a General Schedule (GS) position is not subject 
to the limitation on GS basic pay in 5 U.S.C. 5303(f) of the rate for 
level V of the Executive Schedule (EX). This statement was included in 
former Sec.  359.705(c) as in effect prior to May 1, 2005. In addition, 
a commenter requested that OPM clarify what pay limitations apply to 
SES saved rates.
    Under Sec.  359.705(a), an appointee placed under subpart G in a 
position outside the SES is entitled to receive basic pay at the 
highest of (1) the rate of basic pay in effect for the position in 
which the appointee is being placed; (2) the rate of basic pay 
currently in effect for the position the appointee held immediately 
before being appointed to the SES; or (3) the rate of basic pay in 
effect for the appointee immediately before removal from the SES. Under 
5 U.S.C. 5382, the maximum SES rate for an agency with a certified 
performance appraisal system is the rate for EX-II, and the maximum SES 
rate for an agency without a certified performance appraisal system is 
the rate for EX-III. Consistent with the purpose of the SES saved pay 
provision, we are revising Sec.  359.705(c) to clarify that an employee 
placed under subpart G in a position outside of the SES pay system is 
subject to the limitation on SES pay in 5 U.S.C. 5382 of the rate for 
level II of the Executive Schedule.

Comments Applicable to General Schedule Basic Pay Setting

Definitions of Demotion and Promotion (Sec.  531.203)

    A commenter recommended that OPM revise the definitions of 
promotion and demotion in Sec.  531.203 to cover situations involving 
movements between pay systems. Specifically, the commenter would like 
the definitions to be the same as or similar to the definitions of 
promotion and change to

[[Page 66144]]

lower grade in the Guide to Processing Personnel Actions (GPPA).
    We are not adopting this recommendation. The same or similar terms 
may be used and defined in different ways in the GPPA and the CFR, 
depending on the purpose of the term and statutory requirements. In the 
GPPA, a promotion is an employee's movement to a position at a higher 
grade level within the same job classification system and pay schedule, 
or to a position with a higher rate of basic pay in a different job 
classification system and pay schedule. In Sec.  531.203, a promotion 
is a GS employee's movement from one GS grade to a higher GS grade 
while continuously employed. It is necessary for the definition of 
promotion in Sec.  531.203 to be more narrow than the definition of 
promotion in the GPPA because the two-step promotion rule in 5 U.S.C. 
5334(b) and 5 CFR 531.214 applies only to GS employees who are promoted 
to a higher grade under the General Schedule without a break in 
service. Similarly, the demotion rules in Sec.  531.215 apply only to 
employees who move from one GS grade to a lower GS grade while 
continuously employed. As a result, we cannot revise the definitions of 
promotion and demotion in Sec.  531.203 to be consistent with the GPPA 
definitions. Agencies need to be aware of these different definitions. 
For example, an employee who moves from a non-GS pay system to the GS 
pay system may receive an increase in basic pay, and the nature of 
action may be documented as a promotion as that term is defined in the 
GPPA. However, for GS pay-setting purposes, the movement would be 
considered a transfer or reassignment as those terms are defined in 
Sec.  531.203, depending on whether the movement occurs within the same 
agency or between agencies.

Superior Qualifications and Special Needs Pay-Setting Authority (Sec.  
531.212)

    An agency recommended that OPM clarify what constitutes a 
candidate's existing salary in Sec.  531.212(c)(2). Section 531.212(c) 
provides the factors an agency may consider, as applicable in the case 
at hand, to determine the step at which to set an employee's rate of 
basic pay using the superior qualifications and special needs pay-
setting authority. The agency stated it would be helpful to clarify 
whether bonuses or overtime premium pay should or could be a factor in 
the candidate's existing salary.
    We are not adopting this recommendation. Bonuses or overtime pay 
could be a factor in determining the step at which to set an employee's 
payable rate of basic pay, since those payments could be considered 
``other relevant factors'' under Sec.  531.212(c)(10). However, this is 
a matter that must be decided at the agency level.

Setting Pay Upon Promotion (Sec.  531.214)

    A commenter requested clarification on why the locality pay 
associated with his previous worksite was not considered in setting his 
pay upon promotion at his new worksite. He stated that the interim 
regulations provide that locality rates are considered basic pay in 
applying GS pay administration provisions (e.g., GS promotion 
provisions).
    When an employee's official worksite is changed to a new location 
where different pay schedules apply, the agency must convert the 
employee to the applicable pay schedule(s) and rate(s) of basic pay for 
the new official worksite based on the employee's position of record 
before the promotion, as provided in Sec.  531.205, before processing a 
simultaneous promotion action. See Sec.  531.214(b) and 5 U.S.C. 
5334(g). Therefore, the geographic conversion rule must be applied 
before the use of any applicable locality rates in applying the GS pay-
setting rules. A major objective of the geographic conversion rule is 
to provide the same pay result that would have occurred if the employee 
in question had moved laterally without a change in position (such as 
grade) to the new geographic location and then underwent a position 
change.
    An agency recommended OPM revise Sec.  531.214(b) to state that the 
rate resulting from the geographic conversion rule must be used as the 
existing rate in processing a promotion. While the converted rate is 
used as the existing rate, we are not adopting the recommendation 
because the geographic conversion rule is adequately stated in 
Sec. Sec.  531.205, 531.206, and 531.214(d)(1). We also note that the 
definition of existing rate in Sec.  531.203, which is a term used in 
Sec.  531.214, includes ``For example, the existing rate immediately 
before a promotion action must reflect any geographic conversion under 
Sec.  531.205 and any simultaneous within-grade increase or quality 
step increase.''
    Three commenters, who were apparently entitled to special rates 
prior to May 1, 2005, expressed concerns that their basic pay had 
decreased upon promotion. In the past, special rates were viewed as a 
rate of basic pay replacing the corresponding GS base rates of pay. 
Under current law and regulations, a special rate is viewed as 
consisting of a base rate (GS rate or law enforcement officer special 
base rate) and a special rate supplement--similar to the base-plus-
supplement concept we have long used for locality rates. In other 
words, special rate employees have the same base rates as non-special 
rate employees, but have a different supplement. Changing the way 
special rates are documented is not a reduction in basic pay. Special 
rates are still considered basic pay for the purposes specified in 
Sec.  530.308, including retirement contributions and benefits.
    It appears the commenters were promoted either from or to positions 
where special rates had recently been terminated. Section 301 of the 
Act amended 5 U.S.C. 5305(h) so that 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 a retained rate). The 
termination of these special rates did not result in a loss in pay for 
any covered employees, since all affected employees continued to 
receive the higher locality rate to which they were otherwise entitled.
    Furthermore, by law, OPM was required to issue regulations 
governing the extent to which special rates and locality rates would be 
used in applying the GS promotion rule. (See 5 U.S.C. 5334(b), as 
amended by section 301(a)(3) of the Act.) Under the law and regulations 
in effect before May 1, 2005, a special rate employee promoted to a 
grade with underlying special rates (where locality rates were higher 
at all steps of the grade) would have received a higher pay increase 
than the normal GS promotion increase. Section 301 of the Act was 
designed to correct this anomaly and restore fairness by ensuring that 
locality rates would be considered in applying the promotion rule. This 
intent was documented in the legislative history of the Act:

    Section 301(a)(3)(A) would amend Sec. 5334(b), which covers 
employee entitlement to basic pay rates upon promotion * * *. OPM 
would prescribe regulations on the circumstances under which and the 
extent to which special rates or locality-adjusted rates would be 
considered to be basic pay in applying this subsection. This 
amendment would authorize OPM to determine how special rates and 
locality rates should be used in applying the two-step promotion 
rule (upon promotion to a higher General Schedule grade, an employee 
is generally eligible for a pay increase at least equal to two steps 
in the grade from which he or she is promoted) in order to remedy 
existing pay administration problems arising in situations involving 
promotions, special rates, and retained pay when locality pay is not 
considered to be basic pay. This amendment would also allow OPM to 
prescribe regulations to avoid current windfalls resulting from 
employees receiving a two-step promotion (based on the higher 
special

[[Page 66145]]

rate schedule) and then receiving locality pay on top of the 
adjusted rate.

    H.R. Rep. No. 108-733 (2004), 2005 U.S.C.C.A.N. 2289, 2298-2299.

The promotion rules in Sec.  531.214 meet the statutory requirements 
and the Congressional intent of the Act and further changes are 
unnecessary.
    One of the commenters requested to be ``grandfathered in,'' stating 
that changes should apply to new personnel entering the workforce. OPM 
is not able to accommodate any requests to be grandfathered in because 
the Act contained no special grandfathering provisions. Pay actions 
must be processed using the law and regulations that are in effect at 
the time of the pay action.

Using a Highest Previous Rate Under the Maximum Payable Rate Rule 
(Sec.  531.221-223)

    An individual objected to the revised rule in Sec.  531.221 of the 
interim regulations for determining an employee's maximum payable rate 
when the employee's highest previous rate is a rate under the Federal 
Wage System (FWS). The individual stated that the revised rule is 
neither consistent with the President's intention for locality pay nor 
legal. The individual also stated that even though he received an 
increase in total pay (i.e., basic pay and locality pay), his basic pay 
was reduced.
    We do not agree that the current maximum payable rate rule is 
inconsistent with Presidential or Congressional intent. In applying the 
former maximum payable rate rule in cases where an employee was moving 
from an FWS position to a GS position, a highest previous rate based on 
an FWS rate of pay was compared to the underlying GS base rate range 
for the employee's grade, excluding locality pay. The maximum payable 
rate was set at the lowest step rate in the underlying GS base rate 
range that equaled or exceeded the highest previous rate, not to exceed 
the rate for step 10 of the GS grade. This process of comparing a 
locality-based FWS rate to a GS rate range that did not include a 
locality adjustment resulted in substantial pay increases for affected 
employees--an anomalous result not intended by the maximum payable rate 
rule. At the same time, in cases where an employee was moving from a GS 
position to an FWS position, the employee's highest previous rate was 
based on the GS base rate, excluding locality pay, and was compared to 
the locality-based FWS rate range. This process resulted in an FWS rate 
that was significantly lower than the employee's former GS locality 
rate, which also was an anomalous result not intended by the FWS 
highest previous rate rule. Both types of anomalies have been corrected 
under the current OPM regulations, which require that GS locality rates 
be considered in applying these pay-setting rules.
    Under the current GS maximum payable rate rule, when an employee 
moves from an FWS position to a GS position, his or her highest 
previous rate is compared to the GS rate range for the employee's 
grade, including locality pay. The maximum payable rate is set at the 
lowest rate in the locality rate range that equals or exceeds the 
highest previous rate. The current rule more logically compares a 
locality-based FWS rate of pay to a GS locality rate range to determine 
the employee's maximum payable rate and avoids substantial pay 
increases not intended by the maximum payable rate rule.
    A commenter requested clarification regarding how the maximum 
payable rate rule applies to employees in the GM pay plan. (A GM 
employee is a GS employee who was formerly covered by the Performance 
Management and Recognition System under 5 U.S.C chapter 54 on October 
1, 1993, and became covered on November 1, 1993, by section 4 of Public 
Law 103-89, the Performance Management and Recognition System 
Termination Act of 1993.) As noted in Sec.  531.221(a)(1), special 
rules for GM employees are provided in Sec.  531.247.
    In the Supplementary Information for the interim regulations 
published May 31, 2005, we invited comments on a proposal to establish 
a regulatory time limit on the period of time from which an employee's 
highest previous rate may be drawn. The purpose of the proposed time 
limit was to 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.
    We received mixed reactions regarding establishing a regulatory 
time limit. Two agencies supported this proposal and three agencies did 
not support the proposal. Two agencies stated it would be better if the 
time limit was discretionary. One agency did not think a time limit was 
necessary, but stated, if a time limit is established, OPM should 
mandate a time limit rather than allowing each agency to establish its 
own policy. The agencies also expressed different views regarding the 
length of the time limit.
    We have decided not to establish a regulatory time limit. We note 
that each agency continues to have 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 recentness of an employee's highest 
previous rate in exercising that discretion.
    An agency suggested that OPM specify that a rate of pay earned 
during military service may not be used as an employee's highest 
previous rate. We agree. While Sec.  531.222(a)(1)(i) already provides 
that a highest previous rate must be a ``rate of basic pay previously 
received * * * while employed in a civilian position * * * '', we have 
added a new paragraph Sec.  531.223(i) to expressly exclude a rate of 
pay received as a member of the uniformed services from rates of pay 
that may be used as the highest previous rate. ``Uniformed services'' 
is defined in 5 U.S.C. 2101.
    A commenter requested clarification on determining an employee's 
maximum payable rate when the employee has a retained rate under part 
536. We have added a new paragraph Sec.  531.223(j) excluding retained 
rates from rates of pay that may be used as the highest previous rate. 
Under part 536 of the interim regulations, a retained rate is based on 
an employee's highest applicable rate, including any applicable 
locality rate after any geographic conversion. This clarification is 
consistent with the policy in effect before May 1, 2005, that a 
locality-adjusted retained rate could not be used as a highest previous 
rate. The agency may use the rate of pay the employee received 
immediately before his or her entitlement to pay retention as the 
employee's highest previous rate.

Comment Applicable to Removal of Special Pay Adjustments for Law 
Enforcement Officers

    The interim regulations removed 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, because all of the special geographic adjustments for LEOs have 
been surpassed by regular locality payments under 5 U.S.C. 5304. One 
commenter asked hypothetically whether an employee would become 
entitled to special geographic adjustments for LEOs if locality 
payments were to decrease and fall below the LEO special geographic 
adjustments. Although such a scenario seems unlikely under current 
circumstances, OPM would address such a situation by regulation if it 
were to occur.

[[Page 66146]]

Comment Applicable to General Schedule Within-Grade Increases

    One agency asked if an increase in pay an employee receives when 
moving from a non-GS pay system to the GS pay system would be an 
equivalent increase, as determined under the rules in Sec.  531.407. 
Section 531.407 provides a list of personnel actions that are 
considered equivalent increases for the purpose of determining when GS 
employees are entitled to their next within-grade increase. The within-
grade increase rules take into account personnel actions that occur 
within the GS pay system and within a non-GS pay system (for the 
purpose of determining when an employee is eligible to receive a 
within-grade increase after movement from a non-GS to a GS position). 
Personnel actions that occur within the GS pay system are listed in 
Sec.  531.407(a). Personnel actions that occur within a non-GS system 
are listed in Sec.  531.407(b).
    We have revised Sec.  531.407(b) to clarify that the personnel 
actions listed in paragraph (b) must have occurred in the non-GS pay 
system. If an employee receives an increase in pay as a result of 
moving between non-GS pay systems, from a non-GS to the GS pay system, 
or from the GS pay system to a non-GS pay system, such personnel 
actions are not considered equivalent increases.
    However, when certain personnel actions occur simultaneously with a 
pay system change under authority of the non-GS pay system and those 
personnel actions are within-level or within-range increases that 
result in forward movement in the rate range that applies to the 
employee's new position, such actions are considered equivalent 
increases. This would include, for example, a pay increase that is paid 
simultaneously with a pay system change to account for the value of 
accrued within-grade increases under the former system or to provide a 
promotion-equivalent increase. We have revised Sec.  531.407(b)(2) to 
clarify that such a simultaneous personnel action is considered an 
equivalent increase. We also have revised Sec.  531.407(b)(2)(ii) to 
clarify that placement under a new basic pay schedule within the same 
pay system is not an equivalent increase when such placement results in 
a nondiscretionary basic pay increase to account for occupational pay 
differences.

Comments Applicable to Locality Rates

Determining an Employee's Official Worksite (Sec.  531.605)

    In the Supplementary Information for the interim regulations 
published on May 31, 2005, we invited comments on a proposal to revise 
the regulations so that, in cases involving a temporary promotion or 
reassignment, the official worksite for the employee's permanent 
position of record would be considered to be the official worksite of 
the temporary position of record for pay-setting purposes (unless the 
employee receives relocation benefits under 5 U.S.C. 5737).
    One agency supported the proposal. Another agency suggested 
revising the proposal to provide agencies with the flexibility to 
determine whether or not the official worksite should be changed, 
depending on which location would provide the employee with the 
greatest pay entitlement. Revising the proposal as suggested would not 
be equitable to an employee who is permanently reassigned or promoted 
to a different location and cannot receive the same benefit due to the 
geographic conversion rule in Sec.  531.205. A third agency summarized 
conflicting comments it received from its subcomponents on this issue.
    We will consider these comments further as we review the need for 
changes in OPM requirements related to documentation of personnel 
actions. Accordingly, we have not included the proposed changes in 
these final regulations.
    The interim regulations implemented 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). Under 
Sec.  531.605(a), the official worksite generally is the place where 
the employee regularly performs his or her duties. We are making 
clarifying revisions in Sec.  531.605(a) to provide that, when an 
employee's work involves recurring travel or the work location varies 
on a recurring basis, the official worksite is the location where the 
work activities for his or her position of record are based, as 
determined by the employing agency, subject to the requirement that the 
official worksite must be in a locality pay area in which the employee 
regularly performs work.
    Under Sec.  531.605(d) (as issued in the May 2005 interim 
regulations), a 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. One agency recommended 
removing this portion of the regulations because of the ``potentially 
adverse impact that the interim regulations will have on employees who 
are currently teleworking from outside their locality pay area.''
    We do not agree. It is not consistent with the law (5 U.S.C. 5304) 
to pay locality payments based on an employee's regular worksite if the 
employee generally does not perform his or her duties in that locality 
pay area. We do not see any reason to remove the requirements in Sec.  
531.605(d). The public had an opportunity to comment on the proposed 
regulations issued in January 2005, and we addressed the comments we 
received on those proposed regulations in the Supplementary Information 
accompanying the interim regulations issued in May 2005.
    Another agency suggested that OPM delete ``at least once a week'' 
from the regulation and allow the agency to determine what constitutes 
having an employee report to the official worksite on a regular and 
recurring basis. We do not agree that the determination of an 
employee's official worksite should be made by individual agencies 
without criteria or parameters. Providing certain specific criteria in 
regulations is essential to ensure that agencies pay employees fairly 
and consistently, especially in situations such as telework 
arrangements. However, we have revised Sec.  531.605 to replace the 
once-a-week standard with a twice-a-pay-period standard. Revised Sec.  
531.605 allows an agency to treat the regular worksite for a telework 
employee's position of record as the employee's official worksite if 
the employee works at the regular worksite for the employee's position 
of record at least twice each biweekly pay period on a regular and 
recurring basis. We are identifying additional examples of temporary 
situations in which an agency may make an exception to the twice-a-pay-
period standard: (1) An extended period of approved absence from work, 
(2) a period during which the employee is in temporary duty travel 
status away from the official worksite, or (3) a period during which an 
employee is temporarily detailed to work at a location other than a 
location covered by a telework agreement. These changes will provide 
agencies some additional flexibility in determining official worksites 
for teleworkers while continuing to ensure such determinations are made 
consistently and meet the intent of the locality pay law.

Relationship of Locality Rates to Other Pay Rates (Sec.  531.608)

    A union and an agency requested that OPM waive Sec.  531.608 for 
certain Department of Defense civilian engineers until implementation 
of the National Security Personnel System

[[Page 66147]]

(NSPS) in October 2006. The agency noted that an employee's entitlement 
to a special rate is terminated when an employee's locality rate 
exceeds a corresponding special rate; the agency was concerned how this 
loss of entitlement to the special rate would affect the employee's 
promotion entitlement. The agency also expressed concerns about 
possible recruitment and retention problems.
    OPM has no authority to delay the effective date of this regulation 
until implementation of NSPS. The provisions regulated under Sec.  
531.608(b) are required by law at 5 U.S.C. 5305(c). See the discussion 
in the ``Comment Applicable to the Effective Date'' section within this 
Supplementary Information. Also see the discussion of promotions 
involving special rates under ``Comments Applicable to General Schedule 
Basic Pay Setting'' within this Supplementary Information. To address 
any existing or likely staffing problems, an agency may request that 
OPM establish or increase special rates under Sec.  530.305 or use 
other tools such as recruitment and retention incentives under 5 CFR 
part 575.

Treatment of Locality Rates as Basic Pay (Sec.  531.610)

    In the Supplementary Information for the interim regulations 
published May 31, 2005, we invited 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 
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 or the 
District of Columbia). (See 69 FR 47353, August 5, 2004.) 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.
    OPM received comments on the August 2004 interim regulations from 
three agencies that a locality rate should be considered basic pay for 
the purpose of computing danger pay and post differentials for all 
employees on temporary duty assignments at overseas posts designated 
for post differentials as well as for those posts designed for danger 
pay.
    OPM solicited comments in the May 2005 interim regulations on 
whether it is appropriate to continue the current rules and consider 
special rates as basic pay in computing post differentials where danger 
pay allowances do not apply, while locality rates are not considered 
rates of basic pay in this same situation. Two agencies responded that 
the difference in treatment is not appropriate because it is not 
consistent with the intent of the new pay administration regulations, 
which is to treat both locality rates and special rates as supplements 
to the General Schedule. OPM also solicited comments on whether we 
should maintain the existing policy of using detailed employees' 
locality rates in computing danger pay allowances and post 
differentials only in danger pay areas or establish a new policy 
requiring the use of detailed employees' locality rates to compute post 
differentials authorized in any area (regardless of whether danger pay 
applies). Three agencies clearly supported extending the policy to 
other post differential areas. No commenters opposed the proposals.
    We agree with the commenters. We are revising Sec.  531.610(f) to 
treat locality pay as basic pay for the purpose of computing danger pay 
under 5 U.S.C. 5928, post differentials for foreign areas under 5 
U.S.C. 5925(a), and post differentials for nonforeign areas under 5 
U.S.C. 5941 when an employee's official worksite is in a locality pay 
area.

Miscellaneous Provisions (Sec.  531.611)

    Section 531.611(a) of the interim regulations provides that a 
locality rate may be paid only for those hours for which an employee is 
in a pay status. An agency requested that OPM clarify the situations 
where an employee is in a pay status.
    An employee is in a pay status during the hours for which an 
employee receives pay, such as when the employee works or uses paid 
time off. This provision was in the former Sec.  531.606(d). Under 5 
U.S.C. 5304(c)(2)(B), a locality-based comparability payment must ``be 
paid in the same manner and at the same time as the basic pay payable 
to such employee pursuant to any provision of law outside of this 
section.''

Comments Applicable to Grade and Pay Retention

Definitions of Management Action, Position of Record, and Temporary 
Reassignment (Sec.  536.103)

    An agency requested that OPM clarify an employee's entitlement to 
grade or pay retention in situations in which an employee is reduced in 
grade or pay for inability to perform the duties of his or her position 
because of a medical or physical condition beyond the employee's 
control. The agency noted that the definition of reduced in grade or 
pay for personal cause states that such a reduction is not considered 
to be for personal cause. However, the agency requested that OPM 
clarify whether such a reduction is caused or influenced by a 
management action or if the employee is reduced in grade or pay at the 
employee's request. The agency recommended that OPM revise the 
regulations to provide that a determination to grant or not to grant 
grade or pay retention in demotions based on physical or mental 
inability to perform should be based on the individual circumstances of 
each case and should be left to the discretion of the agency.
    We do not believe it is necessary to revise the regulations. An 
employee who is reduced in grade or pay for inability to perform the 
duties of his or her position because of a medical or physical 
condition beyond the employee's control would not be entitled to 
mandatory or optional grade retention because that is not a basis for 
grade retention. However, such an employee normally will be eligible 
for optional pay retention under Sec.  536.302 if the reduction in 
grade or pay is the result of a management action, unless the 
employee's reduction satisfies one of the conditions for mandatory pay 
retention in Sec.  536.301.
    Another agency requested clarification regarding the definition of 
position of record in Sec.  536.103. The definition in the interim 
regulations stated that it excludes ``any position to which an employee 
is temporarily detailed.'' The agency asked OPM to clarify whether the 
exclusion of any position to which an employee is temporarily detailed 
includes any temporary action (including temporary promotion). The 
exclusion refers only to situations when the employee is temporarily 
detailed. We are revising the definition of position of record in 
Sec. Sec.  530.302, 531.203, 531.602, and 536.103 to clarify that a 
position to which an employee is temporarily detailed is not documented 
as a position of record. An employee who is on detail is considered for 
pay and strength count purposes to be permanently occupying his or her 
regular position. Unless the agency chooses to use a Standard Form 50 
(Notification of Personnel Action), a detail is generally documented 
with a Standard Form 52 (Request for Personnel Action).

[[Page 66148]]

    The same agency also asked whether there is a Nature of Action Code 
for a temporary reassignment. The agency stated that previously 
temporary reassignments have not been processed by the GPPA.
    Section 536.102(c) provides that a temporary reassignment is not a 
basis for grade or pay retention. A reassignment is defined in Sec.  
210.102(b)(12) as a change of an employee, while serving continuously 
within the same agency, from one position to another without promotion 
or demotion. An agency may intend to reassign an employee to another 
position for a specified period of time, but the agency would still use 
the Nature of Action (NOA) Code 721 for reassignments. OPM staffing 
regulations make no distinction between permanent and temporary 
reassignments. However, certain OPM regulations recognize this 
distinction. For example, application of the pay retention regulation 
requires that the time-limited nature of a reassignment be documented 
in some way beyond a NOA code.

Mandatory Grade Retention or Optional Grade Retention (Sec. Sec.  
536.201 and 536.202)

    An agency requested that OPM clarify whether a reclassification 
process, as that term is used in Sec.  536.201(a)(2), includes the 
correction of an erroneous classification. It does. See 5 CFR part 511, 
subpart G.
    Another agency requested that OPM clarify whether mandatory or 
optional grade retention applies when an employee moves without a break 
in service of more than 3 days from a position in a Department of 
Defense or Coast Guard nonappropriated fund instrumentality (NAFI) to a 
position under a covered pay system in the same agency. The agency 
stated that Sec.  536.201(e) and Sec.  536.202(d) of the interim 
regulations appeared to have the same wording.
    We have determined that the regulations in effect prior to May 1, 
2005, did not provide grade retention to a NAFI employee who moved to a 
position in a covered pay schedule. A NAFI employee would not have a 
reduction-in-force right to a competitive or excepted service position 
under OPM's 5 CFR part 351 regulations. In addition, OPM has previously 
determined that the movement from NAFI to another pay system would not 
be as a result of a reclassification process. (See discussion in 57 FR 
182, September 18, 1992.) Therefore, neither mandatory nor optional 
grade retention applies when an employee moves without a break in 
service of more than 3 days from a position in a Department of Defense 
or Coast Guard NAFI to a position under a covered pay system in the 
same agency. Adding the NAFI-related provisions in Sec. Sec.  
536.201(e) and 536.202(d) in the interim regulations was an error. 
Accordingly, we are removing Sec. Sec.  536.201(e) and 536.202(d). 
These changes bring the grade retention regulations in conformity with 
Sec.  536.102(b)(8) and (d). If an agency provided grade retention to 
an employee moving from a NAFI position to a position under a covered 
pay system based on the erroneous provision in the interim regulations, 
that action should be corrected.

Loss of Eligibility for Grade Retention and Termination of Grade 
Retention (Sec. Sec.  536.207 and 536.208)

    An agency recommended that OPM clarify whether an employee who is 
eligible for optional grade retention would be ineligible for optional 
pay retention if he or she waives optional grade retention. The agency 
recognized that, under Sec. Sec.  536.207(c) and 536.208(d) of the 
interim regulations, an employee is not eligible for pay retention if 
the employee elects to terminate mandatory eligibility for grade 
retention. The agency believed it was not clear that an employee is 
also ineligible to receive pay retention if he or she waives optional 
grade retention.
    We agree that clarification is needed. Both Sec.  536.207(a) and 
Sec.  536.208(d) cross reference Sec.  536.207(a)(5), which deals with 
loss of eligibility for mandatory grade retention. While the provision 
dealing with loss of eligibility for optional grade retention in Sec.  
536.207(b) refers to the conditions in Sec.  536.207(a), we agree that 
the effect on optional grade retention is not clear. Accordingly, we 
have revised Sec. Sec.  536.207(c) and 536.208(d) to clarify that an 
employee is not eligible for pay retention if the employee elects to 
terminate mandatory or optional eligibility for grade retention. This 
is consistent with the provision in Sec.  536.207(b)(1) concerning loss 
of eligibility for optional grade retention.

Mandatory Pay Retention (Sec.  536.301)

    A commenter requested clarification about whether an employee whose 
payable rate of basic pay otherwise would be reduced as a result of a 
management action that places the employee in a formal employee 
development program generally used Governmentwide is entitled to pay 
retention under Sec.  536.301(a)(5) when the employee is moving from a 
non-covered pay system to a covered pay system. The commenter believed 
the employee would be entitled to pay retention.
    We agree that mandatory pay retention under Sec.  536.301(a)(5) can 
apply to an employee who is moving from a non-covered pay system to a 
covered pay system, but only if this movement is within the same agency 
so that it qualifies as a ``placement,'' as required by Sec.  
536.301(a)(5). If such a movement involves a ``transfer'' to a 
different agency, the gaining agency may provide optional pay retention 
as long as the employee is otherwise eligible. We have revised Sec.  
536.301(a) to clarify that, subject to the requirements in Sec.  
536.102 and Sec.  536.301, an agency must provide pay retention to an 
employee who moves between positions under a covered pay system, or 
from a position not under a covered pay system to a position under a 
covered pay system, and whose payable rate of basic pay otherwise would 
be reduced (after application of any applicable geographic conversion 
under Sec.  536.303(a)) as a result of one of the actions listed in 
paragraph (a). The actions listed in paragraph (a) include placement in 
a position under a formal employee development program generally used 
Governmentwide.
    Another commenter suggested revising Sec.  536.301(a)(6) to be 
consistent with the promotion rules in Sec.  531.214. The commenter 
noted that, under Sec.  536.301(a)(6), an agency must provide pay 
retention to an employee in a position under a covered pay system whose 
payable rate of basic pay otherwise would be reduced as a result of the 
application of the promotion rule for GS employees under 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 the highest applicable rate 
range. The commenter requested clarification because step D of the 
promotion rules in Sec.  531.214(d)(3)(i) and (4)(i) provides that, if 
the rate identified in step C exceeds the maximum of the rate range 
identified in step D, the employee's payable rate is (1) that maximum 
rate, or (2) if the employee's existing rate is higher than that 
maximum rate, a retained rate under 5 CFR part 536 equal to that 
existing rate. The commenter also requested that OPM clarify a similar 
provision under Sec.  536.301(a)(7), which states that an agency must 
provide pay retention to an employee in a position under a covered pay 
system whose payable rate of basic pay otherwise would be reduced as a 
result of the application of the promotion rule for prevailing rate 
employees under 5 CFR 532.407 when the employee's payable rate of basic 
pay after

[[Page 66149]]

promotion exceeds the maximum scheduled rate of the grade, as described 
in 5 CFR 532.407(b).
    We agree that a revision to Sec.  536.301 is needed to clarify how 
a retained rate is created when application of a promotion increase 
rule for GS or prevailing rate employees results in a rate of basic pay 
that exceeds the maximum rate of the highest applicable rate range for 
the employee's new position. We are deleting former paragraphs (a)(6) 
and (a)(7) and inserting a new paragraph (b) in Sec.  536.301 to 
address retained rates resulting from application of a promotion rule. 
We are adding a reference to the GS and prevailing rate promotion 
increase rules and noting that, under those rules, a retained rate is 
created only when an employee's existing rate before promotion exceeds 
the maximum rate of the grade to which promoted, and such retained rate 
is set to equal that existing rate. Retained rates created under the GS 
or prevailing rate system promotion rule are not created based on a 
finding that pay would otherwise be reduced, because the promotion 
rules themselves prevent such a reduction. These promotion-rule 
retained rates should be rare, since they should occur only when an 
employee is being promoted from the high steps of a high special rate 
range to a non-special rate range. Employees with an existing retained 
rate under 5 CFR part 536 who are promoted are excluded from this 
provision because they are covered by the rules in Sec.  536.304(c)(3)-
(5).

Determining an Employee's Pay Retention Entitlement (Sec.  536.304)

    Two commenters requested that OPM allow their agencies to continue 
paying locality payments on top of retained rates.
    OPM is not able to accommodate the commenters' request. Section 
301(a)(1) of the Act amended the definition of ``scheduled rates of 
basic pay'' in 5 U.S.C. 5302 so that a retained rate was no longer 
considered a scheduled rate of basic pay. Locality pay under 5 U.S.C. 
5304 is paid on top of a scheduled rate of basic pay (see 5 U.S.C. 
5304(c)(1)(B)). Thus, locality pay ceased to be payable on top of a 
retained rate effective May 1, 2005. Instead, Sec.  536.304 provides 
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 
supplement).

Comment Requesting Definition of ``One Year''

    One agency recommended that OPM define what constitutes ``one 
year'' as provided in Sec. Sec.  531.223(b), 531.407(a)(5), and 
536.203(b). We did not change the use of the term ``one year'' in the 
interim regulations, and the clarification is not directly related to 
changes made by the Federal Workforce Flexibility Act of 2004. We will 
review the need to clarify ``one year'' in future regulations, and, if 
warranted, we will invite comments on the use of the term.

Additional Miscellaneous Changes

    The final regulations also include additional miscellaneous changes 
to correct technical errors or omissions and to improve clarity. For 
example, in various places in parts 530, 531, and 536, we are 
clarifying that references to a ``rate'' being used in lieu of a 
``step'' refer to the relative position in range of a GM employee's 
off-step rate. We also are revising the definition of special rate 
supplement in Sec. Sec.  530.302, 531.203, and 531.602 to clarify that, 
when a special rate schedule covers both law enforcement officer 
positions and other positions, the value of the special rate supplement 
will be less for law enforcement officers because they have a higher 
base rate. Additional miscellaneous changes are described below.
    In subpart G of part 359 (dealing with SES saved rates), we are 
making the following changes:
     Adding a parenthetical explanation in Sec.  359.705(a)(1) 
to clarify that the rate of basic pay in effect for the position in 
which the appointee is being placed refers to a rate of basic pay 
within the normal rate range of that position, consistent with the 
rules of the pay system covering such position.
     Correcting an omission by adding a paragraph (c)(3) to 
Sec.  359.705 to provide that an SES saved rate is considered to be an 
employee's rate of basic pay for the same purposes that apply to a 
retained rate under part 536. This is consistent with OPM's stated 
purpose for making changes to Sec.  359.705, which was explained in the 
Supplementary Information for the interim regulations-namely, to ``make 
changes that are consistent with * * * the changes made in the pay 
retention provisions in part 536 * * * .'' (See 70 FR 31286.)
    In subpart C of part 530 (dealing with special rates), we are 
making the following changes:
     Removing the words ``under 5 CFR 359.705 or 5 CFR part 
536'' from the definition of rate of basic pay in Sec.  530.302 because 
these references are included in the definition of retained rate in the 
same section.
     Revising the last sentence of Sec.  530.304(a) to make the 
language regarding the limitation on special rates more consistent with 
the language in 5 U.S.C. 5305(a)(1).
     Revising Sec.  530.309(d) to add a cross reference to 
Sec.  530.308 and to update a reference to an action under Sec.  
930.214. OPM revised the administrative law judge program regulations 
in 5 CFR part 930, subpart B, in March 2007, which included renumbering 
Sec.  930.214 as Sec.  930.211.
    In subpart B of part 531 (dealing with GS basic pay setting), we 
are making the following changes:
     Revising the definition of rate of basic pay in Sec.  
531.203 to clarify that, for the purpose of applying the maximum 
payable rate rule using a rate under a non-GS pay system as an 
employee's highest previous rate, the non-GS rate may not be a type of 
rate that is generally excluded under Sec.  531.223. We are also adding 
references to 5 CFR 530.308, 531.610, and 536.307. Those regulations 
address the purposes for which a special rate is considered a rate of 
basic pay, a locality rate is considered a rate of basic pay, and a 
retained rate is considered a rate of basic pay, respectively.
     In Sec.  531.205, replacing ``(or rate)'' with ``(or a GM 
employee's GS rate)'' in the second sentence.
     Revising Sec.  531.212(a)(3) to clarify a ``non-permanent 
appointment'' excludes a Schedule C appointment under 5 CFR part 213. 
An agency may not use the superior qualifications and special needs 
pay-setting authority when an employee moves from a Schedule C 
appointment to a non-Schedule C appointment, unless the employee has a 
90-day break in service. We are also listing non-permanent appointments 
and time-limited appointments separately to increase clarity.
     Adding employment under the Student Career Experience 
Program under 5 CFR 213.3202(b) as a new paragraph (3)(v) in Sec.  
531.212(a). A similar provision was included in the former superior 
qualifications and special needs pay-setting regulations, but it was 
inadvertently left out of the interim regulations.
     Revising Sec.  531.215 to clarify an agency is not limited 
in pursuing action for misconduct or other problems and setting pay in 
accordance with such action when an employee is in a supervisory 
probationary period, consistent with 5 U.S.C. 3321(b)(2). Such an 
action, however, would have to

[[Page 66150]]

be taken in accordance with applicable laws and regulations.
     Revising Sec.  531.221(a)(1) to clarify that the maximum 
payable rate rule may be used when an employee moves from a non-GS pay 
system to the GS pay system without a change in position. We are also 
clarifying that an agency may use the maximum payable rate rule upon 
termination of grade or pay retention.
     In Sec.  531.244, replacing ``rate of basic pay'' in each 
place it appears with ``GS rate'' and replacing ``GM rate'' in 
paragraph (a)(2) with ``GS rate''.
     Replacing ``rate of basic pay'' in Sec.  531.246 with ``GS 
rate''.
     Replacing steps 1-6 with steps A-F in Sec.  531.247 to be 
consistent with other tables in the regulations.
    In subpart D of part 531 (dealing with GS within-grade increases), 
we are making the following changes:
     Deleting the last sentence of Sec.  531.406(b)(2). The 
sentence is not necessary because Sec.  531.406(b)(3) sufficiently 
states that time in a nonpay status that is in excess of the allowable 
amount extends a waiting period for a within-grade increase by the 
excess amount, except as provided in Sec.  531.406(c).
     Revising Sec.  531.407(a)(2) to improve clarity.
    In subpart F of part 531 (dealing with locality-based comparability 
payments), we are updating a reference in Sec.  531.611(d) to the 
administrative law judge program regulations. OPM revised 5 CFR 930, 
subpart B, in March 2007, which included renumbering Sec.  930.214 as 
Sec.  930.211.
    In 5 CFR part 536 (dealing with grade and pay retention), we are 
making the following changes:
     Replacing the term representative rate with comparison 
rate throughout part 536, including the definition of representative 
rate in Sec.  536.103. OPM's regulations in 5 CFR 351.203 define the 
term representative rate for reduction-in-force purposes. Separate 
terms will help reduce any confusion since the terms are defined 
differently.
     Correcting an omission by clarifying in Sec.  536.208 that 
termination of grade retention benefits takes effect at the end of the 
day before separation from service if termination is the result of a 
break in service. We are also adding in Sec.  536.208 a necessary 
exception to the rule that the termination of grade retention benefits 
takes effect at the end of the last day of the pay period in which the 
employee elects to terminate grade retention benefits. The exception is 
that, if an employee's election specifically provides that the 
termination will take effect at the end of a later pay period, the 
election is considered to be made effective on the last day of that 
later pay period.
     Revising Sec.  536.304(c)(3) and (c)(4) to add references 
to the terminating conditions in Sec.  536.308.
     Adding, in Sec.  536.307, an explicit reference to adverse 
action provisions in 5 CFR part 752 as a purpose for which a retained 
rate is considered a rate of basic pay, consistent with longstanding 
policies and OPM's interpretation of the interim regulations. We also 
are removing ``OPM'' from Sec.  536.307(a)(11) to clarify that a 
retained rate is considered a rate of basic pay for the purpose of 
computing and applying other provisions as specified in regulations of 
OPM or other agencies.
     Revising the language in Sec.  536.308(a)(2) to clarify 
that entitlement to an equal or higher rate of basic pay during a 
temporary promotion or temporary reassignment does not terminate an 
employee's preexisting entitlement to pay retention, but that the pay 
retention entitlement is held in abeyance.
     Correcting an omission in Sec.  536.308 by clarifying that 
termination of pay retention benefits takes effect at the end of the 
day before separation from service if termination is the result of a 
break in service.
     Correcting an omission in Sec.  536.308 by clarifying that 
termination of pay retention benefits takes effect at the end of the 
day before the employee becomes entitled to an equal or greater rate as 
described in Sec.  536.308(a)(2).
    In 5 CFR part 550 (dealing with miscellaneous pay administration 
matters), we are making the following changes:
     In Sec. Sec.  550.202 and 550.703, adding the word 
``supplement'' after ``special rate'' in paragraph (1) of the 
definition of rate of basic pay.
     Deleting a reference to a temporary appointment pending 
establishment of a register (TAPER) in the definition of nonqualifying 
appointment in Sec.  550.703 because the TAPER authority is no longer 
used.
    We are replacing the term representative rate with comparison rate 
in Sec. Sec.  550.703, 831.503, and 842.206 and clarifying those 
definitions. Under 5 CFR 536.102(b)(6), an agency may not provide grade 
or pay retention under part 536 to an employee who moves between 
positions not under a covered pay system or from a position under a 
covered pay system to a position not under a covered pay system. 
However, the severance pay (Sec.  550.703) and discontinued service 
retirement provisions (Sec. Sec.  831.503 and 842.206) do not have this 
same exclusion. Therefore, although paragraph (2) in the definition of 
new term comparison rate in Sec.  536.103 of the grade and pay 
retention regulations refers to comparing grades or levels of work in 
making reasonable offer determinations when one of the grades or levels 
of work is not under a covered pay system, this comparison for making 
reasonable offer determinations for severance pay or discontinued 
service retirement purposes is not limited to whether the offered 
position is under a covered pay system.

Title 38 Market Pay

    Since publication of the interim regulations in May 2005, OPM has 
used its authority under 5 U.S.C. 5371 to delegate to certain agencies 
authority to provide market pay to physicians and dentists under 38 
U.S.C. 7431(c), consistent with the authority of the Department of 
Veterans Affairs. Under this OPM delegation, title 38 market pay may be 
paid on top of General Schedule base rates in lieu of locality payments 
under 5 U.S.C. 5304, special rate supplements under 5 U.S.C. 5305, or 
grade and pay retention under 5 U.S.C. 5361-5365. We decided it would 
not be necessary to amend the regulations related to locality payments, 
special rate supplements, and grade and pay retention to address the 
exclusion of physicians and dentists receiving title 38 market pay. 
Those exclusions are not effected under the authorities related to 
those payments, but are based on OPM's administrative authority under 5 
U.S.C. 5371. Title 38 market pay is generally not considered basic pay 
for GS pay administration purposes; however, it may be used in 
establishing an employee's highest previous rate. (See revised 
definitions of rate of basic pay and special rate in Sec.  531.203 and 
new paragraph (a)(5) in Sec.  531.221.)

Pay Setting for NAFI Employees Who Move to GS Positions

    This notice finalizes the rules in 5 CFR 531.216, as published in 
the May 2005 interim regulations, concerning pay setting for 
nonappropriated fund instrumentality (NAFI) employees who move to GS 
positions. However, section 1114 of the National Defense Authorization 
Act for Fiscal Year 2008 (Pub. L. 110-181, January 28, 2008) amended 5 
U.S.C. 5334(f) to provide that a NAFI employee in the Department of 
Defense (DOD) or the United States Coast Guard (USCG) (as described in 
5 U.S.C. 2105(c)) who moves voluntarily to a GS position in DOD or 
USCG, respectively, without a break in service of more than 3 days may 
(at the employing agency's discretion) have the GS rate of basic pay 
set at the lowest

[[Page 66151]]

step rate of the applicable GS grade that equals or exceeds the former 
NAFI rate. This amendment became effective on January 28, 2008. Under 
previous law, the employee's GS rate of basic pay could not exceed the 
formerly applicable NAFI rate in such voluntary movements; thus, 
setting the rate at a GS step for these former NAFI employees generally 
resulted in a reduction in pay. The amendment permits DOD and USCG to 
set pay at the next higher step rate, avoiding a pay reduction. OPM has 
issued proposed regulations to conform with this statutory change. (See 
73 FR 50575, August 27, 2008.)

E.O. 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with E.O. 12866.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because they 
will apply only to Federal agencies and employees.

List of Subjects in 5 CFR 294, 359, 362, 451, 530, 531, 532, 534, 
536, 550, 591, 630, 831, and 842

    Administrative practice and procedure; Air traffic controllers; 
Alimony; Claims; Decorations, medals, awards; Disability benefits; 
Firefighters; Freedom of information; Government employees; Hospitals; 
Income taxes; Intergovernmental relations; Law enforcement officers; 
Pensions; Reporting and recordkeeping requirements; Research; 
Retirement; Students; Transportation and travel expenses; Wages.

Office of Personnel Management.
Michael W. Hager,
Acting Director.

0
The interim rule published May 31, 2005, at 70 FR 31278 and amended at 
70 FR 74995 (December 19, 2005) is adopted as final with the changes 
set forth below, and OPM further amends 5 CFR chapter I as follows:

PART 359--REMOVAL FROM THE SENIOR EXECUTIVE SERVICE; GUARANTEED 
PLACEMENT IN OTHER PERSONNEL SYSTEMS

0
1. The authority citation for part 359 is revised to read as follows:

    Authority: 5 U.S.C. 1302, 3302, and 3596, unless otherwise 
noted.

Subpart G--Guaranteed Placement

0
2. In Sec.  359.705, revise paragraphs (a)(1) and (c) to read as 
follows:


Sec.  359.705  Pay.

    (a) * * *
    (1) The rate of basic pay in effect for the position in which the 
appointee is being placed (i.e., a rate of basic pay within the normal 
rate range of the position in which placed, consistent with the rules 
of the pay system covering such position);
* * * * *
    (c)(1) For an employee placed in a General Schedule position, a 
saved rate established under this section may not be supplemented by a 
locality payment under 5 U.S.C. 5304, a special rate supplement under 5 
U.S.C. 5305, or a similar payment under other legal authority.
    (2) A saved rate established under this section is subject to the 
limitation on Senior Executive Service pay in 5 U.S.C. 5382 of the rate 
for level II of the Executive Schedule.
    (3) A saved rate established under this section is considered an 
employee's rate of basic pay for the same purposes as a retained rate 
under 5 CFR part 536, as described in 5 CFR 536.307.
* * * * *

PART 530--PAY RATES AND SYSTEMS (GENERAL)

0
3. The authority citation for part 530 continues to read as follows:

    Authority: 5 U.S.C. 5305 and 5307; subpart C also issued under 5 
U.S.C. 5338 and sec. 4 of the Performance Management and Recognition 
System Termination Act of 1993, Pub. L. 103-89), 107 Stat. 981.

Subpart C--Special Rate Schedules for Recruitment and Retention

0
4. In Sec.  530.302--
0
a. Revise the definition of position of record;
0
b. Amend the definition of rate of basic pay by removing the words 
``under 5 CFR 359.705 or 5 CFR part 536''; and
0
c. Revise the definition of special rate supplement.
    The revisions read as follows:


Sec.  530.302  Definitions.

* * * * *
    Position of record means an employee's official position (defined 
by grade, occupational series, employing agency, LEO status, and any 
other condition that determines coverage under a pay schedule (other 
than official worksite)), as documented on the employee's most recent 
Notification of Personnel Action (Standard Form 50 or equivalent) and 
current position description. A position to which an employee is 
temporarily detailed is not documented as a position of record. For an 
employee whose change in official position is followed within 3 
workdays by a reduction in force resulting in the employee's separation 
before he or she is required to report for duty in the new position, 
the position of record in effect immediately before the position change 
is deemed to remain the position of record through the date of 
separation.
* * * * *
    Special rate supplement means the portion of a special rate paid 
above an employee's GS