[Federal Register Volume 64, Number 130 (Thursday, July 8, 1999)]
[Rules and Regulations]
[Pages 36763-36775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16992]



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  Federal Register / Vol. 64, No. 130 / Thursday, July 8, 1999 / Rules 
and Regulations  

[[Page 36763]]


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 531, 550, and 591

RIN 3206-AF38


Pay Administration (General); Lump-Sum Payments for Annual Leave

AGENCY: Office of Personnel Management.

ACTION: Final regulation.

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SUMMARY: The Office of Personnel Management is issuing final 
regulations to establish a uniform Governmentwide policy for 
calculating lump-sum payments for accumulated and accrued annual leave 
for employees who separate from the Federal service.

EFFECTIVE DATE: September 7, 1999.

FOR FURTHER INFORMATION CONTACT: Brenda Roberts, (202) 606-2858, FAX 
(202) 606-0824, or email to [email protected].

SUPPLEMENTARY INFORMATION: The Technical and Miscellaneous Civil 
Service Amendments Act of 1992 (Pub. L. 102-378, October 2, 1992) added 
section 5553 to title 5, United States Code, to give the Office of 
Personnel Management (OPM) regulatory authority for the administration 
of lump-sum payments for accumulated and accrued annual leave. Under 5 
U.S.C. 5551 and 5552, an agency must make a lump-sum payment for annual 
leave when an employee separates from the Federal service or enters on 
active duty in the armed forces and elects to receive a lump-sum 
payment. The lump-sum payment must equal the pay the employee would 
have received had he or she remained employed until expiration of the 
period of annual leave. Section 6306 of title 5, United States Code, 
provides that when an employee is reemployed in the Federal service 
prior to the expiration of the period of annual leave (i.e., the lump-
sum leave period), he or she must refund the portion of the lump-sum 
payment that represents the period between the date of reemployment and 
the expiration of the lump-sum period. An agency must recredit to the 
employee an amount of annual leave equal to the days or hours of work 
remaining between the date of reemployment and the expiration of the 
lump-sum leave period.
    OPM acknowledges that some of these regulatory provisions involve 
items not expressly provided for by statute. However, OPM would 
emphasize in this regard that an administrative agency may determine 
matters within its expertise that have not been specifically addressed 
by statute. Indeed, administrative agencies formulate policy and make 
appropriate rules as needed to carry out their regulatory 
responsibilities consistent with statutory authority. See Chevron 
U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 843 (1984) 
and United States v. Grimaud, 220 U.S. 506, 517 (1911), as cited in 
Davis, K., Administrative Law Treatise, Third Edition, Sec. 2.6, pp. 
70-71. The construction of a statute by those charged with its 
administration is entitled to great deference, particularly when that 
interpretation has been followed over a long period of time. United 
States v. Clark, 454 U.S. 555, 565 (1982) and Rosete v. OPM, 48 F.3d 
514, 518-519 (Fed. Cir. 1995).
    On July 29, 1997, OPM published proposed regulations (62 FR 40475) 
to establish a Governmentwide policy for calculating lump-sum payments 
for accumulated and accrued annual leave for employees who separate 
from Federal service. OPM received comments from 7 agencies, 1 labor 
organization, 1 employee association, and 4 individuals, for a total of 
13 comments. The majority of the agencies and the labor organization 
agreed that regulations are needed to provide consistency throughout 
the Federal Government. The labor organization stated that the 
development of one set of rules will ensure that employees are aware of 
the lump-sum payment policy and are familiar with their rights to 
receive payment for unused annual leave when they separate from the 
Federal service. The labor organization further stated that the 
adoption of one Governmentwide policy eliminates inequities that 
necessarily result from agency-specific policies. A summary of the 
comments received and the changes made in the regulations is presented 
below.

Employees Eligible for a Lump-Sum Payment

    The proposed regulations stated that an agency must not make a 
lump-sum payment for accumulated or accrued annual leave to an employee 
whom the agency determines to be in a continuing employment program 
under which the employee is required to work a mixed tour of duty 
(i.e., the employee works full-time or part-time for a limited portion 
of the year and intermittently for the remainder). Since an employee 
working intermittent duty cannot accrue or use leave, the proposed 
regulations required the agency to hold any accrued leave in abeyance 
during the time the employee is working intermittent duty and to 
recredit the annual leave when the employee returns without a break in 
service to full-time or part-time employment. In addition, the proposed 
regulations required the agency to hold in abeyance any of the 
employee's fractional pay periods for leave accrual purposes and 
recredit the pro-rata leave as provided in Sec. 630.204 when the 
employee returns to full-time or part-time employment.
    One agency recommended that the final regulations allow each agency 
the discretion to determine whether to pay a lump-sum payment for 
annual leave when an employee changes to intermittent duty or to hold 
the employee's accrued annual leave in abeyance until he or she returns 
to a part-time or full-time position. The agency disagrees with the 
proposed regulations and believes that requiring an agency to hold 
leave in abeyance results in additional leave being available for use 
during periods of part-time and full-time employment when the agency 
needs its employees at work the most. The agency believes mission 
requirements, staffing needs, and sources of available funds vary 
greatly from one organization to another and that applying the same 
rule universally may have a negative financial impact on one or more 
agencies or organizations. In addition, the agency stated that the 
proposed rule would eliminate the financial cushion (i.e., lump-sum 
payment) that many employees working mixed tours of duty have become

[[Page 36764]]

accustomed to receiving during non-work periods.
    Another agency commented on the administrative burden of paying 
lump-sum payments during short periods of intermittent work. The agency 
requested approval to hold accrued annual leave in abeyance so that an 
employee would have annual leave available at the beginning of his or 
her part-time or full-time employment. Under this approach, an employee 
also would not lose any fractional hours of creditable service for 
purposes of leave accrual when the employee's tour changes to 
intermittent.
    Upon further review, we believe it would be in the best interest of 
the Government to permit more flexibility. Therefore, Sec. 550.1203(i) 
of the final regulations permits each agency to prescribe its own 
policy for paying lump-sum payments for employees on mixed tours of 
duty. Each agency's policy must ensure that employees are treated in a 
fair and equitable manner. In developing its policy, we encourage each 
agency to consider the likelihood that an employee will return to work, 
as well as the agency's mission requirements and staffing needs.
    An agency requested clarification as to whether an employee on a 
mixed tour of duty is entitled to continue to accrue leave on a 
prorated basis during periods of intermittent employment. If an 
employee is assigned intermittent duty and does not have an established 
regular tour of duty each week, he or she cannot accrue or use leave 
during the intermittent period. (See 5 U.S.C. 6301(2).)
    A commenter requested clarification about entitlement to a lump-sum 
payment when an employee who had annual leave restored under 5 U.S.C. 
6304(d)(3) transfers to a component of the Department of Defense (DOD) 
that is not undergoing closure or realignment. Section 1611 of Pub. L. 
104-201 (September 23, 1996), added paragraph (c) to 5 U.S.C. 5551 to 
require DOD to pay a lump-sum payment to an employee for any unused 
annual leave that was restored under 5 U.S.C. 6304(d)(3) when the 
employee (1) transfers to a position in any other department or agency 
of the Federal Government or (2) moves to a position within DOD not 
located at an installation undergoing closure or realignment. The 
entitlement to a lump-sum payment for affected DOD employees became 
effective on September 23, 1996, and applies only to employees 
transferring from a DOD component undergoing closure or realignment at 
the time of transfer. Further questions on this provision should be 
directed to DOD's Civilian Personnel Management Service, Field Advisory 
Services, 1400 Key Boulevard, Arlington, VA 22209-5144 (telephone: 
(703) 696-6301).
    The proposed regulations stated that when an employee enters active 
duty, any annual leave previously restored under 5 U.S.C. 6304(d) may 
not remain to the employee's credit and may be paid in a lump-sum 
payment. An agency commented that this statement is confusing, since 5 
U.S.C. 6304(d)(2) requires an agency to make a lump-sum payment for 
restored annual leave when an employee enters on active duty. We agree 
and have revised Sec. 550.1203(c) of the final regulations to require 
an agency to make a lump-sum payment for any annual leave previously 
restored under 5 U.S.C. 6304(d) when an employee enters active duty. 
The agency may not recredit the restored leave when the employee 
returns to Federal service.

Employees Not Eligible for a Lump-Sum Payment

    Under the proposed regulations, if an employee transfers to a 
position that is not covered by subchapter I of chapter 63 of title 5, 
United States Code (e.g., a position in the U.S. Postal Service), and 
only a portion of his or her accumulated and accrued annual leave may 
be transferred, the losing agency would hold in abeyance the annual 
leave that could not be transferred. The agency would then recredit the 
annual leave that had been held in abeyance once the employee is 
reemployed without a break in service in a position to which his or her 
accumulated and accrued annual leave may be transferred. An agency 
suggested that OPM seek a statutory change in 5 U.S.C. 5551 to allow 
for the immediate lump-sum payment of any annual leave in excess of the 
amount accepted by the gaining agency (e.g., the U.S. Postal Service). 
The agency believes this change would preclude the need for 
establishing and tracking a separate leave account for non-
transferrable leave and result in quicker settlement of the matter for 
the employee. The agency stated that this change would, in effect, be 
identical to the lump-sum payment provisions in 5 U.S.C. 5551(c) for 
employees affected by base realignment or closure (Pub. L. 104-201).
    We agree with the substance of the agency's recommendation, but 
have determined that this can be accomplished by regulation rather than 
legislation. Therefore, Sec. 550.1203(f) of the final regulations 
provides that when an employee transfers to a position that is not 
covered by subchapter I of chapter 63 of title 5, United States Code, 
the losing agency must make a lump-sum payment under Sec. 550.1205 for 
the amount of annual leave that cannot be transferred to the gaining 
agency. This does not apply to an employee transferring to an excepted 
position under 5 U.S.C. 6301(2)(x)-(xiii), (e.g., a member of the 
Senior Executive Service who accepts a Presidential appointment).
    Under the proposed regulations, an employee who was concurrently 
employed in more than one part-time position in more than one agency, 
and who separated from one of the part-time positions, would have had 
the annual leave that accrued in the agency from which he or she 
separated transferred to the current employing agency. An agency 
recommended that the agency pay a lump-sum payment to an employee who 
separates from any of the part-time appointments. The agency believes 
the annual leave should not be transferred because (1) such transfer 
would place a financial burden on the gaining agency in terms of a 
future lump-sum payment if the employee later separates from Federal 
service, (2) the employee would receive an unintended increase or loss 
in the value of annual leave if the multiple part-time appointments are 
at different grades or levels, and (3) the employee may be absent for 
extended periods in the gaining agency and/or may be forced to forfeit 
annual leave in excess of the maximum annual leave limitation.
    We agree that these are all important factors for employees to 
consider when separating from a part-time position. However, the law 
provides that an employee is entitled to a lump-sum payment only when 
he or she separates from Federal service (or goes on military duty) or 
when unused annual leave cannot be transferred or credited at a gaining 
agency. Since an employee who is employed in a second part-time 
position is not separated from Federal service and could have his or 
her accumulated annual leave transferred to a gaining agency, he or she 
is not entitled to a lump-sum payment. Therefore, OPM made no changes 
in Sec. 550.1203(h)(4) of the final regulations.

Projecting the Lump-Sum Leave Period

    An agency asked whether ``use or lose'' or restored annual leave 
should be included in the projected lump-sum leave period if the leave 
is scheduled to be forfeited within a few days after separation. The 
answer is yes. Under 5 U.S.C. 5551, an employee is entitled to receive 
a lump-sum payment for accumulated and currently accrued annual leave 
to which an employee is entitled by statute on the date of

[[Page 36765]]

separation. This includes all ``use or lose'' and restored annual leave 
to the employee's credit on the date of separation. Annual leave that 
has not yet been forfeited must be included in a lump-sum payment.
    The proposed regulations required an agency to project the lump-sum 
leave period so that annual leave restored under 5 U.S.C. 6304(d) in a 
separate leave account must be used before using any accumulated annual 
leave in the employee's regular annual leave account. This was done so 
that if an employee returned to Federal service prior to the expiration 
of the lump-sum leave period, the restored annual leave would have 
already been used and would not be recredited to the employee. We have 
revised the proposed regulations on recrediting annual leave so that 
there is no longer any requirement to identify restored annual leave 
and recredit it upon reemployment. Therefore, Sec. 550.1204(c) of the 
final regulations does not require agencies to project the lump-sum 
leave period so that restored annual leave is used before using regular 
annual leave.
    Section 550.1204(a) of the final regulations states that the period 
of leave used for calculating the lump-sum payment may not be extended 
by compensatory time off earned under 5 U.S.C. 5543 and 
Secs. 550.114(d) or 551.531 or by credit hours accumulated under an 
alternative work schedule under 5 U.S.C. 6126. The employee association 
expressed concern that agencies may misinterpret this regulation to 
mean that they do not have to pay a separating employee for any earned 
compensatory time off or credit hours. Section 550.1204(a) merely 
ensures that compensatory time off and credit hours, which are not 
types of leave under chapter 63 of title 5, United States Code, are not 
identified and included in the calculation of a lump-sum payment for 
annual leave. Since agencies are responsible for ensuring that 
compensatory time off and credit hours (credit hours not in excess of 
24 hours) remaining to an employee's credit at the time of separation 
are paid separately as part of a final salary payment under existing 
law and regulations, we do not believe any change is necessary. (See 
Secs. 550.114(d) and 551.531(d) and 5 U.S.C. 6126.)

Pay Received Prior to Separation

    Throughout the regulations, we use the phrases ``immediately prior 
to separation, death, or transfer'' and ``immediately prior to the date 
the employee becomes/became eligible for a lump-sum payment under 
Sec. 550.1203'' interchangeably. An agency recommended that OPM 
consistently use the phrase ``immediately prior to the date the 
employee becomes/became eligible for a lump-sum payment under 
Sec. 550.1203'' throughout the regulations. The agency believes this 
change would eliminate any confusion and ensure coverage of all 
intended employees, including those who choose to receive a lump-sum 
payment upon entering active duty in the armed forces. We agree and 
have modified the final regulations as suggested.

Calculating the Lump-Sum Payment

    Under 5 U.S.C. 5551, a lump-sum payment must equal the pay an 
employee would have received had he or she remained in Federal service 
until expiration of the period of annual leave (excluding any 
differential under section 5925 and any allowance under section 5928). 
The term ``pay'' is not further defined in law. In the final 
regulations, we have interpreted this term to mean the pay the employee 
would have received on a biweekly basis had he or she remained in 
Federal service on annual leave. For example, an employee's rate of 
basic pay, any applicable locality payment, and availability pay for 
law enforcement officers (where applicable) are included in a lump-sum 
payment, while hazardous duty pay, environmental differentials, and 
Sunday premium pay are excluded. Also excluded are allowances that are 
paid in addition to a rate of basic pay for the sole purpose of 
encouraging an employee to remain in Government service, such as 
retention allowances and physicians comparability allowances.
    Under Sec. 550.1205(a) of the final regulations, an agency 
calculates a lump-sum payment by multiplying the number of hours of 
accumulated and accrued annual leave by the employee's applicable 
hourly rate of pay, including the types of pay listed in 
Sec. 550.1205(b). An algebraically equivalent method that an agency may 
also use is to multiply the weeks of annual leave by the employee's 
applicable weekly rate of pay.
    One agency believes the phrase ``including types of pay'' could be 
misconstrued and recommended it be changed to ``plus other applicable 
types of pay'' so as to limit the additional types of pay to those 
applicable to the employee. To clarify our intent, we have revised 
Sec. 550.1205(a) to state that a lump-sum payment must be calculated by 
multiplying the number of hours of accumulated and accrued annual leave 
by the applicable hourly rate of pay, including other applicable types 
of pay listed in Sec. 550.1205(b).
    For an employee on an uncommon tour of duty (as defined in 
Sec. 630.201), an agency may choose to calculate the lump-sum payment 
based on the applicable weekly rate and convert the annual leave 
balance to a 40-hour workweek basis. For example, to determine the 
number of weeks to use in computing a lump-sum payment for an employee 
who normally works an uncommon tour of duty of 72 hours each week, the 
agency may convert the employee's annual leave balance from a 72-hour 
workweek basis to a 40-hour workweek basis by multiplying the total 
hours of annual leave by the fraction 40/72 and dividing the result by 
40.
    The proposed regulations listed the types of basic pay that must be 
included in a lump-sum payment. An agency suggested that OPM include a 
retained rate authorized under 5 U.S.C. 5363 and 5 CFR part 536, 
subpart B, in the list. We agree and have added a retained rate of pay 
to the list in Sec. 550.1205(b)(1)(i). In addition, we have added 
supervisory differentials paid under 5 U.S.C. 5755 to the list of the 
types of pay to be included in a lump-sum payment, since an employee 
who was receiving such a differential would have received supervisory 
differential payments on a biweekly basis had he or she remained in 
Federal service on annual leave. (See Sec. 550.1205(b)(7).)

General Pay Adjustments

    The proposed regulations stated that in the case of a Federal Wage 
System (FWS) employee, a lump-sum payment must include the rate of pay 
established under 5 U.S.C. 5343. In addition, such an employee would 
receive any applicable adjustments in prevailing rates that become 
effective during the lump-sum leave period if the employee separated 
after issuance of an official order to conduct a wage survey for his or 
her applicable wage area. The lump-sum payment would be adjusted to 
reflect the increased prevailing rate beginning on the effective date 
of the rate adjustment. Since a prevailing rate employee who separated 
from Federal service prior to the issuance of an official order to 
conduct a wage survey in his or her applicable wage area would not be 
entitled to the FWS pay adjustment in that wage area for that year, we 
proposed that the FWS pay adjustment should not be included in the 
employee's lump-sum payment for annual leave.
    An agency recommended that prevailing rate employees be treated the 
same as General Schedule employees under Sec. 550.1205(b)(2). Only 
those pay adjustments approved before the date of separation must be 
included in a lump-

[[Page 36766]]

sum payment. The agency noted that because FWS surveys are ordered 9 
weeks before the survey results take effect, the agency would have to 
establish temporary payroll files whenever a retroactive recomputation 
of a lump-sum payment would be necessary.
    We agree that the proposed regulations were unnecessarily 
complicated with respect to inclusion of pay adjustments after 
separation and would have caused administrative burdens for the 
agencies, including the need for additional individual calculations of 
lump-sum payments. Because of the concerns we received from agencies 
about the complexity in determining an employee's entitlement to a pay 
adjustment in his or her lump-sum payment after the employee separates 
from Federal service, we have simplified the final regulations. Section 
550.1205(b)(2) and (3) provide that lump-sum payments for all covered 
Federal employees must include any general pay adjustment and locality 
pay adjustment that becomes effective during the employee's lump-sum 
leave period. The lump-sum leave period is the employee's annual leave 
projected forward for all workdays the employee would have worked if he 
or she had remained in Federal service, including holidays (even though 
they are typically nonworkdays) as required by 5 U.S.C. 5551(a), until 
the expiration of the employee's accumulated and accrued annual leave. 
The lump-sum payment will be adjusted to reflect the increased rate on 
and after the effective date of the pay schedule adjustment. We do not 
believe these changes to simplify the calculation of lump-sum payments 
will significantly increase costs for Federal agencies, since many 
employees separate after the official approval or authorization of a 
pay adjustment and/or do not have large amounts of accumulated and 
accrued annual leave that extend beyond the effective date of a pay 
adjustment.

Night Differential and Night Pay

    Under Sec. 550.1205(b)(5)(i) of the final regulations, a lump-sum 
payment includes a night differential under 5 U.S.C. 5343(f) for 
regularly scheduled nonovertime hours at the percentage rate received 
by a prevailing rate employee for the last full workweek immediately 
prior to the date the employee becomes eligible for a lump-sum payment. 
An agency recommended that the night differential be based on the 
average received during a 12-week period, since a single week could 
reflect an unusual or anomalous situation. Under 5 U.S.C. 5343(f), a 
night differential for a prevailing rate employee is considered part of 
basic pay and is included in all regularly scheduled nonovertime 
periods of night shift duty, including periods of paid leave. The 
language in OPM's proposed regulations was adopted from the Federal 
Wage System (FWS) Operating Manual. The FWS Operating Manual comprises 
long-standing policies, practices, and recommendations adopted by the 
Federal Prevailing Rate Advisory Committee, a labor and management 
committee that reports to the Director of OPM. The FWS Operating Manual 
states that a night shift differential is included in a lump-sum 
payment and is paid at the percentage rate received by the employee for 
the last full workweek immediately prior to separation. Therefore, OPM 
made no changes in Sec. 550.1205(b)(5)(i).
    The proposed regulations provided that a lump-sum payment includes 
night pay under 5 U.S.C. 5545 for regularly scheduled nonovertime hours 
based on the average amount of night pay received by a General Schedule 
(GS) employee during the 12 workweeks immediately prior to the date the 
employee becomes eligible for a lump-sum payment. Two agencies objected 
to including night pay in a lump-sum payment, since night pay is not 
considered part of basic pay for GS employees. In addition, the 
agencies noted that 5 U.S.C. 5545(a)(2) prohibits the payment of night 
pay for any hours of leave between 6 a.m. and 6 p.m. whenever the total 
amount of leave in the pay period equals or exceeds 8 hours. The 
agencies believe the proposed regulations would result in an employee 
receiving more than he or she would have received had he or she 
remained in Federal service. One agency objected to the requirement for 
12-week averaging, since such a requirement would force timekeepers to 
compute an average amount of night pay manually. The same agency 
recommended that OPM treat night pay for GS employees the same as night 
differentials for prevailing rate employees by calculating the amount 
of night pay to be included in a lump-sum payment based on the rate the 
employee received for regularly scheduled nonovertime hours in the 
workweek immediately prior to becoming eligible for a lump-sum payment.
    We agree that night pay is not part of basic pay for GS employees 
and that the proposed regulations would have provided such employees 
with a greater benefit than they would have received if they had 
remained in Federal service. Therefore, the final regulations do not 
include night pay for GS employees among the types of pay that must be 
included in a lump-sum payment.

Sunday Premium Pay

    The proposed regulations provided that a lump-sum payment includes 
Sunday premium pay for nonovertime hours on Sunday based on the average 
amount of Sunday premium pay received by the employee during the 12 
workweeks immediately prior to the date the employee became eligible 
for a lump-sum payment. An agency recommended that Sunday premium pay 
be excluded from a lump-sum payment because it is not considered part 
of basic pay for retirement purposes. Two agencies recommended that the 
amount of Sunday premium pay included in a lump-sum payment be based 
solely on the employee's workweek immediately prior to eligibility for 
a lump-sum payment. Another agency added that if OPM wishes to use an 
average amount received during a 12-week period, the computation should 
be based on the average number of hours worked on Sunday rather than on 
the amount of Sunday premium pay received. The agency noted that the 
actual amount of Sunday premium pay received during an earlier work 
period could have been paid at a lower rate if, for example, an 
employee received a within-grade increase or promotion during the 
latter part of the 12-week period.
    Section 636 of the Treasury and General Government Appropriations 
Act, 1998 (Pub. L. 105-61, October 10, 1997), permanently restricts the 
payment of Sunday premium pay for all employees Governmentwide who are 
paid from appropriated funds and who do not actually perform work on 
Sunday. In addition, section 624 of the Treasury and General Government 
Appropriations Act, 1999 (Pub. L. 105-277, October 21, 1998), expanded 
the permanent restriction on the payment of Sunday premium pay to cover 
employees who are paid from any Act (including payments from revolving 
funds). Consistent with these laws, we removed Sunday premium pay from 
the types of pay that must be included in a lump-sum payment.

Overtime Pay

    Under the proposed regulations, a lump-sum payment included 
overtime pay under the Fair Labor Standards Act of 1938, as amended 
(FLSA), for overtime work that is regularly scheduled during an 
employee's established uncommon tour of duty (as defined in 
Sec. 630.201 and established under Sec. 630.210) for which the

[[Page 36767]]

employee receives standby duty pay under 5 U.S.C. 5545(c)(1) if the 
uncommon tour of duty was applicable to the employee immediately prior 
to the date the employee became eligible for a lump-sum payment. The 
lump-sum payment included the amount of FLSA overtime pay for regularly 
scheduled overtime work ordered or approved at the time the employee 
became eligible for a lump-sum payment. (This provision applied to most 
firefighters and some emergency medical technicians.)
    On June 18, 1997, OPM issued an Interagency Advisory Group 
Memorandum that encouraged agencies to include in a lump-sum payment 
all FLSA overtime pay for overtime hours that are regularly scheduled 
during an employee's established uncommon tour of duty if the uncommon 
tour of duty was in effect for the employee immediately prior to the 
date the employee became eligible for a lump-sum payment under 
Sec. 550.1203. OPM based this advice on the results of two lawsuits--
James Calhoun v. The United States (Fed. Cl. No. 95-840C, December 21, 
1995) and Theodore Abbott, et al., v. The United States (Fed. Cl. No. 
90-756C, January 31, 1994 ). In these cases, the Federal Government 
conceded that FLSA overtime pay for regularly scheduled overtime hours 
that occur during an uncommon tour of duty must be included in an 
employee's lump-sum payment for accumulated and accrued annual leave 
under 5 U.S.C. 5551.
    Two agencies disagreed with the inclusion of FLSA overtime pay in a 
lump-sum payment. One suggested that hours of work that are used for 
the purpose of determining entitlement to FLSA overtime pay should not 
be used for determining entitlement to other payments under title 5, 
United States Code. The other agency believes such inclusion would be 
contrary to the intent of Congress' prohibition on the payment of 
premium pay during periods of paid leave. An employee association 
agreed with the inclusion of FLSA overtime pay, but suggested that the 
amount be based on the average number of hours worked during the 
preceding 12 weeks.
    On October 21, 1998, legislation was enacted that changes the 
method of computing basic pay, overtime pay, and other entitlements for 
Federal firefighters who are classified in the GS-081 classification 
series (Fire Protection and Prevention) and who have regular tours of 
duty averaging at least 53 hours per week (or 106 hours biweekly). (See 
section 628 of the Treasury and General Government Appropriations Act, 
1999, as incorporated in Division A, section 101(h) of Pub. L. 105-277, 
October 21, 1998.) The new law eliminates the use of standby duty pay 
for firefighters and provides that firefighters are paid solely on an 
hourly rate basis using a special ``firefighter hourly rate.'' Both 
FLSA-covered (nonexempt) and FLSA-exempt firefighters will receive 
time-and-one-half overtime pay for all overtime hours--i.e., hours in 
excess of 53 hours per week (or 106 hours biweekly).
    On November 23, 1998, OPM issued interim regulations (63 FR 64589) 
that included a revised definition of ``uncommon tour of duty'' in 
Sec. 630.201(b)(2) to incorporate a reference to firefighters 
compensated under the new law. Also, a new paragraph (c) was added to 
Sec. 630.210 to require that agencies establish an uncommon tour of 
duty for leave purposes for firefighters with regular tours of duty 
that generally consist of 24-hour shifts. An agency may also establish 
an uncommon tour of duty under Sec. 630.210(a) for leave purposes for 
firefighters with a regular tour of duty that includes a basic 40-hour 
workweek, plus regularly scheduled overtime hours. Existing regulations 
(Sec. 550.1306(c)) require that in computing a lump-sum payment for 
firefighters with an uncommon tour of duty established under 
Sec. 630.210 for leave purposes, an agency must use the rates of pay 
for the position held by the firefighter that apply to hours in that 
uncommon tour of duty, including regular overtime pay for such hours.
    As a result of these changes, a new paragraph (iv) has been added 
to Sec. 550.1205(b)(5) of the final regulations to provide that 
overtime pay for overtime hours within a firefighter's regular tour of 
duty is used in computing a lump-sum payment for annual leave, since 
those overtime hours are part of an uncommon tour of duty established 
under Sec. 630.210 for leave purposes. Section 550.1205(b)(6) continues 
to apply to an employee who receives FLSA overtime pay for overtime 
work that is regularly scheduled during an established uncommon tour of 
duty as defined in Sec. 630.201(b)(1), for which the employee receives 
standby duty pay under 5 U.S.C. 5545(c)(1) (e.g., emergency medical 
technicians).
    We believe the amount of overtime pay to be included in a lump-sum 
payment should reflect the amount the employee would have received had 
he or she remained employed in the Federal service. In addition, it is 
not our intent to require agencies to establish new methodologies for 
calculating overtime pay for lump-sum payment purposes. Therefore, in 
response to agency comments that overtime pay in a lump-sum payment for 
firefighters should be limited to the normal amount of overtime work 
performed in each pay period--i.e., after meeting the overtime weekly 
standard of 53 hours (or 106 hours biweekly), we have added a sentence 
to Secs. 550.1205(b)(5)(iv) and 550.1205(b)(6) of the final regulations 
to state that a lump-sum payment must be calculated using the same 
methodology used by the employing agency to calculate the firefighter's 
entitlement to regular overtime pay for the pay period immediately 
prior to the date the firefighter became eligible for a lump-sum 
payment. Therefore, if an agency calculates overtime on a biweekly 
basis, the amount of overtime pay to be included in a lump-sum payment 
will be determined after the employee meets the overtime standard of 
106 hours each biweekly pay period. If an agency calculates overtime 
pay on a weekly basis, the amount of overtime pay to be included in a 
lump-sum payment will be determined after the employee meets the 
overtime standard of 53 hours each week.

Sample Calculation

    The following example shows how an agency should calculate the 
overtime pay component of a lump-sum payment for a firefighter with an 
uncommon tour of duty established under Sec. 630.210(c). In the 
example, a firefighter who normally works 144 hours each pay period 
(three 24-hour tours of duty in each administrative workweek) separates 
at the end of a pay period with 400 hours of accumulated and accrued 
annual leave. The firefighter receives a ``firefighter hourly rate'' 
(as established in 5 CFR 550.1303) for all 400 hours of annual leave, 
plus \1/2\ of the ``firefighter hourly rate'' for all overtime hours in 
the employee's uncommon tour of duty. The agency determines the 
firefighter's entitlement to overtime pay based on a 106-hour biweekly 
overtime standard. Thus, in each full 144-hour biweekly pay period, the 
firefighter is entitled to overtime pay for 38 regularly scheduled 
overtime hours (144 - 106 = 38) within his or her uncommon tour of 
duty.

[[Page 36768]]



                                  Example of Lump-Sum Payment for a Firefighter
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Projecting the lump-sum leave     Pay Period 1=144    Pay Period 2=144    Pay Period 3=112    Total=400 hours of
 period for 400 hours of annual    hours.              hours.              hours.              annual leave.
 leave.                           Annual leave        Annual leave        Annual leave
                                   remaining: 256      remaining: 112      remaining:.
                                   hours.              hours.               0 hours.........
                                  (400-144=256).....  (256-144=112).....  (112-112=0)
Firefighter hourly rate.........  144 hours.........  144 hours.........  112 hours.........  400 hours.
Firefighter overtime rate.......  38 hours..........  38 hours..........  6 hours...........  82 hours.
----------------------------------------------------------------------------------------------------------------

    Although each agency has the right to establish the work schedules 
of its employees, this authority may not be used to change an 
employee's work schedule just prior to separation or retirement for the 
sole purpose of circumventing OPM's regulation requiring agencies to 
include FLSA overtime pay in a lump-sum payment. We have added a 
provision to Secs. 550.1205(b)(5)(iv) and 550.1205(b)(6) to prevent 
such an outcome.

Air Traffic Controllers

    An employee recommended that OPM include the ``5 percent 
operational differential'' or ``controller pay'' for Federal Aviation 
Authority Air Traffic Controllers in the calculation of lump-sum 
payments. Pub. L. 104-50 (November 15, 1995), authorized the 
Administrator of the Federal Aviation Administration (FAA) to develop 
and implement a personnel management system that addresses the unique 
demands on that agency's workforce. The compensation provisions in 
title 5, United States Code, no longer apply to FAA employees, and OPM 
has no authority to prescribe regulations for lump-sum payments to FAA 
employees.

Refund of a Lump-Sum Payment

    Under 5 U.S.C. 6306, when an employee who receives a lump-sum 
payment for accumulated and accrued annual leave under 5 U.S.C. 5551 is 
reemployed in the Federal service prior to the end of the period 
covered by the lump-sum payment, the employee must refund to the 
employing agency an amount equal to the payment covering the period 
between the date of reemployment and the expiration of the lump-sum 
period. This rule applies whether an employee is reemployed in a 
position covered by chapter 63 of title 5, United States Code, or under 
a different formal leave system. The refund is based on the pay used to 
compute the lump-sum payment; e.g., an employee who received a lump-sum 
payment based on the pay for a GS-11 position must refund the lump-sum 
payment based on the same GS-11 pay, even if he or she is reemployed at 
a lower or higher grade level. The refund is deposited in the Treasury 
of the United States to the credit of the employing agency.
    In the final regulations, Sec. 550.1206(a) states that an agency 
may permit an employee to refund a lump-sum payment for annual leave in 
installments. If an agency permits the lump-sum to be paid in 
installments, the employee must pay the refund in full within 1 year 
after the date of reemployment. A component of an agency recommended 
that the agency require a full refund of a lump-sum payment before an 
employee returns to the Federal Government. The component further 
advised that if this cannot be implemented, employees should be 
required to sign an installment agreement before entering on duty. 
OPM's regulations at Sec. 550.1206(a) provide agencies with 
discretionary authority to establish a policy for refunding lump-sum 
payments for annual leave. The only restriction is that the lump-sum 
refund must be paid in full within 1 year after the date of 
reemployment. Agencies may establish internal policies to require an 
employee to sign an installment agreement for refunding a lump-sum 
payment. In addition, we have added a statement that an agency may not 
waive the refund of a lump-sum payment.
    We recently received inquiries about whether a refund for a lump-
sum payment is required from a retired Federal employee who is 
reemployed under a temporary appointment of less than 90 days. If an 
employee retires from the Federal Government and is immediately 
reemployed on the next work day, he or she is not entitled to a lump-
sum payment because this is not a separation from Federal service. 
However, if an employee retires from the Federal Government and has a 
break in service of 1 or more workdays, he or she is entitled to a 
lump-sum payment. If an annuitant is reemployed in the Federal 
Government prior to the expiration of the lump-sum period in a 
temporary appointment of less than 90 days, he or she must refund to 
the employing agency an amount equal to the pay covering the period 
between the date of reemployment and the expiration of the lump-sum 
period. In addition, the reemploying agency must recredit to the 
reemployed annuitant an amount of leave equal to the leave represented 
by the refund, and the employee may use the recredited leave during the 
temporary appointment. We added a new paragraph (e) to Sec. 550.1206 of 
the final regulations to reflect these outcomes, which are required by 
law.

Recredit of Annual Leave

    The final regulations include a new Sec. 550.1207, Recredit of 
Annual Leave. Paragraphs (b), (c), (d), (g) and (h) of Sec. 550.1206 of 
the proposed regulations were moved to the new Sec. 550.1207 and 
renumbered.
    An agency requested clarification of the proposed regulations, 
which provided that if any part of a lump-sum refund reflects annual 
leave restored under 5 U.S.C. 6304(d), the annual leave must be 
restored in a separate account using the expiration date originally 
established for using the restored annual leave. If the expiration date 
originally established for using the restored annual leave occurs 
before the date of reemployment, a refund is required for all of the 
unexpired portion, but none of the restored annual leave may be 
recredited. The agency does not believe this is the intent of the law. 
Another agency asked whether a refund must reflect all remaining annual 
leave, including ``use or lose'' annual leave, and whether the ``use or 
lose'' annual leave should be recredited to the employee's leave 
account. A third agency recommended that an employee should not be 
required to pay back any portion of a lump-sum payment that reflects 
leave that cannot be recredited to the employee's leave account.
    OPM's proposed regulations were intended to ensure that an 
employee's leave would be treated the same upon reemployment as it 
would have been treated had the employee remained employed. Restored 
annual leave and leave in excess of the maximum limitation in 5 U.S.C. 
6304(b) would be subject to forfeiture if the employee did not use the 
leave within the time periods prescribed. However, when an employee who 
receives a lump-sum payment for accumulated and accrued annual leave 
under 5 U.S.C. 5551 is reemployed in the Federal service prior to the 
end of the period covered by the

[[Page 36769]]

lump-sum payment, the employee must refund to the employing agency an 
amount equal to the payment covering the period between the date of 
reemployment and expiration of the projected lump-sum period. (See 5 
U.S.C. 6306.) In addition, an amount of annual leave equal to the days 
or hours of work remaining between the date of reemployment and the 
expiration of the lump-sum leave period must be recredited to the 
employee by the employing agency.
    Thus, both the lump-sum refund and the recredit of annual leave are 
based on the date of reemployment and the end of the lump-sum period, 
not the amount or type of leave included in the lump-sum payment. We 
believe the intent of the law is to recredit any and all annual leave 
that is equivalent to the refund of the lump-sum payment. In addition, 
former OPM guidance stated that restored annual leave included in a 
lump-sum payment is not subject to refund and may not be recredited if 
the employee is reemployed prior to the expiration of the lump-sum 
leave period. (See attachment to former FPM Letter 630-22, January 11, 
1974).
    Therefore, we have revised Sec. 550.1206(a) of the final 
regulations to provide that an agency should not include restored 
annual leave in a lump-sum refund and must subtract restored annual 
leave from the lump-sum leave period if an employee is reemployed prior 
to the expiration of the lump-sum leave period. In addition, we have 
revised Sec. 550.1207(a)(3) to provide that an agency will not recredit 
restored annual leave to an employee if the employee is reemployed 
prior to the expiration of the lump-sum leave period.
    The proposed regulations provided that if annual leave recredited 
to an employee is in excess of the maximum annual leave limitation 
established under 5 U.S.C. 6304(a), (b), (c), or (f), as appropriate, 
for the position in which reemployed, and the employee was subject to a 
higher maximum annual leave limitation in the former position, the 
employee's maximum annual leave limitation must be determined based on 
the amount of annual leave to be recredited. Two agencies expressed 
concern that this provision would allow an employee's maximum annual 
leave limitation to be set below the 240-hour maximum limitation 
established by 5 U.S.C. 6304(a). Another agency noted that there were 
no rules for setting an employee's personal leave ceiling when the 
amount of annual leave to be recredited is in excess of the maximum 
limitation for the position in which reemployed and the maximum annual 
leave limitation for the former position is less than the current 
maximum annual leave limitation.
    The proposed regulations would have applied only when the annual 
leave to be recredited was in excess of the maximum annual leave 
limitation for the position in which reemployed and the employee was 
subject to a higher maximum annual leave limitation in the former 
position. Therefore, it would be impossible to set the employee's 
maximum annual leave limitation below the 240-hour maximum limitation 
established by 5 U.S.C. 6304(a). If the amount of annual leave the 
agency is to recredit is less than or equal to the maximum annual leave 
limitation for the position in which the employee is reemployed, 
Sec. 550.1207(b) of the final regulations requires the agency to set 
the employee's maximum annual leave limitation at the maximum annual 
leave limitation for the position in which the employee is reemployed.
    In response to these comments and additional questions we have 
received, we have clarified (Sec. 550.1207(c) and (d)) of the final 
regulations as follows.
    First, if the amount of annual leave to be recredited is more than 
the maximum annual leave limitation for the new position, and the 
employee's former maximum annual leave limitation was established under 
5 U.S.C. 6304(a), (b), (c), or (f), as appropriate, the agency must 
establish the employee's new maximum annual leave limitation on the 
date of reemployment as a personal leave ceiling equal to the amount of 
annual leave to be recredited.

                  Examples of Recrediting Annual Leave
------------------------------------------------------------------------
 Annual leave to     Former maximum      New maximum      New personal
  be recredited      leave ceiling      leave ceiling     leave ceiling
------------------------------------------------------------------------
300                360                240               300
400                360                240               400
900                1000*              240               900
1200               1000*              720 (SES)         1200
------------------------------------------------------------------------
*SES Personal Leave Ceiling established under Sec.  630.306(d).

    Second, if the amount of annual leave to be recredited is more than 
the maximum annual leave limitation for the new position, and the 
employee's former maximum annual leave limitation was established under 
an authority other than 5 U.S.C. 6304(a), (b), (c), or (f), as 
appropriate, the agency must establish the employee's new maximum 
annual leave limitation on the date of reemployment as a personal leave 
ceiling equal to the employee's former maximum annual leave limitation.

       Example of Recrediting Annual Leave Upon Transfer From USPS
------------------------------------------------------------------------
 Annual leave to     Former maximum      New maximum      New personal
  be recredited      leave ceiling      leave ceiling     leave ceiling
------------------------------------------------------------------------
540                440*               240               440
------------------------------------------------------------------------
*Maximum Annual Leave Limitation for U.S. Postal Service.

    Under 5 U.S.C. 6304(c), an employee's personal leave ceiling will 
be reduced if more annual leave is used than earned in a leave year 
until it equals the maximum annual leave limitation established for the 
position in which reemployed. In addition, an employee must use the 
annual leave earned in a leave year or it becomes subject to forfeiture 
at the end of the leave year.

Income Taxes and Deductions

    Under 5 U.S.C. 5551, a lump-sum payment for annual leave is 
considered pay for income tax purposes. A number of agencies requested 
guidance on whether a nonforeign area cost-of-living

[[Page 36770]]

allowance (COLA) that is included in a lump-sum payment is subject to 
income tax. Under section 912 of title 26, United States Code, a COLA 
paid under 5 U.S.C. 5941(a)(1) to an employee stationed in a nonforeign 
area outside of the contiguous United States (48 States) is not 
included as gross income and is not subject to income tax. OPM posed 
the agencies' question to the Internal Revenue Service (IRS).
    In a letter to OPM dated March 12, 1998, IRS stated that a 
nonforeign area COLA authorized under 5 U.S.C. 5941(a)(1) that is paid 
in connection with a lump-sum payment for annual leave is not subject 
to Federal income tax. Therefore, in calculating an employee's taxable 
Federal income for a lump-sum payment for annual leave, agencies must 
first subtract any nonforeign area COLA authorized under 5 U.S.C. 
5941(a)(1). Similarly a post allowance in a foreign area authorized 
under 5 U.S.C. 5924(1) is not subject to Federal income tax, and the 
agency must subtract it from a lump-sum payment when determining 
taxable Federal income. However, nonforeign area post differentials 
authorized under 5 U.S.C. 5941(a)(2) that are included in a lump-sum 
payment for annual leave are included as gross income and are subject 
to Federal income tax.
    An agency asked about the treatment of lump-sum payments in 
relation to deductions for the Federal Insurance Contributions Act 
(FICA) and Medicare. The agency stated that some types of pay included 
in a lump-sum payment are subject to deductions for FICA/Medicare, 
while others are not. The agency requested clarification as to whether 
the lump-sum payment should be considered as one separate payment or 
whether each type of pay should be considered separately when computing 
deductions for FICA/Medicare. The agency also requested that OPM state 
in the regulations that (1) if a lump-sum payment is repaid in the same 
calendar year, the employee is required to pay back the gross amount of 
the lump-sum payment, minus Federal and State income taxes and FICA/
Medicare; and (2) if the employee repays the lump-sum payment in a 
subsequent year, he or she must repay the gross amount reduced only by 
FICA/Medicare. The agency stated that IRS has ruled that corrections of 
earnings for Federal, State, or local withholding taxes cannot be made 
for a prior year.
    OPM referred these questions and comments to IRS. In a letter to 
OPM dated April 22, 1998, IRS responded that it is appropriate to 
divide a lump-sum payment into that portion (i.e., different types of 
pay) that is subject to FICA taxes and that which is not. In addition, 
IRS stated that repayment of a lump-sum payment made in the same year 
it is paid affects the treatment of Federal income tax withholding and 
FICA taxes, but that a repayment in a subsequent year affects only FICA 
taxes. IRS stated that employers should refer to Publication 15, 
Circular E, Employers Tax Guide, for additional information on Federal 
employment tax consequences and reporting requirements. General 
information on Federal income tax forms and instructions can be found 
on the Internet at http://www.irs.ustreas.gov/prod/forms__pubs/
index.html. Any questions on State and local tax implications should be 
referred to the appropriate State and local taxing authority.
    OPM received a comment from the labor organization recommending 
that employees be afforded some flexibility in choosing when to receive 
their lump-sum payment. The labor organization encouraged OPM to permit 
employees to defer a lump-sum payment for a reasonable period of time 
so that their tax liability may be mitigated. We referred this comment 
to IRS. In its letter to OPM dated April 22, 1998, IRS advised that 
such a choice would result in the lump-sum being included for income 
tax purposes in the taxable year it is first made available, without 
regard to whether an employee chose to receive it immediately or defer 
the payment.

Effective Date of Regulations

    The final regulations apply only to lump-sum payments made by an 
agency on or after the effective date of the final regulations. The 
final regulations on lump-sum payments for annual leave are not 
retroactive. The issuance of retroactive regulations is neither the 
preferred nor usual method for rulemaking. See Alaskan Arctic Gas 
Pipeline v. United States, 831 F.2d 1043, 1045-8 (Fed. Cir. 1987). 
Retroactivity in rulemaking is permissible where Congress has expressly 
authorized it in law, but that is not the case here. See Landgraf v. 
USI Film Products, 511 U.S. 244, 255-257 (1984). This is a new rule 
that standardizes inconsistent agency practices. The determinations 
made by agencies prior to the effective date of the final regulations 
are not subject to change based on the provisions of the final 
regulations.
    Two agencies requested additional time to implement the final rules 
in order to modify their payroll systems and operating procedures. We 
agree. The final regulations will become effective 60 days after the 
date of publication in the Federal Register. The delayed effective date 
will also provide additional time for those agencies responsible for 
pay authorities outside of title 5 to review their policies and issue 
regulations for the administration of lump-sum payments for annual 
leave.

Miscellaneous Comments

    The components of two large agencies commented that any pay 
excluded from retirement basic pay should also be excluded from lump-
sum payments for annual leave. In effect, this would limit a lump-sum 
payment to basic pay and certain types of premium pay, such as annual 
premium pay under 5 U.S.C. 5545(c)(1) and (2) and 5545a. One of the 
agencies stated that it would support a final regulation limiting lump-
sum payments to basic pay, excluding FLSA overtime pay. In addition, an 
individual commented that a lump-sum payment should not be adjusted to 
include any extra pay or benefits such as Sunday premium pay, night 
pay, or any general pay adjustments or within-grade increases that 
become effective after the employee separates from Federal service.
    Under 5 U.S.C. 5551, a lump-sum payment ``must equal the pay 
(excluding any differential under section 5925 and any allowance under 
section 5928) the employee or individual would have received had he 
remained in the service until expiration of the period of the annual or 
vacation leave.'' Issuing final regulations to limit lump-sum payments 
to those that are basic pay for retirement purposes would be contrary 
to the lump-sum payment law.
    The labor organization recommended that OPM consider approaches to 
expedite lump-sum payments to employees. In addition, the labor 
organization recommended that OPM simplify and expedite the process of 
recrediting annual leave when employees are reemployed in the Federal 
service. Agencies are responsible for administering lump-sum payments, 
consistent with the law and OPM's regulations. A universal rule is not 
feasible, since it cannot possibly accommodate the requirements and 
complexities of the numerous agency payroll systems that administer 
lump-sum payments.
    An agency asked whether implementation of the final regulations on 
lump-sum payments would be subject to collective bargaining and 
inquired about the date by which such bargaining must be completed. 
Certain provisions may be subject to collective bargaining--e.g., 
whether an agency permits employees to refund a lump-

[[Page 36771]]

sum payment in installments. Additional questions on this matter should 
be addressed to the agency's labor relations office.
    An agency commented that agencies responsible for administering 
other kinds of pay outside of title 5 should be permitted the greatest 
latitude possible and that each agency should decide whether its 
regulations should be consistent with OPM's regulations. In contrast, 
another agency recommended that such agencies not be permitted to 
determine the types of pay to be included in a lump-sum payment because 
this would result in the exact situation that OPM is trying to 
correct--i.e., inconsistent payment practices and inequities among 
Federal employees.
    Under 5 U.S.C. 5553, OPM has regulatory authority for the 
administration of lump-sum payments for annual leave. Section 
550.1205(c) delegates authority to the head of each agency to determine 
other kinds of pay authorized in statutes outside of title 5 that 
should be included in a lump-sum payment. We continue to believe such 
agencies are in the best position to determine the types of pay under 
their authority that should be included in a lump-sum payment 
consistent with 5 U.S.C. 5551, 5552, and 6306. If inconsistencies and 
inequities arise, OPM will reconsider the delegation of these 
authorities.

Conforming Amendments

    In many parts of title 5, Code of Federal Regulations, there are 
existing references to lump-sum payments for annual leave. Because 
there is now a new subpart on lump-sum payments in part 550, there is 
no further need for these separate references. Therefore, we are 
removing these references and reserving the following sections: 
Sec. 531.304(d) (special law enforcement officer adjusted rate of pay), 
Sec. 531.606(d) (locality rate of pay), Sec. 531.703(c) (continued rate 
of pay), and Sec. 550.186(c) (availability pay). In Sec. 591.210(c)(1) 
(allowances and differentials in nonforeign areas), we are deleting the 
last sentence. However, the references to lump-sum payments for annual 
leave in part 532 will need to be reviewed by the Federal Prevailing 
Rate Advisory Committee before we make any similar changes.

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 affect only Federal employees and agencies.

List of Subjects

5 CFR Part 531

    Government employees, Law enforcement officers, Wages.

5 CFR Part 550

    Administrative practice and procedure, Claims, Government 
employees, Wages.

5 CFR Part 591

    Government employees, Travel and transportation expenses, Wages.

Office of Personnel Management
Janice R. Lachance,
Director.

    Accordingly, OPM is amending parts 531, 550, and 591 of title 5 of 
the Code of Federal Regulations as follows:

PART 531--PAY UNDER THE GENERAL SCHEDULE

    1. The authority citation for part 531 continues to read as 
follows:

    Authority: 5 U.S.C. 5115, 5307, and 5338; sec. 4 of Pub. L. 103-
89, 107 Stat. 981; and E.O. 12748, 56 FR 4521, 3 CFR, 1991 Comp., p. 
316;
    Subpart B also issued under 5 U.S.C. 5303(g), 5333, 5334(a), and 
7701(b)(2);
    Subpart C also issued under 5 U.S.C. 5304, 5305, and 5553; 
sections 302 and 404 of FEPCA, Pub. L. 101-509, 104 Stat. 1462 and 
1466; and section 3(7) of Pub. L. 102-378, 106 Stat. 1356;

    2. In Sec. 531.304, paragraph (d) is revised to read as follows:


Sec. 531.304  Administration of special law enforcement adjusted rates 
of pay.

* * * * *
    (d) A special law enforcement adjusted rate of pay is paid only for 
those hours for which a law enforcement officer is in a pay status.
* * * * *
    3. In Sec. 531.606, paragraph (d) is revised to read as follows:


Sec. 531.606  Administration of locality rates of pay.

* * * * *
    (d) A locality rate of pay is paid only for those hours for which 
an employee is in a pay status.
* * * * *
    4. In Sec. 531.703, paragraph (c) is revised to read as follows:


Sec. 531.703  Administration of continued rates of pay.

* * * * *
    (c) A continued rate of pay is paid only for those hours for which 
an employee is in a pay status.
* * * * *

PART 550--PAY ADMINISTRATION (GENERAL)

Subpart A--Premium Pay

    5. The authority citation for Subpart A of Part 550 continues to 
read as follows:

    Authority: 5 U.S.C. 5304 note, 5305 note, 5541(2)(iv), 5545b, 
5548, 5553, and 6101(c); E.O. 12748, 3 CFR, 1992 Comp., p. 316.


Sec. 550.186  [Amended]

    6. In Sec. 550.186, paragraph (c) is removed and paragraph (d) is 
redesignated as paragraph (c).
    7. Subpart L is added to part 550 to read as follows:

Subpart L--Lump-Sum Payment for Accumulated and Accrued Annual Leave

Sec.
550.1201  Purpose, applicability, and administration.
550.1202  Definitions.
550.1203  Eligibility.
550.1204  Projecting the lump-sum leave period.
550.1205  Calculating a lump-sum payment.
550.1206  Refunding a lump-sum payment.
550.1207  Recrediting annual leave.

Subpart L--Lump-Sum Payment for Accumulated and Accrued Annual 
Leave

    Authority: 5 U.S.C. 5553, 6306, and 6311.


Sec. 550.1201  Purpose, applicability, and administration.

    (a) Purpose. This subpart provides regulations to implement 
sections 5551, 5552, and 6306 of title 5, United States Code, and must 
be read together with those sections. Sections 5551 and 5552 provide 
for the payment of a lump-sum payment for accumulated and accrued 
annual leave when an employee:
    (1) Separates from Federal service; or
    (2) Enters on active duty in the armed forces and elects to receive 
a lump-sum payment for accumulated and accrued annual leave. Section 
6306 requires that when an employee is reemployed in the Federal 
service prior to the expiration of the lump-sum period, he or she must 
refund an amount equal to the pay covering the period between the date 
of reemployment and the expiration of the period of annual leave (i.e., 
the lump-sum leave period).
    (b) Applicability. This subpart applies to--
    (1) Any employee who separates, dies, or transfers under the 
conditions prescribed in Sec. 550.1203; and
    (2) Any employee or individual employed by a territory or 
possession of the United States who enters on active

[[Page 36772]]

duty in the armed forces and who elects to receive a lump-sum payment 
for accumulated and accrued annual leave.
    (c) Administration. The head of an agency having employees subject 
to this subpart is responsible for the proper administration of this 
subpart.


Sec. 550.1202  Definitions.

    In this subpart--
    Accumulated and accrued annual leave means any annual leave 
accumulated and accrued, as these terms are defined in Sec. 630.201 of 
this chapter, plus any annual leave credited to an employee under 5 
U.S.C. 6304(c) and Sec. 630.301(d) of this chapter and any annual leave 
restored under 5 U.S.C. 6304(d). Accumulated and accrued annual leave 
does not include annual leave received by a leave recipient under the 
voluntary leave transfer or leave bank programs established under 
subchapters III and IV of chapter 63 of title 5, United States Code, or 
annual leave advanced to an employee under 5 U.S.C. 6302(d).
    Administrative workweek has the meaning given that term in 
Sec. 610.102 of this chapter.
    Agency means--
    (1) An executive agency and a military department as defined in 
sections 105 and 102 of title 5, United States Code, respectively; and
    (2) A legislative or judicial agency or a unit of the legislative 
or judicial branch of the Federal Government that has positions in the 
competitive service.
    Employee has the meaning given that term in 5 U.S.C. 2105.
    Lump-sum payment means a final payment to an employee for 
accumulated and accrued annual leave.
    Mixed tour of duty means a condition of employment for positions in 
which a fluctuating workload requires an employee to work full-time or 
part-time for a limited portion of the year and on an intermittent 
basis for the remainder of the year.
    Rate of basic pay means the rate of pay fixed by law or 
administrative action for the position held by an employee before any 
deductions and exclusive of additional pay of any kind.
    Transfer means the movement of an employee to another position 
without a break in service of 1 workday or more.


Sec. 550.1203  Eligibility.

    (a) An agency must make a lump-sum payment for accumulated and 
accrued annual leave when an employee--
    (1) Separates or retires from the Federal service;
    (2) Dies; or
    (3) Transfers to a position that is not covered by subchapter I of 
chapter 63 of title 5, United States Code, and his or her accumulated 
and accrued annual leave cannot be transferred, except as provided in 
paragraphs (c), (d), and (e) of this section.
    (b) The Department of Defense (DOD) must make a lump-sum payment to 
an employee who has unused annual leave that was restored under 5 
U.S.C. 6304(d)(3) when he or she transfers from a DOD installation 
undergoing closure or realignment to a position in any other department 
or agency of the Federal Government or moves to a position within DOD 
not located at an installation undergoing closure or realignment.
    (c) An employee who enters on active duty in the armed forces may 
elect to receive a lump-sum payment for accumulated and accrued annual 
leave or may request to have the annual leave remain to his or her 
credit until return from active duty. However, an agency must make a 
lump-sum payment for any annual leave previously restored under 5 
U.S.C. 6304(d) when the employee enters active duty. The agency may not 
recredit the restored leave when the employee returns to Federal 
service.
    (d) An employee who transfers to a position in a public 
international organization under 5 U.S.C. 3582 may elect to retain 
accumulated and accrued annual leave to his or her credit at the time 
of transfer or receive a lump-sum payment for such annual leave under 5 
U.S.C. 3582(a)(4). However, the agency must make a lump-sum payment for 
any annual leave previously restored under 5 U.S.C. 6304(d) when the 
employee transfers to the public international organization. The agency 
may not recredit the leave under these circumstances.
    (e) An agency must make a lump-sum payment to an employee who 
transfers to a position excepted from subchapter I of chapter 63 of 
title 5, United States Code, by 5 U.S.C. 6301(2)(x)-(xiii) for any 
annual leave restored under 5 U.S.C. 6304(d) upon transfer to an 
excepted position. However, the agency may not make a lump-sum payment 
for any annual leave in the employee's regular leave account upon 
transfer to the excepted position. The agency must hold such annual 
leave in abeyance for recredit if the employee is subsequently 
reemployed without a break in service in a position to which his or her 
accumulated and accrued annual leave may be transferred. If the 
employee later becomes eligible for a lump-sum payment under the 
conditions specified in this section, the current employing agency must 
make a lump-sum payment for the annual leave held in abeyance. The 
agency must compute the lump-sum payment under Sec. 550.1205(b) based 
on the pay the employee was receiving immediately before the date of 
the transfer to the position excepted by 5 U.S.C. 6301(2)(x)-(xiii). An 
employee who elects to retain his or her leave benefits upon accepting 
a Presidential appointment, as permitted by 5 U.S.C. 3392(c), is not 
entitled to receive a lump-sum payment.
    (f) In the case of an employee who transfers to a position that is 
not covered by subchapter I of chapter 63 of title 5, United States 
Code, and to which only a portion of his or her accumulated and accrued 
annual leave may be transferred, the agency must make a lump-sum 
payment for any remaining annual leave that cannot be transferred. The 
agency must compute the lump-sum payment under Sec. 550.1205(b) based 
on the pay the employee was receiving immediately before the date of 
the transfer to the position not covered by subchapter I of chapter 63 
of title 5, United States Code. This does not apply to an employee 
transferring to an excepted position covered by paragraph (e) of this 
section.
    (g) An agency must make a lump-sum payment for accumulated and 
accrued annual leave to an employee in a missing status (as defined in 
5 U.S.C. 5561(5)) on or after January 1, 1965, or the employee may 
elect to have such leave restored in a separate leave account under 5 
U.S.C. 6304(d)(2) upon his or her return to Federal service. The agency 
must compute the lump sum payment under Sec. 550.1205(b) based on the 
rate of pay in effect at the time the annual leave became subject to 
forfeiture under 5 U.S.C. 6304(a), (b), or (c).
    (h) An agency may not make a lump-sum payment for accumulated or 
accrued annual leave to--
    (1) An employee who transfers between positions covered by 
subchapter I of chapter 63 of title 5, United States Code;
    (2) An employee who transfers to a position not covered by 
subchapter I of chapter 63 of title 5, United States Code, but to which 
all of his or her accumulated and accrued annual leave may be 
transferred;
    (3) An employee who transfers to the government of the District of 
Columbia or the U.S. Postal Service;
    (4) A nonappropriated fund employee of the Department of Defense or 
the Coast Guard who moves without a break in service of more than 3 
days to an appropriated fund position within the Department of Defense 
or the Coast Guard, respectively, under 5 U.S.C. 6308(b); or

[[Page 36773]]

    (5) An employee who is concurrently employed in more than one part-
time position and who separates from one of the part-time positions. 
Instead, the former employing agency must transfer the employee's 
accumulated and accrued annual leave to the current agency (if the 
part-time positions are in different agencies) or credit the employee's 
annual leave account in the current position (if the part-time 
positions are in the same agency).
    (6) An employee who elects to retain his or her leave benefits upon 
accepting a Presidential appointment, as permitted by 5 U.S.C. 3392(c).
    (i) An agency must establish a policy for determining when an 
employee in a continuing employment program with a mixed tour of duty 
will receive a lump-sum payment for annual leave. The agency may choose 
to pay an employee a lump-sum payment when he or she is assigned 
intermittent duty or hold the employee's annual leave in abeyance 
during intermittent duty and recredit it when the employee returns 
without a break in service to full-time or part-time employment. If the 
agency decides to hold the employee's annual leave in abeyance, it must 
also hold in abeyance the credit for any fractional pay period earned 
and recredit the annual leave on a pro rata basis, as provided in 
Sec. 630.204 of this chapter, when the employee returns to full-time or 
part-time employment. In developing its policy, each agency must 
consider the likelihood that the employee will return to work, as well 
as the agency's mission requirements and staffing needs. The agency's 
policy must ensure that employees are treated in a fair and equitable 
manner.


Sec. 550.1204  Projecting the lump-sum leave period.

    (a) A lump-sum payment must equal the pay an employee would have 
received had he or she remained in the Federal service until the 
expiration of the accumulated and accrued annual leave to the 
employee's credit. The agency must project the lump-sum period leave 
beginning on the first workday (counting any holiday) occurring after 
the date the employee becomes eligible for a lump-sum payment under 
Sec. 550.1203 and counting all subsequent workdays and holidays until 
the expiration of the period of annual leave. The period of leave used 
for calculating the lump-sum payment must not be extended by any 
holidays under 5 U.S.C. 6103 (or applicable Executive or administrative 
order) which occur immediately after the date the employee becomes 
eligible for a lump-sum payment under Sec. 550.1203; annual leave 
donated to an employee under the leave transfer or leave bank programs 
under subparts I and J of part 630 of this chapter; compensatory time 
off earned under 5 U.S.C. 5543 and Sec. 550.114(d) or Sec. 551.531(d) 
of this chapter; or credit hours accumulated under an alternative work 
schedule established under 5 U.S.C. 6126.
    (b) For employees whose annual leave was held in abeyance 
immediately prior to becoming eligible for a lump-sum payment, the 
agency must project the lump-sum payment beginning on the first workday 
occurring immediately after the date the employee becomes eligible for 
a lump-sum payment under Sec. 550.1203, consistent with paragraph (a) 
of this section.


Sec. 550.1205  Calculating a lump-sum payment.

    (a) An agency must compute a lump-sum payment based on the types of 
pay listed in paragraph (b) of this section, as in effect at the time 
the affected employee becomes eligible for a lump-sum payment under 
Sec. 550.1203 and any adjustments in pay included in paragraphs (b)(2), 
(3), and (4) of this section. The agency must calculate a lump-sum 
payment by multiplying the number of hours of accumulated and accrued 
annual leave by the applicable hourly rate of pay, including other 
applicable types of pay listed in paragraph (b) of this section, or by 
using a mathematically equivalent method, such as multiplying weeks of 
annual leave by the applicable weekly rate of pay. If the agency 
calculates a lump-sum payment using weekly rates, the number of weeks 
of annual leave must be rounded to the fourth decimal place (e.g., 
0.4444). The agency must convert an annual rate of pay to an hourly 
rate of pay by dividing the annual rate of pay by 2,087 (or 2,756 for 
firefighters, if applicable) and rounding it to the nearest cent, 
counting one-half cent and over as the next higher cent.
    (b) The agency must compute a lump-sum payment using the following 
types of pay and pay adjustments, as applicable:
    (1) The greatest of the following rates of pay:
    (i) An employee's rate of basic pay, including any applicable 
special salary rate established under 5 U.S.C. 5305 or similar 
provision of law or a special rate for law enforcement officers under 
section 403 of the Federal Employees Pay Comparability Act of 1990 
(FEPCA), Pub. L. 101-509, 104 Stat. 1465, or a retained rate of pay 
under subpart B of part 536 of this chapter;
    (ii) A locality rate of pay under subpart F of part 531 of this 
chapter or similar provision or law, where applicable;
    (iii) A special law enforcement adjusted rate of pay under subpart 
C of part 531 of this chapter, where applicable, including a rate 
continued under Sec. 531.307 of this chapter; or
    (iv) A continued rate of pay under subpart G of part 531 of this 
chapter.
    (2) Any statutory adjustments in pay or any general system-wide 
increases in pay, such as adjustments under sections 5303, 5304, 5305, 
5318, 5362, 5363, 5372, 5372a, 5376, 5382, or 5392 of title 5, United 
States Code, that become effective during the lump-sum leave period. 
The agency must adjust the lump-sum payment to reflect the increased 
rate on and after the effective date of the pay adjustment.
    (3) In the case of a prevailing rate employee, the agency must 
include in the lump-sum payment the scheduled rate of pay under 5 
U.S.C. 5343, 5348, or 5349 and any applicable adjustments in rates that 
are determined under 5 U.S.C. 5343, 5348, or 5349 that become effective 
during the lump-sum leave period. The agency must adjust the lump-sum 
payment to reflect the increased prevailing rate on and after the 
effective date of the rate adjustment.
    (4) A within-grade increase under 5 U.S.C. 5335 or 5343(e)(2) if 
the employee has met the requirements of Sec. 531.404 or Sec. 532.417 
of this chapter prior to the date the employee becomes eligible for a 
lump-sum payment under Sec. 550.1203.
    (5) The following types of premium pay (to the extent such premium 
pay was actually payable to the employee):
    (i) Night differential under 5 U.S.C. 5343(f) for nonovertime hours 
at the percentage rate received by a prevailing rate employee for the 
last full workweek immediately prior to separation, death, or transfer;
    (ii) Premium pay under 5 U.S.C. 5545(c) or 5545a if the employee 
was receiving premium pay for the pay period immediately prior to the 
date the employee became eligible for a lump-sum payment under 
Sec. 550.1203. The agency must base the lump-sum payment on the 
percentage rate received by the employee for the pay period immediately 
prior to the date the employee became eligible for a lump-sum payment 
under Sec. 550.1203. In cases where the amount of premium pay actually 
payable in the final pay period was limited by a statutory cap, the 
agency must base the lump-sum payment on a reduced percentage rate that 
reflects the actual amount of premium pay the employee received in that 
pay period; and

[[Page 36774]]

    (iii) Overtime pay under 5 U.S.C. 5545b and Sec. 550.1304 of this 
chapter for overtime hours in an employee's uncommon tour of duty (as 
defined in Sec. 630.201 of this chapter), established in accordance 
with Sec. 630.210 of this chapter. The uncommon tour of duty must be 
applicable to the employee for the pay period immediately prior to the 
date the employee became eligible for a lump-sum payment under 
Sec. 550.1203. The agency must calculate overtime pay using the same 
methodology it used to calculate the employee's entitlement to overtime 
pay as provided in Sec. 550.1304 of this chapter in the pay period 
immediately prior to the date the employee became eligible for a lump-
sum payment under Sec. 550.1203. An agency may not change an employee's 
work schedule for the sole purpose of avoiding or providing payment of 
premium pay under Sec. 550.1205(b)(5)(i)-(iv) in a lump-sum payment.
    (6) Overtime pay under the Fair Labor Standards Act of 1938, as 
amended (FLSA), for overtime work that is regularly scheduled during an 
employee's established uncommon tour of duty, as defined in 
Sec. 630.201(b)(1) of this chapter and established under 
Sec. 630.210(a) of this chapter, for which the employee receives 
standby duty pay under 5 U.S.C. 5545(c)(1). The agency must include 
FLSA overtime pay in a lump-sum payment if an uncommon tour of duty was 
applicable to the employee for the pay period immediately prior to the 
date the employee became eligible for a lump-sum payment under 
Sec. 550.1203. The agency must calculate FLSA overtime pay using the 
same methodology it used to calculate the employee's entitlement to 
FLSA overtime pay for the pay period immediately prior to the date the 
employee became eligible for a lump-sum payment under Sec. 550.1203. An 
agency may not change an employee's work schedule for the sole purpose 
of avoiding or providing payment of FLSA overtime pay in a lump-sum 
payment.
    (7) A supervisory differential under 5 U.S.C. 5755 based on the 
percentage rate (or dollar amount) received by the employee for the pay 
period immediately prior to the date the employee became eligible for a 
lump-sum payment under Sec. 550.1203.
    (8) A cost-of-living allowance and/or post differential in a 
nonforeign area under 5 U.S.C. 5941 if the employee's official duty 
station is in the nonforeign area when he or she becomes eligible for a 
lump-sum payment under Sec. 550.1203.
    (9) A post allowance in a foreign area under 5 U.S.C. 5924(1) and 
the Standardized Regulations (Government Civilians, Foreign Areas) if 
the employee's official duty station is in the foreign area when he or 
she becomes eligible for a lump-sum payment under Sec. 550.1203.
    (c) The head of an agency must prescribe regulations or standards 
for the inclusion of any other kinds of pay authorized in statutes 
other than title 5, United States Code, in a lump-sum payment. Such 
regulations or standards must be consistent with 5 U.S.C. 5551, 5552, 
6306, and other applicable provisions of law.
    (d) A lump-sum payment may not include any other pay not 
specifically listed in paragraph (b) of this section, except as 
provided in paragraph (c) of this section.
    (e) An employee may not earn leave for the period covered by a 
lump-sum payment.
    (f) A lump-sum payment is not subject to deductions for retirement 
under the Civil Service Retirement System or the Federal Employees' 
Retirement System established by chapters 83 and 84 of title 5, United 
States Code, respectively; health benefits under the Federal Employees 
Health Benefits program established by chapter 89 of title 5, United 
States Code; life insurance under the Federal Employees' Group Life 
Insurance program established by chapter 87 of title 5, United States 
Code; and savings under the Thrift Savings Plan established by 
subchapter III of chapter 84 of title 5, United States Code.
    (g) For a reemployed annuitant who becomes eligible for a lump-sum 
payment under Sec. 550.1203, the agency must compute the lump-sum 
payment using the annuitant's pay before any reductions required under 
Sec. 831.802 of this chapter.
    (h) A lump-sum payment is subject to garnishment under parts 581 
and 582 of this chapter and to administrative offset (for recovery of 
debts to the Federal Government) under 31 U.S.C. chapter 37.


Sec. 550.1206  Refunding a lump-sum payment.

    (a) When an employee who received a lump-sum payment for 
accumulated and accrued annual leave under 5 U.S.C. 5551 is reemployed 
in the Federal service prior to the end of the period covered by the 
lump-sum payment, the employee must refund to the employing agency an 
amount equal to the pay included in the lump-sum payment under 
Sec. 550.1205(b) that covers the period between the date of 
reemployment and the expiration of the lump-sum leave period, except as 
provided in paragraphs (b) and (c) of this section. The agency must 
compute the refund based on the pay used to compute the lump-sum 
payment under Sec. 550.1205(b). However, annual leave restored under 5 
U.S.C. 6304(d) that was included in a lump-sum payment is not subject 
to refund if an agency reemploys the employee prior to the expiration 
of the lump-sum leave period. The agency must subtract such restored 
annual leave from the lump-sum leave period before calculating the 
refund. An agency may permit an employee to refund the lump-sum payment 
for annual leave in installments, but may not waive collection. If an 
agency permits the lump-sum refund to be paid in installments, the 
employee must refund the lump-sum payment in full within 1 year after 
the date of reemployment.
    (b) An employee who is reemployed in a position listed in 5 U.S.C. 
6301(2)(ii), (iii), (vi), or (vii) is not required to refund a lump-sum 
payment under paragraph (a) of this section.
    (c) An employee who is reemployed in a position that has no leave 
system to which annual leave can be recredited is not required to 
refund a lump-sum payment under paragraph (a) of this section, except 
that individuals reemployed as Presidential appointees must refund a 
lump-sum payment and the annual leave will be held in abeyance, as 
provided in Sec. 550.1207(e).
    (d) An individual first hired by the District of Columbia 
government on or after October 1, 1987, who received a lump-sum payment 
upon separation from the District of Columbia government and who is 
employed by the Federal Government prior to the expiration of the lump-
sum leave period must refund the lump-sum payment, and the agency must 
recredit the annual leave under Sec. 550.1207.
    (e) An employee who retired from the Federal Government and 
received a lump-sum payment under Sec. 550.1203 of this chapter, and 
who is reemployed under a temporary appointment of less than 90 days 
prior to the expiration of the lump-sum leave period, is required to 
refund the lump-sum payment, and the agency must recredit the annual 
leave under Sec. 550.1207. The employee may use the recredited annual 
leave during the temporary appointment.


Sec. 550.1207  Recrediting annual leave.

    (a) When an employee pays a full refund to an agency under 
Sec. 550.1206(a), the agency must recredit to the employee an amount of 
annual leave equal to the days or hours of work (including holidays) 
remaining between the date of reemployment and the expiration of the 
lump-sum period. The recredited annual leave is available for use by 
the employee on and after the date the annual leave is recredited. The

[[Page 36775]]

agency must recredit annual leave as follows:
    (1) When an employee is reemployed in the Federal service in a 
position covered by subchapter I of chapter 63 of title 5, United 
States Code, the employing agency must recredit an amount of annual 
leave equal to the days or hours of work (including holidays) remaining 
between the date of reemployment and the expiration of the lump-sum 
period.
    (2) When an employee is reemployed in the Federal service in a 
position that is not covered by subchapter I of chapter 63 of title 5, 
United States Code, but is covered by a different leave system, the 
employing agency must recredit to the employee an amount of annual 
leave representing the days or hours of work (including holidays) 
remaining between the date of reemployment and the expiration of the 
lump-sum period, as determined under Sec. 630.501(b) of this chapter. 
If the unexpired period of leave covers a larger amount of leave than 
can be recredited under the different leave system, the employee must 
refund only the amount that represents the leave that can be 
recredited.
    (3) When an employee is reemployed prior to the expiration of the 
lump-sum leave period, the agency may not recredit to the employee the 
annual leave restored under 5 U.S.C. 6304(d) that was included in a 
lump-sum payment. The agency must subtract such restored annual leave 
from the lump-sum leave period before it determines the amount of 
annual leave to recredit under paragraph (a)(1) of this section.
    (b) Any annual leave the agency recredits to the employee under 
paragraph (a) of this section is subject at the beginning of the next 
leave year to the maximum annual leave limitation established by 5 
U.S.C. 6304(a), (b), (c), or (f), as appropriate, for the position in 
which the employee is reemployed, except as provided in paragraphs (c) 
and (d) of this section.
    (c) If the amount of annual leave to be recredited under paragraph 
(a) of this section is more than the maximum annual leave limitation 
for the position in which reemployed, and the employee's former maximum 
annual leave limitation was established under 5 U.S.C. 6304(a), (b), 
(c), or (f), as appropriate, the agency must establish the employee's 
new maximum annual leave limitation on the date of reemployment as a 
personal leave ceiling equal to the amount of annual leave to be 
recredited under paragraph (a) of this section. The new maximum annual 
leave limitation is subject to reduction in the same manner as provided 
in 5 U.S.C. 6304(c) until the employee's accumulated annual leave is 
equal to or less than the maximum annual leave limitation for the 
position in which reemployed.
    (d) If the amount of annual leave to be recredited under paragraph 
(a) of this section is more than the maximum annual leave limitation 
for the position in which the employee is reemployed, and the 
employee's former maximum annual leave limitation was established under 
an authority other than 5 U.S.C. 6304(a), (b), (c), or (f), as 
appropriate, the agency must establish the employee's new maximum 
annual leave limitation on the date of reemployment as a personal leave 
ceiling equal to the employee's former maximum annual leave limitation. 
The new maximum annual leave limitation is subject to reduction in the 
same manner as provided in 5 U.S.C. 6304(c) until the employee's 
accumulated annual leave is equal to or less than the maximum annual 
leave limitation for the position in which reemployed.
    (e) When an employee is reemployed in a position listed in 5 U.S.C. 
6301(2)(x)-(xiii), the agency must recredit and hold in abeyance the 
amount of annual leave that would have been recredited under paragraph 
(a) of this section. The agency must include unused annual leave in a 
lump-sum payment when the employee becomes eligible for a lump-sum 
payment under Sec. 550.1203. If the employee transfers from a position 
listed in 5 U.S.C. 6301(2)(x)-(xiii) to a position covered by 
subchapter I of chapter 63 of title 5, United States Code, or to a 
position under a different formal leave system to which his or her 
annual leave can be recredited, the employing agency must recredit the 
annual leave to the employee's credit as provided in paragraph (a) of 
this section.
    (f) An agency must document the calculation of an employee's lump-
sum payment as provided in Sec. 550.1205(b) so as to permit the 
subsequent calculation of any refund required under Sec. 550.1206(a) 
and any recredit of annual leave required under this section.

PART 591--ALLOWANCES AND DIFFERENTIALS

    8. The authority citation for subpart B of part 591 continues to 
read as follows:

Subpart B--Cost-of-Living Allowance and Post Differential-
Nonforeign Areas

    Authority: 5 U.S.C. 5941; E.O. 10000, 3 CFR, 1943-1948 Comp., p. 
792; and E.O. 12510, 3 CFR, 1985 Comp., 338.


Sec. 591.210  [Amended]

    9. In Sec. 591.210, the last sentence of paragraph (c)(1) is 
removed.

[FR Doc. 99-16992 Filed 7-7-99; 8:45 am]
BILLING CODE 6325-01-P