[Federal Register Volume 67, Number 76 (Friday, April 19, 2002)]
[Rules and Regulations]
[Pages 19319-19321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-9537]



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  Federal Register / Vol. 67, No. 76 / Friday, April 19, 2002 / Rules 
and Regulations  

[[Page 19319]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 550

RIN 3206-AJ56


Premium Pay Limitations

AGENCY: Office of Personnel Management.

ACTION: Interim rule with request for comments.

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SUMMARY: The Office of Personnel Management is issuing interim 
regulations to implement recent statutory amendments dealing with the 
premium pay limitations for Federal employees. Those amendments raise 
the premium pay caps for most employees, provide authority to use an 
annual cap instead of a biweekly cap in additional circumstances, and 
make certain other changes.

DATES: Effective Date: The interim regulations are effective on April 
27, 2002.
    Applicability Date: The interim regulations apply on the first day 
of the first pay period beginning on or after April 27, 2002.
    Comments Date: Comments must be received on or before June 18, 
2002.

ADDRESSES: Send or deliver comments to Donald J. Winstead, Assistant 
Director for Compensation Administration, Workforce Compensation and 
Performance Service, Office of Personnel Management, Room 7H31, 1900 E 
Street NW., Washington, DC 20415, FAX: (202) 606-4264, or 
e-mail them to [email protected].

FOR FURTHER INFORMATION CONTACT: Bryce Baker by telephone at (202) 606-
2858; by fax at (202) 606-4264; or by 
e-mail to [email protected].

SUPPLEMENTARY INFORMATION: The Office of Personnel Management (OPM) is 
issuing interim regulations to implement the new premium pay 
limitations established by section 1114 of the National Defense 
Authorization Act for Fiscal Year 2002 (Public Law 107-107, December 
28, 2001). Section 1114 amended 5 U.S.C. 5547, which establishes 
biweekly or annual limitations on the premium pay that a covered 
Federal employee may receive.
    The law provides that the section 1114 amendments will become 
effective on the first day of the first pay period beginning on or 
after the 120th day following enactment. The 120th day falls on 
Saturday, April 27, 2002. Since biweekly pay periods for Federal 
employees begin on a Sunday, these provisions begin to apply on either 
April 28 or May 5, 2002, depending on the employing agency's payroll 
cycle.

Description of Prior Law

    Prior to the amendments made by section 1114, the following premium 
pay limitations applied under 5 U.S.C. 5547:
     Federal employees were generally subject to a biweekly cap 
on premium pay. For all employees other than law enforcement officers, 
premium pay was capped to the extent that it caused the sum of the 
employee's basic pay and premium pay in a biweekly pay period to exceed 
the applicable biweekly rate of basic pay for GS-15, step 10.
     For employees who perform work in connection with an 
emergency involving a direct threat to life or property (except law 
enforcement officers), premium pay in an affected pay period was not 
subject to a biweekly cap. However, the employee could not receive 
premium pay to the extent it caused him or her to receive an aggregate 
total of basic pay and premium pay in the calendar year in excess of 
the applicable annual rate of basic pay for GS-15, step 10.
     Law enforcement officers were subject to a biweekly cap 
equal to the lesser of (1) 150 percent of the applicable rate of basic 
pay for GS-15, step 1, or (2) the rate for level V of the Executive 
Schedule. In recent years, the level V rate was the lesser rate in all 
locations and thus served as the cap. By law, the annual cap for 
emergency situations was not applicable to law enforcement officers. 
(See 5 U.S.C. 5547(c).) (As of January 2002, the level V cap fell below 
the GS-15, step 10, cap in nine locality pay areas with the largest 
locality pay percentages.)

Summary of Statutory Changes

    Section 1114 makes the following changes in the premium pay 
limitations established by 5 U.S.C. 5547:
     Section 1114 removes the separate premium pay limitation 
for law enforcement officers. Law enforcement officers will be covered 
by the same premium pay limitations that apply to other Federal 
employees.
     Section 1114 ties the premium pay limitations to the 
higher of two rates: (1) The rate of basic pay for GS-15, step 10 
(including any applicable locality payment, special rate, or similar 
adjustment), or (2) the rate payable for level V of the Executive 
Schedule. For most employees, this results in a higher premium pay cap.
     Section 1114 makes clear that an agency may apply an 
annual limitation for employees performing work in the aftermath of an 
emergency involving a direct threat to life or property. For example, 
work performed by Federal emergency workers in the immediate aftermath 
of a hurricane or a forest fire would qualify.
     Section 1114 adds a discretionary authority under which an 
agency head may approve the use of an annual cap whenever he or she 
determines that the work in question is critical to the mission of the 
agency and that an annual cap is needed.
     Section 1114 provides that OPM must prescribe regulations 
to govern how the annual limitation applies to employees receiving 
certain forms of regularly recurring premium payments. These payments 
are availability pay for criminal investigators under 5 U.S.C. 5545a, 
administratively uncontrollable overtime (AUO) pay under 5 U.S.C. 
5545(c)(2), standby premium pay under 5 U.S.C. 5545(c)(1), and regular 
overtime pay for firefighters covered by 5 U.S.C. 5545b. Generally, 
these forms of premium pay are paid as regular salary supplements and 
are creditable as basic pay for retirement purposes.

Description of New Regulatory Provisions

    Under 5 U.S.C. 5548, OPM has general authority to issue regulations 
necessary to administer the premium pay provisions in subchapter V of 
chapter 55 of title 5, United States Code. The newly amended sections 
5547(b)(3) and (c) also provide specific authority to regulate certain 
matters related to the

[[Page 19320]]

premium pay limitation provisions. These regulations revise sections 
550.105 through 550.107 in subpart A of part 550, United States Code.
    Section 550.105--We are revising this section (dealing with the 
biweekly limitation) to incorporate the new premium pay cap amounts and 
to provide that these caps now apply to law enforcement officers. In 
addition, we are adding a paragraph to make clear that, in applying the 
biweekly cap, agencies must pay certain types of premium pay before 
paying other types of premium pay.
    Section 550.106--We are revising this section (dealing with the 
annual limitation) to be consistent with the section 1114 amendments by 
(1) incorporating the new premium pay cap amounts; (2) adding language 
to make clear that work performed in the aftermath of an emergency 
qualifies as emergency work; (3) adding a provision regarding the use 
of an annual cap when an agency determines that employees are 
performing mission-critical work; and (4) noting that certain types of 
premium pay remain subject to a biweekly cap, as provided in 
Sec. 550.107.
    The new authority to apply an annual cap when employees are 
performing work the agency determines to be mission-critical may be 
used at the sole discretion of the agency head (or designee). As with 
the annual cap for emergency work, this annual cap would allow premium 
payments in excess of the normal biweekly cap only in pay periods 
during which covered work is performed. If an employee ceases to 
perform approved mission-critical work, the agency must apply the 
normal biweekly cap in future pay periods. In that circumstance, the 
annual cap would continue to operate only to ensure that total premium 
pay for the calendar year does not cause the annual cap to be exceeded.
    In addition, we are adding several new paragraphs to Sec. 550.106 
to address various issues under our broad regulatory authority:
     Paragraph (d) provides that the end-of-year rates of basic 
pay used to determine the annual cap must be computed using hourly 
rates of pay and taking into account the number of paychecks in the 
calendar year. Thus, in calendar years in which there are 27 paychecks, 
the annual cap would be increased to reflect payment for an additional 
pay period.
     Paragraph (e) provides agencies with authority to delay 
payment of the additional premium pay payable to an employee because of 
an annual cap until the end of the calendar year. This would prevent 
overpayments that would otherwise result because of erroneous 
projections of basic pay. (For example, an unanticipated quality step 
increase or promotion could cause an employee's annual total of basic 
pay to be greater than expected.)
     Paragraph (f) clarifies that a retroactive payment that 
corrects an underpayment of premium pay in a previous calendar year 
must be treated as being made in the previous calendar year for the 
purpose of applying the annual cap.
    Section 550.107--We are replacing the former section 550.107 (which 
dealt with the special premium pay cap for law enforcement officers) 
with a new section to address the treatment of certain types of regular 
and recurring premium pay: (1) Standby pay under 5 U.S.C. 5545(c)(1); 
(2) AUO pay under 5 U.S.C. 5545(c)(2); (3) availability pay under 5 
U.S.C. 5545a; and (4) regular overtime pay for firefighters covered by 
5 U.S.C. 5545b. Generally, these types of premium pay are creditable as 
basic pay for retirement purposes. (AUO pay is retirement creditable 
for law enforcement officers only. Also, only the straight-time portion 
of a firefighter's regular overtime pay is retirement creditable.)
    As authorized by 5 U.S.C. 5547(c) (as amended by section 1114), the 
interim regulations provide that these types of regular and recurring 
premium pay remain subject to a biweekly cap, even while other types of 
premium pay are simultaneously subject to an annual cap. In other 
words, in any pay period during which an annual cap has been invoked, 
these types of premium pay are paid first, subject to the biweekly cap. 
Then, the agency may pay any additional types of premium pay under the 
annual cap provisions. This ensures that the above-cited types of 
premium payments remain as stable salary supplements that employees can 
count on from pay period to pay period, as intended by the law. An 
annual cap would cause an employee's regular pay to vary dramatically 
over the course of a year.
    In addition, a biweekly cap is appropriate for the above-cited 
types of premium payments because they are generally creditable as 
basic pay for retirement purposes. Various anomalies would result if 
retirement-creditable forms of premium pay were subjected to an annual 
cap. Employees could experience a reduction in their Thrift Savings 
Plan deposits as non-retirement creditable premium payments are paid in 
lieu of retirement-creditable premium payments. Also, irregular 
retirement-creditable premium payments could affect employees' high-
three average salaries positively or negatively, thus resulting in 
unwarranted increases or decreases in employees' annuity payments. By 
continuing to apply a biweekly cap to retirement-creditable premium 
pay, we ensure that employees are treated fairly and consistently.

Waiver of Notice of Proposed Rule Making and Delay in Effective 
Date

    Pursuant to 5 U.S.C. 553(b)(3)(B), I find that good cause exists to 
waive the general notice of proposed rulemaking. Also, pursuant to 5 
U.S.C. 553(d)(3), I find that good cause exists for making this rule 
effective in less than 30 days. These regulations implement section 
1114 of Public Law 107-107, which takes effect on the first day of the 
first pay period beginning on or after April 27, 2002. Certain 
provisions cannot be applied, however, unless OPM issues implementing 
regulations. The waiver of the requirements for proposed rulemaking and 
a delay in effective date are necessary to ensure timely implementation 
of the law as intended by Congress.

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 agencies and employees.

E.O. 12866, Regulatory Review

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

List of Subjects in 5 CFR Part 550

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

Office of Personnel Management.
Kay Coles James,
Director.

    Accordingly, OPM is amending part 550 of title 5 of the Code of 
Federal Regulations as follows:

PART 550--PAY ADMINISTRATION (GENERAL)

Subpart A--Premium Pay

    1. Revise the authority citation for subpart A of part 550 to read 
as follows:

    Authority: 5 U.S.C. 5304 note, 5305 note, 5541(2)(iv), 
5545a(h)(2)(B) and (i), 5547(b) and (c), 5548, and 6101(c); sections 
407 and 2316, Pub. L. 105-277, 112 Stat. 2681-101 and 2681-828 (5 
U.S.C. 5545a); E.O. 12748, 3 CFR, 1992 Comp., p. 316.

    2. Revise Sec. 550.105 to read as follows:

[[Page 19321]]

Sec. 550.105  Biweekly maximum earnings limitation.

    (a) Except as provided in paragraph (c) of this section, an 
employee may receive premium pay under this subpart only to the extent 
that the payment does not cause the total of his or her basic pay and 
premium pay for any biweekly pay period to exceed the greater of--
    (1) The maximum biweekly rate of basic pay payable for GS-15 
(including any applicable locality-based comparability payment under 
section 5304 or similar provision of law and any applicable special 
rate of pay under 5 U.S.C. 5305 or similar provision of law); or
    (2) The biweekly rate payable for level V of the Executive 
Schedule.
    (b) In applying the biweekly limitation under this section, premium 
pay of the types listed in Sec. 550.107(a) must be paid before paying 
any other type of premium pay.
    (c) This section does not apply to--
    (1) Any pay period during which an employee is subject to an annual 
limitation as provided in Sec. 550.106;
    (2) An employee of the Federal Aviation Administration or the 
Department of Defense who receives premium pay under 5 U.S.C. 5546a.

    3. Revise Sec. 550.106 to read as follows:


Sec. 550.106  Annual maximum earnings limitation.

    (a)(1) For any pay period in which the head of an agency (or 
designee), or the Office of Personnel Management on its own motion, 
determines that an emergency exists, the agency must pay an affected 
employee premium pay under the limitations described in paragraph (c) 
of this section and Sec. 550.107 instead of under the biweekly 
limitation described in Sec. 550.105(a). An employee is affected if he 
or she has been determined by the head of the agency (or designee) to 
be performing work in connection with the emergency or its aftermath. 
(See definition of ``emergency'' in Sec. 550.103.)
    (2) The head of an agency (or designee) must make the determination 
under paragraph (a)(1) of this section as soon as practicable after the 
work in connection with the emergency or its aftermath begins. 
Entitlement to premium pay under this annual limitation becomes 
effective on the first day of the pay period in which such work began.
    (b)(1) For any pay period in which the head of an agency (or 
designee), in his or her sole discretion, determines that an employee 
is needed to perform work that is critical to the mission of the 
agency, the agency may pay premium pay under the limitations described 
in paragraph (c) of this section and Sec. 550.107 instead of under the 
biweekly limitation described in Sec. 550.105(a).
    (2) Entitlement to premium pay under this annual limitation becomes 
effective on the first day of the pay period designated by the head of 
the agency (or designee).
    (c) In any calendar year during which an employee has been 
determined to be performing emergency or mission-critical work as 
provided in paragraphs (a) or (b) of this section, the employee may 
receive premium pay under this subpart (excluding the types of premium 
pay identified in Sec. 550.107) only to the extent that the payment 
does not cause the total of his or her basic pay and premium pay for 
the calendar year to exceed the greater of--
    (1) The maximum annual rate of basic pay payable for GS-15 
(including any applicable locality-based comparability payment under 
section 5304 or similar provision of law and any applicable special 
rate of pay under 5 U.S.C. 5305 or similar provision of law) in effect 
on the last day of the calendar year; or
    (2) The annual rate payable for level V of the Executive Schedule 
in effect on the last day of the calendar year.
    (d) The annual rates under paragraphs (c)(1) and (2) of this 
section must be computed as follows:
    (1) Compute an hourly rate by dividing the published annual rate of 
basic pay by 2,087 hours and rounding the result to the nearest cent;
    (2) Compute a biweekly rate by multiplying the hourly rate from 
paragraph (d)(1) of this section by 80 hours;
    (3) Compute an annual rate by multiplying the biweekly rate from 
paragraph (d)(2) of this section by the number of pay periods for which 
a paycheck is issued in the given calendar year under the agency's 
payroll cycle (i.e., either 26 or 27).
    (e) An agency may defer payment of the additional premium pay owed 
an employee as a result of the annual limitation until the end of the 
calendar year.
    (f) Any payment made in the current calendar year that corrects an 
underpayment of premium pay in a previous calendar year must be treated 
as being made in the previous calendar year for the purpose of applying 
the annual cap under this section.

    4. Revise Sec. 550.107 to read as follows:


Sec. 550.107  Premium payments capped on a biweekly basis when an 
annual limitation otherwise applies.

    (a) The following types of premium pay remain subject to a biweekly 
limitation when other premium payments are subject to an annual 
limitation under Sec. 550.106:
    (1) Standby duty pay under 5 U.S.C. 5545(c)(1);
    (2) Administratively uncontrollable overtime pay under 5 U.S.C. 
5545(c)(2);
    (3) Availability pay for criminal investigators under 5 U.S.C. 
5545a; and
    (4) Overtime pay for hours in the regular tour of duty of a 
firefighter covered by 5 U.S.C. 5545b.
    (b) An employee must receive premium pay of the types identified in 
paragraph (a) of this section before receiving any other type of 
premium pay.
    (c) In any pay period during which an employee is subject to an 
annual limitation under Sec. 550.106, the employee may receive the 
types of premium pay identified in paragraph (a) of this section only 
to the extent that the payment does not cause the total of his or her 
basic pay and such premium pay for the pay period to exceed the greater 
of--
    (1) The maximum biweekly rate of basic pay payable for GS-15 
(including any applicable locality-based comparability payment under 
section 5304 or similar provision of law and any applicable special 
rate of pay under 5 U.S.C. 5305 or similar provision of law); or
    (2) The biweekly rate payable for level V of the Executive 
Schedule.
    (d) Premium pay paid, or projected to be paid, under this section 
is included in determining whether the sum of the employee's basic pay 
and premium pay would exceed the annual limitation under Sec. 550.106.

[FR Doc. 02-9537 Filed 4-11-02; 8:45 am]
BILLING CODE 6325-39-P