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



[[Page 31277]]

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Part V





Office of Personnel Management





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5 CFR Part 294, et al.



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

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

[[Page 31278]]


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OFFICE OF PERSONNEL MANAGEMENT

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

RIN 3206-AK88


Changes in Pay Administration Rules for General Schedule 
Employees

AGENCY: Office of Personnel Management.

ACTION: Interim rule with request for comments.

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

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

ADDRESSES: Send or deliver written comments to Donald J. Winstead, 
Deputy Associate Director for Pay and Performance Policy, Division for 
Strategic Human Resources Policy, Office of Personnel Management, Room 
7H31, 1900 E Street, NW., Washington, DC 20415-8200, by FAX at (202) 
606-0824; or by e-mail at [email protected].

FOR FURTHER INFORMATION CONTACT: Bryce Baker by telephone at (202) 606-
2858; by fax at (202) 606-0824; or by e-mail at [email protected].

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

[[Page 31279]]

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

Special Rates

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

Locality Rates

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

[[Page 31280]]

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

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

General Schedule Basic Pay Setting

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

[[Page 31282]]

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

[[Page 31283]]

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

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

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

General Schedule Within-Grade Increases

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

Grade and Pay Retention

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

[[Page 31284]]

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

[[Page 31285]]

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

[[Page 31286]]

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

SES Pay Retention

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

Waiver of Notice of Proposed Rulemaking and Delayed Effective Date

    Pursuant to 5 U.S.C. 553(b)(3)(B), I find that good cause exists 
for waiving 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 interim regulations 
implement section 301 of Public Law 108-411, which became effective on 
May 1, 2005. Thus, these interim regulations are necessarily effective 
retroactive to May 1, 2005. Waiver of the requirement for proposed 
rulemaking and making the effective date less than 30 days after 
publication are necessary to ensure timely implementation of the law as 
intended by Congress. To delay implementation of these regulations by 
imposing a general notice of proposed rulemaking or an additional 30-
day implementation requirement would be contrary to the public interest 
of good governance. It would leave Federal agencies without 
regulations, required by law, directing those agencies in implementing 
complex and extensive pay administration rules. Delay in implementation 
would prevent uniform and consistent application of the new pay 
administration rules. The public and the Federal workforce will be 
benefited by timely implementation of these regulations. Comments are 
being solicited which will assist OPM in issuing final regulations.

E.O. 12866, Regulatory Review

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

Regulatory Flexibility Act

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

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

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

Office of Personnel Management.
Dan G. Blair,
Acting Director.

0
For the reasons stated in the preamble, OPM is amending parts 294, 359, 
362, 451, 530, 531, 532, 534, 536, 550, 591, 630, 831, and 842 of title 
5 of the Code of Federal Regulations as follows:

PART 294--AVAILABILITY OF OFFICIAL INFORMATION

0
1. The authority citation for part 294 is revised to read as follows:

    Authority: 5 U.S.C. 552, Freedom of Information Act, Pub. L. 92-
502, as amended by the Freedom of Information Reform Act of 1986, 
Pub. L. 99-570, and E.O. 12600, 52 FR 23781, 3 CFR, 1987 Comp., p. 
235.

Subpart D--Cross References


Sec.  294.401  [Amended]

0
2. Amend Sec.  294.401 by removing the reference ``536.307'' and adding 
in its place ``536.405''.

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

0
3. The authority citation for part 359 continues to read as follows:

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

Subpart G--Guaranteed Placement

0
4. Revise Sec.  359.705 to read as follows:


Sec.  359.705  Pay.

    (a) An appointee placed under this subpart in a position outside 
the SES (in the same or different agency) is entitled to receive basic 
pay at the highest of--
    (1) The rate of basic pay in effect for the position in which the 
appointee is being placed;
    (2) The rate of basic pay currently in effect for the position the 
appointee held immediately before being appointed to the SES; or
    (3) The rate of basic pay in effect for the appointee immediately 
before removal from the SES.
    (b)(1) The rate of basic pay under paragraph (a)(1) and (2) of this 
section includes any applicable locality payment under 5 U.S.C. 5304, 
special rate supplement under 5 U.S.C. 5305, or

[[Page 31287]]

similar payment under other legal authority.
    (2) When an employee is entitled to a payable rate of basic pay 
under paragraph (a)(2) or (3) of this section which exceeds the maximum 
payable rate of basic pay for the grade or level of the employee's 
position after placement, the resulting saved rate is subject to the 
adjustment and termination rules in paragraphs (d) through (f) of this 
section.
    (c) For an employee placed in a General Schedule position, a saved 
rate established under this section may not be supplemented by a 
locality payment under 5 U.S.C. 5304, a special rate supplement under 5 
U.S.C. 5305, or a similar payment under other legal authority.
    (d) A saved rate established under this section must be adjusted in 
connection with a pay schedule adjustment according to the following 
rules:
    (1) When the maximum payable rate of basic pay for the grade or 
level of an employee's position is increased while the employee is 
receiving a saved rate, the employee is entitled to a pay adjustment 
equal to 50 percent of the amount of the increase in that maximum 
payable rate, except as otherwise provided in this section.
    (2) If an employee's official worksite is changed while the 
employee is receiving a saved rate, a change in the applicable range 
maximum because of a change in an employee's official worksite is not 
considered in applying paragraph (d)(1) of this section. Instead, any 
adjustment of the employee's saved rate in conjunction with a change in 
official worksite must be determined under paragraph (e) of this 
section. If an employee's range maximum is increased because of a pay 
schedule adjustment on the same effective date as a change in the 
employee's official worksite, the saved rate must be adjusted under 
paragraph (d)(1) of this section before applying paragraph (e) of this 
section.
    (3) A change in an employee's rate range maximum resulting from a 
change in the employee's position (e.g., change in occupational series) 
that causes the employee to be covered by a different pay schedule does 
not result in application of paragraph (d)(1) of this section.
    (4) When an employee's saved rate becomes equal to or lower than 
the maximum payable rate of basic pay for the grade or level of the 
employee's position, the employee is entitled to the maximum payable 
rate, and saved pay under this section ceases to apply.
    (e) When an employee receiving a saved rate established under this 
section is covered by a pay system that provides different basic pay 
schedules based on geographic location (such as the General Schedule 
pay system), the saved rate must be adjusted in conjunction with a 
change in the employee's official worksite consistent with the 
geographic conversion rule for retained rates under 5 CFR 536.303(b).
    (f) A saved rate established under this section must be terminated 
if--
    (1) The employee has a break in service of 1 workday or more;
    (2) The employee is demoted based on unacceptable performance or 
conduct or at the employee's request; or
    (3) The employee becomes entitled to a rate of basic pay that is 
equal to or higher than the saved rate.
    (g) If an employee is receiving a saved rate established under this 
section on May 1, 2005 (when section 301 of Pub. L. 108-411 took 
effect), any locality payment under 5 U.S.C. 5304 formerly paid in 
addition to the employee's saved rate no longer applies as of that 
date. Any locality-adjusted saved rate in effect and payable on April 
30, 2005, must be converted to an equal saved rate effective on May 1, 
2005. If the employee received no locality payment because of a pay 
limitation, no conversion under this paragraph is required.

PART 362--PRESIDENTIAL MANAGEMENT INTERN PROGRAM

0
5. The authority citation for part 362 is revised to read as follows:

    Authority: E.O. 12364, 47 FR 22931, 3 CFR, 1982 Comp., p. 185.

Subpart B--Program Administration


Sec.  362.202  [Amended]

0
6. In Sec.  362.202, amend paragraph (d) by removing the reference 
``rules under 5 CFR 531.203(c)'' and adding in its place ``rule under 5 
CFR 531.221''.

PART 451--AWARDS

0
7. The authority citation for part 451 is revised to read as follows:

    Authority: 5 U.S.C. 4302, 4501-4509; E.O. 11438, 33 FR 18085, 3 
CFR, 1966-1970 Comp., p. 755; E.O. 12828, 58 FR 2965, 3 CFR, 1993 
Comp., p. 569.

Subpart A--Agency Awards

0
8. In Sec.  451.104, revise paragraph (g) to read as follows:


Sec.  451.104  Awards.

* * * * *
    (g) When granting an award paid as a percentage of basic pay under 
5 U.S.C. 4505a(a)(2)(A), the rate of basic pay used must include any 
applicable locality payment under 5 CFR part 531, subpart F; special 
rate supplement under 5 CFR part 530, subpart C; or similar payment or 
supplement under other legal authority. For an employee receiving a 
retained rate under 5 CFR part 536, subpart C (or similar authority, 
such as 5 CFR 359.705), the rate of basic pay is the maximum payable 
rate for the employee's grade or level, rather than the retained rate.

PART 530--PAY RATES AND SYSTEMS (GENERAL)

0
9. The authority citation for part 530 is revised to read as follows:

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


0
10. Revise subpart C to read as follows:
Subpart C--Special Rate Schedules for Recruitment and Retention

General Provisions

Sec.
530.301 Purpose and applicability.
530.302 Definitions.
530.303 Coverage.
530.304 Establishing or increasing special rates.
530.305 Agency requests for new or increased special rates.
530.306 Evaluating agency requests for new or increased special 
rates.
530.307 OPM review and adjustment of special rate schedules.
530.308 Treatment of special rate as basic pay.
530.309 Miscellaneous provisions.

Setting an Employee's Rate of Pay

530.321 General.
530.322 Setting pay when a special rate is newly established or 
increased.
530.323 Setting pay when a special rate is discontinued or 
decreased.

Subpart C--Special Rate Schedules for Recruitment and Retention

General Provisions


Sec.  530.301  Purpose and applicability.

    (a) Purpose. This subpart contains OPM regulations implementing 5 
U.S.C. 5305, which authorizes the establishment of special rates of pay 
for Federal employees in executive agencies to address significant 
recruitment or retention problems. This subpart also contains rules for 
determining an employee's rate of pay when a special rate schedule is 
established, increased, decreased, or discontinued, or when conditions 
for coverage under a special rate schedule are changed. All other pay 
actions for special rate employees are governed by the pay-setting 
rules in 5 CFR parts 531 and 536.

[[Page 31288]]

    (b) Applicability. Except as explained in Sec.  530.303(a), this 
subpart applies only to GS employees.


Sec.  530.302  Definitions.

    In this subpart:
    Agency means an executive agency as defined in 5 U.S.C. 105.
    Authorized agency official means the head of the agency or an 
official who is authorized to act for the head of the agency in the 
matter concerned.
    Employee has the meaning given that term in 5 U.S.C. 2105.
    General Schedule or GS means the classification and pay system 
established under 5 U.S.C. chapter 51 and subchapter III of chapter 53. 
It also refers to the pay schedule of GS rates established under 5 
U.S.C. 5332, as adjusted under 5 U.S.C. 5303 or other law (including GS 
rates payable to GM employees). Law enforcement officers (LEOs) 
receiving LEO special base rates are covered by the GS classification 
and pay system, but receive higher base rates of pay in lieu of GS 
rates at grades GS-3 through GS-10.

GM employee has the meaning given that term in 5 CFR 531.203.

    GS rate means a rate of basic pay within the General Schedule, 
excluding any LEO special base rate and additional pay of any kind such 
as locality payments or special rate supplements. A rate payable to a 
GM employee is considered a GS rate.
    Highest applicable rate range means the rate range applicable to an 
employee's position that provides the highest rates of basic pay, 
excluding any retained rates. For example, a rate range of special 
rates may exceed an applicable locality rate range. In certain 
circumstances, the highest applicable rate range may consist of two 
types of pay rates from different pay schedules--e.g., a range where 
special rates (based on a fixed dollar supplement) are higher in the 
lower portion of the range and locality rates are higher in the higher 
portion of the range.
    Law enforcement officer or LEO has the meaning given that term in 5 
CFR 550.103.
    LEO special base rate means a special base rate established for GS 
law enforcement officers at grades GS-3 through GS-10 under section 403 
of the Federal Employees Pay Comparability Act of 1990 (section 529 of 
Pub. L. 101-509, November 5, 1990, as amended) which is used in lieu of 
a GS rate.
    Locality payment has the meaning given that term in 5 CFR 531.602.
    Locality rate means a GS rate or an LEO special base rate, if 
applicable, plus any applicable locality payment.
    Official worksite means the official location of an employee's 
position of record as determined under 5 CFR 531.605. Official worksite 
is synonymous with the term ``official duty station'' as used in 5 
U.S.C. 5305(i).
    OPM means the Office of Personnel Management.
    Pay schedule means a set of rate ranges established for GS 
employees under a single authority--i.e., the General Schedule, an LEO 
special base rate schedule (for grades GS-3 through 10), a locality 
rate schedule based on GS rates, a locality rate schedule based on LEO 
special base rates (for grades GS-3 through 10), a special rate 
schedule under this subpart, or a similar schedule under 38 U.S.C. 
7455. A pay schedule applies to or covers a defined category of 
employees based on established coverage conditions (e.g., official 
worksite, occupation). A pay schedule is considered to apply to or 
cover an employee who meets the established coverage conditions even 
when a rate under that schedule is not currently payable to the 
employee because of a higher pay entitlement under another pay 
schedule.
    Position of record means an employee's official position (defined 
by grade, occupational series, employing agency, LEO status, and any 
other condition that determines coverage under a pay schedule (other 
than official worksite)), as documented on the employee's most recent 
Notification of Personnel Action (Standard Form 50 or equivalent) and 
current position description, excluding any position to which the 
employee is temporarily detailed. For an employee whose change in 
official position is followed within 3 workdays by a reduction in force 
resulting in the employee's separation before he or she is required to 
report for duty in the new position, the position of record in effect 
immediately before the position change is deemed to remain the position 
of record through the date of separation.
    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, including a GS rate, an LEO special base rate, a locality 
rate, a special rate under this subpart or a similar rate under 38 
U.S.C. 7455, or a retained rate under 5 CFR 359.705 or 5 CFR part 536, 
but excluding additional pay of any other kind.
    Rate range or range means the range of rates of basic pay for a 
grade within an established pay schedule, excluding any retained rate. 
A rate range may consist of GS rates, LEO special base rates, locality 
rates, special rates, or similar rates under other legal authority.
    Retained rate means a rate above the maximum rate of the rate range 
applicable to the employee which is payable under 5 CFR part 536 or, 
for a former member of the Senior Executive Service, under 5 CFR 
359.705.
    Special rate means a rate of pay within a special rate schedule 
established under this subpart.
    Special rate schedule means a pay schedule established under this 
subpart to provide higher rates of pay for specified categories of GS 
positions or employees at one or more grades. An increased or decreased 
special rate schedule refers to an increase or decrease in one or more 
rate ranges within that schedule.
    Special rate supplement means the portion of a special rate paid 
above an employee's GS rate after applying any applicable pay 
limitation. For a law enforcement officer receiving an LEO special base 
rate who is also entitled to a special rate, a special rate supplement 
increases the LEO's pay only to the extent that the resulting special 
rate exceeds the LEO's rate of basic pay. The payable amount of a 
special rate supplement is subject to the Executive Level IV 
limitation, as provided in Sec.  530.304(a).


Sec.  530.303  Coverage.

    (a) Under 5 U.S.C. 5305, OPM may establish special rates for 
employees paid under a statutory pay system (as defined in 5 U.S.C. 
5302(1)) or any other pay system established by or under Federal 
statute for civilian positions in the executive branch. Special rates 
apply only to GS employees unless the approved schedule coverage 
criteria specifically state otherwise. OPM will establish special rate 
schedules covering employees under a non-GS pay system only at the 
request of the agency responsible for administering that system. For 
employees covered by a non-GS pay system, the responsible agency is 
subject to the requirements in 5 U.S.C. 5305. To the extent the 
statutory or regulatory provisions governing the non-GS pay system 
differ from the regulatory provisions of this subpart, the responsible 
agency must follow policies that are consistent as possible with this 
subpart.
    (b) An employee's coverage under a special rate schedule is subject 
to the coverage conditions established by OPM for that schedule, except 
as provided in paragraph (c) of this section. The coverage conditions 
for a special rate schedule may be based on occupation, grade, 
employing agency, geographic location of official worksite, or other

[[Page 31289]]

factors OPM may determine to be appropriate. An agency determination as 
to whether an employee meets the coverage conditions for a special rate 
schedule must be based on the employee's position of record and 
official worksite. An agency also may be required to consider other 
employee-specific factors established by OPM to determine special rate 
coverage, such as special qualifications or certifications.
    (c) An agency must pay the applicable special rate to any employee 
who meets the coverage conditions established by OPM with respect to a 
special rate schedule unless an authorized agency official determines 
that a category of employees of the agency will not be covered by a 
proposed or existing special rate schedule, subject to the following 
requirements:
    (1) An authorized agency official may determine that a category of 
employees of the agency will not be covered by a special rate request 
or a proposed new special rate schedule. The official must provide 
written notice to OPM that identifies the specific category or 
categories of employees who will not be covered by the special rate 
schedule. The notice must be received by OPM before the effective date 
of the new special rate schedule.
    (2) An authorized agency official may remove a category of 
employees of the agency from coverage under an existing special rate 
schedule. The official must provide written notice to OPM that 
identifies the specific category or categories of employees who will 
not be covered by the special rate schedule. The loss of coverage under 
a special rate schedule will become effective on the first day of the 
first pay period beginning on or after the date of the notice to OPM.
    (d) An employee covered by a special rate schedule is not entitled 
to a special rate for any purpose with respect to any period during 
which the employee is entitled to a higher rate of basic pay under any 
other legal authority. For example, an employee is not entitled to a 
special rate if he or she is entitled to a higher locality rate or a 
retained rate.


Sec.  530.304  Establishing or increasing special rates.

    (a) OPM may increase the minimum rates of pay otherwise payable to 
a category of employees in one or more areas or locations, grades or 
levels, occupational groups, series, classes, or subdivisions thereof, 
when it is necessary to address existing or likely significant 
recruitment or retention difficulties. OPM will consider the 
circumstances listed in paragraph (b) of this section and the factors 
listed in Sec.  530.306 when evaluating the need for special rates. 
When OPM establishes a minimum special rate under this authority, 
corresponding increases also may be made in one or more of the 
remaining rates of the affected grade or level. For any given grade, a 
minimum special rate may not exceed the maximum rate of basic pay for 
the rate range (excluding any locality rate, other special rate, or 
similar payment under other legal authority) by more than 30 percent. A 
special rate is not payable if it exceeds the rate for level IV of the 
Executive Schedule.
    (b) The circumstances considered by OPM in evaluating the need for 
special rates are the following:
    (1) Rates of pay offered by non-Federal employers which are 
significantly higher than those payable by the Government within the 
area, location, occupational group, or other category of positions 
under GS pay system;
    (2) The remoteness of the area or location involved;
    (3) The undesirability of the working conditions or the nature of 
the work involved (including exposure to toxic substances or other 
occupational hazards); or
    (4) Any other circumstances OPM considers appropriate.
    (c) In setting the level of special rates within a rate range for a 
category of employees, OPM will compute the special rate supplement by 
adding a fixed dollar amount or a fixed percentage to all GS rates 
within that range, except that an alternate method may be used for 
grades GS-1 and GS-2, where within-grade increases vary throughout the 
range.
    (d) If OPM establishes a special rate schedule that covers only law 
enforcement officers, OPM may compute the special rate supplement for 
grades GS-3 through 10 as a fixed percentage of LEO special base rates 
instead of GS rates. With respect to such a schedule, references to GS 
rates in Sec.  530.307 are deemed to be references to LEO special base 
rates.


Sec.  530.305  Agency requests for new or increased special rates.

    (a) An agency may request that a special rate schedule be 
established or increased or that its employees be covered by an 
existing special rate schedule at any time. An authorized agency 
official in the agency headquarters office must submit to OPM any 
request to establish or increase special rates for a category of agency 
employees. The request must include a certification by the authorized 
agency official that the requested special rates are necessary to 
ensure adequate staffing levels to accomplish the agency's mission.
    (b) The authorized agency official is responsible for submitting 
complete supporting data for any request for new or higher special 
rates. OPM may require that the supporting data include a survey of 
prevailing non-Federal pay rates in the relevant labor market.
    (c) OPM may coordinate an agency special rate request with other 
agencies that have similar categories of employees. OPM may designate a 
lead agency to assist in coordinating the collection of relevant data. 
Each affected agency is responsible for submitting complete supporting 
data upon request to OPM or the lead agency, as appropriate, unless the 
agency determines that a category of its employees will not be covered 
by the proposed special rate schedule, as provided in Sec.  530.303(c).


Sec.  530.306  Evaluating agency requests for new or increased special 
rates.

    (a) In evaluating agency requests for new or increased special 
rates, OPM may consider the following factors:
    (1) The number of existing vacant positions and the length of time 
they have been vacant;
    (2) The number of employees who have quit (i.e., voluntarily left 
Federal service), including, when available, a subcount of the number 
of employees who quit to take a comparable position offering higher 
pay;
    (3) Evidence to support a conclusion that recruitment or retention 
problems likely will develop (if such problems do not already exist) or 
will worsen;
    (4) The number of vacancies an agency tried to fill, compared to 
the number of hires and offers made;
    (5) The nature of the existing labor market;
    (6) The degree to which an agency has considered and used other 
available pay flexibilities to alleviate staffing problems, including 
the superior qualifications and special needs pay-setting authority in 
5 CFR 531.212 and recruitment, relocation, and retention incentives 
under 5 CFR part 575;
    (7) The degree to which an agency has considered relevant non-pay 
solutions to staffing problems, such as conducting an aggressive 
recruiting program, using appropriate appointment authorities, 
redesigning jobs, establishing training programs, and improving working 
conditions;
    (8) The effect of the staffing problem on the agency's mission; and
    (9) The level of non-Federal rates paid for comparable positions. 
Data on non-Federal salary rates may be

[[Page 31290]]

supplemented, if appropriate, by data on Federal salary rates for 
comparable positions established under a non-GS pay system.
    (b) In determining the level at which to set special rates, OPM may 
consider the following factors:
    (1) The pay levels that, in OPM's judgment, are necessary to 
recruit or retain an adequate number of qualified employees based on 
OPM's findings with respect to the factors set forth in paragraph (a) 
of this section;
    (2) The dollar costs that will be incurred if special rates are not 
authorized;
    (3) The level of pay for comparable positions; and
    (4) The need to provide for a reasonable progression in pay from 
lower grade levels to higher grade levels to avoid pay alignment 
problems (e.g., such as might result from applying the two-step 
promotion rule in 5 U.S.C. 5334(b)).
    (c) No one factor or combination of factors specified in paragraph 
(a) or (b) of this section requires OPM to establish or increase 
special rates or to set special rates at any given level.


Sec.  530.307  OPM review and adjustment of special rate schedules.

    (a) OPM may review an established special rate schedule at any time 
to determine whether that schedule should be increased, decreased, or 
discontinued, taking into account the circumstances listed in Sec.  
530.304(b) and the factors listed in Sec.  530.306 that led to 
establishing the schedule. An authorized agency official may request 
that OPM conduct such a review of one or more special rate schedules.
    (b) OPM may designate lead agencies to assist in the review of 
designated special rate schedules and to coordinate the collection of 
relevant data. Each affected agency is responsible for submitting 
complete supporting data upon request to OPM or the lead agency, as 
appropriate.
    (c) OPM will adjust a special rate schedule by determining the 
amount of the special rate supplement to be paid on top of the current 
GS rate for each rate range within the schedule. OPM will determine the 
extent to which special rate supplements are to be adjusted (increased 
or decreased), if at all, and when the special rate supplements are to 
be adjusted. As provided in 5 U.S.C. 5305(d), special rate schedule 
adjustments made by OPM have the force and effect of statute.
    (d)(1) For special rate schedules computed by applying a fixed-
percentage supplement on top of each GS rate within a rate range, OPM 
may require that a change in the underlying GS rate automatically 
results in an adjusted special rate schedule, unless OPM determines 
that an adjustment in the supplement percentage is appropriate for one 
or more special rate schedules.
    (2) For special rate schedules computed by applying a fixed-dollar 
supplement on top of each GS rate within a rate range, OPM may require 
that special rate supplements generally be adjusted to reflect the 
increase in GS rates, unless OPM determines that a different adjustment 
is appropriate for one or more special rate schedules.
    (e) If OPM determines that a special rate schedule, or a rate range 
within a special rate schedule, is no longer needed to ensure 
satisfactory recruitment or retention of qualified employees, OPM may 
discontinue the schedule or rate range. Consistent with Sec.  
530.303(d), if all employees and positions covered by a special rate 
schedule or rate range are entitled to a higher rate of basic pay, the 
schedule or rate range (as applicable) will be automatically 
discontinued.
    (f) OPM may change the established conditions for coverage under a 
special rate schedule at any time based on a reevaluation of the 
circumstances and factors that led to establishing the schedule. 
Expansion of coverage is equivalent to establishing a special rate 
schedule for a category of affected employees. Reduction of coverage is 
the equivalent of discontinuing a special rate schedule for a category 
of affected employees.
    (g) When a special rate schedule is adjusted or discontinued, or 
when there is a change in a schedule's coverage criteria, the rate of 
pay for affected employees must be set as provided in Sec. Sec.  
530.321 through 530.323.


Sec.  530.308  Treatment of special rate as basic pay.

    Except as otherwise specifically provided under other legal 
authority, a special rate is considered a rate of basic pay only for 
the following purposes:
    (a) The purposes for which a locality rate is considered to be a 
rate of basic pay in computing other payments or benefits, to the 
extent provided by 5 CFR 531.610, except as otherwise provided in 
paragraphs (b) through (d) of this section;
    (b) Computation of nonforeign area cost-of-living allowances and 
post differentials under 5 U.S.C. 5941 and 5 CFR part 591, subpart B;
    (c) Computation of foreign area post differentials under 5 U.S.C. 
5925(a) and danger pay allowances under 5 U.S.C. 5928; and
    (d) Application of pay administration provisions for prevailing 
rate employees which consider rates of basic pay under the GS pay 
system in setting pay (except as otherwise provided in 5 CFR part 532), 
subject to the requirement that, if the employee's actual special rate 
would not apply at the official worksite for the prevailing rate 
position, a special rate may be used only if it is a corresponding 
special rate on a special rate schedule that would cover the employee 
if his or her GS position of record were located at the same official 
worksite as the prevailing rate position, consistent with the 
geographic conversion rule in 5 CFR 531.205.


Sec.  530.309  Miscellaneous provisions.

    (a) A special rate may be paid only for those hours for which an 
employee is in a pay status.
    (b) A pay increase caused by an employee becoming entitled to a new 
or higher special rate supplement is not an equivalent increase in pay 
within the meaning of 5 U.S.C. 5335. (See 5 CFR 531.407(c).)
    (c) A special rate is included in an employee's total remuneration, 
as defined in 5 CFR 551.511(b), and straight time rate of pay, as 
defined in 5 CFR 551.512(b), for the purpose of overtime pay 
computations under the Fair Labor Standards Act of 1938, as amended.
    (d) The reduction or termination of an employee's special rate 
supplement in accordance with the requirements of this subpart is not 
an adverse action under 5 CFR part 752, subpart D, or an action under 5 
CFR 930.214.

Setting an Employee's Rate of Pay


Sec.  530.321  General.

    (a) This section and Sec. Sec.  530.322 and 530.323 provide 
conversion rules for setting an employee's pay when a special rate 
schedule is established, increased, decreased, or discontinued, or when 
an employee's coverage under an existing special rate schedule is 
affected by a change in coverage criteria. These conversion rules do 
not apply to changes in an employee's special rate entitlements based 
on a change in the employee's position of record or official worksite. 
Pay-setting rules for other personnel actions affecting special rate 
employees are provided in 5 CFR parts 531 and 536. For example, if an 
employee becomes covered by a special rate schedule as a result of a 
change in the employee's official worksite, the geographic conversion 
rule in 5 CFR 531.205 must be used to set the employee's rate(s) of 
basic pay in the new location before considering any

[[Page 31291]]

other simultaneous pay action (other than a general pay adjustment).
    (b) The conversion rules in Sec. Sec.  530.322 and 530.323 are 
considered general pay adjustments for the purpose of applying 5 CFR 
531.206 (dealing with the order of precedence for processing 
simultaneous pay actions). The rate(s) of pay resulting from these 
conversion rules are considered the employee's existing rate(s) of pay 
before processing the next simultaneous pay action in the order of 
precedence.


Sec.  530.322  Setting pay when a special rate schedule is newly 
established or increased.

    (a) General rule. When an employee holds a position that becomes 
covered by a newly established special rate schedule (including a 
schedule for which coverage is expanded) or increased special rate 
schedule (including an increased special rate range within a schedule), 
the agency must set the employee's rate of pay at the step or rate of 
the grade on the new special rate schedule that corresponds to the 
employee's existing numerical step or rate (as in effect immediately 
before the new special rate schedule takes effect), except as otherwise 
provided in this section. The corresponding special rate is determined 
by adding the applicable special rate supplement on top of the 
employee's GS rate, subject to the limitation that no special rate may 
exceed the rate for level IV of the Executive Schedule. For an employee 
receiving an LEO special base rate, add the applicable special rate 
supplement to the GS rate for the employee's grade and step, except as 
otherwise provided under Sec.  530.304(d).
    (b) Employee entitled to a higher rate of basic pay. As provided in 
Sec.  530.303(d), if an employee meeting the coverage conditions for a 
newly established or increased special rate schedule is entitled to a 
higher rate of basic pay under other legal authority, the employee must 
be paid at that higher rate.
    (c) Employee receiving a retained rate. When an employee is 
receiving a retained rate immediately before the employee's position is 
covered by a newly established or increased special rate schedule, the 
agency must determine the employee's rate of pay consistent with the 
requirements in 5 CFR part 536, subpart C (or 5 CFR 359.705 for a 
former member of the Senior Executive Service receiving a retained rate 
under that section).


Sec.  530.323  Setting pay when a special rate is discontinued or 
decreased.

    (a) General. This section applies when a special rate applicable to 
a position is discontinued or decreased because of--
    (1) A reduction or termination of the rates of the special rate 
schedule (or of rates of a rate range within a schedule); or
    (2) The reduction in the scope of coverage of the special rate 
schedule.
    (b) Employee entitled to pay retention. When a special rate 
applicable to a position is discontinued or decreased, and an employee 
holding the position is entitled to pay retention under 5 CFR part 536 
as a result, the employee's rate of pay must be set consistent with the 
requirements in 5 CFR part 536, subpart C.
    (c) Employee not entitled to pay retention. When a special rate 
applicable to a position is discontinued or decreased, and an employee 
holding the position is not entitled to pay retention under 5 CFR part 
536, the employee's rate of pay is set in the highest applicable rate 
range at the grade and step (or rate) that corresponds to the grade and 
step (or rate) for the employee's existing special rate (as in effect 
immediately before the schedule change).
    (d) Employee receiving a retained rate. When a special rate 
applicable to a position is discontinued or decreased, and the employee 
holding the position is receiving a retained rate immediately before 
the schedule change, the employee's rate of pay must be set consistent 
with the requirements in 5 CFR part 536, subpart C (or 5 CFR 359.705 
for a former member of the Senior Executive Service receiving a 
retained rate under that section).

PART 531--PAY UNDER THE GENERAL SCHEDULE

0
11. The authority citation for part 531 is revised 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), 5305, 5333, 
5334(a) and (b), and 7701(b)(2); Subpart D also issued under 5 
U.S.C. 5335(g) and 7701(b)(2); Subpart E also issued under 5 U.S.C. 
5336; Subpart F also issued under 5 U.S.C. 5304, 5305, and 5338; and 
E.O. 12883, 58 FR 63281, 3 CFR, 1993 Comp., p. 682 and E.O. 13106, 
63 FR 68151, 3 CFR, 1998 Comp., p. 224.


0
12. Revise subpart B to read as follows:

Subpart B--Determining Rate of Basic Pay

General Provisions

Sec.
531.201 Purpose.
531.202 Coverage.
531.203 Definitions.
531.204 Entitlement to other rates of pay.
531.205 Converting pay upon change in location of employee's 
official worksite.
531.206 Order of processing simultaneous pay actions.
531.207 Applying annual pay adjustments.

Setting Pay When Appointment or Position Changes

531.211 Setting pay for a newly appointed employee.
531.212 Superior qualifications and special needs pay-setting 
authority.
531.213 Setting pay upon change in position without a change in 
grade.
531.214 Setting pay upon promotion.
531.215 Setting pay upon demotion.
531.216 Setting pay when an employee moves from a Department of 
Defense or Coast Guard nonappropriated fund instrumentality.
531.217 Special conversion rules for certain non-GS employees.

Using a Highest Previous Rate Under the Maximum Payable Rate Rule

531.221 Maximum payable rate rule.
531.222 Rates of basic pay that may be used as the highest previous 
rate.
531.223 Rates of basic pay that may not be used as the highest 
previous rate.

Special Rules for GM Employees

531.241 Retaining and losing GM status.
531.242 Setting pay upon loss of GM status.
531.243 Promotion of a GM employee.
531.244 Adjusting a GM employee's rate at the time of an annual pay 
adjustment.
531.245 Computing locality rates and special rates for GM employees.
531.246 Within-grade increases for GM employees.
531.247 Maximum payable rate rule for GM employees.

Subpart B--Determining Rate of Basic Pay

General Provisions


Sec.  531.201  Purpose.

    This subpart contains regulations of the Office of Personnel 
Management (OPM) implementing 5 U.S.C 5332, 5333, and 5334, which deal 
with setting and adjusting rates of basic pay for General Schedule (GS) 
employees. These regulations are supplemented by regulations on GS 
within-grade increases in subpart D of this part; GS quality step 
increases in subpart E of this part; locality rates in subpart F of 
this part; special rates in 5 CFR part 530, subpart C; and grade and 
pay retention in 5 CFR part 536.


Sec.  531.202  Coverage.

    This subpart covers employees who occupy positions classified and 
paid under the GS classification and pay system, as provided in 5 
U.S.C. 5102 and 5331 or other applicable laws. Law

[[Page 31292]]

enforcement officers (LEOs) receiving LEO special base rates are 
covered by the GS classification and pay system, but receive higher 
base rates of pay in lieu of GS rates at grades GS-3 through GS-10. 
This subpart also covers GS employees who receive special rates under 5 
U.S.C. 5305 and 5 CFR part 530, subpart C.


Sec.  531.203  Definitions.

    In this subpart:
    Agency means an Executive agency as defined in 5 U.S.C. 105 or an 
agency in the legislative branch with employees covered by this 
subpart. To the extent that the regulations in this subpart relate to 
non-GS service in the Federal Government, agency includes any other 
agency in the Federal Government.
    Demotion means a change of an employee, while continuously 
employed, from one GS grade to a lower GS grade, with or without a 
reduction in pay.
    Employee means an employee as defined in 5 U.S.C. 2105 who is 
covered by this subpart. For the purpose of determining eligibility 
under the superior qualifications and special needs pay-setting 
authority in Sec.  531.212 and applying the maximum payable rate 
provisions in Sec. Sec.  531.216 and 531.221 (which consider rates of 
pay received during non-GS service in the Federal Government), employee 
also includes any employee as defined in 5 U.S.C. 2105 and--
    (1) An individual employed by the U.S. Postal Service or the Postal 
Rate Commission who would be considered an employee under 5 U.S.C. 2105 
but for the exclusion in section 2105(e); and
    (2) An individual employed by a Department of Defense or Coast 
Guard nonappropriated fund instrumentality (as described in 5 U.S.C. 
2105(c)) for service covered by Sec.  531.216 (for the purpose of 
applying that section and Sec. Sec.  531.211 and 531.212).
    Existing rate means the rate received immediately before a pay 
action takes effect, after processing a general pay adjustment and any 
other simultaneous pay action that is higher in the order of precedence 
under Sec.  531.206. For example, the existing rate immediately before 
a promotion action must reflect any geographic conversion under Sec.  
531.205 and any simultaneous within-grade increase or quality step 
increase.
    Federal Government means all entities of the Government of the 
United States, including the U.S. Postal Service and the Postal Rate 
Commission. The District of Columbia is deemed to be part of the 
Federal Government with respect to employees of the government of the 
District of Columbia (DC) who were first employed by that government 
before October 1, 1987. A Department of Defense or Coast Guard 
nonappropriated fund instrumentality (as described in 5 U.S.C. 2105(c)) 
is not considered part of the Federal Government except for the purpose 
of applying Sec. Sec.  531.211 and 531.212 to employees covered by 
Sec.  531.216 upon employment in a GS position.
    General Schedule or GS means the classification and pay system 
established under 5 U.S.C. chapter 51 and subchapter III of chapter 53. 
It also refers to the pay schedule of GS rates established under 5 
U.S.C. 5332, as adjusted under 5 U.S.C. 5303 or other law (including GS 
rates payable to GM employees). Law enforcement officers (LEOs) 
receiving LEO special base rates are covered by the GS classification 
and pay system but receive higher base rates of pay in lieu of GS rates 
at grades GS-3 through GS-10.
    GM employee means a GS employee who was formerly covered by the 
Performance Management and Recognition System under 5 U.S.C. chapter 54 
on October 31, 1993 (and therefore became covered on November 1, 1993, 
by section 4 of Pub. L. 103-89, the Performance Management and 
Recognition System Termination Act of 1993), and who continues 
thereafter to occupy a position as a supervisor or management official 
(as defined in 5 U.S.C. 7103(a)(10) and (11)) in the same grade of the 
General Schedule (GS-13, 14, or 15) and in the same agency without a 
break in service of more than 3 days. (See Sec.  531.241.) Any 
reference to employees, grades, positions, or rates of basic pay under 
the General Schedule includes GM employees.
    GS rate means a rate of basic pay within the General Schedule, 
excluding any LEO special base rate and additional pay of any kind such 
as locality payments or special rate supplements. A rate payable to a 
GM employee is considered a GS rate even though the rate may fall 
between GS step rates.
    Highest applicable rate range means the rate range applicable to a 
GS employee based on a given position of record and official worksite 
that provides the highest rates of basic pay, excluding any retained 
rates. For example, a rate range of special rates may exceed an 
applicable locality rate range. In certain circumstances, the highest 
applicable rate range may consist of two types of pay rates from 
different pay schedules--e.g., a range where special rates (based on a 
fixed dollar supplement) are higher in the lower portion of the range 
and locality rates are higher in the higher portion of the range.
    Law enforcement officer or LEO has the meaning given that term in 5 
CFR 550.103.
    LEO special base rate means a special base rate established for GS 
law enforcement officers at grades GS-3 through GS-10 under section 403 
of the Federal Employees Pay Comparability Act of 1990 (section 529 of 
Pub. L. 101-509, November 5, 1990, as amended) which is used in lieu of 
a GS rate.
    Locality payment means a locality-based comparability payment 
payable to GS employees under 5 U.S.C. 5304 and 5 CFR part 531, subpart 
F.
    Locality rate means a GS rate or an LEO special base rate, if 
applicable, plus any applicable locality payment.
    Official worksite means the official location of the employee's 
position of record, as determined under 5 CFR 531.605.
    OPM means the Office of Personnel Management.
    Payable rate means the highest rate of basic pay to which an 
employee is entitled based on the employee's position of record, 
official worksite, and step (or relative position in range for a GM 
employee) or, if applicable, a retained rate.
    Pay schedule means a set of rate ranges established for GS 
employees under a single authority--i.e., the General Schedule, an LEO 
special base rate schedule (for grades GS-3 through 10), a locality 
rate schedule based on GS rates, a locality rate schedule based on LEO 
special base rates (for grades GS-3 through 10), or a special rate 
schedule. A pay schedule applies to or covers a defined category of 
employees based on established coverage conditions (e.g., official 
worksite, occupation). A pay schedule is considered to apply to or 
cover an employee who meets the established coverage conditions even 
when a rate under that schedule is not currently payable to the 
employee because of a higher pay entitlement under another pay 
schedule.
    Position of record means an employee's official position (defined 
by grade, occupational series, employing agency, LEO status, and any 
other condition that determines coverage under a pay schedule (other 
than official worksite)), as documented on the employee's most recent 
Notification of Personnel Action (Standard Form 50 or equivalent) and 
current position description, excluding any position to which the 
employee is temporarily detailed. For an employee whose change in 
official position is followed within 3 workdays by a reduction in force 
resulting in the employee's separation

[[Page 31293]]

before he or she is required to report for duty in the new position, 
the position of record in effect immediately before the position change 
is deemed to remain the position of record through the date of 
separation.
    Promotion means a GS employee's movement from one GS grade to a 
higher GS grade while continuously employed (including such a movement 
in conjunction with a transfer).
    Rate of basic pay means the rate of pay fixed by law or 
administrative action for the position held by a GS employee before any 
deductions, including a GS rate, an LEO special base rate, a special 
rate, a locality rate, a retained rate, but exclusive of additional pay 
of any other kind. For the purpose of applying the maximum payable rate 
rules in Sec. Sec.  531.216 and 531.221 to non-GS employees, rate of 
basic pay means a rate of pay under other legal authority which is 
equivalent to a rate of basic pay for GS employees, as described in 
this definition.
    Rate range or range means a range of rates of basic pay for a grade 
within an established pay schedule, excluding any retained rate. A rate 
range may consist of GS rates, LEO special base rates, locality rates, 
special rates, or, for non-GS employees, similar rates under other 
legal authority.
    Reassignment means a change of an employee, while serving 
continuously in the same agency, from one position to another without 
promotion or demotion.
    Reemployment means employment, including reinstatement or another 
type of appointment, after a break in service of at least 1 full 
workday.
    Retained rate means a rate above the maximum rate of the rate range 
applicable to a GS employee which is payable under 5 CFR part 536 or, 
for a former member of the Senior Executive Service, under 5 CFR 
359.705.
    Special rate means a rate of pay within a special rate schedule 
established under 5 CFR part 530, subpart C, or a similar rate for GS 
employees established under other legal authority (e.g., 38 U.S.C. 
7455). The term special rate does not include an LEO special base rate.
    Special rate schedule means a pay schedule established under 5 CFR 
part 530, subpart C, to provide higher rates of pay for specified 
categories of GS positions or employees at one or more grades or levels 
or a similar schedule established for GS employees under other legal 
authority (e.g., 38 U.S.C. 7455).
    Special rate supplement means the portion of a special rate paid 
above an employee's GS rate after applying any applicable pay 
limitation. For a law enforcement officer receiving an LEO special base 
rate who is also entitled to a special rate under 5 CFR part 530, 
subpart C, the special rate supplement increases the LEO's pay only to 
the extent that the resulting special rate exceeds the LEO's rate of 
basic pay.
    Temporary promotion means a time-limited promotion with a not-to-
exceed date or a specified term.
    Transfer means a change of an employee, without a break in service 
of 1 full workday, from one branch of the Federal Government 
(executive, legislative, or judicial) to another or from one agency to 
another.
    Where different pay schedules apply means, in the context of 
applying the geographic conversion rule, that an employee's official 
worksite is changed to a new location that would cause the employee to 
lose or gain coverage under a location-based pay schedule (i.e., 
locality rate schedule or special rate schedule) if the employee were 
to remain in the same position of record.
    Within-grade increase has the meaning given that term in Sec.  
531.403.


Sec.  531.204  Entitlement to other rates of pay.

    (a) A law enforcement officer is entitled to LEO special base rates 
in lieu of GS rates at grades GS-3 through GS-10. A law enforcement 
officer is entitled to the LEO special base rate that corresponds to 
his or her grade and step. If an employee loses LEO status, the 
employee is entitled to the GS rate for his or her grade and step 
unless a higher rate is set under the maximum payable rate rule in 
Sec.  531.221 or under the pay retention rules in 5 CFR part 536, as 
applicable. LEO special base rates are used in computing locality 
rates, as provided in subpart F of this part. A law enforcement officer 
may be entitled to a special rate that is computed using the underlying 
GS rate for the LEO's grade and step.
    (b) When an employee's GS rate or LEO special base rate is 
determined under the rules of this subpart, the agency must determine 
any other rate of basic pay to which the employee is entitled, 
including a locality rate under subpart F of this part and a special 
rate under 5 CFR part 530, subpart C, or other legal authority (e.g., 
38 U.S.C. 7455). The employee is entitled to the highest applicable 
rate of basic pay as his or her payable rate. When an employee's 
special rate is surpassed by a higher locality rate, his or her 
entitlement to a special rate is terminated, as provided in Sec.  
530.303(d).
    (c) When application of the rules in this subpart results in 
setting an employee's payable rate in the highest applicable pay 
schedule (e.g., a locality rate schedule or a special rate schedule), 
the agency must determine the employee's underlying GS rate or LEO 
special base rate, as applicable, based on that payable rate (i.e., by 
finding the corresponding underlying rate with the same grade and step 
(or relative position) as the payable rate).


Sec.  531.205  Converting pay upon change in location of employee's 
official worksite.

    When an employee's official worksite is changed to a new location 
where different pay schedules apply, the agency must convert the 
employee's rate(s) of basic pay to the applicable pay schedule(s) in 
the new location before processing any simultaneous pay action (other 
than a general pay adjustment, as provided in Sec.  531.206). The 
agency must first set the employee's rate(s) of basic pay in the 
applicable pay schedule(s) in the new location based on his or her 
position of record (including grade) and step (or rate) immediately 
before the change in the employee's official worksite. The resulting 
rate must be used as the existing rate in processing the next 
simultaneous pay action in the order of precedence, using the 
applicable pay schedules in the new location. In conjunction with any 
simultaneous pay actions, the employee's rate(s) of basic pay will then 
be set based on the employee's new position of record and new official 
worksite.


Sec.  531.206  Order of processing simultaneous pay actions.

    When multiple pay actions with the same effective date affect an 
employee's rate of basic pay, the actions will be processed in the 
following order:
    (a) Process general pay adjustments before any individual pay 
action that takes effect at the same time. General pay adjustments 
include an annual adjustment in the General Schedule under 5 U.S.C. 
5303; an adjustment in LEO special base rates; an adjustment of a 
locality pay percentage under subpart F of this part; the establishment 
or adjustment of a special rate schedule under 5 CFR part 530, subpart 
C, or similar legal authority (e.g., 38 U.S.C. 7455); and an adjustment 
of a retained rate under 5 CFR 359.705(d)(1) and 536.305(a)(1) based on 
the establishment or adjustment of a pay schedule.
    (b) Convert the employee's rate(s) of pay to reflect any change in 
the location of the employee's official worksite, as prescribed in 
Sec.  531.205 (or similar geographic conversion provision).

[[Page 31294]]

    (c) Process any within-grade increase or quality step increase to 
which the employee is entitled.
    (d) Process any promotion action using the rates of pay and rate 
ranges in the sequence prescribed in Sec.  531.214.
    (e) Except as otherwise provided in paragraphs (a) through (d) of 
this section or other regulation, process individual pay actions that 
take effect at the same time in the order that gives the employee the 
maximum benefit.


Sec.  531.207  Applying annual pay adjustments.

    (a) Except as otherwise provided in this section, on the effective 
date of a GS pay adjustment under 5 U.S.C. 5303 or similar authority, 
an agency initially must set the GS rate of a GS employee at the new 
rate of the adjusted General Schedule corresponding to the employee's 
grade and step in effect immediately before the effective date of the 
pay adjustment. Any simultaneous pay actions must be processed after 
the pay adjustment, as provided in Sec.  531.206.
    (b) For employees receiving a retained rate immediately before the 
effective date of a GS annual pay adjustment, the agency must adjust 
the employee's rate of basic pay under the rules in 5 CFR 536.305 (or 
under 5 CFR 359.705 for former members of the Senior Executive Service 
receiving a retained rate under that section).
    (c) For GM employees, the agency must follow the rules in Sec.  
531.244.

Setting Pay When Appointment or Position Changes


Sec.  531.211  Setting pay for a newly appointed employee.

    (a) First appointment. An agency must set the payable rate of basic 
pay for an employee receiving his or her first appointment (regardless 
of tenure) as a civilian employee of the Federal Government at the 
minimum rate of the highest applicable rate range for the employee's 
position of record, except as provided in Sec.  531.212.
    (b) Reemployment. For an employee who has previous civilian service 
in the Federal Government, an agency must set the payable rate of basic 
pay upon reemployment at the minimum rate of the highest applicable 
rate range for the employee's position of record unless--
    (1) The employee meets the conditions in Sec.  531.212 and an 
agency determines it is appropriate to set pay under that section; or
    (2) The employee is eligible for a higher payable rate under the 
maximum payable rate rule in Sec.  531.221 and the agency chooses to 
apply that rule.


Sec.  531.212  Superior qualifications and special needs pay-setting 
authority.

    (a) Agency authority. (1) An agency may use the superior 
qualifications and special needs pay-setting authority in 5 U.S.C. 5333 
to set the payable rate of basic pay for an employee above the minimum 
rate of the highest applicable rate range for the employee's position 
of record. The superior qualifications and special needs pay-setting 
authority may be used for--
    (i) A first appointment (regardless of tenure) as a civilian 
employee of the Federal Government; or
    (ii) A reappointment that is considered a new appointment under 5 
U.S.C. 5333 because it meets the conditions prescribed in paragraph 
(a)(2) and (3) of this section.
    (2) An agency may use the superior qualifications and special needs 
pay-setting authority for a reappointment only when the employee has 
had a break in service of at least 90 days from the last period of 
civilian employment with the Federal Government, except as provided in 
paragraph (a)(3) of this section.
    (3) An agency may use the superior qualifications and special needs 
pay-setting authority for a reappointment without requiring a 90-day 
break in service if the candidate's civilian employment with the 
Federal Government during the 90-day period immediately preceding the 
appointment was limited to one or more of the following:
    (i) Employment under a time-limited or non-permanent appointment in 
the competitive or excepted service;
    (ii) Employment under an appointment as an expert or consultant 
under 5 U.S.C. 3109 and 5 CFR part 304; or
    (iii) Employment under a provisional appointment designated under 5 
CFR 316.403.
    (4) Service as an employee of a nonappropriated fund 
instrumentality (NAFI) of the Department of Defense or Coast Guard is 
not considered employment by the Federal Government under this section 
except for employees covered by Sec.  531.216 upon appointment or 
reappointment (i.e., employees who move from NAFI position to GS 
position with a break in service of 3 days or less and without a change 
in agency). Employees covered by Sec.  531.216 upon appointment or 
reappointment to a GS position are not eligible to have pay set under 
the superior qualifications or special needs authority, since their 
NAFI employment is considered employment by the Federal Government. 
Otherwise, NAFI employment does not block application of this section.
    (b) Superior qualifications or special needs determination. An 
agency may set the payable rate of basic pay of a newly appointed 
employee above the minimum rate of the grade under this section if the 
candidate meets one of the following criteria:
    (1) The candidate has superior qualifications. An agency may 
determine that a candidate has superior qualifications based on the 
level, type, or quality of the candidate's skills or competencies 
demonstrated or obtained through experience and/or education, the 
quality of the candidate's accomplishments compared to others in the 
field, or other factors that support a superior qualifications 
determination. The candidate's skills, competencies, experience, 
education, and/or accomplishments must be relevant to the requirements 
of the position to be filled. These qualities must be significantly 
higher than that needed to be minimally required for the position and/
or be of a more specialized quality compared to other candidates; or
    (2) The candidate fills a special agency need. An agency may 
determine that a candidate fills a special agency need if the type, 
level, or quality of skills and competencies or other qualities and 
experiences possessed by the candidate are relevant to the requirements 
of the position and are essential to accomplishing an important agency 
mission, goal, or program activity. A candidate also may meet the 
special needs criteria by meeting agency workforce needs, as documented 
in the agency's strategic human capital plan.
    (c) Pay rate determination. An agency may consider one or more of 
the following factors, as applicable in the case at hand, to determine 
the step at which to set an employee's payable rate of basic pay using 
the superior qualifications and special needs pay-setting authority:
    (1) The level, type, or quality of the candidate's skills or 
competencies;
    (2) The candidate's existing salary, recent salary history, or 
salary documented in a competing job offer (taking into account the 
location where the salary was or would be earned and comparing the 
salary to payable rates of basic pay in the same location);
    (3) Significant disparities between Federal and non-Federal 
salaries for the skills and competencies required in the position to be 
filled;
    (4) Existing labor market conditions and employment trends, 
including the availability and quality of candidates for the same or 
similar positions;

[[Page 31295]]

    (5) The success of recent efforts to recruit candidates for the 
same or similar positions;
    (6) Recent turnover in the same or similar positions;
    (7) The importance/criticality of the position to be filled and the 
effect on the agency if it is not filled or if there is a delay in 
filling it;
    (8) The desirability of the geographic location, duties, and/or 
work environment associated with the position;
    (9) Agency workforce needs, as documented in the agency's strategic 
human capital plan; or
    (10) Other relevant factors.
    (d) Consideration of recruitment incentive. In determining whether 
to use the superior qualifications and special needs pay-setting 
authority and the level at which the employee's payable rate of basic 
pay should be set, an agency must consider the possibility of 
authorizing a recruitment incentive under 5 CFR part 575, subpart A.
    (e) Approval and documentation requirements. (1) An agency must 
approve each determination to use the superior qualifications and 
special needs pay-setting authority prior to the candidate entering on 
duty. Each determination must be made in writing and reviewed and 
approved by an official of the agency who is at least one level higher 
than the employee's supervisor, unless there is no official at a higher 
level in the agency.
    (2) An agency must document all of the following for each 
determination to use the superior qualifications and special needs pay-
setting authority sufficient to allow reconstruction of the action 
taken in each case:
    (i) The superior qualifications of the candidate under paragraph 
(b)(1) of this section or the special agency need for the candidate's 
services under paragraph (b)(2) of this section which justifies a 
higher than minimum rate;
    (ii) An explanation of the factor(s) and supporting documentation 
under paragraph (c) of this section which were used to justify the rate 
at which the employee's pay is set. The written documentation must 
explain how the factors directly relate to the rate approved; and
    (iii) The reasons for authorizing a higher than minimum rate 
instead of or in addition to a recruitment incentive under 5 CFR part 
575, subpart A.
    (f) Ensuring compliance. An agency must establish appropriate 
internal guidelines and evaluation procedures to ensure compliance with 
the law, this section of OPM regulations, and agency policies.


Sec.  531.213  Setting pay upon change in position without a change in 
grade.

    For an employee who is moved laterally (by transfer, reassignment, 
change in type of appointment, change in official worksite, or other 
change in position) from one GS position to a different GS position 
without a change in grade or a break in service, the agency must 
determine the employee's payable rate of basic pay and any underlying 
rate(s)s of basic pay based on the employee's new position of record, 
new official worksite, and the step (or rate) in effect before the 
position change. If an employee is eligible to receive a higher rate 
under the maximum payable rate rule in Sec.  531.221, the agency may 
choose to apply that rule. If an employee is entitled to pay retention, 
the agency must apply the rules in 5 CFR part 536.


Sec.  531.214  Setting pay upon promotion.

    (a) General. An agency must set an employee's payable rate of basic 
pay upon promotion following the rules in this section, consistent with 
5 U.S.C. 5334(b). The promotion rule in 5 U.S.C. 5334(b) and the 
implementing rules in this section apply only to a GS employee who is 
promoted from one GS grade to a higher GS grade. Consistent with Sec.  
531.206, any general pay adjustment that takes effect on the same day 
as a promotion action must be processed before applying the rules in 
this section.
    (b) Geographic conversion. When an employee's official worksite is 
changed to a new location where different pay schedules apply, the 
agency must convert the employee to the applicable pay schedule(s) and 
rate(s) of basic pay for the new official worksite based on the 
employee's position of record before promotion as provided in Sec.  
531.205 before processing a simultaneous promotion action.
    (c) Simultaneous within-grade increase. When an employee is 
entitled to a within-grade increase or a quality step increase that is 
effective at the same time as a promotion, the agency must process that 
increase before processing the promotion action.
    (d) Promotion rule. (1) General. An agency must determine an 
employee's payable rate of basic pay upon promotion using the standard 
method in paragraph (d)(3) of this section or the alternate method in 
paragraph (d)(4) of this section, subject to the special rule in 
paragraph (d)(5) of this section for employees receiving a retained 
rate before promotion. A determination regarding whether the alternate 
method is used in place of the standard method depends on the pay 
schedules that apply to an employee before and after promotion, as 
provided in paragraph (d)(2) of this section. In this paragraph (d), 
references to an employee's rate or range ``before promotion'' mean the 
rate or range before promotion but after any geographic conversion 
required by paragraph (b) of this section.
    (2) Determining applicable method. The following rules govern 
determinations regarding which promotion method to use:
    (i) Apply the standard method exclusively if the employee is 
covered by the same pay schedules before and after promotion. For 
example, an employee may be covered by the General Schedule and the 
same locality rate schedule before and after promotion.
    (ii) Apply the alternate method if the employee is covered by 
different pay schedules before and after promotion and if the alternate 
method will produce a higher payable rate upon promotion than the 
standard method. For example, an employee may be covered after 
promotion by a special rate schedule that did not apply to him or her 
before promotion, and the alternate method will produce a higher rate.
    (iii) Apply the standard method in all other circumstances, except 
that an agency may, at its sole and exclusive discretion, apply the 
alternate method for an employee covered by different pay schedules 
before and after promotion even though the method produces a lesser 
payable rate than the standard method, but only under the following 
conditions:
    (A) The agency determines it would be inappropriate to use the 
alternate method based on a finding that the higher pay for the 
position before promotion is not sufficiently related to the knowledge 
and skills required for the position after promotion; and
    (B) The agency informs the employee of the determination to use the 
alternate method before the effective date of the promotion.
    (3) Standard method. (i) The standard method of applying the 
promotion rule is presented in the following table:

Promotion Rule--Standard Method

    Step A--If applicable, apply the geographic conversion rule in 
Sec.  531.205 to determine the employee's rate(s) and range(s) of 
basic pay based on the employee's position of record before 
promotion and the new official worksite, as required by paragraph 
(b) of this section. Also, if applicable, provide any simultaneous 
within-grade increase or quality step increase, as required by 
paragraph (c) of this section. Use the resulting rate(s) of basic 
pay as the existing rate(s) in effect immediately before promotion 
in applying steps B and C.

[[Page 31296]]

    Step B--Identify the employee's existing GS rate (or LEO special 
base rate) in the grade before promotion, and increase that rate by 
two GS within-grade increases for that grade.
    Step C--Determine the payable (highest) rate of basic pay for 
the step or rate determined in step B by applying any locality 
payment or special rate supplement applicable to the given grade, 
based on the employee's position of record before promotion and 
official worksite after promotion. (If the rate determined in step B 
is above the range maximum, use the same locality payment or special 
rate supplement that applies to rates within the rate range.)
    Step D--Identify the highest applicable rate range for the 
employee's position of record after promotion and find the lowest 
step rate in that range that equals or exceeds the rate determined 
in step C. This is the employee's payable rate of basic pay upon 
promotion. (If the rate identified in step C exceeds the maximum of 
the rate range identified in this step, the employee's payable rate 
is that maximum rate, or, if the employee's existing rate is higher 
than that maximum rate, a retained rate under 5 CFR part 536 equal 
to that existing rate.)

    (ii) Example of standard method: A GS-11, step 5, employee in Los 
Angeles is promoted to a GS-12 position in Kansas City. In Kansas City, 
a special rate schedule would apply to the employee's GS-11 position, 
but at GS-12 no special rate range applies; instead, just a locality 
rate range applies. Thus, different pay schedules apply to the employee 
in Kansas City before and after promotion. The agency determines that 
the standard method produces a higher rate than the alternate method 
because the employee is covered by a special rate schedule before 
promotion but not after promotion, The agency also determines it will 
not invoke the exception provision under paragraph (d)(2)(iii). The 
agency applies the standard method as follows:

    Step A--Apply the geographic conversion rule to determine the 
rates of basic pay for the GS-11, step 5, position in Kansas City. 
The pay schedules applicable to the employee in Kansas City are the 
General Schedule, the locality rate schedule applicable in Kansas 
City, and the special rate schedule applicable to the employee's 
position in Kansas City.
    Step B--Using the underlying General Schedule, increase the GS-
11, step 5, rate by two within-grade increases, which produces the 
GS-11, step 7, rate.
    Step C--The payable (highest) rate of basic pay for GS-11, step 
7, is the corresponding GS-11, step 7, special rate that would be 
applicable to the GS-11 position in Kansas City.
    Step D--The highest applicable rate range for the GS-12 position 
after promotion is the GS-12 locality rate range under the Kansas 
City locality rate schedule. Find the lowest step rate in that range 
that equals or exceeds the GS-11, step 7, special rate from step C. 
That step rate is the payable rate of basic pay upon promotion.

    (4) Alternate method. (i) The alternate method of applying the 
promotion rule, which involves using pay schedules applicable before 
promotion and then converting pay to a different schedule applicable 
after promotion, is presented in the following table:

Promotion Rule--Alternate Method

    Steps A, B, C--Same as standard method in paragraph (d)(3) of 
this section.
    Step D--Identify the highest applicable rate range for the 
employee's grade after promotion based on consideration of any pay 
schedule that applied to the employee's position of record before 
promotion (after any geographic conversion). (Do not consider pay 
schedules that apply only to the employee's new position of record 
after promotion. For example, if a particular special rate schedule 
applies only to an employee's position of record after promotion, 
disregard that schedule in applying this step.) Find the lowest step 
in the highest applicable rate range that equals or exceeds the rate 
identified in step C. (If the rate identified in step C exceeds the 
maximum of the rate range identified in this step, the employee's 
payable rate is that maximum rate, or, if the employee's existing 
rate is higher than that maximum rate, a retained rate under 5 CFR 
part 536 equal to that existing rate.)
    Step E--Convert the lowest step rate identified in step D to a 
corresponding step rate (same step) in the highest applicable rate 
range for the employee's new position of record after promotion. 
This is the employee's alternate payable rate of basic pay upon 
promotion. (If the rate derived under step D was a retained rate, 
determine the alternate payable rate of basic pay as provided in 
paragraph (d)(4)(ii) of this section.)
    Step F--If the alternate payable rate identified in step E 
exceeds the payable rate resulting from the standard method in 
paragraph (d)(3) of this section, the employee is entitled to the 
alternate rate upon promotion. Otherwise, the employee is entitled 
to the payable rate derived under the standard method, except as 
provided in paragraph (d)(2)(iii) of this section.

    (ii) In applying step E of the table in paragraph (d)(4)(i) of this 
section, if the rate derived under step D was a retained rate, compare 
the retained rate to the highest applicable rate range identified in 
step E. If the retained rate exceeds the maximum of that rate range, 
the retained rate continues and is the employee's alternate payable 
rate upon promotion. If the retained rate is below the rate range 
maximum, the employee's alternate payable rate upon promotion is the 
maximum rate of the range (step 10).
    (iii) Example of alternate method: A GS-7, step 7, employee in 
Atlanta is promoted to a GS-9 position in Washington, DC. The promotion 
involves not only a change in grade but also a change in the employee's 
occupational series. In Washington, DC, no special rate schedule would 
apply to a GS-7 or GS-9 position in the old occupational series, but a 
special rate schedule does apply to the GS-9 position in the new 
occupational series. Thus, different pay schedules apply before and 
after promotion, and the alternate method would result in a higher rate 
than the standard method. As provided in paragraph (d)(2)(ii) of this 
section, the agency must apply the alternate method and compare the 
result to the result derived under the standard method, as follows:

    Step A--Apply the geographic conversion rule in Sec.  531.205 to 
determine the rates of basic pay for the GS-7, step 7, position in 
Washington, DC. Based on the GS-7 position before promotion 
(including the old occupational series), the pay schedules 
applicable to the employee in Washington, DC, would be the General 
Schedule and the locality rate schedule applicable in Washington, 
DC.
    Step B--Using the underlying General Schedule, increase the GS-
7, step 7, rate by two within-grade increases, which produces the 
GS-7, step 9, rate.
    Step C--The payable (highest) rate of basic pay for GS-7, step 
9, is the corresponding GS-7, step 9, locality rate in Washington, 
DC.
    Step D--If the employee were promoted to a GS-9 position in the 
old occupational series, the highest applicable rate range for that 
GS-9 position after promotion would be the GS-11 locality rate range 
in Washington, DC. The GS-9, step 3, locality rate is the lowest 
step rate in that range that equals or exceeds the GS-7, step 9, 
locality rate from step C.
    Step E--Convert the GS-9, step 3, locality rate to the higher 
GS-9, step 3, special rate that applies to the employee's position 
after promotion (including the new occupational series). That GS-9, 
step 3, special rate is the payable rate of basic pay upon 
promotion.
    Step F--Assume that the standard method would have compared the 
GS-7, step 9, locality rate directly to the higher GS-9 range of 
special rates and produced a rate of GS-9, step 1. Since the rate 
produced by the alternate method (GS-9, step 3) is greater than the 
rate produced by the standard method, the result of the alternate 
method is used.

    (5) If employee was receiving a retained rate before promotion. (i) 
If an employee's existing payable rate of basic pay before promotion is 
a retained rate, apply the applicable promotion methods in paragraphs 
(d)(3) or (d)(4) of this section as if the employee were receiving the 
maximum rate of the employee's grade before promotion.
    (ii) If the payable rate of basic pay after promotion determined 
under paragraph (d)(5)(i) of this section is greater than the 
employee's existing retained rate, the employee is entitled to that 
payable rate.
    (iii) If the existing retained rate is greater than the rate 
determined under

[[Page 31297]]

paragraph (d)(5)(i) of this section, the retained rate must be compared 
to the highest applicable rate range for the position after promotion, 
as provided in 5 CFR 536.304. The employee is entitled to the lowest 
step rate in the range that equals or exceeds the retained rate or, if 
the retained rate exceeds the range maximum, to the retained rate.
    (6) If employee is promoted from GS-1 or GS-2. In applying the 
promotion rule to an employee who is promoted from step 9 or 10 of 
grade GS-1 or GS-2, the value of two within-grade increases is 
determined by doubling the within-grade increase between step 9 and 10 
for the applicable grade.
    (e) Temporary promotions. Pay is set for an employee receiving a 
temporary promotion on the same basis as a permanent promotion. Upon 
expiration or termination of the temporary promotion, pay is set as 
provided in Sec.  531.215(c). If a temporary promotion is made 
permanent immediately after the temporary promotion ends, the agency 
may not return the employee to the lower grade; instead, the agency 
must convert the employee's temporary promotion to a permanent 
promotion without a change in pay.
    (f) Corrections of demotions. The promotion rule in this section 
may not be used in correcting an erroneous demotion. (See Sec.  
531.215(e).)


Sec.  531.215  Setting pay upon demotion.

    (a) General. Except as otherwise provided in this section, an 
employee who is demoted is entitled to the minimum payable rate of 
basic pay for the lower grade unless the agency sets the employee's pay 
at a higher rate under--
    (1) The grade and pay retention rules in 5 CFR part 536, as 
applicable; or
    (2) The maximum payable rate rule in Sec.  531.221, as applicable.
    (b) Geographic conversion. If the employee's official worksite 
after demotion is in a different geographic location where different 
pay schedules apply, the agency must first convert the employee's 
payable rate of pay as required by Sec.  531.205 before setting the 
demoted employee's pay using the grade and pay retention rules in 5 CFR 
part 536 or the maximum payable rate rule in Sec.  531.221.
    (c) Expiration or termination of a temporary promotion. (1) When an 
employee is returned to the lower grade from which promoted on 
expiration or termination of a temporary promotion, the agency must set 
the employee's payable rate of basic pay in the lower grade as if he or 
she had not been temporarily promoted, unless the agency sets pay at a 
higher rate under the maximum payable rate rule in Sec.  531.221. As 
provided in subpart D of this part, time during the temporary promotion 
may be creditable service towards GS within-grade increases in the 
lower grade.
    (2) If a temporary promotion is made permanent immediately after 
the temporary promotion ends, the agency may not return the employee to 
the lower grade. (See Sec.  531.214(e).)
    (d) Demotion upon failure to complete a supervisory probationary 
period. When an employee promoted to a supervisory or managerial 
position does not satisfactorily complete a probationary period 
established under 5 U.S.C. 3321(a)(2) and is returned to a position at 
the lower grade held before the promotion, the agency must set the 
employee's payable rate of basic pay upon return to the lower grade as 
if the employee had not been promoted to the supervisory or managerial 
position, unless the agency sets pay at a higher rate under the maximum 
payable rate rule in Sec.  531.221. As provided in subpart D of this 
part, time served following the promotion may be creditable service 
towards GS within-grade increases in the lower grade. However, nothing 
in this paragraph prohibits an agency from taking action against an 
employee covered by this paragraph for cause unrelated to supervisory 
or managerial performance and setting pay in accordance with such 
action.
    (e) Correcting an erroneous demotion. When a demotion is determined 
to be erroneous and is canceled, the agency must set the employee's 
rate of basic pay as if the employee had not been demoted. The action 
is a correction of the original demotion action and may not be treated 
as a promotion under Sec.  531.214. For example, when a demotion based 
on a reclassification of the employee's position is found to be 
erroneous and is corrected retroactively under 5 CFR 511.703, the 
corrective action is cancellation of the original demotion.


Sec.  531.216  Setting pay when an employee moves from a Department of 
Defense or Coast Guard nonappropriated fund instrumentality.

    (a) General. This section governs the setting of pay for an 
employee who moves to a GS position from a position in a Department of 
Defense or Coast Guard nonappropriated fund instrumentality (NAFI) (as 
described in 5 U.S.C. 2105(c)) without a break in service of more than 
3 days and without a change in the employing agency. If an employee 
moves from an NAFI position to a GS position with a break of more than 
3 days or in conjunction with a transfer to a different agency, the 
employee has no special conversion rights, and this section does not 
apply.
    (b) NAFI highest previous rate. For the purpose of this section, 
the term ``NAFI highest previous rate'' means the highest rate of basic 
pay received by an employee during service in a NAFI position, as 
described in 5 U.S.C. 2105(c).
    (c) Voluntary move. (1) For a Department of Defense or Coast Guard 
employee who moves voluntarily, without a break in service of more than 
3 days, from an NAFI position in the Department of Defense or the Coast 
Guard to a GS position in the same agency, the agency may set the 
employee's initial payable rate of basic pay at any step rate in the 
highest applicable rate range currently in effect for the employee's GS 
position of record and official worksite which does not exceed the 
employee's NAFI highest previous rate of pay, except as provided in 
paragraph (c)(2) or (3) of this section.
    (2) If the highest applicable rate range would be different if the 
official worksite for the employee's position of record were located at 
the place where the employee was stationed while earning the NAFI 
highest previous rate, the agency must determine the employee's maximum 
payable rate of basic pay as follows:
    (i) Compare the NAFI highest previous rate to the highest 
applicable rate range currently in effect in the location where the 
employee was stationed while earning that rate. The highest applicable 
rate range is determined based on the pay schedules that would be 
applicable to the employee's current GS position of record if the 
employee were stationed in that location. Identify the highest step 
rate in the highest applicable rate range that was equal to or lower 
than the NAFI highest previous rate. If the NAFI highest previous rate 
is less than the range minimum, identify the minimum step rate (step 
1).
    (ii) Identify the step rate in the highest applicable rate range 
for the employee's current official worksite and position of record 
that corresponds to the step rate derived under paragraph (c)(2)(i) of 
this section. That corresponding rate is the maximum payable rate at 
which the agency may set the employee's pay under this section, except 
as provided by paragraph (c)(3) of this section. The agency may set the 
employee's rate of basic pay at any step rate below that maximum 
payable rate.
    (3) An agency may choose to apply the maximum payable rate rule in 
Sec.  531.221 based on a non-NAFI rate of

[[Page 31298]]

basic pay if that rule provides a higher rate than provided by 
paragraph (c)(1) or (2) of this section.
    (d) Involuntary move. (1) For a Department of Defense or Coast 
Guard employee who is moved involuntarily (as defined in paragraph 
(d)(3) of this section), without a break in service of more than 3 
days, from a position with substantially the same duties in a 
Department of Defense or Coast Guard NAFI to a GS position in the same 
agency, the employee is entitled to an initial payable rate of basic 
pay at the lowest step rate of the grade that is equal to or greater 
than the employee's rate of basic pay in the NAFI position immediately 
before the move. The agency must compare the employee's former NAFI 
rate to the highest applicable rate range for the employee's GS 
position of record and official worksite.
    (2) For an employee covered by paragraph (d)(1) of this section, 
the agency may set the initial payable rate of basic pay at any of the 
following rates, unless the employee is entitled to receive a higher 
rate of basic pay under paragraph (d)(1) of this section:
    (i) A step rate within the highest applicable rate range for the 
employee's GS position of record and official worksite that does not 
exceed the employee's NAFI highest previous rate (consistent with the 
method prescribed in paragraphs (c)(1) and (2) of this section);
    (ii) A rate determined under the maximum payable rate rule in Sec.  
531.221 (using non-NAFI rates of basic pay); or
    (iii) A rate determined under the authority to grant pay retention 
in 5 CFR 536.302(a).
    (3) For the purpose of this paragraph (d), ``moved involuntarily'' 
means the movement of the incumbent of an NAFI position in the 
Department of Defense or the Coast Guard with the position when it is 
moved to the civil service employment system of the Department of 
Defense or the Coast Guard, respectively.


Sec.  531.217  Special conversion rules for certain non-GS employees.

    When an employee moves (without a break in service) to a GS 
position from a non-GS system under an authority in 5 U.S.C. chapters 
47, 95, or similar provision of law, and that authority provides that 
an employee will be converted to GS-equivalent rates immediately before 
leaving the non-GS system, the employee is considered a GS employee in 
applying the provisions of this subpart.

Using a Highest Previous Rate Under the Maximum Payable Rate Rule


Sec.  531.221  Maximum payable rate rule.

    (a) General. (1) An agency may apply the maximum payable rate rule 
as described in this section to determine an employee's payable rate of 
basic pay under the GS pay system at a rate higher than the otherwise 
applicable rate upon reemployment, transfer, reassignment, promotion, 
demotion, or change in type of appointment. (Note: Special rules for GM 
employees are provided in Sec.  531.247.) A payable rate set under this 
section must take effect on the effective date of the action involved. 
This section may not be used to set an employee's rate of basic pay 
retroactively unless a retroactive action is required to comply with a 
nondiscretionary agency policy.
    (2) At its discretion, an agency may set an employee's rate(s) of 
basic pay at the maximum rate identified under this section or at a 
lower rate. However, the employee's rate may not be lower than the rate 
to which he or she is entitled under any other applicable pay-setting 
rule.
    (3) In applying this section, an agency must use applicable annual 
rates of pay or, if a rate under a non-GS system is an hourly rate, 
convert the hourly rate to an annual rate.
    (b) When highest previous rate is based on a GS rate or LEO special 
base rate. When an employee's highest previous rate (as determined 
under Sec.  531.222) is based on a GS rate or an LEO special base rate 
paid under the GS pay system, an agency must determine the maximum 
payable rate of basic pay that may be paid to the employee as follows:
    (1) Compare the employee's highest previous rate with the GS rates 
for the grade in which pay is currently being set. For this comparison, 
use the schedule of GS rates in effect at the time the highest previous 
rate was earned. In applying this paragraph to an employee who was a 
law enforcement officer receiving an LEO special base rate when the 
highest previous rate was earned, compare the highest previous rate to 
the applicable LEO special base rates in lieu of GS rates if the grade 
in which pay is currently being set is one of the grades from GS-3 
through GS-10.
    (2) Identify the lowest step in the grade at which the GS rate (or 
LEO special base rate, if applicable) was equal to or greater than the 
employee's highest previous rate. If the employee's highest previous 
rate was greater than the maximum GS rate (or LEO special base rate, if 
applicable) for the grade, identify the step 10 rate (i.e., maximum 
rate of the grade).
    (3) Identify the rate on the currently applicable range of GS rates 
or LEO special base rates for the employee's current position of record 
and grade that corresponds to the step identified in paragraph (b)(2) 
of this section. This rate is the maximum payable GS rate or LEO 
special base rate the agency may pay the employee under this section.
    (4) After setting the employee's GS or LEO special base rate within 
the rate range for the grade (not to exceed the maximum payable rate 
identified in paragraph (b)(3) of this section), the agency must 
determine the employee's payable rate of basic pay based on the 
employee's GS or LEO special base rate.
    (c) When highest previous rate is based on a GS employee's special 
rate. When a GS employee is reassigned under the conditions described 
in Sec.  531.222(c), the employee's former special rate in effect 
immediately before the reassignment may be used as the employee's 
highest previous rate. If the employee's former special rate schedule 
is being adjusted on the effective date of the employee's reassignment, 
the agency must determine what the employee's special rate would have 
been on that adjusted schedule (before any other simultaneous action) 
and treat the resulting special rate as the employee's former special 
rate in applying paragraph (c)(1) and (2) of this section. The agency 
must apply the maximum payable rate rule as follows:
    (1) When the employee is assigned to an official worksite within 
the geographic boundaries of a formerly applicable special rate 
schedule, compare the former special rate to the rates of basic pay in 
the highest applicable rate range for the employee's current position 
of record and current official worksite. Identify the lowest step rate 
in that range that equals or exceeds the former special rate (or the 
maximum step rate, if the former special rate exceeds the range 
maximum). That step rate is the employee's maximum payable rate of 
basic pay.
    (2) When the employee is assigned to an official worksite outside 
the geographic boundaries of the formerly applicable special rate 
schedule, determine the maximum payable rate as follows:
    (i) Convert the former special rate to a corresponding rate (same 
step) in the current highest applicable rate range for the new official 
worksite based on the employee's position of record immediately before 
the reassignment.
    (ii) If the rate resulting from the geographic conversion under 
paragraph (c)(2)(i) of this section is a special rate, that converted 
special rate is deemed to be the employee's former special rate

[[Page 31299]]

and highest previous rate in applying paragraph (c)(2)(iii) of this 
section. If the resulting rate is not a special rate, this paragraph 
(c) may not be used to determine the employee's maximum payable rate. 
Instead, paragraph (b) of this section must be used.
    (iii) Compare the employee's highest previous rate (i.e., the 
former special rate after the geographic conversion) with the rates on 
the current highest applicable rate range for the new official worksite 
based on the employee's position of record after the reassignment. 
Identify the lowest step rate in that range that equals or exceeds the 
highest previous rate (or the maximum step rate, if the highest 
previous rate exceeds the range maximum). That step rate is the 
employee's maximum payable rate of basic pay.
    (3) After setting the employee's rate of basic pay in the highest 
applicable rate range (not to exceed the maximum payable rate), the 
agency must determine any underlying rate of basic pay to which the 
employee is entitled based on the employee's step rate.
    (d) When highest previous rate is based on a rate under a non-GS 
pay system. When an employee's highest previous rate (as provided in 
Sec.  531.222) is based on a rate of basic pay in a non-GS pay system, 
the agency must determine the maximum payable rate of basic pay that 
may be paid to the employee in his or her current GS position of record 
as follows:
    (1) Compare the highest previous rate to the highest applicable 
rate range in effect at the time and place where the highest previous 
rate was earned. The highest applicable rate range is determined as if 
the employee held the current GS position of record (including grade in 
which pay is being set) at that time and place. Identify the lowest 
step rate in that range that was equal to or higher than the highest 
previous rate (or the maximum step rate if the highest previous rate 
exceeded the range maximum).
    (2) Convert the step rate identified in paragraph (d)(1) of this 
section to a corresponding rate (same step) in the current highest 
applicable rate range for the employee's current GS position of record 
and official worksite. That step rate is the employee's maximum payable 
rate of basic pay.
    (3) After setting the employee's rate of basic pay in the current 
highest applicable rate range (not to exceed the maximum payable rate), 
the agency must determine any underlying rate of basic pay to which the 
employee is entitled at the determined step rate.


Sec.  531.222  Rates of basic pay that may be used as the highest 
previous rate.

    (a)(1) Subject to the conditions in this section and Sec.  531.223, 
the highest previous rate used in applying Sec.  531.221 is--
    (i) The highest rate of basic pay previously received by an 
individual while employed in a civilian position in any part of the 
Federal Government (including service with the government of the 
District of Columbia for employees first employed by that government 
before October 1, 1987), without regard to whether the position was in 
the GS pay system; or
    (ii) The highest rate of basic pay in effect when a GS employee 
held his or her highest GS grade and highest step within that grade.
    (2) The highest previous rate must be a rate of basic pay received 
by an employee while serving--
    (i) On a regular tour of duty under an appointment not limited to 
90 days or less; or
    (ii) For a continuous period of not less than 90 days under one or 
more appointments without a break in service.
    (b) For periods of service as a GS employee, the highest previous 
rate may not be a special rate, except as provided in paragraph (c) of 
this section. If the highest previous rate is a locality rate, the 
underlying GS rate or an LEO special base rate associated with that 
locality rate must be used as the highest previous rate in applying 
Sec.  531.221(b).
    (c) An agency may use a GS employee's special rate established 
under 5 U.S.C. 5305 and 5 CFR part 530, subpart C, or 38 U.S.C. 7455 as 
the highest previous rate when all of the following conditions apply:
    (1) The employee is reassigned to another position in the same 
agency at the same grade level;
    (2) The special rate is the employee's rate of basic pay 
immediately before the reassignment; and
    (3) An authorized agency official finds that the need for the 
services of the employee, and the employee's contribution to the 
program of the agency, will be greater in the position to which 
reassigned. An agency must make such determinations on a case-by-case 
basis. In each case, the agency must document the determination to use 
the special rate as an employee's highest previous rate in writing.
    (d) When an agency is barred from using a special rate established 
under 5 U.S.C. 5305 and 5 CFR part 530, subpart C, or 38 U.S.C. 7455 as 
an employee's highest previous rate under Sec.  531.223(g), the agency 
must consider a special rate employee's underlying GS rate (or LEO 
special base rate, if applicable) in determining the employee's highest 
previous rate for the purpose of applying paragraph (b) of this 
section.


Sec.  531.223  Rates of basic pay that may not be used as the highest 
previous rate.

    The highest previous rate may not be based on the following:
    (a) A rate received under an appointment as an expert or consultant 
under 5 U.S.C. 3109;
    (b) A rate received in a position to which the employee was 
temporarily promoted for less than 1 year, except upon permanent 
placement in a position at the same or higher grade;
    (c) A rate received in a position from which the employee was 
reassigned or reduced in grade for failure to satisfactorily complete a 
probationary period as a supervisor or manager;
    (d) A rate received by an individual while employed by the 
government of the District of Columbia who was first employed by that 
government on or after October 1, 1987;
    (e) A rate received by an individual while employed by a Department 
of Defense or Coast Guard nonappropriated fund instrumentality;
    (f) A rate received solely during a period of interim relief under 
5 U.S.C. 7701(b)(2)(A);
    (g) A special rate established under 5 U.S.C. 5305 and 5 CFR part 
530, subpart C, or 38 U.S.C. 7455 (except as provided in Sec.  
531.222(c)); or
    (h) A rate received under a void appointment or a rate otherwise 
contrary to applicable law or regulation.

Special Rules for GM Employees


Sec.  531.241  Retaining and losing GM status.

    (a) An employee retains status as a GM employee (as defined in 
Sec.  531.203) when detailed to any position or when reassigned to 
another GS position in which the employee continues to be a supervisor 
or management official (as defined in 5 U.S.C. 7103(a)(10) and (11)).
    (b) An employee permanently loses status as a GM employee if he or 
she is promoted (including a temporary promotion), transferred, 
demoted, reassigned to a position in which the employee will no longer 
be a supervisor or management official, has a break in service of more 
than 3 days, or becomes entitled to a retained rate under 5 CFR part 
536. (A retained grade is not considered in determining whether a GM 
employee has been reduced in grade. See 5 CFR 536.205.)


Sec.  531.242  Setting pay upon loss of GM status.

    (a) On loss of status as a GM employee under Sec.  531.241 (except 
as provided in

[[Page 31300]]

paragraph (b) of this section), an employee must receive his or her 
existing payable rate of basic pay, plus any of the following 
adjustments that may be applicable on the effective date of the loss of 
status, in the order specified:
    (1) The amount of any annual adjustment in GS rates under 5 U.S.C. 
5303, and the amount of any adjustment in locality payments or special 
rate supplements, to which the employee otherwise would be entitled on 
that date;
    (2) The amount of any within-grade increase to which the employee 
otherwise would be entitled on that date under 5 U.S.C. 5335 and 
subpart D of this part;
    (3) The amount resulting from a promotion effective on that date 
(consistent with Sec.  531.243(c));
    (4) In the case of an employee who loses GM status without a change 
of grade and whose GS rate falls between two steps of a GS grade, the 
amount of any increase needed to pay the employee the rate for the next 
higher step of that grade; and
    (5) In the case of an employee whose resulting GS rate is below the 
minimum rate of a GS grade, the amount of any increase needed to pay 
the employee the minimum rate for that grade.
    (b) For an employee who loses status as a GM employee as a result 
of a demotion, pay must be set as provided in Sec.  531.215. A GM 
employee's off-step GS rate at the grade before demotion is not 
converted to a GS step rate before the demotion, but the employee must 
be placed on a GS step rate when pay is set in the lower grade.


Sec.  531.243  Promotion of a GM employee.

    (a) Upon promotion, an employee's status as a GM employee ends, as 
provided in Sec.  531.241(b).
    (b) When an employee loses status as a GM employee because of a 
temporary promotion and is returned to the lower grade upon expiration 
or termination of the temporary promotion under Sec.  531.215(c)(1), he 
or she will be deemed to have been placed at the lowest step rate that 
equals or exceeds the employee's former GS rate (as a GM employee) on 
the effective date of the temporary promotion, before applying any 
other step increases based on his or her service during the temporary 
promotion.
    (c) A GM employee's GS rate is used as the existing rate of pay in 
applying the promotion rule in Sec.  531.214. A GM employee's off-step 
GS rate in the grade before promotion is not converted to a GS step 
rate in applying the promotion rule, but the employee must be placed on 
a GS step rate in the post-promotion grade.


Sec.  531.244  Adjusting a GM employee's rate at the time of an annual 
pay adjustment.

    (a) On the effective date of an annual pay adjustment under 5 
U.S.C. 5303 or similar authority, an agency must set the new GS rate 
for a GM employee as follows:
    (1) For a GM employee whose rate of basic pay equals a regular GS 
step rate, set the employee's rate at the new step rate in the adjusted 
General Schedule that corresponds to the employee's grade and step as 
in effect immediately before the effective date of the pay adjustment.
    (2) For a GM employee whose rate of basic pay is below the minimum 
rate of the GS rate range for the employee's grade, increase the 
existing GM rate by the same percentage as the annual pay adjustment 
for the GS rate range applicable to the employee's grade, with the 
result rounded to the nearest dollar (not to exceed the minimum rate of 
the range).
    (3) For a GM employee whose rate of basic pay is between GS step 
rates, apply the following method:


    Step A--Using the rates and ranges in effect immediately before 
the annual pay adjustment, find the difference between the GM 
employee's GS rate and the minimum rate of the GS rate range for the 
employee's grade.
    Step B--Find the difference between the maximum rate and minimum 
rate of the GS rate range in effect immediately before the annual 
pay adjustment. (If the GS maximum rate was not payable because of 
the EX level V pay limitation in 5 U.S.C. 5303(f), use the uncapped 
maximum rate.)
    Step C--Divide the result from step A by the result from step B. 
Carry this result to the seventh decimal place and truncate, rather 
than round, the result. This decimal factor represents the 
employee's relative position in the rate range.
    Step D--Using rates and ranges in effect after the annual pay 
adjustment, find the difference between the maximum rate and minimum 
rate of the new GS rate range for the employee's grade. (If the GS 
maximum rate was not payable because of the EX level V pay 
limitation, use the uncapped maximum rate.)
    Step E--Multiply the result from step D by the factor derived 
from step C.
    Step F--Add the result from step E to the minimum rate of the 
employee's current GS rate range and round to the next higher whole 
dollar. The resulting rate is the GM employee's new GS rate (subject 
to the EX level V pay limitation).

Sec.  531.245  Computing locality rates and special rates for GM 
employees.

    Locality rates and special rates are computed for GM employees in 
the same manner as locality rates and special rates for other GS 
employees. The applicable locality payment or special rate supplement 
is added on top of the GM employee's GS rate.


Sec.  531.246  Within-grade increases for GM employees.

    GM employees are entitled to within-grade increases as provided 
under subpart D of this part. A within-grade increase may not cause a 
GM employee's rate of basic pay to exceed the maximum rate of his or 
her grade. GM employees may receive quality step increases as provided 
in subpart E.


Sec.  531.247  Maximum payable rate rule for GM employees.

    (a) A rate received by a GM employee may qualify as a highest 
previous rate under Sec.  531.222.
    (b) As provided in Sec. Sec.  531.221(a) and 531.241(b), if an 
employee loses status as a GM employee because of a transfer, 
promotion, demotion, or reassignment to a position in which the 
employee will no longer be a supervisor or management official, and if 
the employing agency after the action chooses to apply the maximum 
payable rate rule, the agency must follow the rules in Sec.  531.221.
    (c) If an employee retains GM status after an action that allows 
application of the maximum payable rate rule in Sec.  531.221 to set 
the employee's pay, the rules in Sec.  531.221 must be applied in 
accordance with the following special provisions:
    (1) In comparing the employee's highest previous rate to an 
applicable rate range for the grade in which pay is being set, do not 
identify the lowest step rate that equals or exceeds the highest 
previous rate. Instead, identify the rate in the rate range that equals 
the highest previous rate unless that highest previous rate is below 
the range minimum or above the range maximum. If the highest previous 
rate is below the range minimum, identify the minimum rate (step 1) of 
the grade. If the highest previous rate is above the range maximum, 
identify the maximum rate (step 10) of the grade.
    (2) In applying Sec.  531.221(b) for an employee whose highest 
previous rate is a GS rate, the highest previous rate must be compared 
to the GS rate range for the grade in which pay is currently being set, 
but which was in effect at the time the highest previous rate was 
earned. If the highest previous rate was earned while the current GS 
rate range was in effect, the rate identified under paragraph (c)(1) of 
this section is the maximum payable GS rate. Otherwise, based on the 
rate identified in paragraph (c)(1) of this section, the agency must

[[Page 31301]]

determine the corresponding rate in the current GS rate range for the 
grade in which pay is currently being set. That corresponding rate is 
the maximum payable GS rate. If the highest previous rate was above the 
range minimum and below the range maximum, the corresponding rate in 
the current GS rate range must be derived as follows:

    Step 1--Find the difference between the employee's highest 
previous rate and the minimum rate for the GS rate range (for the 
employee's current grade) in effect at the time the highest previous 
rate was earned.
    Step 2--Find the difference between the maximum rate and the 
minimum GS rate of the rate range identified in step 1. (If the GS 
maximum rate was not payable because of the EX level V pay 
limitation, use the uncapped maximum rate.)
    Step 3--Divide the result from step 1 by the result from step 2. 
Carry this result to the seventh decimal place and truncate, rather 
than round, the result. This decimal factor represents the 
employee's relative position in the rate range.
    Step 4--Using the current GS rate range (for the employee's 
current grade), find the difference between the maximum rate and the 
minimum rate. (If the GS maximum rate was not payable because of the 
EX level V pay limitation, use the uncapped maximum rate.)
    Step 5--Multiply the result from step 4 by the factor derived 
from step 3.
    Step 6--Add the result from step 5 to the minimum rate for the 
employee's current GS rate range and round to the next higher whole 
dollar. This rate is the maximum payable GS rate the agency may pay 
the employee (subject to the EX level V pay limitation).

    (3) In applying Sec.  531.221(c) for an employee whose highest 
previous rate is a special rate, the highest previous rate (after any 
geographic conversion) must be compared directly to the current highest 
applicable rate range for the employee's position of record and 
official worksite after reassignment. Thus, the rate identified under 
paragraph (c)(1) of this section is the maximum payable rate of basic 
pay.

Subpart C--[Removed and Reserved]

0
13. Remove and reserve subpart C, consisting of Sec. Sec.  531.301 
through 531.307.

Subpart D--Within-Grade Increases

0
14. Revise Sec.  531.402 to read as follows:


Sec.  531.402  Employee coverage.

    (a) Except as provided in paragraph (b) of this section, this 
subpart applies to employees who--
    (1) Are classified and paid under the General Schedule;
    (2) Occupy permanent positions; and
    (3) Are paid less than the maximum rate of their grade.
    (b) This subpart does not apply to any employee who is appointed by 
the President, by and with the advice and consent of the Senate.

0
15. In Sec.  531.403--
0
a. Amend the definition of acceptable level of competence by adding 
``(or designee)'' after ``head of the agency'';
0
b. Add in alphabetical order definitions of General Schedule, GM 
employee, GS rate, law enforcement officer, LEO special base rate, 
promotion, and temporary promotion;
0
c. Revise the definitions of agency, employee, equivalent increase, 
next higher rate within the grade, and rate of basic pay; and
0
d. Revise the introductory text and paragraph (2) of the definition of 
within-grade increase.
    The additions and revisions read as follows:


Sec.  531.403  Definitions.

* * * * *
    Agency means an agency with employees covered by this subpart, as 
provided in Sec.  531.402.
* * * * *
    Employee has the meaning given that term in 5 U.S.C. 2105, except 
that for the purpose of applying the provisions regarding equivalent 
increases and creditable service with respect to non-GS service, 
employee also includes--
    (1) An individual employed by the U.S. Postal Service or the Postal 
Rate Commission who would be considered an employee under 5 U.S.C. 2105 
but for the exclusion in section 2105(e); and
    (2) An individual employed by a nonappropriated fund 
instrumentality for service that is creditable under Sec.  
531.406(b)(4).
    Equivalent increase means an increase in an employee's rate of 
basic pay, or an opportunity for such an increase under a non-GS pay 
system, as described in Sec.  531.407.
    General Schedule or GS means the classification and pay system 
established under 5 U.S.C. chapter 51 and subchapter III of chapter 53. 
The term also refers to the pay schedule of GS rates established under 
5 U.S.C. 5332, as adjusted under 5 U.S.C. 5303 or other law (including 
GS rates payable to GM employees). Law enforcement officers receiving 
LEO special base rates are covered by the GS classification and pay 
system, but receive higher base rates of pay in lieu of GS rates at 
grades GS-3 through GS-10.
    GM employee has the meaning given that term in 5 CFR 531.203.
    GS rate means a rate of basic pay within the General Schedule, 
excluding additional pay of any kind such as locality payments under 
subpart F of this part and special rate supplements under 5 CFR part 
530, subpart C, or 38 U.S.C. 7455. A rate payable to a GM employee is 
considered a GS rate.
    Law enforcement officer or LEO has the meaning given that term in 5 
CFR 550.103.
    LEO special base rate means a special base rate established for GS 
law enforcement officers at grades GS-3 through GS-10 under section 403 
of the Federal Employees Pay Comparability Act of 1990 (section 529 of 
Pub. L. 101-509, November 5, 1990, as amended) which is used in lieu of 
a GS rate.
    Next higher rate within the grade for a GM employee means the rate 
of basic pay that exceeds the employee's existing rate of basic pay by 
one within-grade increase, not to exceed the maximum rate of the grade. 
For the purpose of this definition, a within-grade increase equals the 
dollar value of the GS within-grade increase for the applicable grade 
(excluding any locality payment, special rate supplement, or any other 
additional payment).
* * * * *
    Promotion means an employee's movement from one grade or level to a 
higher grade or level while continuously employed (including such a 
movement in conjunction with a transfer).
    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. For an employee 
covered by the General Schedule, that rate of basic pay is the GS rate 
or, if applicable, an LEO special base rate.
* * * * *
    Temporary promotion means a time-limited promotion with a not-to-
exceed date or a specified term.
* * * * *
    Within-grade increase is synonymous with the term ``step increase'' 
used in 5 U.S.C. 5335 and means--* * *
    (2) For a GM employee whose rate does not equal a regular GS step 
rate (i.e., an off-step rate), a periodic increase in an employee's 
rate of basic pay from the employee's current rate to the next higher 
rate within the grade (as defined in this section) consistent with 
section 4 of Public Law 103-89.

0
16. Revise Sec.  531.407 to read as follows:


Sec.  531.407  Equivalent increase determinations.

    (a) GS employees. For a GS employee, an equivalent increase is 
considered to occur at the time of any of the following personnel 
actions:
    (1) A within-grade increase, excluding a quality step increase 
granted under

[[Page 31302]]

subpart E of this part or an interim within-grade increase if that 
increase is later terminated under Sec.  531.414;
    (2) A promotion (permanent or temporary) to a higher grade, 
including the promotion of an employee receiving a retained rate under 
5 CFR 359.705 or 5 CFR part 536 that does not result in a pay increase, 
but excluding--
    (i) A temporary promotion if the employee is returned to the grade 
and step from which promoted (before any adjustment in the step (or 
rate) based on credit for service during the temporary promotion, as 
provided in Sec.  531.215(c)); or
    (ii) A promotion to a supervisory or managerial position when the 
employee does not satisfactorily complete a probationary period 
established under 5 U.S.C. 3321(a)(2) and is returned to a position at 
the lower grade and step or rate held by the employee before placement 
(before any adjustment in the step or rate based on credit for service 
during the probationary period, as provided in Sec.  531.215(d));
    (3) Application of the maximum payable rate rule in Sec.  531.221 
that results in a higher step rate within the employee's GS grade (or 
an increase for a GM employee to the next higher rate within the 
grade), except for application of that rule in a demotion to the extent 
that the employee's rate of basic pay after demotion does not exceed 
the lowest step rate that equals or exceeds the employee's rate of 
basic pay immediately before the demotion;
    (4) Application of the superior qualifications and special needs 
pay-setting authority in Sec.  531.212 that results in a higher step 
rate within the employee's GS grade (or an increase for a GM employee 
to the next higher rate within the grade); or
    (5) Application of the qualifications pay authority in 5 U.S.C. 
9814 to an employee of the National Aeronautics and Space 
Administration, when the employee fulfills the 1-year service 
requirement in the position for which qualifications pay was paid or in 
a successor position.
    (b) Non-GS employees who move to the GS pay system. For an employee 
who performs service under a non-GS Federal pay system which is 
potentially creditable towards a GS within-grade increase waiting 
period, an equivalent increase is considered to occur at the time of 
any of the following personnel actions:
    (1) A promotion to a higher grade or work level (unless the 
promotion is cancelled and the employee's rate of basic pay is 
redetermined as if the promotion had not occurred); or
    (2) An opportunity to receive a within-level or within-range 
increase that results in forward movement in the applicable range of 
rates of basic pay, where ``forward movement in the applicable range'' 
means any kind of increase in the employee's rate of basic pay other 
than an increase that is directly and exclusively linked to--
    (i) A general structural increase in the employee's basic pay 
schedule or rate range (including the adjustment of a range minimum or 
maximum); or
    (ii) The employee's placement under a new basic pay schedule within 
the same pay system.
    (c) Locality rates and special rates. Since locality rates under 
subpart F of this part and special rates under 5 CFR part 530, subpart 
C, and similar rates under other legal authority (e.g., 38 U.S.C. 7455) 
are not rates of basic pay for the purpose of this subpart, increases 
in pay resulting from an adjustment in an employee's locality payment 
or special rate supplement or from placement on a new locality rate or 
special rate schedule are not considered in making equivalent increase 
determinations.

Subpart F--Locality-Based Comparability Payments

0
17. Revise Sec.  531.601 to read as follows:


Sec.  531.601  Purpose.

    This subpart contains Office of Personnel Management (OPM) 
regulations implementing 5 U.S.C. 5304, which authorizes locality 
payments in defined geographic areas for GS employees and other 
categories of employees to whom locality payments are extended. These 
regulations must be read together with 5 U.S.C. 5304.

0
18. In Sec.  531.602--
0
a. Revise the definitions of General Schedule and scheduled annual rate 
of pay;
0
b. Amend the definition of employee by removing the words ``duty 
station'' in both places it appears and adding in each place the words 
``worksite';
0
c. Remove the definitions of locality rate of pay and official duty 
station; and
0
d. Add in alphabetical order the definitions of GM employee, GS rate, 
law enforcement officer, LEO special base rate, locality payment, 
locality pay percentage, locality rate, official worksite, position of 
record, rate range, retained rate, special rate, special rate schedule, 
special rate supplement, telework, and telework agreement.
    The additions and revisions read as follows:


Sec.  531.602  Definitions.

* * * * *
    General Schedule or GS means the classification and pay system 
established under 5 U.S.C. chapter 51 and subchapter III of chapter 53. 
It also refers to the pay schedule of GS rates established under 5 
U.S.C. 5332, as adjusted under 5 U.S.C. 5303 or other law (including GS 
rates payable to GM employees). Law enforcement officers (LEOs) 
receiving LEO special base rates are covered by the GS classification 
and pay system, but receive higher base rates of pay in lieu of GS 
rates at grades GS-3 through GS-10.
    GM employee has the meaning given that term in 5 CFR 531.203.
    GS rate means a rate of basic pay within the General Schedule, 
excluding any LEO special base rate and additional pay of any kind such 
as locality payments or special rate supplements. A rates payable to a 
GM employee is considered a GS rate.
* * * * *
    Law enforcement officer or LEO has the meaning given that term in 5 
CFR 550.103.
    LEO special base rate means a special base rate established for GS 
law enforcement officers at grades GS-3 through GS-10 under section 403 
of the Federal Employees Pay Comparability Act of 1990 (section 529 of 
Pub. L. 101-509, November 5, 1990, as amended) which is used in lieu of 
a GS rate.
* * * * *
    Locality payment means a locality-based comparability payment 
payable under 5 U.S.C. 5304 and this subpart. An employee's locality 
payment is the difference between the employee's locality rate and the 
employee's scheduled annual rate of pay.
    Locality pay percentage means the percentage authorized for a 
locality pay area under 5 U.S.C. 5304 or 5304a which is used to compute 
a locality payment (before applying any maximum pay limitations under 
Sec.  531.606).
    Locality rate means a scheduled annual rate of pay plus an 
applicable locality payment. An employee's locality rate is computed 
under Sec.  531.604.
* * * * *
    Official worksite means the official location of an employee's 
position of record as determined under Sec.  531.605.
    Position of record means an employee's official position (defined 
by grade, occupational series, employing agency, LEO status, and any 
other condition that determines coverage under a pay schedule (other 
than official worksite)), as documented on the employee's most recent 
Notification of Personnel Action (Standard Form 50 or equivalent) and 
current position

[[Page 31303]]

description, excluding any position to which the employee is 
temporarily detailed. For an employee whose change in official position 
is followed within 3 workdays by a reduction in force resulting in the 
employee's separation before he or she is required to report for duty 
in the new position, the position of record in effect immediately 
before the position change is deemed to remain the position of record 
through the date of separation.
    Rate range or range means a range of rates of basic pay for a grade 
within an established pay schedule, excluding any retained rate. A rate 
range may consist of GS rates, LEO special base rates, locality rates, 
special rates, or, for non-GS employees, similar rates under other 
legal authority.
    Retained rate means a rate above the maximum rate of the rate range 
applicable to the employee which is payable under 5 CFR part 536 or 
similar legal authority.
    Scheduled annual rate of pay means, as applicable--
    (1) The annual GS rate payable to an employee;
    (2) An annual LEO special base rate; or
    (3) For an employee in a category of positions described in 5 
U.S.C. 5304(h)(1)(A)-(D) for which the President (or designee) has 
authorized locality payments under 5 U.S.C. 5304(h)(2), the annual rate 
of pay fixed by law or administrative action, exclusive of any 
locality-based adjustments (including adjustments equivalent to local 
special rate supplements under 5 CFR part 530, subpart C) or additional 
pay of any other kind.
    Special rate means a rate of pay within a special rate schedule 
established under 5 CFR part 530, subpart C, or a similar rate 
established under other legal authority (e.g., 38 U.S.C. 7455). The 
term special rate does not include an LEO special base rate.
    Special rate schedule means a pay schedule established under 5 CFR 
part 530, subpart C, to provide higher rates of pay for specified 
categories of positions or employees at one or more grades or levels or 
a similar schedule established under other legal authority (e.g., 38 
U.S.C. 7455).
    Special rate supplement means the portion of a special rate paid 
above an employee's GS rate or equivalent rate of basic pay after 
applying any applicable pay limitation. For a law enforcement officer 
receiving an LEO special base rate who is also entitled to a special 
rate under 5 CFR part 530, subpart C, a special rate supplement 
increases the LEO's pay only to the extent that the resulting special 
rate exceeds the LEO's rate of basic pay.
    Telework means work performed by an employee at an alternative 
worksite instead of the location of the employee's assigned 
organization. Alternative worksites may include the employee's home, 
telecenter, satellite office, field installation, or other location.
    Telework agreement means a formal oral or written agreement between 
a supervisor and an employee to permit the employee to work at an 
alternative worksite (i.e., telework) instead of the location of the 
employee's assigned organization.


Sec.  531.603  [Amended]

0
19. In Sec.  531.603, amend paragraph (a) by removing the words ``duty 
stations'' and adding in their place the word ``worksites''.

0
20. Revise Sec.  531.604 to read as follows:


Sec.  531.604  Determining an employee's locality rate.

    (a) An annual locality rate consists of a scheduled annual rate of 
pay plus an applicable locality payment (representing an annual dollar 
amount), as determined under paragraph (b) of this section.
    (b) An agency determines an employee's locality rate by--
    (1) Determining the employee's official worksite consistent with 
the rules in Sec.  531.605;
    (2) Determining the locality pay area in which the employee's 
official worksite is located, consistent with the locality pay areas 
established in Sec.  531.603;
    (3) Identifying the locality pay percentage in effect in the 
applicable locality pay area;
    (4) Increasing the employee's scheduled annual rate of pay by the 
applicable locality pay percentage and rounding the result to the 
nearest whole dollar (counting 50 cents and over as the next higher 
dollar); and
    (5) Applying any applicable limitation as described in Sec.  
531.606.
    (c) A locality rate may be expressed as an hourly, daily, weekly, 
or biweekly rate, as provided in Sec.  531.607.

0
21. Revise Sec.  531.605 to read as follows:


Sec.  531.605  Determining an employee's official worksite.

    (a) Except as otherwise provided in this section, the official 
worksite is the location of an employee's position of record where the 
employee regularly performs his or her duties or, if the employee's 
work involves regular travel or the employee's work location varies on 
a daily basis, where his or her work activities are based, as 
determined by the employing agency. An agency must document an 
employee's official worksite on an employee's Notification of Personnel 
Action (Standard Form 50 or equivalent).
    (b) For an employee who is relocated and authorized to receive 
relocation expenses under 5 U.S.C. chapter 57, subchapter II (or 
similar authority), the official worksite is the established worksite 
for the position in the area to which the employee has been relocated. 
For an employee authorized to receive relocation expenses under 5 
U.S.C. 5737 in connection with an extended assignment resulting in a 
temporary change of station, the duty station associated with the 
extended assignment is the official worksite. (See 41 CFR 302-1.1.)
    (c) For an employee whose assignment to a new worksite is followed 
within 3 workdays by a reduction in force resulting in the employee's 
separation before he or she is required to report for duty at the new 
location, the official worksite in effect immediately before the 
assignment remains the official worksite through the date of 
separation.
    (d)(1) For an employee covered by a telework agreement who is 
scheduled (while in duty status) to report at least once a week on a 
regular and recurring basis to the regular worksite for the employee's 
position of record, the regular worksite is the official worksite. 
However, for an employee whose work location varies on a daily basis, 
the employee need not report at least once a week to the established 
official worksite (where the employee's work activities are based) as 
long as the employee is performing work within the locality pay area 
for that worksite at least once a week on a regular and recurring 
basis. An agency must determine a telework employee's official worksite 
on a case-by-case basis.
    (2) If an employee covered by a telework agreement does not meet 
the requirements of paragraph (d)(1) of this section, the employee's 
official worksite is the location of the employee's telework site.
    (3) An authorized agency official may make a temporary exception to 
the requirements in paragraph (d)(1) and (2) of this section in 
appropriate situations, such as when an employee is recovering from an 
injury or medical condition that prevents the employee from commuting 
to the regular worksite.
    (e) In applying paragraph (d)(1) of this section for the purpose of 
other location-based pay entitlements under other regulations that 
reference this section, the reference to a locality pay area is deemed 
to be a reference to the

[[Page 31304]]

applicable geographic area associated with the given pay entitlement. 
For example, for the purpose of special rates under 5 CFR part 530, 
subpart C, the reference to a locality pay area is deemed to be a 
reference to the geographic area covered by a special rate schedule.

0
22. Revise Sec.  531.606 to read as follows:


Sec.  531.606  Maximum limits on locality rates.

    (a) Except as provided by paragraph (b) of this section, a locality 
rate may not exceed the rate of basic pay payable for level IV of the 
Executive Schedule.
    (b)(1) A locality rate for an employee in a category of positions 
described in 5 U.S.C. 5304(h)(1)(A)-(C) may not exceed the rate for 
level III of the Executive Schedule.
    (2) A locality rate for an employee in a category of positions 
described in 5 U.S.C. 5304(h)(1)(D) may not exceed--
    (i) The rate for level IV of the Executive Schedule, when the 
maximum scheduled annual rate of pay (excluding any retained rate) for 
such positions is less than or equal to the maximum payable scheduled 
annual rate of pay for GS-15; or
    (ii) The rate for level III of the Executive Schedule, when the 
maximum scheduled annual rate of pay (excluding any retained rate) for 
such positions exceeds the maximum payable scheduled annual rate of pay 
for GS-15, but is not more than the rate for level IV of the Executive 
Schedule.
    (3) If initial application of paragraph (b)(2) of this section 
otherwise would reduce an employee's existing locality rate, the 
employee's locality rate is capped at the higher of--
    (i) The amount of the employee's locality rate on the day before 
paragraph (b)(2) of this section was initially applied, or
    (ii) The rate for level IV of the Executive Schedule.
    (c) Paragraph (b) of this section does not apply to experts and 
consultants appointed under 5 U.S.C. 3109 if the pay for those experts 
and consultants is limited to the highest rate payable under 5 U.S.C. 
5332 (i.e., the unadjusted maximum GS-15 rate). Such experts and 
consultants are subject to the pay limitations established in 5 CFR 
304.105.
    (d) A portion of a locality payment that is not payable because of 
an applicable limitation is not considered in applying any other 
provision of law or regulation.

0
23. Revise Sec.  531.607 to read as follows:


Sec.  531.607  Computing hourly, daily, weekly, and biweekly locality 
rates.

    (a) Apply the following methods to convert an annual locality rate 
to an hourly, daily, weekly, or biweekly rate:
    (1) To derive an hourly rate, divide the annual locality rate by 
2,087 and round to the nearest cent, counting one-half cent and over as 
the next higher cent.

Example:
    Annual locality rate = $50,000
    Computation of hourly rate: $50,000 / 2,087 = 23.957 or $23.96.

    (2) To derive a daily rate, multiply the hourly rate by the number 
of daily hours of service required by the employee's basic daily tour 
of duty.

Example:
    Hourly rate = $23.96
    Daily hours = 8
    Computation of daily rate: $23.96 x 8 = $191.68

    (3) To derive a weekly or biweekly rate, multiply the hourly rate 
by 40 or 80, as applicable.

Example:
    Hourly rate = $23.96
    Biweekly hours = 80
    Computation of biweekly rate: $23.96 x 80 = $1,916.80

    (b) Notwithstanding paragraph (a) of this section, for a 
firefighter whose pay is computed under 5 U.S.C. 5545b, a firefighter 
hourly locality rate is computed using a divisor of 2,756 hours instead 
of 2,087, as prescribed in 5 CFR part 550, subpart M. Also, such a 
firefighter's weekly and biweekly locality rates must be based on the 
firefighter's extended tour of duty as prescribed in that subpart.

0
24. Add a new Sec.  531.608 to read as follows:


Sec.  531.608  Relationship of locality rates to other pay rates.

    (a) An employee must receive the greatest of the following rates of 
pay, as applicable--
    (1) The scheduled annual rate of pay payable to the employee;
    (2) A locality rate under this subpart;
    (3) A special rate under 5 CFR part 530, subpart C, or a similar 
rate under other legal authority (e.g., 38 U.S.C. 7455); or
    (4) A retained rate under 5 CFR part 536 or a similar rate under 
other legal authority.
    (b) A GS employee receiving a special rate is entitled to any 
applicable locality payment on the same basis as any other GS employee. 
The locality payment is computed based on the employee's scheduled 
annual rate of pay, which excludes any special rate. The employee is 
entitled to the higher of the locality rate or the corresponding 
special rate. As provided in 5 U.S.C. 5305(h) and 5 CFR 530.303(d), 
when an employee's locality rate exceeds a corresponding special rate, 
the employee's entitlement to the special rate is terminated.

0
25. Add a new Sec.  531.609 to read as follows:


Sec.  531.609  Adjusting or terminating locality rates.

    (a) When an employee's official worksite is changed to a different 
locality pay area, the employee's entitlement to the locality rate for 
the new locality pay area begins on the effective date of the change in 
official worksite.
    (b) A locality rate must be adjusted as of the effective date of 
any change in the applicable scheduled annual rate of pay or any change 
in the applicable locality percentage.
    (c) Except as provided in paragraph (d) of this section, 
entitlement to a locality rate associated with a particular locality 
pay area under this subpart terminates on the date--
    (1) An employee's official worksite is no longer in the locality 
pay area;
    (2) An employee is no longer in a position covered by this subpart; 
or
    (3) An employee separates from Federal service.
    (d) In the event of a change in the geographic coverage of a 
locality pay area as a result of the addition by OMB of a new area(s) 
to the definition of an MSA or CSA or as the result of any change made 
by the President's Pay Agent in the definition of a locality pay area, 
the effective date of any change in an employee's entitlement to a 
locality rate under this subpart is the first day of the first pay 
period beginning on or after January 1 of the next calendar year. Any 
area removed by OMB from coverage within an MSA or CSA that serves as 
the basis for defining a locality pay area must be reviewed by the 
Federal Salary Council and the President's Pay Agent before a decision 
is made regarding the locality pay status of that area.
    (e) As provided in Sec.  531.205, when an employee becomes covered 
by one or more different pay schedule(s) because the employee is 
stationed at a new official worksite in a different geographic 
location, the employee's pay (including a locality rate) must first be 
converted to the applicable pay schedule(s) in the new location before 
applying any other pay action (other than a general pay adjustment).

0
26. Add a new Sec.  531.610 to read as follows:

[[Page 31305]]

Sec.  531.610  Treatment of locality rate as basic pay.

    A locality rate is considered to be an employee's rate of basic pay 
for the purpose of computing or applying--
    (a) Retirement deductions, contributions, and benefits under 5 
U.S.C. chapters 83 and 84;
    (b) Life insurance premiums and benefits under 5 U.S.C. chapter 87;
    (c) Premium pay under 5 U.S.C. chapter 55, subchapter V, and 5 CFR 
part 550, subparts A and I (including the computation of limitations on 
premium pay);
    (d) Severance pay under 5 U.S.C. 5595 and 5 CFR part 550, subpart 
G;
    (e) Advances in pay under 5 U.S.C. 5524a and 5 CFR part 550, 
subpart B;
    (f) Post differentials under 5 U.S.C. 5925(a) and danger pay 
allowances under 5 U.S.C. 5928 for an employee temporarily working in a 
foreign area for which the Department of State has established a danger 
pay allowance, when the employee's official worksite is located in a 
locality pay area;
    (g) Recruitment, relocation, and retention incentives, supervisory 
differentials, and extended assignment incentives under 5 U.S.C. 
chapter 57, subchapter IV, and 5 CFR part 575;
    (h) Performance-based cash awards under 5 U.S.C. 4505a and 5 CFR 
part 451, subpart A, when such awards are computed as a percentage of 
an employee's rate of basic pay;
    (i) GS pay administration provisions (e.g., GS promotion 
provisions) to the extent provided in subpart B of this part;
    (j) Pay administration provisions for prevailing rate employees 
which consider rates of basic pay under the GS pay system in setting 
pay (except as otherwise provided in 5 CFR part 532), subject to the 
requirement that, if the employee's actual locality rate would not 
apply at the official worksite for the prevailing rate position, that 
locality rate must be converted to a corresponding rate on the locality 
rate schedule for that official worksite;
    (k) Lump-sum payments for accumulated and annual leave under 5 CFR 
part 550, subpart L;
    (l) Grade and pay retention under 5 U.S.C. chapter 53, subchapter 
VI, to the extent provided by 5 CFR part 536;
    (m) Other provisions as specified in other statute or OPM 
regulations; and
    (n) Payments or benefits equivalent to those listed in this section 
under other legal authority, as determined by the head of the agency or 
other authorized official responsible for administering such payments 
or benefits.

0
27. Add a new Sec.  531.611 to read as follows:


Sec.  531.611  Miscellaneous provisions.

    (a) A locality rate may be paid only for those hours for which an 
employee is in a pay status.
    (b) Payment of, or an increase in, a locality rate is not an 
equivalent increase in pay within the meaning of 5 U.S.C. 5335. (See 
Sec.  531.407(c).)
    (c) A locality rate is included in an employee's total 
remuneration, as defined in 5 CFR 551.511(b), and straight time rate of 
pay, as defined in 5 CFR 551.512(b), for the purpose of overtime pay 
computations under the Fair Labor Standards Act of 1938, as amended.
    (d) A reduction or termination of a locality rate under Sec.  
531.609 is not an adverse action for the purpose of 5 CFR part 752, 
subpart D, or an action under 5 CFR 930.214.

Subpart F--[Amended]

0
28. In addition to the preceding amendments to 5 CFR part 531, subpart 
F (Sec. Sec.  531.601 through 531.611), remove the words ``locality 
rate of pay'' and add in their place the words ``locality rate'' 
throughout the subpart, as amended.

Subpart G--[Removed and Reserved]

0
29. Remove and reserve subpart G, consisting of Sec. Sec.  531.701 
through 531.705.

PART 532--PREVAILING RATE SYSTEMS

0
30. The authority citation for part 532 continues to read as follows:

    Authority: 5 U.S.C. 5343, 5346; Sec.  532.707 also issued under 
5 U.S.C. 552.

Subpart B--Prevailing Rate Determinations

0
31. In Sec.  532.415, amend paragraph (c) by removing the reference ``5 
CFR 536.104(a)(3)'' and adding in its place ``5 CFR 536.301(a)(8)''.

PART 534--PAY UNDER OTHER SYSTEMS

0
32. The authority citation for part 534 is revised to read as follows:

    Authority: 5 U.S.C. 1104, 3161(d), 5307, 5351, 5352, 5353, 5376, 
5382, 5383, 5384, 5385, 5541, 5550a, and sec. 1125 of the National 
Defense Authorization Act for FY 2004, Pub. L. 108-136, 117 Stat. 
1638 (5 U.S.C. 5304, 5382, 5383, 7302; 18 U.S.C. 207).

Subpart D--Pay and Performance Awards Under the Senior Executive 
Service

0
33. In Sec.  534.403, amend paragraph (b) by removing the reference ``5 
CFR 536.104'' and adding in its place ``5 CFR part 536, subpart C''.

0
34. In Sec.  534.404, amend paragraph (h)(2) by removing the reference 
``5 CFR 536.104'' and adding in its place ``5 CFR part 536, subpart 
C''.

PART 536--GRADE AND PAY RETENTION

0
35. Revise the authority citation for part 536 to read as follows:

    Authority: 5 U.S.C. 5361-5366; sec. 4 of the Performance 
Management and Recognition System Termination Act of 1993, Pub. L. 
103-89, 107 Stat. 981; Sec.  536.405 also issued under 5 U.S.C. 552, 
Freedom of Information Act, Pub. L. 92-502; Sec.  536.308 also 
issued under section 301(d)(2) of the Federal Workforce Flexibility 
Act of 2004, Pub. L. 108-411, 118 Stat. 2305.


0
36. Revise subparts A and B to read as follows:

Subpart A--General Provisions

Sec.
536.101 Purpose.
536.102 Coverage.
536.103 Definitions.
536.104 Reasonable offer.
536.105 Comparing grades under different pay systems.


Sec.  536.101  Purpose.

    This part contains OPM regulations for the administration of grade 
and pay retention. This part supplements and implements the provisions 
of 5 U.S.C. 5361-5366 and must be read together with those sections of 
law. Under 5 U.S.C. 5362, an employee under a covered pay system who is 
placed in a lower grade (e.g., as a result of a reduction in force or 
when his or her position is reduced in grade as a result of a 
reclassification) is entitled to retain the grade held immediately 
before the reduction for a period of 2 years under the circumstances 
prescribed in this part. Under 5 U.S.C. 5363, an employee whose rate of 
basic pay otherwise would be reduced as a result of a management action 
is entitled to retain his or her rate of basic pay under the 
circumstances prescribed in this part.


Sec.  536.102  Coverage.

    (a) Subject to the exclusions in paragraphs (b) through (e) of this 
section, this part covers any employee who, at the time this part is 
applied--
    (1) Is in a covered pay system; or
    (2) Is moving to a position under a covered pay system from a 
position not under a covered pay system, as long as the individual was 
an employee as defined in 5 CFR 536.103 while serving in the position 
in a noncovered pay system.

[[Page 31306]]

    (b) An agency may not provide grade or pay retention under this 
part to an employee who--
    (1) Is reduced in grade or pay for personal cause or at the 
employee's request;
    (2) Was employed on a temporary or term basis immediately before 
the action causing the reduction in grade or pay;
    (3) Does not satisfactorily complete the probationary period 
prescribed by 5 U.S.C. 3321(a)(2), and, as a result, is removed from a 
supervisory or managerial position;
    (4) Is entitled to receive a saved rate of basic pay under 5 U.S.C. 
3594(c) and 5 CFR 359.705 because of removal from the Senior Executive 
Service and placement in a civil service position (other than a Senior 
Executive Service position) under 5 U.S.C. 3594(b)(2);
    (5) Moves from an Executive Schedule position paid under 5 U.S.C. 
chapter 53, subchapter II, or a position whose rate of pay is fixed by 
law at a rate equal to a rate for the Executive Schedule;
    (6) Moves between positions not under a covered pay system or from 
a position under a covered pay system to a position not under a covered 
pay system;
    (7) Moves to a nonappropriated fund position as described in 5 
U.S.C. 2105(c) (except a position occupied by a prevailing rate 
employee); or
    (8) Moves from a nonappropriated fund position as described in 5 
U.S.C. 2105(c) (except a position occupied by a prevailing rate 
employee) to a position in a covered pay system, unless covered by 
Sec.  536.302(a).
    (c) An agency may not provide grade or pay retention under this 
part based on the grade or rate of basic pay held by the employee 
during a temporary promotion or temporary reassignment. However, a 
temporary promotion or temporary reassignment does not affect an 
employee's preexisting entitlement to grade or pay retention.
    (d) An agency may not provide grade retention under subpart B of 
this part to an employee who moves from a position not under a covered 
pay system to a position under a covered pay system.
    (e) An employee loses eligibility for or entitlement to grade or 
pay retention under the conditions specified in Sec. Sec.  536.207, 
536.208, and 536.308.


Sec.  536.103  Definitions.

    For the purpose of this part:
    Authorized agency official means the head of the agency or an 
official who is authorized to act for the head of the agency in the 
matter concerned.
    Covered pay system means a covered pay schedule as defined in 5 
U.S.C. 5361(5)--i.e., the General Schedule pay system established under 
5 U.S.C. chapter 53, subchapter III; a prevailing rate system 
established under 5 U.S.C. chapter 53, subchapter IV; or a special 
occupational pay system established under 5 U.S.C. chapter 53, 
subchapter IX. The various prevailing rate systems under 5 U.S.C. 
chapter 53, subchapter IV, are considered separate systems if they have 
separate job grading structures.
    Employed on a temporary or term basis means employment under an 
appointment having a definite time limitation or designated as 
temporary or term.
    Employee has the meaning given that term in 5 U.S.C. 2105, except 
that employee also includes--
    (1) An individual employed by the U.S. Postal Service or the Postal 
Rate Commission who would be considered an employee under 5 U.S.C. 2105 
but for the exclusion in section 2105(e); and
    (2) An individual employed by a Department of Defense or Coast 
Guard nonappropriated fund instrumentality (as described in 5 U.S.C. 
2105(c)) who is moved without a break in service of more than 3 days 
from employment in such an instrumentality to a position under a 
covered pay system in the same agency.
    FEPCA means the Federal Employees Pay Comparability Act of 1990 
(section 529 of Pub. L. 101-509, November 5, 1990, as amended).
    General Schedule or GS means the classification and pay system 
established under 5 U.S.C. chapter 51 and subchapter III of chapter 53. 
This term also refers to the pay schedule established under 5 U.S.C. 
5332.
    Highest applicable rate range means the rate range applicable to an 
employee based on a given position of record and official worksite that 
provides the highest rates of basic pay, excluding any retained rates. 
For example, a rate range of special rates under 5 U.S.C. 5305 may 
exceed an applicable locality rate range under 5 U.S.C. 5304 for 
General Schedule employees. In certain circumstances, the highest 
applicable rate range may consist of two types of pay rates from 
different pay schedules--e.g., a range where special rates are higher 
in the lower portion of the range and locality rates are higher in the 
higher portion of the range.
    Management action means an action (not for personal cause) by an 
agency official not initiated or requested by an employee which may 
adversely affect the employee's grade or rate of basic pay. However, an 
employee's placement in or transfer to a position under a formal 
employee development program established by an agency for recruitment 
and employee advancement purposes (e.g., Career Intern Program) is 
considered a management action even though the employee initiates or 
requests such placement or transfer.
    Official worksite means the official location of the employee's 
position of record as determined under the rules of the applicable pay 
system (e.g., 5 CFR 531.605 for General Schedule employees). Official 
worksite is synonymous with the term ``official duty station'' as used 
in 5 U.S.C. 5363(c).
    OPM means the Office of Personnel Management.
    Payable rate means the highest rate of basic pay to which an 
employee is entitled based on the employee's position of record, 
official worksite, and step (or relative position in range for a GM 
employee) or, if applicable, a retained rate.
    Pay schedule means a set of rate ranges established under a single 
authority--i.e., the General Schedule, a law enforcement officer 
special base rate schedule (for grades GS-3 through 10) under section 
403 of FEPCA; a prevailing rate schedule (including a special schedule 
or special rate schedule) under 5 U.S.C. chapter 53, subchapter IV; a 
locality rate schedule under 5 U.S.C. 5304 based on GS rates; a 
locality rate schedule under 5 U.S.C. 5304 based on law enforcement 
officer special base rates (for grades GS-3 through 10); or a special 
rate schedule under 5 U.S.C. 5305 or similar authority. A pay schedule 
applies to or covers a defined category of employees based on 
established coverage conditions (e.g., official worksite, occupation). 
A pay schedule is considered to apply to or cover an employee who meets 
the established coverage conditions even when a rate under that 
schedule is not currently payable to the employee because of a higher 
pay entitlement under another pay schedule.
    Position of record means an employee's official position (defined 
by grade or level, occupational series, employing agency, law 
enforcement officer status, and any other condition that determines 
coverage under a pay schedule (other than official worksite)), as 
documented on the employee's most recent Notification of Personnel 
Action (Standard Form 50 or equivalent) and the current position 
description, excluding any position to which an employee is temporarily 
detailed. A retained grade is considered to be part of an employee's 
position of record even though the actual grade of the employee's 
position is a lower grade, except as provided in Sec.  536.205(b). For

[[Page 31307]]

an employee whose change in official position is followed within 3 
workdays by a reduction in force resulting in the employee's separation 
before he or she is required to report for duty in the new position, 
the position of record in effect immediately before the position change 
is deemed to remain the position of record through the date of 
separation.
    Prevailing rate employee has the meaning given that term in 5 
U.S.C. 5342(a)(2) and refers to an employee in a position covered by a 
prevailing rate system or schedule established under 5 U.S.C. chapter 
53, subchapter IV.
    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, including a General Schedule rate under 5 U.S.C. 5332; a 
law enforcement officer special base rate under section 403 of FEPCA; a 
special rate under 5 CFR part 530, subpart C, or similar payment under 
other legal authority; a locality rate under 5 CFR part 531, subpart F, 
or similar payment under other legal authority; a prevailing rate under 
5 U.S.C. 5343; or a retained rate under this part, but excluding 
additional pay of any other kind (such as premium payments, 
differentials, and allowances).
    Rate range or range means the range of rates of basic pay for a 
grade within an established pay schedule, excluding any retained rate.
    Reasonable offer means an offer that meets the conditions in Sec.  
536.104.
    Reduced in grade or pay at the employee's request means a reduction 
in grade or rate of basic pay that is initiated by the employee for his 
or her benefit, convenience, or personal advantage. A reduction in 
grade or pay that is caused or influenced by a management action is not 
considered to be at an employee's request, except that the voluntary 
reduction in grade or pay of an employee in response to a management 
action directly related to personal cause is considered to be at the 
employee's request.
    Reduced in grade or pay for personal cause means a reduction in 
grade or rate of basic pay based on the conduct, character, or 
unacceptable performance of an employee. In situations in which an 
employee is reduced in grade or pay for inability to perform the duties 
of his or her position because of a medical or physical condition 
beyond the employee's control, the reduction in grade is not considered 
to be for personal cause.
    Reorganization means the planned elimination, addition, 
redistribution, or restructuring of functions or duties either wholly 
within an agency or between agencies.
    Representative rate means--
    (1) For the purpose of comparing grades that are under different 
covered pay systems under Sec.  536.105 and after applying any 
applicable geographic conversion under Sec.  536.105(b) for positions 
with different official worksites--
    (i) The highest rate of basic pay that applies to the fourth step 
of the grade for a position covered by the General Schedule; and
    (ii) The highest rate of basic pay that applies to the second step 
of the grade of a position under a regular prevailing rate system 
established under 5 U.S.C. chapter 53, subchapter IV, or, in the case 
of a prevailing rate position with a single rate, the single rate of 
basic pay for that position; and
    (2) For the purpose of comparing grades or levels of work in making 
reasonable offer determinations when one of the grades or levels of 
work is not under a covered pay system and after applying any 
applicable geographic conversion rules under Sec.  536.105(b) for 
positions with different official worksites--
    (i) The maximum payable rate of basic pay that applies to the grade 
of a position covered by the General Schedule;
    (ii) The maximum payable rate of basic pay that applies to the 
grade of a position under a regular prevailing rate system established 
under 5 U.S.C. chapter 53, subchapter IV, or in the case of a 
prevailing rate position with a single rate, the single rate of basic 
pay for that position; and
    (iii) The maximum payable rate of basic pay that applies to the 
grade or level of work in the case of a position not covered by 
paragraph (2)(i) or (ii) of this definition. In the case of a position 
with a single rate under such a schedule, the single rate of basic pay 
for that position is the representative rate.
    Retained rate means a rate above the maximum rate of the employee's 
highest applicable rate range that is payable under subpart C of this 
part.
    Temporary promotion means a promotion that has a definite time 
limitation or is otherwise designated as temporary when the affected 
employee is informed in advance.
    Temporary reassignment means a reassignment that has a definite 
time limitation or is otherwise designated as temporary when the 
affected employee is informed in advance.
    Where different pay schedules apply means, in the context of 
applying the geographic conversion rule, that an employee's official 
worksite is changed to a new location that would cause the employee to 
lose or gain coverage under a location-based pay schedule if the 
employee were to remain in the same position of record.


Sec.  536.104  Reasonable offer.

    (a) For the purpose of determining whether grade retention 
eligibility or entitlement must be terminated under Sec.  536.207 or 
536.208, the offer of a position is a reasonable offer if the 
position's grade is equal to or higher than the retained grade and if 
all the conditions in paragraph (c) of this section are met. If the 
offered position is in a different pay system, Sec.  536.105 must be 
applied to determine whether the grade of the offered position is equal 
to or greater than the retained grade.
    (b) For the purpose of determining whether pay retention 
eligibility or entitlement must be terminated under Sec.  536.308, the 
offer of a position is a reasonable offer if the employee's rate of 
basic pay in the position would be equal to or greater than the rate to 
which the employee is or would be entitled under the pay retention 
provisions and if all the conditions in paragraph (c) of this section 
are met.
    (c) An offer of a position must meet the following additional 
conditions to qualify as a reasonable offer:
    (1) The offer must be in writing and must include an official 
position description of the offered position;
    (2) The offer must inform the employee that entitlement to grade or 
pay retention will terminate if the offer is declined and that the 
employee may appeal the reasonableness of the offer as provided in 
Sec.  536.402;
    (3) The offered position must be of equal or greater tenure than 
the employee's position before the action resulting in the grade or pay 
retention entitlement;
    (4) The offered position must be full-time, unless the employee's 
position immediately before the action resulting in entitlement to 
grade or pay retention was less than full-time, in which case the 
offered position must have a work schedule providing for no fewer hours 
of work per week or per pay period than the position held before the 
action; and
    (5) The offered position must be in the same commuting area as the 
employee's position immediately before the offer, unless the employee 
is subject to a mobility agreement or a published agency policy that 
requires employee mobility.


Sec.  536.105  Comparing grades under different pay systems.

    (a) General. An agency must compare the representative rates (as 
defined in

[[Page 31308]]

Sec.  536.103) of the applicable grades to determine whether a grade of 
a position is equal to, higher than, or lower than the grade of another 
position when--
    (1) Determining eligibility for grade retention upon movement from 
a position under a covered pay system to a lower-graded position under 
a different covered pay system (including determinations under Sec.  
536.203 that involve different covered pay systems);
    (2) Determining whether grade retention eligibility is lost or 
grade retention is terminated when an employee is placed in a lower-
graded position under a different covered pay system and the action is 
taken for personal cause or at the employee's request;
    (3) Determining whether grade retention eligibility is lost or 
grade retention is terminated based on movement to a position under a 
different covered pay system with an equal or higher grade;
    (4) Determining whether grade retention eligibility is lost or 
grade retention is terminated based on declination of a reasonable 
offer of a position under a different pay system with an equal or 
higher grade; and
    (5) Determining whether pay retention eligibility is lost or a 
retained rate is terminated when an employee is placed in a lower-
graded position under a different covered pay system and the action is 
taken for personal cause or at the employee's request.
    (b) Geographic conversion. When comparing positions under paragraph 
(a) of this section which are stationed in different geographic 
locations where different pay schedules apply, the representative rate 
of the employee's existing position of record (as in effect before the 
movement to a position in a different pay system) must be determined as 
if the official worksite of that position of record were the same as 
the official worksite of the new or offered position of record. 
Geographic conversion is not necessary for the purpose of comparing 
grades if an employee is being moved to (or given a reasonable offer 
of) a position under the same covered pay system (i.e., same grading 
structure).

Subpart B--Grade Retention

Sec.
536.201 Mandatory grade retention.
536.202 Optional grade retention.
536.203 Additional eligibility requirements for grade retention.
536.204 Period of grade retention.
536.205 Applicability of retained grade.
536.206 Determining an employee's rate of basic pay under grade 
retention.
536.207 Loss of eligibility for grade retention.
536.208 Termination of grade retention.


Sec.  536.201  Mandatory grade retention.

    (a) Subject to the requirements in this section and in Sec. Sec.  
536.102 and 536.203, an agency must provide grade retention to an 
employee who moves from a position under a covered pay system to a 
lower-graded position under a covered pay system as a result of--
    (1) Reduction in force procedures, or
    (2) A reclassification process.
    (b) An agency must apply Sec.  536.105 in determining whether a 
position under a different covered pay system is a lower-graded 
position.
    (c) An employee's movement to a lower-graded position is considered 
to be the result of reduction in force procedures when the employee has 
received a specific reduction in force notice and--
    (1) The employee is placed in the position offered in the notice; 
or
    (2) The employee is placed in a position other than that offered in 
the notice but in the same agency, if the position was offered in 
writing and at the initiative of management.
    (d) An employee's movement to a lower-graded position is considered 
to be the result of a reclassification process when--
    (1) The employee remains in his or her position after it is 
reclassified; or
    (2) The employee is placed in a different position in the same 
agency before the effective date of the reclassification action, if the 
position was offered in writing and at the initiative of management 
after the employee received a specific written notice that the position 
would be reclassified to a lower grade.
    (e) Notwithstanding paragraph (a) of this section, an agency must 
provide grade retention to an employee who moves without a break in 
service of more than 3 days from a position in a Department of Defense 
or Coast Guard nonappropriated fund instrumentality (as defined in 5 
U.S.C. 2105(c)) to a position under a covered pay system in the same 
agency.


Sec.  536.202  Optional grade retention.

    (a) Subject to the requirements in Sec. Sec.  536.102 and 536.203, 
an authorized agency official may provide grade retention to an 
employee moving from a position under a covered pay system to a lower-
graded position under a covered pay system when--
    (1) Management announces a reorganization or reclassification 
decision in writing (including a general notice or a specific notice) 
that may or would affect the employee; and
    (2) The employee moves to a lower-graded position (either at the 
employee's initiative or in response to a management-initiated offer) 
on or before the date the announced reorganization or reclassification 
is effected.
    (b) An agency must apply Sec.  536.105 in determining whether a 
position under a different covered pay system is a lower-graded 
position.
    (c) When an employee is offered a position with grade retention 
under this section in anticipation of a reduction in grade, the agency 
must inform the employee in writing that acceptance of the position is 
not required and that declination of the offer will not affect the 
employee's entitlement to grade retention under Sec.  536.201 if the 
agency actually moves the employee to the lower-graded position.
    (d) Notwithstanding paragraph (a) of this section, an agency may 
provide grade retention to an employee who is moved without a break in 
service of more than 3 days from a position in a Department of Defense 
or Coast Guard nonappropriated fund instrumentality (as defined in 5 
U.S.C. 2105(c)) to a position under a covered pay system in the same 
agency.


Sec.  536.203  Additional eligibility requirements for grade retention.

    (a) An employee is eligible for grade retention under Sec.  
536.201(a)(1) only if the employee has served for at least 52 
consecutive weeks in one or more positions under a covered pay system 
at one or more grades higher than the grade of the position in which 
the employee is being placed. Such service is deemed to include service 
performed by an employee of a nonappropriated fund instrumentality of 
the Department of Defense or the Coast Guard (as defined in 5 U.S.C. 
2105(c)) who is moved to a position in the civil service employment 
system of the Department of Defense or the Coast Guard, respectively, 
without a break in service of more than 3 days.
    (b) An employee is eligible for grade retention under Sec.  
536.201(a)(2) based on a reclassification of his or her position only 
if, immediately before the reduction in grade, that position was 
classified at the existing grade or a higher grade for a continuous 
period of at least 1 year.
    (c) An employee is eligible for grade retention under Sec.  536.202 
only if, immediately before being placed in the lower grade, the 
employee has served for at least 52 consecutive weeks in one or more 
positions under a covered pay system at one or more grades higher than 
that lower grade. Such service is deemed to include service performed 
by an employee of a nonappropriated fund instrumentality of the 
Department of

[[Page 31309]]

Defense or the Coast Guard (as defined in 5 U.S.C. 2105(c)) who is 
moved to a position in the civil service employment system of the 
Department of Defense or the Coast Guard, respectively, without a break 
in service of more than 3 days.
    (d) Eligibility for grade retention under Sec.  536.201 or 536.202 
ceases under the conditions specified in Sec.  536.207.


Sec.  536.204  Period of grade retention.

    (a) Unless grade retention is terminated under Sec.  536.208, an 
employee is entitled to retain the grade held immediately before the 
action that provides entitlement to grade retention for 2 years 
beginning on the date the employee is placed in the lower-graded 
position.
    (b) During the 2-year period of grade retention, if an agency 
further reduces an employee in grade under circumstances also entitling 
the employee to grade retention, the employee must continue to retain 
the previous retained grade for the remainder of the first 2-year 
period. At the end of the first 2-year period, the employee is entitled 
to retain the grade of the position from which the second reduction in 
grade was made for 2 years following the effective date of the second 
reduction in grade.
    (c) Notwithstanding Sec.  536.207(a)(1), grade retention continues 
to apply to an employee serving under an interim appointment made under 
5 CFR 772.102 for the duration of the original 2-year grade retention 
period if the employee's grade was retained under this part in the 
appointment immediately preceding the interim appointment.


Sec.  536.205  Applicability of retained grade.

    (a) Except as provided in paragraph (b) of this section, an agency 
must treat an employee's retained grade as the employee's grade for all 
purposes, including pay and pay administration, premium pay, 
retirement, life insurance, and eligibility for training. If the 
employee's actual position of record is under a different covered pay 
system than the covered pay system associated with the retained grade, 
the agency also must treat the employee as being under the covered pay 
system associated with the retained grade for the same purposes.
    (b) An agency may not use an employee's retained grade--
    (1) In any reduction in force procedure;
    (2) To determine whether an employee has been reduced in grade for 
the purpose of terminating grade or pay retention (i.e., based on 
personal cause or at the employee's request);
    (3) To determine whether an employee retains status as a GM 
employee (as defined in 5 CFR 531.203); or
    (4) To determine whether an employee is exempt or nonexempt from 
the Fair Labor Standards Act of 1938, as amended.


Sec.  536.206  Determining an employee's rate of basic pay under grade 
retention.

    (a) General. (1) When an employee becomes entitled to grade 
retention or becomes covered by one or more different pay schedules 
(because of a change in the employee's position of record, a change in 
the employee's official worksite, or the establishment of a new pay 
schedule) during a period of grade retention, the agency must apply the 
rules in this section to determine the employee's rate of basic pay.
    (2) This section does not apply to an employee whose entitlement to 
grade retention is terminated under one of the conditions in Sec.  
536.208. (See Sec.  536.208(d).)
    (b) Preexisting rate within a range. If an employee is entitled to 
a rate of basic pay within the applicable rate range before the action 
resulting in application of this section, the employee is entitled to 
the rate(s) of basic pay in the applicable pay schedule(s) for the 
employee's position of record after the action (including the retained 
grade) which correspond to the employee's grade and step (or rate) 
immediately before the action. The employee's payable rate is the 
corresponding rate in the highest applicable rate range for the 
employee's position of record after the action (including the retained 
grade). If an employee's rate of basic pay otherwise would be reduced 
because of placement under a lower-paying pay schedule (excluding any 
reduction that results from a geographic conversion), the employee 
would be eligible for pay retention under subpart C of this part to the 
same extent as other employees holding the same position of record 
whose actual grade is the same as the employee's retained grade.
    (c) Preexisting retained or saved rate. (1) If an employee is 
entitled to a retained rate immediately before the action resulting in 
application of this section, the agency must determine the employee's 
payable rate of basic pay under Sec. Sec.  536.303 and 536.304.
    (2) If an employee is entitled to a saved rate under 5 CFR 359.705, 
the agency must determine the employee's payable rate of basic pay 
under that section.
    (d) Order of processing pay actions. When an action resulting in 
application of this section takes effect on the same effective date as 
other pay actions that affect an employee's rate of basic pay (e.g., 
within-grade increase), the actions will be processed in the order 
prescribed in the rules governing the covered pay system of the 
employee's position of record (e.g., 5 CFR 531.206 for GS positions and 
5 CFR 532.413 for Federal Wage System positions).


Sec.  536.207  Loss of eligibility for grade retention.

    (a) Eligibility for grade retention as a result of an entitlement 
under Sec.  536.201 ceases if any of the following conditions occurs at 
any time after the employee receives written notice of the reduction in 
grade, but before the commencement of the 2-year period of grade 
retention:
    (1) The employee has a break in service of 1 workday or more;
    (2) The employee is reduced in grade for personal cause or at the 
employee's request (based on the actual grade of the employee's 
position rather than the employee's retained grade and, when a movement 
to a different covered pay system is involved, a comparison of 
representative rates under Sec.  536.105);
    (3) The employee moves to a position under a covered pay system 
with a grade that is equal to or higher than the retained grade (as 
determined under Sec.  536.105), excluding a temporary promotion;
    (4) The employee declines a reasonable offer of a position with a 
grade equal to or higher than the retained grade (as determined under 
Sec. Sec.  536.104 and 536.105);
    (5) The employee elects in writing to terminate the benefits of 
grade retention; or
    (6) The employee moves to a position not under a covered pay 
system.
    (b) Eligibility for grade retention as a result of entitlement 
under Sec.  536.202 ceases if any of the following conditions occurs at 
any time after management informs the employee of an impending 
reorganization or reclassification that will or could result in a 
reduction in grade, but before the commencement of the 2-year period of 
grade retention:
    (1) Any of the conditions listed in paragraph (a) of this section 
except that an employee's request for placement in a lower-graded 
position, in lieu of displacing another employee at his or her grade 
under reduction in force procedures, is not a declination of a 
reasonable offer for grade retention purposes; or
    (2) The employee fails to enroll in, or to comply with reasonable 
written requirements established to assure full consideration under, a 
program providing priority consideration for placement.

[[Page 31310]]

    (c) If an employee loses eligibility for grade retention under this 
section, the employee's rate of basic pay must be set in accordance 
with the pay-setting rules and pay rates applicable to the employee's 
position of record (e.g., 5 CFR part 531, subpart B, for GS positions). 
An employee is not eligible for pay retention under subpart C of this 
part based on an action that provided eligibility for grade retention 
if the employee elects to terminate mandatory eligibility for grade 
retention under paragraph (a)(5) of this section.


Sec.  536.208  Termination of grade retention.

    (a) Grade retention under Sec.  536.201 terminates if any of the 
conditions listed in Sec.  536.207(a) occurs after commencement of the 
2-year period of grade retention.
    (b) Grade retention under Sec.  536.202 terminates if any of the 
conditions listed in Sec.  536.207(b) occurs after the commencement of 
the 2-year period of grade retention.
    (c) Termination of grade retention benefits takes effect--
    (1) At the end of the day before placement if the termination is 
the result of the employee's placement in another position; or
    (2) At the end of last day of the pay period in which the 
employee--
    (i) Declines a reasonable offer;
    (ii) Elects to terminate grade retention benefits; or
    (iii) Fails to enroll in, or comply with reasonable written 
requirements established to assure full consideration under, a program 
providing priority consideration for placement.
    (d) If an employee's entitlement to grade retention terminates 
under this section, the employee's rate of basic pay must be set in 
accordance with the pay-setting rules and pay rates applicable to the 
employee's position of record (e.g., 5 CFR part 531, subpart B, for GS 
positions). An employee is not entitled to pay retention under subpart 
C of this part based on a reduction in basic pay resulting from waiver 
of the employee's grade retention entitlement under Sec.  
536.207(a)(5).

0
37. Redesignate subpart C as subpart D; revise the title of 
redesignated subpart D to read ``Appeals and Miscellaneous 
Provisions''; remove Sec. Sec.  536.305, 536.306, and 536.308; and 
redesignate Sec. Sec.  536.301, 536.302, 536.303, 536.304, and 536.307 
as Sec. Sec.  536.401, 536.402, 536.403, 536.404, and 536.405, 
respectively.

0
38. In newly redesignated subpart D--
0
a. In newly redesignated Sec.  536.403, remove ``Sec.  536.304'' and 
add in its place ``Sec.  536.404''; and
0
b. In newly redesignated Sec.  536.405(b), remove ``Sec.  297.204(c)'' 
and add in its place ``Sec.  297.205''.

0
39. Add a new subpart C to read as follows:

Subpart C--Pay Retention

Sec.
536.301 Mandatory pay retention.
536.302 Optional pay retention.
536.303 Geographic conversion.
536.304 Determining an employee's pay retention entitlement.
536.305 Adjusting an employee's retained rate when a pay schedule is 
adjusted.
536.306 Limitation on retained rates.
536.307 Treatment of a retained rate as basic pay for other 
purposes.
536.308 Loss of eligibility for or termination of pay retention.
536.309 Converting retained rates on May 1, 2005.


Sec.  536.301  Mandatory pay retention.

    (a) Subject to the requirements in Sec.  536.102 and this section, 
an agency must provide pay retention to an employee in a position under 
a covered pay system whose payable rate of basic pay otherwise would be 
reduced (after application of any applicable geographic conversion 
under Sec.  536.303(a)) as a result of--
    (1) The expiration of the 2-year period of grade retention under 
subpart B of this part;
    (2) A reduction in force or reclassification action that places an 
employee in a lower-graded position when the employee does not meet the 
eligibility requirements for grade retention under subpart B of this 
part;
    (3) A management action that places an employee in a non-special 
rate position or in a lower-paid special rate position from a special 
rate position;
    (4) A management action that places an employee under a different 
pay schedule;
    (5) A management action that places an employee in a formal 
employee development program generally utilized Governmentwide, such as 
upward mobility, apprenticeship, and career intern programs;
    (6) The application of the promotion rule for GS employees under 5 
U.S.C. 5334(b) and 5 CFR 531.214 when the employee's payable rate of 
basic pay after promotion exceeds the maximum rate of the highest 
applicable rate range;
    (7) The application of the promotion rule for prevailing rate 
employees under 5 CFR 532.407 when the employee's payable rate of basic 
pay after promotion exceeds the maximum scheduled rate of the grade, as 
described in 5 CFR 532.407(b);
    (8) A reduction or elimination of scheduled rates, special 
schedules, or special rate schedules, excluding--
    (i) A statutory reduction in scheduled rates of pay under the 
General Schedule, including a reduction authorized under 5 U.S.C. 
5303(b); or
    (ii) A statutory reduction in a prevailing rate schedule 
established under 5 U.S.C. chapter 53, subchapter IV, and 5 CFR part 
532.
    (b) If an employee's official worksite changes in conjunction with 
an action that may entitle the employee to pay retention under 
paragraph (a) of this section, the agency must apply the geographic 
conversion rule in Sec.  536.303(a) before determining whether an 
employee's rate of basic pay otherwise would be reduced.
    (c) An employee is considered ``placed'' under paragraph (a)(2), 
(3), (4), and (5) of this section only when the employee remains in a 
position in the same agency. Optional pay retention under Sec.  536.302 
may apply when an employee transfers to a different agency as a result 
of a reduction in force or reclassification action or is selected by a 
different agency to fill a position under a formal employee development 
program, if all other qualifying conditions are met.
    (d) Eligibility for pay retention under this section ceases under 
the conditions specified in Sec.  536.308.


Sec.  536.302  Optional pay retention.

    (a) Subject to the requirements in Sec.  536.102 and this section, 
an authorized agency official may provide pay retention to an employee 
not entitled to pay retention under Sec.  536.301, but whose payable 
rate of basic pay otherwise would be reduced (after application of any 
applicable geographic conversion under Sec.  536.303(a)) as the result 
of a management action. This includes a management action to move an 
employee's position, without a break in service of more than 3 days, 
from a Department of Defense or Coast Guard nonappropriated fund 
instrumentality (as defined in 5 U.S.C. 2105(c)) to a position under a 
covered pay system in the same agency.
    (b) If an employee's official worksite changes in conjunction with 
an action that may entitle the employee to pay retention under 
paragraph (a) of this section, the agency must apply the geographic 
conversion rule in Sec.  536.303(a) before determining whether an 
employee's rate of basic pay otherwise would be reduced.
    (c) Eligibility for pay retention under this section ceases under 
the conditions specified in Sec.  536.308.

[[Page 31311]]

Sec.  536.303  Geographic conversion.

    (a) Geographic conversion at time of action that may provide 
initial entitlement to pay retention. If, in conjunction with a pay 
action that may entitle the employee to pay retention under Sec. Sec.  
536.301 or 536.302, an employee's official worksite is changed to a new 
location where different pay schedules apply, the agency must convert 
the employee's rate(s) of basic pay to the applicable pay schedule(s) 
in the new location before applying the pay retention rules in this 
subpart or any other simultaneous pay action (other than a general pay 
adjustment). The agency must identify the highest applicable rate range 
that would apply to the employee's position of record before the pay 
action as if that position were stationed at the new official worksite 
and determine the employee's converted payable rate of basic pay based 
on the step (or rate) in that range that corresponds to the employee's 
step (or rate) before the pay action. A reduction in an employee's 
payable rate of basic pay resulting from this geographic conversion is 
not a basis for entitlement to pay retention. The pay retention rules 
in this subpart must be applied as if the employee's payable rate of 
basic pay after geographic conversion is the employee's existing 
payable rate of basic pay in effect immediately before the action.
    (b) Geographic conversion when a retained rate employee's official 
worksite is changed. When an employee is receiving a retained rate and 
the employee's official worksite is changed to a new location where 
different pay schedules apply, the agency must apply the following 
rules (after applying any simultaneous general pay adjustment under 
Sec.  536.305) to derive the converted retained rate that will be used 
as the existing retained rate in determining the employee's pay 
retention entitlement in the new position of record and at the new 
official worksite:
    (1) Identify the maximum rate for the highest applicable rate range 
that applies to the employee's former position of record based on the 
former official worksite;
    (2) Identify the maximum rate for the highest applicable rate range 
that would apply to the employee's former position of record if the 
employee were stationed at the official worksite for the new position 
of record;
    (3) Divide the maximum rate identified in paragraph (b)(2) of this 
section by the maximum rate identified in paragraph (b)(1) of this 
section and round the result to the fourth decimal place; and
    (4) Multiply the factor resulting from paragraph (b)(3) of this 
section by the employee's former retained rate and round to the nearest 
whole dollar (for an annual rate) or the nearest whole cent (for an 
hourly rate) to derive the employee's converted retained rate at the 
new official worksite.


Sec.  536.304  Determining an employee's pay retention entitlement.

    (a) General. (1) When an employee becomes entitled to pay retention 
under Sec.  536.301 or 536.302 or undergoes a change in his or her 
position of record or pay schedule while receiving a retained rate 
(when the terminating conditions for pay retention under Sec.  536.308 
do not apply), the agency must determine the employee's pay retention 
entitlement following the rules in this section.
    (2) Any general pay adjustment (including a retained rate 
adjustment under Sec.  536.305) that takes effect on the same date as 
an action described in paragraph (a)(1) of this section must be 
processed first, before any other pay action and before applying the 
rules in paragraphs (a)(3), (a)(4), (b), or (c) of this section, as 
applicable.
    (3) If the location of an employee's official worksite changes in 
conjunction with an action that may provide initial entitlement to pay 
retention, the agency must apply the geographic conversion rule under 
Sec.  536.303(a) before applying the rules in paragraph (b) of this 
section. The converted rate of basic pay must be treated as the 
employee's existing payable rate of basic pay in applying those rules.
    (4) If the location of an employee's official worksite changes 
while he or she is receiving a retained rate, the agency must apply the 
geographic conversion rule under Sec.  536.303(b) before applying the 
rules in paragraph (c) of this section. The converted retained rate 
must be treated as the employee's existing retained rate in applying 
those rules.
    (5) When an employee's pay retention entitlement is established or 
redetermined under this section on the same effective date as other pay 
actions that affect an employee's rate of basic pay, the actions must 
be processed in the order prescribed under the rules governing the 
covered pay system of the employee's position of record (e.g., 5 CFR 
531.206 for GS positions and 5 CFR 532.413 for Federal Wage System 
positions).
    (6) In applying this section, an agency must convert an employee's 
existing annual rate of pay to an hourly rate of pay if the employee's 
new position is under a pay system that uses only hourly rates. An 
agency must convert an employee's existing hourly rate of pay to an 
annual rate of pay if the employee's new position is under a pay system 
that uses annual rates of pay.
    (b) Determining initial pay retention entitlement. When an employee 
becomes entitled to pay retention under Sec.  536.301 or 536.302, the 
agency must determine the employee's pay retention entitlement under 
the following rules (subject to the requirements in paragraph (a) of 
this section):
    (1) If an employee's existing payable rate of basic pay is less 
than or equal to the maximum rate of the highest applicable rate range 
for the grade of the employee's position of record immediately after 
the event causing the pay retention entitlement, the employee is 
entitled to the lowest rate of basic pay in such rate range that equals 
or exceeds the employee's existing payable rate of basic pay. If an 
employee's payable rate of basic pay is set at or below the maximum 
rate of the highest applicable rate range, pay retention under this 
subpart ceases to apply to the employee.
    (2) If the employee's existing payable rate of basic pay is greater 
than the maximum rate of the highest applicable rate range for the 
grade of the employee's position immediately after the event causing 
the pay retention entitlement, the employee is entitled to a retained 
rate equal to the employee's existing payable rate of basic pay, 
subject to the limitations in paragraph (b)(3) of this section.
    (3) A newly established retained rate may not exceed--
    (i) 150 percent of the maximum payable rate of basic pay of the 
highest applicable rate range for the grade of the employee's position 
of record; or
    (ii) The Executive Level IV maximum rate limitation established 
under Sec.  536.306.
    (4) In applying this section for an employee who becomes eligible 
for pay retention while serving on a temporary promotion or temporary 
reassignment, the agency must use the rate of basic pay the employee 
would have received if the temporary promotion or temporary 
reassignment had not occurred.
    (c) Redetermining pay retention entitlement at time of change in 
position or pay schedule. When an employee receiving a retained rate 
undergoes a change in position or pay schedule that results in a new 
highest applicable rate range (and when the terminating conditions for 
pay retention under Sec.  536.308(a)(1), (3), (4), and (5) do not 
apply), the agency must determine the employee's pay retention 
entitlement under the following rules (subject to the

[[Page 31312]]

requirements in paragraph (a) of this section):
    (1) If the employee's grade and pay system are not changing and if 
the employee's existing retained rate is less than or equal to the 
maximum rate of the highest applicable rate range for the employee's 
position of record immediately after the position or schedule change, 
the employee is entitled to the maximum rate of the highest applicable 
rate range, and pay retention ceases to apply.
    (2) If the employee's grade and pay system are not changing and if 
the employee's existing retained rate is greater than the maximum rate 
on the highest applicable rate range for the employee's position of 
record immediately after the position or schedule change, the employee 
continues to be entitled to the existing retained rate.
    (3) If the employee's pay system is not changing but the employee 
is being promoted to a higher-graded position, the agency must apply 
the applicable promotion rules to determine the employee's payable rate 
of basic pay (e.g., the rules in 5 CFR 531.214(d)(5) for GS positions 
and 5 CFR 532.407 for Federal Wage System positions). When the 
resulting rate is equal to or greater than the existing retained rate, 
pay retention ceases to apply. When the resulting rate is less than the 
existing retained rate, the employee continues to be entitled to the 
existing retained rate.
    (4) If the employee is moving to a position under a different 
covered pay system whose grade has a higher representative rate, the 
agency must apply the applicable pay administration rules to determine 
the employee's payable rate of basic pay (e.g., part 531, subpart B, 
for GS positions and part 532 for Federal Wage System provisions). When 
the resulting rate is equal to or greater than the existing retained 
rate, pay retention ceases to apply to the employee. When the resulting 
rate is less than the existing retained rate, the employee continues to 
be entitled to the existing retained rate.
    (5) In applying this section to a retained rate employee who 
receives a temporary promotion or temporary reassignment, the temporary 
promotion or temporary reassignment is not a basis for permanently 
terminating an employee's pay retention entitlement. When the temporary 
promotion or temporary reassignment ends, the employee's pay retention 
entitlement will be determined as if the employee had not received the 
temporary promotion or temporary reassignment.
    (6) Notwithstanding Sec.  536.308(a)(1), an agency must continue a 
retained rate entitlement for an employee serving under an interim 
appointment made under 5 CFR 772.102 if the employee's pay was retained 
under this subpart under the appointment immediately preceding the 
interim appointment.


Sec.  536.305  Adjusting an employee's retained rate when a pay 
schedule is adjusted.

    (a)(1) Except as otherwise provided in this section, when the 
maximum rate of the highest applicable rate range for an employee's 
position of record is increased while the employee is receiving a 
retained rate, the employee is entitled to 50 percent of the amount of 
the increase in that maximum rate, subject to the maximum rate 
limitation in Sec.  536.306. This 50-percent adjustment rule applies 
only when the maximum rate increases are attributable to the adjustment 
of the employee's existing pay schedule or the establishment of a new 
pay schedule that covers the employee's existing position of record.
    (2) As provided in 5 CFR 531.206, a retained rate adjustment under 
paragraph (a)(1) of this section is a general pay adjustment that must 
be applied before any geographic conversion under Sec.  536.303(b) or 
any other simultaneous pay action. The retained rate adjustment under 
paragraph (a)(1) of this section must be determined based on the 
employee's position of record and official worksite as in effect 
immediately before the effective date of the adjustment.
    (3) Consistent with 5 U.S.C. 5363(c), a change in the maximum rate 
of the highest applicable rate range based on a change in the 
employee's official worksite is not considered in applying paragraph 
(a)(1) of this section. The employee's new retained rate must be 
determined under the geographic conversion rule in Sec.  536.303(b).
    (4) Paragraph (a)(1) of this section does not apply to an increase 
in an employee's highest applicable rate range that results from a 
change in the employee's position of record. Such an increase is not 
attributable to an adjustment in the pay schedule applicable to the 
employee's position and thus is not an increase as described in 5 
U.S.C. 5363(b)(2)(B).
    (b) When a pay schedule adjustment causes an employee's retained 
rate (after any adjustment under this section) to become equal to or 
lower than the maximum rate of the highest applicable rate range for 
the grade of the employee's position, the employee is entitled to the 
maximum rate of the highest applicable rate range, and pay retention 
ceases to apply.


Sec.  536.306  Limitation on retained rates.

    (a) A retained rate may not at any time exceed the rate payable for 
level IV of the Executive Schedule.
    (b) When an employee's retained rate is limited under this section, 
an agency may not apply this subpart or the provisions of any other law 
or regulation to the rate of basic pay the employee would have received 
but for this limitation.


Sec.  536.307  Treatment of a retained rate as basic pay for other 
purposes.

    (a) A retained rate is considered to be an employee's rate of basic 
pay for the purpose of computing or applying--
    (1) Retirement deductions, contributions, and benefits under 5 
U.S.C. chapters 83 and 84;
    (2) Life insurance premiums and benefits under 5 U.S.C. chapter 87;
    (3) Premium pay under 5 U.S.C. chapter 55, subchapter V, and 5 CFR 
part 532 and part 550, subparts A and I;
    (4) Severance pay under 5 U.S.C. 5595 and 5 CFR part 550, subpart 
G;
    (5) Post differentials under 5 U.S.C. 5925 and danger pay 
allowances under 5 U.S.C. 5928;
    (6) Nonforeign area cost-of-living allowances and post 
differentials under 5 U.S.C. 5941(a) and 5 CFR part 591, subpart B;
    (7) Lump-sum payments for accumulated and annual leave under 5 CFR 
part 550, subpart L;
    (8) General Schedule pay administration provisions (e.g., promotion 
increases) to the extent provided in 5 CFR part 531, subpart B;
    (9) Pay administration provisions for prevailing rate employees to 
the extent provided in 5 CFR part 532;
    (10) Other provisions as specified in other statutes or OPM 
regulations; and
    (11) Payments and benefits equivalent to those listed in this 
section under other legal authorities, as determined by the head of the 
agency or other authorized official responsible for administering such 
payments or benefits.
    (b) For the purpose of applying other laws and regulations not 
listed in paragraph (a) of this section to an employee receiving a 
retained rate, the employee's rate of basic pay is deemed to be the 
applicable maximum rate of basic pay for the employee's position of 
record (e.g., the maximum rate of basic pay for a locality rate range 
or special rate range, as applicable, for the purpose of computing a 
percentage-based award under 5 CFR 451.104(g)).

[[Page 31313]]

Sec.  536.308  Loss of eligibility for or termination of pay retention.

    (a) Eligibility for pay retention ceases if any of the following 
conditions occurs at any time after the employee has received written 
notification that the employee's pay will be reduced, and entitlement 
to pay retention terminates if any of the following conditions occurs 
after the commencement of pay retention:
    (1) The employee has a break in service of 1 workday or more;
    (2) The employee is entitled to a rate of basic pay under a covered 
pay system which is equal to or greater than the employee's retained 
rate (after applying any applicable geographic conversion under 
paragraph (b) of this section), excluding a rate resulting from a 
temporary promotion or temporary reassignment;
    (3) The employee declines a reasonable offer (as determined under 
Sec.  536.104) of a position in which the employee's rate of basic pay 
would be equal to or greater than the employee's retained rate (after 
applying any applicable geographic conversion under paragraph (b) of 
this section);
    (4) The employee is reduced in grade for personal cause or at the 
employee's request (based on the actual grade of the employee's 
position rather than the employee's retained grade and, when a movement 
to a different covered pay system is involved, a comparison of 
representative rates under Sec.  536.105); or
    (5) The employee moves to a position not under a covered pay 
system.
    (b) When the rate comparison required by paragraph (a)(2) or (3) of 
this section involves a new or offered position that is located in a 
different geographic area where different pay schedules would apply to 
the employee's existing position of record, the agency must convert the 
employee's existing retained rate using the geographic conversion rules 
in Sec.  536.303(b) before making the rate comparison. The converted 
retained rate must be compared to the payable rate of basic pay for the 
new or offered position in determining whether the rate of basic pay 
for an offered position is equal to or higher than the employee's 
retained rate.
    (c) Termination of pay retention benefits takes effect--
    (1) At the end of the day before placement if the termination is 
the result of the employee's placement in another position; or
    (2) At the end of the last day of the pay period in which the 
employee declines a reasonable offer.
    (d) If an employee's eligibility for pay retention ceases or 
entitlement to pay retention terminates under this section, the 
employee's rate of basic pay must be set using the pay-setting rules 
applicable to the employee's position of record (e.g., 5 CFR part 531, 
subpart B, for GS positions). However, when an employee's retained rate 
is terminated under paragraph (a)(2) or (3) of this section and the 
employee's grade is unchanged, the employee's payable rate of basic pay 
may not be set below the maximum rate of the highest applicable rate 
range.


Sec.  536.309  Converting retained rates on May 1, 2005.

    (a) Consistent with section 301(d)(2) of Public Law 108-411, an 
agency must convert an employee's retained rate or similar rate, as 
described in paragraph (b) of this section, to a retained rate under 
this subpart on May 1, 2005. The new retained rate must equal the 
retained rate in effect on April 30, 2005, as adjusted to include any 
applicable locality payment under 5 U.S.C. 5304 or similar provision of 
law.
    (b) This section applies to an employee under a covered pay system 
who, on April 30, 2005, was receiving--
    (1) A retained rate under 5 U.S.C. 5363;
    (2) A rate paid under the authority of 5 U.S.C. 5334(b) or 5 U.S.C. 
5362 which was greater than the maximum rate of basic pay payable for 
the grade of the employee's position of record; or
    (3) A continued rate of pay under 5 CFR part 531, subpart C or G 
(as contained in the January 1, 2005, edition of title 5, Code of 
Federal Regulations, parts 1 to 699) which was greater than the maximum 
rate of basic pay payable for the grade of the employee's position.
    (c) The conversion rules in this section must be applied before any 
simultaneous pay action that takes effect on May 1, 2005.

PART 550--PAY ADMINISTRATION (GENERAL)

Subpart A--Premium Pay

0
40. The authority citation for subpart A of part 550 is revised to read 
as follows:

    Authority: 5 U.S.C. 5304 note, 5305 note, 5504(d), 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.


0
41. In Sec.  550.103, revise the definition of rate of basic pay to 
read as follows:


Sec.  550.103  Definitions

* * * * *
    Rate of basic pay means the rate of pay fixed by law or 
administrative action for the position held by an employee, including 
any applicable locality payment under 5 CFR part 531, subpart F; 
special rate supplement under 5 CFR part 530, subpart C; or similar 
payment or supplement under other legal authority, before any 
deductions and exclusive of additional pay of any other kind.
* * * * *

Subpart B--Advances in Pay

0
42. The authority citation for subpart B of part 550 is revised to read 
as follows:

    Authority: 5 U.S.C. 5524a, 5545a(h)(2)(B); E.O. 12748, 3 CFR, 
1992 Comp., p. 316.


0
43. In Sec.  550.202, revise the definition of rate of basic pay to 
read as follows:


Sec.  550.202  Definitions.

* * * * *
    Rate of basic pay means the rate of pay fixed by law or 
administrative action for the position held by an employee, excluding 
additional pay of any kind except the following, as applicable:
    (1) Any locality payment under 5 CFR part 531, subpart F; special 
rate under 5 CFR part 530, subpart C; or similar payment or supplement 
under other legal authority;
    (2) Annual premium pay under 5 U.S.C. 5545(c) or availability pay 
under 5 U.S.C. 5545a;
    (3) Straight-time pay for regular overtime hours for firefighters 
under 5 U.S.C. 5545b (as provided in Sec.  550.1305(b)); and
    (4) Night differential for prevailing rate employees under 5 U.S.C. 
5343(f).

Subpart G--Severance Pay

0
44. The authority citation for subpart G of part 550 continues to read 
as follows:

    Authority: 5 U.S.C. 5595; E.O. 11257, 3 CFR, 1964-1965 Comp., p. 
357.

0
45. In Sec.  550.703, amend the definition of representative rate by 
removing the reference ``5 CFR 536.102'' and adding in its place ``5 
CFR 536.103'', and revise the definition of rate of basic pay to read 
as follows:


Sec.  550.703  Definitions.

* * * * *
    Rate of basic pay means the rate of pay fixed by law or 
administrative action for the position held by an employee, excluding 
additional pay of any kind except the following, as applicable:
    (1) Any locality payment under 5 CFR part 531, subpart F; special 
rate under

[[Page 31314]]

5 CFR part 530, subpart C; or similar payment or supplement under other 
legal authority;
    (2) Annual premium pay under 5 U.S.C. 5545(c) or availability pay 
under 5 U.S.C. 5545a;
    (3) Straight-time pay for regular overtime hours for firefighters 
under 5 U.S.C. 5545b (as provided in Sec.  550.1305(b)); and
    (4) Night differential for prevailing rate employees under 5 U.S.C. 
5343(f).
* * * * *

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

0
46. The authority citation for subpart L continues to read as follows:

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

0
47. In Sec.  550.1202, revise the definition of rate of basic pay to 
read as follows:


Sec.  550.1202  Definitions.

* * * * *
    Rate of basic pay means the rate of pay fixed by law or 
administrative action for the position held by an employee, including 
any applicable locality payment under 5 CFR part 531, subpart F; 
special rate supplement under 5 CFR part 530, subpart C; or similar 
payment or supplement under other legal authority, before any 
deductions and exclusive of additional pay of any other kind.
* * * * *

0
48. In Sec.  550.1205, revise paragraph (b)(1) to read as follows:


Sec.  550.1205  Calculating a lump-sum payment.

* * * * *
    (b) * * *
    (1) An employee's rate of basic pay (as defined in Sec.  550.1202);
* * * * *

Subpart M--Firefighter Pay

0
49. The authority citation for subpart M of part 550 continues to read 
as follows:

    Authority: 5 U.S.C. 5545b, 5548, and 5553.


Sec.  550.1305  Treatment as basic pay.

0
50. In Sec.  550.1305, amend paragraph (e) by removing the reference 
``Sec.  531.606(b) of this chapter'' and adding in its place ``5 CFR 
531.610''.

PART 591--ALLOWANCES AND DIFFERENTIALS

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

0
51. The authority citation for subpart B of part 591 continues to read 
as follows:

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


0
52. In Sec.  591.201, remove the definition of official duty station, 
add in alphabetical order the definitions of official worksite and 
position of record, and revise the definition of rate of basic pay to 
read as follows:


Sec.  591.201  Definitions.

* * * * *
    Official worksite means the official location of an employee's 
position of record as determined under 5 CFR 531.605.
    Position of record means an employee's official position (defined 
by grade, occupational series, employing agency, law enforcement 
officer status, and any other condition that determines coverage under 
a pay schedule (other than official worksite)), as documented on the 
employee's most recent Notification of Personnel Action (Standard Form 
50 or equivalent) and the current position description, excluding any 
position to which the employee is temporarily detailed. For an employee 
whose change in official position is followed within 3 workdays by a 
reduction in force resulting in the employee's separation before he or 
she is required to report for duty in the new position, the position of 
record in effect immediately before the position change is deemed to 
remain the position of record through the date of separation.
* * * * *
    Rate of basic pay means the rate of pay fixed by statute for the 
position held by an individual, including any supplement included as 
part of basic pay under this subpart by law or regulation (e.g., a 
special rate supplement under 5 CFR part 530, subpart C), before any 
deductions and exclusive of additional pay of any other kind, such as 
overtime pay, night differential, extra pay for work on holidays, or 
other allowances and differentials. For firefighters covered by 5 
U.S.C. 5545b, straight-time pay for regular overtime hours is basic 
pay, as provided in Sec.  550.1305(b) of this chapter.
* * * * *

Subpart B [Amended]

0
53. In addition to the amendments set forth above, in 5 CFR part 591, 
subpart B, remove the words ``official duty station'' and ``duty 
station'' and add in their place the words ``official worksite'' 
throughout the subpart, as amended.

PART 630--ABSENCE AND LEAVE

0
54. The authority citation for part 630 is revised to read as follows:

    Authority: 5 U.S.C. 6311; Sec.  630.301 also issued under Pub. 
L. 103-356, 108 Stat. 3410 and Pub. L. 108-411, 118 Stat 2312; Sec.  
630.303 also issued under 5 U.S.C. 6133(a); Sec. Sec.  630.306 and 
630.308 also issued under 5 U.S.C. 6304(d)(3), Pub. L. 102-484, 106 
Stat. 2722, and Pub. L. 103-337, 108 Stat. 2663; subpart D also 
issued under Pub. L. 103-329, 108 Stat. 2423; Sec.  630.501 and 
subpart F also issued under E.O. 11228, 30 FR 7739, 3 CFR, 1974 
Comp., p. 163; subpart G also issued under 5 U.S.C. 6305; subpart H 
also issued under 5 U.S.C. 6326; subpart I also issued under 5 
U.S.C. 6332, Pub. L. 100-566, 102 Stat. 2834, and Pub. L. 103-103, 
107 Stat. 1022; subpart J also issued under 5 U.S.C. 6362, Pub. L. 
100-566, 102 Stat. 2834, and Pub. L. 103-103, 107 Stat. 1022; 
subpart K also issued under Pub. L. 105-18, 111 Stat. 158; subpart L 
also issued under 5 U.S.C. 6387 and Pub. L. 103-3, 107 Stat. 23; and 
subpart M also issued under 5 U.S.C. 6391 and Pub. L. 102-25, 105 
Stat. 92.

Subpart L--Family and Medical Leave

0
55. In Sec.  630.1204, revise paragraph (d)(1) to read as follows:


Sec.  630.1204  Intermittent leave or reduced leave schedule.

* * * * *
    (d) * * *
    (1) An equivalent grade or pay level, including any applicable 
locality payment under 5 CFR part 531, subpart F; special rate 
supplement under 5 CFR part 530, subpart C; or similar payment or 
supplement under other legal authority;
* * * * *
0
56. In Sec.  630.1208, revise paragraph (b)(2) to read as follows:


Sec.  630.1208  Protection of employment and benefits.

* * * * *
    (b) * * *
    (2) An equivalent grade or pay level, including any applicable 
locality payment under 5 CFR part 531, subpart F; special rate 
supplement under 5 CFR part 530, subpart C; or similar payment or 
supplement under other legal authority;
* * * * *

[[Page 31315]]

PART 831--RETIREMENT

0
57. The authority citation for part 831 continues to read as follows:

    Authority: 5 U.S.C. 8347; Sec. 831.102 also issued under 5 
U.S.C. 8334; Sec. 831.106 also issued under 5 U.S.C. 552a; Sec. 
831.108 also issued under 5 U.S.C. 8336(d)(2); Sec. 831.114 also 
issued under 5 U.S.C. 8336(d)(2), and section 1313(b)(5) of Pub. L. 
107-296, 116 Stat. 2135; Sec. 831.201(b)(1) also issued under 5 
U.S.C. 8347(g); Sec. 831.201(b)(6) also issued under 5 U.S.C. 
7701(b)(2); Sec. 831.201(g) also issued under sections 11202(f), 
11232(e), and 11246(b) of Pub. L. 105-33, 111 Stat. 251; Sec. 
831.201(g) also issued under sections 7(b) and 7(e) of Pub. L. 105-
274, 112 Stat. 2419; Sec. 831.201(i) also issued under sections 3 
and 7(c) of Pub. L. 105-274, 112 Stat. 2419; Sec. 831.204 also 
issued under section 102(e) of Pub. L. 104-8, 109 Stat. 102, as 
amended by section 153 of Pub. L. 104-134, 110 Stat. 1321; Sec. 
831.205 also issued under section 2207 of Pub. L. 106-265, 114 Stat. 
784; Sec. 831.301 also issued under section 2203 of Pub. L. 106-265, 
114 Stat. 780; Sec. 831.303 also issued under 5 U.S.C. 8334(d)(2) 
and section 2203 of Pub. L. 106-235, 114 Stat. 780; Sec. 831.502 
also issued under 5 U.S.C. 8337; Sec. 831.502 also issued under 
section 1(3), E.O. 11228, 3 CFR 1964-1965 Comp. p. 317; Sec. 831.663 
also issued under sections 8339(j) and (k)(2); Secs. 831.663 and 
831.664 also issued under section 11004(c)(2) of Pub. L. 103-66, 107 
Stat. 412; Sec. 831.682 also issued under section 201(d) of Pub. L. 
99-251, 100 Stat. 23; Sec. 831.912 also issued under Appendix C to 
Pub. L. 106-554, 114 Stat. 2763A-125; subpart V also issued under 5 
U.S.C. 8343a and section 6001 of Pub. L. 100-203, 101 Stat. 1330-
275; Sec. 831.2203 also issued under section 7001(a)(4) of Pub. L. 
101-508, 104 Stat. 1388-328.

Subpart E--Eligibility for Retirement


Sec.  831.503  [Amended]

0
58. In Sec.  831.503, amend paragraph (b)(3)(iv) by removing the 
reference ``Sec.  536.102'' and adding in its place ``Sec.  536.103''.

PART 842--FEDERAL EMPLOYEES RETIREMENT SYSTEM--BASIC ANNUITY

0
59. The authority citation for part 842 continues to read as follows:

    Authority: 5 U.S.C. 8461(g); Secs. 842.104 and 842.106 also 
issued under 5 U.S.C. 8461(n); Sec. 842.104 also issued under 
sections 3 and 7(c) of Pub. L. 105-274, 112 Stat. 2419; Sec. 842.105 
also issued under 5 U.S.C. 8402(c)(1) and 7701(b)(2); Sec. 842.106 
also issued under section 102(e) of Pub. L. 104-8, 109 Stat. 102, as 
amended by section 153 of Pub. L. 104-134, 110 Stat. 1321-102; Sec. 
842.107 also issued under sections 11202(f), 11232(e), and 11246(b) 
of Pub. L. 105-33, 111 Stat. 251, and section 7(b) of Pub. L. 105-
274, 112 Stat. 2419; Sec. 842.108 also issued under section 7(e) of 
Pub. L. 105-274, 112 Stat. 2419; Sec. 842.213 also issued under 5 
U.S.C. 8414(b)(1)(B) and section 1313(b)(5) of Pub. L. 107-296, 116 
Stat. 2135; Secs. 842.604 and 842.611 also issued under 5 U.S.C. 
8417; Sec. 842.607 also issued under 5 U.S.C. 8416 and 8417; Sec. 
842.614 also issued under 5 U.S.C. 8419; Sec. 842.615 also issued 
under 5 U.S.C. 8418; Sec. 842.703 also issued under section 
7001(a)(4) of Pub. L. 101-508, 104 Stat. 1388; Sec. 842.707 also 
issued under section 6001 of Pub. L. 100-203, 101 Stat. 1300; Sec. 
842.708 also issued under section 4005 of Pub. L. 101-239, 103 Stat. 
2106 and section 7001 of Pub. L. 101-508, 104 Stat. 1388; subpart H 
also issued under 5 U.S.C. 1104; Sec. 842.810 also issued under 
section 636 of Appendix C to Pub. L. 106-554 at 114 Stat. 2763A-164.

Subpart B--Eligibility


Sec.  842.206  [Amended]

0
60. In Sec.  842.206, amend paragraph (c)(3)(iv) by removing the 
reference ``Sec.  536.102'' and adding in its place ``Sec.  536.103''.

[FR Doc. 05-10793 Filed 5-26-05; 9:37 am]
BILLING CODE 6325-39-P