[Federal Register Volume 71, Number 42 (Friday, March 3, 2006)]
[Proposed Rules]
[Pages 10913-10914]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-3016]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 71, No. 42 / Friday, March 3, 2006 / Proposed 
Rules  

[[Page 10913]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 534

RIN 3206-AL01


Senior Executive Service Pay

AGENCY: Office of Personnel Management.

ACTION: Proposed rule.

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SUMMARY: The Office of Personnel Management (OPM) is issuing proposed 
regulations to provide agencies with the authority to increase the 
rates of basic pay of certain members of the Senior Executive Service 
(SES) whose pay was set before the agency's senior executive 
performance appraisal system was certified for the calendar year 
involved. The proposed regulations would allow an agency to review the 
rate of basic pay of these SES members and provide an additional pay 
increase, if warranted, up to the rate for level II of the Executive 
Schedule upon certification of the agency's senior executive 
performance appraisal system for the current calendar year.

DATES: Comments must be received on or before April 3, 2006.

ADDRESSES: Send or deliver comments to Donald J. Winstead, Deputy 
Associate Director for Pay and Performance 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: Jo Ann Perrini 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 proposed regulations to provide agencies with the authority to 
increase the rates of basic pay of certain members of the Senior 
Executive Service (SES) whose pay was set before the agency's senior 
executive performance appraisal system was certified under 5 CFR part 
430, subpart D, for the calendar year involved. The proposed 
regulations would allow an agency to review the rates of basic pay set 
for these SES members, which was capped at the rate for level III of 
the Executive Schedule, and provide an additional pay increase, if 
warranted, up to the rate for level II of the Executive Schedule upon 
certification of the agency's senior executive performance appraisal 
system for the current calendar year.
    The National Defense Authorization Act for Fiscal Year 2004 (Pub. 
L. 108-136, November 24, 2003) authorized a new performance-based pay 
system for SES members. Under the new SES pay system, an agency must 
set and adjust the rate of basic pay for an SES member on the basis of 
the employee's performance and/or contribution to the agency's 
performance, as determined by the agency through the administration of 
its performance management system(s) for senior executives. On December 
6, 2004, OPM issued final regulations on the administration of the SES 
performance-based pay system and prescribed the criteria for 
establishing and adjusting SES rates of basic pay and paying 
performance awards (69 FR 70355).
    Agencies have had experience administering pay under the new SES 
performance-based system for 2 years. During this period, we have 
identified a recurring problem that occurs at the beginning of each 
calendar year and that prevents an agency from setting pay above the 
rate for level III of the Executive Schedule because its senior 
executive performance appraisal system has not yet been certified for 
that calendar year.
    Under 5 U.S.C. 5307(d), an agency's senior executive performance 
appraisal system is certified on a calendar year basis. (The 
regulations in 5 CFR part 430, subpart D, provide the requirements for 
obtaining certification of a performance appraisal system for senior 
executives.) Under 5 U.S.C. 5382(b), the maximum rate of the SES rate 
range may not exceed the rate for level III of the Executive Schedule 
unless the agency's senior executive performance appraisal system is 
certified under 5 U.S.C. 5307(d). Therefore, an agency may not set pay 
for an SES member at a rate above the rate for level III until its 
senior executive performance appraisal system is certified for the 
calendar year involved. Since many agencies' senior executive 
performance appraisal systems are not certified at the beginning of a 
calendar year, there is a gap from the time an agency may set SES pay 
above level III (in the previous calendar year) to the time an agency 
may again set SES pay above level III upon certification of its senior 
executive performance appraisal system (in the next calendar year).
    In one limited circumstance, OPM authorized the extension of 
provisional certification into the following calendar year--i.e., for 
the sole purpose of adjusting pay on the basis of official ratings 
determined during the calendar year for which their appraisal system 
was certified. (See 5 CFR 430.405(c)(2).) However, this limited 
exception does not help affected agencies in other situations--e.g., 
recruiting individuals with superior leadership skills into the SES, 
reassigning current SES members into positions with substantially 
greater responsibility, or retaining an SES member who is critical to 
the mission of the agency--because non-certified agencies may not set 
SES pay above the rate for level III in these situations. Moreover, the 
statutory prohibition against adjusting SES pay more than once during 
any 12-month period (except in unusual situations as described in OPM's 
regulations) results in these individuals receiving lower rates of 
basic pay than individuals in the same situations whose rates of basic 
pay were or are set during a period when the agency's senior executive 
appraisal system has been certified.
    The requirement in 5 U.S.C. 5307(d) that senior executive 
performance appraisal systems be certified on a calendar year basis may 
be changed only by legislation. We are proposing regulations to allow 
agencies that obtain certification of their senior executive 
performance appraisal system(s) to review the rates of pay they set 
earlier in the calendar year for certain SES members and provide an 
additional pay increase, if warranted, up to the rate for level II of 
the Executive Schedule. Under this proposal, the determination to 
provide an additional pay increase could not be made effective before 
the date the agency's senior executive performance appraisal system is 
certified under 5 CFR part 430, subpart D, or after December 31st of 
the calendar year for which the agency's system is

[[Page 10914]]

certified. The additional pay increase would not be considered a pay 
adjustment for the purpose of applying 5 CFR 534.404(c) (the ``12-month 
rule'').

Waiver of 60-Day Comment Period for Proposed Rulemaking

    Pursuant to 5 U.S.C. 553(b)(3)(B), I find that good cause exists to 
waive the 60-day comment period for general notice of proposed 
rulemaking. Limiting the comment period for the proposed regulations to 
30 days will enable OPM to issue final regulations in 2006, which will 
give practical effect to these regulations at the earliest possible 
moment. The final regulations will permit agencies to review the rates 
of basic pay set previously in early 2006 for SES members and provide 
an additional pay increase, if warranted, later in 2006 upon 
certification of the agency's senior executive performance appraisal 
system.

Regulatory Flexibility Act

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

E.O. 12866, Regulatory Review

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

List of Subjects in Part 534

    Government employees, Hospitals, Students, and Wages.

Office of Personnel Management.
Linda M. Springer,
Director.

    Accordingly, OPM proposes to amend part 534 of title 5 of the Code 
of Federal Regulations as follows:

PART 534--PAY UNDER OTHER SYSTEMS

    1. The authority citation for part 534 continues 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, Public Law 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

    2. In Sec.  534.404, redesignate paragraphs (c)(3)(v) and (vi) as 
(c)(3)(vi) and (vii), respectively, add new paragraph (c)(3)(v), and 
revise paragraph (e) to read as follows:


Sec.  534.404  Setting and adjusting pay for senior executives.

* * * * *
    (c) 12-month rule. * * *
    (3) * * *
    (v) A determination to provide an additional pay increase under 
paragraph (e)(2) of this section when an agency's senior executive 
performance appraisal system is certified under 5 CFR part 430, subpart 
D, after the beginning of a calendar year;
* * * * *
    (e) Adjustments in pay after certification of applicable 
performance appraisal system.
    (1) In the case of an agency that obtains certification of a 
performance appraisal system for senior executives under 5 CFR part 
430, subpart D, an authorized agency official may increase a covered 
senior executive's rate of basic pay up to the rate for level II of the 
Executive Schedule, consistent with the limitations in Sec.  
534.403(a)(3). The authorized agency official may provide an increase 
in pay if warranted under the conditions prescribed in paragraph (b) of 
this section and if the senior executive is otherwise eligible for such 
an increase (i.e., he or she did not receive a pay adjustment under 
Sec.  534.404(c) during the previous 12-month period). An adjustment in 
pay made under this paragraph is considered a pay adjustment for the 
purpose of applying Sec.  534.404(c).
    (2) In the case of an agency that was prevented from establishing 
or adjusting a rate of basic pay above the rate for level III of the 
Executive Schedule for an individual upon initial appointment to the 
SES under Sec.  534.404(a) or for a current SES member using one of the 
exceptions to the 12-month rule in Sec.  534.404(c)(4)(i), (ii), or 
(iii) because the agency had not yet obtained certification of its 
performance appraisal system for senior executives under 5 CFR 430, 
subpart D, in the current calendar year, an authorized agency official 
may increase such a senior executive's rate of basic pay up to the rate 
for level II of the Executive Schedule upon certification of the 
agency's senior executive performance appraisal system, consistent with 
the limitations in Sec.  534.403(a)(3). The authorized agency official 
may review the previous determination to set or adjust the pay of a 
senior executive to determine whether, and to what extent, an 
additional pay increase may be warranted based on the same criteria 
used for the previous determination. The determination to provide an 
additional pay increase may not be made effective before the date the 
agency's senior executive performance appraisal system is certified 
under 5 CFR 430, subpart D, or after December 31st of the calendar year 
for which the agency's system is certified. An adjustment in pay made 
under this paragraph is not considered a pay adjustment for the purpose 
of applying Sec.  534.404(c) and does not begin a new 12-month period 
for that purpose.
* * * * *
 [FR Doc. E6-3016 Filed 3-2-06; 8:45 am]
BILLING CODE 6325-39-P