[Federal Register Volume 71, Number 131 (Monday, July 10, 2006)]
[Rules and Regulations]
[Pages 38753-38754]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-10750]



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 Rules and Regulations
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  Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules 
and Regulations  

[[Page 38753]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 534

RIN 3206-AL01


Senior Executive Service Pay

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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

SUMMARY: The Office of Personnel Management is issuing final 
regulations to provide agencies with the authority to increase the 
rates of basic pay of certain members of the Senior Executive Service 
whose pay was set before the agency's senior executive performance 
appraisal system was certified for the calendar year involved. The 
final regulations allow an agency to review the rate of basic pay of 
these employees 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: Effective Date: The final regulations will become effective on 
July 10, 2006.

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: On March 3, 2006, the Office of Personnel 
Management (OPM) issued 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 (71 FR 
10913). We proposed that agencies be authorized to review the rates of 
basic pay set for 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. 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'').
    The 30-day public comment period ended on April 3, 2006. During the 
public comment period, OPM received comments from eight Federal 
agencies and one association of Federal executives. All of the 
commenters fully support OPM's proposed regulations. Therefore, we are 
adopting the proposed regulations as final.

``Certification Gap''

    Under the new SES performance-based 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. 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). By law, such certification must be made on a calendar year 
basis. (See 5 U.S.C. 5307(d) and 5 CFR part 430, subpart D.) Therefore, 
an agency may not set or adjust 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 or adjust pay above level III (in the previous 
calendar year) to the time an agency may set or adjust pay above level 
III upon certification of its senior executive performance appraisal 
system (in the next calendar year).
    The regulations at 5 CFR 534.404(e)(2) allow agencies that 
eventually receive certification of their senior executive performance 
appraisal system(s) to provide an additional pay increase to certain 
SES members, such as a new appointee with superior leadership skills, 
an SES member accepting a position with substantially greater 
responsibility, or an SES member who is critical to the mission of the 
agency and who is likely to leave the agency. This is accomplished by 
providing for an additional exception to the ``12-month rule.''
    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 through legislation. Although the commenters fully 
support OPM's efforts to close the ``certification gap,'' several 
recognized the need for a long-term solution and recommended a 
legislative change to allow senior executive performance appraisal 
systems to be certified on an annual basis (i.e., once every 12 
months), rather than on a calendar year basis, as required by current 
law.

Effective Date

    Under 5 CFR 534.404(e)(2), the decision to provide an additional 
pay increase to an SES member may 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 certified. An agency asked 
whether the effective date for providing an additional pay increase 
would be the effective date of the final regulations or the date the 
agency's senior executive performance appraisal system is certified. If 
an agency's senior executive performance appraisal system is certified 
for calendar year 2006 before the final regulations become effective, 
the earliest date an agency may provide an additional pay increase 
would be the effective date of the final regulations. The agency has no 
authority to provide an additional pay increase until the final 
regulations become effective. However, if an agency's senior executive 
performance appraisal system is certified for calendar year 2006 after 
the final regulations become effective, the earliest date an agency may 
provide an additional pay increase would be the date the agency's 
senior executive performance appraisal system is certified.

[[Page 38754]]

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because they 
apply only to 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 5 CFR Part 534

    Government Employees, Hospitals, Students, and Wages.

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

0
Accordingly, OPM is amending part 534 of title 5 of the Code of Federal 
Regulations as follows:

PART 534--PAY UNDER OTHER SYSTEMS

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

0
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).


0
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 part 
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 part 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. E6-10750 Filed 7-7-06; 8:45 am]
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