[Federal Register Volume 72, Number 73 (Tuesday, April 17, 2007)]
[Proposed Rules]
[Pages 19126-19135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-7255]


 ========================================================================
 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. 72, No. 73 / Tuesday, April 17, 2007 / 
Proposed Rules  

[[Page 19126]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 9501

RIN 3206-AL02


Office of Personnel Management Criteria for Internal Revenue 
Service Broadbanding Systems

AGENCY: Office of Personnel Management.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Office of Personnel Management (OPM) is issuing proposed 
regulations to revise the criteria for Internal Revenue Service (IRS) 
broadbanding systems. The proposed regulations would provide the 
Department of the Treasury with the flexibility, in coordination with 
OPM, to establish broader bands for covered IRS employees. The proposed 
regulations also would establish a more direct relationship between pay 
and performance. Finally, the proposed regulations would revise the 
criteria consistent with the changes in the General Schedule pay 
administration rules made by the Federal Workforce Flexibility Act of 
2004 and OPM implementing regulations.

DATES: Comments must be received on or before June 18, 2007.

ADDRESSES: Send or deliver written comments to Jerry Mikowicz, Deputy 
Associate Director for Pay and Leave Administration, Strategic Human 
Resources Policy Division, 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: Jeanne Jacobson, 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 revise the criteria for Internal 
Revenue Service (IRS) broadbanding systems. Under 5 U.S.C. 9509, the 
Secretary of the Treasury may establish one or more broadbanding 
systems covering all or any portion of the IRS workforce under the 
General Schedule (GS). Note that under 5 U.S.C. 9501(c), employees 
within a unit to which a labor organization is accorded exclusive 
recognition under 5 U.S.C. chapter 71 will not be subject to the 
broadbanding flexibility provided by Sec.  9509 unless the exclusive 
representative and IRS have entered into a written agreement that 
specifically provides for the exercise of the broadbanding flexibility. 
Section 9509(b) of title 5, United States Code, directs OPM to 
prescribe criteria for IRS broadbanding systems and specifies certain 
principles that such criteria must follow, at a minimum. OPM published 
the final criteria as a notice in the Federal Register on December 19, 
2000 (65 FR 79433). We propose to issue these criteria as regulations 
in 5 CFR part 9501 with the revisions discussed in this Supplementary 
Information.
    Under 5 U.S.C. 9508, the Secretary of the Treasury must develop a 
performance management system for the IRS. These criteria include the 
definition of certain performance appraisal terms consistent with the 
concepts and terminology found in 5 U.S.C. 9508. Any performance 
management system that supports broadbanding must include the concepts 
defined by these terms. However, in its operating instructions, the IRS 
may continue to use current terminology that captures these concepts or 
apply these definitions to currently used terms if it determines that 
such an approach is the most effective for employee understanding and 
acceptance. The supplemental information explaining the criteria 
contains language describing the relevant application of these concepts 
and terms as currently used by IRS, where applicable.

Maximum Number of Grades in a Band

    We are proposing to revise the criteria to provide the Department 
of the Treasury additional flexibility in combining GS grades into 
bands under IRS broadbanding systems. Section 9501.203(a) of the 
proposed regulations (section V.B. of the current criteria) provides 
the minimum and maximum number of GS grades that may be combined into 
bands. In Sec.  9501.203(b), we propose to allow the Department of the 
Treasury, after coordination with OPM, to establish one or more bands 
that encompass grades not otherwise permitted by Sec.  9501.203(a).
    In addition, we propose to add a new provision in Sec.  9501.203(c) 
to require each IRS broadbanding system to include at least one band 
that combines two or more General Schedule grades, consistent with the 
definition of ``broadbanded system'' in 5 U.S.C. 9509(a). We have also 
amended the definition of broadbanding system in Sec.  9501.104 to 
provide that all positions covered by the regulations are considered to 
be in a single broadbanding system unless the Department of the 
Treasury determines that a separate system is needed for supervisors 
and managerial employees (as authorized in Sec.  9501.206(a)).

Within-Band Pay Adjustments

    The proposed regulations at Sec.  9501.205 revise the criteria 
currently found in section V.D. concerning within-band pay adjustments. 
This section includes some minor wording changes for clarity, 
consistency, and regulatory formatting. As discussed further, the other 
changes in the criteria for within-band adjustments are intended 
primarily to establish a more direct relationship between pay and 
performance.
    Section 9501.205(f)(1) of the proposed regulations requires IRS to 
use performance assessments derived under a performance appraisal 
system established under 5 U.S.C. 9508 (i.e., ratings of record as 
currently applied by IRS) as a basis for within-band pay increases. 
This paragraph provides that IRS policies for granting within-band pay 
increases on the basis of a positive assessment must provide for pay 
distinctions based on levels of performance and requires that a 
positive assessment in the IRS performance appraisal system supporting 
the broadbanding system must have two or more summary rating levels 
that represent performance equivalent to fully successful or better 
(i.e., a rating of record of ``Fully Successful'' or higher level as 
currently applied by IRS). In Sec.  9501.104, we have added a 
definition of positive assessment to mean a

[[Page 19127]]

summary performance assessment documenting that employee performance is 
the equivalent of fully successful or better (i.e., a rating of record 
of ``Fully Successful'' or higher as currently applied by IRS). In 
addition, we have added a definition of negative assessment to mean a 
summary performance assessment documenting that employee performance is 
less than the equivalent of fully successful (i.e., a rating of record 
of ``Minimally Successful'' or ``Unacceptable'' as currently applied by 
IRS). Furthermore, for clarification and ease of reference, we have 
included definitions for performance assessment and unacceptable 
performance.
    The proposed regulations at Sec.  9501.205(f)(6) allow IRS to 
establish a separate pay progression plan and separate salary increase 
budget for entry/developmental employees in recognition of the fact 
that pay progression for entry/developmental employees is often 
designed to be more rapid (as with GS entry/developmental employees who 
are in career ladders and receive regular promotions providing sizable 
pay increases typically each year). Because of this additional 
flexibility, the proposed regulations at Sec.  9501.401 require that, 
if IRS provides prorated career-ladder promotion payments to a group of 
employees converted to entry/developmental positions covered by a 
separate pay progression plan, the first salary increase budget for 
these entry/developmental employees following conversion must be 
determined after taking into account the length of time between the 
prorated promotion payments and the first performance-based payments 
under the IRS broadbanding system. Generally, the normal salary 
increase budget for entry/developmental employees should be reduced if 
that length of time is less than 52 weeks. Similarly, if an individual 
employee enters the broadbanding system by transfer or reassignment 
from another Federal position and receives a prorated within-grade 
increase or career-ladder promotion payment at conversion, the 
employee's first performance-based payment under the IRS broadbanding 
system may be reduced, as allowed under Sec.  9501.205(f)(8) and 
discussed below.
    Section 9501.205(f)(8) provides IRS with the flexibility to reduce 
an employee's performance-based within-band increase from that 
generally provided under the pay progression plan when, for example, an 
employee enters the broadbanding system during the appraisal period 
that is the basis for the within-band increase, an employee was in a 
leave without pay status during the appraisal period (except for 
employees with restoration rights under 5 CFR part 353), or an employee 
entered the broadbanding system and received a prorated within-grade 
increase or career-ladder promotion payment less than 52 weeks before 
the performance-based within-band increase.
    The proposed regulations provide IRS additional flexibility to 
grant within-band pay increases. For example, Sec.  9501.205(f)(7) 
allows IRS to take into account an employee's position in the rate 
range in determining within-band pay increases. Section 9501.205(f)(5) 
continues to allow IRS to use other individual factors to provide 
within-band pay increases, such as the acceptance of a supervisory 
position within the same band. However, Sec.  9501.205(f)(2) continues 
to prohibit within-band pay increases based solely on time at pay 
level.
    Section 9501.205(g) allows IRS to provide general pay increases to 
specified categories of employees with current positive assessments 
when band rate ranges are adjusted under Sec.  9501.204. We added a 
definition of general pay increase to Sec.  9501.104 to help clarify 
that general pay increases for employees under IRS broadbanding systems 
are different from General Schedule across-the-board increases under 5 
U.S.C. 5303. Such general pay increases may be paid in combination with 
performance-based pay increases under Sec.  9501.205(f). The amount of 
such pay increases may be any percentage amount up to the percentage 
amount by which band rate ranges are adjusted. IRS may authorize 
different general pay increases for different employee categories. 
However, if IRS provides an increase that is less than the band rate 
range adjustment, the resulting unused funds must be redirected and 
applied to performance-based pay increases. The proposed regulations 
also provide IRS the flexibility to forgo paying any general pay 
increase and to use performance-based pay increases exclusively. Under 
Sec.  9501.205(f)(4), the pay of an employee with a positive assessment 
must not fall below the minimum rate of a band as a result of receiving 
a pay increase that is less than the band rate range increase.
    Section 9501.205(h) prohibits IRS from providing any kind of pay 
increase (including a locality pay increase or a staffing supplement 
increase) to an employee with a negative assessment, even if it were to 
cause the employee to fall below the band minimum rate. This section 
requires IRS to establish procedures for dealing with employees who do 
not receive a performance-based pay increase, a general pay increase, 
or other pay increase because of a negative assessment. Such procedures 
may allow an employee who later receives a positive assessment to 
receive such increases prospectively.
    Section 9501.205(h) prescribes procedures for dealing with 
employees who do not receive a locality pay increase because of a 
negative assessment. The locality payment for such an employee must be 
frozen at its existing level. The regulations include provisions for 
adjusting a frozen locality payment when an employee moves to a new 
locality pay area and when an employee subsequently receives a positive 
assessment. The regulations include similar rules for employees 
receiving a frozen staffing factor under the staffing supplement 
provisions at Sec.  9501.304(b).
    Section 9501.205(i) provides the requirements for adjusting the pay 
of a retained rate employee, consistent with the proposed criteria in 
other paragraphs of Sec.  9501.205. IRS must provide a retained rate 
employee a pay increase equal to 50 percent of the dollar increase in 
the maximum rate of the applicable band (including any locality payment 
or staffing supplement). A retained rate employee with a negative 
assessment may not receive a pay increase. This is a variation of the 
pay retention rules in 5 U.S.C. 5363, as authorized by 5 U.S.C. 
9509(c).
    Finally, Sec.  9501.205(j) provides that within-band pay reductions 
authorized on the basis of unacceptable performance and/or conduct may 
not exceed 10 percent or cause an employee's rate of pay to fall below 
the minimum rate of his or her band. An employee's rate of pay may not 
be reduced more than once in a 12-month period based on unacceptable 
performance and/or conduct.

Pay Administration Changes

    The proposed regulations contain changes in the IRS broadbanding 
criteria consistent with the changes in the GS pay administration rules 
made by sections 101 and 301 of the Federal Workforce Flexibility Act 
of 2004 (Public Law 108-411, October 30, 2004) and OPM implementing 
regulations. Section 101 of the Federal Workforce Flexibility Act of 
2004 amended 5 U.S.C. 5753 and 5754 by providing a new authority to 
make recruitment, relocation, and retention incentive payments. OPM 
issued interim regulations to implement the new authority on May 13, 
2005 (70 FR 25732). We propose to amend the

[[Page 19128]]

criteria for IRS broadbanding systems to reflect the new terms 
``recruitment, relocation, and retention incentives,'' as used in the 
interim regulations. The remaining proposed revisions in the criteria 
are a result of amendments made by section 301 of the Act and 
implementing regulations.
    Section 301 of the Federal Workforce Flexibility Act of 2004 
amended provisions in 5 U.S.C. chapter 53 relating to the 
administration of special rates, locality rates, and retained rates. 
These statutory amendments became effective on the first day of the 
first pay period beginning on or after April 28, 2005--i.e., May 1, 
2005. OPM issued interim regulations to implement the amendments and 
revise the rules that govern pay setting for Federal employees covered 
by the GS pay system on May 31, 2005 (70 FR 31278).
    We are proposing to revise the criteria for IRS broadbanding 
systems to be consistent with the Federal Workforce Flexibility Act of 
2004 amendments because 5 U.S.C. 9509(b)(3) provides that ``except as 
otherwise provided under this section, employees under a broad-banded 
system shall continue to be subject to the law and regulations covering 
employees under the pay system that otherwise would apply to such 
employees.'' That is, employees are to be treated as GS employees, 
except as otherwise provided by 5 U.S.C. 9509. For example, section 
V.G. of the current criteria, proposed in Sec.  9501.208, states that 
the provisions in the criteria related to grade and pay retention are 
based on the current grade and pay retention authority in 5 U.S.C. 
chapter 53, subchapter VI, and 5 CFR part 536. Section 301 of the 
Federal Workforce Flexibility Act of 2004 amended 5 U.S.C. 5302 so that 
locality payments under 5 U.S.C. 5304 are no longer paid on top of a 
retained rate. Rather, an employee's pay retention entitlement is 
derived by comparing an employee's payable (highest) rate of basic pay 
(including any locality rate or special rate) to the highest applicable 
rate range (including a locality rate or special rate range) for the 
employee's current position. Consistent with this change, we are 
proposing to revise the procedures for converting the pay of an 
employee to a retained rate under an IRS broadbanding system in Sec.  
9501.401 (Appendix B of the current criteria). We are also proposing to 
revise the procedures for determining the converted GS-equivalent pay 
rate for an employee who is retaining a band or pay rate under an IRS 
broadbanding system in Sec.  9501.402 (Appendix C of the current 
criteria), consistent with the changes in the GS pay retention rules.
    The Federal Workforce Flexibility Act of 2004 also amended 5 U.S.C. 
5303 so that 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). We are proposing to delete a 
reference in the current Appendix C to a situation where an employee 
who is entitled to a higher locality rate of pay also is entitled to a 
special rate. We are also proposing to revise terminology throughout 
the criteria to be consistent with new terminology in the interim 
regulations implementing the Federal Workforce Flexibility Act of 2004.

Publishing the Criteria in Regulations

    The IRS broadbanding criteria were originally published in the 
Federal Register as a notice with three appendices. Since that time, 
significant developments have occurred to establish agency-specific 
personnel systems in regulations (e.g., the Department of Homeland 
Security Human Resources Management System in 5 CFR Chapter XCVII and 
part 9701 and the Department of Defense Human Resources Management and 
Labor Relations Systems in 5 CFR chapter XCIX and part 9901). 
Consequently, OPM proposes to pursue the option of organizing and 
establishing the criteria for the Internal Revenue Service broadbanding 
systems and related appendices as four subparts in a new 5 CFR chapter 
XCV and part 9501.. Subpart A of the proposed regulations provides the 
purpose and the general provisions governing the IRS broadbanding 
system and defines terms that are used throughout the new part 9501. 
Subpart A also clarifies the relationship of the regulations in part 
9501 to other provisions of law and regulations. Subpart B of the 
proposed regulations provides the criteria for the IRS broadbanding 
system. The criteria follow the principles outlined in 5 U.S.C. 
9509(b)(4)(A)-(F). Subpart C consists of the former Appendix A, but we 
are proposing to delete the formulas in the current Appendix A because 
the rules the formulas express are adequately described in proposed 
Sec.  9501.303(a). Subpart D consists of the current Appendices B and 
C. We have also taken this opportunity to make other minor 
clarifications and formatting changes.

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

List of Subjects in 5 CFR Part 9501

    Administrative practice and procedure, Government employees, Wages.

    Office of Personnel Management.
Linda M. Springer,
Director.
    Accordingly, under the authority of section 9509 of title 5, United 
States Code, OPM is proposing to amend title 5, Code of Federal 
Regulations, by establishing chapter XCV consisting of part 9501, as 
follows:

CHAPTER XCV--OFFICE OF PERSONNEL MANAGEMENT CRITERIA FOR INTERNAL 
REVENUE SERVICE BROADBANDING SYSTEMS

PART 9501--OFFICE OF PERSONNEL MANAGEMENT CRITERIA FOR INTERNAL 
REVENUE SERVICE BROADBANDING SYSTEMS

Subpart A--General Provisions
Sec.
9501.101 Authority.
9501.102 Applicability.
9501.103 Broadbanding system plan.
9501.104 Definitions.
Subpart B--Broadbanding Criteria
9501.201 General.
9501.202 Structure of broadbanding systems.
9501.203 Minimum and maximum number of grades in a band.
9501.204 Setting minimum and maximum rates of pay in a band.
9501.205 Adjusting an employee's pay within a band.
9501.206 Setting the pay of a supervisor.
9501.207 Setting the pay of an employee.
9501.208 Related provisions.
Subpart C--Staffing Supplements
9501.301 Authority.
9501.302 Eligibility.
9501.303 Conversion to staffing supplement.
9501.304 Administration of staffing supplements.
9501.305 Treatment of staffing supplements as basic pay.
9501.306 New staffing supplements.
Subpart D--Conversion Rules
9501.401 Conversion into broadbanding systems.
9501.402 Conversion to the General Schedule pay system.

    Authority: 5 U.S.C. 9509(b).

[[Page 19129]]

Subpart A--General Provisions


Sec.  9501.101  Authority.

    This part contains regulations providing the criteria for Internal 
Revenue Service (IRS) broadbanding systems, as authorized by 5 U.S.C. 
9509(b). Section 9509 of title 5, United States Code, as added by the 
IRS Restructuring and Reform Act of 1998 (Pub. L. 105-206), provides 
the Secretary of the Treasury the authority to establish one or more 
broadbanding systems covering all or any portion of the IRS workforce 
under the General Schedule (GS). Section 9509(b) of title 5, United 
States Code, directs the Office of Personnel Management (OPM) to 
prescribe criteria for IRS broadbanding systems and specifies certain 
principles that such criteria must follow, at a minimum.


Sec.  9501.102  Applicability.

    (a) A broad-banded system is defined in 5 U.S.C. 9509(a) as a 
system for grouping positions for pay, job evaluation, and other 
purposes that is different from the General Schedule pay and 
classification system established under 5 U.S.C. chapter 51 and chapter 
53, subchapter III. Employees covered by IRS broadbanding systems are 
not covered by subchapter III of chapter 53 or by those provisions of 
chapter 51 that define General Schedule grades. However, selected 
provisions from those parts of law are used in applying parallel 
features to employees in IRS broadbanding systems, as provided in this 
part.
    (b)(1) As required by 5 U.S.C. 9509(b)(3), employees covered by IRS 
broadbanding systems are to be treated as if they are General Schedule 
employees for the purpose of applying other laws and regulations 
governing General Schedule employees, except as otherwise provided in 
this part. Applicable laws and regulations include, but are not limited 
to 5 U.S.C. 5304, authorizing locality-based comparability payments 
(except as provided in Sec.  9501.205(h)); 5 U.S.C. chapter 53, 
subchapter VI, authorizing grade and pay retention (except as otherwise 
provided in this part); and 5 U.S.C. 5753 and 5754, authorizing 
recruitment, relocation, and retention incentives. (Many title 5 
provisions apply to Federal employees on a more general basis and do 
not base coverage on whether an employee is covered by the General 
Schedule system--e.g., aggregate pay limitation under 5 U.S.C. 5307; 
premium pay under 5 U.S.C. chapter 55, subchapter V; severance pay 
under 5 U.S.C. 5595; leave under 5 U.S.C. chapter 63; retirement under 
5 U.S.C. chapters 83 and 84; and insurance under 5 U.S.C. chapter 87.)
    (2) Employees in IRS broadbanding systems are not covered by the 
special rate program established under 5 U.S.C. 5305. However, IRS 
broadbanding systems may use a parallel authority to establish staffing 
supplements, which are linked to established special rates as described 
in subpart C of this part.
    (c) The criteria in this part apply only to broadbanding systems 
that cover General Schedule positions. Section 9509(b)(1)(B) of title 
5, United States Code, authorizes the Secretary of the Treasury, with 
the prior approval of the Director of OPM, to include in a broadbanding 
system positions that otherwise would be subject to 5 U.S.C. chapter 
53, subchapter IV (prevailing rate systems), or 5 U.S.C. 5376 (senior-
level positions). Including such positions requires OPM's separate 
review and approval of a specific plan for that purpose. The criteria 
in this part do not apply to broadbanding systems that include such 
positions.


Sec.  9501.103  Broadbanding system plan.

    Before implementing any broadbanding system under this part, IRS 
must develop a written plan that includes policies and implementing 
procedures to address each criterion relevant to the broadbanding 
system, including descriptions of broadbanding structure(s), positions 
covered, classification criteria, the method of pay progression within 
a band, policies for setting and adjusting pay, policies for paying 
supervisors or managerial employees, and policies for converting 
positions into broadbanding systems.


Sec.  9501.104  Definitions.

    In this part:
    Band means a pay level or work level within a career path 
containing one or more General Schedule grades and related ranges of 
pay.
    Broadbanding system means a system for grouping positions for pay, 
job evaluation, and other purposes that is different from the General 
Schedule system established under 5 U.S.C. chapter 51 and chapter 53, 
subchapter III, as a result of combining the grades and related ranges 
of pay for one or more occupational series. All positions covered by 
this part are considered to be in a single broadbanding system unless 
the Department of the Treasury determines that a separate system is 
needed for supervisors and managerial employees (as authorized in Sec.  
9501.206(a)).
    Career path means a grouping of one or more occupational series 
into broad occupational families or career tracks for job evaluation, 
pay, or other purposes. A career path may contain one or more bands.
    Employee means an individual who otherwise would be covered by 5 
U.S.C. chapter 51 and chapter 53, subchapter III, if not covered by a 
broadbanding system.
    General pay increase means a pay increase IRS may provide to 
specified categories of employees when the minimum and maximum rates of 
pay for band rate ranges are adjusted under Sec.  9501.204.
    Managerial has the meaning given that term in OPM's General 
Schedule Supervisory Guide.
    Negative assessment means a summary performance assessment 
consistent with 5 U.S.C. 9508 prepared at the end of the established 
period covering an employee's performance over the applicable period or 
to support a pay determination, including one granted in accordance 
with Sec.  9501.205, and documenting that the employee's performance is 
less than the equivalent of fully successful.
    Performance assessment has the meaning given that term in 5 U.S.C. 
9508(b)(1).
    Positive assessment means a summary performance assessment 
consistent with 5 U.S.C. 9508 prepared at the end of the established 
period covering an employee's performance over the applicable period or 
to support a pay determination, including one granted in accordance 
with Sec.  9501.205, and documenting that the employee's performance is 
the equivalent of fully successful or better. Positive assessments must 
include a minimum of two levels of distinction and may include more 
than two.
    Supervisor has the meaning given that term in OPM's General 
Schedule Supervisory Guide.
    Unacceptable performance has the meaning given that term in 5 
U.S.C. 9508(b)(2).

Subpart B--Broadbanding Criteria


Sec.  9501.201  General.

    Under 5 U.S.C. 9509(b)(3), the criteria for IRS broadbanding 
systems in this subpart must--
    (a) Ensure that the structure of any broadbanding system maintains 
the principle of equal pay for substantially equal work (see Sec.  
9501.202);
    (b) Establish the minimum and maximum number of grades that may be 
combined into bands (see Sec.  9501.203);
    (c) Establish the requirements for setting the minimum and maximum 
rates of pay in a band (see Sec.  9501.204);

[[Page 19130]]

    (d) Establish the requirements for adjusting the pay of an employee 
within a band (see Sec.  9501.205);
    (e) Establish the requirements for setting the pay of a supervisory 
employee whose position is in a band or who supervises employees whose 
positions are in bands (see Sec.  9501.206); and
    (f) Establish the requirements and methodologies for setting the 
pay of an employee upon conversion to a broadbanding system, initial 
appointment, change of position or type of appointment (including 
promotion, demotion, transfer, reassignment, reinstatement, placement 
in another broad band, or movement to a different geographic location), 
and movement between a broadbanding system and another pay system (see 
Sec.  9501.207).


Sec.  9501.202  Structure of broadbanding systems.

    (a) IRS broadbanding systems must--
    (1) Link to the General Schedule;
    (2) Assign occupations to career paths based on the nature of work 
performed, the qualifications required, the normal career and pay 
progression, and other characteristics of those occupations;
    (3) Combine General Schedule grades into bands following the 
criteria in paragraph (b) of this section and Sec.  9501.203;
    (4) Place positions into bands within career paths in accordance 
with--
    (i) Classification standards published by OPM under 5 U.S.C. 5105; 
or
    (ii) Any agency guidance that places a position within its correct 
band and career path (but which need not be sufficient to determine a 
position's correct General Schedule grade);
    (5) Not include law enforcement officers covered by special base 
rates under section 403 of the Federal Employees Pay Comparability Act 
of 1990 (section 529 of Public Law 101-509, November 5, 1990, as 
amended) in the same band as non-law enforcement officers when the 
maximum grade in the band is any one of grades 3 through 10; and
    (6) Use established General Schedule rates of pay (including any 
applicable locality rates or special rates) for premium pay purposes 
under 5 U.S.C. chapter 55, subchapter V, and 5 CFR part 550, subpart A 
(i.e., for the purpose of determining the maximum hourly overtime rate 
and the biweekly premium pay limitation).
    (b) The range of difficulty and responsibility of each band must be 
the same as the range of difficulty and responsibility of the band's 
constituent grades (i.e., consistent with the grade level criteria in 
standards published by OPM in accordance with 5 U.S.C. 5105) and must 
represent the normal range of work performed in the organization.


Sec.  9501.203  Minimum and maximum number of grades in a band.

    (a) Except as provided in paragraphs (b) and (c) of this section, a 
band under an IRS broadbanding system must contain--
    (1) At least one General Schedule grade; and
    (2) Not more than--
    (i) Eight General Schedule grades when grades 13, 14, and 15 are 
not included in the band;
    (ii) Five General Schedule grades when grade 13 is included, but 
neither grade 14 nor 15 is included in the band;
    (iii) Three General Schedule grades when grade 14 is included, but 
grade 15 is not included in the band; and
    (iv) Two General Schedule grades when grade 15 is included in the 
band.
    (b)(1) The Department of the Treasury may, after coordination with 
OPM (as defined in paragraph (b)(2) of this section), approve the 
establishment of one or more bands containing General Schedule grades 
not otherwise permitted under paragraph (a) of this section.
    (2) For the purpose of applying paragraph (b)(1) of this section, 
coordination with OPM means the process by which the Department of the 
Treasury, after appropriate staff-level consultation, officially 
provides OPM with notice of a proposed band and its intended effective 
date. If OPM concurs, or does not respond to that notice within 30 
calendar days, the Department of the Treasury may proceed to establish 
the proposed band. However, in the event that OPM objects to the 
combination of grades that would be grouped together in a proposed 
band, the Department of the Treasury may not proceed until the matter 
is resolved. OPM may condition its concurrence on the establishment of 
appropriate within-band control points, as provided in Sec.  
9501.205(d).
    (c) Each IRS broadbanding system must include at least one band 
that combines two or more General Schedule grades subject to the limits 
in paragraph (a)(2) of this section.


Sec.  9501.204  Setting minimum and maximum rates of pay in a band.

    (a)(1) The minimum rate of pay for each band must equal the minimum 
rate of pay payable under 5 U.S.C. 5332 for the lowest General Schedule 
grade in that band. The maximum rate of pay for each band must equal 
the maximum rate of pay payable under 5 U.S.C. 5332 for the highest 
General Schedule grade in that band. Unless otherwise stated in this 
part, references in this part to the minimum rate of pay or maximum 
rate of pay for a band exclude any applicable locality payment or 
staffing supplement.
    (2) Notwithstanding paragraph (a)(1) of this section, the minimum 
rates of pay and the maximum rates of pay for bands covering law 
enforcement officers must equal the minimum and maximum special base 
rates for grades 3 through 10 established under section 403 of the 
Federal Employees Pay Comparability Act of 1990, as applicable.
    (3) The maximum rate of pay for any band may not exceed the maximum 
rate of pay for grade 15 under 5 U.S.C. 5332.
    (b) The minimum rate of pay and maximum rate of pay that define 
each band must be adjusted at the same time and in the same manner as 
adjustments are made in the corresponding minimum and maximum General 
Schedule rates of pay under 5 U.S.C. 5303 or similar provision of law.
    (c) Employees in IRS broadbanding systems are not covered by the 
special rate authority in 5 U.S.C. 5305. However, IRS broadbanding 
systems may provide for the use of staffing supplements instead of 
special rates under subpart C of this part. If special rates are not 
replaced with staffing supplements, special rate employees must be 
converted into a broadbanding system under the procedures established 
in subpart D of this part.
    (d) Only employees receiving retained rates of pay under 5 U.S.C. 
chapter 53, subchapter VI, as applied in the broadbanding system, may 
receive rates of pay that exceed the locality-adjusted or staffing 
supplement-adjusted band maximum rates.
    (e) Only employees who fail to receive a pay increase under Sec.  
9501.205(h) may receive rates of pay that are less than the band 
minimum rate of pay (as a result of the rate range adjustment made 
under paragraph (b) of this section).


Sec.  9501.205  Adjusting an employee's pay within a band.

    (a) IRS broadbanding systems must establish policies providing for 
pay adjustments within a band consistent with the requirements of this 
section.
    (b) IRS must establish policies concerning which level of 
management will make pay adjustment decisions for employees.
    (c) IRS must establish principles for managing pay progression and 
payroll costs associated with pay adjustments and provide funding for 
salary increases under its broadbanding systems. Because broadbanding 
systems provide more choices on how to distribute pay to employees, IRS 
must have an overall

[[Page 19131]]

budget to manage the costs associated with such choices. At a minimum, 
the salary increase budget must include funds approximately equal to 
the amounts that would be required for individual pay adjustments made 
at the time of schedule adjustments under 5 U.S.C. 5303 (or similar 
provision of law), locality-based comparability payments under 5 U.S.C. 
5304, and staffing supplement adjustments under subpart C of this part, 
as applicable. A salary increase budget must meet salary cost 
objectives and be consistent with policies and procedures for adjusting 
pay under a broadbanding system that are established to ensure equal 
pay for work of equal value, as required by 5 U.S.C. 2301(b)(3).
    (d) IRS may use control points within bands. Control points are 
dollar points within bands that limit or restrict the movement of 
employees through the rate range of the band. They may be expressed as 
a percentage of the rate range or as a percentage of the range maximum 
rate of pay. If control points are used, IRS broadbanding systems must 
include policies governing the establishment of control points within 
bands including the circumstances under which an employee's rate of pay 
may be set or adjusted above a control point.
    (e) IRS must provide for locality payments as if its employees were 
General Schedule employees covered by 5 U.S.C. 5304 and 5 CFR part 531, 
subpart F, except as provided by paragraph (h) of this section. (See 
subpart C of this part for information on possible staffing 
supplements.)
    (f) IRS must establish policies for providing performance-based 
within-band pay increases to employees consistent with the criteria in 
this section, including the following:
    (1) IRS must use employee performance assessments as a basis for 
within-band pay increases for employees. IRS policies for granting 
within-band pay increases on the basis of a positive assessment must 
provide for pay distinctions based on levels of performance. The IRS 
performance appraisal system supporting the IRS broadbanding system 
must have two or more summary rating levels that represent performance 
equivalent to fully successful or better.
    (2) Within-band pay increases may not be based solely on time at 
pay level.
    (3) As required by paragraph (h) of this section, an employee with 
a current negative assessment may not receive a pay increase under this 
paragraph.
    (4) The rate of pay of an employee with a current positive 
assessment may not fall below the band minimum rate of pay.
    (5) IRS may also use other individual factors to provide additional 
within-band pay increases, such as the acceptance of a supervisory 
position within the same band.
    (6) IRS may cover entry/developmental employees under a different 
pay progression plan than that which is applicable to employees at the 
full performance (journey) level. IRS may establish a tailored salary 
increase budget for entry/developmental employees who are covered by a 
separate pay progression plan.
    (7) IRS policies may take into account an employee's position in 
the rate range in determining the amount of a within-band pay increase.
    (8) IRS policies may provide for proration of an employee's 
performance-based within-band increase (i.e., reduction from the amount 
generally provided under the pay progression plan) in specified 
appropriate circumstances, such as--
    (i) An employee entered the broadbanding system during the 
appraisal period that is the basis for the within-band increase;
    (ii) An employee was in leave-without-pay status during the 
appraisal period that is the basis for the within-band increase (except 
for employees covered by 5 CFR part 353); or
    (iii) An employee entered the broadbanding system and received a 
prorated within-grade increase or career-ladder promotion payment under 
Sec.  9501.401(b) less than 52 weeks before the within-band increase.
    (g) IRS may provide general pay increases for specified categories 
of employees when the minimum and maximum rates of pay for band rate 
ranges are adjusted under Sec.  9501.204, consistent with the following 
criteria:
    (1) As provided in paragraph (h) of this section, an employee with 
a current negative assessment may not receive a pay increase under this 
paragraph.
    (2) A pay increase under this paragraph may be used in combination 
with performance-based pay increases under paragraph (f)(1) of this 
section. Alternatively, IRS may exclusively use performance-based pay 
increases under paragraph (f)(1) of this section and not grant general 
pay increases under this paragraph.
    (3) The amount of a pay increase under this paragraph for a 
specified category of employees may be any percentage amount up to the 
percentage amount by which band rate ranges are adjusted under Sec.  
9501.204. IRS may authorize different pay increases under this 
paragraph for different employee categories. If IRS provides an 
increase under this paragraph that is less than the band rate range 
adjustment, the resulting unused funds must be redirected and applied 
to performance-based pay increases under paragraph (f) of this section.
    (h) Except as provided in paragraph (h)(2) of this section and 
Sec.  9501.304(b)(1), IRS may not provide any kind of pay increase to 
any employee who has a current negative assessment, even if this causes 
the employee's rate of pay to fall below the minimum rate of pay of the 
employee's band because of a simultaneous rate range adjustment. In 
addition, IRS may not allow such an employee to receive a pay increase 
as a result of a higher locality pay percentage (as described in 
paragraph (e) of this section). The locality pay percentage for that 
employee must be frozen at its existing level. IRS must apply the 
following rules for employees who do not receive pay increases under 
this paragraph:
    (1) IRS must establish procedures for dealing with employees 
described in this paragraph who do not receive a pay increase under 
paragraphs (f) and/or (g) of this section because of a negative 
assessment. Those procedures may allow an employee who later receives a 
positive assessment to receive a pay increase. However, any such 
increase may not be retroactive and may not exceed the pay increase the 
employee would have received if the employee had a positive assessment 
at the time pay increases under paragraphs (f) and/or (g) of this 
section were determined.
    (2) For an employee receiving a frozen locality payment because of 
a negative assessment, if such an employee moves to a new official 
worksite in a different locality pay area, the employee must receive 
the locality payment applicable in the new locality pay area as in 
effect on the day before the locality rate was frozen. See Sec.  
9501.304(b)(1) if the employee's position of record is covered by a 
staffing supplement at the new official worksite.
    (3) If an employee receiving a frozen locality payment because of a 
negative assessment subsequently receives a positive assessment, the 
employee will become entitled to the currently applicable locality 
payment on the first day of the first pay period beginning on or after 
the date when he or she receives a positive assessment. See Sec.  
9501.304(b)(2) if the employee's position of record is covered by a 
staffing supplement when he or she receives a positive assessment.
    (i) IRS policies on adjusting a retained rate for employees on pay 
retention must provide a retained rate employee

[[Page 19132]]

a pay increase equal to 50 percent of the dollar increase in the 
maximum rate of the applicable band (including any applicable locality 
payment or staffing supplement), except that a retained rate employee 
with a negative assessment may not receive a pay increase. (This is a 
variation of the pay retention rules in 5 U.S.C. 5363, as authorized by 
5 U.S.C. 9509(c). See Sec.  9501.208(b).)
    (j) IRS may establish policies for reducing an employee's rate of 
pay within a band, but only for unacceptable performance and/or 
conduct, or the voluntary loss of supervisory status (if such loss 
results in a reversal of a within-band adjustment granted at the time 
of placement in a supervisory position). These reductions may be made 
effective at any time. However, reductions based on unacceptable 
performance, as defined in 5 U.S.C. 9508, and/or conduct may not occur 
more than once in a 12-month period. Any reductions in an employee's 
rate of pay based on unacceptable performance and/or conduct are 
adverse actions under 5 U.S.C. 7512 as long as the employee and the 
action are otherwise covered by that section. (See 5 CFR 752.401.) A 
reduction based on unacceptable performance and/or conduct may not 
exceed 10 percent of the employee's rate of pay or cause an employee's 
rate to fall below the minimum rate of pay of the employee's band.


Sec.  9501.206  Setting the pay of a supervisor.

    (a) IRS broadbanding systems may provide for a separate 
broadbanding system or career path for supervisors and managerial 
employees.
    (b) A supervisor's or managerial employee's rate of pay may not be 
based on the salaries of the employees he or she supervises or manages.


Sec.  9501.207  Setting the pay of an employee.

    (a) IRS broadbanding systems must include policies for determining 
the career path, band, and rate of pay for employees upon conversion 
into the system consistent with the provisions in Sec.  9501.401. IRS 
broadbanding systems may also include policies for making prorated 
within-grade increase or career-ladder promotion payments to employees 
as an adjustment in pay or a lump-sum payment upon conversion from the 
General Schedule to a broadbanding system consistent with the 
provisions in Sec.  9501.401.
    (b) IRS broadbanding systems must include policies for determining 
an employee's career path, band, and rate of pay upon initial 
appointment, promotion, demotion, transfer, reassignment, or placement 
in a different band or career path. The methods used to set pay must be 
consistent with the principle of equal pay for substantially equal work 
and the following:
    (1) Pay must be set at least at the minimum rate of pay and must 
not exceed the maximum rate of pay of the band to which assigned 
(except for employees who receive a rate below the minimum rate of pay 
as described in Sec.  9501.205(h) or who receive a rate above the 
maximum rate of pay under pay retention provisions). (See Sec.  
9501.204(d) and (e).)
    (2) Policies must specify the conditions under which pay may be set 
above the minimum rate of pay upon initial placement in a band and the 
amount of any minimum or maximum pay increase upon promotion. The time-
in-grade provisions in 5 CFR 300.601-605 do not apply to employees 
under a broadbanding system.
    (3) Upon movement to a different official worksite, IRS must 
process a geographic conversion as provided in 5 CFR 531.205.
    (4) Movement of an employee to a band with a lower maximum rate of 
pay than the employee's former band is equivalent to a reduction in 
grade for the purpose of applying 5 U.S.C. chapters 43 and 75.
    (c) Agencies must use the procedures in Sec.  9501.402 for 
determining an employee's GS equivalent grade and pay rate upon 
conversion from a broadbanding system to the General Schedule.


Sec.  9501.208  Related provisions.

    (a) For provisions of 5 U.S.C. chapter 51 that apply to the 
determination of General Schedule grades, other than sections 5104 and 
5105, the term grade is deemed to mean band within a career path.
    (b) The provisions in this part related to grade and pay retention 
are based on the grade and pay retention authority in 5 U.S.C. chapter 
53, subchapter VI, and 5 CFR part 536. When applying the grade and pay 
retention provisions, the term band has the same meaning as grade under 
the statute and regulations. Under 5 U.S.C. 9509(c), the Secretary of 
the Treasury may provide for variations from the grade and pay 
retention authority for employees who are covered by broadbanding 
systems with prior approval of the Director of OPM and in accordance 
with a plan for implementing such variations. Section 9501.205(i) is an 
implementation of this variation authority.
    (c) When applying the severance pay provisions to employees covered 
by IRS broadbanding systems, the term band has the same meaning as 
grade in paragraph (c)(4) of the definition of reasonable offer in 5 
CFR 550.703. When applying this definition, IRS will also consider a 
position one band below the employee's current band level to be a 
reasonable offer in the case of a broadbanding system under which the 
next lower band comprises two or more grades.

Subpart C--Staffing Supplements


Sec.  9501.301  Authority.

    IRS broadbanding systems may use staffing supplements under the 
terms and conditions in this subpart.


Sec.  9501.302  Eligibility.

    If an employee is assigned to a position meeting the coverage 
requirements for a special rate under 5 U.S.C. 5305 and is in a band 
where the maximum rate for the banded GS grades is a special rate that 
exceeds the maximum GS rate of basic pay (including any applicable 
locality rate under 5 U.S.C. 5304 or similar provision of law) for the 
banded grades, the employee is eligible for a staffing supplement.


Sec.  9501.303  Conversion to staffing supplement.

    (a) Upon conversion, the employee's broadbanding rate of pay is 
established by dividing the employee's former GS special rate or 
locality rate (whichever was higher) by the staffing factor. The 
staffing factor is determined by dividing the maximum special rate for 
the banded grades by the GS base rate corresponding to that special 
rate (step 10 of the GS rate for the same grade as the special rate, 
excluding any locality payment). The employee's staffing supplement is 
derived by multiplying the employee's broadbanding rate of pay by the 
staffing factor minus one. The employee's final staffing supplement-
adjusted rate equals the employee's broadbanding rate of pay plus the 
staffing supplement. This amount will equal the employee's former GS 
special rate or locality rate. Since the employee's total pay rate 
immediately after conversion into the broadbanding system will be the 
same as immediately before conversion, the provisions regarding adverse 
action under 5 U.S.C. chapter 75, subchapter II, and pay retention 
under 5 U.S.C. 5363 do not apply.
    (b) If an employee is in a band where the maximum GS rate for the 
banded grades is a locality rate, the broadbanding rate upon conversion 
into a broadbanding system is derived by dividing the employee's former 
locality rate or special rate by the applicable

[[Page 19133]]

locality pay factor (e.g., 1.1750 in the Washington-Baltimore-Northern 
Virginia locality pay area in 2006). The employee's broadbanding 
locality-adjusted rate will equal the employee's former GS locality 
rate or special rate. Since there is no change in total pay rate, the 
provisions regarding adverse action under 5 U.S.C. chapter 75, 
subchapter II, and pay retention under 5 U.S.C. 5363 do not apply.
    (c) The rules for converting an employee on pay retention who is in 
a position meeting the coverage requirements for a special rate under 5 
U.S.C. 5305 are in Sec.  9501.401(d).


Sec.  9501.304  Administration of staffing supplements.

    (a) A staffing supplement is added to an employee's broadbanding 
rate much like a locality adjustment is added to a GS base rate, as 
follows:
    (1) Any General Schedule or special rate schedule adjustment will 
require recomputation of the staffing supplement under Sec.  9501.303. 
Employees receiving a staffing supplement remain entitled to a locality 
rate, which may, over time, supersede the need for a staffing 
supplement. If the employee is entitled to a higher locality rate, the 
employee is not entitled to a staffing supplement for any purpose.
    (2) If OPM discontinues or decreases a special rate schedule on 
which staffing supplements are based, pay retention rules will be 
applied, as appropriate.
    (3) Upon geographic movement, an employee who receives a staffing 
supplement will have the supplement removed or recomputed to reflect 
any applicable staffing supplement or locality rate in the new official 
worksite, consistent with Sec.  9501.303(a). Any resulting reduction in 
pay is not an adverse action under 5 U.S.C. chapter 75, subchapter II, 
or a basis for pay retention under 5 U.S.C. 5363.
    (b) IRS may not allow an employee with a current negative 
assessment to receive a pay increase as a result of a staffing factor 
increase. The staffing supplement for that employee must be frozen at 
its existing level. IRS must apply the following rules for employees 
who do not receive pay increases under this paragraph:
    (1) For an employee receiving a frozen staffing supplement because 
of a negative assessment, if such an employee moves to a new position 
of record or official worksite where a different staffing supplement 
applies, the employee must receive the staffing supplement applicable 
to the employee's new position of record and/or official worksite as in 
effect on the day before the staffing supplement was frozen. If no 
staffing supplement applies to the employee's new position of record or 
official worksite, apply the rules in Sec.  9501.205(h)(1) to determine 
the employee's entitlement to any locality payment.
    (2) If an employee receiving a frozen staffing supplement because 
of a negative assessment subsequently receives a positive assessment, 
the employee will become entitled to the currently applicable staffing 
supplement on the first day of the first pay period beginning on or 
after the date when he or she receives a positive assessment. If no 
staffing supplement is applicable to the employee's position of record, 
the employee will become entitled to the currently applicable locality 
payment, as provided in Sec.  9501.205(h)(2).
    (c) An employee's broadbanding rate adjusted by a staffing 
supplement may not exceed the rate for level IV of the Executive 
Schedule.


Sec.  9501.305  Treatment of staffing supplements as basic pay.

    The employee's broadbanding rate adjusted by the staffing 
supplement is basic pay for the same purposes as a special rate under 5 
CFR 530.308--e.g., for retirement, life insurance, premium pay, pay 
retention, and severance pay purposes, and for determining recruitment, 
relocation, and retention incentives. The staffing supplement is also 
basic pay under 5 U.S.C. chapter 75, subchapter II, for the limited 
purpose of determining whether a reduction in pay occurs at the point 
of an employee's conversion into a broadbanding system. The staffing 
supplement will also be used to compute worker's compensation payments 
and lump-sum payments for accrued and accumulated annual leave.


Sec.  9501.306  New staffing supplements.

    OPM may approve staffing supplements for categories of employees 
within an IRS broadbanding system who are not in approved special rate 
categories for General Schedule employees, consistent with the 
provisions in 5 U.S.C. 5305(a) and (b).

Subpart D--Conversion Rules


Sec.  9501.401  Conversion into broadbanding systems.

    (a)(1) General. IRS broadbanding systems must include policies for 
determining the career path, band, and pay rate for employees upon 
conversion into a broadbanding system under the terms and conditions in 
this section.
    (2) An employee may not suffer a reduction in his or her total pay 
rate upon initial conversion to a broadbanding system. For this 
purpose, ``total pay rate'' includes any applicable locality payment, 
special rate supplement, and staffing supplement--each of which will be 
considered to be part of basic pay under 5 U.S.C. chapter 75, 
subchapter II, for the limited purpose of determining whether a 
reduction in pay occurs at conversion.
    (3) If conversion into a broadbanding system is accompanied by any 
simultaneous pay action, the employee's General Schedule pay 
entitlements must be determined before converting the employee into the 
broadbanding system.
    (b) Prorated within-grade increase and career-ladder promotion 
payments. IRS broadbanding systems may include policies for making 
prorated within-grade increase or career-ladder promotion payments to 
employees as an adjustment in pay or a lump-sum payment after 
conversion from the General Schedule to a broadbanding system under the 
following conditions:
    (1) An employee may receive a prorated within-grade increase or a 
career-ladder promotion payment after conversion to an IRS broadbanding 
system under this section, but not both.
    (2) The amount of any within-grade increase or career-ladder 
promotion payment may not be more than the prorated value of the 
employee's within-grade increase or career-ladder promotion at the time 
of conversion, based on the number of weeks of creditable service the 
employee has performed as of the date of initial conversion into the 
broadbanding system. There is no restriction on when such payments may 
be made.
    (3) A prorated within-grade increase or career-ladder promotion 
payment may be made only to an employee with a positive assessment at 
the time of conversion into a broadbanding system.
    (4) A within-grade increase payment may not be made to an employee 
receiving the maximum rate of pay for his or her grade or a retained 
rate immediately before conversion.
    (5) If IRS provides career-ladder promotion payments to a group of 
employees converted to entry/developmental positions for which the IRS 
has established a special pay progression plan under Sec.  
9501.205(f)(6), the first salary increase budget for these entry/
developmental employees following conversion must be determined after 
taking into account the length of time between the prorated career-
ladder promotion payment and the first performance-based payments under 
an IRS broadbanding system.
    (6) A within-grade increase or career-ladder promotion payment paid 
as an adjustment to pay after conversion into a broadbanding system may 
not cause

[[Page 19134]]

an employee's pay to exceed the maximum rate of pay of a band.
    (c) Special rate employees. If an IRS broadbanding system uses 
staffing supplements instead of special rates under 5 U.S.C. 5305, 
special rate employees must be converted into the system consistent 
with the provisions in subpart C of this part. If an IRS broadbanding 
system eliminates special rates, a new locality-adjusted rate of pay 
must be derived for each employee, as follows:
    (1) Divide the employee's special rate by the locality pay factor 
for the area (e.g., 1.1750 for the Washington-Baltimore-Northern 
Virginia locality pay area in 2006) to determine the new broadbanding 
rate of pay.
    (2) Multiply the employee's new broadbanding rate of pay by the 
locality pay factor for the area to determine the employee's 
broadbanding locality rate of pay. If the employee's broadbanding 
locality rate of pay exceeds the maximum locality-adjusted rate for the 
employee's band, the employee must be placed on pay retention (if not 
otherwise excluded from the pay retention authority at 5 U.S.C. chapter 
53, subchapter VI). The locality adjustment is basic pay under 5 U.S.C. 
chapter 75, subchapter II, for the limited purpose of determining 
whether a reduction in basic pay occurs at the point of an employee's 
conversion into a broadbanding system.
    (d) Employees on pay retention. Upon conversion, employees on pay 
retention must be assigned to the band that encompasses the grade of 
their position. Determine the employee's broadbanding rate of pay as 
follows:
    (1) Compare the employee's retained rate to the highest applicable 
maximum rate of pay for the employee's band (including any applicable 
locality payment or staffing supplement).
    (2) If the employee's retained rate is higher than the highest 
applicable maximum rate of pay for the band, the employee will continue 
to receive a retained rate.
    (3) If the employee's retained rate is less than the highest 
applicable maximum rate of pay for the band, divide the employee's 
retained rate by the applicable locality pay factor or staffing factor 
that applies to the employee's new position of record and official 
worksite to derive the employee's new broadbanding rate of pay. 
Multiply the employee's new broadbanding rate of pay by the applicable 
locality pay or staffing factor to derive the employee's broadbanding 
locality-adjusted or staffing supplement-adjusted rate of pay. The 
locality adjustment and staffing supplement are basic pay under 5 
U.S.C. chapter 75, subchapter II, for the limited purpose of 
determining whether a reduction in basic pay occurs at the point of an 
employee's conversion into a broadbanding system.
    (e) Employees on grade retention. Upon conversion, employees on 
grade retention must be assigned to the band that encompasses their 
retained grade until the original 2-year grade retention period 
expires. When the 2-year period expires, the employee's rate of pay 
must be determined under the pay retention rules at 5 CFR 536.304 in 
the band for his or her position of record.


Sec.  9501.402  Conversion to the General Schedule pay system.

    (a)(1) Except as provided in paragraph (a)(2) of this section, when 
an employee covered by a broadbanding system moves voluntarily or 
involuntarily to a GS position, IRS must use the procedures in this 
section to convert the employee's band and pay rate to a GS-equivalent 
grade and rate of pay before the employee moves out of the system. IRS 
must determine the converted GS-equivalent grade and rate of pay before 
any accompanying geographic move, promotion, or other simultaneous 
action. The new employing organization must use the converted GS-
equivalent grade and rate of pay in applying various pay administration 
rules that govern how pay is set in the GS position (e.g., rules for 
promotion and highest previous rate under 5 CFR part 531, subpart B, 
and grade and pay retention under 5 CFR part 536). For the purpose of 
those rules, the converted GS grade and rate of pay are deemed to have 
been in effect at the time the employee left the broadbanding system. 
The rules for determining the converted GS grade for pay administration 
purposes do not apply to the determination of an employee's GS-
equivalent grade for other purposes, such as reduction-in-force or 
adverse action.
    (2) The conversion procedures in this section do not apply to 
employees who involuntarily move back to the same General Schedule 
career-ladder position they held immediately before conversion into the 
broadbanding system prior to any pay adjustment event under the system 
(including any promotion, demotion, or pay adjustment provided under 
Sec.  9501.205). (A pay adjustment event does not include any prorated 
within-grade or career-ladder promotion pay increase received as part 
of conversion into the system.) For such employees, IRS must subtract 
any prorated within-grade or career-ladder promotion payment and 
reconstruct the employee's grade and rate of pay under the General 
Schedule as if he or she had never entered the broadbanding system.
    (3) The provisions regarding adverse action under 5 U.S.C. chapter 
75, subchapter II, and pay retention under 5 U.S.C. 5363 do not apply 
to reductions in pay that occur when the IRS subtracts any prorated 
within-grade or career-ladder promotion increase from a career-ladder 
employee's rate of pay upon conversion back to the General Schedule as 
required by paragraph (a)(2) of this section.
    (b) GS grade level determination. (1) Upon voluntary or involuntary 
conversion of an employee out of a broadbanding system to the GS pay 
system (other than an involuntary conversion covered by paragraph 
(a)(2) of this section), IRS must determine the employee's GS-
equivalent grade level as follows (except as otherwise provided in 
paragraphs (b)(2), (b)(3), and (d) of this section):
    (i) Convert an employee in a band encompassing a single GS grade to 
that grade.
    (ii) For an employee in a band encompassing more than one GS grade, 
compare the employee's rate of pay (including any locality adjustment 
or staffing supplement, as applicable) with the rates of pay in the 
highest applicable GS rate range for each grade encompassed by the 
employee's band. If the employee's occupational series is a two-grade 
interval series, consider only odd-numbered grades between GS-5 and GS-
11. In identifying the highest applicable GS rate range consider the 
following types of rate ranges:
    (A) The GS base pay schedule;
    (B) The LEO special base rate schedule;
    (C) An applicable locality pay schedule for the locality pay area 
in which the employee's official worksite is located; or
    (D) A special rate schedule for the employee's position and 
official worksite, as applicable.
    (iii) If the employee's rate of pay (including any locality 
adjustment or staffing supplement) fits into an area of the highest 
applicable GS rate range for a GS grade that does not overlap with the 
rate range of the next higher or lower grade in the same band, convert 
the employee to that GS grade.
    (iv) If the employee's rate of pay (including any locality 
adjustment or staffing supplement) fits into an area of the highest 
applicable GS rate range for a grade that overlaps with the highest 
applicable GS rate range of the next higher or lower grade in the same 
band, compare the employee's rate of pay with the dollar midpoint of 
the overlap area. If the employee's rate of pay is lower

[[Page 19135]]

than the dollar midpoint of the overlap area, convert the employee to 
the lower grade. If the employee's rate of pay is equal to or higher 
than the dollar midpoint of the overlap area, convert the employee to 
the higher grade.
    (v) If an employee's rate of pay (including any locality payment or 
staffing supplement) is lower than the minimum rate of the highest 
applicable GS rate range for the lowest GS grade in the band, convert 
the employee to the lowest grade.
    (2) Notwithstanding paragraphs (b)(1)(i)-(b)(1)(v) of this section, 
upon voluntary or involuntary conversion of an employee out of a 
broadbanding system to the GS pay system (other than an involuntary 
conversion covered by paragraph (a)(2) of this section), an employee's 
converted GS grade may not be lower than the GS grade held by the 
employee immediately preceding a lateral conversion into the 
broadbanding system, unless the employee was retaining a GS grade 
immediately before conversion or the employee underwent a reduction in 
band while in the broadbanding system.
    (3) Notwithstanding paragraphs (b)(1)(i) through (b)(1)(v) of this 
section, upon voluntary or involuntary conversion of an employee out of 
a broadbanding system to the GS pay system (other than an involuntary 
conversion covered by paragraph (a)(2) of this section), if an employee 
moves back to the General Schedule before any pay adjustment event 
under the broadbanding system (including any promotion, demotion, or 
pay adjustment provided under Sec.  9501.205), the employee's converted 
GS grade is the grade the employee held immediately before conversion 
into the broadbanding system. (A pay adjustment event does not include 
any prorated within-grade or career-ladder promotion pay increase 
received as part of conversion into the system.)
    (c) GS pay rate determination. Upon voluntary or involuntary 
conversion of an employee out of a broadbanding system to the GS pay 
system (other than an involuntary conversion covered by paragraph 
(a)(2) of this section), IRS must determine the employee's GS-
equivalent rate of pay under the rules in this paragraph (except as 
otherwise provided in paragraph (d) of this section). If an employee 
voluntarily moves back to the General Schedule before any pay 
adjustment event under the broadbanding system (including any 
promotion, demotion, or pay adjustment provided under Sec.  9501.205), 
IRS must subtract any prorated pay increase received as part of 
conversion into the broadbanding system (including any applicable 
locality payment or staffing supplement associated with that increase) 
before applying the rules in this paragraph. (The preceding sentence 
does not apply to an employee who involuntarily moves back to the 
General Schedule.) As provided in paragraph (a)(3) of this section, any 
resulting reduction in pay is not an adverse action.
    (1) Convert the employee's rate of pay under the broadbanding 
system (including any locality adjustment or staffing supplement) to a 
rate on the highest applicable GS rate range for the converted GS grade 
derived under paragraph (b) of this section. In identifying the highest 
applicable GS rate range consider the following types of rate ranges:
    (i) The GS base pay schedule;
    (ii) The LEO special base rate schedule;
    (iii) An applicable locality pay schedule for the locality pay area 
in which the employee's official worksite is located; or
    (iv) A special rate schedule for the employee's position and 
official worksite, as applicable.
    (2) If the highest applicable GS rate range is under a locality pay 
schedule, convert the employee's rate of pay (including any locality 
adjustment or staffing supplement) to a GS locality rate of pay. Since 
this converted rate is used only as a basis for setting the employee's 
rate in the new position, do not adjust the converted rate to equal a 
standard step rate. The rate of pay underlying the converted GS 
locality rate of pay becomes the employee's converted GS base rate.
    (3) If the highest applicable GS rate range is a special rate 
range, convert the employee's rate of pay (including any locality 
adjustment or staffing supplement) to a special rate. The converted 
special rate may fall between the standard step rates. The rate of pay 
underlying the converted GS special rate becomes the employee's 
converted GS base rate.
    (4) If the employee's rate of pay (including any locality 
adjustment or staffing supplement) exceeds the maximum rate of the 
highest applicable GS rate range, convert the rate of pay to a retained 
rate (if not otherwise excluded from the pay retention authority at 5 
U.S.C. chapter 53, subchapter VI).
    (5) If the employee's rate of pay (including any locality 
adjustment or staffing supplement) is lower than the minimum rate of 
the highest applicable GS rate range, convert the employee's rate of 
pay to a GS locality rate, or special rate, as applicable. Since this 
converted rate is used only as a basis for setting the employee's rate 
in the new position, do not adjust the converted rate to equal a 
standard step rate. If the employee's converted rate is a locality 
rate, the rate of pay underlying the locality rate becomes the 
employee's GS base rate.
    (d) Employees on band or pay retention. Apply the following 
procedures to determine the converted GS-equivalent grade and pay rate 
upon voluntary or involuntary conversion of an employee from a 
broadbanding system to the GS system (other than an involuntary 
conversion covered by paragraph (a)(2) of this section) when the 
employee is retaining a band or pay rate under the broadbanding system:
    (1) If an employee is retaining a band, apply the procedures in 
paragraphs (b) and (c) of this section using the grades encompassed by 
the employee's retained band to determine the employee's GS-equivalent 
retained grade and pay rate. The time in a retained band counts toward 
the 2-year limit on grade retention in 5 U.S.C. 5362. (If the employee 
is also receiving a retained rate, apply the procedures in paragraph 
(d)(2) of this section instead of paragraph (c) of this section to 
determine the employee's GS-equivalent rate of pay.)
    (2) If the employee's rate of pay under the broadbanding system is 
a retained rate, the employee's GS-equivalent grade is the highest 
grade encompassed in his or her band (unless the employee is also 
retaining a band in which case apply paragraph (d)(1) of this section 
to determine the employee's GS-equivalent grade). If the employee's 
retained rate is less than the maximum rate of the highest applicable 
GS rate range for the employee's GS-equivalent grade, apply the 
procedures in paragraph (c)(1)-(c)(3) of this section to determine the 
employee's GS-equivalent pay rate. If the employee's retained rate 
exceeds the maximum rate of the highest applicable GS rate range for 
the employee's GS-equivalent grade, convert the employee's broadbanding 
retained rate to an equal GS-equivalent retained rate.
    (e) Within-grade increase equivalent increase determinations. 
Service under a broadbanding system is creditable for within-grade 
increase purposes upon conversion to the GS pay system. (See 5 CFR 
531.407(b) for additional information on equivalent increase 
determinations.)

 [FR Doc. E7-7255 Filed 4-16-07; 8:45 am]
BILLING CODE 6325-39-P