[Federal Register Volume 72, Number 231 (Monday, December 3, 2007)]
[Rules and Regulations]
[Pages 67831-67841]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-23411]



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  Federal Register / Vol. 72, No. 231 / Monday, December 3, 2007 / 
Rules and Regulations  

[[Page 67831]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 530 and 575

RIN: 3206-AK81


Recruitment, Relocation, and Retention Incentives

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The Office of Personnel Management is issuing final 
regulations on recruitment, relocation, and retention incentives. The 
final regulations revise the interim regulations by making a number of 
technical modifications, corrections, and clarifications. The final 
regulations continue to provide agencies with additional flexibility to 
help recruit and retain Federal employees and better meet agency 
strategic human capital needs.

DATES: Effective Date: January 2, 2008.

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: On May 13, 2005, the Office of Personnel 
Management (OPM) published interim regulations (70 FR 25732) to 
implement section 101 of the Federal Workforce Flexibility Act of 2004 
(Pub. L. 108-411, October 30, 2004). Section 101 amended 5 U.S.C. 5753 
and 5754 by providing a new authority to make recruitment, relocation, 
and retention payments. The amended law replaced the former recruitment 
and relocation bonus and retention allowance authority provided by 5 
U.S.C. 5753 and 5754. The 60-day comment period for the interim 
regulations ended July 12, 2005.
    During the comment period, we received comments from eight 
agencies, one employee organization, and eight individuals. A number of 
the commenters stated they are pleased with the flexibilities provided 
by the interim regulations. They believe the enhanced recruitment, 
relocation, and retention incentive (3Rs) authorities will allow 
agencies to be more competitive with the private sector and assist in 
recruiting and retaining highly qualified employees and candidates. The 
commenters support the approach taken by OPM to provide agencies with 
maximum flexibility and discretion to craft plans for administering the 
incentives to best meet their needs.
    The Supplementary Information for the interim regulations posed a 
number of questions about whether the 3Rs regulations should provide 
agencies with the authority to pay recruitment incentives to help 
recruit current employees (as authorized by 5 U.S.C. 5753(b) under 
conditions that would be described in OPM regulations) and to pay 
retention incentives to help retain employees likely to leave for a 
different Federal position (as authorized by 5 U.S.C. 5754(b) under 
conditions that would be described in OPM regulations) and, if so, 
under what circumstances.
    The comments we received in response to these questions are not 
addressed in these final regulations, but will be addressed in a future 
Federal Register notice. This Federal Register notice addresses the 
remaining comments and makes a number of technical revisions and 
clarifications in the 3Rs regulations, which are summarized below.

Comments Applicable to Recruitment, Relocation, and Retention 
Incentives

Definition of Basic Pay (Sec. Sec.  530.202, 575.102, 575.202, and 
575.302)

    An individual expressed confusion about the definition of basic pay 
in the aggregate limitation on pay regulations at Sec.  530.202 and the 
definition of rate of basic pay in the recruitment, relocation, and 
retention incentive regulations at Sec. Sec.  575.102, 575.202, and 
575.302, respectively. The commenter questioned why the terms 
themselves are different and why they are defined differently.
    Similar terms may be used and defined in different ways in title 5, 
Code of Federal Regulations, depending on the purpose of the term and 
statutory requirements. Differences in the term basic pay for the 
purpose of the aggregate limitation on pay and the term rate of basic 
pay for the purpose of the 3Rs are necessary based on how each term is 
used in its respective subpart of the regulations. Each term must be 
read only within the context of the subpart of the regulation in which 
it is defined. In the aggregate limitation on pay regulations, an 
employee's basic pay is added to certain other payments authorized 
under title 5, United States Code, to determine whether the employee's 
total pay has reached the aggregate limitation on pay in the calendar 
year. In the 3Rs regulations, an employee's rate of basic pay is used 
to compute recruitment and relocation incentive payment limits and 
retention incentive payments.

Eligible Categories of Employees (Sec. Sec.  575.103, 575.203, and 
575.303)

    An agency questioned whether employees under administratively 
determined (AD) pay systems are covered by the 3Rs authorities. The 
agency wanted to ensure that AD employees are covered.
    OPM has not regulated that all AD positions are eligible for 
recruitment, relocation, and retention incentives. Under 5 U.S.C. 
5753(a)(1)(B) and 5754(a)(1)(B), OPM may approve coverage of a category 
of non-General Schedule (non-GS) employees under the 3Rs authorities at 
the request of the head of an Executive agency. When we issued the 
interim regulations implementing the new authorities, OPM approved 
those categories of non-GS employees that were previously covered under 
the former recruitment and relocation bonus and retention allowance 
authorities for coverage under the new authorities, except when such 
categories are excluded by law (5 U.S.C. 5753(a)(2) and 5754(a)(2)) or 
regulation (Sec. Sec.  575.104, 575.204, and 575.304). (See CPM 2005-08 
on OPM's Web site at http://www.opm.gov/oca for additional information 
and a list of approved single-agency categories of employees.) If a 
category of AD employees (or other employee category) is not already 
approved for coverage, the head of an Executive agency may request OPM 
approval for coverage of such employees. The coverage of each category 
of AD positions requires separate OPM approval.
    The same agency noted the regulations at Sec. Sec.  575.103, 
575.203, and

[[Page 67832]]

575.303 cover employees in a position under the Executive Schedule paid 
under 5 U.S.C. 5311-5317. The agency stated Executive Schedule 
positions are filled using presidential appointments and such 
appointments are excluded from coverage under Sec. Sec.  575.104, 
575.204, and 575.304. The agency commented that the regulations appear 
to be contradictory and suggested the coverage of Executive Schedule 
positions be restated or clarified.
    We agree most Executive Schedule positions are filled using 
presidential appointments and, thus, employees appointed to such 
positions would not be eligible for 3Rs payments under Sec. Sec.  
575.104, 575.204, and 575.304. However, we are retaining the provision 
in Sec. Sec.  575.103, 575.203, and 575.303 stating employees appointed 
to or in Executive Schedule positions are eligible for 3Rs payments to 
ensure that an employee in an Executive Schedule position that is not 
otherwise excluded by Sec.  575.104, 575.204, and 575.304 (e.g., not a 
presidential appointee) remains eligible for such payments.
    Another agency asked for clarification on whether employees of 
nonappropriated fund instrumentalities (NAFI) are eligible for 
recruitment, relocation, and retention incentives. We have not made a 
change to the regulations in response to this comment. An employee in a 
NAFI position meeting the definition of a prevailing rate position in 5 
U.S.C. 5342(a)(3) is eligible for recruitment, relocation, and 
retention incentives, as long as the position is not otherwise excluded 
by Sec. Sec.  575.104, 575.204, and 575.304. (See Sec. Sec.  
575.103(f), 575.203(f), and 575.303(f).) As of the date of publication 
of these final regulations in the Federal Register, all other 
categories of NAFI positions (e.g., ``white collar'' NAFI positions) 
are ineligible for 3Rs payments. However, because a NAFI employee is 
covered by the definition of employee in 5 U.S.C. 5753(a)(3) and 
5754(a)(3) and Sec. Sec.  575.102, 575.202, and 575.302 of the 
regulations, OPM may extend coverage of the 3Rs authorities to 
currently excluded categories of NAFI employees upon request of the 
head of an Executive agency.
    Finally, we are revising the introductory text in Sec. Sec.  
575.103, 575.203, and 575.303 to clarify that only an Executive agency 
(as defined in Sec. Sec.  575.102, 575.202, and 575.302) may pay 
recruitment, relocation, and retention incentives to the categories of 
non-GS employees listed in those sections. (See 5 U.S.C. 5753(a)(1)(B) 
and 5754(a)(1)(B).) These sections continue to provide that an agency 
in the executive branch or legislative branch may pay recruitment, 
relocation, and retention incentives to GS employees. (See the 
definition of agency in Sec. Sec.  575.102, 575.202, and 575.302.)

Payment Approval Levels (Sec. Sec.  575.107, 575.207, and 575.307)

    An individual questioned whether the authority to approve 3Rs 
requests could be delegated to the immediate supervisor of the employee 
receiving the 3Rs incentive provided the supervisor is the head of a 
departmental element who reports to the head of an agency and the 
employee receiving the incentive is not a member of the Senior 
Executive Service. The commenter noted the second-level supervisory or 
managerial approval requirement seems contrary to OPM's intent to 
expeditiously hire and retain the best and brightest and stated ``this 
new requirement will actually slow the process and hamper efforts to 
review and approve 3R incentives in a timely manner.''
    We understand the need for streamlined and efficient agency 
approvals of 3Rs incentives. However, this need must be balanced with 
an appropriate and judicious use of the authorities. We note that the 
second-level supervisory or management approval of 3Rs incentives is 
not a new requirement-i.e., it was required by the regulations for the 
former recruitment and relocation bonus and retention allowance 
authorities and was carried over into the new regulations. Since no 
additional approval levels have been added, we foresee no slowing of 
the approval process because of the new regulations.
    We note that several provisions in the regulations make it possible 
to approve incentives without a second-level supervisory or managerial 
review. For example, the regulations at Sec.  575.107(b)(2) allow an 
agency to establish criteria in advance so an employment candidate's 
supervisor or equivalent-level official may offer a recruitment 
incentive within a pre-established range without further review or 
approval. Also, the relocation incentive regulations at Sec.  
575.207(b)(2) do not require higher-level approval when approving 
coverage of individual employees under a previously approved group 
relocation incentive authorization under Sec.  575.208(b). Finally, 
under Sec.  575.307(b)(2), second-level supervisory or managerial 
approval is not required when approving coverage of individual 
employees under a previously approved group retention incentive 
authorization.
    In addition, agencies have considerable discretion when they craft 
their 3Rs plans to decide which officials will have approval authority 
for these incentives. (See Sec. Sec.  575.107(a)(1), 575.207(a)(1), and 
575.307(a)(1).) If agencies require very high-level reviews for these 
incentives, the approval process may become slow and unwieldy. However, 
this is a matter that must be decided at the agency level.

Paying Recruitment, Relocation, and Retention Incentives Concurrently 
(Sec. Sec.  575.109, 575.209, and 575.309)

    Two agencies requested the regulations specify whether the service 
agreement periods for more than one type of incentive should be served 
concurrently or sequentially. Another agency pointed out the 
regulations do not address the ability to offer a recruitment incentive 
followed by a relocation incentive and suggested the explanation of the 
order of and the basis for offering multiple incentives be described 
more thoroughly in each respective section under Sec. Sec.  575.109, 
575.209, and 575.309.
    We agree that the regulations should clarify these issues. The 
interim retention incentive regulations at Sec.  575.309(g) provided an 
agency may not commence a retention incentive service agreement (or 
begin paying a retention incentive without a service agreement) during 
a period of employment established under a service agreement required 
for the payment of a recruitment incentive or a relocation incentive. 
After a retention incentive service agreement has commenced (or 
retention incentive payments without a service agreement have 
commenced), the retention incentive regulations allowed an agency to 
pay a relocation incentive without affecting the payment of an existing 
retention incentive. However, the interim recruitment and relocation 
incentive regulations were silent on paying recruitment, relocation, 
and retention incentives concurrently and whether employees should 
serve multiple 3Rs service agreements concurrently or sequentially.
    These final regulations provide the following rules regarding 
concurrent recruitment, relocation, and retention incentive payments:
     New Sec.  575.105(c) provides that an agency may not 
commence a recruitment incentive service agreement during (1) a period 
of employment established under a service agreement required for a 
relocation incentive, or (2) during a period of employment established 
under a service agreement for a previously authorized retention 
incentive or for which an employee is receiving a previously authorized 
retention incentive without a service agreement.

[[Page 67833]]

     New Sec.  575.205(d) provides that an agency may not 
commence a relocation incentive service agreement during (1) a period 
of employment established under any service agreement required for a 
recruitment incentive, or (2) a period of employment established under 
any service agreement required for a previously authorized relocation 
incentive.
     New Sec.  575.205(e) provides that an agency may commence 
a relocation incentive service agreement during a period of employment 
established under a service agreement for a previously authorized 
retention incentive or for which an employee is receiving previously 
authorized retention incentive payments without a service agreement. 
(This provision was formerly in Sec.  575.309(g).) This new paragraph 
also clarifies that the service period under two such service 
agreements must run concurrently.
     Revised Sec.  575.309(g) provides that an agency may not 
commence a retention incentive service agreement (or begin paying a 
retention incentive without a service agreement) during (1) a period of 
employment established under any service agreement required for payment 
of a recruitment incentive or a relocation incentive or (2) a period of 
employment established under a service agreement for a previously 
authorized retention incentive or for which an employee is receiving a 
previously authorized retention incentive without a service agreement.
    Except as provided in Sec.  575.205(e), these regulatory changes 
prohibit the simultaneous payment of multiple incentives and prohibit 
concurrent 3Rs service agreements. However, the recruitment, 
relocation, and retention incentive authorities provide substantial 
flexibility to make sizable incentive payments in situations in which 
offering multiple incentives may otherwise be attractive. For example, 
if an employee fulfilling a recruitment incentive service agreement is 
relocated to a different geographic area in a difficult to fill 
position, the regulations provide the agency the flexibility to 
terminate the recruitment incentive service agreement under Sec.  
575.111(a) and authorize a relocation incentive under 5 CFR part 575, 
subpart B, in its place. In this case, the employee would not be 
disadvantaged because under Sec.  575.111(e), the employee would be 
entitled to all recruitment incentive payments attributable to 
completed service and to retain any portion of a recruitment incentive 
payment already received that is attributable to uncompleted service. 
The agency could consider any remaining recruitment incentive payments 
and time remaining under the recruitment incentive service agreement in 
determining the amount of the relocation incentive and length of the 
relocation incentive service agreement.
    Similarly, if an employee receiving a group retention incentive 
under Sec.  575.305(b) is still likely to leave Federal service and has 
unusually high or unique qualifications that are not adequately covered 
by the group retention incentive authorization, the agency could 
terminate the group retention incentive under Sec.  575.311(a) for the 
individual employee and authorize an individual retention incentive 
under Sec.  575.305(a) for the employee. The agency could consider the 
amount of the group retention incentive and time remaining under the 
group retention incentive service agreement, if any, in determining the 
amount of the new retention incentive and length of any new retention 
incentive service agreement.

Definition of ``Fully Successful'' (Sec. Sec.  575.110(d), 575.111(b), 
575.205(c), 575.210(d), 575.211(b), 575.305(d), 575.306(c)(2), 
575.310(d), 575.311(b), and 575.311(f)(5)(ii))

    An agency requested clarification of the definition of ``fully 
succeed'' [sic] due to variances in Federal performance ratings. The 
agency questioned whether the intent is to limit the payment of 
recruitment incentives to only those employees whose rating of record 
is at the highest level under the applicable performance appraisal 
system and recommended that employees at least one level below the 
highest level be eligible, so as to accommodate the ratings of new 
hires.
    Because recruitment incentives may be paid only to newly-appointed 
Federal employees (or former employees with a 90-day break in service), 
the regulations do not require an employee to have a ``Fully 
Successful'' or higher rating of record to receive a recruitment 
incentive. However, the regulations at Sec. Sec.  575.205(c) and 
575.305(d) provide that a relocation and retention incentive may be 
paid to an employee only when the employee's rating of record (or 
official performance appraisal or evaluation under a system not covered 
by 5 U.S.C. chapter 43 or 5 CFR part 430) is at least ``Fully 
Successful'' or equivalent. In addition, the regulations at Sec. Sec.  
575.110(d), 575.111(b), 575.210(d), 575.211(d), 575.310(d), 575.311(b), 
and 575.311(f)(5)(ii) require agencies to terminate 3Rs service 
agreements and retention incentive payments when no service agreement 
is required if the employee receives a rating of record of less than 
``Fully Successful'' or equivalent. We note ``Fully Successful'' is not 
intended to refer to a rating of record that is the highest level under 
an applicable performance appraisal system, unless the performance 
appraisal system is a pass-fail system.

Repayment Waivers (Sec. Sec.  575.111(g) and 575.211(g))

    Sections 575.111(g) and 575.211(g) of the interim regulations 
provided that the head of an agency may use the authority in 5 U.S.C. 
5584 to waive a debt resulting from an employee's failure to reimburse 
the agency for the full amount of a recruitment or relocation incentive 
repayment requirement when the employee fails to fulfill a required 
service period. An individual commented that OPM appears to have the 
authority to permit agencies to waive repayment of recruitment and 
relocation incentives without reliance on 5 U.S.C. 5584 because 5 
U.S.C. 5753(g) permits OPM to promulgate ``regulations relating to 
repayment of a bonus under this section under appropriate circumstances 
when the agreed upon service period has not been completed.'' The 
commenter also noted such waivers should not be routine, but 
circumstances are likely to arise under which repayment of unliquidated 
amounts would constitute an undue hardship, such as for unforeseen and 
compelling personal reasons.
    We agree that it is appropriate for OPM to use its regulatory 
authority at 5 U.S.C. 5753(g) to provide agencies with the authority to 
waive the requirement to repay recruitment or relocation incentive 
payments attributable to uncompleted service when a service agreement 
is terminated under Sec. Sec.  575.111(b) and 575.211(b), rather than 
relying on the agency's authority to waive recovery of an erroneous 
payment under 5 U.S.C. 5584. We are revising the regulations at 
Sec. Sec.  575.111(g) and 575.211(g) to remove the reference to an 
agency's authority to waive a debt under 5 U.S.C. 5584. We also are 
adding new paragraphs Sec. Sec.  575.111(h) and 575.211(h) to provide 
an authorized agency official with the authority to waive the 
requirement for an employee to repay recruitment or relocation 
incentive payments attributable to uncompleted service under Sec. Sec.  
575.111(f) and 575.211(f) when collection of the excess payments from 
the employee would be against equity and good conscience and not in the 
best interests of the United States. Agencies should ensure such waiver 
authority is used judiciously. (See also the conforming changes in 
Sec. Sec.  575.107(a)(1) and 575.207(a)(1).)

[[Page 67834]]

Agencies continue to have the authority under 5 U.S.C. 5584 to waive 
recovery of recruitment or relocation incentives or other pay or 
allowances that are paid erroneously.

Reporting Requirements (Sec. Sec.  575.113, 575.213, and 575.313)

    An agency requested the supplementary information or final 
regulations clarify that the Department of Defense (DOD) and United 
States Coast Guard (USCG) are not expected to report incentives paid to 
prevailing rate employees from non-appropriated funds in its submission 
for OPM's report to Congress. The agency stated, although NAFI 
prevailing NAFI rate employees are included in the definition of 
employee and in the eligible categories of employees for each type of 
incentive, a 3Rs payment paid to those employees is paid out of funds 
not appropriated by Congress.
    We do not agree. Incentives paid from non-appropriated funds should 
be included in the annual report to OPM required by Sec. Sec.  
575.113(b), 575.213(b) and 575.313(b). The congressional reporting 
requirement in section 101(c) of the Federal Workforce Flexibility Act 
of 2004 does not make a distinction between appropriated and non-
appropriated fund positions. Agencies should report required 3Rs data 
and information for both types of employees.

Comments Applicable to Recruitment Incentives

Definition of ``Newly Appointed'' (Sec.  575.102)

    An agency asked for clarification on whether the regulations permit 
the payment of recruitment incentives to employees moving from either 
prevailing rate or white-collar NAFI positions to positions covered by 
the recruitment incentive regulations (e.g., GS). Under 5 U.S.C. 
5753(b)(2)(A), a recruitment incentive may be paid to an employee 
``newly appointed as an employee of the Federal Government.'' Newly 
appointed is defined in Sec.  575.102 as referring to (1) the first 
appointment as an employee of the Federal Government, (2) an 
appointment of a former employee of the Federal Government following a 
90-day break-in-service, or (3) an appointment as an employee of the 
Federal Government when the employee's Federal service during the 90-
day period immediately preceding the appointment was limited to certain 
types of employment (e.g., a time-limited appointment).
    Under the interim regulations, certain categories of NAFI employees 
in DOD and USCG were considered newly appointed and eligible to receive 
a recruitment incentive under the conditions prescribed in 5 CFR part 
575, subpart A, when moving to a position listed in Sec.  575.103 
(i.e., NAFI employees who moved to a position in the same agency after 
more than a 3-day break in service and NAFI employees who moved to a 
position in a different agency with or without a break in service). 
Such NAFI employees did not need the 90-day break in service required 
by paragraph (2) of the definition of newly appointed to receive a 
recruitment incentive. (See the exemptions in paragraphs (3)(iv) and 
(v) of that definition in the interim regulations.)
    Based on the definition of employee in Sec.  575.102 and the 
definition of employee in 5 U.S.C. 5753(a)(3), both of which 
specifically include a DOD and USCG NAFI employee, as described in 5 
U.S.C. 2105(c), we believe it would be more consistent to revise the 
definition of newly appointed in these final regulations to remove the 
special exemptions from the 90-day break-in-service requirement in 
paragraphs (3)(iv) and (v) of the definition of newly appointed for DOD 
and USCG NAFI employees. In other words, all DOD and USCG NAFI service 
will be considered Federal service in applying the 90-day break-in-
service rule. DOD and USCG NAFI employees must have a 90-day break-in-
service to be eligible for a recruitment incentive upon movement to a 
position listed in Sec.  575.103 (unless one of the remaining 
exclusions in the definition of newly appointed applies).

Payment and Repayment Requirements (Sec.  575.111)

    An agency recommended amending Sec.  575.111(b) and (f) to state 
employees must repay recruitment incentive payments for any part of the 
service period in which they did not meet all of the terms of the 
service agreement; e.g., for periods of unsatisfactory performance. The 
same agency recommended the regulations require full repayment of a 
recruitment incentive if employment is terminated due to falsified 
employment documents or pre-employment conditions.
    The regulations at Sec.  575.111(b) require an agency to terminate 
a recruitment incentive service agreement when an employee receives a 
rating of record of less than ``Fully Successful'' or equivalent or 
when an employee otherwise fails to fulfill the terms of the service 
agreement. If an agency terminates a service agreement for such 
reasons, Sec.  575.111(f) provides that the employee is entitled to 
keep any portion of recruitment incentive payments already received 
that are attributable to completed service; however, the employee is 
obligated to repay any recruitment incentive payments received 
attributable to uncompleted service. Under this section, if an employee 
has received recruitment incentive payments less than the amount 
attributable to completed service when the service agreement is 
terminated, the agency is not obligated to pay the employee the amount 
attributable to completed service, unless the agency agreed to such 
payment in the employee's service agreement. Agencies may want to 
consider not paying all of a recruitment incentive as an up-front, 
lump-sum payment in advance of the employee fulfilling a service period 
and, instead, paying all or part of a recruitment incentive after an 
employee successfully completes all or part of the service period.
    We agree the regulations should require full repayment of a 
recruitment incentive if employment is terminated due to falsified 
employment documents or pre-employment conditions. We are adding a new 
paragraph (j) to Sec.  575.111 to require an employee to repay all 
recruitment incentive payments if an agency terminates a service 
agreement when an employee is separated as a result of material false 
or inaccurate statements or deception or fraud in examination or 
appointment, or as a result of failing to meet employment 
qualifications.
    An individual commented, if an applicant accepts an offer of 
employment along with a recruitment incentive, an agency should not be 
able to cancel the agreement (unless for poor performance) without 
paying out the full amount of the incentive (regardless of the 
installment plan). The individual stated if an applicant accepts a 
recruitment incentive offer in good faith, allowing the agency to 
terminate the service agreement without paying the full incentive 
seemed unfair.
    We disagree. The regulations provide appropriate protections for an 
employee if the agency terminates a service agreement when the employee 
is not at fault. Section 575.111(e) provides that such an employee is 
entitled to receive recruitment incentive payments attributable to 
completed service and to keep any recruitment incentive payments 
already received for completed and uncompleted service. An agency 
should not be obligated to pay additional recruitment incentive 
payments for service that is not completed under a terminated service 
agreement.
    An agency commented the recruitment incentive repayment

[[Page 67835]]

requirements are not consistent with the student loan repayment 
regulations which require full repayment if a service agreement is not 
completed. The student loan repayment program is based on a different 
statutory authority with different repayment requirements if the 
service agreement is not fulfilled. Under 5 U.S.C. 5379, an employee is 
obligated to reimburse the paying agency for the full amount of the 
student loan repayment benefits provided when the employee voluntarily 
separates from Federal service, or is separated involuntarily due to 
misconduct or poor performance, and does not complete the terms of the 
student loan repayment service agreement. There is no similar statutory 
requirement for recruitment incentives in 5 U.S.C. 5753. Under 5 U.S.C. 
5753(c)(2), OPM has the authority to regulate the terms and conditions 
under which recruitment incentives are payable, including the 
conditions under which a service agreement may be terminated and the 
effect of the termination. Consistent with the former recruitment bonus 
authority, the recruitment incentive regulations at Sec.  575.111 
generally require a pro-rated repayment of incentive payments received 
that are attributable to uncompleted service if a service agreement is 
not fulfilled.
    The same agency commented that Sec.  575.111(f) is vague and stated 
clarification is needed on whether agencies have the discretion to 
define completed service as the duration of the service agreement. The 
agency questioned whether it may require full repayment if the employee 
fails to complete a service period or must the repayment amount be 
prorated based on the portion of the agreement served.
    Under Sec.  575.110(a), a service period is the period of 
employment that an employee agrees to fulfill in exchange for a 
recruitment incentive, as documented in the employee's service 
agreement. ``Completed service,'' as used in Sec.  575.111, is the 
amount of time the employee has fulfilled under the service agreement, 
and ``uncompleted service'' is the amount of time the employee has not 
fulfilled under the service agreement. We are clarifying the 
recruitment and relocation incentive regulations by adding a new 
paragraph (i) to Sec. Sec.  575.111 and 575.211 to provide that in 
determining the amount of recruitment and relocation incentive payments 
attributable to completed and uncompleted service, agencies must 
prorate the full amount of the authorized incentive payments across the 
length of the service period. (See the fact sheet at http://www.opm.gov/oca/PAY/HTML/rectermcalc.asp for additional information.)

Additional Changes

    We are making the following additional changes to the recruitment 
incentive regulations to correct technical errors and make minor 
clarifications:
     Revising the definition of employee and replacing the 
definition of employee of the Federal Government with Federal 
Government in Sec.  575.102 to eliminate redundancy and circular 
language regarding NAFI employees. These final regulations also revise 
paragraphs (2) and (3) in the definition of newly appointed in Sec.  
575.102 consistent with these new definitions.
     Revising paragraph (3)(i) of the definition of newly 
appointed in Sec.  575.102 to clarify a ``nonpermanent appointment'' 
excludes a Schedule C appointment under 5 CFR part 213. An agency may 
not pay a recruitment incentive to an employee moving from a Schedule C 
appointment to a non-Schedule C appointment, unless the employee has a 
90-day break in service.
     Adding employment under the Student Career Experience 
Program under 5 CFR 213.3202(b) as a new paragraph (3)(vi) in the 
definition of newly appointed in Sec.  575.102. A similar provision was 
included in the former recruitment bonus regulations, but it was 
inadvertently left out of the interim recruitment incentive 
regulations.
     Adding an appointment as an expert or consultant under 5 
U.S.C. 3109 and 5 CFR part 304 as a new paragraph (3)(iv) in the 
definition of newly appointed in Sec.  575.102. Service under a 
temporary expert and consultant appointment is already not counted as 
Federal service in applying the 90-day break-in-service requirement in 
the existing definition of newly appointed. This addition will ensure 
that service under an intermittent ``expert and consultant'' 
appointment that is not a temporary appointment also is disregarded in 
applying the 90-day break-in-service requirement.
     Revising Sec.  575.106(b)(1) to clarify a factor for 
determining when a position is likely to be difficult to fill is the 
availability and quality of candidates possessing the competencies 
required for the position, including the success of recent efforts to 
recruit candidates for ``the position or similar positions.'' The 
language in the interim regulations stated only the success of recent 
efforts to recruit candidates for ``similar positions.''
     Clarifying Sec.  575.107(b)(1) to provide an authorized 
agency official must review and approve the recruitment incentive 
determination before paying the incentive to the employee.

Comments Applicable to Relocation Incentives

Definition of Temporary Relocation (Sec.  575.205(a)(2))

    An agency commented that the Supplementary Information of the 
interim regulations stated that a relocation incentive may be paid for 
a temporary relocation. The agency suggested ``temporary relocation'' 
should be defined.
    We do not agree. Section 575.205(a) provides an agency may pay a 
relocation incentive to an employee who must relocate to a different 
geographic area ``permanently or temporarily.'' Because there is no 
minimum length for a relocation incentive service agreement as there is 
for recruitment incentives, it is not necessary to define what is meant 
by ``temporary relocation.'' Note that under Sec.  575.205(b) employees 
must establish a residence in the new geographic area before an agency 
may pay a relocation incentive to an employee, even when the employee 
is relocated to a different geographic area on a temporary basis.

Payment to Former NAFI Employees (Sec.  575.205(a))

    An agency requested clarification of whether relocation incentives 
may be paid to DOD or USCG NAFI employees who move to appropriated fund 
positions. An agency may pay a relocation incentive to a white-collar 
or prevailing rate NAFI employee in a DOD or USCG NAFI position who 
moves without a break in service to an appropriated fund position that 
is eligible for relocation incentives under Sec.  575.203 and that is 
in a different geographic area. Consistent with the definition of 
employee in 5 U.S.C. 5753(a)(3), employee is defined in Sec.  575.202 
to mean an employee as defined in 5 U.S.C. 2105 ``except that the term 
also includes an employee described in 5 U.S.C. 2105(c) * * *.'' 
Section 2105(c) of title 5, United States Code, covers DOD and USCG 
NAFI employees.
    To help clarify this further, Sec.  575.202 includes a revised 
definition of employee and replaces the definition of employee of the 
Federal Government with Federal Government to eliminate redundancy and 
circular language regarding NAFI employees. Also, we are revising Sec.  
575.205(a) to provide that an agency may pay a relocation incentive 
under the conditions in 5 CFR part 575, subpart B, to an employee (as 
that term is newly defined) who (1) relocates to a

[[Page 67836]]

different geographic area (temporarily or permanently) to accept a 
position listed in Sec.  575.203 in an agency that is likely to be 
difficult to fill and (2) is an employee of the Federal Government (as 
those terms are newly defined) immediately before the relocation.

Additional Changes

    We are making the following additional changes to the relocation 
incentive regulations to correct technical errors and make minor 
clarifications:
     Revising Sec.  575.206(a)(4) to replace the term 
``recruitment incentive'' with ``relocation incentive.''
     Revising Sec.  575.206(b)(1) to clarify a factor for 
determining when a position is likely to be difficult to fill is the 
availability and quality of candidates possessing the competencies 
required for the position, including the success of recent efforts to 
recruit candidates for ``the position or similar positions.'' The 
language in the interim regulations stated only the success of recent 
efforts to recruit candidates for ``similar positions.''
     Revising Sec.  575.207(b)(1) to clarify an authorized 
agency official must review and approve a relocation incentive 
determination before paying the incentive to the employee.
     Revising Sec.  575.210(e) by removing the words ``agree 
to'' in the second sentence so that the language is parallel to Sec.  
575.110(e) of the recruitment incentive regulations.

Comments Applicable to Retention Incentives

Group Retention Incentives (Sec.  575.309(a)(2))

    An agency recommended that the limit on an agency's authority to 
approve group retention incentives under Sec.  575.309(a)(2) be raised 
from 10 percent to 25 percent. The agency stated with the increase in 
the maximum retention incentive amount from 25 to 50 percent, it would 
be appropriate to raise the agency authority to approve group retention 
incentives from the current 10 percent to 25 percent.
    We do not agree. The 10 percent limitation on an agency's authority 
to approve group retention incentives is provided by statute at 5 
U.S.C. 5754(e)(1)(B). The law requires OPM approval of group retention 
incentives in excess of 10 percent. (See 5 U.S.C. 5754(f).)

Computing Lump-Sum Retention Incentives (Sec.  575.309(d))

    An agency recommended the regulations describe how to calculate the 
total basic pay earned during a full service period for the purpose of 
calculating a retention incentive paid at the end of the service 
period. We are adding an example to Sec.  575.309(d) that shows how to 
compute a retention incentive for the full period of service under a 
service agreement (including the total amount of basic pay earned 
during the full period of service) consistent with the example in Sec.  
575.309(c)(1).

Grandfathered Retention Allowances (Sec.  575.314)

    An individual requested clarification on why an agency would not 
renew or continue a retention allowance that was originally authorized 
before May 2005 after the issuance of the new retention incentive 
regulations. The commenter observed that terminating retention 
allowances seems counterproductive to the purpose of the allowances 
which is to recruit and retain persons with unique skills.
    Under section 101(d)(3) of Public Law 108-411 and Sec.  575.314 of 
the regulations, retention allowances authorized before May 1, 2005, 
were required to continue to be paid until the allowance was 
reauthorized or terminated, but not later than April 30, 2006. Agencies 
were required to pay such grandfathered retention allowances subject to 
regulations applicable to retention allowances before May 1, 2005. 
Under the former retention allowance regulations, agencies had the 
flexibility to terminate retention allowances if a retention allowance 
was not needed to retain the employee, labor-market factors made it 
more likely to recruit a candidate with the qualifications possessed by 
the employee, the agency's need for the employee's services was reduced 
to a level that made paying an allowance unnecessary, or budgetary 
considerations made it difficult to continue paying the allowance. When 
a grandfathered retention allowance was terminated, an agency could 
have authorized a new retention incentive in its place under the 
conditions described in 5 CFR part 575, subpart C, as in effect 
starting on May 13, 2005. Any decision to terminate a grandfathered 
retention allowance before April 30, 2006 (the required termination 
date under the statute), and whether to replace that allowance with a 
new retention incentive was subject to agency discretion based on the 
needs of the agency and the requirements of the retention incentive law 
and regulations. We note that, by law, all grandfathered retention 
allowances should have been terminated by April 30, 2006.

Additional Changes

    We are making the following additional changes to the retention 
incentive regulations to correct technical errors and make minor 
clarifications:
     Revising Sec.  575.307(a)(6)(iii) to remove the 
requirement that agency retention incentive plans address the 
obligations of an employee if an agency terminates a service agreement. 
Because retention incentive payments are not paid in advance of an 
employee fulfilling the period of service attributable to the payments, 
employees do not have repayment obligations if a service agreement is 
terminated.
     Revising Sec.  575.307(b)(1) to clarify an authorized 
agency official must review and approve each retention incentive before 
paying an incentive to an employee.
     Revising the examples in Sec.  575.309(c)(1) and (c)(2) to 
clarify how the amount of pay an employee earned during the service 
period is computed.
     Revising Sec.  575.311 to clarify and make consistent the 
conditions under which agencies have the discretion and are required to 
terminate a retention incentive paid under a service agreement and a 
retention incentive paid without a service agreement. We also are 
adding a new paragraph to this section to clarify how to compute 
retention incentive payments that may be owed to an employee for 
completed service if an agency terminates a retention incentive service 
agreement.
    Finally, a number of commenters noted that the reference to 
paragraph (g) in Sec.  575.310(a) should be changed to paragraph (f). 
This error was corrected in the Federal Register notice published on 
December 19, 2005 (70 FR 74995).

Miscellaneous Changes to Other Regulations

    Commenters noted incorrect references to the special rate 
regulations (5 CFR part 530, subpart C) in the aggregate limitation on 
pay (5 CFR part 530, subpart B), supervisory differential (5 CFR part 
575, subpart D), and extended assignment incentive (5 CFR part 575, 
subpart E) regulations. A commenter also noted an incorrect reference 
to the prevailing rate night differential authority at 5 U.S.C. 5343(f) 
in the supervisory differential regulations. These references are 
corrected in these final regulations.
    We are revising the definition of discretionary payment in the 
aggregate limitation on pay regulations at Sec.  530.202 to remove 
``extended assignment incentives'' as an example of a discretionary 
payment, consistent

[[Page 67837]]

with the removal of retention incentives as an example of a 
discretionary payment in the interim regulations. We also are 
clarifying the definition to provide payments that are authorized to an 
employee under the terms of a service agreement are not discretionary 
payments.
    Also, to conform with the new Sec. Sec.  575.111(h) and 575.211(h) 
and OPM's authority in 5 U.S.C. 5757(f) to prescribe regulations on an 
employee's entitlement to retain extended assignment incentive payments 
when an agreement is canceled, these final regulations add a new Sec.  
575.513(g) to the extended assignment incentive regulations to provide 
an authorized agency official with the authority to waive the 
requirement under Sec.  575.513(b) and (c)(1) to repay excess extended 
assignment incentive payments if an extended assignment incentive 
service agreement is terminated when collection of the excess amount 
would be against equity and good conscience and not in the best 
interest of the United States. We are removing the reference to 5 
U.S.C. 5584 in Sec.  575.513(c)(1) as the authority for waiving 
recovery of such excess payments.

E.O. 12866, Regulatory Review

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

Regulatory Flexibility Act

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

List of Subjects in 5 CFR 530 and 575

    Government employees, Reporting and recordkeeping requirements, 
Wages.


    Office of Personnel Management
Linda M. Springer,
Director.

0
Accordingly, OPM amends 5 CFR parts 530 and 575 as follows:

PART 530--PAY RATES AND SYSTEMS (GENERAL)

0
1. The authority citation for part 530 continues to read as follows:

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

Subpart B--Aggregate Limitation on Pay

0
2. In Sec.  530.202, revise the first sentence in the definition of 
basic pay and the definition of discretionary payment to read as 
follows:


Sec.  530.202  Definitions.

* * * * *
    Basic pay means the total amount of pay received at a rate fixed by 
law or administrative action for the position held by an employee, 
including any special rate under 5 CFR part 530, subpart C, or any 
locality-based comparability payment under 5 CFR part 531, subpart F, 
or other similar payment under other legal authority, before any 
deductions. * * *
* * * * *
    Discretionary payment means a payment an agency has discretion to 
make to an employee. Payments that are authorized to be made to an 
employee under the terms of a service agreement or preauthorized to be 
made to an employee at a regular fixed rate each pay period are not 
discretionary payments.
* * * * *

PART 575--RECRUITMENT, RELOCATION, AND RETENTION INCENTIVES; 
SUPERVISORY DIFFERENTIALS; AND EXTENDED ASSIGNMENT INCENTIVES

0
3. The authority citation for part 575 continues to read as follows:

    Authority: 5 U.S.C. 1104(a)(2) and 5307; subparts A and B also 
issued under 5 U.S.C. 5753 and sec. 101 of the Federal Workforce 
Flexibility Act of 2004, Public Law 108-411, 118 Stat. 2305; subpart 
C also issued under 5 U.S.C. 5754 and sec. 101 of the Federal 
Workforce Flexibility Act of 2004, Public Law 108-411, 118 Stat. 
2305; subpart D also issued under 5 U.S.C. 5755; subpart E also 
issued under 5 U.S.C. 5757 and sec. 207 of Public Law 107-273, 116 
Stat. 1780.

Subpart A--Recruitment Incentives

0
4. In Sec.  575.102--
0
A. Revise the definition of employee,
0
B. Remove the definition of employee of the Federal Government,
0
C. Add a new definition of Federal Government, and
0
D. Revise paragraphs (2) and (3) in the definition of newly appointed.
    The revisions and addition read as follows:


Sec.  575.102  Definitions.

* * * * *
    Employee has the meaning given that term in 5 U.S.C. 2105, except 
that the term also includes an employee described in 5 U.S.C. 2105(c). 
For the purpose of determining whether an individual was an employee of 
the Federal Government during the 90-day period referred to in the 
definition of newly appointed, employee also includes an employee 
described in 5 U.S.C. 2105(e). For the purpose of Sec.  575.109(d), an 
employee means an individual not yet employed who has received a 
written offer to be newly appointed or reappointed and has signed the 
written service agreement required by Sec.  575.110 before payment of 
the recruitment incentive.
* * * * *
    Federal Government means all entities of the Government of the 
United States, including the United States Postal Service and the 
Postal Regulatory Commission.
* * * * *
    Newly appointed refers to--* * *
    (2) An appointment of a former employee of the Federal Government 
following a break in Federal Government service of at least 90 days; or
    (3) An appointment of an individual in the Federal Government when 
his or her service in the Federal Government during the 90-day period 
immediately preceding the appointment was limited to one or more of the 
following:
    (i) A time-limited appointment in the competitive or excepted 
service;
    (ii) A non-permanent appointment (excluding a Schedule C 
appointment under 5 CFR part 213) in the competitive or excepted 
service;
    (iii) Employment with the government of the District of Columbia 
(DC) when the candidate was first appointed by the DC government on or 
after October 1, 1987;
    (iv) An appointment as an expert or consultant under 5 U.S.C. 3109 
and 5 CFR part 304;
    (v) Employment under a provisional appointment designated under 5 
CFR 316.403; or
    (vi) Employment under the Student Career Experience Program under 5 
CFR 213.3202(b).
* * * * *

0
5. In Sec.  575.103--
0
A. Redesignate paragraphs (a) through (g) as paragraphs (a)(1) through 
(a)(7), respectively,
0
B. Designate the introductory sentence as paragraph (a) introductory 
text and revise it, and
0
C. Add a new paragraph (b).
    The revision and addition read as follows:

[[Page 67838]]

Sec.  575.103  Eligible categories of employees.

    (a) Except as provided in Sec.  575.104, an Executive agency may 
pay a recruitment incentive to an employee appointed or placed in the 
following categories of positions:
* * * * *
    (b) Except as provided in Sec.  575.104, a legislative agency may 
pay a recruitment incentive to an employee appointed or placed in a 
General Schedule position paid under 5 U.S.C. 5332 or 5305 (or similar 
special rate authority).
0
6. In Sec.  575.105, add a new paragraph (c) to read as follows:


Sec.  575.105  Applicability to employees.

* * * * *
    (c) An agency may not commence a recruitment incentive service 
agreement during--
    (1) A period of employment established under any service agreement 
required for a relocation incentive under 5 CFR part 575, subpart B, or
    (2) A period of employment established under any service agreement 
required for a retention incentive or for which an employee receives 
retention incentive payments without a service agreement under 5 CFR 
part 575, subpart C.
0
7. In Sec.  575.106, revise paragraph (b)(1) to read as follows:


Sec.  575.106  Authorizing a recruitment incentive.

* * * * *
    (b) * * *
    (1) The availability and quality of candidates possessing the 
competencies required for the position, including the success of recent 
efforts to recruit candidates for the position or similar positions 
using indicators such as offer acceptance rates, proportion of 
positions filled, and the length of time required to fill similar 
positions;
* * * * *

0
8. In Sec.  575.107, revise paragraphs (a)(1) and (b)(1) to read as 
follows:


Sec.  575.107  Agency recruitment incentive plan and approval levels.

    (a) * * *
    (1) The designation of officials with authority to review and 
approve payment of recruitment incentives (subject to paragraph (b) of 
this section), including the circumstances under which an official has 
the authority to approve payment without higher-level approval under 
paragraph (b)(2) of this section, and the designation of officials with 
authority to waive the repayment of a recruitment incentive under Sec.  
575.111(h);
* * * * *
    (b)(1) Except as provided in paragraph (b)(2) of this section, an 
authorized agency official who is at least one level higher than the 
employee's supervisor must review and approve each determination to pay 
a recruitment incentive to a newly appointed employee, unless there is 
no official at a higher level in the agency. The authorized agency 
official must review and approve the recruitment incentive 
determination before the agency may pay the incentive to the employee.
* * * * *

0
9. In Sec.  575.111--
0
A. Revise the first sentence and the last sentence in paragraph (f),
0
B. Remove the last sentence in paragraph (g), and
0
C. Add new paragraphs (h), (i), and (j).
    The revision and additions read as follows:


Sec.  575.111  Termination of a service agreement.

* * * * *
    (f) Except as provided in paragraph (j) of this section, if an 
authorized agency official terminates a service agreement under 
paragraph (b) of this section, the employee is entitled to retain 
recruitment incentive payments previously paid by the agency that are 
attributable to the completed portion of the service period. * * * If 
the employee received recruitment incentive payments in excess of the 
amount that would be attributable to the completed portion of the 
service period, he or she must repay the excess amount, except when an 
authorized agency official waives the requirement to repay the excess 
amount under paragraph (h) of this section.
* * * * *
    (h) If an employee received recruitment incentive payments in 
excess of the amount that would be attributable to the completed 
portion of the service period under paragraph (f) of this section, an 
authorized agency official may waive the requirement to repay the 
excess amount when, in the judgment of the official, collection of the 
excess amount would be against equity and good conscience and not in 
the best interest of the United States.
    (i) The full amount of the authorized recruitment incentive must be 
prorated across the length of the service period to determine the 
amount of the recruitment incentive attributable to completed service 
and uncompleted service under this section.
    (j) Notwithstanding paragraph (f) of this section, if an agency 
terminates a service agreement under paragraph (b) of this section when 
an employee is separated as a result of material false or inaccurate 
statements or deception or fraud in examination or appointment, or as a 
result of failing to meet employment qualifications, the employee must 
repay all recruitment incentive payments received under that service 
agreement.

Subpart B--Relocation Incentives

0
10. In Sec.  575.202--
0
A. Revise the definition of employee,
0
B. Remove the definition of employee of the Federal Government, and
0
C. Add a new definition of Federal Government.
    The revision and addition read as follows:


Sec.  575.202  Definitions.

* * * * *
    Employee has the meaning given that term in 5 U.S.C. 2105, except 
that the term also includes an employee described in 5 U.S.C. 2105(c). 
For the purpose of determining whether an individual had status as an 
employee of the Federal Government immediately prior to the relocation 
(i.e., in Sec.  575.205(a)(2)), employee also includes an employee 
described in 5 U.S.C. 2105(e).
* * * * *
    Federal Government means all entities of the Government of the 
United States, including the United States Postal Service and the 
Postal Regulatory Commission.
* * * * *

0
11. In Sec.  575.203--
0
A. Redesignate paragraphs (a) through (g) as paragraphs (a)(1) through 
(a)(7), respectively,
0
B. Designate the introductory sentence as paragraph (a) introductory 
text and revise it, and
0
C. Add a new paragraph (b).
    The revision and addition read as follows:


Sec.  575.203  Eligible categories of employees.

    (a) Except as provided in Sec.  575.204, an Executive agency may 
pay a relocation incentive to an employee in the following categories 
of positions:
* * * * *
    (b) Except as provided in Sec.  575.204, a legislative agency may 
pay a relocation incentive to an employee in a General Schedule 
position paid under 5 U.S.C. 5332 or 5305 (or similar special rate 
authority).

0
12. In Sec.  575.205, revise paragraph (a) and add new paragraphs (d) 
and (e) to read as follows:

[[Page 67839]]

Sec.  575.205  Applicability to employees.

    (a) An agency may pay a relocation incentive under the conditions 
prescribed in this subpart to an employee who--
    (1) Relocates to a different geographic area (permanently or 
temporarily) to accept a position listed in Sec.  575.203 in an agency 
when the position is likely to be difficult to fill, as determined 
under Sec.  575.206; and
    (2) Is an employee of the Federal Government immediately before the 
relocation.
* * * * *
    (d) An agency may not commence a relocation incentive service 
agreement during--
    (1) A period of employment established under any service agreement 
required for a recruitment incentive under 5 CFR part 575, subpart A, 
or
    (2) A period of employment established under any service agreement 
required for a relocation incentive previously authorized under this 
subpart.
    (e) An agency may commence a relocation incentive service agreement 
during a period of employment established under a service agreement for 
a previously authorized retention incentive or for which an employee is 
receiving previously authorized retention incentive payments without a 
service agreement under 5 CFR part 575, subpart C. The service period 
under such a relocation incentive service agreement and the service 
period required by the retention incentive service agreement, if 
applicable, must be fulfilled concurrently.

0
13. In Sec.  575.206, revise paragraphs (a)(4) and (b)(1) to read as 
follows:


Sec.  575.206  Authorizing a relocation incentive.

    (a) * * *
    (4) Request a waiver from OPM of the limitation on the maximum 
amount of a relocation incentive under Sec.  575.209(c); and
* * * * *
    (b) * * *
    (1) The availability and quality of candidates possessing the 
competencies required for the position, including the success of recent 
efforts to recruit candidates for the position or similar positions 
using indicators such as offer acceptance rates, proportion of 
positions filled, and the length of time required to fill similar 
positions;
* * * * *

0
14. In Sec.  575.207, revise paragraphs (a)(1) and (b)(1) to read as 
follows:


Sec.  575.207  Agency relocation incentive plan and approval levels.

    (a) * * *
    (1) The designation of officials with authority to review and 
approve payment of relocation incentives (subject to paragraph (b) of 
this section) and the designation of officials with authority to waive 
the repayment of a relocation incentive under Sec.  575.211(h);
* * * * *
    (b)(1) Except as provided in paragraph (b)(2) of this section, an 
authorized agency official who is at least one level higher than the 
employee's supervisor must review and approve each determination to pay 
a relocation incentive, unless there is no official at a higher level 
in the agency. The authorized agency official must review and approve 
the relocation incentive determination before the agency pays the 
incentive to the employee.
* * * * *

0
15. In Sec.  575.210(e), revise the second sentence to read as follows:


Sec.  575.210  Service agreement requirements.

* * * * *
    (e) * * * The service agreement must specify the effect of the 
termination under Sec.  575.211, including the conditions under which 
the agency will pay an additional relocation incentive payment for 
partially completed service under Sec.  575.211(e) and (f).
* * * * *

0
16. In Sec.  575.211--
0
A. Revise the last sentence in paragraph (f),
0
B. Remove the last sentence in paragraph (g), and
0
C. Add new paragraphs (h) and (i).
    The revision and additions read as follows:


Sec.  575.211  Termination of a service agreement.

* * * * *
    (f) * * * If the employee received relocation incentive payments in 
excess of the amount that would be attributable to the completed 
portion of the service period, he or she must repay the excess amount, 
except when an authorized agency official waives the requirement to 
repay the excess amount under paragraph (h) of this section.
* * * * *
    (h) If an employee received relocation incentive payments in excess 
of the amount that would be attributable to the completed portion of 
the service period under paragraph (f) of this section, an authorized 
agency official may waive the requirement to repay the excess amount 
when, in the judgment of the official, collection of the excess amount 
would be against equity and good conscience and not in the best 
interest of the United States.
    (i) The full amount of the authorized relocation incentive must be 
prorated across the length of the service period to determine the 
amount of the relocation incentive attributable to completed service 
and uncompleted service under this section.

Subpart C--Retention Incentives

0
17. In Sec.  575.303--
0
A. Redesignate paragraphs (a) through (g) as paragraphs (a)(1) through 
(a)(7), respectively,
0
B. Designate the introductory sentence as paragraph (a) introductory 
text and revise it, and
0
C. Add a new paragraph (b).
    The revision and addition read as follows:


Sec.  575.303  Eligible categories of employees.

    (a) Except as provided in Sec.  575.304, an Executive agency may 
pay a retention incentive to a current employee who holds--
* * * * *
    (b) Except as provided in Sec.  575.304, a legislative agency may 
pay a retention incentive to a current employee who holds a General 
Schedule position paid under 5 U.S.C. 5332 or 5305 (or similar special 
rate authority).

0
18. In Sec.  575.307, revise paragraph (a)(6)(iii) and add a new 
sentence at the end of paragraph (b)(1) to read as follows:


Sec.  575.307  Agency retention incentive plan and approval levels.

    (a) * * *
    (6) * * *
    (iii) The obligations of the agency if the agency terminates a 
service agreement; and
* * * * *
    (b)(1) * * * The authorized agency official must review and approve 
the retention incentive determination before the agency pays the 
incentive to the employee.
* * * * *

0
19. In Sec.  575.309--
0
A. Revise the fourth sentence in paragraph (c)(1) and the fourth 
sentence in paragraph (c)(2),
0
B. Add four new sentences at the end of paragraph (d), and
0
C. Revise paragraph (g).
    The revisions and additions read as follows:


Sec.  575.309  Payment of retention incentives.

* * * * *

[[Page 67840]]

    (c)(1) * * * The employee earns $15,000 during the 6 pay periods of 
service ($2,500 biweekly rate of basic pay x 6). * * *
    (2) * * * The employee earns $15,000 during the 6 pay periods of 
service ($2,500 biweekly rate of basic pay x 6). * * *
* * * * *
    (d) * * * For example, an agency establishes a retention incentive 
percentage rate of 10 percent for an employee. The employee has a 
service agreement that provides for a single lump-sum retention 
incentive payment after completion of the full service period required 
by the service agreement (i.e., 26 pay periods). The employee earns 
$65,000 during the 26 pay periods of service ($2,500 biweekly rate of 
basic pay x 26). Upon completion of the full service period, the 
employee will receive a single lump-sum retention incentive payment of 
$6,500 ($65,000 x .10).
* * * * *
    (g) An agency may not commence a group or individual retention 
incentive service agreement or provide a group or individual retention 
incentive without a service agreement under Sec.  575.310(f) for any 
biweekly pay period during--
    (1) A period of employment established under any service agreement 
required for the payment of a recruitment incentive under 5 CFR part 
575, subpart A, or a relocation incentive under 5 CFR part 575, subpart 
B, (see 5 CFR 575.205(e) regarding the authority to commence a 
relocation incentive service agreement during a period of employment 
established under a service agreement for a previously authorized 
retention incentive or for which an employee is receiving previously 
authorized retention incentive payments without a service agreement); 
or
    (2) A period of employment established under a service agreement 
for a previously authorized retention incentive or for which an 
employee is receiving a previously authorized retention incentive 
without a service agreement under Sec.  575.310(f) (including a group 
retention incentive with or without a service agreement).
* * * * *

0
20. Revise Sec.  575.311 to read as follows:


Sec.  575.311  Continuation, reduction, and termination of retention 
incentives.

    (a)(1) An authorized agency official must terminate a retention 
incentive service agreement when conditions change such that the 
original determination to pay the retention incentive no longer applies 
(e.g., when the agency assigns the employee to a different position 
that is not within the terms of the service agreement) or when payment 
is no longer warranted after considering factors such as--
    (i) Whether a retention incentive is needed to retain the employee 
(or group of employees),
    (ii) Whether labor-market factors make it more likely (or 
reasonably likely) to recruit a candidate with competencies similar to 
those possessed by the employee (or group of employees), or
    (iii) Whether the agency's need for the services of the employee 
(or group or category of employees) has been reduced to a level that 
makes it unnecessary to continue paying a retention incentive.
    (2) An authorized agency official may terminate unilaterally a 
retention incentive service agreement based solely on the management 
needs of the agency, even if the conditions giving rise to the original 
determination to pay the incentive still exist. For example, an agency 
may terminate a service agreement when there are insufficient funds to 
continue the planned retention incentive payments.
    (b) An authorized agency official must terminate a retention 
incentive service agreement when--
    (1) The employee is demoted or separated for cause (i.e., for 
unacceptable performance or conduct);
    (2) The employee receives a rating of record (or an official 
performance appraisal or evaluation under a system not covered by 5 
U.S.C. chapter 43 or 5 CFR part 430) of less than ``Fully Successful'' 
or equivalent; or
    (3) The employee otherwise fails to fulfill the terms of the 
service agreement.
    (c) If an authorized agency official terminates a service agreement 
under paragraph (a) of this section, the employee is entitled to retain 
any retention incentive payments that are attributable to completed 
service and to receive any portion of a retention incentive payment 
owed by the agency for completed service.
    (d) If an authorized agency official terminates a service agreement 
under paragraph (b) of this section, the employee is entitled to retain 
retention incentive payments previously paid by the agency that are 
attributable to the completed portion of the service period. If the 
employee received retention incentive payments that are less than the 
amount that would be attributable to the completed portion of the 
service period, the agency is not obligated to pay the employee the 
amount attributable to completed service, unless the agency agreed to 
such payment under the terms of the retention incentive service 
agreement.
    (e) To determine the amount of retention incentive payments that 
may be owed to an employee for completed service under paragraphs (c) 
and (d) of this section, multiply the total rate of basic pay the 
employee earned during the completed portion of the service period by 
the retention incentive percentage rate established for the employee 
under Sec.  575.309(a) and subtract the amount of retention incentive 
payments already paid to the employee from this product. The difference 
is the amount owed to the employee for completed service.
    (f)(1) For retention incentives that are paid when no service 
agreement is required under Sec.  575.310(f), an agency must review 
each determination to pay the incentive at least annually to determine 
whether payment is still warranted. An authorized agency official must 
certify this determination in writing.
    (2) An agency may continue paying a retention incentive to an 
employee when no service agreement is required as long as the 
conditions giving rise to the original determination to pay the 
incentive still exist.
    (3) An authorized agency official must reduce or terminate a 
retention incentive authorization when no service agreement is required 
whenever conditions change such that the original determination to pay 
the retention incentive no longer applies (e.g., when the agency 
assigns the employee to a different position that is not within the 
terms of the original determination) or when payment is no longer 
warranted at the level originally approved or at all after considering 
factors such as--
    (i) Whether a lesser amount (or none at all) would be sufficient to 
retain the employee (or group or category of employees);
    (ii) Whether labor-market factors make it more likely (or 
reasonably likely) to recruit a candidate with competencies similar to 
those possessed by the employee (or group or category of employees); or
    (iii) Whether the agency's need for the services of the employee 
(or group or category of employees) has been reduced to a level that 
makes it unnecessary to continue payment at the level originally 
approved (or at all).
    (4) An authorized agency official may terminate unilaterally a 
retention incentive authorization when no service agreement is required 
based solely on the management needs of the agency, even if the 
conditions giving rise to the original determination to pay the

[[Page 67841]]

incentive still exist. For example, an agency may terminate a retention 
incentive when there are insufficient funds to continue the planned 
retention incentive payments.
    (5) An authorized agency official must terminate a retention 
incentive authorization when no service agreement is required when--
    (i) The employee is demoted or separated for cause (i.e., for 
unacceptable performance or conduct), or
    (ii) The employee receives a rating of record (or an official 
performance appraisal or evaluation under a system not covered by 5 
U.S.C. chapter 43 or 5 CFR part 430) of less than ``Fully Successful'' 
or equivalent.
    (g) The termination of a retention incentive service agreement or 
the reduction or termination of a retention incentive under this 
section is not grievable or appealable.
    (h) If an agency terminates a retention incentive service agreement 
or reduces or terminates a retention incentive paid without a service 
agreement under this section, the agency must notify the employee in 
writing. When a retention incentive is terminated under paragraph (f) 
of this section, the employee is entitled to receive any scheduled 
incentive payments through the end of the pay period in which the 
written notice is provided or until the date of separation, if sooner.

Subpart D--Supervisory Differentials

0
21. In Sec.  575.402, revise paragraph (b) to read as follows:


Sec.  575.402  Delegation of authority.

* * * * *
    (b) A supervisory differential may not be paid on the basis of 
supervising a civilian employee whose rate of basic pay exceeds the 
maximum rate of basic pay established for grade GS-15 on the pay 
schedule applicable to the GS supervisor, including a schedule for any 
applicable special rate under 5 CFR part 530, subpart C; locality-based 
comparability payment under 5 CFR part 531, subpart F; or similar 
payment or supplement under other legal authority.
* * * * *

0
22. In Sec.  575.403, revise the definition of rate of basic pay to 
read as follows:


Sec.  575.403  Definitions.

* * * * *
    Rate of basic pay means the rate of pay fixed by law or 
administrative action for the position to which the employee is or will 
be appointed before deductions and including any special rate under 5 
CFR part 530, subpart C; locality-based comparability payment under 5 
CFR part 531, subpart F; or similar payment or supplement under other 
legal authority, but excluding additional pay of any other kind. For 
example, rate of basic pay excludes a night differential under 5 U.S.C. 
5343(f), an environment differential under 5 U.S.C. 5343(c)(4), or a 
similar payment under other legal authority.
* * * * *

0
23. Revise Sec.  575.405(d)(1) to read as follows:


Sec.  575.405  Calculation and payment of supervisory differential.

* * * * *
    (d) * * *
    (1) Basic pay, excluding a night or environmental differential 
under 5 U.S.C. 5343(f) or 5343(c)(4), respectively, or similar payment 
under other legal authority;
* * * * *

Subpart E--Extended Assignment Incentives

0
24. In Sec.  575.502, revise the first sentence in the definition of 
rate of basic pay to read as follows:


Sec.  575.502  Definitions.

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

0
25. In Sec.  575.513--
0
A. Revise paragraph (b) introductory text,
0
B. Revise paragraph (c)(1),
0
C. Remove the last sentence in paragraph (f), and
0
D. Add a new paragraph (g).
    The revisions and addition read as follows:


Sec.  575.513  What are the agency's and the employee's obligations 
when an employee fails to fulfill the terms of a service agreement?

* * * * *
    (b) Except as provided in paragraph (g) of this section, an 
employee is indebted to the Federal Government and must repay the 
paying agency for an appropriate portion of an extended assignment 
incentive received by the employee if--
* * * * *
    (c)(1) If an employee does not fulfill the terms of a service 
agreement under the circumstances prescribed in paragraph (b) of this 
section and has received incentive payments whose value as a percentage 
of the planned total sum of incentive payments for the entire service 
period exceeds the percentage reflecting the portion of the service 
period completed by the employee, he or she must repay the excess 
payment and any additional repayment penalty imposed by the agency 
under paragraph (e) of this section, except when an authorized agency 
official waives the requirement to repay the excess amount under 
paragraph (g) of this section.
* * * * *
    (g) If an employee received extended assignment incentive payments 
in excess of the amount that would be attributable to the completed 
portion of the service period under paragraph (c) of this section, an 
authorized agency official may waive the requirement to repay the 
excess amount when, in the judgment of the official, collection of the 
excess amount would be against equity and good conscience and not in 
the best interest of the United States.

[FR Doc. E7-23411 Filed 11-30-07; 8:45 am]
BILLING CODE 6325-39-P