[Federal Register Volume 79, Number 43 (Wednesday, March 5, 2014)]
[Rules and Regulations]
[Pages 12353-12362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-04765]



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  Federal Register / Vol. 79, No. 43 / Wednesday, March 5, 2014 / Rules 
and Regulations  

[[Page 12353]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 534

RIN 3206-AL88


Pay for Senior-Level and Scientific or Professional Positions

AGENCY: U.S. Office of Personnel Management.

ACTION: Final rule.

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

SUMMARY: This document amends rules for setting and adjusting pay of 
senior-level (SL) and scientific or professional (ST) employees. The 
Senior Professional Performance Act of 2008 changes pay for these 
employees by providing for rates of basic pay up to the rate payable 
for level III of the Executive Schedule (EX-III), or, if the employee 
is under a certified performance appraisal system, the rate payable for 
level II of the Executive Schedule (EX-II). Consistent with this 
statutory emphasis on performance-based pay, these regulations provide 
for agencies to set and adjust pay for SL and ST employees based on 
individual performance, contribution to the agency's performance, or 
both, as determined under a rigorous performance appraisal system.

DATES: Effective April 4, 2014.

FOR FURTHER INFORMATION CONTACT: William Collins, 202-606-1642.

SUPPLEMENTARY INFORMATION: Section 2 of the Senior Professional 
Performance Act of 2008 (Pub. L. 110-372, October 8, 2008), hereafter 
referred to as the ``Act,'' made significant changes affecting pay of 
senior-level and scientific or professional employees. OPM published 
proposed regulations on December 23, 2011, (76 FR 80268) and solicited 
agency comments on the proposed implementation of these changes. We 
received comments from three agencies, an executive organization, and 
one individual. Comments are summarized below, along with any revisions 
that have been made in preparing the final regulation. These will be 
discussed according to their subject matter and affected sections of 
the regulation.

Definitions

    An agency observed that OPM's definition of ``performance 
management system'' includes disciplines and activities by which an 
agency addresses the certification criteria in 5 CFR 430.404(a)(1) 
through (9) and asked what implications this has for an agency that 
does not pursue certification of an applicable performance appraisal 
system. OPM cites disciplines and activities associated with these 
criteria to give examples of included disciplines and activities. There 
is no intent to suggest these must be implemented in a way that results 
in certification for an agency's performance management system in order 
to satisfy the definition. This term is used in 5 CFR 534.510 to 
indicate sources and kinds of data an agency may use to document its 
basis for an off-cycle pay increase, but we provide that an agency may 
use other sources deemed useful. We see no adverse implications for an 
agency that chooses not to seek certification; however, we have removed 
a reference to certification from the definition.
    We are concerned that this question may imply a view that an agency 
that does not seek certification need not design and implement its 
performance management system so as to support determining pay of 
covered senior professionals based upon performance. If so, we 
disagree. In SUPPLEMENTARY INFORMATION at 76 FR 80269, December 23, 
2011, we explained that changes made by section 2 of the Act 
demonstrate congressional intent for SL and ST pay to be based upon 
individual performance, contributions to the agency's performance, or 
both, whether or not an agency's performance appraisal system is 
certified by OPM and OMB. An agency that does not seek certification is 
still obligated to design its performance management system for SL and 
ST employees based upon this congressional intent.
    An agency recommended defining the term ``performance appraisal 
system'' because applicable pay ranges are determined based upon 
whether or not an agency's performance appraisal system is certified. 
We agree and have added a definition of ``performance appraisal 
system'' to 5 CFR 534.503. With respect to a senior professional 
employee, this definition includes both appraisal systems and appraisal 
programs as defined at 5 CFR 430.203.
    An agency recommended that OPM redefine the term ``movement'' to 
exclude transfer of a Senior Executive Service (SES) employee to a 
senior professional position or revise 5 CFR 534.509 to provide that an 
SES employee transferring to a senior professional position may not be 
paid above the maximum rate of basic pay for senior professional 
employees at the hiring agency. We have not redefined ``movement'' or 
``transfer'' because those definitions already exclude such changes in 
position, but we agree with the agency's concern. We find that 5 U.S.C. 
5382(c) protects an SES member's pay rate above EX-III only upon the 
employee's transfer to an agency with an applicable maximum rate of pay 
prescribed under 5 U.S.C. 5382(a), which applies only to an SES 
position. Similarly, 5 U.S.C. 5376(b)(4) protects a senior 
professional's pay rate above EX-III only upon the employee's transfer 
to an agency with an applicable maximum rate of pay prescribed under 5 
U.S.C. 5376(b)(1)(B), which applies only to a senior professional 
position. We therefore have added a new paragraph (h) to 5 CFR 534.509 
to specify that provisions of that section do not apply upon 
appointment of an SES member to a senior professional position or upon 
appointment of a senior professional to an SES position.
    The executive association recommended that OPM include Inspectors 
General in the definition of ``agency head'' to give them the same 
authority for senior professional pay actions as other agency heads, 
rather than allowing an agency head to delegate authority for pay 
actions to an Inspector General (IG). The executive association 
considers the latter approach confusing and duplicative of the 
authority granted under the Inspector General Reform Act of 2008 (Pub. 
L. 110-409, October 14, 2008). In SUPPLEMENTARY INFORMATION at 76 FR 
80272, December 23, 2011, we explained that the IG Reform Act of 2008 
does not provide OPM a statutory basis to identify the IG as an agency

[[Page 12354]]

head for purposes of 5 U.S.C. 5376, or to require an agency head to 
delegate authority for senior professional pay actions to an IG. We 
have not adopted the recommendation because the commenter has not 
identified a basis for it that we have not previously considered and 
found wanting.

Written Plan

    The executive association agreed with requiring an agency to 
explain any system it uses to differentiate tiers for its senior 
professional positions, while expressing some doubt that tiers may be 
applied as readily to senior professional positions in most agencies as 
to senior executive positions. The executive association considers it 
especially critical that agencies provide a full explanation of the 
tiers' applicability to senior professional positions and that copies 
of any written plan related to tiers be provided to affected senior 
professionals. We agree with these observations. Each agency must 
determine whether tiers will be applied to their positions and, if so, 
explain in the agency's written pay procedures for senior professionals 
how they apply. However, 5 CFR 534.505(a)(3), as proposed, required 
that any system of tiers be described in an agency's written 
procedures, and 5 CFR 534.505(d) requires an agency to keep its written 
procedures up to date, make them available to senior professionals, and 
provide training or supplemental guidance as needed to clarify their 
application. We have revised 5 CFR 534.505(d) to state first the 
agency's obligation to make its written pay procedures available to 
affected senior professionals and to clarify their application as 
needed. This is done to avoid any possible misreading that would seem 
to make it necessary for senior professionals to request this 
information.

Centralized Review

    An agency and the executive association objected to the agency-
level centralized review requirement as proposed in 5 CFR 
534.505(a)(5). Both argued that review of proposed senior professional 
ratings and pay adjustments by a panel within an agency component is 
sufficient and more similar to SES provisions for Performance Review 
Board (PRB) review of proposed SES ratings and awards. The agency 
considers a component-level PRB responsible for both SES and SL or ST 
appraisals to be a more meaningful venue and notes that the law does 
not require centralized review by a single panel. The executive 
association considers centralized review of SL and ST ratings an 
unnecessary alternative to the discretion provided an agency at 5 CFR 
430.403(d) to include system features in its senior professional 
appraisal system that are the same as, or similar to, the features of 
its SES appraisal system, including procedures corresponding to PRB 
review for senior executives.
    In SUPPLEMENTARY INFORMATION at 76 FR 80269, December 23, 2011, OPM 
explained its proposal to remove the 12-month restriction on senior 
professional pay adjustments and instead provide new rules that require 
the following: (1) determining SL and ST pay adjustments based upon 
performance, contributions to the agency's performance, or both; 2) for 
agencies with ten or more senior professionals, centralized review of 
proposed pay adjustments; and 3) approval of the highest level SL and 
ST pay adjustments and off-cycle pay adjustments under proposed 5 CFR 
534.510 by the agency head or the designee who oversees the 
performance-based pay system. OPM proposed centralized review to 
provide for proposed ratings and pay adjustments to be considered 
within the larger context of ratings, pay adjustments, and pay rates 
for all agency senior professionals, so that an agency head and other 
authorized agency officials responsible for adjusting pay for senior 
professionals based upon individual performance, contributions to 
agency performance, or both, do so based upon advice that takes this 
larger context into account rather than relying solely upon the views, 
values and context of agency components. Our statement in SUPPLEMENTARY 
INFORMATION at 76 FR 80271, December 23, 2011, that an agency's use of 
an agency PRB within a senior professional performance appraisal system 
under 5 CFR 430.403(d) could meet the proposed centralized review 
requirement did not refer to component PRBs. The centralized review is 
intended to provide an agency-wide perspective and a check on proposed 
performance ratings and pay adjustments that would be significantly out 
of line. We have therefore revised 5 CFR 534.505(a)(5) to clarify that 
the centralized review is to provide advice from an agency-wide 
perspective to authorized agency officials for their consideration 
prior to approving pay adjustments.
    An agency recommended deleting paragraphs (i) and (ii) of 5 CFR 
534.505(a)(5) because the agency says it is not clear why an agency 
that does not seek certification should be required to consider whether 
proposed ratings and rates of basic pay are consistent with performance 
and pay differentiation criteria for certification. We disagree. We 
explained in SUPPLEMENTARY INFORMATION at 76 FR 80271, December 23, 
2011, that OPM considers the Act to call for agency heads to use their 
discretion to set and adjust pay for senior professionals based upon 
performance whether or not an applicable performance appraisal system 
is certified. Upon consideration, however, we agree that the 
descriptions of performance differentiation and pay differentiation in 
5 CFR 430.404(a)(8) and (9) include certain problematic elements. The 
description of performance differentiation within the certification 
context requires use of at least one summary performance level above 
Fully Successful, including a summary level that reflects outstanding 
performance, but an agency with an appraisal system that is not 
certified could use a summary rating pattern under 5 CFR 430.208(d) 
that does not meet this requirement. In the certification context, both 
performance and pay differentiation refer to review of ratings and pay 
adjustments that have been finalized rather than review of proposed 
ratings and pay adjustments. We are therefore revising paragraphs (i) 
and (ii) of 5 CFR 534.505(a)(5) to replace references to performance 
differentiation and pay differentiation as described in 5 CFR 
430.404(a)(8) and (9) with language describing the centralized review 
panel's responsibility to advise on whether proposed ratings accurately 
reflect performance, and proposed pay adjustments and pay actions 
appropriately correspond to performance ratings.
    The executive association recommends that OPM provide for PRBs to 
include senior professionals when senior professional ratings and 
awards are being considered and revise 5 CFR 430.310(a)(3) to provide 
that when a career senior professional's proposed ratings and awards 
are being considered in an agency that does not employ SES members, 
more than one-half of the PRB's members must be career senior 
professionals. Although we agree with the suggested career majority 
requirement, an agency that does not employ SES members normally would 
not be subject to 5 CFR 430.310(a)(3). Also, 5 CFR 430.403(d) gives 
agencies discretion to include system features in their senior 
professional appraisal systems that are the same as, or similar to, 
features of SES appraisal system(s), including procedures corresponding 
to PRB reviews, but a decision to include such a feature in a senior 
professional appraisal system would not alter the statutory basis of a 
PRB established

[[Page 12355]]

under 5 CFR 430.310, which pertains only to senior executives, or make 
a non-SES agency subject to requirements of that section.
    We are therefore adding new paragraph (f) to 5 CFR 534.505 to 
require centralized review panels to have a majority of career 
appointees, including career SES and/or career or career-type senior 
professionals when reviewing proposed pay adjustments for a career or 
career-type senior professional. We are not requiring that a 
centralized review panel include a senior professional because career 
SES members normally have experience with performance appraisal, and 
there are enough of them to keep most agencies from having to go 
outside their own employee population to achieve a majority. We are 
adding that an agency head may include employees from outside the 
agency on a central review panel and revising 5 CFR 534.505(e)(3) to 
assure that it is not read as precluding use of Federal employees who 
are within a different OIG in the same agency on a review panel. We are 
also providing that an agency using the discretion provided at 5 CFR 
430.403(d) must do so in accordance with the centralized review 
requirement.
    The executive association recommends that OPM encourage Government 
corporations which are not covered by SES statutes or chapter 43 of 
title 5 to closely follow these regulations and use them in managing 
their SL employees. Although Government corporations are excluded from 
performance appraisal requirements of 5 U.S.C. 4301-4305, they are 
covered by 5 U.S.C. 5108, regarding allocation and establishment of SL 
positions, and 5 U.S.C. 5376, regarding compensation for SL positions. 
Since these regulations apply to Executive agencies, including 
Government corporations (5 CFR 534.503), we consider 5 CFR 
534.505(a)(5) and (f) to apply to a Government corporation that obtains 
SL slots and establishes SL positions under 5 U.S.C. 5108 and 
compensates its SL employees under 5 U.S.C. 5376, if the Government 
corporation uses its discretion to implement a performance appraisal 
system for those employees despite being exempt from 5 U.S.C. 4301-
4305. The exemption in 5 CFR 534.511(a) applies with respect to SL or 
ST positions and employees actually excluded from performance 
appraisal.

Delegation of Authority for Certain Pay Actions

    One agency commented that permitting delegation of pay actions 
identified in 5 CFR 534.505(c) to the designee who performs the 
functions in 5 CFR 430.404(a)(6) is not sufficient to provide for 
delegating authority for these pay actions if the applicable 
performance appraisal system is not certified. We disagree. This 
requirement is intended to focus on the certifications described in 5 
CFR 430.404(a)(6)(i), (ii) and (iii), which relate to the obligation of 
an agency, including an agency with a performance appraisal system that 
is not certified, to determine the pay of a senior professional based 
upon performance. However, the proposed language could be misunderstood 
as indicating that the official performing these certifications must be 
selected in accordance with the criteria in 5 CFR 430.404(a)(6). In an 
agency with a certified appraisal system, the designee who performs the 
functions in 5 CFR 430.404(a)(6) is also the one who performs the 
functions in 5 CFR 430.404(a)(5). In an agency with an appraisal system 
that is not certified, this need not be the case. Accordingly, we have 
revised 5 CFR 534.505(c) to authorize delegation to a designee who 
performs the certifications described in 5 CFR 430.404(a)(6)(i), (ii) 
and (iii) for all senior professionals in the agency and made 
corresponding adjustments in 5 CFR 534.506(c)(2), 5 CFR 534.510(a), and 
5 CFR 534.510(d). An agency head who does not designate a single 
official to do this for all agency senior professionals is responsible 
for approving pay actions described in 5 CFR 534.505(c).
    The agency also commented that a restriction on delegation of 
authority to approve pay actions falling within the top 10 percent of 
the applicable pay range differs substantially from SES regulations and 
creates confusing discrepancies about points at which higher-level 
approval is required depending upon whether an appraisal system is 
certified or not certified or whether the employee is SES or a senior 
professional. The agency says the 10 percent criterion is 
counterintuitive and is not required by statute; the agency recommends 
that OPM change the threshold amount in Sec.  534.505(c)(1) to EX-III, 
the same as for SES pay actions under 5 CFR 534.404(g)(3).
    We do not consider the top 10 percent rule to be counterintuitive. 
OPM finds that amendments in section 2 of the Act demonstrate Congress 
intends senior professional pay to be based upon performance. An agency 
cannot simply opt out by choosing not to seek certification. The 10 
percent criterion provides a proportional rule that leaves most pay 
actions subject to approval by lower-level officials but requires top 
level scrutiny for certain pay actions, including the largest pay 
adjustments and those resulting in the highest rates of basic pay. For 
both certified and non-certified systems, the rules are the same, the 
pay actions affected are the same, the portion of the pay range subject 
to higher level scrutiny is the same, and the officials designated to 
provide that scrutiny are the same. Thus, the rule is consistent and 
related to its purpose. Accordingly, we have made no changes with 
respect to the 10 percent rule. If we were revising the SES pay rules 
at this time, we would consider imposing the same discipline for SES 
positions under appraisal systems that are not certified. Note that the 
final regulations still distinguish rates above EX-III as reserved for 
new senior professional appointees who meet criteria described in 5 CFR 
534.506(a) and current senior professional appointees who meet criteria 
described in 5 CFR 534.507(b)(2) and require an agency's written plan 
to address criteria that will be used in setting or increasing pay at 
those rates.

Annual Pay Adjustment

    One agency stated that, because the statute does not require an 
agency to communicate in writing the reasons for a decision not to 
adjust a senior professional's pay, this should be left to agency 
discretion. OPM explained in SUPPLEMENTARY INFORMATION at 76 FR 80271, 
December 23, 2011, its view that an SL or ST employee rated Fully 
Successful and properly positioned within the pay range should at least 
receive a pay increase that preserves the economic value of his or her 
salary. The statute also requires an agency head to adjust each rate of 
pay established under 5 U.S.C. 5376 annually by an amount the agency 
head considers appropriate. We consider written explanation appropriate 
to: (1) Establish pay adjustment as a normal expectation for a senior 
professional rated Fully Successful; (2) verify the agency's 
consideration when pay has not been adjusted; and (3) explain why pay 
was not adjusted in a specific case. Accordingly, we are retaining this 
requirement.
    Another agency recommended deleting the requirement for an annual 
adjustment in 5 CFR 534.507(a). The agency said pay for senior 
professionals, like SES pay, should be based upon performance and 
should not be linked to GS increases or include a guaranteed 
adjustment. As written, the agency said this adds a cost-of-living 
adjustment to any performance increase. If done for senior 
professionals, it should be done for the SES also. OPM cannot delete 
the requirement for an agency head to adjust pay for senior 
professional positions annually because it is a

[[Page 12356]]

statutory requirement under 5 U.S.C. 5376(b)(2). Although we think a 
senior professional rated Fully Successful and properly positioned 
within the pay range should receive a pay increase that preserves the 
economic value of his or her salary, we do not agree with construing 
this as a cost-of-living adjustment supplementing performance based 
adjustments. Rather, we consider the amount needed to preserve the 
economic value of existing salary to be a good reference point for 
determining the appropriate performance-based pay adjustment for a 
senior professional rated Fully Successful. Since Congress does not 
provide a system-wide adjustment for senior professionals and has 
eliminated locality pay, this should not be treated as a cost-of-living 
adjustment to supplement performance-based pay.
    The executive association considered proposed 5 CFR 534.507(a)(1) 
confusing in that it provided for a zero adjustment determined after 
review of a senior professional's performance to be considered a pay 
adjustment for purposes of that paragraph, unlike the SES regulations 
(5 CFR 534.404(c)(3)(ii)), under which a zero adjustment is not 
considered a pay adjustment. We find that the SES pay and senior 
professional pay contexts differ in a way that supports treating zero 
adjustments differently. The intent of the proposed language was to 
assure that a zero adjustment considered appropriate by the agency head 
is deemed to meet the statutory requirement to adjust senior 
professional pay rates annually. We are revising 5 CFR 534.507(a) by 
providing a new paragraph (a)(2) stating that a zero adjustment 
satisfies paragraph (a)(1) (i.e., the requirement to adjust a senior 
professional's rate of basic pay at the time of the General Schedule 
pay adjustment under 5 U.S.C. 5303) only if the notice required by 
paragraph (h) (i.e., giving the reasons for a zero adjustment) is 
provided. However, any pay adjustment authorized at any time other than 
that specified in 5 CFR 534.507(a) must meet the conditions specified 
in 5 CFR 534.510.
    The executive association strongly agrees with requiring an agency 
to explain why a senior professional received a zero adjustment but 
sees no reason for the exception proposed at 5 CFR 534.507(h), i.e., 
for senior professionals paid within the top 10 percent of the pay 
range, no written explanation is required unless the employee is rated 
outstanding and there is an increase in the Executive Schedule pay 
range. The executive association recommends an agency be required to 
explain all zero adjustments. Our view that fully successful 
performance generally deserves a pay adjustment that helps preserve the 
economic value of a senior professional's salary is tempered when the 
individual is already highly compensated for his or her position. Such 
a senior professional should not expect increases, either to maintain 
or advance relative position within the pay range, apart from 
maintaining or exceeding the levels of performance that justified 
elevation to his or her existing pay rate. In effect, the bar is raised 
for these employees. The requirement for a written explanation if there 
is no increase in pay despite an outstanding rating is consistent with 
SES rules in that (1) an executive rated outstanding must be considered 
for a pay increase (5 CFR 534.404(b)(2)); and (2) an executive paid 
above EX-III must normally be rated outstanding to receive an increase 
under 5 CFR 534.404(b)(4) to maintain his or her relative position 
within the pay range. We have revised 5 CFR 534.507(h)(2)(ii) to 
clarify that if the Executive Schedule pay rates are increased, the 
written communication requirement applies to a senior professional paid 
within the top 10% of the pay range if he or she receives the highest 
available rating (except a fully successful rating) under the 
applicable summary level pattern, i.e., receives a level 4 rating in an 
appraisal program that uses summary level pattern C or G, or a level 5 
rating in an appraisal program that uses summary level patterns B, E, 
F, or H. This is consistent with proposed 5 CFR 534.507(h)(2)(ii) and 
with the executive association's stated concern that the written 
communication requirement be broadly applied.

Pay Increase Upon a Temporary Movement

    An agency recommended deletion of proposed Sec.  534.508(d) under 
which an SL could receive a temporary pay increase upon movement to 
another SL position, because it could be subject to abuse. For example, 
an agency could break out seasonal or especially challenging aspects of 
work into multiple positions and reassign SL employees among them in 
such a manner as to either minimize or maximize the amount of time the 
SL employees are paid at a higher rate. In response to this concern we 
are revising Sec.  534.508(d) by restricting its use to a circumstance 
justified under Sec.  534.510 for movement to a position that has a 
substantially greater impact upon agency performance. It is written and 
intended to apply only upon movement to a different position. It does 
not apply upon a detail or temporary change in duties of an SL or ST 
employee's current position.

Miscellaneous

    The executive association asked for examples of positions or 
employees that would be covered by the exception to certain regulatory 
requirements provided at 5 CFR 534.511. We principally have in view 
agencies that are excluded from performance appraisal requirements 
under 5 U.S.C. 4301 but still employ senior professionals covered by 
these regulations, such as a Government corporation. When such an 
agency has discretion to implement performance appraisal for its senior 
professionals despite being exempt and does so, we consider the Act to 
call for that agency to use the results of performance appraisal to set 
pay for those employees, so that the exception in 5 CFR 534.511 would 
not apply. In addition, 5 U.S.C. 4301 excludes certain employees from 
performance appraisal who could be senior professionals. For example, 5 
U.S.C. 4301(2)(F) excludes Presidential appointees. Certain U.S. 
Marshal positions filled by Presidential appointment with Senate 
confirmation are senior professional positions. An agency's enabling 
legislation might also exclude specific positions or employees from 
performance appraisal that are not already excluded by 5 U.S.C. 4301.
    An agency recommended that OPM establish a Governmentwide 
standardized performance plan and a standardized performance management 
system for senior professionals to streamline certification procedures 
before finalizing these regulations. OPM does not consider these 
proposals an appropriate basis to delay regulations implementing pay 
provisions of the Act.
    An agency recommended that an SL/ST performance management system 
be certified for 4 years with no distinction of provisional or full 
certification. Section 3 of the Act provides that certification is for 
not more than 24 months, unless extended by the Director of OPM for up 
to 6 additional months. This change would therefore require new 
legislation.
    An agency recommended that OPM establish a separate bonus pool for 
senior professionals and that there be no minimum bonus for a senior 
professional. This is beyond the scope of the current regulations. The 
SES bonus pool and minimum bonus are established by law. OPM provides 
associated regulations and guidance under 5 U.S.C. 5384(d) and 5385. 
The statute governing senior professional performance awards, 5 U.S.C. 
4503 and

[[Page 12357]]

5 U.S.C. 4505a as extended by regulation at 5 CFR 451.101(e), does not 
define a bonus pool or establish a minimum award amount for senior 
professionals or specifically authorize OPM to do so.
    OPM received six comments from an individual, some with multiple 
attachments including final decision notices on certain classification 
appeals relating to General Schedule positions, certain OPM 
publications related to classification of General Schedule positions, 
and several publications related to agriculture and economic issues in 
certain nations. We reviewed these comments but did not identify any 
specific comments concerning provisions of the proposed regulations 
that we could address.

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.

E.O. 12866, Regulatory Review

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

List of Subjects in 5 CFR Part 534

    Government employees, Hospitals, Students, and Wages.

U.S. Office of Personnel Management
Katherine Archuleta,
Director.

    For the reasons stated in the preamble, the U.S. Office of 
Personnel Management amends 5 CFR part 534 as follows:

PART 534--PAY UNDER OTHER SYSTEMS

0
1. Revise the authority citation for part 534 to read as follows:

    Authority:  5 U.S.C. 1104, 3161(d), 5307, 5351, 5352, 5353, 
5376, 5382, 5383, 5384, 5385, 5541, 5550a, sec. 1125 of the National 
Defense Authorization Act for FY 2004, Pub. L. 108-136, 117 Stat. 
1638 (5 U.S.C. 5304, 5382, 5383, 7302; 18 U.S.C. 207); and sec. 2 of 
Pub. L. 110-372, 122 Stat. 4043 (5 U.S.C. 5304, 5307, 5376).


Sec.  534.404  [Amended]

0
2. Amend Sec.  534.404 by removing and reserving paragraphs (c)(3)(v) 
and (e)(2).
0
3. Revise subpart E to read as follows:
Subpart E--Pay for Senior-Level and Scientific or Professional 
Positions
Sec.
534.501 Purpose.
534.502 Coverage.
534.503 Definitions.
534.504 Pay range.
534.505 Written procedures.
534.506 Setting a rate of basic pay upon appointment.
534.507 Annual increases in basic pay.
534.508 Reductions in a rate of basic pay.
534.509 Preservation of an established rate of basic pay.
534.510 Off-cycle pay increases.
534.511 Exemption from performance appraisal requirements.

Subpart E--Pay for Senior-Level and Scientific or Professional 
Positions


Sec.  534.501  Purpose.

    This subpart provides rules for setting and adjusting rates of 
basic pay for senior-level (SL) and scientific or professional (ST) 
employees under 5 U.S.C. 5376. Section 5376, as amended by section 2 of 
the Senior Professional Performance Act of 2008 (Pub. L. 110-372, 
October 8, 2008), promotes performance-based pay by enabling an agency 
that attains certification of a performance appraisal system covering 
senior professionals to fix rates of basic pay for those employees up 
to the rate payable for level II of the Executive Schedule. Under 5 
U.S.C. 5307(d) and subpart D of part 430 of this chapter, the Office of 
Personnel Management (OPM), with Office of Management and Budget (OMB) 
concurrence, grants certification only to a performance appraisal 
system that, in its design and application, makes meaningful 
distinctions based upon relative performance. This subpart implements 
the purpose of the law by providing for pay determinations for SL and 
ST employees to be based on individual performance, contributions to 
the agency's performance, or both, as determined through administration 
of the agency's performance management system(s) for SL and ST 
employees.


Sec.  534.502  Coverage.

    (a) This subpart implements 5 U.S.C. 5376 and applies to--
    (1) Senior-level (SL) positions classified above GS-15 pursuant to 
5 U.S.C. 5108; and
    (2) Scientific or professional (ST) positions established under 5 
U.S.C. 3104.
    (b) This subpart does not apply to--
    (1) Senior Executive Service positions established under 5 U.S.C. 
3132, unless the incumbent of the position declined to convert to the 
SES and, under Sec.  317.303 of this chapter, remained at grade GS-16, 
17, or 18 (now the SL pay system) or under the ST pay system;
    (2) Positions in the Federal Bureau of Investigation and Drug 
Enforcement Administration Senior Executive Service, Defense 
Intelligence Executive Service, or Senior Cryptologic Executive 
Service; or
    (3) Positions for which pay is fixed by administrative action and 
is limited to level IV of the Executive Schedule under 5 U.S.C. 5373.


Sec.  534.503  Definitions.

    In this subpart--
    Agency means--
    (1) An Executive agency as defined in 5 U.S.C. 105;
    (2) The Library of Congress; and
    (3) Any other entity that is not part of an Executive agency, for 
which OPM has approved establishment of one or more scientific or 
professional positions under 5 U.S.C. 3104.
    Authorized agency official means the head of an agency or an 
official who is authorized to act for the head of the agency in the 
matter concerned.
    Certified means having the certification that OPM, with OMB 
concurrence, grants under 5 U.S.C. 5307(d) and part 430, subpart D of 
this chapter only to a performance appraisal system that makes, in its 
design and application, meaningful distinctions based on relative 
performance. In this subpart, the term ``certified'' refers to a 
performance appraisal system that has this certification, including a 
performance appraisal system for which certification has been 
reinstated after suspension under Sec.  430.405(h) of this chapter.
    Movement means a change of an SL or ST employee from one SL or ST 
position to a different SL or ST position without a break in service 
under procedures that meet applicable requirements for staffing 
positions in the competitive service and excepted service. As used in 
this subpart, the term ``movement'' applies only to an appointment, not 
a detail, and is used without reference to the pay consequences of an 
action. Unless otherwise specified, the term refers to position changes 
both within and between agencies.
    Not certified means lacking the certification that OPM, with OMB 
concurrence, grants under 5 U.S.C. 5307(d) and part 430, subpart D of 
this chapter only to a performance appraisal system that makes, in its 
design and application, meaningful distinctions based on relative 
performance. In this subpart, the term ``not certified'' refers to a 
performance appraisal system that does not have this certification, or 
for which a previously granted certification has expired or is 
suspended under Sec.  430.405(h) of this chapter.
    Off-cycle pay increase means any increase in a senior 
professional's rate of basic pay that becomes effective on a date other 
than the date specified in Sec.  534.507(a)(1).

[[Page 12358]]

    OMB means the Office of Management and Budget.
    OPM means the Office of Personnel Management.
    Performance appraisal system means the policies, practices, and 
procedures an agency establishes under 5 U.S.C. chapter 43 and 5 CFR 
part 430, subpart B, or other applicable legal authority, for planning, 
monitoring, developing, evaluating, and rewarding employee performance. 
For a senior professional employee, this term refers to appraisal 
programs or appraisal systems as defined in Sec.  430.203 of this 
chapter.
    Performance management system means the framework of policies and 
practices that an agency uses to implement performance management, as 
described in Sec.  430.102 of this chapter. As used in this subpart, 
the term includes, but is not limited to, those disciplines and 
activities by which an agency addresses the criteria identified in 
Sec.  430.404(a)(1) through (9) of this chapter.
    Performance rating means the written, or otherwise recorded, 
appraisal of performance compared to the SL or ST employee's 
performance standard(s) for each critical and non-critical element on 
which there has been an opportunity to perform for a minimum of 90 
days. A performance rating may include the assignment of a summary 
level within a pattern as specified in Sec.  430.208(d) of this 
chapter.
    Rate of basic pay means the rate of pay fixed by law or 
administrative action for an SL or ST employee under the provisions of 
5 U.S.C. 5376 and this subpart before any deductions and exclusive of 
additional pay of any other kind.
    Rating of record means the performance rating prepared at the end 
of an appraisal period for performance of agency-assigned duties over 
the entire period and the assignment of a summary level within a 
pattern as specified in Sec.  430.208(d) of this chapter that has been 
reviewed and approved in accordance with Sec.  534.505(a).
    Scientific or professional (ST) employee means an individual 
appointed to a position described in Sec.  319.103 and authorized by 
OPM under Sec.  319.202 of this chapter or otherwise established under 
5 U.S.C. 3104.
    Senior-level (SL) employee means an individual appointed to a 
position described in Sec.  319.102 and authorized by OPM under Sec.  
319.202 of this chapter.
    Senior professional means an SL or ST employee.
    Transfer means any movement, as defined in this section, that is a 
change of a senior professional from an SL or ST position in one agency 
to an SL or ST position in another agency without a break in service of 
at least 1 full workday.


Sec.  534.504  Pay range.

    (a) A rate of basic pay under this subpart must be--
    (1) Not less than 120 percent of the minimum rate of basic pay 
payable for GS-15 of the General Schedule, and
    (2) Not greater than--
    (i) The rate of basic pay payable for level III of the Executive 
Schedule (EX-III), or
    (ii) In the case of an SL or ST employee who is covered by a 
certified performance appraisal system or whose established rate of 
basic pay is preserved under Sec.  534.509, the rate of basic pay 
payable for level II of the Executive Schedule (EX-II).
    (b) An agency may not set or adjust the rate of basic pay for an SL 
or ST employee higher than the maximum in--
    (1) Paragraph (a)(2)(i) of this section (i.e., EX-III) when the SL 
or ST employee is covered by a performance appraisal system that is not 
certified or when the SL or ST employee is not subject to a performance 
appraisal system, except as provided in Sec.  534.509; or
    (2) Paragraph (a)(2)(ii) of this section (i.e., EX-II) when the SL 
or ST employee is covered by a certified performance appraisal system.


Sec.  534.505  Written procedures.

    (a) Each agency with positions subject to this subpart must 
establish written procedures for setting the rate of basic pay and 
increasing the rate of basic pay of incumbents of the positions in 
accordance with law and this subpart. Agencies must provide for 
transparency in the processes for making pay decisions, while assuring 
confidentiality. The agency's plan for setting and increasing rates of 
basic pay must reflect meaningful distinctions among SL and ST 
employees based on individual performance, contribution to agency 
performance, or both, and must include--
    (1) The criteria that will be used to set and increase a senior 
professional's rate of basic pay to ensure that individual pay rates or 
pay increases, as well as their overall distribution within the senior 
professional pay range, reflect meaningful distinctions within a single 
performance level (e.g., the higher the employee's relative performance 
within a rating level, the higher the pay increase), between 
performance rating levels (e.g., the higher the rating level, the 
higher the pay increase), or both;
    (2) The criteria that will be used to set and increase a senior 
professional's rate of basic pay at a rate that exceeds the rate for 
level III of the Executive Schedule if the applicable agency 
performance appraisal system has been certified under part 430, subpart 
D of this chapter;
    (3) Any system, methods, or criteria the agency uses to establish 
pay ranges applicable to various SL or ST positions within the pay 
range that applies under Sec.  534.504(a), consistent with the 
requirement that pay be determined based upon individual performance, 
contributions to the agency's performance, or both;
    (4) The designation of the authorized agency official(s) who will 
have the authority to set and adjust rates of basic pay for SL and ST 
employees, subject to the requirements of paragraph (c) of this 
section; and
    (5) The administrative and management controls that will be applied 
to assure compliance with applicable statutes, OPM regulations, the 
agency's written procedures established under this section, the 
applicable maximum rate of basic pay in Sec.  534.504(a), and, where 
applicable, the certification requirements set forth in part 430, 
subpart D of this chapter. In an agency that employs ten or more senior 
professionals, these controls must include centralized review of 
ratings proposed under Sec.  430.208 of this chapter and pay actions 
proposed under Sec.  534.507 by a panel of individuals designated by 
the agency head to provide advice from an agency-wide perspective for 
authorized agency officials to consider before approving pay 
adjustments on whether--
    (i) Ratings of record and performance ratings proposed for senior 
professionals accurately reflect their individual performance, 
contributions to agency performance, or both, and take into account, as 
appropriate, assessment of the agency's performance against program 
performance measures and other relevant considerations; and
    (ii) Proposed pay adjustments for senior professionals conform to 
the requirements of Sec.  534.507 and appropriately correspond to 
proposed ratings of record and performance ratings.
    (b) Each agency's written procedure must provide that, effective at 
the beginning of the first applicable pay period commencing on or after 
the first day of the month in which an adjustment takes effect under 5 
U.S.C. 5303 in the rates of basic pay under the General Schedule, the 
head of an agency will adjust a senior professional's rate of basic pay 
under the provisions of Sec.  534.507.

[[Page 12359]]

    (c) The following actions must be approved by the agency head or by 
a designee who provides the certifications described in Sec.  
430.404(a)(6)(i), (ii) and (iii) of this chapter for all senior 
professionals in the agency, and this approval authority may not be 
further delegated:
    (1) Any pay-setting action under Sec.  534.506 or any pay increase 
under Sec.  534.507 that results in a rate of basic pay that is within 
the highest 10 percent of the applicable rate range under Sec.  
534.504. A rate of basic pay equal to or above the amount derived using 
the following rules is considered to be within the highest 10 percent 
of the applicable pay range (in 2013, $173,685 or above if the 
applicable system is certified, or $160,725 or above if the applicable 
system is not certified or performance appraisal does not apply):
    (i) Subtract the minimum rate of basic pay from the maximum rate of 
basic pay for the applicable rate range under Sec.  534.504 (in 2013, 
$179,700-$119,554 = $60,146 if the applicable system is certified, or 
$165,300-$119,554 = $45,746 if the applicable system is not certified 
or performance appraisal does not apply);
    (ii) Multiply the amount derived in paragraph (b)(1)(i) of this 
section by 0.10 (in 2013, $60,146 x 0.10 = $6,015 if the applicable 
system is certified, or $45,746 x 0.10 = $4,575 if the applicable 
system is not certified or performance appraisal does not apply); and
    (iii) Subtract the amount derived in paragraph (b)(1)(ii) of this 
section from the maximum rate of basic pay applicable under Sec.  
534.504 (in 2013, $179,700-$6,015 = $173,685 if the applicable system 
is certified, or $165,300-$4,575 = $160,725 if the applicable system is 
not certified or performance appraisal does not apply);
    (2) Any pay increase under Sec.  534.507 that results in a rate of 
basic pay more than 10 percent above the SL or ST employee's rate of 
basic pay as in effect on the last day of the preceding fiscal year or, 
if the individual was first appointed as an SL or ST employee in the 
agency after the last day of the preceding fiscal year, more than 10 
percent above the rate of basic pay set at the time of that 
appointment. A rate of basic pay more than 10 percent above the 
applicable rate of basic pay is considered to be any rate of basic pay 
that exceeds the amount derived by multiplying the applicable rate of 
basic pay by a factor of 1.1;
    (3) Any pay-setting action under Sec.  534.506(c)(2) that results 
in a higher rate of basic pay than the senior professional had upon 
leaving the agency; and
    (4) Any off-cycle pay increase under Sec.  534.510.
    (d) An agency must keep its written procedures for setting and 
increasing rates of basic pay up to date, make them available to 
affected SL and ST employees, periodically provide training or 
supplemental guidance to clarify how they are applied, and provide a 
copy to OPM upon request.
    (e)(1) The head of an agency may delegate to an Inspector General 
the authority to set and adjust pay for senior professionals in the 
Office of the Inspector General, including authority for pay actions 
described in paragraph (c) of this section.
    (2) An agency head who delegates to an Inspector General the 
authority to set and adjust pay for all senior professionals in the 
Office of the Inspector General, including all pay actions described in 
paragraph (c) of this section, may exclude those senior professionals 
from the count of agency senior professionals for the purpose of 
determining whether centralized review under paragraph (a)(5) of this 
section is required.
    (3) An Inspector General to whom an agency head delegates authority 
to set and adjust pay for 10 or more senior professionals in the Office 
of the Inspector General must provide the centralized review required 
by paragraph (a)(5) of this section and may use Federal employees from 
outside the agency for that purpose or from the Inspector General 
community, whether or not in the same agency.
    (f)(1) A panel performing centralized review under paragraphs 
(a)(5) or (e)(3) of this section for a senior professional who holds a 
career or career-conditional appointment or an appointment of 
equivalent tenure in the excepted service must have a majority of 
career appointees.
    (2) For the purpose of paragraph (f)(1) of this section, a career 
appointee is considered to be a career SES member or a senior 
professional who holds a career or career-conditional appointment or an 
appointment of equivalent tenure in the excepted service.
    (3) An agency head may include Federal employees from outside the 
agency on a panel performing centralized review.
    (4) An agency using the discretion provided in Sec.  430.403(d) of 
this chapter must do so in accordance with paragraphs (a)(5), (e) and 
(f) of this section, as applicable.


Sec.  534.506  Setting a rate of basic pay upon appointment.

    (a) An authorized agency official may set the rate of basic pay of 
an individual who is not currently an SL or ST appointee of the agency 
at any rate within the applicable rate range under Sec.  534.504(a) 
upon appointment to an SL or ST position in the agency, subject to the 
requirements of this section. In setting a new senior professional's 
rate of basic pay, an agency must consider the nature and quality of 
the individual's experience, accomplishments, and any unique skills, 
qualifications, or competencies the individual possesses as they relate 
to requirements of the senior professional position and its impact on 
the agency's performance. Rates of basic pay above the rate for level 
III of the Executive Schedule, but less than or equal to the rate for 
level II of the Executive Schedule, generally are reserved for those 
newly appointed senior professionals who possess superior leadership, 
scientific, professional or other competencies necessary to address key 
program and mission requirements, as determined by the agency through 
its strategic human capital planning process.
    (b) Consistent with the agency's written procedures and paragraph 
(a) of this section, an authorized agency official may set the rate of 
basic pay for an SL or ST employee upon transfer from another agency at 
any rate of basic pay within the pay range that applies to the SL or ST 
position under Sec.  534.504(a), except as provided in Sec.  
534.509(a).
    (c)(1) Consistent with the agency's written procedures and 
paragraph (a) of this section, except as provided in paragraph (c)(2) 
of this section, an authorized agency official may set pay upon 
reappointment of a former SL or ST employee at any rate of basic pay 
within the pay range that applies to the SL or ST position under Sec.  
534.504(a).
    (2) If a former agency SL or ST employee is reappointed within 30 
days to the same position or a successor position in the same agency, 
the agency may not give the individual a higher rate of basic pay upon 
reappointment unless the agency head or a designee who provides the 
certifications described in Sec.  430.404(a)(6)(i), (ii) and (iii) of 
this chapter for all senior professionals in the agency determines that 
a higher rate of basic pay is warranted.


Sec.  534.507  Annual increases in basic pay.

    (a)(1) Effective at the beginning of the first applicable pay 
period commencing on or after the first day of the month in

[[Page 12360]]

which an adjustment takes effect under 5 U.S.C. 5303 in the rates of 
basic pay under the General Schedule, the head of an agency must adjust 
a senior professional's rate of basic pay under paragraph (b) of this 
section by an amount he or she considers appropriate, subject to the 
applicable maximum rate under Sec.  534.504(a), the agency's written 
procedures under Sec.  534.505, and the provisions of this section.
    (2) A determination by an authorized agency official to make a zero 
adjustment in pay after reviewing a senior professional's current 
rating of record or performance rating meets the requirement of 
paragraph (a)(1) of this section only if the notice required by 
paragraph (h) of this section is provided to the senior professional.
    (3) A pay adjustment under paragraph (a)(1) or a determination 
under paragraph (a)(2) of this section does not restrict the authority 
of an agency head to increase pay at other times under Sec.  534.510, 
if warranted.
    (b)(1) An agency may provide a pay increase to a senior 
professional only upon a determination by the authorized agency 
official that the senior professional's performance and/or 
contributions to agency performance so warrant.
    (2) Increases resulting in a rate of basic pay that exceeds the 
rate for level III of the Executive Schedule, but is less than or equal 
to the rate for level II of the Executive Schedule, are reserved for 
those senior professionals who demonstrate the highest levels of 
individual performance, make the greatest contributions to the agency's 
performance, or both, as determined by the agency through the 
administration of its performance management system.
    (3) A pay increase must reflect the agency's judgment concerning 
the value of the employee's characteristic and continuing service to 
the agency in the SL or ST position. A single noteworthy contribution 
that is not characteristic of the employee's continuing performance 
requirements, individual performance or contributions to the agency's 
performance should be recognized by an appropriate award under part 
451, subpart A of this chapter or other appropriate authority, rather 
than by a permanent increase in the rate of basic pay.
    (c) An agency must document the basis for each pay increase granted 
under paragraph (b) by means of--
    (1) A current rating of record; or
    (2) A performance rating that covers a period of at least 90 days 
and is assigned in accordance with subpart B of part 430 of this 
chapter and the centralized review required by Sec.  534.505(a)(5), but 
only if a rating of record is not available or does not reflect current 
performance.
    (d) Any increase under this section that results in a rate of basic 
pay above the rate for level III of the Executive Schedule may not be 
made effective unless--
    (1) The rating of record or performance rating used to justify the 
increase covers a period of at least 90 days of performance during 
which the applicable performance appraisal system has continuously been 
certified under 5 U.S.C. 5307(d) and part 430, subpart D of this 
chapter;
    (2) The rating of record or performance rating used to justify the 
increase becomes final while the applicable performance appraisal 
system is certified;
    (3) The rating and pay increase are reviewed and approved in 
accordance with Sec.  534.505(a);
    (4) The pay increase is approved in accordance with Sec.  
534.505(c), as applicable, and the agency's written procedures; and
    (5) The pay increase becomes effective while the applicable 
performance appraisal system is certified.
    (e) Upon the initial certification under 5 U.S.C. 5307(d) and part 
430, subpart D of this chapter by OPM, with OMB concurrence, of an 
agency performance appraisal system covering SL or ST employees, OPM 
may waive the requirement of paragraph (d)(1) of this section. The 
requirement may be waived only if OPM determines that the agency has, 
for a period of no less than 90 days prior to certification, 
consistently applied the same performance appraisal system to covered 
SL or ST employees in a manner consistent with certification. If OPM 
waives this requirement, OPM will notify the agency in writing.
    (f) Except as required by paragraph (g) of this section, a pay 
increase under this section may not be provided to an employee--
    (1) Who has a current rating of record below Level 3 (Fully 
Successful or equivalent), as described in Sec.  430.208 of this 
chapter; or
    (2) Who, after receiving a rating of record at Level 3 or above, 
receives a more recent performance rating that rates performance in a 
critical element at a level below Fully Successful, as described in 
Sec.  430.206(b)(8)(i) of this chapter.
    (g) An SL or ST employee whose rate of basic pay would otherwise 
fall below the minimum rate of the SL and ST pay range under Sec.  
534.504(a)(1) must be provided a pay adjustment sufficient to maintain 
the minimum rate of basic pay.
    (h)(1) If the rates of basic pay under the General Schedule are 
increased under 5 U.S.C. 5303 on the date specified in paragraph (a)(1) 
of this section and the agency head decides upon a zero adjustment for 
an SL or ST employee who has a current rating of record or applicable 
performance rating at Level 3 or above, as described in Sec.  430.208 
of this chapter, the agency must communicate the reasons for that 
decision to the employee in writing.
    (2) Paragraph (h)(1) of this section does not apply to a senior 
professional with a rate of basic pay described in Sec.  534.505(c)(1) 
unless--
    (i) The rates of basic pay for the Executive Schedule are also 
increased on the date specified in paragraph (a)(1) of this section; 
and
    (ii) The senior professional has a current rating of record or 
applicable performance rating at Level 4 in an appraisal program that 
uses summary level pattern C or G, or at Level 5 in an appraisal 
program that uses summary level pattern B, E, F, or H, as described in 
Sec.  430.208 of this chapter.
    (3) Paragraphs (h)(1) and (h)(2) of this section may not be 
construed to require a pay increase for any senior professional 
employee.


Sec.  534.508  Reductions in a rate of basic pay.

    (a) Any reduction in a rate of basic pay for an SL or ST employee 
is subject to part 752, subpart D of this chapter except as otherwise 
provided in this section.
    (b) If an employee is removed from an SL or ST position and placed 
in a General Schedule position under procedures in part 752, subpart D 
of this chapter or part 432 of this chapter providing for reduction in 
grade, or otherwise moves voluntarily or involuntarily to a General 
Schedule position, the employee is entitled to the minimum rate of 
basic pay, as defined in Sec.  531.203 of this chapter, for the General 
Schedule grade unless the agency sets the employee's pay at a higher 
rate under--
    (1) The maximum payable rate rule in Sec.  531.221 of this chapter, 
if applicable;
    (2) The superior qualifications and special needs pay-setting 
authority in Sec.  531.212 of this chapter, if applicable; or
    (3) The pay retention rules in part 536, subpart C of this chapter, 
if applicable.
    (c) An agency may reduce an SL or ST employee's rate of basic pay, 
subject to part 752, subpart D of this chapter, upon movement to a 
different SL or ST position within the agency. If an SL or ST employee 
elects to accept a

[[Page 12361]]

reduction in pay to facilitate a reassignment and the agency documents 
the voluntary nature of the action, the resulting pay reduction is not 
subject to part 752, subpart D of this chapter.
    (d) If an agency justifies an increase in an SL or ST employee's 
rate of basic pay under Sec.  534.510 upon the employee's movement to 
another SL or ST position having a substantially greater impact on 
agency performance with the understanding that the employee will be 
reduced to his or her former rate of basic pay upon movement out of the 
position, and the agency documents the voluntary nature of the action, 
the resulting reduction to the former rate of basic pay (or to a higher 
rate of basic pay determined under this subpart that is within the pay 
range applicable to the SL or ST position under Sec.  534.504(a)) is 
not subject to part 752, subpart D of this chapter.
    (e) A reduction in the rate of basic pay of an SL or ST employee 
under Sec.  534.506(b) upon transfer is considered voluntary upon the 
employee's acceptance of the appointment and is not subject to part 
752, subpart D of this chapter, except that an SL or ST employee's rate 
of basic pay may not be reduced upon transfer under circumstances 
described in Sec.  534.509(a). A reduction in the rate of basic pay of 
an SL or ST employee upon a transfer of function under part 351, 
subpart C of this chapter from another agency is subject to part 752, 
subpart D of this chapter unless otherwise provided by statute.


Sec.  534.509  Preservation of an established rate of basic pay.

    (a) An SL or ST employee whose rate of basic pay is higher than the 
rate for level III of the Executive Schedule may not suffer a reduction 
in pay as a result of transfer to an SL or ST position in another 
agency where the maximum rate of basic pay for the applicable SL or ST 
rate range is equal to the rate for level III of the Executive 
Schedule.
    (b) An SL or ST employee whose rate of basic pay is higher than the 
rate for level III of the Executive Schedule may not suffer a reduction 
in pay because his or her agency's applicable performance appraisal 
system certification expires or is suspended under Sec.  430.405(h) of 
this chapter. See Sec.  530.203(g) and (h) of this chapter for 
treatment of the aggregate pay limit when certification status changes 
during the calendar year.
    (c) An agency may continue an SL or ST employee's rate of basic pay 
above the rate for level III of the Executive Schedule upon that 
employee's movement within the agency to an SL or ST position that is 
not under a certified performance appraisal system. Pay may be reduced 
upon the movement only as provided in Sec.  534.508.
    (d) If an agency grants a temporary pay increase under conditions 
described in Sec.  534.508(d) to an SL or ST employee subject to a 
certified performance appraisal system who, prior to the temporary pay 
increase, has a rate of basic pay above the rate for level III of the 
Executive Schedule, the agency may return the employee to an SL or ST 
position that is not subject to a certified performance appraisal 
system when the temporary assignment ends and set the SL or ST 
employee's rate of basic pay at the rate in effect immediately before 
the temporary pay increase.
    (e) When a rate of basic pay that is higher than the rate for level 
III of the Executive Schedule is preserved under a provision of this 
section, the SL or ST employee will continue to receive his or her 
current rate of basic pay and is not eligible for a pay increase until 
he or she is assigned to an SL or ST position covered by a certified 
performance appraisal system or his or her rate of basic pay is less 
than the rate for level III of the Executive Schedule.
    (f) An agency that is otherwise subject to the limitation in Sec.  
534.504(a)(2)(i) with respect to an SL or ST position occupied by an SL 
or ST employee whose rate of basic pay is authorized to be preserved 
under paragraph (a), (b), (c), or (d) of this section may set that 
employee's rate of basic pay above EX-III only at the level required to 
preserve the applicable rate.
    (g) Preservation of a rate of basic pay under this section does not 
preclude a subsequent reduction in pay as provided in Sec.  534.508.
    (h) The provisions of this section do not apply upon the 
appointment of a senior professional employee to a position in the 
Senior Executive Service or upon the appointment of a member of the 
Senior Executive Service to a senior professional position.


Sec.  534.510  Off-cycle pay increases.

    (a) An authorized agency official may provide an off-cycle pay 
increase to a senior professional if, and only if, the agency head or a 
designee who provides the certifications described in Sec.  
430.404(a)(6)(i), (ii) and (iii) of this chapter for all senior 
professionals in the agency determines an off-cycle pay increase is 
warranted and approves the amount of the increase, subject to the 
requirements of this section and the agency's written procedures 
established under Sec.  534.505. The authority to approve an off-cycle 
pay increase under this section may not be further delegated.
    (b) Except as provided in paragraph (d) of this section, an off-
cycle pay increase must be supported by factors that distinguish the 
level of the senior professional's performance and/or contributions to 
agency performance from that of his or her peers, as applicable, and 
from that sufficiently rewarded through the annual pay adjustment. In 
assessing the warrant for an off-cycle pay increase, the approving 
official may consider such factors as--
    (1) A senior professional's exceptionally meritorious 
accomplishments that contribute significantly to the agency's 
performance;
    (2) The need to offer a pay increase to reassign a senior 
professional to a position that has a substantially greater impact on 
agency performance; and
    (3) The need to retain a senior professional whose contributions 
are critical to the agency and who is likely to leave the agency in the 
absence of a pay increase.
    (c) Each off-cycle pay increase that is based upon such factors as 
are described in paragraphs (b)(1) through (3) of this section must be 
documented in accordance with Sec.  534.507(b) through (e), except that 
the agency must also provide information to explain how each applicable 
factor was considered in determining the pay increase. This information 
may be derived from the agency's written pay procedures established 
under Sec.  534.505, agency performance management system activities, 
or other sources the agency deems useful for this purpose.
    (d) If the maximum rate of basic pay applicable to an agency's 
senior professionals increases during the 1 year period following the 
annual pay adjustment under Sec.  534.507(a)(1) for reasons other than 
a change in the certification status of an applicable performance 
appraisal system, the agency head or a designee who provides the 
certifications described in Sec.  430.404(a)(6)(i), (ii) and (iii) of 
this chapter for all senior professionals in the agency may consider 
whether, and to what extent, an additional pay increase may be 
warranted for a senior professional based on the same criteria used in 
determining his or her annual pay increase. However, if the increase in 
maximum rate of basic pay is due to a change in the certification 
status of an applicable performance appraisal system, the requirements 
of paragraphs (a), (b), and (c) of this section apply.
    (e) An off-cycle pay increase granted under this section will be 
effective prospectively, not retroactively.

[[Page 12362]]

Sec.  534.511  Exemption from performance appraisal requirements.

    (a) An agency responsible for setting and adjusting rates of basic 
pay for SL or ST employees or positions excluded from performance 
appraisal by or under statute is, with respect to those employees or 
positions, exempt from any provision of this subpart to the extent that 
it makes a pay determination contingent upon performance appraisal, 
including--
    (1) Section 534.505(a)(1), (2) and (3) to the extent these 
paragraphs require that an agency's plan for setting and increasing 
rates of basic pay reflect meaningful distinctions among SL and ST 
employees based upon individual performance and include criteria that 
ensure individuals with the highest levels of individual performance, 
or the greatest contributions to agency performance, or both, receive 
the highest pay increases. The agency must still provide written 
procedures for setting and adjusting rates of pay for covered SL and ST 
employees that specify criteria that will be applied consistent with 
applicable law. The remaining provisions of Sec.  534.505 apply, except 
for references in Sec.  534.505(a)(5) to compliance with certification 
requirements and centralized review of ratings and pay actions;
    (2) Section 534.507(b), (c), (d), (e), and (f). The agency must 
still document in writing the basis for each pay increase under Sec.  
534.507 in accordance with criteria specified in the agency's written 
procedures under Sec.  534.505(a); and
    (3) Section 534.510(b) and (c). The agency must still document in 
writing the basis for each off-cycle pay increase under Sec.  534.510 
in accordance with criteria specified in the agency's written 
procedures under Sec.  534.505(a).
    (b) Except as specified in paragraph (a) of this section, an agency 
responsible for setting and adjusting rates of basic pay for SL or ST 
employees excluded from performance appraisal by or under statute is 
subject to the requirements of this subpart with respect to those 
employees.
    (c) The maximum rate of basic pay for an SL or ST employee or 
position not subject to performance appraisal is the maximum rate 
described in Sec.  534.504(a)(2)(i). An agency head who uses the 
exemption in paragraph (a) of this section to set the rate of basic pay 
for SL or ST employees who are not subject to performance appraisal may 
not certify that those employees are covered by a performance appraisal 
system meeting the certification criteria established in part 430, 
subpart D of this chapter for purposes of authorizing rates of basic 
pay above the rate for level III of the Executive Schedule.
    (d) Notwithstanding paragraph (c) of this section, an agency 
responsible for setting and adjusting rates of basic pay for SL or ST 
employees or positions excluded from performance appraisal by or under 
statute is subject to Sec.  534.509(a) when setting a rate of basic pay 
for an SL or ST employee upon transfer to such a position. The agency 
may also apply Sec.  534.509(c) upon movement of an SL or ST employee 
whose rate of basic pay was initially set under Sec.  534.509(a) or (c) 
to another SL or ST position that is excluded from performance 
appraisal. Pay may be reduced upon the movement only as provided in 
Sec.  534.508. In either case, the employee will not be eligible for a 
pay increase until he or she is appointed to an SL or ST position that 
is subject to a certified performance appraisal system or until his or 
her rate of basic pay is less than the rate for level III of the 
Executive Schedule.

[FR Doc. 2014-04765 Filed 3-4-14; 8:45 am]
BILLING CODE 6325-39-P