[Federal Register Volume 82, Number 12 (Thursday, January 19, 2017)]
[Proposed Rules]
[Pages 6339-6353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-01326]


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

  Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / 
Proposed Rules  

[[Page 6339]]



Office of Personnel Management

5 CFR Parts 317, 430, and 534

Office of Management and Budget

5 CFR Part 1330

RIN 3206-AL20


Performance Appraisal System Certification

AGENCY: Office of Personnel Management and Office of Management and 
Budget.

ACTION: Proposed rule with request for comments.

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

SUMMARY: The U.S. Office of Personnel Management (OPM) and the U.S. 
Office of Management and Budget (OMB) jointly propose to implement 
certain requirements contained in the Senior Professional Performance 
Act of 2008, incorporate OPM policies and to reorganize information for 
ease of reading. OPM additionally proposes to make conforming changes 
and technical corrections, and to update and simplify the processes 
used based on over a decade of experience with the certification 
process and recommendations from an interagency workgroup.

DATES: OPM must receive comments on or before February 21, 2017.

ADDRESSES: You may submit comments, identified by ``RIN 3206-AL20,'' 
using any of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments. All submissions received through 
the Portal must include the agency name and docket number or Regulation 
Identifier Number (RIN) for this rulemaking.
    Email: [email protected]. Include ``RIN 3206-AL20'' in the subject 
line of the message.
    Fax: (202) 606-4264.
    Mail, Hand Deliver/Courier comments: Address comments to Mr. 
Stephen T. Shih, Deputy Associate Director for Senior Executive 
Services and Performance Management, Suite 7412, 1900 E Street NW., 
Washington, DC 20415-9700.

FOR FURTHER INFORMATION CONTACT: Myriam Mayobre by telephone at (202) 
606-8046, by FAX at (202) 606-4264, or by email at 
[email protected].

SUPPLEMENTARY INFORMATION: This proposal updates current regulations to 
account for changes in statute, policies, and processes that have 
occurred since the current regulation became effective in 2004. This 
proposal also streamlines the existing process to decrease burden on 
agencies while ensuring OPM and OMB have information needed for 
certification.
    On October 8, 2008, the President signed into law the Senior 
Professional Performance Act of 2008 (the Act), Public Law 110-372. The 
Act made significant changes in the law governing certification of 
senior employee performance appraisal systems. This rulemaking would 
revise subpart D of parts 430 and 1330 of title 5, Code of Federal 
Regulations to reflect the changes resulting from the Act. Other 
changes to the regulations not related to the Act have been included in 
this revision to update and simplify the processes used based on over a 
decade of experience with the certification process and recommendations 
from an interagency workgroup. OPM convened the workgroup in December 
2014 as a result of a President's Management Agenda recommendation made 
in 2011 by a separate workgroup, to follow up on recommendations made 
by a Chief Human Capital Officers workgroup held in February 2014, and 
as part of the current Presidential Management Agenda initiatives to 
improve the Senior Executive Service (SES). The workgroup was comprised 
of agency subject matter experts who were tasked to review the 
certification process and provide recommendations regarding the 
certification criteria and streamlining the process.
    While OPM and OMB jointly propose to amend parts 430 and 1330 of 
title 5, Code of Federal Regulations, OPM additionally proposes to make 
the following changes to parts 317, 430 Subpart C, and 534 of title 5, 
Code of Federal Regulations, for which OPM alone is responsible. OPM 
proposes changes in 5 CFR 317.501(b)(2) and 317.503(g)(3) to fix 
erroneous internal cross-references to certain regulations affecting 
those sections. OPM also proposes certain changes to final regulations 
on 5 CFR 430 subpart C--Managing Senior Executive Performance published 
September 25, 2015, 80 FR 57693 to update citations to the proposed 
regulation. Revisions to 5 CFR 430.309(e)(2) would further clarify 
higher level review.
    OPM is proposing conforming changes to pay regulations at 5 CFR 534 
subparts D and E. For the most part, these changes update citations 
from the current regulations with citations to the same or similar 
material in the proposed regulations or change the existing references 
in current regulation to ``suspension'' of an appraisal system 
certification with the term ``termination'' of certification. In 5 CFR 
534 subpart D, OPM also proposes to revise 5 CFR 534.404(e)(1) to 
clarify that certification of an appraisal system does not provide an 
immediate opportunity to adjust the pay of current senior executives. 
Rather, pay adjustments for current senior executives must be based on 
an annual summary rating and, therefore, occur only after the 
completion of a rating cycle under the newly certified appraisal 
system. This should occur on the normal appraisal cycle and include a 
period of performance under the certified system that is at least equal 
to the agency's minimum appraisal period. OPM also proposes to add new 
paragraph 534.404(c)(6) to address a technical issue associated with 
the 12-month rule and enable authorized agency officials to grant a pay 
adjustment up to 2 days before the expiration date of the 12-month 
restriction on pay adjustments that applies to a senior executive. This 
will allow agencies to make a pay adjustment consistent with an 
otherwise applicable annual performance and pay adjustment cycle. OPM 
finds this appropriate to support agencies in maintaining a cycle that 
provides for granting pay adjustments based upon performance on the 
first day of the same bi-weekly pay period each year (e.g., at the time 
of the statutory annual adjustment to General Schedule rates, which may 
occur 1 or 2 days short of a full 12-month period). OPM does not 
propose to require annual approval and documentation of the basis for 
this exception prior to its use. In 5 CFR 534 subpart E, OPM proposes 
to revise 5

[[Page 6340]]

CFR 534.505(a)(5) to add the review of proposed performance awards for 
senior professionals as a responsibility of the centralized review 
panel. This creates consistency with the duties of the performance 
review boards (PRB) for senior executives. OPM also proposes to revise 
5 CFR 534.507(a)(2) to include a 14-day time period from the date 
specified in paragraph (a)(1) of that section in which an authorized 
agency official must provide notice to a senior professional concerning 
the reasons for a zero adjustment in pay, as required by paragraph (h) 
of that section. Specifying a 14-day time period will ensure that 
senior professionals receive such notices in a timely manner.

Key Changes to 5 CFR Parts 430 and 1330

    The proposed regulations implement the provision in the Act that 
authorizes agencies to apply higher maximum rates of basic pay for 
employees in senior-level (SL) and scientific or professional (ST) 
positions (i.e., senior professionals) paid under 5 U.S.C. 5376. An 
agency without an applicable certified appraisal system must use a 
maximum rate of basic pay for senior professionals that does not exceed 
the rate for level III of the Executive Schedule (EX-III). An agency 
with an applicable certified appraisal system may use a maximum rate of 
basic pay for senior professionals covered by the certified system that 
does not exceed the rate for level II of the Executive Schedule (EX-
II).
    The proposed regulation implements a section of the Act providing 
that certification may be granted beginning at any point in the year 
for a period not to exceed 24 months. Under rare and exceptional 
circumstances, the Director of OPM may extend certification for up to 6 
additional months. Full certification will be granted for a period of 
24 months. Provisional certification will be granted for a period of 12 
months.
    Since certification no longer expires at the end of a calendar 
year, there is no need for OPM to extend provisional certification into 
the following calendar year. That extension enabled agencies to 
maintain certification long enough to make pay adjustments using the 
higher maximum rate of the newly adjusted pay range and continued their 
access to the higher pay rate of EX-II.
    OPM proposes to remove sections of the regulation that governed the 
renewal of an already fully certified system and described a process 
for automatic renewal based on an OPM/OMB review of the required agency 
annual report. OPM determined that this information alone is 
insufficient to assess whether an agency's system continues to meet the 
certification criteria. An agency that intends to maintain its 
certification must submit a request for certification in accordance 
with proposed sections 430.407 and 1330.407.
    OPM proposes to change the requirement of current sections 
430.404(a)(6) and 1330.404(a)(6) that only the agency head or the 
official designated under paragraph (a)(5) of those sections may 
provide oversight of the agency's appraisal system and its results. The 
proposed regulations also add Communication of Results (i.e., overall 
rating distributions, average adjustment in the rate of basic pay for 
each rating level, and average performance award for each rating level, 
as applicable) as a certification criterion. This change is consistent 
with OPM's current guidance that each agency must describe the 
communication of ratings and payouts to senior employees and other 
involved officials in its certification request. Additionally, the 
proposed regulations combine the criteria for Alignment and Results 
into a single criterion, Aligned Results.
    OPM proposes to remove the references that distinguish requests for 
full certification from requests for provisional certification. As the 
certification process has evolved, OPM has found that submission of the 
same information is needed for all agency requests for certification. 
Based on review of an agency request, OPM, with OMB concurrence, may 
then grant full or provisional certification as appropriate. Reasons 
for which an agency would receive provisional rather than full 
certification are specified in the proposed regulations. OPM also 
proposes to remove the requirement for agencies to submit, as part of 
their certification requests, the process they use for ensuring ratings 
are not distributed arbitrarily or on a rotational basis. OPM believes 
this falls within the responsibilities of the oversight official to 
ensure the appraisal system is administered appropriately. OPM 
continues to require, as part of the oversight criterion, that an 
agency identify the official responsible for certifying that the senior 
employee appraisal process makes meaningful distinctions based on 
relative performance. OPM recognizes the ability to make meaningful 
distinctions in performance starts with the development of performance 
standards and requirements that clearly describe the different 
expectations at various performance levels. Agencies should consult 
their strategic plans and objectives when developing performance 
requirements to ensure alignment with mission outcomes and 
organizational results. This first critical step falls to the rating 
official, in consultation with the senior employee, followed by the 
accurate application of these standards/requirements when assessing 
performance. The proper development of performance standards/
requirements and the accurate assessment of performance compared to 
these standards/requirements should lead to meaningful distinctions in 
ratings. OPM has found that the role of the oversight official provides 
the appropriate level for ensuring ratings make meaningful distinctions 
on the basis of actual differences in levels of performance. 
Furthermore, OPM proposes to remove the requirement for an agency to 
submit, as part of its certification request, the process for reviewing 
performance standards, requirements, expectations, or ratings of 
employees supervised by senior employees, because OPM believes this too 
is a review that should be included in the responsibilities of the 
Oversight Official.
    The proposed regulations introduce a new procedural framework that 
provides for shared responsibilities in assessing certification 
criteria. Instead of OPM assessing all criteria, OPM will assess 
Aligned Results, Performance Distinctions, and Pay Differentiation. OPM 
will seek OMB concurrence on its findings. Agencies will verify 
Organizational Assessment and Guidelines, Oversight, and Communication. 
The criteria verified by the agency will, however, be subject to 
periodic spot checks by OPM to ensure continued compliance. Spot checks 
will not be announced in advance and when they occur, agencies will 
submit to OPM the documentation they used as the basis of their 
verification of the applicable criteria. In addition, the proposed 
regulations allow for an agency to demonstrate compliance with the 
Aligned Results criterion through a peer review process. This peer 
review process will provide the option for an agency with full 
certification to either have its performance plans reviewed by another 
agency with a fully certified appraisal system or submit the 
performance plans to OPM. Agencies that maintain full certification may 
continuously use this peer review method to demonstrate compliance with 
the Aligned Results criterion subject to spot checks by OPM. To 
maintain the integrity of the peer review process, agencies will not be 
allowed to conduct reciprocal reviews.
    OPM proposes to remove Consultation, Balance, and Accountability 
criteria from the

[[Page 6341]]

Certification Criteria and move them to a new section, Additional 
Appraisal Program Requirements and add the Training requirement to this 
same section. Based on over a decade of experience and careful 
deliberation by a cross-agency working group of subject matter experts, 
we have determined these important aspects of a successful and 
effective performance management system no longer need to be reviewed 
by OPM for the purpose of supporting a certification determination. 
Since they are vital to the success of a performance management system, 
are included in the design and application of the Basic SES appraisal 
system, and agencies already have incorporated them into their 
performance cultures, each agency will now be responsible for ensuring 
they continue to be properly applied within their organizations.
    OPM proposes to modify the definition of Relative Performance to 
clarify that a senior employee's performance is compared to the 
performance expectations established for his or her position, including 
their contribution to agency performance as appropriate. The definition 
of Relative Performance also specifies that it does not permit peer 
ranking or peer comparison for rating purposes. OPM also proposes to 
remove Outstanding Performance from the definitions to avoid confusion 
with the commonly used Level 5 rating label--Outstanding. As used in 
the certification regulations, Outstanding Performance originally was 
intended to allow for separately identifying the highest performers 
even within the highest performance level, usually Level 5, which often 
uses the label Outstanding. Some additional terms have been defined, as 
noted in the table of changes. OPM also proposes to revise the title of 
this subpart from Performance Appraisal Certification for Pay Purposes 
to Performance Appraisal System Certification for accuracy.
    Agencies will also be required to submit, as part of the 
certification request, the applicable agency SES or SL/ST pay setting 
and adjustment policy required under 5 CFR part 534 and the policy and 
procedures for granting performance awards under Sec.  534.405 for SES 
or Sec. Sec.  451.101(e) and 451.104(a)(3) for SL/ST. In order to 
assess whether an agency is meeting the pay differentiation criterion 
for certification, OPM often finds it necessary to examine the pay 
policy to understand the context within which the reported pay 
adjustments have been authorized and performance awards have been 
granted. OPM also proposes that agencies make pay adjustments and 
performance awards for senior employees in a timely manner. These pay 
adjustments and awards for SES must have an effective date no later 
than 5 months after the end of the applicable appraisal period. For 
senior professionals, agencies must make pay adjustments, in compliance 
with requirements in Sec.  534.505(b), at the same time as the 
adjustment to the General Schedule. This is the only time during the 
year annual increases in basic pay for senior professionals are 
permissible. Performance awards must be paid as soon as practicable 
after the end of the appraisal period. These timeliness requirements 
support the principles of performance-based compensation by ensuring 
the pay and awards are as close as practicable to the ratings upon 
which they are based.
    OPM proposes to remove paragraphs addressing the limits on basic 
pay and aggregate total compensation because they are contained in 5 
CFR part 534, subparts D and E and Sec.  530.203(b) respectively.

Summary of Major Changes

    These proposed regulations make the following major changes:
    1. Proposed revisions make conforming changes as a result of Public 
Law 110-372, Senior Professional Performance Act of 2008.
     Adds that an agency with an applicable certified appraisal 
system may apply the higher maximum rate of basic pay for senior 
professionals covered by the certified system.
     Implements the provision of the Act where certification 
may be granted beginning at any point in the year for a period not to 
exceed 24 months as opposed to a calendar-year basis.
    2. Proposed revisions address recommendations stemming from over a 
decade of experience with certification as well as from an interagency 
work group tasked to design an improved certification process to 
support the President's Management Agenda recommendation to improve the 
SES.
     Provides for shared responsibilities in assessing 
certification criteria in which OPM assesses Aligned Results, 
Performance Distinctions, and Pay Differentiation and agencies will 
verify all other criteria.
     Adds new option for Peer Review--this would allow fully 
certified agencies to engage in a review of other fully certified 
agencies' performance plans to determine whether they meet the 
criterion for ``Aligned Results,'' while prohibiting concurrent 
reciprocal reviews.
     Requires timely pay adjustments and performance awards for 
senior employees; for SES, not later than 5 months after the end of the 
appraisal period.

Request for Comments

    In addition to the general request for comments on the proposed 
regulation, we would appreciate feedback focused specifically on the 
following questions:
     How could agencies best assess and highlight their 
organizational performance--strengthening alignment to individual SES 
performance requirements--to distinguish between SES performance levels 
and/or to objectively set high performance expectations for individual 
SES?
     Are there additional ways, or alternatives, OMB and OPM 
should consider to make the SES and SL/ST performance appraisal system 
certification process less resource-intensive, while still achieving 
the goal of tying performance to agency outcomes, and making meaningful 
distinctions amongst individuals' performance levels?

Complete Table of Changes

    The following table lists all the proposed changes to the current 
regulations. The ``current rule'' column lists the regulations in the 
current subpart D. The ``proposed rule'' column indicates where matters 
addressed in the current regulation are addressed in the proposed 
regulation and where new material is being added. The third column 
explains each change.

------------------------------------------------------------------------
         Current rule             Proposed rule    Explanation of change
------------------------------------------------------------------------
                           Part 430, subpart D
------------------------------------------------------------------------
430.401(a)....................  430.401(a) and     Divides paragraph
                                 (b).               into multiple
                                                    sections to increase
                                                    clarity.
430.401(b)....................  Removed..........  Removes paragraphs
                                                    addressing the
                                                    limits on basic pay
                                                    and aggregate
                                                    compensation because
                                                    they are contained
                                                    in 5 CFR part 534,
                                                    subparts D and E and
                                                    Sec.   530.203(b)
                                                    respectively.

[[Page 6342]]

 
430.402.......................  430.402..........  Adds definitions for
                                                    Agency, Agency Head,
                                                    Annual Summary
                                                    Rating, Appraisal,
                                                    Certification
                                                    Criteria, Peer
                                                    Review, Rating of
                                                    Record, Senior
                                                    Professional Review
                                                    Panel (SPRP),
                                                    updates GPRA to
                                                    GPRAMA, clarifies
                                                    the definitions of
                                                    Performance
                                                    Expectations,
                                                    Relative
                                                    Performance, and
                                                    Senior Executive.
                                                    Removes the
                                                    definition for
                                                    Outstanding
                                                    Performance.
430.403(a)....................  430.403(a).......  Edits made to
                                                    increase clarity.
                                430.403(b).......  Adds provision that
                                                    certifications are
                                                    not renewable.
430.403(b)....................  430.403(c).......  Moves requirement
                                                    that agencies
                                                    seeking
                                                    certification must
                                                    submit systems that
                                                    have been approved
                                                    by OPM.
430.403(c)....................  Removed..........  Removes option for
                                                    agencies to submit a
                                                    new appraisal
                                                    system(s) for
                                                    certification that
                                                    has not yet been
                                                    approved by OPM.
430.403(d)....................  430.403(e).......  Moves requirement
                                                    that agencies submit
                                                    for certification,
                                                    separate systems for
                                                    their senior
                                                    professionals and
                                                    SES members. Adds
                                                    new requirement for
                                                    a centralized review
                                                    panel for agencies
                                                    with 10 or more
                                                    senior
                                                    professionals. Also
                                                    moves the option to
                                                    include features in
                                                    the senior
                                                    professional
                                                    appraisal system
                                                    that are similar to
                                                    the SES system.
430.403(e)....................  430.403(c) and     Splits paragraph into
                                 (d).               two sections.
430.404(a)....................  430.404..........  Edits made to
                                                    increase clarity.
430.404(a)(1).................  430.404(a)(1)....  Moves certification
                                                    criterion and
                                                    changes name from
                                                    Alignment to Aligned
                                                    Results.
430.404(a)(2).................  430.406(a).......  Moves to Additional
                                                    Appraisal System
                                                    Requirements and
                                                    clarifies.
430.404(a)(3).................  430.404(a)(2)....  Moves certification
                                                    criterion and
                                                    changes name from
                                                    Results to Aligned
                                                    Results.
                                430.404(a)(3)....  New provision
                                                    allowing for peer
                                                    review of aligned
                                                    results.
430.404(a)(4).................  430.406(b).......  Moves to Additional
                                                    Appraisal System
                                                    Requirements and
                                                    clarifies.
430.404(a)(5).................  430.405(a).......  Moves certification
                                                    criterion and
                                                    simplifies.
430.404(a)(6).................  430.405(b).......  Moves certification
                                                    criterion and
                                                    clarifies.
430.404(a)(7).................  430.406(c).......  Moves to Additional
                                                    Appraisal System
                                                    Requirements,
                                                    changes name from
                                                    Accountability to
                                                    Accountability for
                                                    the Performance
                                                    Management of
                                                    Subordinates, and
                                                    clarifies.
430.404(a)(8).................  430.404(b)(2)....  Moves the
                                                    certification
                                                    criterion, changes
                                                    the name from
                                                    Performance
                                                    Differentiation to
                                                    Performance
                                                    Distinctions, and
                                                    simplifies.
430.404(a)(9).................  430.404(c)(1) and  Moves certification
                                 (2).               criterion and
                                                    clarifies.
                                430.404(c)(3)....  Adds specific
                                                    timeframe for making
                                                    pay adjustments and
                                                    awards in a timely
                                                    manner.
430.404(a)(9).................  430.404(c)(4)....  Moves certification
                                                    criterion and
                                                    clarifies
                                                    transparency in the
                                                    process for making
                                                    pay and awards
                                                    decisions.
430.404(b)....................  Removed..........  Addressed by defining
                                                    agency head to mean
                                                    an Inspector General
                                                    when applying these
                                                    provisions to
                                                    Offices of the
                                                    Inspector General.
                                430.405(c).......  Adds Communication of
                                                    Results as a
                                                    certification
                                                    criterion.
                                430.406(d).......  Adds Training to
                                                    Additional Appraisal
                                                    System Requirements.
                                430.405..........  Adds new section
                                                    titled Certification
                                                    Criteria Verified by
                                                    the Agency.
430.405(a)....................  430.407..........  Moves and clarifies.
430.405(b)....................  430.407(a).......  Moves and removes the
                                                    requirement to
                                                    identify whether the
                                                    request is for full
                                                    or provisional
                                                    certification.
                                                    Removes requests
                                                    covering an
                                                    agencywide system or
                                                    a system that
                                                    applies to one or
                                                    more agency
                                                    organizations or
                                                    components.
                                                    Specifies who must
                                                    submit certification
                                                    requests.
430.405(b)(1).................  430.407(a)(1)....  Moves and remains
                                                    unchanged.
                                430.407(a)(2)....  Adds new paragraph
                                                    explicitly requiring
                                                    separate
                                                    certification
                                                    requests for Offices
                                                    of Inspectors
                                                    General.
430.405(b)(1)(i)..............  430.407(a)(3)(i).  Moves and remains
                                                    unchanged.
430.405(b)(1)(ii).............  Removed..........  Removes applicable
                                                    administrative
                                                    instructions and
                                                    implementing
                                                    guidance from
                                                    written requests for
                                                    certification.
430.405(b)(1)(iii)............  430.407(a)(3)(ii)  Moves and edits made
                                                    to increase clarity.
430.405(b)(1)(iii)(A) and (B).  430.404(b)(1)....  Moves and clarifies.
                                430.404(b)(3)....  Adds provision
                                                    requiring agencies
                                                    to appropriately
                                                    assign the highest
                                                    ratings to the best
                                                    performers.
430.405(b)(1)(iii)(C).........  430.404(b)(4)....  Moves and replaces
                                                    Outstanding
                                                    Performance with the
                                                    highest level of
                                                    performance.
430.405(b)(2).................  Removed..........  Removes requirement
                                                    to submit a clearly
                                                    defined process for
                                                    reviewing initial
                                                    ratings as well as
                                                    the requirement to
                                                    submit a review of
                                                    supervised
                                                    employees'
                                                    performance
                                                    standards,
                                                    requirements, and
                                                    ratings.
430.405(b)(3).................  430.407..........  Moves and simplifies.
430.405(b)(3)(i) and (ii).....  Removed..........  Removes distinction
                                                    between requirements
                                                    associated with full
                                                    and provisional
                                                    certification
                                                    requests.
                                430.407(a)(4)....  New requirement to
                                                    include a sample of
                                                    performance plans.
                                430.407(a)(5)....  New requirement to
                                                    include
                                                    documentation of
                                                    organizational
                                                    performance results
                                                    and relationship
                                                    with ratings
                                                    distribution.

[[Page 6343]]

 
430.405(b)(4).................  430.407(a)(6) and  Moves and references
                                 (7).               the annual reporting
                                                    requirement. Moves
                                                    references to full
                                                    certification and
                                                    the two appraisal
                                                    periods, by
                                                    requiring data
                                                    reported in the
                                                    annual data call.
                                430.407(a)(7)....  New requirement to
                                                    submit documentation
                                                    of the pay policy
                                                    and procedures as
                                                    well as policies
                                                    established for
                                                    awards programs.
430.405(b)(5).................  430.407(a)(8)....  Moves and remains
                                                    unchanged.
                                430.407(b).......  Requires agencies
                                                    participating in
                                                    peer review to
                                                    submit such
                                                    documentation as OPM
                                                    requires.
430.405(c)....................  430.408(a).......  Moves and simplifies.
430.405(c)(1).................  430.408(a)(1)....  Moves, redefines the
                                                    certification period
                                                    from 2 calendar
                                                    years to 24 months,
                                                    and clarifies the
                                                    requirements for
                                                    full certification.
430.405(c)(2).................  430.408(a)(2)....  Moves, deletes the
                                                    option for OPM to
                                                    extend provisional
                                                    certification into
                                                    the following
                                                    calendar year,
                                                    redefines the
                                                    certification period
                                                    from 1 calendar year
                                                    to 12 months, and
                                                    specifies reasons an
                                                    agency would receive
                                                    provisional rather
                                                    than full
                                                    certification.
430.405(c)(3).................  430.410(a).......  Moves and changes the
                                                    word suspend to
                                                    terminate.
                                430.408(b)(1)....  Implements statutory
                                                    authority of OPM
                                                    Director to provide
                                                    certification
                                                    extensions.
                                430.408(b)(2)....  New provision
                                                    providing
                                                    requirements for
                                                    requesting a
                                                    certification
                                                    extension.
430.405(d)....................  Removed..........  Removes paragraphs
430.405(e)(2).................                      addressing the
430.405(f)(2).................                      limits on basic pay
                                                    and aggregate
                                                    compensation because
                                                    they are contained
                                                    in 5 CFR part 534,
                                                    subparts D and E and
                                                    Sec.   530.203(b),
                                                    respectively.
430.405(e)(1).................  430.408(a)(1)(i)-  Moves and
                                 (iii).             restructures for
                                                    clarity. Adds as a
                                                    requirement for full
                                                    certification,
                                                    demonstration of
                                                    appropriate system
                                                    application based on
                                                    data reports for the
                                                    two most recent
                                                    completed
                                                    performance cycles.
430.405(e)(3).................  Removed..........  Removes automatic
                                                    renewal of full
                                                    certification.
430.405(f)(1).................  430.408(a)(2)(i)   Moves and
                                 and (ii).          restructures for
                                                    clarity.
                                430.408(a)(2)(iii  Adds as a reason for
                                 ).                 receiving
                                                    provisional rather
                                                    than full
                                                    certification, the
                                                    demonstration of
                                                    appropriate system
                                                    application based on
                                                    data reports for
                                                    only the most recent
                                                    completed
                                                    performance cycle.
430.405(f)(3).................  Removed..........  Removes requirement
                                                    to resubmit
                                                    application
                                                    requesting
                                                    provisional
                                                    certification.
430.405(g)....................  430.409..........  Moves and edits for
                                                    increased clarity.
                                                    Also removes the
                                                    requirement to
                                                    report aggregate
                                                    total compensation.
430.405(h)(1).................  430.410(a).......  Combines redundant
                                                    provisions
                                                    previously at
                                                    430.405(c)(3) and
                                                    430.405(h)(1).
430.405(h)(2).................  430.410(b).......  Moves and changes the
                                                    word suspension to
                                                    termination.
430.405(h)(3).................  430.410(c)-(e)...  Moves and
                                                    restructures for
                                                    increased clarity.
                                                    Changes the word
                                                    suspension to
                                                    termination.
430.405(h)(4).................  430.410(f).......  Moves, changes the
                                                    word suspension to
                                                    termination, and
                                                    clarifies that a
                                                    restored
                                                    certification will
                                                    terminate on the
                                                    same date as the
                                                    original
                                                    certification.
430.405(h)(5).................  430.410(g).......  Moves and changes the
                                                    word suspension to
                                                    termination.
------------------------------------------------------------------------

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 U.S. Office of Management and 
Budget in accordance with E.O. 12866.

List of Subjects

5 CFR Parts 317 and 1330

    Government employees.

List of Subjects in 5 CFR Parts 430

    Decorations, Government employees.

List of Subjects in 5 CFR Part 534

    Government employees, Hospitals, Students, and Wages.

U.S. Office of Management and Budget.
Shaun Donovan,
Director.

U.S. Office of Personnel Management.
Beth F. Cobert,
Acting Director.

    Accordingly, OPM and OMB are proposing jointly to amend parts 430 
and 1330 of title 5 of the Code of Federal Regulations, and OPM 
proposes to amend parts 317, 430, and 534 of title 5, Code of Federal 
Regulations as follows:

5 CFR Chapter I--Office of Personnel Management

PART 317--EMPLOYMENT IN THE SENIOR EXECUTIVE SERVICE

0
1. The authority citation for part 317 continues to read as follows:

    Authority:  5 U.S.C. 3392, 3393, 3395, 3397, 3592, 3593, 3595, 
3596, 8414, and 8421.

Subpart E--Career Appointments

0
2. In Sec.  317.501, revise paragraph (b)(2) to read as follows:


Sec.  317.501  Recruitment and selection for initial SES career 
appointment be achieved from the brightest and most diverse pool 
possible.

* * * * *
    (b) * * *
    (2) Before an agency may fill an SES vacancy by an initial career 
appointment, it must post a vacancy announcement in USAJOBS for at 
least 14 calendar days, including the date of publication. Each 
agency's SES vacancy announcement must comply with criteria in Sec.  
330.104 of subpart A of this chapter, except for criteria pertaining to

[[Page 6344]]

veterans' preference, the Career Transition Assistance Program, and the 
Interagency Career Transition Assistance Program.
* * * * *
0
3. In Sec.  317.503, revise paragraph (g)(3) to read as follows:


Sec.  317.503  Probationary period.

* * * * *
    (g) * * *
    (3) The break in SES service was the result of military duty or 
compensable injury, and the time credited under paragraph (d)(3) of 
this section was not sufficient to complete the probationary period.

PART 430--MANAGING SENIOR EXECUTIVE PERFORMANCE

0
4. The authority citation for Part 430 continues to read as follows:

    Authority:  5 U.S.C. chapter 43 and 5307(d).

0
5. In Sec.  430.309, revise the last sentence of the introductory text 
in paragraph (e)(2), paragraph (e)(2)(ii), and the first sentence in 
paragraph (e)(2)(iii) to read as follows:


Sec.  430.309.  Rating Performance

* * * * *
    (e) * * *
    (2) * * * The agency must provide each senior executive an 
opportunity for review of the initial summary rating by an employee, or 
(with the consent of the senior executive) a commissioned officer in 
the uniformed services on active duty in the agency, in a higher level 
in the agency than the official who prepared the initial rating.
* * * * *
    (ii) When an agency cannot provide review by a higher-level 
official for a senior executive who receives an initial summary rating 
from the agency head because no such official exists in the agency, the 
agency must offer an alternative review as it determines appropriate; 
however, neither HLR nor alternative review may be provided by a member 
of the PRB that will make a recommendation under Sec.  430.311(b)(2) 
concerning the senior executive or by an official who participated in 
determining the initial summary rating.
    (iii) If a senior executive declines review by agency-designated 
higher-level officials, the agency may offer an alternative review but 
is not obligated to do so unless the only official in a higher level 
than the initial rater is the head of the agency. * * *
* * * * *

PART 430--PERFORMANCE MANAGEMENT

0
6. The authority citation for part 430 continues to read as follows:

    Authority: 5 U.S.C. chapter 43 and 5307(d).

0
7. Revise subpart D to read as follows.
Subpart D--Performance Appraisal System Certification
Sec.
430.401 Purpose.
430.402 Definitions.
430.403 System certification.
430.404 Certification criteria verified by OPM/OMB.
430.405 Certification criteria verified by the agency.
430.406 Additional appraisal system requirements.
430.407 Agency certification requests.
430.408 OPM certification actions.
430.409 Annual reporting requirement.
430.410 Termination of certification.

Subpart D--Performance Appraisal System Certification


Sec.  403.401  Purpose.

    (a) This subpart implements 5 U.S.C. 5307(d), which provides for 
certification of performance appraisal systems that as designed and 
applied make meaningful distinctions based on relative performance with 
respect to--
    (1) Members of the Senior Executive Service (SES) paid under 5 
U.S.C. 5382 and 5383; and
    (2) Employees in senior-level (SL) and scientific or professional 
(ST) positions paid under 5 U.S.C. 5376.
    (b) The regulations in this subpart strengthen the application of 
performance-based-pay principles to senior employees. Specifically, the 
statutory provisions that these regulations implement authorize an 
agency to apply a higher maximum rate of basic pay in setting and 
adjusting rates of basic pay for senior employees (consistent with 5 
CFR part 534, subparts D and E) and apply a higher annual aggregate 
limitation on pay (consistent with 5 CFR part 530, subpart B) to its 
senior employees, when OPM, with OMB concurrence, has certified that 
the design and application of the agency's appraisal systems for these 
employees make meaningful distinctions based on relative performance. 
This subpart establishes the certification criteria and procedures that 
OPM will apply in considering agency requests for such certification.


403.402  Definitions.

    In this subpart--
    Agency means an agency as that term is defined in 5 U.S.C. 105 and 
an Office of Inspector General, which is considered a separate agency 
for purposes of applying all provisions relating to the Senior 
Executive Service under the Inspector General Act of 1978 (5 U.S.C. App 
6(d)).
    Agency head means the head of an agency and includes the Inspector 
General when applying the provisions of this subpart to Offices of the 
Inspector General.
    Annual summary rating means the overall rating level that an 
appointing authority assigns at the end of the appraisal period as 
defined in Sec.  430.303.
    Appraisal system means the policies, practices, and procedures an 
agency establishes under 5 U.S.C. chapter 43 and 5 CFR part 430, 
subparts B and C, or other applicable legal authority, for planning, 
monitoring, developing, evaluating, and rewarding employee performance. 
This includes appraisal systems and appraisal programs as defined in 
Sec.  430.203 and performance management systems as defined in Sec.  
430.303.
    Certification criteria means the factors used to determine whether 
an agency appraisal system as designed and applied makes meaningful 
distinctions based on relative performance.
    GPRAMA means the Government Performance and Results Modernization 
Act of 2010.
    OMB means the Office of Management and Budget.
    OPM means the Office of Personnel Management.
    Peer review means the review under Sec.  430.404(a) of performance 
plans by one agency for another agency, both having fully certified 
performance appraisal systems, to determine whether they meet the 
certification criterion for Aligned Results.
    Performance expectations means--
    (1) the critical elements, performance requirements, and 
performance standards that constitute the senior executive performance 
plans, as defined in Sec.  430.303, established for senior executives;
    (2) the performance elements and standards that constitute the 
performance plans, as defined in Sec.  430.203, established for senior 
professionals; or
    (3) other appropriate means authorized under performance appraisal 
systems not covered by 5 U.S.C. chapter 43 for communicating what a 
senior employee is expected to do and the measures that demonstrate 
success, including contribution to agency performance where 
appropriate.
    Program performance measures means results-oriented measures of 
performance, whether at the agency, component, or function level, which

[[Page 6345]]

include, for example, measures under GPRAMA.
    PRB means Performance Review Board, as described in Sec.  430.311.
    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 as defined in Sec.  430.203.
    Relative performance means the performance of a senior employee 
compared to the performance expectations established for his or her 
position (including contribution to agency performance) and those 
expectations must be set at a level that is sufficiently high to be 
commensurate with the authorities and responsibilities of a senior 
employee in the Federal Government. This does not permit peer ranking 
or peer comparison for rating purposes.
    Senior employee means a senior executive or a senior professional.
    Senior executive means a member of the Senior Executive Service 
(SES) paid under 5 U.S.C. 5382 and 5383.
    Senior professional means an employee in a senior-level (SL) or 
scientific or professional position (ST) paid under 5 U.S.C. 5376.
    SPRP means Senior Professional Review Panel as described in Sec.  
534.505(a)(5).


Sec.  430.403   System certification.

    (a) OPM, with OMB concurrence, will certify an agency appraisal 
system under Sec.  430.408 when a review of that system's design (i.e., 
system documentation), implementation (i.e., performance plans), and 
application (i.e., pay, performance awards, and ratings upon which they 
are based) reveals that the agency meets the certification criteria 
established in Sec. Sec.  430.404 and 430.405 and has followed the 
procedural requirements set forth in Sec.  430.407, and results in a 
finding that the system as designed and applied makes meaningful 
distinctions based on relative performance and otherwise conforms to 
statutory and regulatory requirements relating to performance 
appraisal, pay, and awards.
    (b) Each certification granted shall cover a specific period of 
time and is not renewable.
    (c) Agencies subject to 5 U.S.C. chapter 43 and 5 CFR part 430 
seeking certification of their appraisal systems must submit systems 
that have been approved by OPM under Sec.  430.210 or Sec.  430.314, as 
applicable.
    (d) Agencies not subject to the appraisal provisions of 5 U.S.C. 
chapter 43 and 5 CFR part 430 seeking certification of their appraisal 
system(s) under this subpart must submit appropriate documentation to 
demonstrate that each system complies with the appropriate legal 
authority that governs the establishment, implementation, and 
application of that system.
    (e) For senior professionals, an agency must establish an appraisal 
system(s), as defined in Sec.  430.402, that meets the requirements of 
5 CFR part 430, subpart B, and is separate from the system(s) 
established to cover its SES members under 5 CFR part 430, subpart C. 
At its discretion, an agency may include system features in its senior 
professional appraisal system(s) that are the same as, or similar to, 
the features of its SES appraisal system(s), as appropriate. For the 
purpose of certification under this subpart, such senior professional 
appraisal system(s) with 10 or more senior professionals covered by the 
system(s), must include a requirement for centralized review of senior 
professionals' ratings of record and proposed pay and performance 
awards actions.


Sec.  430.404  Certification criteria verified by OPM/OMB.

    To be certified, an agency's applicable appraisal system(s) for 
senior executives or senior professionals must meet the following 
certification criteria, as verified by OPM, with OMB concurrence:
    (a) Aligned results. (1) Performance expectations for individual 
senior employees must derive from, and clearly align with, the agency's 
mission and organizational goals, such as those communicated through 
GPRAMA strategic goals, program and policy objectives, and/or annual 
performance plans and budget priorities.
    (2) Performance plans must contain performance expectations, 
including at least one critical element focusing on business results, 
that--
    (i) Apply to their respective areas of responsibility and control;
    (ii) Reflect expected agency and/or organizational outcomes and 
outputs, performance targets or metrics, policy/program objectives, 
and/or milestones;
    (iii) Identify specific programmatic crosscutting, external, and 
partnership-oriented goals or objectives, as applicable; and
    (iv) Are stated in terms of observable, measurable, and/or 
demonstrable performance (e.g., quality, quantity, timeliness, or cost 
effectiveness, as applicable).
    (3) OPM may establish additional procedures to allow agencies to 
conduct peer reviews of the performance plans to determine whether the 
plans meet this criterion. When conducting peer review, agencies may 
not conduct concurrent reciprocal reviews.
    (b) Performance distinctions. (1) Appraisal systems must include 
summary levels of performance as described in 5 CFR 430.305(a)(6) for 
senior executives, and for senior professionals at least one summary 
level of performance above fully successful.
    (2) Agency application of performance appraisal systems must--
    (i) Result in meaningful distinctions based on relative 
performance; and
    (ii) Take into account the assessment of the agency's performance 
against relevant program performance measures, as described in Sec.  
430.405(a), employee performance expectations, and such other relevant 
factors as may be appropriate.
    (3) Authorized agency officials, as designated through agency 
delegated authority, must appraise senior employee performance 
accurately and realistically so that senior employees who have 
demonstrated the highest performance and/or exceptional contribution to 
the agency's performance receive the highest annual summary ratings or 
ratings of record, as applicable.
    (4) Agencies with equivalent appraisal systems not otherwise 
subject to this part must provide for clearly distinguishing and 
identifying the rating that reflects the highest level of performance.
    (5) Agencies may not equate the requirement to make distinctions 
based on relative performance to permitting a forced distribution of 
annual summary ratings or ratings of record, which is prohibited under 
Sec. Sec.  430.208(c) and 430.305(a)(5). However, methods used to make 
distinctions among employees or groups of employees such as comparing, 
categorizing, and ranking employees or groups on the basis of their 
performance may be used for purposes other than assigning a summary 
level including, but not limited to, award determinations.
    (c) Pay differentiation. (1) Agencies must ensure senior employees 
who have demonstrated the highest performance receive the highest 
annual summary ratings or ratings of record, as applicable, and the 
largest corresponding performance awards, pay adjustments, and rates of 
pay, in accordance with applicable limitations;
    (2) Agencies must ensure differentiation is evident separately in 
the pay adjustments, performance awards, and rates of pay;
    (3) Agencies must ensure they make pay adjustments and performance 
awards for senior employees in a timely manner.

[[Page 6346]]

    (i) For senior executives, the pay adjustments authorized under 5 
CFR 534.404(b)(3) and the performance awards authorized under 5 U.S.C. 
5384 must have effective dates not later than 5 months after the end of 
the applicable appraisal period;
    (ii) For senior professionals, agencies must make pay adjustments 
in accordance with the requirements in Sec.  534.505(b) and pay 
performance awards as soon as practicable after the end of the 
appraisal period; and
    (4) Agencies must develop processes for making pay decisions and 
granting awards affecting senior employees that comply with 
Governmentwide law, regulation, and guidance. To make these processes 
transparent agencies must provide access to the appraisal and pay 
policies that govern the decisions and communicate the results as 
required in Sec.  430.405(c).


Sec.  430.405  Certification criteria verified by the agency.

    To be certified, an agency's applicable appraisal system(s) for 
senior executives or senior professionals must meet the following 
certification criteria, as verified by the agency in accordance with 
instructions provided by OPM:
    (a) Organizational assessment and guidelines. Agencies must comply 
with all applicable OMB requirements for assessing organizational 
performance and may use those assessments to inform the individual 
ratings of its senior employees. The results of these assessments are 
shared with individuals involved in the rating process through the 
issuance of guidelines based at least in part upon those assessments. 
The guidelines must--
    (1) Address agency performance overall and with respect to each of 
its particular missions, components, programs, policy areas, and 
support functions--such as reports of the agency's GPRAMA goals, annual 
performance plans and targets, program performance measures, and other 
appropriate indicators;
    (2) Be communicated by the agency head, or an individual 
specifically designated by the agency head for such purpose, to 
affected senior employees, their rating and reviewing officials, and 
PRB and SPRP members;
    (3) Be provided at the conclusion of the appraisal period but 
before individual senior employee performance ratings are recommended, 
so that they inform individual performance appraisals; and
    (4) Not take the form of quantitative limitations on the number of 
ratings at any given rating level.
    (b) Oversight. The agency head or the individual specifically 
designated under paragraph (a)(2) of this section must certify for a 
particular senior employee appraisal system that--
    (1) The senior employee rating process makes meaningful 
distinctions based on relative performance;
    (2) The results of the senior employee appraisal process take into 
account the agency's assessment of its performance against program 
performance measures, as well as other relevant considerations, as 
appropriate;
    (3) Performance awards, pay adjustments, and levels of pay based on 
the results of the rating process accurately reflect and recognize 
distinctions in individual performance and/or contribution to the 
agency's performance; and
    (4) Final decisions include PRB or SPRP recommendations regarding 
senior employee ratings and must--
    (i) Be consistent with 5 CFR part 430, subparts B and C; and
    (ii) Appropriately reflect the employee's performance expectations, 
relevant program performance measures, and such other relevant factors 
as the PRB or SPRP may find appropriate.
    (c) Communication of results. Agencies must communicate annually to 
senior employees, rating and reviewing officials, and PRB or SPRP 
members the results of the application of the appraisal process (i.e., 
overall ratings distributions, average adjustment in the rate of basic 
pay for each rating level, and average performance award for each 
rating level, as applicable) while assuring confidentiality of 
protected information.


Sec.  430.406  Additional appraisal system requirements.

    To be certified, an agency's appraisal system must meet the 
requirements of 5 CFR part 430, subparts B or C, as applicable, or 
other applicable legal authority. Agencies are responsible for ensuring 
their senior employee appraisal systems provide for--
    (a) Consultation. Performance expectations for senior employees 
must be developed with the input and involvement of the senior 
employees who are covered thereby;
    (b) Balance. Performance expectations established in the individual 
senior employee appraisal plan must include two parts:
    (1) Expected results; and
    (2) Those technical, leadership and/or managerial competencies or 
behaviors that contribute to, and are necessary to distinguish, levels 
of performance. In addition, for senior employees in supervisory 
positions, their performance expectations also must address appropriate 
measures or indicators of stakeholder and/or employee perspective when 
applicable, such that stakeholder/employee feedback is sought and used 
to inform decisions.
    (c) Accountability for the performance management of subordinates. 
The performance expectations for individual senior employees in 
supervisory positions must clearly communicate their responsibility for 
ensuring--
    (1) The performance expectations for individual subordinate 
employees clearly link to organizational mission, GPRAMA strategic 
goals, or other program or policy objectives; and
    (2) The appraisal of their subordinate employees is based on 
established performance expectations that differentiate among the 
various levels of performance. An appraisal must be a realistic 
assessment of the employees' actual performance, including their 
contribution to organizational goals as measured in GPRAMA and other 
organizational plans.
    (d) Training. Agencies must provide senior employees, rating and 
reviewing officials (including those in other services/appointments 
such as political appointments, Foreign Service, military, etc.), and 
PRB or SPRP members initial training, periodic refresher training, and 
annual reminders on the operation of the applicable agency performance 
management and pay and awards policies.


Sec.  430.407  Agency certification requests.

    To receive system certification, an agency must provide 
documentation demonstrating that its appraisal system(s), in design, 
implementation, and application, meet the certification criteria in 
Sec. Sec.  430.404 and 430.405 as well as the procedural requirements 
set forth in this section.
    (a) In order for an agency's appraisal system to be certified, the 
agency head or designee must submit documentation in accordance with 
OPM instructions, including--
    (1) A written request, which may include signed electronic formats, 
for certification of its appraisal system(s) to the Director of OPM, or 
an OPM official assigned to accept certification requests;
    (2) Separate certification requests for systems applying to senior 
executives, senior professionals, and Offices of the Inspector General;
    (3) A full description of the appraisal system(s) to be certified, 
including--
    (i) Organizational and employee coverage information; and
    (ii) Rating levels as described in Sec.  430.404(b)(1) and (4) that 
establish

[[Page 6347]]

clear distinctions between levels of performance so senior employees 
receive ratings based on assessments of their actual performance 
relative to their established performance expectations in any given 
appraisal period;
    (4) A sample of senior employee performance plans as specified by 
OPM, except as provided in paragraph (b) of this section;
    (5) Documentation of organizational performance results and an 
explanation of how these results support the rating distribution in 
accordance with OPM instructions;
    (6) Data required by the annual reporting requirement in Sec.  
430.409;
    (7) Documentation of the pay policy and procedures for setting and 
adjusting pay and granting performance awards that includes--
    (i) For the agency's senior executives covered by 5 CFR part 534, 
subpart D, the plan for setting and adjusting the rate of basic pay 
described in Sec.  534.404(g);
    (ii) For the agency's senior professionals covered by 5 CFR part 
534, subpart E, the written procedures for setting and adjusting the 
rate of basic pay described in Sec.  534.505; and
    (iii) Policies established for award programs authorized under 
Sec.  534.405 or responsibilities identified in Sec.  451.106, as 
appropriate; and
    (8) Any additional information that OPM and OMB may require to make 
a determination regarding certification.
    (b) Agencies that participate in a peer review under Sec.  
430.404(a) must submit such documentation as OPM requires.


Sec.  430.408  OPM certification actions.

    OPM will certify performance appraisal systems, with OMB 
concurrence, only for those agencies that comply with all related laws 
and regulations.
    (a) Granting certification. At the request of an agency head or 
designee, the Director of OPM, at his or her discretion and in 
accordance with the requirements of this subpart and with OMB 
concurrence, may--
    (1) Grant full certification, which covers a period of 24 months, 
of an agency's senior employee appraisal system(s) when the agency 
has--
    (i) Demonstrated in the initial submission of its documentation, 
and without making any revisions directed by OPM, that it has designed 
and fully operationalized the certification criteria defined in 
Sec. Sec.  430.404 and 430.405;
    (ii) Met the documentation requirements in Sec.  430407; and
    (iii) Demonstrated appropriate system application through the data 
reports required in Sec.  430.409 based on the 2 most recently 
completed performance cycles (2 years of data).
    (2) Grant provisional certification, which covers a period of 12 
months, of an agency's senior employee appraisal system(s) when the 
agency has--
    (i) Designed a senior employee appraisal system(s) that meets the 
certification criteria in Sec. Sec.  430.404 and 430.405; and
    (ii) Revised one or more senior employee performance plans in 
accordance with instructions from OPM in order to meet the 
certification requirements in Sec.  430.404(a); or
    (iii) Demonstrated appropriate system application through the data 
reports required in Sec.  430.409 based on only the most recently 
completed performance cycle (1 year of data).
    (3) Grant provisional certification to an agency more than once.
    (b) Extending certification. (1) Consistent with the requirements 
of this subpart, the Director of OPM, at his or her discretion or upon 
the request of an agency head or designee, may grant a single extension 
of up to six additional months for an agency's appraisal system 
certification. The discretionary use of the Director's extension 
authority will be reserved for rare, exceptional circumstances.
    (2) When requesting an extension, the agency head or designee must 
submit a written request, which may include signed electronic formats, 
to OPM outlining why the agency needs the extension and how the 
extension will support effective performance management. OPM will 
consider requests for extensions on a case-by-case basis.


Sec.  430.409  Annual reporting requirement.

    Agencies must provide OPM with the annual summary ratings or 
ratings of record, as applicable, and rates of basic pay, pay 
adjustments, and performance and cash awards for their senior employees 
in accordance with instructions for OPM's annual data call and at any 
other time as needed to support a certification request.


Sec.  430.410  Termination of certification.

    (a) Any time OPM determines that an agency's certified appraisal 
system is no longer in compliance with certification criteria, OPM, 
with OMB concurrence, may terminate such certification.
    (b) An agency's system certification is terminated automatically 
when OPM withdraws performance appraisal system approval or mandates 
corrective action because of misapplication of the system as authorized 
under Sec.  430.210(c) or Sec.  430.314(c).
    (c) OPM will notify the agency head at least 30 calendar days in 
advance of the termination and the reason(s) for the termination, as 
well as any expected corrective action.
    (d) Upon such termination, and until its system certification is 
reinstated, the agency must--
    (1) Set a senior employee's rate of basic pay under 5 CFR part 534, 
subparts D or E as applicable, at a rate that does not exceed the rate 
for level III of the Executive Schedule.
    (2) Limit aggregate compensation received in a calendar year by a 
senior employee to the rate for level I of the Executive Schedule.
    (e) Performance awards, pay adjustments, and levels of pay in 
effect prior to such termination will remain in effect unless OPM finds 
that any such decision and subsequent action was in violation of law, 
rule, or regulation.
    (f) OPM, with OMB concurrence, may reinstate certification to an 
agency whose certification has been terminated only after the agency 
demonstrates it has taken appropriate corrective action. A restored 
certification will terminate on the same date as the original 
certification. An agency with a terminated certification may choose to 
submit a new certification request once it has corrected the issue(s) 
that led to the termination.
    (g) OPM may reinstate the certification of an appraisal system that 
has been terminated automatically under paragraph (b) of this section 
upon the agency's compliance with the applicable OPM-mandated 
corrective action(s).

PART 534--PAY UNDER OTHER SYSTEMS

0
8. 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 Pub. L. 
110-372, 122 Stat. 4043 (5 U.S.C. 5304, 5307, 5376).

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

0
9. In Sec.  534.403, revise the first sentence of paragraph (b) to read 
as follows:


Sec.  534.403  SES rate range.

* * * * *
    (b) Termination of certification of performance appraisal system. A 
senior executive whose rate of basic pay is higher than the rate for 
level III of the Executive Schedule may not suffer a

[[Page 6348]]

reduction in pay because his or her agency's applicable performance 
appraisal system certification is terminated under 5 CFR 430.410. * * *
0
10. In Sec.  534.404--
0
a. Revise paragraphs (b)(4)(ii) and (b)(4)(iii);
0
b. Revise paragraphs (c)(1) and (c)(4) and add new paragraph (c)(6);
0
c. Revise paragraph (e)(1);
0
d. Revise paragraph (g)(3);
0
e. Revise paragraph (i)(1).
    The revisions and additions to read as follows:


Sec.  534.404  Setting and adjusting pay for senior executives.

* * * * *
    (b) * * *
    (4) * * *
    (ii) A pay increase under paragraph (b)(4)(i) of this section may 
not be provided to a senior executive whose rate of basic pay is at or 
below the rate for level III of the Executive Schedule if such an 
increase would cause the senior executive's rate of basic pay to exceed 
the rate for level III of the Executive Schedule unless the senior 
executive has received an annual summary rating of outstanding for the 
most recently completed appraisal period and the agency head or 
designee who performs the functions described in 5 CFR 430.405(a)(2) 
and (b) (including the Inspector General, where applicable) has 
approved the increase in pay.
    (iii) A pay increase under paragraph (b)(4)(i) of this section may 
not be provided to a senior executive whose rate of basic pay is above 
the rate for level III of the Executive Schedule unless the senior 
executive has received an annual summary rating of outstanding for the 
most recently completed appraisal period and the agency head or 
designee who performs the functions described in 5 CFR 430.405(a)(2) 
and (b) (including the Inspector General, where applicable) has 
approved the increase in pay. However, in the case of a senior 
executive whose rate of basic pay is above the rate for level III of 
the Executive Schedule and who has been rated below outstanding, but 
above fully successful, for the most recently completed appraisal 
period, the agency head or designee who performs the functions 
described in 5 CFR 430.405(a)(2) and (b) (including the Inspector 
General, where applicable) may approve such a pay increase in limited 
circumstances, such as for an exceptionally meritorious accomplishment.
* * * * *
    (c) 12-month rule. (1) An authorized agency official may adjust 
(i.e., increase or reduce) the rate of basic pay of a senior executive 
not more than once during any 12-month period. However, an agency may 
make a determination to provide an additional pay increase under 
certain conditions as prescribed in paragraphs (c)(3), (c)(4), and 
(c)(6) of this section without regard to whether the senior executive 
has received a pay adjustment during the previous 12-month period.
* * * * *
    (4) An authorized agency official may approve increases in a senior 
executive's rate of basic pay more than once during a 12-month period 
if the agency head or designee who performs the functions described in 
5 CFR 430.405(a)(2) and (b) (including the Inspector General, where 
applicable) determines that--
* * * * *
    (6) When necessary to maintain an annual executive appraisal and 
pay adjustment cycle that permits pay adjustments on the first day of 
the 27th full bi-weekly pay period following the effective date of pay 
adjustments for the previous cycle, an authorized agency official may 
provide a pay adjustment to a senior executive not more than 2 days 
before an applicable 12-month period expires. The pay adjustment begins 
a new 12-month period for the purpose of paragraph (c)(1).
* * * * *
    (e) Adjustments in pay after certification of applicable 
performance appraisal system. (1) In the case of an agency that obtains 
certification of a performance appraisal system for senior executives 
under 5 CFR part 430, subpart D, an authorized agency official may 
subsequently increase a covered senior executive's rate of basic pay 
based upon a performance appraisal under the certified system up to the 
rate for level II of the Executive Schedule, consistent with the 
limitations in Sec.  534.403(a)(3), under the conditions prescribed in 
paragraph (b) of this section, if the senior executive is otherwise 
eligible for such an increase (i.e., he or she did not receive a pay 
adjustment under Sec.  534.404(c) during the previous 12-month period). 
An adjustment in pay made under this paragraph is considered a pay 
adjustment for the purpose of applying Sec.  534.404(c).
* * * * *
    (g) * * *
    (3) The designation of the authorized agency official who has 
authority to set and adjust SES rates of pay for individual senior 
executives, subject to the requirement that the agency head or designee 
who performs the functions described in 5 CFR 430.405(a)(2) and (b) 
(including the Inspector General, where applicable) must approve any 
determination to set a senior executive's rate of basic pay higher than 
the rate for level III of the Executive Schedule and must approve any 
determination to increase a senior executive's rate of basic pay more 
than once in any 12-month period; and
* * * * *
    (i) Setting pay following a break in SES service--(1) General. Upon 
reappointment to the SES, an authorized agency official may set the 
rate of basic pay of a former senior executive at any rate within the 
SES rate range, subject to the limitations in Sec.  534.403(a), if 
there has been a break in SES service of more than 30 days. If there 
has been a break in SES service of 30 days or less, the senior 
executive's rate of basic pay may be set at any rate within the SES 
rate range (without regard to whether the employee received a pay 
adjustment during the previous 12-month period), but not higher than 
the senior executive's former SES rate of basic pay. Where there has 
been a break in service of 30 days or less, the agency head or designee 
who performs the functions described in 5 CFR 430.405(a)(2) and (b) 
(including the Inspector General, where applicable) may approve a 
higher rate than the senior executive's former rate of basic pay, if 
warranted. Setting a rate of basic pay upon reappointment to the SES is 
considered a pay adjustment under Sec.  534.404(c).
* * * * *


Sec.  534.503  [Amended].

0
11. Amend Sec.  534.503 as follows:
0
a. Remove the reference ``Sec.  430.405(h)'' from the definition 
``Certified'' and add in its place ``Sec.  430.410'', and remove from 
that definition the term ``suspension'' and add in its place 
``termination'';
0
b. Remove the reference ``Sec.  430.405(h)'' from the definition ``Not 
certified'' and add in its place ``Sec.  430.410'', and remove from 
that definition the term ``suspended'' and add in its place 
``terminated''; and
0
c. Remove the reference ``Sec.  430.404(a)(1) through (9)'' and add in 
its place ``Sec. Sec.  430.404 and 430.405''.
0
12. Amend Sec.  534.505 as follows:
0
a. Remove the reference ``Sec.  430.404(a)(6)(i), (ii) and (iii)'' and 
add in its place ``Sec.  430.405(b)(1), (2) and (3)''; and
0
b. Remove the reference ``Sec.  430.403(d)'' and add in its place 
``Sec.  430.403(e)''.
0
c. Revise paragraph (a)(5) to read as follows:

[[Page 6349]]

Sec.  534.505  Written procedures.

    (a) * * *
    (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 inSec.  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, pay actions 
proposed under Sec.  534.507, and performance awards under Sec.  
451.104(a)(3) 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 and performance 
awards 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 and performance awards for senior 
professionals conform to the requirements of Sec. Sec.  534.507 and 
451.104(a)(3) respectively and appropriately correspond to proposed 
ratings of record and performance ratings.
* * * * *


Sec.  534.506  [Amended].

0
13. Amend Sec.  534.506 to remove the reference ``Sec.  
430.404(a)(6)(i), (ii) and (iii)'' and add in its place ``Sec.  
430.405(b)(1), (2) and (3)''.
0
14. In Sec.  534.507, revise paragraph (a)(2) to read as follows:


Sec.  534.507  Annual increases in basic pay.

    (a) * * *
    (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 no 
later than 14 days after the date specified in paragraph (a)(1) of this 
section.
* * * * *
0
15. In Sec.  534.509, revise paragraph (b) to read as follows:


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

* * * * *
    (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 terminated under Sec.  430.410 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.
* * * * *


Sec.  534.510  [Amended].

0
16. Amend Sec.  534.510 to remove the references ``Sec.  
430.404(a)(6)(i), (ii) and (iii)'' and add in their place ``Sec.  
430.405(b)(1), (2) and (3)'' wherever they occur.

5 CFR Chapter III--Office of Management and Budget

Subchapter C--Joint Regulations With the Office of Personnel 
Management

PART 1330--HUMAN RESOURCES MANAGEMENT

0
17. The authority citation for part 1330 continues to read as follows:

    Authority:  5 U.S.C. chapter 43 and 5307(d).

0
18. Revise Subpart D of part 1330 to to read as follows:

Subparts A--C [Reserved]

Subpart D--Performance Appraisal System Certification
Sec.
1330.401 Purpose.
1330.402 Definitions.
1330.403 System certification.
1330.404 Certification criteria verified by OPM/OMB.
1330.405 Certification criteria verified by the agency.
1330.406 Additional appraisal system requirements.
1330.407 Agency certification requests.
1330.408 OPM certification actions.
1330.409 Annual reporting requirement.
1330.410 Termination of certification.

    Authority:  5 U.S.C. 5307(d).

Subpart D--Performance Appraisal System Certification


Sec.  1330.401  Purpose.

    (a) This subpart implements 5 U.S.C. 5307(d), which provides for 
certification of performance appraisal systems that as designed and 
applied make meaningful distinctions based on relative performance with 
respect to--
    (1) Members of the Senior Executive Service (SES) paid under 5 
U.S.C. 5382 and 5383; and
    (2) Employees in senior-level (SL) and scientific or professional 
(ST) positions paid under 5 U.S.C. 5376.
    (b) The regulations in this subpart strengthen the application of 
performance-based-pay principles to senior employees. Specifically, the 
statutory provisions that these regulations implement authorize an 
agency to apply a higher maximum rate of basic pay in setting and 
adjusting rates of basic pay for senior employees (consistent with 5 
CFR part 534, subparts D and E) and apply a higher annual aggregate 
limitation on pay (consistent with 5 CFR part 530, subpart B) to its 
senior employees, when OPM, with OMB concurrence, has certified that 
the design and application of the agency's appraisal systems for these 
employees make meaningful distinctions based on relative performance. 
This subpart establishes the certification criteria and procedures that 
OPM will apply in considering agency requests for such certification.


Sec.  1330.402  Definitions.

    In this subpart--
    Agency means an agency as that term is defined in 5 U.S.C. 105 and 
an Office of Inspector General, which is considered a separate agency 
for purposes of applying all provisions relating to the Senior 
Executive Service under the Inspector General Act of 1978 (5 U.S.C. App 
6(d)).
    Agency head means the head of an agency and includes the Inspector 
General when applying the provisions of this subpart to Offices of the 
Inspector General.
    Annual summary rating means the overall rating level that an 
appointing authority assigns at the end of the appraisal period as 
defined in Sec.  430.303.
    Appraisal system means the policies, practices, and procedures an 
agency establishes under 5 U.S.C. chapter 43 and 5 CFR part 430, 
subparts B and C, or other applicable legal authority, for planning, 
monitoring, developing, evaluating, and rewarding employee performance. 
This includes appraisal systems and appraisal programs as defined in 
Sec.  430.203 and performance management systems as defined in Sec.  
430.303.
    Certification criteria means the factors used to determine whether 
an agency appraisal system as designed and applied makes meaningful 
distinctions based on relative performance.
    GPRAMA means the Government Performance and Results Modernization 
Act of 2010.
    OMB means the Office of Management and Budget.

[[Page 6350]]

    OPM means the Office of Personnel Management.
    Peer review means the review under Sec.  1330.404(a) of performance 
plans by one agency for another agency, both having fully certified 
performance appraisal systems, to determine whether they meet the 
certification criterion for Aligned Results.
    Performance expectations means--
    (1) the critical elements, performance requirements, and 
performance standards that constitute the senior executive performance 
plans, as defined in Sec.  430.303, established for senior executives;
    (2) the performance elements and standards that constitute the 
performance plans, as defined in Sec.  430.203, established for senior 
professionals; or
    (3) other appropriate means authorized under performance appraisal 
systems not covered by 5 U.S.C. chapter 43 for communicating what a 
senior employee is expected to do and the measures that demonstrate 
success, including contribution to agency performance where 
appropriate.
    Program performance measures means results-oriented measures of 
performance, whether at the agency, component, or function level, which 
include, for example, measures under GPRAMA.
    PRB means Performance Review Board, as described in Sec.  430.311.
    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 as defined in Sec.  430.203.
    Relative performance means the performance of a senior employee 
compared to the performance expectations established for his or her 
position (including contribution to agency performance) and those 
expectations must be set at a level that is sufficiently high to be 
commensurate with the authorities and responsibilities of a senior 
employee in the Federal Government. This does not permit peer ranking 
or peer comparison for rating purposes.
    Senior employee means a senior executive or a senior professional.
    Senior executive means a member of the Senior Executive Service 
(SES) paid under 5 U.S.C. 5382 and 5383.
    Senior professional means an employee in a senior-level (SL) or 
scientific or professional position (ST) paid under 5 U.S.C. 5376.
    SPRP means Senior Professional Review Panel as described in Sec.  
534.505(a)(5).


Sec.  1330.403  System certification.

    (a) OPM, with OMB concurrence, will certify an agency appraisal 
system under Sec.  1330.408 when a review of that system's design 
(i.e., system documentation), implementation (i.e., performance plans), 
and application (i.e., pay, performance awards, and ratings upon which 
they are based) reveals that the agency meets the certification 
criteria established in Sec. Sec.  1330.404 and 1330.405 and has 
followed the procedural requirements set forth in Sec.  1330.407, and 
results in a finding that the system as designed and applied makes 
meaningful distinctions based on relative performance and otherwise 
conforms to statutory and regulatory requirements relating to 
performance appraisal, pay, and awards.
    (b) Each certification granted shall cover a specific period of 
time and is not renewable.
    (c) Agencies subject to 5 U.S.C. chapter 43 and 5 CFR part 430 
seeking certification of their appraisal systems must submit systems 
that have been approved by OPM under Sec.  430.210 or Sec.  430.314, as 
applicable.
    (d) Agencies not subject to the appraisal provisions of 5 U.S.C. 
chapter 43 and 5 CFR part 430 seeking certification of their appraisal 
system(s) under this subpart must submit appropriate documentation to 
demonstrate that each system complies with the appropriate legal 
authority that governs the establishment, implementation, and 
application of that system.
    (e) For senior professionals, an agency must establish an appraisal 
system(s), as defined in Sec.  1330.402, that meets the requirements of 
5 CFR part 430, subpart B, and is separate from the system(s) 
established to cover its SES members under 5 CFR part 430, subpart C. 
At its discretion, an agency may include system features in its senior 
professional appraisal system(s) that are the same as, or similar to, 
the features of its SES appraisal system(s), as appropriate. For the 
purpose of certification under this subpart, such senior professional 
appraisal system(s) with 10 or more senior professionals covered by the 
system(s), must include a requirement for centralized review of senior 
professionals' ratings of record and proposed pay and performance 
awards actions.


Sec.  1330.404  Certification criteria verified by OPM/OMB.

    To be certified, an agency's applicable appraisal system(s) for 
senior executives or senior professionals must meet the following 
certification criteria, as verified by OPM, with OMB concurrence:
    (a) Aligned results. (1) Performance expectations for individual 
senior employees must derive from, and clearly align with, the agency's 
mission and organizational goals, such as those communicated through 
GPRAMA strategic goals, program and policy objectives, and/or annual 
performance plans and budget priorities.
    (2) Performance plans must contain performance expectations, 
including at least one critical element focusing on business results, 
that--
    (i) Apply to their respective areas of responsibility and control;
    (ii) Reflect expected agency and/or organizational outcomes and 
outputs, performance targets or metrics, policy/program objectives, 
and/or milestones;
    (iii) Identify specific programmatic crosscutting, external, and 
partnership-oriented goals or objectives, as applicable; and
    (iv) Are stated in terms of observable, measurable, and/or 
demonstrable performance (e.g., quality, quantity, timeliness, or cost 
effectiveness, as applicable).
    (3) OPM may establish additional procedures to allow agencies to 
conduct peer reviews of the performance plans to determine whether the 
plans meet this criterion. When conducting peer review, agencies may 
not conduct concurrent reciprocal reviews.
    (b) Performance distinctions. (1) Appraisal systems must include 
summary levels of performance as described in 5 CFR 430.305(a)(6) for 
senior executives, and for senior professionals at least one summary 
level of performance above fully successful.
    (2) Agency application of performance appraisal systems must--
    (i) Result in meaningful distinctions based on relative 
performance; and
    (ii) Take into account the assessment of the agency's performance 
against relevant program performance measures, as described in Sec.  
1330.405(a), employee performance expectations, and such other relevant 
factors as may be appropriate.
    (3) Authorized agency officials, as designated through agency 
delegated authority, must appraise senior employee performance 
accurately and realistically so that senior employees who have 
demonstrated the highest performance and/or exceptional contribution to 
the agency's performance receive the highest annual summary ratings or 
ratings of record, as applicable.
    (4) Agencies with equivalent appraisal systems not otherwise 
subject to this part must provide for clearly

[[Page 6351]]

distinguishing and identifying the rating that reflects the highest 
level of performance.
    (5) Agencies may not equate the requirement to make distinctions 
based on relative performance to permitting a forced distribution of 
annual summary ratings or ratings of record, which is prohibited under 
Sec. Sec.  430.208(c) and 430.305(a)(5). However, methods used to make 
distinctions among employees or groups of employees such as comparing, 
categorizing, and ranking employees or groups on the basis of their 
performance may be used for purposes other than assigning a summary 
level including, but not limited to, award determinations.
    (c) Pay differentiation. (1) Agencies must ensure senior employees 
who have demonstrated the highest performance receive the highest 
annual summary ratings or ratings of record, as applicable, and the 
largest corresponding performance awards, pay adjustments, and rates of 
pay, in accordance with applicable limitations;
    (2) Agencies must ensure differentiation is evident separately in 
the pay adjustments, performance awards, and rates of pay;
    (3) Agencies must ensure they make pay adjustments and performance 
awards for senior employees in a timely manner.
    (i) For senior executives, the pay adjustments authorized under 5 
CFR 534.404(b)(3) and the performance awards authorized under 5 U.S.C. 
5384 must have effective dates not later than 5 months after the end of 
the applicable appraisal period;
    (ii) For senior professionals, agencies must make pay adjustments 
in accordance with the requirements in Sec.  534.505(b) and pay 
performance awards as soon as practicable after the end of the 
appraisal period; and
    (4) Agencies must develop processes for making pay decisions and 
granting awards affecting senior employees that comply with 
Governmentwide law, regulation, and guidance. To make these processes 
transparent agencies must provide access to the appraisal and pay 
policies that govern the decisions and communicate the results as 
required in Sec.  1330.405(c).


Sec.  1330.405  Certification criteria verified by the agency.

    To be certified, an agency's applicable appraisal system(s) for 
senior executives or senior professionals must meet the following 
certification criteria, as verified by the agency in accordance with 
instructions provided by OPM:
    (a) Organizational assessment and guidelines. Agencies must comply 
with all applicable OMB requirements for assessing organizational 
performance and may use those assessments to inform the individual 
ratings of its senior employees. The results of these assessments are 
shared with individuals involved in the rating process through the 
issuance of guidelines based at least in part upon those assessments. 
The guidelines must--
    (1) Address agency performance overall and with respect to each of 
its particular missions, components, programs, policy areas, and 
support functions--such as reports of the agency's GPRAMA goals, annual 
performance plans and targets, program performance measures, and other 
appropriate indicators;
    (2) Be communicated by the agency head, or an individual 
specifically designated by the agency head for such purpose, to 
affected senior employees, their rating and reviewing officials, and 
PRB and SPRP members;
    (3) Be provided at the conclusion of the appraisal period but 
before individual senior employee performance ratings are recommended, 
so that they inform individual performance appraisals; and
    (4) Not take the form of quantitative limitations on the number of 
ratings at any given rating level.
    (b) Oversight. The agency head or the individual specifically 
designated under paragraph (a)(2) of this section must certify for a 
particular senior employee appraisal system that--
    (1) The senior employee rating process makes meaningful 
distinctions based on relative performance;
    (2) The results of the senior employee appraisal process take into 
account the agency's assessment of its performance against program 
performance measures, as well as other relevant considerations, as 
appropriate;
    (3) Performance awards, pay adjustments, and levels of pay based on 
the results of the rating process accurately reflect and recognize 
distinctions in individual performance and/or contribution to the 
agency's performance; and
    (4) Final decisions include PRB or SPRP recommendations regarding 
senior employee ratings and must--
    (i) Be consistent with 5 CFR part 430, subparts B and C; and
    (ii) Appropriately reflect the employee's performance expectations, 
relevant program performance measures, and such other relevant factors 
as the PRB or SPRP may find appropriate.
    (c) Communication of results. Agencies must communicate annually to 
senior employees, rating and reviewing officials, and PRB or SPRP 
members the results of the application of the appraisal process (i.e., 
overall ratings distributions, average adjustment in the rate of basic 
pay for each rating level, and average performance award for each 
rating level, as applicable) while assuring confidentiality of 
protected information.


Sec.  1330.406  Additional appraisal system requirements.

    To be certified, an agency's appraisal system must meet the 
requirements of 5 CFR part 430, subparts B or C, as applicable, or 
other applicable legal authority. Agencies are responsible for ensuring 
their senior employee appraisal systems provide for--
    (a) Consultation. Performance expectations for senior employees 
must be developed with the input and involvement of the senior 
employees who are covered thereby;
    (b) Balance. Performance expectations established in the individual 
senior employee appraisal plan must include two parts:
    (1) Expected results; and
    (2) Those technical, leadership and/or managerial competencies or 
behaviors that contribute to, and are necessary to distinguish, levels 
of performance. In addition, for senior employees in supervisory 
positions, their performance expectations also must address appropriate 
measures or indicators of stakeholder and/or employee perspective when 
applicable, such that stakeholder/employee feedback is sought and used 
to inform decisions.
    (c) Accountability for the performance management of subordinates. 
The performance expectations for individual senior employees in 
supervisory positions must clearly communicate their responsibility for 
ensuring--
    (1) The performance expectations for individual subordinate 
employees clearly link to organizational mission, GPRAMA strategic 
goals, or other program or policy objectives; and
    (2) The appraisal of their subordinate employees is based on 
established performance expectations that differentiate among the 
various levels of performance. An appraisal must be a realistic 
assessment of the employees' actual performance, including their 
contribution to organizational goals as measured in GPRAMA and other 
organizational plans.
    (d) Training. Agencies must provide senior employees, rating and 
reviewing officials (including those in other services/appointments 
such as political appointments, Foreign Service, military, etc.), and 
PRB or SPRP members initial training, periodic refresher training, and

[[Page 6352]]

annual reminders on the operation of the applicable agency performance 
management and pay and awards policies.


Sec.  1330.407  Agency certification requests.

    To receive system certification, an agency must provide 
documentation demonstrating that its appraisal system(s), in design, 
implementation, and application, meet the certification criteria in 
Sec. Sec.  1330.404 and 1330.405 as well as the procedural requirements 
set forth in this section.
    (a) In order for an agency's appraisal system to be certified, the 
agency head or designee must submit documentation in accordance with 
OPM instructions, including--
    (1) A written request, which may include signed electronic formats, 
for certification of its appraisal system(s) to the Director of OPM, or 
an OPM official assigned to accept certification requests;
    (2) Separate certification requests for systems applying to senior 
executives, senior professionals, and Offices of the Inspector General;
    (3) A full description of the appraisal system(s) to be certified, 
including--
    (i) Organizational and employee coverage information; and
    (ii) Rating levels as described in Sec.  1330.404(b)(1) and (4) 
that establish clear distinctions between levels of performance so 
senior employees receive ratings based on assessments of their actual 
performance relative to their established performance expectations in 
any given appraisal period;
    (4) A sample of senior employee performance plans as specified by 
OPM, except as provided in paragraph (b) of this section;
    (5) Documentation of organizational performance results and an 
explanation of how these results support the rating distribution in 
accordance with OPM instructions;
    (6) Data required by the annual reporting requirement in Sec.  
1330.409;
    (7) Documentation of the pay policy and procedures for setting and 
adjusting pay and granting performance awards that includes--
    (i) For the agency's senior executives covered by 5 CFR part 534, 
subpart D, the plan for setting and adjusting the rate of basic pay 
described in Sec.  534.404(g);
    (ii) For the agency's senior professionals covered by 5 CFR part 
534, subpart E, the written procedures for setting and adjusting the 
rate of basic pay described in Sec.  534.505; and
    (iii) Policies established for award programs authorized under 
Sec.  534.405 or responsibilities identified in Sec.  451.106, as 
appropriate; and
    (8) Any additional information that OPM and OMB may require to make 
a determination regarding certification.
    (b) Agencies that participate in a peer review under Sec.  
1330.404(a) must submit such documentation as OPM requires.


Sec.  1330.408  OPM certification actions.

    OPM will certify performance appraisal systems, with OMB 
concurrence, only for those agencies that comply with all related laws 
and regulations.
    (a) Granting certification. At the request of an agency head or 
designee, the Director of OPM, at his or her discretion and in 
accordance with the requirements of this subpart and with OMB 
concurrence, may--
    (1) Grant full certification, which covers a period of 24 months, 
of an agency's senior employee appraisal system(s) when the agency 
has--
    (i) Demonstrated in the initial submission of its documentation, 
and without making any revisions directed by OPM, that it has designed 
and fully operationalized the certification criteria defined in 
Sec. Sec.  1330.404 and1330.405;
    (ii) Met the documentation requirements in Sec.  1330.407; and
    (iii) Demonstrated appropriate system application through the data 
reports required in Sec.  1330.409 based on the 2 most recently 
completed performance cycles (2 years of data).
    (2) Grant provisional certification, which covers a period of 12 
months, of an agency's senior employee appraisal system(s) when the 
agency has--
    (i) Designed a senior employee appraisal system(s) that meets the 
certification criteria in Sec. Sec.  1330.404 and 1330.405; and
    (ii) Revised one or more senior employee performance plans in 
accordance with instructions from OPM in order to meet the 
certification requirements in Sec.  1330.404(a); or
    (iii) Demonstrated appropriate system application through the data 
reports required in Sec.  1330.409 based on only the most recently 
completed performance cycle (1 year of data).
    (3) Grant provisional certification to an agency more than once.
    (b) Extending certification. (1) Consistent with the requirements 
of this subpart, the Director of OPM, at his or her discretion or upon 
the request of an agency head or designee, may grant a single extension 
of up to six additional months for an agency's appraisal system 
certification. The discretionary use of the Director's extension 
authority will be reserved for rare, exceptional circumstances.
    (2) When requesting an extension, the agency head or designee must 
submit a written request, which may include signed electronic formats, 
to OPM outlining why the agency needs the extension and how the 
extension will support effective performance management. OPM will 
consider requests for extensions on a case-by-case basis.


Sec.  1330.409  Annual reporting requirement.

    Agencies must provide OPM with the annual summary ratings or 
ratings of record, as applicable, and rates of basic pay, pay 
adjustments, and performance and cash awards for their senior employees 
in accordance with instructions for OPM's annual data call and at any 
other time as needed to support a certification request.


Sec.  1330.410  Termination of certification.

    (a) Any time OPM determines that an agency's certified appraisal 
system is no longer in compliance with certification criteria, OPM, 
with OMB concurrence, may terminate such certification.
    (b) An agency's system certification is terminated automatically 
when OPM withdraws performance appraisal system approval or mandates 
corrective action because of misapplication of the system as authorized 
under Sec.  430.210(c) or Sec.  430.314(c).
    (c) OPM will notify the agency head at least 30 calendar days in 
advance of the termination and the reason(s) for the termination, as 
well as any expected corrective action.
    (d) Upon such termination, and until its system certification is 
reinstated, the agency must--
    (1) Set a senior employee's rate of basic pay under 5 CFR part 534, 
subparts D or E as applicable, at a rate that does not exceed the rate 
for level III of the Executive Schedule.
    (2) Limit aggregate compensation received in a calendar year by a 
senior employee to the rate for level I of the Executive Schedule.
    (e) Performance awards, pay adjustments, and levels of pay in 
effect prior to such termination will remain in effect unless OPM finds 
that any such decision and subsequent action was in violation of law, 
rule, or regulation.
    (f) OPM, with OMB concurrence, may reinstate certification to an 
agency whose certification has been terminated only after the agency 
demonstrates it has taken appropriate corrective action. A restored 
certification will terminate on the same date as the original 
certification. An agency with a terminated certification may choose to 
submit a new certification request once it has corrected the issue(s) 
that led to the termination.

[[Page 6353]]

    (g) OPM may reinstate the certification of an appraisal system that 
has been terminated automatically under paragraph (b) of this section 
upon the agency's compliance with the applicable OPM-mandated 
corrective action(s).

[FR Doc. 2017-01326 Filed 1-18-17; 8:45 am]
 BILLING CODE 6325-39-P