[Federal Register Volume 76, Number 215 (Monday, November 7, 2011)]
[Rules and Regulations]
[Pages 68631-68634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28742]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 76, No. 215 / Monday, November 7, 2011 /
Rules and Regulations
[[Page 68631]]
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Parts 530, 531, and 536
RIN 3206-AM43
Pay in Nonforeign Areas
AGENCY: U.S. Office of Personnel Management.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Office of Personnel Management (OPM) is issuing final
regulations on certain pay administration rules dealing with employees
in nonforeign areas outside the 48 contiguous States. We are revising
provisions related to special rates, locality rates, and retained
rates. Some of the revisions are necessary to address the effects of
implementing the Non-Foreign Area Retirement Equity Assurance Act of
2009, while others are to improve the administration of special rates.
DATES: Effective Date: December 7, 2011.
FOR FURTHER INFORMATION CONTACT: Carey Jones by telephone at (202) 606-
2858; by fax at (202) 606-0824; or by email at [email protected].
SUPPLEMENTARY INFORMATION: On August 1, 2011, the U.S. Office of
Personnel Management (OPM) published proposed regulations (76 FR 45710)
to revise certain pay administration rules for employees in
``nonforeign areas,'' which include Alaska, Hawaii, Guam, Puerto Rico,
the Virgin Islands, and certain other areas listed in 5 CFR 591.205.
Some of the revisions are necessary to address the effects of
implementing the Non-Foreign Area Retirement Equity Assurance Act of
2009 (NAREAA), as contained in subtitle B of title XIX of the National
Defense Authorization Act for Fiscal Year 2010 (Pub. L. 111-84, October
28, 2009), while others are to improve the administration of special
rates.
The 45-day comment period ended on September 15, 2011. During the
comment period, we received comments from three Senators, one agency,
and six individuals. This supplementary information addresses the
comments we received. The agency concurred with OPM's proposed changes
as written.
Special Rates
In the supplementary information accompanying the proposed
regulations, we stated that certain provisions of NAREAA required
additional increases in special rate schedules to levels beyond what
may be justified to prevent significant recruitment or retention
difficulties. We stated that, accordingly, OPM may consider reducing
special rate schedules in nonforeign areas. We proposed to provide OPM
with discretionary authority to establish a separate special rate
schedule that temporarily maintains the higher special rates for
current employees covered by a given special rate schedule before the
effective date of the schedule reduction. This means that future hires
would be covered by a lower special rate schedule established
consistent with labor market conditions while current employees would
have ``grandfather'' coverage under a higher special rate schedule that
would provide pay protection, but would be phased out over time.
The Senators and one individual were concerned about the proposal.
Specifically, the individual does not want OPM to phase out any special
rates. The Senators were concerned that OPM has decided to eliminate
additional adjustments for special rate employees and by the suggestion
that the adjusted rates may be higher than justified without supporting
analysis. The Senators were also concerned that the proposal could lead
to losses in take-home pay if cost-of-living allowance (COLA)
reductions are not adequately considered and the phase-out is done too
quickly. (As locality pay increases, payable COLA rates must be reduced
as specified in section 1912(b) of NAREAA. As a consequence, covered
employees may receive both locality pay and a reduced COLA for a number
of years, until the applicable COLA rate is reduced to zero.) They
stated that pay reductions could impair agencies' recruitment and
retention efforts and recommended that any decreases in special rates
be done gradually in order to protect pay.
During the January 2010-January 2012 transition period, additional
adjustments are being added to the original special rates to compensate
for COLA reductions, as required by NAREAA. The original special rates
without the NAREAA additional adjustments were set at levels necessary
to address recruitment and/or retention difficulties. We note that most
of the special rate schedules established in nonforeign areas were
derived from nationwide or worldwide schedules for which the special
rates were set without consideration of the fact that employees in the
nonforeign areas would receive COLA on top of special rates. Thus, the
total pay rates may have been beyond what was necessary to prevent
significant recruitment or retention problems in the nonforeign areas.
Accordingly, as part of the annual review of special rates, we have
asked agencies to conduct reviews to determine whether they need the
special rates set at a level above the original special rates, taking
into consideration the remaining COLA that will be paid on top of the
special rates. See CPM 2011-11, issued July 8, 2011, at http://www.chcoc.gov/Transmittals/TransmittalDetails.aspx?TransmittalID=3995.
An agency finding that reducing a special rate schedule would cause
significant recruitment or retention problems would merit special
consideration by OPM and may result in no schedule reduction.
OPM has not yet determined how it will adjust special rates for
employees in nonforeign areas after January 1, 2012, because we are
waiting for agencies to complete their reviews of special rates that
apply to their employees. OPM will announce its decisions resulting
from the annual review of special rates in a memorandum that is
typically issued in December. Under 5 U.S.C. 1103(b)(4), the Director
of OPM is not required to publish in the Federal Register a notice of
the establishment or adjustment of any schedules or rates of basic pay
or allowances under subpart D of part III of title 5.
OPM is adopting as final the proposed change providing the
discretionary authority to establish a separate special rate schedule
that temporarily maintains
[[Page 68632]]
the higher special rates for employees covered by the given special
rate schedule before the effective date of the schedule reduction. This
is an authority OPM may or may not exercise based on agency input and
the circumstances and factors OPM considers in evaluating the need for
special rates in 5 CFR 530.304(b) and 530.306.
OPM is also adopting the proposal to add locality pay and
nonforeign COLA as circumstances and factors OPM may consider in
evaluating the need for special rates. This means that OPM can take
into account any COLA reductions or locality pay increases as it is
determining how to adjust special rate schedules in nonforeign areas.
Locality Rates
Another individual requested that OPM's regulations provide
locality pay for employees in foreign areas. OPM does not have the
authority to provide locality pay for employees in foreign areas
because 5 U.S.C. 5304(f) does not cover foreign areas.
Retained Rates
A third individual was concerned that there is no provision in
NAREAA allowing non-appropriated fund (NAF) employees covered by NAREAA
to receive a rate exceeding the maximum of the NAF pay band. The
individual asked OPM to address NAF pay issues in the regulations.
These regulations do not address NAF pay issues because OPM has the
authority to regulate pay setting only for NAF employees who move to
the General Schedule. We note that, under section 1918(b) of NAREAA,
administrators of pay systems not administered by OPM must carry out
the provisions of NAREAA consistent with OPM rules, subject to the
concurrence of OPM. Thus, if there are nonforeign area employees in the
NAF pay system who are covered by NAREAA and who are receiving a
retained rate similar to a retained rate under 5 U.S.C. 5363, then the
NAF pay system administrator should prescribe rules consistent with
OPM's regulations on retained rates.
On December 27, 2010, OPM issued a memorandum (CPM 2010-23) that
provided a special (more generous) rule for adjusting retained rates
under 5 U.S.C. 5363 for employees in nonforeign areas receiving COLAs
during the January 2010-January 2012 transition period. Without the
special rule, some retained rate employees may have experienced a
reduction in gross pay during the transition period because the
increase in pay resulting from a retained rate adjustment may have been
less than the loss in pay resulting from the COLA reduction. OPM stated
in the supplementary information accompanying the proposed regulations
that OPM was not proposing to continue the special rule after the
transition period. OPM explained that a continuing exception to the
statutory retained rate adjustment rule would not be appropriate. The
NAREAA section 1918(a)(2) authority under which OPM established the
special retained rate adjustment rule applies only during the
transition period, when locality pay is being increased by significant
amounts and there are corresponding large reductions in COLA payments.
The Senators and an individual recommended that OPM continue the
special retained rate adjustment rule beyond the transition period. The
Senators believed that the rule was consistent with Congressional
intent to protect employees' pay. They cited the sense of Congress in
section 1915(a) of NAREAA, which states: ``It is the sense of Congress
that the application of this subtitle to any employee should not result
in a decrease in the take home pay of that employee.'' The Senators
further maintained that there is no basis for distinguishing between
the transition period and the post-transition period in terms of
providing employee pay protection.
While a sense of Congress does not have the effect of law, OPM has
recognized that it is an expression of the general intent of Congress.
OPM has taken this intent into account in implementing NAREAA, while
complying with the requirements of NAREAA and other applicable law.
In NAREAA, Congress did provide for special treatment during the
transition period. For example, section 1918(a)(2) gave OPM authority
to enact special rules governing the adjustment of pay rates during the
transition period for certain employees (including retained rate
employees). Also, section 1915(b)(1) established special rules
governing the adjustment of special rates during the transition period.
The transition period is distinguishable from the post-transition
period because locality pay is being phased in by providing large
increases each year equal to one-third of the applicable locality rate,
which results in correspondingly large reductions in COLA payments.
This was the basis for Congress enacting special authorities for the
transition period.
Since certain NAREAA provisions are applicable only to the
transition period, OPM understands that the law generally intended a
return to the normal pay rules after the transition period, absent a
specific NAREAA provision providing otherwise. For example, OPM expects
to apply the normal provisions of its special rates authority in 5
U.S.C. 5305 in making determinations regarding the adjustment of
special rates after January 1, 2012, rather than rely on the formula in
NAREAA section 1915(b). Likewise, OPM expects to follow the normal
retained rate adjustment rules in 5 U.S.C. 5363 after the transition
period. Any reduction in take-home pay would not be attributable to the
application of NAREAA, but to the application of the regular pay laws.
We note that the idea of protecting take-home pay has always been
problematic, since take-home pay for each individual is affected by
various deductions, some of which can be controlled by the employee and
some of which have nothing to do with the application of NAREAA. Also,
a focus on take-home pay fails to take into account the benefits of
replacing COLA with basic pay. Basic pay is used to compute retirement
annuities, Government contributions towards Thrift Savings Plan
accounts, life insurance benefits, and other payments and benefits.
When OPM established a more generous retained rate adjustment rule
during the NAREAA transition period, it did so because analysis showed
that the large reductions in COLA payments during the transition period
could result in a significant reduction in a retained rate employee's
gross total pay. Our analysis shows that such reductions will not occur
when locality pay increases and corresponding COLA reductions are more
modest. That difference does provide a basis for treating the
transition period differently than the post-transition period.
It is important to remember that employees receiving a retained
rate are, by definition, being paid above the regular salary range for
their position. That salary range, including the maximum rate of the
range that is the eventual target salary for the retained rate
employee, is receiving the full pay adjustments. By design, retained
rate employees receive lesser increases so that they can fall back into
the normal salary range over time and be paid appropriately for their
position.
The three Senators recommended that OPM use the authority in NAREAA
section 1918(a)(3) to establish a more generous retained rate
adjustment rule for the post-transition period. Section 1918(a)(3)
provides that OPM may establish ``rules governing the establishment and
adjustment of saved or retained rates for any employee whose rate of
pay exceeds applicable pay limitations on the first day of the
[[Page 68633]]
first pay period beginning on or after January 1, 2012'' (i.e., the
last day of the transition period). However, this authority may be
applied only to those whose rate of pay exceeds applicable pay
limitations ``on'' the last day of the transition period. The
regulations proposed by OPM would use this authority for two closed
sets of ``grandfathered'' employees to (1) Waive the normal cap on
retained rates of level IV of the Executive Schedule (EX-IV) for
nonforeign area employees with a retained rate in excess of that cap at
the end of the transition period and (2) allow temporary and term
employees to have a retained rate established at the end of the
transition period or afterwards. While we could perhaps use the section
1918(a)(3) authority to establish a more generous retained rate
adjustment rule for employees who have a retained rate at the end of
the transition period, we do not believe we could use this authority to
apply that more generous rule to nonforeign area employees whose
retained rate is created at a later date or who move to the nonforeign
area at a later date with a retained rate. Thus, agencies would be
required to apply a different retained rate adjustment rule to
different categories of nonforeign area employees, which would raise
equity concerns and pose significant administrative problems. The more
generous retained rate adjustment rule for a limited category of
employees would be in place until COLA was entirely eliminated, which
may be many years away. We do not believe that NAREAA requires OPM to
depart from the normal statutory retained rate adjustment rule for
years after the transition period has ended.
As indicated by our responses above, we are not using the authority
in NAREAA section 1918(a)(3) to adopt a more generous retained rate
adjustment rule for certain grandfathered employees at this time;
however, we will study and analyze this issue further. For General
Schedule employees, OPM will use the more generous retained rate
adjustment rule on January 1, 2012. The next possible application of
the retained rate adjustment rule after January 2012 will be in January
2013 under current law. That gives us some time to further consider
this matter.
The Senators and an individual supported OPM's proposed rule change
to 5 CFR 536.310 to lift the EX-IV pay cap for employees who are
receiving special rates in excess of the rate for EX-IV on January 1,
2012, that are converted to retained rates consistent with section 1913
of NAREAA. It has come to our attention that the exception to the level
IV cap should apply to other employees. In the memorandum announcing
the special retained rate adjustment rule to be used during the
transition period, OPM stated ``the Executive Schedule level IV cap on
retained rates under 5 CFR 536.306(a) does not apply to a retained rate
adjusted under this special authority.'' Therefore, we are revising 5
CFR 536.310(a) to provide that a nonforeign area employee who is
receiving a retained rate in excess of EX-IV on January 1, 2012,
consistent with NAREAA, may continue to receive this rate until the
retained rate becomes equal to or falls below the rate for EX- IV, or
the employee ceases to be entitled to pay retention under Sec.
536.308. This includes employees who are receiving special rates in
excess of EX-IV on January 1, 2012, that are converted to retained
rates consistent with section 1913 of NAREAA.
Biweekly Premium Pay Cap
Another individual was concerned about nonforeign area employees
whose pay is limited by the biweekly cap on premium pay under 5 U.S.C.
5547(a) and 5 CFR 550.105. Specifically, the individual states that
such employees who are receiving law enforcement availability pay
(LEAP) under 5 U.S.C. 5545a have experienced reductions in total pay
because, as the employee's locality pay increases and COLA decreases
under NAREAA, the employee's LEAP is reduced so that the sum of the
employee's basic pay and premium pay does not exceed the biweekly cap
on premium pay. (COLA is not subject to the biweekly premium pay cap
while locality pay is subject to the biweekly premium pay cap.) The
individual requests that OPM use the authority in section 1918(a)(3) of
NAREAA to issue regulations preventing employees subject to the
biweekly premium pay limitation in nonforeign areas from experiencing
reductions in total pay.
We are not adopting this recommendation. Section 1918(a)(3)
provides OPM the authority to prescribe rules governing the
establishment and adjustment of saved or retained rates for any
employee whose rate of pay exceeds applicable pay limitations on the
first day of the first pay period beginning on or after January 1,
2012. The authority is intended to apply to nonforeign area employees
who have a rate in excess of applicable pay limitations on the last day
of the transition period and who will have a saved or retained rate.
That does not fit the premium pay situations cited by the commenter.
There is no authority to prevent premium pay from being reduced as a
result of the biweekly cap on premium pay. Any reduction is due to
application of the longstanding premium pay cap law, not the
application of NAREAA. We note that employees whose official worksites
are within the continental United States may also experience reductions
in their premium pay as a result of the biweekly premium pay cap when
their locality pay increases.
Executive Order 13563 and Executive Order 12866
The Office of Management and Budget has reviewed this rule in
accordance with E.O. 13563 and E.O. 12866.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because they
will apply only to Federal agencies and employees.
List of Subjects in 5 CFR Parts 530, 531 and 536
Administrative practice and procedure, Freedom of information,
Government employees, Law enforcement officers, Reporting and
recordkeeping requirements, Wages.
U.S. Office of Personnel Management.
John Berry,
Director.
Accordingly, OPM is amending 5 CFR parts 530, 531, and 536 as
follows:
PART 530--PAY RATES AND SYSTEMS (GENERAL)
0
1. Revise the authority citation for part 530 to read as follows:
Authority: 5 U.S.C. 5305 and 5307; subpart C also issued under
5 U.S.C. 5338, sec. 4 of the Performance Management and Recognition
System Termination Act of 1993 (Pub. L. 103-89), 107 Stat. 981, and
sec. 1918 of Public Law 111-84, 123 Stat. 2619.
Subpart C--Special Rate Schedules for Recruitment and Retention
0
2. In Sec. 530.304--
0
a. Remove ``or'' at the end of paragraph (b)(3);
0
b. Redesignate paragraph (b)(4) as (b)(6);
0
c. Add new paragraphs (b)(4) and (b)(5);
0
d. Revise paragraph (c); and
0
e. Add a new paragraph (e).
The revisions and additions read as follows:
Sec. 530.304 Establishing or increasing special rates.
* * * * *
(b) * * *
(4) Locality pay authorized under 5 U.S.C. 5304 for the area
involved;
[[Page 68634]]
(5) A nonforeign area cost-of-living allowance authorized under 5
U.S.C. 5941(a)(1) for the area involved; or
* * * * *
(c) In setting the level of special rates within a rate range for a
category of employees, OPM will compute the special rate supplement by
adding a fixed dollar amount or a fixed percentage to all GS rates
within that range, except that an alternate method may be used--
(1) For grades GS-1 and GS-2, where within-grade increases vary
throughout the range; and
(2) In the nonforeign areas listed in 5 CFR 591.205 for special
rate schedules established before January 1, 2012.
* * * * *
(e) Using its authority in section 1918(a)(1) of the Non-Foreign
Area Retirement Equity Assurance Act of 2009 in combination with its
authority under 5 U.S.C. 5305, OPM may establish a separate special
rate schedule for a category of employees who are in GS positions
covered by a nonforeign area special rate schedule in effect on January
1, 2012, and who are employed in a nonforeign area before an OPM-
specified effective date. Such a separate schedule may be established
if the existing special rate schedule is being reduced. An employee's
coverage under the separate special rate schedule is contingent on the
employee being continuously employed in a covered GS position in the
nonforeign area after the OPM-specified effective date. Such a separate
special rate schedule must be designed to provide temporary pay
protection and be phased out over time until all affected employees are
covered under the pay schedule that would otherwise apply to the
category of employees in question.
0
3. In Sec. 530.306--
0
a. Remove ``and'' at the end of paragraph (a)(8);
0
b. Remove the period at the end of paragraph (a)(9) and add ``; and''
in its place; and
0
c. Add a new paragraph (a)(10) to read as follows:
Sec. 530.306 Evaluating agency requests for new or increased special
rates.
(a) * * *
(10) The level of any locality pay authorized under 5 U.S.C. 5304
and any nonforeign area cost-of-living allowance authorized under 5
U.S.C. 5941(a)(1) for the area involved.
* * * * *
0
4. In Sec. 530.308--
0
a. Revise paragraph (a);
0
b. Remove paragraph (b); and
0
c. Redesignate paragraphs (c) and (d) as paragraphs (b) and (c),
respectively.
The revision reads as follows:
Sec. 530.308 Treatment of special rate as basic pay.
* * * * *
(a) The purposes for which a locality rate is considered to be a
rate of basic pay in computing other payments or benefits to the extent
provided by 5 CFR 531.610, except as otherwise provided in paragraphs
(b) and (c) of this section;
* * * * *
PART 531--PAY UNDER THE GENERAL SCHEDULE
0
5. Revise the authority citation for part 531 to read as follows:
Authority: 5 U.S.C. 5115, 5307, and 5338; sec. 4 of Public Law
103-89, 107 Stat. 981; and E.O. 12748, 56 FR 4521, 3 CFR, 1991
Comp., p. 316; Subpart B also issued under 5 U.S.C. 5303(g), 5305,
5333, 5334(a) and (b), and 7701(b)(2); Subpart D also issued under 5
U.S.C. 5335 and 7701(b)(2); Subpart E also issued under 5 U.S.C.
5336; Subpart F also issued under 5 U.S.C. 5304, 5305, and 5941(a);
E.O. 12883, 58 FR 63281, 3 CFR, 1993 Comp., p. 682; and E.O. 13106,
63 FR 68151, 3 CFR, 1998 Comp., p. 224.
Subpart F--Locality-Based Comparability Payment
0
6. In Sec. 531.610, revise paragraph (g) to read as follows:
Sec. 531.610 Treatment of locality rate as basic pay.
* * * * *
(g) Nonforeign area cost-of-living allowances and post
differentials under 5 U.S.C. 5941 and 5 CFR part 591, subpart B;
* * * * *
PART 536--GRADE AND PAY RETENTION
0
7. Revise the authority citation for part 536 to read as follows:
Authority: 5 U.S.C. 5361-5366; sec. 4 of the Performance
Management and Recognition System Termination Act of 1993 (Pub. L.
103-89), 107 Stat. 981; Sec. 536.301(b) also issued under 5 U.S.C.
5334(b); Sec. 536.308 also issued under sec. 301(d)(2) of the
Federal Workforce Flexibility Act of 2004 (Pub. L. 108-411), 118
Stat. 2305; Sec. 536.310 also issued under sections 1913 and 1918
of the Non-Foreign Area Retirement Equity Assurance Act of 2009
(subtitle B of title XIX of Pub. L.111-84), 123 Stat. 2619; Sec.
536.405 also issued under 5 U.S.C. 552, Freedom of Information Act,
Public Law 92-502.
Subpart C--Pay Retention
0
8. Add a new Sec. 536.310 to read as follows:
Sec. 536.310 Exceptions for certain employees in nonforeign areas.
(a) Notwithstanding Sec. Sec. 536.304(b)(3) and 536.306(a), an
employee who is receiving a retained rate in excess of Executive
Schedule level IV on January 1, 2012, consistent with the Non-Foreign
Retirement Equity Assurance Act of 2009 (subtitle B of title XIX of
Pub. L. 111-84), may continue to receive a retained rate higher than
Executive Schedule level IV until--
(1) The retained rate becomes equal to or falls below Executive
Schedule level IV; or
(2) The employee ceases to be entitled to pay retention under Sec.
536.308.
(b) Notwithstanding 5 U.S.C. 5361(1) and Sec. 536.102(b)(2), an
employee who is employed on a temporary or term basis is not barred
from receiving a retained rate if such employee--
(1) Is receiving a special rate above Executive Schedule level IV
on January 1, 2012, and is covered by paragraph (a) of this section; or
(2) Is receiving a special rate incorporating an additional
adjustment under section 1915(b)(1) of the Non-Foreign Retirement
Equity Assurance Act (subtitle B of title XIX of Pub. L. 111-84) at the
time the employee's special rate schedule is reduced or terminated.
[FR Doc. 2011-28742 Filed 11-4-11; 8:45 am]
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