2013 Federal Employees Almanac
Chapter 1: Pay
Last updated: April 19, 2013
- By Almanac Staff
- January 03, 2013
Main Federal Pay Schedules and Systems
The General Schedule is the federal government’s main pay system that sets the pay rates for employees in most white-collar positions not at the senior executive or other senior levels. The General Schedule is composed of 15 grades, or salary levels. Each grade includes 10 steps through which employees advance based on satisfactory job performance and length of service. For all GS grades, the waiting periods to be advanced to each higher step (that is, qualifying for a “within-grade increase”) are as follows: 52 calendar weeks to be advanced to steps 2, 3, and 4; 104 calendar weeks to be advanced to steps 5, 6, and 7; and 156 calendar weeks to be advanced to steps 8, 9, and 10 (see 5 CFR 531.405). Performance-based “quality step increases” also are allowed. See Section 4 of this chapter.
Position classification standards, developed by the Office of Personnel Management (OPM), are the legal basis for determining the series and grade—and consequently the pay—for the majority of GS positions. In most cases, a GS employee’s basic pay reflects the pay rate specified for the position’s grade and step in the locality where the worker is employed. Disputes over the classification of a GS position that cannot be resolved within the agency can be referred to OPM by either the employee or the agency. OPM is responsible for making the final decision on such an appeal, and its decision is final. See Position Classification Appeals in Chapter 10, Section 1.
General Schedule jobs commonly are referred to according to one of the “PATCO” (for professional, administrative, technical, clerical, and other) occupational categories:
Professional—Requires knowledge in a field of science or learning characteristically acquired through education or training pertinent to the specialized field, as distinguished from general education. The work of a professional occupation requires the exercise of discretion, judgment, and personal responsibility for the application of an organized body of knowledge that is constantly studied to make new discoveries and interpretations, and to improve the data, materials and methods.
Administrative—Involves the exercise of analytical ability, judgment, discretion, and personal responsibility, and application of a substantial body of knowledge, principles, concepts, and practices applicable to one or more fields of administration or management. While these positions do not require specialized education majors, they do involve the types of skills (analytical, research, writing, judgment) typically gained through a college level general education or through progressively responsible experience.
Technical—Involves work that is non-routine in nature and is typically associated with, and in support of, a professional or administrative field. Such occupations involve extensive practical knowledge gained through on-the-job experience or specific training less than by college graduation. Work in these occupations may involve substantial elements of the professional or administrative field but require less competence in the field involved.
Clerical—Involves structured work in support of office, business, field, or fiscal operations; duties are performed in accordance with established policies, experience or working knowledge related to the tasks to be performed.
Other—Occupations that do not fall into the above categories.
Supervisors of other GS employees ordinarily are classified at least one grade higher than those employees. However, this does not necessarily mean that supervisors will be paid more than each of their subordinates. Supervisory differentials are paid in some cases to keep the supervisor’s pay ahead (see Supervisory Differentials in Section 4 of this chapter).
Some white-collar employees below the senior levels are under pay banding—also called broad banding—systems. In such systems, several GS grades are combined into one, and the agency has greater leeway in setting starting salaries and increasing pay for various reasons, including for performance (see Section 5 of this chapter). Pay banding systems are common in “demonstration projects” and other settings where exceptions to standard civil service rules apply (see Chapter 8, Section 7).
Federal Wage System
Blue-collar occupations comprise the trades, crafts, and manual labor (unskilled, semi-skilled, or skilled), including foreman and supervisory positions entailing trade, craft, or laboring experience and knowledge as the paramount requirement.
The pay of the federal government’s blue-collar employees is set as an hourly rate in accordance with procedures established under 5 U.S.C. 5343. The law requires that hourly rates for these federal wage system employees—also commonly called wage grade or prevailing rate—be adjusted in accordance with pay rates in local markets. The most common wage system schedule—that is, the wage grade schedule used for most non-supervisory workers—contains 15 grades. Each of the grades includes five steps, which are set at 4 percent increments.
If the employee’s performance is above unacceptable, advancement to the second step occurs after six months of employment, advancement to the third after an additional 18 months, to the fourth after an additional two years, and to the fifth after an additional two years.
Occupations often cover more than one grade level, and many occupations typically are represented at each grade. Differences in rates of pay among wage areas reflect the fact that the prevailing cost of labor varies by region across the United States.
The wage system’s prevailing rate determinations are made on the basis of surveys by a “lead agency”—the agency with the most blue-collar employees in an area, most commonly the Defense Department—of rates paid by private employers in each local wage area for work similar to that performed by federal wage employees. Wage schedule adjustments have been capped for many years through the budget process. Because of the pay cap, wage grade adjustments in an area cannot exceed the local General Schedule pay increase (including both base GS and locality pay adjustments); in many years prior to 2004, federal wage system raises were capped at the GS national average. Wage schedules are adjusted at different times of the year according to when the local lead agency conducts the annual wage survey in each individual wage area.
U.S. Postal Service
As an independent establishment, the U.S. Postal Service operates its own pay system that has two general types of salary structures, as well as a specialized structure for rural letter carriers. The two general pay structures are: the PS (Postal Service) salary structure, which covers bargaining unit personnel, such as most clerks and carriers, mail handlers, nurses, and security personnel; and the EAS (Executive and Administrative Schedule) structure, which covers executives, professionals, supervisors, postmasters, technical and administrative employees, and other workers not covered by bargaining agreements. See Chapter 12, Section 3.
Executive Schedule, Congressional, and Judicial Pay
Salary levels of certain top officials of all three branches of government are linked. The Executive Schedule, which governs the pay of Cabinet officers and other top federal executives—almost all of them political appointees—is the basic underlying structure. It includes five levels which are, in descending order:
• Level I, Cabinet-Level officials;
• Level II, deputy secretaries of departments, secretaries of military departments, and heads of major agencies;
• Level III, undersecretaries of departments and heads of middle-level agencies;
• Level IV, assistant well and general counsels of departments, heads of smaller agencies, members of certain boards and commissions; and
• Level V, administrators, commissioners, directors, and members of boards, commissions, or units of agencies.
Under the Ethics Reform Act of 1989, P.L. 101-194, the salaries of the Vice President, the Chief Justice and the Speaker of the House are to be equivalent. Similarly, the salaries of Cabinet officials (Level I) and certain congressional leaders are to be equivalent, as are the salaries of those at Level II, most members of the House and Senate, and most federal judges. However, the actual figures differ somewhat because in some years salaries for Congress were frozen while raises were paid to Executive Schedule employees, judges, or both.
Various Executive Schedule rates also are used to establish certain salary limits for General Schedule employees, the Senior Executive Service, employees in senior-level and senior scientific and technical jobs, administrative law judges, and certain other highly paid positions. See the pertinent topics in this section.
The Ethics Reform Act of 1989 provided for an annual salary adjustment for leaders and members of the Senate and House of Representatives, the Vice President, individuals in positions on the Executive Schedule, and federal justices and judges. The adjustment is based on the percentage change in the wages and salaries (not seasonally adjusted) for the private industry workers element of the employment cost index (ECI), minus 0.5 percent, using the December indicator. It becomes effective at the same time as, and at a rate no greater than, the annual basic pay rate adjustment (that is, the across-the-board component only and not counting the locality pay component) for federal employees under the General Schedule. The adjustment cannot, however, be less than zero or greater than 5 percent. While the Ethics Reform Act sets the rate of the judicial pay adjustment, salary increases for justices and judges must be enacted separately.
While judicial raises require an annual authorization, the congressional and Executive Schedule pay raises are automatic unless Congress acts to prevent them—which has happened in some years. Although refusals to accept the raise primarily occur because of sensitivity over congressional pay, the linkage often causes salaries of judges and Executive Schedule officials to be frozen as well.
The President’s salary is set by law, 3 U.S.C. §102, at $400,000 and cannot be changed during an incumbent’s term.
Senior Executive Service
The Senior Executive Service (SES) is a cadre of high-level supervisors, most of them career employees although some are politically appointed. The SES pay system (see 5 U.S.C. Chapter 53, Subchapter VIII) features a pay range with a minimum rate of basic pay starting at 120 percent of the rate for grade 15, step 1, of the base General Schedule (not including locality pay). Agencies that demonstrate that their executive appraisal systems make “meaningful distinctions based on relative performance,” as certified by the Office of Personnel Management with concurrence by the Office of Management and Budget, may pay up to Level II of the Executive Schedule. Most agencies have that certification; for those that don’t, the cap is Level III of the Executive Schedule.
SES members in an agency with a certified executive performance appraisal system also are subject to a higher aggregate compensation limit (that is, basic salary, plus performance bonus for career SES members, and other allowances and incentives) equivalent to the pay of the Vice President. Absent certification, the maximum annual aggregate compensation is the rate for Level I of the Executive Schedule. See Aggregate Limit on Compensation in Section 2 of this chapter for details of the certification procedure and what forms of compensation are counted toward the total compensation cap.
SES members do not receive annual across-the-board or locality pay adjustments. Pay adjustments for SES members must be based on the employee’s individual performance and/or contribution to the agency’s performance. See Section 9 in Chapter 8.
SES members paid at a rate of basic pay equal to or greater than 86.5 percent of the rate for Level II are subject to certain additional post-employment restrictions. See Post-employment Restrictions in Chapter 10, Section 5.
The SES pay system took its current form in 2004 under Public Law 108-136, which replaced a system that had six pay levels.
Other High-Level Systems
Administrative Law Judges—ALJs are hearing officers who hear cases brought by parties whose affairs are controlled or regulated by agencies of the federal government. They operate under a merit system designed to protect the judge’s decisional independence from undue agency influence and they have greater tenure protection than federal employees in general. They hear cases involving economic regulations, adjudication of claims to benefits, and enforcement of actions brought by federal agencies against individuals or organizations. Most work at the Social Security Administration.
The ALJ pay system consists of three levels, in descending order AL-1, -2 and -3; level 3 in turn is divided into six rates, A-F. ALJ positions are placed at levels AL-2 and AL-1 when they involve significant administrative and managerial responsibilities. The minimum rate for ALJ positions is 65 percent of Level IV of the Executive Schedule, and the maximum, including locality adjustments, is Level III.
An ALJ who is appointed and placed in level AL-3 must be paid at the minimum rate A, unless the ALJ is eligible for a higher rate, not to exceed the maximum rate F, because of prior service, superior qualifications or reinstatement eligibility.
Administrative law judges must serve at least one year in each AL pay level, or in an equivalent or higher level in positions in the federal service, before advancing to the next higher level. Administrative law judges may advance only one level at a time. An ALJ in level AL-3 is advanced automatically to the next higher rate upon completion of the required waiting period—52 weeks each up to level D, and 104 weeks to advance to E and to F.
Time previously served in the next lower rate will be creditable service towards completing the waiting period when an ALJ returns after a break in service to the same rate. However, time under the administrative appeals judge pay system is not creditable service in computing the required waiting period. Time in non-pay status is generally creditable service in computation of a waiting period as long as it does not exceed, in the aggregate, two weeks per 52 weeks of service. Absence due to uniformed service or compensable injury is fully creditable upon re-employment.
On a one-time basis and with prior OPM approval, an agency may advance an ALJ in an AL-3 position with added administrative and managerial duties and responsibilities to the next higher rate, up to the maximum rate F.
ALJs may earn premium pay, subject to the applicable premium pay cap, but are not eligible for recruitment, relocation, or retention incentives or for the student loan repayment program.
ALJs typically receive, by annual presidential directives, the same across-the-board and pertinent locality pay raises as General Schedule employees.
Administrative Appeals Judges—The duties of an AAJ primarily involve reviewing decisions of administrative law judges and rendering final administrative decisions. The AAJ pay system has six rates of basic pay: AA-1-6. These rates correspond to the rates of basic pay for AL-3/A-F of the administrative law judge pay system.
Upon initial appointment, an agency must set the rate of basic pay of an AAJ at the minimum rate AA-1, unless the AAJ is appointed without a break in service from a General Schedule position, or the employee is eligible for a higher rate because of prior service or superior qualifications.
An AAJ is advanced automatically to the next higher rate upon completion of the required waiting period—52 weeks to advance each level up to AA-4, and 104 weeks to advance to levels 5 and 6. Time under the administrative law judge pay system is creditable service in computing the required waiting period when an individual moves from that system to the AAJ pay system without a break in service. Time previously served in the next lower rate will be creditable service towards completing the waiting period when an AAJ returns after a break in service to the same rate. Policies regarding time in non-pay status mirror those for ALJs, and AAJs are similarly eligible for premium pay.
The rates of basic pay of the AAJ pay system are adjusted at the same time and in the same manner as adjustments are made in the corresponding rates of basic pay for the ALJ system, including locality payments, subject to a cap of Level III of the Executive Schedule.
Department of Defense Doctors—The Physician and Dentist Pay Plan (PDPP) establishes pay-setting policies, rules, and tables for physicians and dentists at the Department of Defense. It formally began in 2011 after resolution of issues including the transition of many affected positions into and then out of the National Security Personnel System (see Chapter 8, Section 7).
Under the PDPP, total salary includes two components: basic pay and market pay, both of which count for purposes including retirement calculations and benefits such as life insurance and lump-sum payments for unused annual leave on separation. Basic pay grades under the PDPP are determined by the General Schedule. A market pay component is added to reflect the recruitment and retention needs for the specialty or assignment of the position. Employees continue to receive any increase they may have received under the GS system, including within-grade increases, quality step increases, and general pay increases.
In determining ranges of annual pay for the PDPP, DoD mirrors the pay table and tier structure established by the Veterans Affairs Department (see below). The ranges used by the PDPP are based on data gathered from national surveys of pay for physicians and dentists.
PDPP pay tiers set the minimum and maximum amounts of annual pay by specialty groups. Based on recruitment and retention considerations and labor market characteristics, a pay table is a set of tiers for clinical specialties that are grouped together. A tier is a pay range within a pay table that reflects the scope of work within a specialty. Employees are assigned to a pay table based on their clinical specialties.
Factors considered when setting market pay include level of experience, agency need, labor market forces, board certifications, accomplishments, and other qualifications or credentials. Compensation panels are designed to ensure consistency and propriety of market pay decisions.
Department of Veterans Affairs Doctors—The Health Care Personnel Enhancement Act of 2004 (Public Law 108-455) replaced the prior pay system for physicians and dentists in the VA’s Veterans Health Administration with market-based, individually determined pay effective in 2006. Compensation consists of: a uniform nationwide base pay range with 15 steps based on length of service with VA, increased annually by the General Schedule average increase, plus an automatic step increase for longevity every two years; market pay determined according to the recruitment and retention needs for the specialty or assignment at a particular facility, along with experience, board certifications, and other qualifications of the individual physicians and dentists; and performance pay paid on the basis of the achievement of specific goals and performance objectives.
Pay rates and ranges are set for five groupings of clinical specialties and two groupings of administrative assignments (one for chiefs of staff, the other for positions such as chief officer or network director). Within each specialty or assignment, there are between two and four tiers, each with its own rate range and within which each individual has an annual pay amount set.
Senior-Level/Senior Scientific and Technical Positions—These categories cover many positions classified above GS-15 that are not eligible for the Senior Executive Service due to the lack of supervisory duties; they sometimes are called “senior professional” positions. Qualifications for the positions are determined by individual agencies and hiring often is done without competitive examination on the basis of meeting qualification standards.
The senior scientific and technical (ST) system covers nonexecutive positions that involve performance of high-level research and development in the physical, biological, medical, or engineering sciences, or a closely-related field. ST positions may include some supervisory and related managerial duties, provided that these duties occupy less than 25 percent of the incumbent's time. The senior level (SL) system is for nonexecutive positions that do not involve the fundamental research and development responsibilities that are characteristic of the ST system, such as a high-level special assistant or a senior attorney in a highly-specialized field who is not a manager, supervisor, or policy advisor. All ST positions are in the competitive service. So are most SL positions, with some in the excepted service.
Public Law 110-372, effective April 12, 2009, raised the basic salary cap and ended eligibility for locality pay in order to bring policies for senior professionals in line with policies applying to senior executives. Previously they typically received, by annual Presidential order, the same across-the-board and pertinent locality pay raises as General Schedule employees. On conversion, SL and ST employees retained their then-current pay, including any applicable locality pay. The converted rate became the employee’s rate of basic pay for all pay computation purposes.
Salaries are set according to national minimum and maximum rates determined annually. The minimum rate for these positions is 120 percent of the rate for grade 15, step 1 of the base General Schedule (not including locality pay) and the maximum is Level II of the Executive Schedule if the agency’s performance evaluation system is certified by OPM as making “meaningful distinctions based on relative performance,” and Level III if there is no such certification. Employees are guaranteed not to suffer a reduction in pay if they transfer from an agency where salaries are capped at the higher amount to one where salaries are capped at the lower amount.
The aggregate compensation limit (basic salary plus performance bonus and other allowances and incentives) is equivalent to the pay of the Vice President if the agency’s appraisal system is certified, and Level I of the Executive Schedule if it is not. See Aggregate Limit on Compensation in Section 2 of this chapter for details of the certification procedure and what forms of compensation are counted toward the total compensation cap.
SL and ST employees paid at a rate of basic pay equal to or greater than 86.5 percent of the rate for Executive Schedule Level II are subject to certain additional post-employment restrictions. See Post-Employment Restrictions in Chapter 10, Section 5.
Special Salary Rates
The Office of Personnel Management (OPM) may establish higher rates of basic pay—special salary rates, more commonly simply called special rates—for a group or category of General Schedule positions in one or more geographic areas to address existing or likely significant difficulties in recruiting or retaining well-qualified employees. OPM may establish special rates for nearly any category of employee—that is, by series, specialty, grade-level, and/or geographic area. The statutory authority for special rates is found in 5 U.S.C. 5305. Executive Order 12748 delegates to OPM the President’s authority to establish special rates. Rules on establishing and adjusting special rates are at 5 CFR 530.304.
Special rates may be authorized whenever OPM finds that the government’s recruitment or retention efforts are or are likely to be adversely affected by a variety of factors, including significantly higher rates of pay offered by nonfederal employers, the remoteness of the job’s area or location, undesirable working conditions or duties (including exposure to toxic substances or other occupational hazards), or other circumstance that OPM considers appropriate. Once established, each special rate is reviewed at least annually and adjustments made as warranted according to existing labor market conditions and agency staffing needs. Agencies may request OPM to establish special rates for their employees. Such requests must be submitted to OPM by department headquarters and must be coordinated with other federal agencies with employees in the same occupational group and geographic area.
An employee’s entitlement to a special rate is eliminated if the employee is entitled to a higher rate of basic pay, such as a locality rate under 5 U.S.C. 5304 (see 5 U.S.C. 5305(h) and 5 CFR 530.303(d)). This action does not reduce the salaries of the affected employees, since they already are receiving locality rates higher than the special rate.
There are about 250 special rate authorities established by OPM that cover some 41,000 employees. Certain categories of employees receive special rate pay under other authorities, such as law enforcement officers (see below) and certain hospital workers in the Department of Veterans Affairs under 38 U.S.C. 7455.
The minimum rate of a special rate range may exceed the maximum rate of the corresponding grade by as much as 30 percent. However, no special rate may exceed the rate for Executive Level IV.
Special rates generally are basic pay for the same purposes as locality rates. Like a locality rate, a special rate consists of a basic rate and a supplement. An agency may choose to exclude its employees from coverage under a proposed or existing special rate schedule after notifying OPM. Each year, OPM and agencies employing special rate employees conduct a review to determine the amount by which special rates will be adjusted at the time of a general increase in General Schedule rates. Agencies do not have to submit a certification form for each special rate schedule. Instead, they must submit information to OPM only if they are requesting a special rate adjustment greater than or less than the GS annual pay adjustment. OPM reviews such agency submissions and makes a determination regarding the appropriate adjustment in the affected special rate schedules. All other special rate schedules are adjusted by the same percentage as the GS pay adjustment.
The special rate authority allows a lead agency, with the approval of OPM, to establish rates above the regular federal wage system wage schedule rates for an occupation or group of occupations experiencing or potentially experiencing recruitment or retention difficulties. Special rates are established by occupation, grade, agency, and/or geographic location. These rates will be paid by all agencies having positions for which the rates are authorized. The special rate payable may not, at any time, be less than the unrestricted rate otherwise payable for such positions under the applicable regular pay schedule.
Special rate employees are eligible for within-grade raises, raises related to a promotion, and similar types of increases.
A listing of special rate tables for the General Schedule is at http://apps.opm.gov/specialrates. A listing for wage grade employees is at www.cpms.osd.mil/wage/wage_schedules.aspx.
‘Structural’ Firefighters—“Structural” firefighters are classified in the GS-081 series and provide around-the-clock protection at certain federal facilities, mainly Defense Department installations. In addition, they generally provide paramedic support and hazardous material controls. They typically work 24-hour shifts that include sleep, meals and other personal standby time. Most have a 72-hour workweek consisting of three 24-hour shifts. Because sleep and personal time is included in their duty shift, firefighters whose regularly established workweeks average at least 53 hours receive a lower hourly rate of basic pay than other employees. The applicable GS annual rate is divided by a 2,756-hour factor (53 hours per week times 52 weeks) to derive their hourly rate.
GS-081 firefighters have no overtime pay entitlement until they have worked 53 hours in a week or 106 hours in a biweekly pay period. For those who are exempt from the Fair Labor Standards Act (FLSA), overtime pay is capped at one and one-half times the rate for GS-10, step 1, or the employee’s regular rate of basic pay, whichever is higher. The overtime rate for GS-081 firefighters eligible for FLSA overtime is not similarly capped.
GS-081 firefighters are barred from receiving payment of any other premium pay, including night pay, Sunday pay, holiday pay, and hazardous duty pay. Special computations are provided for firefighters whose regular tour of duty includes a basic 40-hour week.
Wildland Firefighters—Wildland firefighters are employed, primarily by the Forest Service and Department of the Interior, to control, extinguish, prevent and manage wildland fires. While some wildland firefighters are employed year-round, most are employed on a seasonal basis, and classified as GS-462 forestry technicians or GS-455 range technicians. While actively fighting fires, they must serve at the site of the fire and work shifts that extend well beyond the eight-hour work day and must stay at a base camp during off-duty hours for sleep and meals and other personal activities.
Wildland firefighters, whether FLSA-exempt or not, receive overtime pay after eight hours in a day or 40 hours in a week. They are not subject to any cap on the hourly rate of overtime pay while engaged in emergency wildland fire suppression activities. They are eligible for hazard pay at the rate of 25 percent for all time in a pay status on any day when they are exposed to a hazard.
Unlike other temporary employees, temporary wildland firefighters and fire protection personnel qualify for Federal Employees Health Benefits program coverage (see Chapter 2, Section 1) regardless of their work schedules. During their active employment they receive the standard government contribution toward premiums; when not employed by the government, coverage is entirely at their own cost.
Wildland firefighters also are covered by federal injury compensation policies. See Chapter 5, Section 5.
Rules for firefighter pay are in 5 CFR Parts 410, 550, 551, and 630.
Law Enforcement Officers
Federal law enforcement officers (LEOs) are primarily involved in criminal and noncriminal investigation, policing, corrections, court operations, security and protection. Most LEO employees with arrest authority are covered by standard basic pay systems, primarily the General Schedule.
LEOs within the GS system are entitled to higher rates of basic pay at grades GS-3 through GS-10, which increase pay by 3 to 23 percent depending on grade level. These LEO special rates, established by Section 529 of Public Law 101-509, are used as basic rates in computing locality payments. The GS system also allows law enforcement officers to receive various forms of premium pay including hazardous duty pay, administratively uncontrollable overtime, night pay, Sunday pay, and holiday pay (see Section 7 of this chapter).
A small percentage of LEOs receive other OPM-established special rate pay; most of these are medical personnel working at correctional institutions. Further, while Department of Veterans Affairs police officers are covered by the GS system, they may receive higher special rates of basic pay established by VA under its Title 38 special rate authority, subject to OPM’s concurrence.
Departments and agencies operating their own LEO salary systems include the U.S. Postal Service, the Bureau of Engraving and Printing, the U.S. Mint, the National Security Agency, the Department of Defense, the State Department (Bureau of Diplomatic Security) and the Department of Homeland Security. The Judicial and Legislative Branches also operate separate systems. The provisions of these systems may be established directly in law, by administrative action, or in some cases by collective bargaining. There are significant variations in pay and benefits entitlements among them.
Transportation Security Administration
The Transportation Security Administration (TSA), part of the Department of Homeland Security, operates a pay system separate from the General Schedule under its authorizing law, P.L. 107-71. TSA uses a pay banding system with minimum and maximum rates that may be higher or lower than the closest GS grade equivalent. The accompanying table shows rough equivalencies.
Assignment to a band is determined by qualifications. Unless otherwise determined by the hiring official, employees newly hired to the TSA are paid at the minimum rate of the pay band for the position. Former or current federal employees are not automatically entitled to receive their highest previous rate of pay upon hiring. Management may match or exceed that rate on a determination that applicants have specialized experience that demonstrates they possess superior skills and abilities to perform the duties of the position. To be considered for setting pay at a rate above the minimum of the pay band, the specialized experience must be in, or related to, the work of the position to be filled.
Increases to basic pay can be made under several circumstances:
• Increases for a promotion may range up to 15 percent, or to the minimum rate for the new band, regardless of the percentage.
• An employee who has been on TSA rolls for at least 90 days may receive a reassignment increase of from 1 to 7 percent of basic pay when permanently assigned to a new position within the same pay band as the current position.
• In-position increases of between 1 and 7 percent can be awarded to acknowledge special circumstances such as an employee’s significant professional growth or increased complexity of an employee’s current job.
• Salary increases and/or bonuses are paid under a pay for performance program (see Other Major Alternative Personnel Authorities in Chapter 8, Section 7).
Other Pay Systems
In addition to the pay schedules or systems described above, the federal government operates numerous other pay systems, many of them unique to agencies or sub-agencies, and many of them occupation-specific. Separate pay systems, for example, are used to set salary levels for Foreign Service employees, air traffic controllers, and employees of “non-appropriated fund instrumentalities,” which are self-funding facilities, such as post exchanges or commissaries. These systems go by a variety of names, use differing nomenclature for classification levels, and vary in how they set and increase salaries. If you are under one of them, check with your personnel office regarding the terms of the system.
Also, many agencies are operating under alternative pay structures that involve pay banding and other non-standard practices (see Chapter 8, Section 7) and agencies have various special pay-setting authorities available to them, some at their own discretion and some upon approval from the Office of Management and Budget and/or OPM (see Section 5 of this chapter).
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Most federal employees work schedules consisting of an eight-hour day, five-day, 40-hour workweek. Hourly rates of pay for General Schedule employees (which are used, for example, for overtime-calculation purposes) are computed by dividing a worker’s annual rate of pay by 2,087 and rounding to the nearest cent. To compute an employee’s biweekly pay, the hourly rate must be multiplied by 80. If computing compensation for fractional pay periods (that is, partially paid periods resulting from separations, retirements, use of leave without pay, etc.), the amount of pay is determined by multiplying the employee’s hourly rate by the number of hours or fractions of hours.
The standard federal workday is eight hours. The law provides overtime for certain employees for work in excess of eight hours in a day, or in excess of 40 hours in the workweek (see Section 6 of this chapter); special rules apply to employees who work under alternative work schedules (see Chapter 8, Section 2). There are also pay differentials for working at night, on Sundays, on holidays and for various other reasons (see Section 7 of this chapter).
An employee must receive the greatest of the following rates of pay, as applicable:
• the scheduled annual rate of pay payable to the employee;
• a special rate under 5 CFR Part 530, subpart C, or a similar rate under other legal authority (for example, 38 U.S.C. 7455);
• a locality rate under 5 CFR Part 531, subpart F, or a similar rate under other legal authority; or
• a retained rate under 5 CFR Part 536 or saved rate under 5 CFR Part 359, subpart G, or a similar rate under other legal authority.
A GS pay computation example is at www.opm.gov/oca/pay/html/computerates.asp. Fact sheets on pay and hours of work are at www.opm.gov/oca/pay/html/factindx.asp.
Worksite for Location-Based Pay Purposes
Certain location-based pay entitlements (such as locality payments, special rate supplements, travel, transportation, and relocation benefits, and non-foreign area cost-of-living allowances) are based on the location of the employee’s official worksite for his or her position of record. Generally, the official worksite is the location of an employee’s position of record where the employee regularly performs his or her duties or, if the employee’s work involves regular travel or the employee’s work location varies on a daily basis, where his or her work activities are based, as determined by the employing agency. An agency must document an employee’s official worksite on the employee’s Notification of Personnel Action (Standard Form 50 or equivalent).
If an employee is in temporary duty travel status away from the official worksite for the employee’s position of record and is eligible for temporary duty travel allowances such as per diem, the employee’s pay entitlements based on that official worksite are not affected.
If an employee is temporarily detailed to a position in a different geographic area and is eligible for temporary duty travel allowances, the employee’s official worksite for his or her position of record and associated pay entitlements are not affected.
If an employee is authorized to receive relocation allowances under 5 U.S.C. 5737 and 41 CFR Part 302-3, subpart E, in connection with long-term assignment (six to 30 months), the work location for the long-term assignment is considered the employee’s official worksite for pay purposes.
If an employee is temporarily reassigned or promoted to a position in a different geographic area, the work location for the position to which temporarily reassigned or promoted is considered the employee’s official worksite for pay purposes.
For telecommuters, an agency determines the official worksite on a case-by-case basis.
Also see Official Duty Station in Chapter 8, Section 1, and www.opm.gov/oca/pay/html/Official_Duty_Station.asp.
There are various limitations on the pay that employees may receive, including special rules for special rates, locality pay and premium pay. See the accompanying Maximum Pay Limitations table for General Schedule positions, the pertinent sections of Section 1 of this chapter for other major salary systems, and Aggregate Limit on Compensation, below, for special rules for certain high-level salary systems.
Biweekly and Annual Limits on Premium Pay—Under 5 U.S.C. 5547(a) and 5 CFR 550.105, General Schedule employees and other covered employees may receive certain types of premium pay for a biweekly pay period only to the extent that the sum of basic pay and premium pay for the pay period does not exceed the greater of the biweekly rate payable for GS-15, step 10 (including any applicable locality payment or special rate supplement), or the rate payable for Level V of the Executive Schedule. The biweekly rate is computed by dividing the applicable annual rate by 2,087 hours, rounding the resulting hourly rate to the nearest cent, and multiplying the hourly rate by 80 hours.
For information on the annual limits on pay, see Aggregate Limit on Compensation, below.
Under 5 U.S.C. 5547(a), an employee, including a law enforcement officer, may receive premium pay in a pay period only to the extent that the aggregate of basic pay and premium pay for the pay period does not exceed the greater of the biweekly rate for (1) GS-15, step 10 (including any applicable special salary rate or locality rate of pay), or (2) Level V of the Executive Schedule. (See 5 U.S.C. 5547(a), as amended, and 5 CFR 550.105.)
Under 5 U.S.C. 5547(b), the biweekly premium pay cap in section 5547(a) does not apply in any pay period during which an employee, including a law enforcement officer, receives premium pay for work in connection with an emergency (including a wildfire emergency) that involves a direct threat to life or property. Work in connection with an emergency includes work performed in the aftermath of the emergency. Such employees may receive premium pay to the extent that the aggregate of basic pay and premium pay for the calendar year does not exceed the greater of the annual rate for (1) GS-15, step 10 (including any applicable special salary rate or locality rate of pay), or (2) Level V of the Executive Schedule.
Under 5 U.S.C. 5547(b), the head of an agency with discretionary authority may waive the biweekly premium pay limitation in § 5547(a) for an employee, including a law enforcement officer, who receives premium pay to perform work critical to the mission of the agency. Such employees may receive premium pay to the extent that the aggregate of basic pay and premium pay for the calendar year does not exceed the greater of the annual rate for (1) GS-15, step 10 (including any applicable special salary rate or locality rate of pay), or (2) Level V of the Executive Schedule.
The biweekly pay limitation in 5 U.S.C. 5547 is also a ceiling on compensatory time off, which is an alternative form of payment for overtime work. Thus, the number of hours for which an employee may receive monetary overtime pay is also the number of hours of compensatory time off that may be credited in a pay period. An employee may not exceed the biweekly pay limitation by choosing compensatory time off as a substitute for monetary overtime pay.
Premium Pay for National Emergency—Agencies have authority under 5 U.S.C. 5547(b) and 5 CFR 550.106 to make exceptions to biweekly premium pay limitations for civilian employees who perform emergency work in support of the National Emergency declared by the Presidential Proclamation of September 14, 2001.
The head of an agency may apply an annual cap to certain types of premium pay for any pay period for employees performing work in connection with an emergency, including work performed in the aftermath of such an emergency, or employees performing work critical to the mission of the agency. Such employees may receive certain types of premium pay to the extent that the aggregate of basic pay and premium pay for the calendar year does not exceed the greater of the annual rate for GS-15, step 10 (including any applicable special salary rate or locality rate of pay), or Level V of the Executive Schedule.
Note: Under 5 CFR 550.107, the following types of premium pay remain subject to a biweekly limitation when other premium payments are subject to an annual limitation: standby duty pay under 5 U.S.C. 5545(c)(1); administratively uncontrollable overtime pay under 5 U.S.C. 5545(c)(2); availability pay for criminal investigators under 5 U.S.C. 5545a; and overtime pay for hours in a firefighter's regular tour of duty covered by 5 U.S.C. 5545b.
Waiver Authority—Under annual Defense Department authorization laws beginning with Public Law 109-163, Section 1105, agencies may waive the annual aggregate pay limitation, setting a limit of the Vice President’s salary instead, for employees assigned to an overseas location in the area of responsibility of the Commander of the U.S. Central Command (or that was formerly in that area of responsibility but has been moved to the area of responsibility of the Commander of the U.S. Africa Command). The Defense and State departments have exercised this authority department-wide; employees of other agencies should check their status. To be eligible, employees must remain in the command’s area of responsibility for at least 42 consecutive calendar days (the period may overlap calendar years) and perform work in direct support of, or directly related to, a military operation or directly related to an operation in response to an emergency declared by the President. A listing of affected countries and a description of special considerations relating to employees stationed in Iraq is in CPM 2013-04 at www.chcoc.gov/transmittals; also see CPM 2012-05 at that same site. The Executive Schedule Level I aggregate limitation on pay (see below) still applies. Amounts exceeding that cap up to the Vice President’s salary are payable in the next calendar year. Guidance is in a March 3, 2011, memo at www.chcoc.gov/transmittals.
Other Exceptions—Certain categories of employees are subject to different caps. For example, a cap of 5 percent above the Executive Schedule Level IV rate applied to employees under DoD’s National Security Personnel System. When employees paid above that rate were transferred out of NSPS due to its termination, they were allowed to retain their salary rates (see Alternative Personnel Practices in Chapter 8, Section 7). Also, the cap applying to Government Accountability Office employees in the top pay band there is the Level III rate.
Aggregate Limit on Compensation
Under 5 U.S.C. 5307, there is a limit on total annual compensation for most federal employees—the aggregate of basic pay, allowances, differentials, bonuses, awards, or other similar cash payments (see below)—at the Level I rate of the Executive Schedule. The limitation on pay applies to all Executive Branch employees, General Schedule (GS) employees in the Legislative Branch, and GS employees in the Judicial Branch (excluding those paid under 28 U.S.C. 332(f), 603, and 604). Certain Executive Branch employees may be excluded from the aggregate limitation on pay under 5 U.S.C. 5307 by other laws but may be subject to similar provisions administered by their agencies.
The limit for members of the Senior Executive Service (SES) and employees in senior level (SL) and senior scientific or technical (ST) positions is the total annual compensation payable to the Vice President under 3 U.S.C. 104 if the Office of Personnel Management, with the concurrence of the Office of Management and Budget, certifies that the agency has a performance appraisal system that makes “meaningful distinctions based on relative performance.” If an agency’s performance appraisal system has not been certified, its aggregate limitation on compensation for those employees is the same as that for all other employees, Level I of the Executive Schedule. Most agencies have that certification.
Basic pay is defined as the total amount of pay received at a rate fixed by law or administrative action for the position held by an employee, including any special rate under 5 CFR Part 530, subpart B, or any locality-based comparability payment under 5 CFR Part 531, subpart F, or other similar payment under other legal authority, before any deductions. Basic pay includes night and environmental differentials for prevailing rate employees under 5 U.S.C. 5343(f) and 5 CFR 532.511. Basic pay excludes additional pay of any other kind.
Under 5 CFR 530.202, aggregate compensation for purposes of the cap is defined as:
• basic pay received as an employee of the Executive Branch or as an employee outside the Executive Branch to whom the General Schedule applies;
• locality payments under 5 U.S.C. 5304; continued rate adjustments under 5 CFR Part 531, subpart G; or special pay adjustments for law enforcement officers under section 404 of the Federal Employees Pay Comparability Act of 1990 (Public Law 101-509);
• premium pay under 5 U.S.C. Chapter 53, subchapter IV;
• premium pay under 5 U.S.C. Chapter 55, subchapter V;
• incentive awards and performance-based cash awards under 5 U.S.C. Chapters 45 and 53;
• recruitment, retention and relocation incentives under 5 U.S.C. 5753 and 5754;
• extended assignment incentives under 5 U.S.C. 5757;
• supervisory differentials under 5 U.S.C. 5755;
• post differentials under 5 U.S.C. 5925;
• danger pay allowances under 5 U.S.C. 5928;
• post differentials based on environmental conditions for employees stationed in non-foreign areas under 5 U.S.C. 5941(a)(2);
• physicians’ comparability allowances under 5 U.S.C. 5948;
• continuation of pay under 5 U.S.C. 8118;
• lump-sum payments in excess of the aggregate limitation on pay as required by § 530.204; and
• other similar payments authorized under Title 5, United States Code, excluding: overtime pay under the Fair Labor Standards Act and 5 CFR Part 551; severance pay under 5 U.S.C. 5595; lump-sum payments for accumulated and accrued annual leave upon separation under 5 U.S.C. 5551 or 5552; back pay awarded to an employee under 5 U.S.C. 5596 because of an unjustified personnel action; student loan repayments under 5 U.S.C. 5379; and non-foreign area cost-of-living allowances under 5 U.S.C. 5941(a)(1).
Payments in excess of the aggregate limitation on pay (other than basic pay) must be deferred and are generally paid as a lump-sum payment at the beginning of the following calendar year. Detailed policies on payment of excess amounts are at www.opm.gov/oca/pay/HTML/aggregatelimitation.asp.
Certification Standards—Rules at 5 CFR Part 430 and 5 CFR Part 1330 establish standards for OPM and OMB to assess whether performance appraisal systems make meaningful distinctions based on relative performance for purposes of determining caps on basic pay and aggregate compensation for senior executive, and senior level and senior scientific and technical employees. “Relative performance” in this context does not require ranking senior employees against each other; such ranking is prohibited for the purpose of determining performance ratings. The factors require linkage between performance expectations and the agency’s mission and goals, involvement of senior employees in their drafting, an emphasis on measurable results, performance differentiation and high-level oversight.
Agencies must apply for certification by supplying OPM with documents including a sample of individual senior employee performance plans and ratings data for each senior employee for the last two appraisal periods. Agencies may submit a single request for certification of several SES and/or senior level and senior scientific and technical appraisal systems or requests for certification of each system.
Under some circumstances, provisional certification may be granted for one calendar year with a possible one-year extension. Agencies with fully or provisionally certified systems may set SES, SL and ST rates of basic pay up to the rate for Level II of the Executive Schedule.
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The Federal Wage System: Background
The federal wage system (FWS)—also known as the wage grade or prevailing rate system—is designed to make the pay of federal blue-collar workers comparable to prevailing private sector local rates for similar positions. It is overseen by the Federal Prevailing Rate Advisory Committee, made up of agency and labor union members and an independent chairman, which studies matters pertaining to prevailing rate determinations and advises OPM on pay policies for FWS employees.
The main FWS pay plan covers most trade, craft, and laboring employees in the Executive Branch. It does not cover Postal Service employees. Special pay plans cover certain employees in special circumstances. OPM authorizes special pay plans when unusual labor market conditions seriously handicap agencies in recruiting and retaining qualified employees.
Wage Grade Locality Pay Procedures
The FWS is a partnership among OPM, other federal agencies, and labor organizations. OPM specifies procedures for agencies to design and conduct wage surveys, to construct wage schedules, to grade levels of work, and to administer basic and premium pay for employees.
To issue common job-grading standards for major occupations, OPM occupational specialists follow specific steps to develop new standards and to update existing standards. They make full occupational studies, which include onsite visits to interview employees, supervisors, and union representatives. Specialists write standards and ask agencies and unions for comments. Federal agencies are required to apply these standards.
OPM defines the geographic boundaries of individual local wage areas—there are about 130 of them, with the number varying somewhat from time to time—and reviews survey job descriptions to ensure that they are accurate and current. In addition, OPM works with agencies and unions to schedule annual local wage surveys in each wage area.
Each FWS wage area consists of a survey area and an area of application. A survey area includes the counties, townships, and cities where the lead agency in the wage area collects and analyzes private sector wage data to produce a wage schedule for the wage area. An area of application includes the survey area and nearby counties, townships, and cities where the wage schedule also applies.
Wage grade raises are paid at differing times of a fiscal year, varying by locality. Wage adjustments become effective in accordance with what is commonly referred to as the 45-day law. This law states that the government has 45 working days to put FWS pay adjustments into effect after each wage survey starts. Each wage schedule has a uniform effective date for all employees in a wage area, regardless of the agency. Normally, the effective date is based on the pay period cycle for the largest employer in the wage area, with the effective date set on the first day of the first pay period following the 45-day wage survey period.
OPM does not conduct local wage surveys. For each wage area, OPM identifies a “lead” agency—in almost all cases the Department of Defense—that employs the majority of wage grade employees in the area. That agency is responsible for conducting wage surveys, analyzing data, and issuing wage schedules under the policies and procedures prescribed by OPM. Out-of-area data are used where the government has large numbers of employees in specialized occupations for which there are insufficient comparable private sector jobs locally. All agencies in a wage area pay their hourly wage employees according to the wage schedules developed by the lead agency.
Labor organizations also play a role in the wage determination process by providing representatives at all levels of the wage determination process. The employee unions having the greatest number of wage employees under exclusive recognition designate two of the five members of a lead agency’s national level wage committee. Locally, the union with the most employees under exclusive recognition in a wage area designates one of the three members of each local wage survey committee. In addition, labor organizations nominate half of the federal employees who collect wage data from private enterprise employers. A team of one labor data collector and one management data collector visits each surveyed employer.
Under the FWS, pay is based on what private industry is paying for comparable levels of work in a local wage area. Employees are paid the full prevailing rate at step 2 of each grade level. Step 5, the highest step in the FWS, is 12 percent above the prevailing rate of pay. However, legislation may limit or delay annual wage adjustments for FWS employees. This has been the practice for many years, in which wage grade raises have been capped at the national average (before 2004) or local (since 2004) General Schedule amount for the fiscal year. Wage grade pay schedules are at www.cpms.osd.mil/wage/wage_schedules.aspx.
GS Annual Increases: Background
The annual pay adjustment for most General Schedule employees consists of two parts: a national, across-the-board increase, and a locality-based pay adjustment, both normally effective at the start of the first full pay period each January.
Under Federal Employees Pay Comparability Act of 1990 (Section 529 of P.L. 101-509) (FEPCA), the amount of the across-the-board increase is supposed to be based on a change in the Employment Cost Index, less 0.5 percent. (The ECI is a statistical measure maintained by the Bureau of Labor Statistics that measures changes in private sector labor costs. Because of the lag time involved in the federal budget process, the period used is the 12 months ending with the September of the year prior to the year preceding the raise.)
Locality pay for General Schedule employees was first authorized for federal workers by FEPCA. The locality pay increases (along with the across-the-board pay hikes) were designed to address a gap between federal and nonfederal salaries that White House and congressional leaders felt was imposing a hardship on employees and leaving the government unable to compete well in the labor market. The law’s goal was to bring federal pay to within virtual comparability with the private sector—within 5 percent—over nine years by using the ECI-based raises to keep federal employees generally apace with private sector wage growth while the locality component closed the officially reported pay gap.
However, due to funding restrictions and disagreements regarding the data used to compare federal versus private sector pay, locality pay adjustments have not reached the levels indicated by the pay law’s formula. In practice, the annual federal raise has been negotiated between Congress and the White House, typically using the pertinent ECI figure as a starting point, with most of the total raise being designated as across-the-board pay and the remainder as locality pay. The result has been that although there is variation in pay by locality, the officially reported “pay gap” has not been narrowed nearly to the extent envisioned by the law.
The system sets specific locality raises for metropolitan areas that meet certain standards regarding federal employment, plus a catchall “rest of the U.S.” (RUS) locality for places in the contiguous 48 states outside of one of those areas, separate localities for Alaska and Hawaii, and one for U.S. territories and possessions. The number and boundaries of localities change over time.
GS employees in non-foreign areas outside the contiguous 48 states traditionally received special allowances in lieu of locality pay. However, locality pay was phased in for those employees to replace those allowances over 2010-2012 (see Non-Foreign Area Allowances and Differentials in Section 4 of this chapter).
Employees in foreign areas do not receive locality pay but may be eligible for various types of allowances. See Overseas Employment in Chapter 8, Section 1.
Note: See Chapter 8, Section 7 for information about alternative pay systems.
GS Locality Pay Procedures
The locality pay determination procedure starts with ongoing studies designed to calculate the pay gaps in each of the designated pay areas, plus the RUS locality, on which the raises are based. These surveys are done by the Bureau of Labor Statistics of more than 100 occupational levels for pay comparability between federal and non-federal employment.
Each year the Federal Salary Council, a group made up of agency and labor union representatives and compensation experts, submits recommendations on local pay gaps to the President’s Pay Agent, which consists of the Secretary of Labor, Director of the Office of Management and Budget, and the Director of the Office of Personnel Management. The Pay Agent decides the pay areas and reports on pay gaps to the President, recommending raises. The President then formally announces the raises payable within the overall percentage set by appropriations law, with payouts apportioned among localities according to the pay gap data.
The council also makes recommendations to the Pay Agent on issues including: setting locality boundary lines, using criteria including local labor markets, commuting patterns and the practices of other employers; adding to a locality an area adjacent to it; creation of new localities or the dropping of existing ones; and the treatment of facilities that cross boundaries. Annual reports of the Salary Council and the Pay Agent, including detailed explanations of the methods used in comparing federal and non-federal pay, are at www.opm.gov/oca.
To determine an employee’s locality rate, agencies increase the employee’s “scheduled annual rate of pay” by the locality pay percentage authorized by the President for the locality pay area in which the employee’s official worksite is located. The “scheduled annual rate of pay” consists of: the General Schedule rate of basic pay for the employee’s grade and step (or relative position in the rate range), excluding additional pay of any kind such as locality payments or special rate supplements; a special base rate for law enforcement officers (LEOs) under section 403 of the Federal Employees Pay Comparability Act of 1990 (FEPCA); or for an employee in a category of positions described in 5 U.S.C. 5304(h)(1)(A)-(D) for which the President (or designee) has authorized locality payments under 5 U.S.C. 5304(h)(2); the annual rate of pay fixed by law or administrative action, exclusive of any locality-based adjustments (including adjustments equivalent to local special rate supplements under 5 CFR 530, subpart C) or other additional pay of any kind.
Locality pay is considered in applying various pay-setting rules (for example, maximum payable rate, promotion, transfer, or pay retention). A locality rate may not be paid on top of a retained rate, and an employee’s entitlement to a special rate is eliminated if the employee is entitled to a higher rate of basic pay, such as a locality rate.
Locality pay is considered basic pay for purposes of: retirement deductions and benefits; life insurance premiums and benefits; premium pay and premium pay limitations; severance pay; advances in pay; lump-sum payments for accrued and accumulated annual leave; post differentials under 5 U.S.C. 5925(a) and danger pay allowances under 5 U.S.C. 5928 under certain circumstances; recruitment, relocation, and retention incentive payments, supervisory differentials, and extended assignment incentives; performance-based cash awards when such awards are computed as a percentage of an employee’s rate of basic pay; GS pay administration provisions (for example, GS promotion provisions) to the extent provided in 5 CFR Part 531, subpart B; pay administration provisions for prevailing rate employees which consider rates of basic pay under the GS pay system in setting pay under certain circumstances; grade and pay retention to the extent provided in 5 CFR Part 536; and for other provisions as specified in other statutes or OPM regulations, and payments or benefits equivalent to those listed above under other legal authorities.
Eligibility for locality pay is based on where an employee works, not on where he or she lives. Locality pay entitlement does not transfer with an employee who moves from one pay zone to another. Relocating employees receive the rate of pay applying in their new duty stations. Employees on details to a different pay area continue receiving their current salaries while on such assignments. The key is the employee’s official duty station of record—the employee receives the salary paid there.
Employees who receive special pay rates that exceed what they would get under the locality pay formula continue to receive the full amount of their special adjustments. They do not get extra pay due to locality increases until the locality pay in their areas exceeds any special rates they already are receiving, at which time the special rate becomes moot.
The pay law allows, but does not require, the President to extend locality pay to certain categories of employees not in the General Schedule. These include administrative law judges, contract appeals board members, and Executive Branch positions where the rate of basic pay is capped at the pay rate authorized for Level IV of the Executive Schedule. In practice, Presidents have granted eligible employees the same locality increases as GS employees since the system’s creation.
The President may not extend the locality payments to positions under the Executive Schedule, senior executives, employees paid under the federal wage system, overseas employees, or to certain other workers designated as “critical.” Employees in senior level and senior scientific and technical positions were eligible for locality pay until a change in pay law for them that took effect in 2009. See Other High-Level Systems in Section 1 of this chapter.
GS Locality Pay Boundaries
The boundaries for the General Schedule locality pay system generally follow the lines of metropolitan statistical areas and consolidated metropolitan statistical areas. (These are standard government measures used for many purposes.) In some cases, jurisdictions that lie just outside such areas are included because of the large numbers of federal employees working there and the high rate of commuting between the core and adjacent areas—so-called “areas of application.”
Metropolitan areas are designated because of their numbers of federal employees, not because of the overall population. Thus, some larger cities with small federal populations fall in the RUS locality, while some smaller cities that have a large federal presence have rates specific to them. Following are the current boundaries for the locality pay areas. The names of the metropolitan locality areas are those of the statistical areas that are the core of each.
Alaska: The state of Alaska
Atlanta-Sandy Springs-Gainesville: In Georgia, Counties of Barrow, Bartow, Butts, Carroll, Chambers, Cherokee, Clayton, Cobb, Coweta, Dawson, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Hall, Haralson, Heard, Henry, Jasper, Lamar, Meriwether, Newton, Paulding, Pickens, Pike, Polk, Rockdale, Spalding, Troup, Upson, and Walton
In Alabama, Chambers County
Boston-Worcester-Manchester: In Massachusetts, Counties of Barnstable, Bristol, Essex, Middlesex, Norfolk, Plymouth, Suffolk, and Worcester
In New Hampshire, Counties of Belknap, Hillsborough, Merrimack, Rockingham, and Strafford
In Rhode Island, Counties of Bristol, Kent, Newport, Providence, and Washington
In Maine, part of York County
Buffalo-Niagara-Cattaraugus: Counties of Cattaraugus, Erie, and Niagara
Chicago-Naperville-Michigan City: In Illinois, Counties of Cook, DeKalb, DuPage, Grundy, Kane, Kankakee, Kendall, Lake, McHenry, and Will
In Indiana, Counties of Jasper, Lake, LaPorte, Newton, and Porter
In Wisconsin, Kenosha County
Cincinnati-Middletown-Wilmington: In Ohio, Counties of Brown, Butler, Clermont, Clinton, Hamilton, and Warren
In Kentucky, Counties of Boone, Bracken, Campbell, Gallatin, Grant, Kenton, and Pendleton
In Indiana, Dearborn, Franklin, and Ohio Counties
Cleveland-Akron-Elyria: Counties of Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage, and Summit
Columbus-Marion-Chillicothe: Counties of Delaware, Fairfield, Fayette, Franklin, Knox, Licking, Madison Marion, Morrow, Pickaway, Ross, and Union
Dallas-Fort Worth: Counties of Collin, Cooke, Dallas, Delta, Denton, Ellis, Fannin, Grayson, Henderson, Hood, Hunt, Johnson, Kaufman, Palo Pinto, Parker, Rockwall, Somervell, Tarrant, and Wise
Dayton-Springfield-Greenville: Counties of Champaign, Clark, Darke, Greene, Miami, Montgomery, and Preble
Denver-Aurora-Boulder: Counties of Adams, Arapahoe, Boulder, Broomfield Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, Larimer, Park, and Weld
Detroit-Warren-Flint: Counties of Genesee, Lapeer, Lenawee, Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw, and Wayne
Hartford-West Hartford-Willimantic: In Connecticut, Counties of Hartford, Middlesex, New London, Tolland, and Windham
In Massachusetts, Counties of Franklin, Hampden, and Hampshire
Hawaii: The state of Hawaii
Houston-Baytown-Huntsville: Counties of Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Matagorda, Montgomery, San Jacinto, Walker, and Waller
Huntsville-Decatur: Counties of Lawrence, Limestone, Madison, and Morgan
Indianapolis-Anderson-Columbus: Counties of Bartholomew, Boone, Brown, Grant, Hamilton, Hancock, Hendricks, Henry, Jennings, Johnson, Madison, Marion, Montgomery, Morgan, Putnam, and Shelby
Los Angeles-Long Beach-Riverside: Counties of Los Angeles, Orange, Riverside, San Bernardino, Santa Barbara, and Ventura. Also includes all of Edwards Air Force Base.
Miami-Ft. Lauderdale-Pompano Beach: Counties of Broward, Miami-Dade, Monroe, and Palm Beach
Milwaukee-Racine-Waukesha: Counties of Milwaukee, Ozaukee, Racine, Washington, and Waukesha
Minneapolis-St. Paul-St. Cloud: In Minnesota, Counties of Anoka, Benton, Carver, Chisago, Dakota, Goodhue, Hennepin, Isanti, McLeod, Ramsey, Rice, Scott, Sherburne, Stearns, Washington, and Wright
In Wisconsin, Pierce and St. Croix Counties
New York-Newark-Bridgeport: In New York, Counties of Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Ulster, and Westchester
In New Jersey, Counties of Bergen, Essex, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, and Warren. Also includes all of Joint Base McGuire-Dix-Lakehurst.
In Connecticut, Fairfield, Litchfield, and New Haven Counties
In Pennsylvania, Monroe and Pike Counties
Philadelphia-Camden-Vineland: In Pennsylvania, Counties of Berks, Bucks, Chester, Delaware, Montgomery, and Philadelphia
In New Jersey, Counties of Atlantic, Burlington (except for portions there of Joint Base McGuire-Dix-Lakehurst, all which is in the New York-Newark-Bridgeport locality), Camden, Cape May, Cumberland, Gloucester, and Salem
In Delaware, Kent and New Castle Counties
In Maryland, Cecil County
Phoenix-Mesa-Scottsdale: Maricopa and Pinal Counties
Pittsburgh-New Castle: Counties of Allegheny, Armstrong, Beaver, Butler, Fayette, Lawrence, Washington, and Westmoreland
Portland-Vancouver-Hillsboro: In Oregon, Counties of Clackamas, Columbia, Marion, Multnomah, Polk, Washington, and Yamhill
In Washington, Clark and Skamania Counties
Raleigh-Durham-Cary: Counties of Chatham, Durham, Franklin, Harnett, Johnston, Orange, Person, and Wake, and the Federal Correctional Complex at Butner, N.C.
Richmond: Counties of Amelia, Caroline, Charles City, Chesterfield, Cumberland, Dinwiddie, Goochland, Hanover, Henrico, King and Queen, King William, Louisa, New Kent, Powhatan, Prince George, and Sussex, cities of Colonial Heights, Hopewell, Petersburg, and Richmond
Sacramento-Arden-Arcade-Yuba City: In California, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo, and Yuba Counties
In Nevada, Counties of Douglas and Carson City
San Diego-Carlsbad-San Marcos: San Diego County
San Jose-San Francisco-Oakland: Counties of Alameda, Contra Costa, Marin, Monterey, Napa, San Benito, San Francisco, San Joaquin, San Mateo, Santa Clara, Santa Cruz, Solano, and Sonoma
Seattle-Tacoma-Olympia: Counties of Island, King, Kitsap, Mason, Pierce, Skagit, Snohomish, Thurston, and Whatcom
Washington-Baltimore-Northern Virginia: District of Columbia
In Maryland, the Counties of Anne Arundel, Baltimore, Calvert, Carroll, Charles, Frederick, Harford, Howard, Montgomery, Prince George’s, Queen Anne’s, St. Mary’s, and Washington and Baltimore city
In Virginia, the Counties of Arlington, Clarke, Culpeper, Fairfax, Fauquier, Frederick, King George, Loudon, Prince William, Spotsylvania, Stafford, Warren and the cities of Alexandria, Fairfax, Falls Church, Fredericksburg, Manassas, Manassas Park, and the city of Winchester
In Pennsylvania, Adams and York Counties
In West Virginia, the Counties of Berkeley, Hampshire, Jefferson, and Morgan
Rest of U.S. (RUS): Portions of the contiguous states not in a metropolitan locality area
Other Non-Foreign Areas: U.S. territories and possessions.
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Within-grade increases are pay increases received by federal employees after they have served a specified amount of time at a certain grade level and demonstrated at least an acceptable level of performance. Within-Grade increases, which also are known as “step increases,” are provided for by Title 5, Section 5335 of the U.S. Code. Regulations are at 5 CFR 531, subpart D.
Generally, employees who are not at the highest step of their grade are entitled to receive the within-grade raise authorized for the next step of their position as long as they: complete the required waiting period, have received at least a “fully successful” (or equivalent) rating for their most recent performance appraisal period, and did not receive an equivalent increase during the waiting period. (For a definition of “equivalent increase,” see 5 CFR 531.403 and 531.407.) They must also be occupying a permanent position, which means a position filled by an employee whose appointment is not designated as temporary and does not have a definite time limitation of one year or less. Permanent position includes a position to which an employee is promoted on a temporary or term basis for at least one year.
A WGI waiting period begins upon first appointment in the federal service, receipt of an equivalent increase, or after a period of non-pay status and/or a break in service in excess of 52 calendar weeks.
Civilian employment in any branch of the federal government (Executive, Legislative, or Judicial) or with a government corporation is creditable service in the computation of a waiting period. Service credit is given for periods of annual, sick, and other leave with pay and service under a temporary or term appointment. See 5 CFR 531.406 for special rules regarding the crediting of military service, time in a non-pay status, time during which an employee receives injury compensation, and certain other periods of service.
A within-grade increase is effective on the first day of the first pay period beginning on or after the completion of the required waiting period.
Under 5 CFR 531.405, waiting periods for within-grade increases for General Schedule grades are as follows:
• 52 calendar weeks to be advanced to steps 2, 3, and 4;
• 104 calendar weeks to be advanced to steps 5, 6, and 7; and
• 156 calendar weeks to be advanced to steps 8, 9, and 10.
For wage grade employees, the waiting periods are:
• six months to be advanced to step 2;
• 18 months to be advanced to step 3;
• two years to be advanced to step 4; and
• two years to be advanced to step 5.
For an employee who performs service under a non-GS federal pay system which is potentially creditable towards a within-grade increase waiting period, an equivalent increase is considered to occur at the time of any of the following personnel actions:
• a promotion to a higher grade or work level (unless the promotion is cancelled and the employee’s rate of basic pay is redetermined as if the promotion had not occurred); or
• an opportunity to receive a within-level or within-range increase that results in (or would have resulted in) forward movement in the applicable range of rates of basic pay, meaning any kind of increase in the employee’s rate of basic pay other than an increase that is directly and exclusively linked to (1) a general structural increase in the employee’s basic pay schedule or rate range (including the adjustment of a range minimum or maximum) or (2) the employee’s placement under a new basic pay schedule within the same pay system.
The personnel actions above must have occurred within the same pay system. That is, even if an employee receives an increase in pay moving between pay systems, that “promotion” or other pay increase is not considered an equivalent increase.
An Office of Personnel Management memo to agencies dated June 8, 2011 (at www.chcoc.gov/transmittals) stressed that within-grade increases are not automatic and should not be granted to employees with ratings of record below the fully successful level.
Further information on eligibility requirements and payment procedures is at www.opm.gov/oca/pay/html/wgifact.asp.
Quality Step Increases
Under 5 CFR 531, subpart E, a one-step increase to basic pay can be granted to recognize employees in the General Schedule who have received the highest available rating of record and meet agency criteria, and provide faster than normal progression through the step rates of the General Schedule. Unlike other forms of monetary recognition, quality step increases permanently increase an employee’s rate of basic pay. No more than one may be granted to an individual employee in the same 52-week period.
A quality step increase can only be granted to an employee whose most recent rating of record is Level 5, or, if covered by an appraisal program that does not use a Level 5 summary, the employee receives a rating of record at the highest summary level used by the program and demonstrates sustained performance of high quality significantly above the “fully successful” level. Employees also must meet agency-specified criteria for qualifying for a quality step increase.
A separate written justification is not required. However, OPM strongly encourages agencies to require some form of recorded justification. The agency should be able to show that the proposed recipient has performed at a truly exceptional level to justify a permanent increase in his or her rate of basic pay.
Peer nomination for quality step increases is permissible. However, some process would need to be set up to ensure that nominated employees meet the eligibility criteria. Also, under Section 531.501 of Title 5, Code of Federal Regulations, final authority for granting quality step increases remains with management.
A quality step increase does not affect the timing of an employee’s next regular within-grade increase unless the quality step increase places the employee in step 4 or step 7 of his or her grade. In these cases, the employee becomes subject to the full waiting period for the new step—104 weeks or 156 weeks, respectively—and the time an employee has already waited counts towards the next increase. The employee receives the full benefit of receiving a within-grade increase at an earlier date and has not lost any time creditable towards his or her next within grade increase.
Pay Upon Promotion
General Schedule—An agency that promotes an employee from one General Schedule (GS) grade to another grade must set the employee’s pay at a rate of the higher grade that will pay at least the equivalent of a two-step increase in the grade from which the worker was promoted (see 5 U.S.C. 5334(b) and 5 CFR Part 531.203 - 531.206, 531.214, and 531.243). When the two-step increase falls between step rates of the higher grade, the higher of the two rates is paid. When an employee’s official worksite is changed to a new location upon promotion where different pay schedules apply, the agency must convert the employee to the applicable pay schedule(s) and rate(s) of basic pay for the new official worksite based on the employee’s position of record before promotion before applying the two-step promotion rule.
An agency may use the maximum payable rate provisions of 5 CFR 531.221 through 531.223 (see below) to set an employee’s pay at a higher rate upon promotion.
Also see www.opm.gov/oca/pay/html/promotion.asp.
Note: Competitive service GS employees in grades 5 and above must serve 52 weeks in a grade before becoming eligible for promotion to the next grade.
Wage System—An agency that promotes an employee from one federal wage system grade to a higher federal wage system grade must set the employee’s pay at a rate of the higher grade that will pay at least 4 percent more than the payline rate (normally step 2) of the grade from which promoted.
Maximum Payable Rate
The maximum payable rate rule (see 5 CFR 531.221-223 and www.opm.gov/oca/pay/html/MPRRule.asp) allows an agency to set pay for a General Schedule employee at a rate above the rate that would be established using normal rules, based on a higher rate of pay the employee previously received in another federal job. The pay set under the maximum payable rate rule may not exceed the rate for step 10 of the GS grade or be less than the rate to which the employee would be entitled under normal pay-setting rules. The maximum payable rate rule may be used in various pay actions, including re-employment, transfer, reassignment, promotion, demotion, or change in type of appointment.
The highest previous rate must be a rate of basic pay received by an employee while serving on a regular tour of duty under an appointment not limited to 90 days or less, or for a continuous period of not less than 90 days under one or more appointments without a break in service. The highest previous rate is:
• the highest rate of basic pay previously received by an individual while employed in a civilian position in any part of the federal government (including service with the government of the District of Columbia for employees first employed by that government before October 1, 1987), without regard to whether that position was under the GS system; or
• the highest rate of basic pay in effect when a GS employee held his or her highest GS grade and highest step within that grade.
If the highest previous rate is a locality rate, the underlying GS rate or a law enforcement officer special basic rate associated with that locality rate must be used as the highest previous rate in applying the maximum payable rate rule.
An agency may use a GS employee’s special rate as the highest previous rate under certain circumstances.
Grade and Pay Retention
The grade and pay retention provisions provide pay protection for employees whose grade or pay is reduced due to a management action for which they are not responsible. If an employee is under grade or pay retention prior to transferring to another agency, the gaining agency generally must continue the employee’s grade or pay retention entitlement, absent the occurrence of one of the terminating events set forth in law and regulation, such as a break in service of one workday or more or demotion at the employee’s request.
Grade Retention—An agency must provide grade retention (see 5 U.S.C. Chapter 53, subchapter VI and 5 CFR Part 536) to an employee who moves from a position under a covered pay system to a lower-graded position under a covered pay system as a result of reduction-in-force (RIF) procedures or a reclassification process. An employee is eligible for grade retention as a result of a RIF only if the employee has served for at least 52 consecutive weeks in one or more positions under a covered pay system at one or more grades higher than the grade of the position in which the employee is placed. An employee is eligible for grade retention based on a reclassification of his or her position only if, immediately before the reduction in grade, that position was classified at the existing grade or a higher grade for a continuous period of at least one year.
An agency may provide grade retention to an employee moving from a position under a covered pay system to a lower-graded position under a covered pay system when management announces a reorganization or reclassification decision in writing that may or would affect the employee and the employee moves to a lower-graded position (either at the employee’s initiative or in response to a management offer) on or before the date the announced reorganization or reclassification is effected. An employee is eligible for optional grade retention only if, immediately before being placed in the lower grade, the employee has served for at least 52 consecutive weeks in one or more positions under a covered pay system at one or more grades higher than that lower grade.
An employee is entitled to retain the grade held immediately before the action that provides entitlement to grade retention for two years beginning on the date the employee is placed in the lower-graded position, unless grade retention is terminated. Eligibility for mandatory grade retention ceases or grade retention terminates if any of the following conditions occur: the employee has a break in service of one workday or more; the employee is reduced in grade for personal cause or at the employee’s request (based on the grade of the employee’s position of record rather than the employee’s retained grade); the employee moves to a position under a covered pay system with a grade that is equal to or higher than the retained grade (excluding temporary promotions); the employee declines a reasonable offer of a position with a grade equal to or higher than the retained grade; the employee elects in writing to terminate the benefits of grade retention; or the employee moves to a position not under a covered pay system. An employee whose grade retention benefits are terminated based on a declination of a reasonable offer of a position the grade of which is equal to or higher than his or her retained grade may appeal the termination to the Office of Personnel Management under 5 CFR Part 536, subpart D.
An agency must treat an employee’s retained grade as the employee’s grade for almost all purposes, including pay and pay administration and premium pay. If the employee’s actual position of record is under a different covered pay system than the covered pay system associated with the retained grade, the agency also must treat the employee as being under the covered pay system associated with the retained grade for the same purposes. For example, if an employee in a General Schedule position is placed in a lower-graded wage system position as a result of a RIF and retains the grade of the GS position, the agency must treat the employee as a GS employee for almost all purposes.
When an employee’s existing pay schedule is adjusted or a new pay schedule that covers the employee’s existing position of record (for the retained grade) is established (for example, establishment of a new special rate schedule) while the employee is entitled to grade retention, the employee receives the same pay adjustments as any employee at the same grade and step. An employee who is receiving a retained rate while entitled to grade retention is entitled to 50 percent of the increase in the maximum rate of the highest applicable rate range for the employee’s position and retained grade.
At the end of the two-year period, the grades of these employees will be lowered. Should their pay at that time exceed the maximum rate of their new grades, they will retain their current rate of pay except that their retained rate may not exceed 150 percent of the top rate of the grade to which they are reduced. Thereafter, if a general federal pay increase is awarded, the retained rate will be increased by 50 percent of the dollar increase in the maximum rate (for example, step 10) of the employee’s grade.
Such employees are eligible to receive the full amount of any applicable locality payment, in addition to the retained rate. If or when their pay is lower than or equal to the maximum rate of their new grades, they will be placed at the maximum rate and they will then receive the full General Schedule pay increase.
An employee is not eligible for grade retention if the employee was serving under a term or temporary appointment in the position from which he or she was downgraded as a result of RIF procedures. However, the fact that the employee accepts a temporary or term appointment in conjunction with being downgraded does not affect the employee’s entitlement to grade retention.
Similarly, if an employee who is already under grade retention receives a temporary or term appointment via reassignment or transfer, the employee would remain entitled to grade retention, unless one of the terminating events specified in law and regulation occur. (See 5 U.S.C. 5362(d) and 5 CFR 536.208.)
Also see www.opm.gov/oca/pay/html/grade_retention.asp.
Pay Retention—An agency must provide pay retention (see 5 U.S.C. Chapter 53, subchapter VI and 5 CFR Part 536) to an employee who moves from a position under a covered pay system whose payable rate of basic pay would be reduced (after application of any applicable geographic conversion) as a result of: the expiration of the two-year period of grade retention under 5 CFR Part 536, subpart B; a RIF or reclassification action that places an employee in a lower-graded position when the employee does not meet the eligibility requirements for grade retention under 5 CFR Part 536, subpart B; a management action that places an employee in a non-special rate position or in a lower-paid special rate position from a special rate position; a management action that places an employee under a different pay schedule; a management action that places an employee in a formal employee development program generally utilized government-wide, such as upward mobility, apprenticeship, and career intern programs; the application of the promotion rule for GS or prevailing rate employees when the employee’s payable rate of basic pay after promotion exceeds the maximum rate of the highest applicable rate range; or a reduction or elimination of scheduled rates, special schedules, or special rate schedules (excluding a statutory reduction in scheduled rates of pay under the General Schedule or prevailing rate schedule). An agency may provide pay retention to an employee not entitled to mandatory pay retention whose payable rate of basic pay otherwise would be reduced as a result of a management action.
An agency may not provide pay retention to an employee who: is reduced in grade or pay for personal cause or at the employee’s request; was employed on a temporary or term basis immediately before the action causing the reduction in grade or pay; is entitled to receive a saved rate of basic pay under 5 CFR 359.705 because of removal from the Senior Executive Service; moves from an Executive Schedule or equivalent position; or moves between positions not under a covered pay system or from a position under a covered pay system to a position not under a covered pay system.
When the maximum rate of the highest applicable rate range for an employee’s position of record is increased while the employee is receiving a retained rate, the employee is entitled to 50 percent of the amount of the increase in that maximum rate. This 50 percent adjustment rule applies only when the maximum rate increases are attributable to the adjustment of the employee’s existing pay schedule or the establishment of a new pay schedule that covers the employee’s existing position of record (for example, establishment of a new special rate schedule).
A newly established retained rate may not exceed 150 percent of the maximum payable rate of basic pay of the highest applicable rate range for the grade of the employee’s position of record, or the rate for level IV of the Executive Schedule. In addition, a retained rate may not exceed the rate for level IV of the Executive Schedule. The 150 percent limitation is applicable only when a retained rate is established.
A retained rate is considered to be an employee’s rate of basic pay for the purpose of computing or applying retirement deductions, contributions, and benefits; life insurance premiums and benefits; premium pay; severance pay; and General Schedule and prevailing rate pay administration provisions.
Eligibility for pay retention ceases or pay retention terminates if any of the following conditions occurs (after applying any applicable geographic conversion): the employee has a break in service of one workday or more; the employee is entitled to a rate of basic pay under a covered pay system which is equal to or greater than the employee’s retained rate (excluding a rate resulting from a temporary promotion or temporary reassignment); the employee declines a reasonable offer of a position in which the employee’s rate of basic pay would be equal to or greater than the employee’s retained rate; the employee is reduced in grade for personal cause or at the employee’s request (based on the grade of the employee’s position of record rather than the employee’s retained grade); or the employee moves to a position not under a covered pay system.
Also see www.opm.gov/oca/pay/html/pay_retention.asp.
Superior Qualifications and Special Needs Pay-Setting Authority
Agencies may set the rate of basic pay of a newly appointed employee at a rate above the minimum rate of the appropriate General Schedule grade because of the superior qualifications of the candidate, or a special need of the agency for the candidate’s services (see 5 U.S.C. 5333 and 5 CFR 531.212). The authority extends to an employee newly appointed (meaning first appointment to the federal government or reappointment after a break in service of at least 90 days) to any General Schedule position, including permanent and temporary positions in the competitive or excepted service.
Under the federal wage system, special qualification appointments allow an employing agency to set pay at a rate above step 1 of the appropriate grade level for candidates with highly specialized skills in an occupation.
Agencies must document: the superior qualifications of the individual or special agency need for the candidate’s services that justifies a higher minimum rate; the factor(s) and supporting documentation that were used to justify the rate at which the employee’s pay is set; and the reason(s) for authorizing a higher minimum rate instead of or in addition to a recruitment incentive under 5 CFR Part 575, subpart A.
Also see www.opm.gov/oca/pay/html/SQAFacts.asp.
Incentive Awards and Payments
The basis for a federal agency granting an award to an individual or a group is that the contribution made benefits the government by reducing costs or improving government operations or services. Such awards may range from honorary recognition, such as a certificate or medal, to a cash award. Cash awards may be based on overall high-level performance, a special act or service, or a suggestion. Awards of over $10,000 are subject to OPM approval (except at the IRS and the Department of Defense), while those over $25,000 are subject to Presidential approval.
Regulations governing awards are at 5 CFR 451. Also see www.opm.gov/perform.
Awards for suggestions, inventions, and special acts or services can be determined on the basis of benefits to the government, either tangible (measurable in dollars) or intangible (such as improved services to the public). When benefits to the government can be measured in dollars—such as reduction in production time, staff-hours, supplies, equipment, and/or space—awards sometimes are based on money saved during the first year the suggested improvement or other contribution is in effect. Performance-based cash awards, because they reward overall performance of assigned duties, typically represent a percentage of the employee’s basic pay and are granted as a lump-sum cash award. However, there are certain restrictions that apply when these awards are calculated as a percentage of basic pay.
In designing their award programs, agencies have a responsibility to look beyond the award regulations themselves and make sure that the specific reward and incentive programs that are being proposed do not conflict with other laws or regulations. Examples of other rules that can be directly related to incentive/reward schemes are procurement, travel, Fair Labor Standards Act, and tax withholding.
Relative comparisons among individuals or groups, such as rank ordering or categorizing employees, can be used for making decisions about distributing awards. For example, agencies may limit awards to the top three producers or teams, or limit awards to those individuals or groups that exceeded certain goals. Agencies can also establish criteria for categories of awards that are given only to a selected number of recipients who best fit the criteria, although the criteria might have been met by more than one person or team.
In addition to the forms of recognition described below, some agencies have developed awards to recognize individual and organizational achievement. These are used, for example, to emphasize the need for paperwork reduction, to improve safety, to increase productivity, as well as to support other management objectives. Also, a number of agencies use competitive-based awards to encourage further excellence in the performance of duties. Examples of these special awards include “Employee of the Year,” “Supervisor of the Year,” “Writer of the Year,” etc.
Rating-Based Awards—A performance-based cash award, commonly known as a rating-based award, is a lump-sum cash payment authorized by 5 U.S.C. 4505a and 5 CFR 451.104 of up to $10,000 without OPM approval and up to $25,000 with OPM approval. It requires only the most recent rating of record as the sole justification for the award. Agencies may calculate the awards as a lump-sum dollar amount, a percentage of base pay, or may use some other method such as assigning shares to rating levels.
If agencies grant rating-based awards, they must base such awards on a rating of record of “fully successful” (or equivalent) or higher and they must ensure that the awards make meaningful distinctions based on levels of performance. That is, employees with higher ratings of record must receive higher dollar amounts than those with lower ratings of record. For example, an award program must grant GS-9s who receive an outstanding rating a higher dollar amount than GS-9s who receive a fully successful rating. Agencies may use their discretion whether to pay rating-based awards as a lump-sum dollar amount or a percentage of base pay. Agencies using pass/fail programs must ensure that employees who receive a rating-based award for a “pass” rating performed at the equivalent of fully successful performance or better.
Agencies have the flexibility to establish their own policies, which may include specifying the rating level(s) needed to receive a rating-based award. There is no entitlement to any award.
Group Incentive Awards—Agencies can support continuing progress toward organizational goals by using gainsharing or goalsharing incentive programs. Gainsharing awards are designed to promote higher levels of performance through the involvement and participation of employees. As productivity improves, employees share in a portion of the financial gain. Goalsharing awards are triggered by reaching goals established for the group or organization as a whole.
Suggestion Programs—Some agencies have programs to reward employee ideas and innovations such as saving time, materials, or paperwork; simplifying procedures or processes; or improving services.
Other Cash Awards—Federal agencies also can make other types of cash awards to recognize exceptional performance or a significant achievement on the part of an individual employee or group of workers. Types of recognition and examples of the kind of contributions that can earn recognition include:
• Special Act or Service Awards—These usually are lump-sum cash awards to recognize specific accomplishments that are in the public interest and have exceeded normal job requirements. Special act or service awards are based on contributions such as work on a special project, performance exceeding job requirements on a particular assignment or task, a scientific achievement, or an act of heroism. These awards can be for individual or group contributions. On-the-spot awards are special act or service awards which normally provide immediate recognition for employees.
• Quality Step Increases—Quality step increases are one-step increases to basic pay as a form of performance recognition. See Quality Step Increases, above.
• Presidential Rank Awards—Members of the Senior Executive Service (SES) compete for Meritorious or Distinguished Rank Awards of 20 or 35 percent of basic pay (senior executives are also eligible for performance bonuses of 5 to 20 percent of their basic pay). See Awards and Bonuses in Chapter 8, Section 9. Agency heads may nominate senior level (SL) or senior scientific or technical (ST) employees to be awarded the ranks of Distinguished Senior Professional for sustained extraordinary accomplishment and Meritorious Senior Professional for sustained accomplishment, in a manner similar to the nominations of career members of the SES. The eligibility criteria are consistent with criteria for the SES.
To be eligible for a rank award, an SES, SL or ST employee must hold a career appointment and be an employee of the agency on the nomination deadline and have at least three years of career or career-type federal civilian service at that level (service need not be continuous but does not include non-career, limited term, or limited emergency appointments).
Agencies nominate individuals for rank awards in accordance with OPM criteria and instructions. OPM reviews the recommendations and recommends to the President which of those individuals should receive rank awards. Each agency may nominate up to 9 percent of its SES, SL or ST career appointees for rank awards. During any fiscal year the number of employees awarded the rank of Meritorious may not exceed 5 percent of the total number of career appointees in those positions and the number of employees awarded the rank of Distinguished may not exceed 1 percent.
Receipt of the Distinguished rank award entitles the individual to a lump-sum payment of an amount equal to 35 percent of annual basic pay, in addition to the basic pay paid under 5 U.S.C. 5376 or 5382, or any award paid under 5 U.S.C. 5384. Receipt of the Meritorious rank award entitles the individual to a lump-sum payment of an amount equal to 20 percent of annual basic pay, in addition to the basic pay paid under 5 U.S.C. 5376 or 5382, or any award paid under 5 U.S.C. 5384. Payment of rank awards must comply with the restrictions on annual aggregate compensation at 5 U.S.C. 5307.
Cash Surrogates—Cash surrogates are an option for cash awards, subject to the limitations and requirements that apply to cash awards. Examples of cash surrogates are “award vouchers” created by the agency itself that can be exchanged for currency through its imprest fund and “gift cheques” that are purchased through a vendor and that are easily and widely redeemable for cash, not merchandise. Recipients of cash surrogates must have the same freedom and control over how that award may be used as they would have over any currency or U.S. Treasury check they might otherwise receive as a cash award, including the option of saving the money or turning it over to any third party (for example, a charity or other individual).
Time-off Awards (TOAs)—A TOA is a grant of time off without charge to leave or loss of pay to an employee as an individual or member of a group. A TOA may not be converted to cash.
Technically, there is no legal bar to offering employees a choice between cash and time-off award. However, OPM strongly recommends that agencies not offer such a choice. To do so would put the employee who opts for time-off in “constructive receipt,” for tax withholding purposes, of the cash award offered. Appropriate withholding based on the cash award offered would have to be done at the time the choice is offered (that is, when the employee reasonably would be expected to receive the cash), rather than based on the pay associated with the time off when the time off is actually taken.
Training or Equipment as an Award—An agency may provide training or purchase equipment as a form of award within a recognition program that contemplates such forms of recognition. It would be subject to all relevant training and procurement regulations, limitations, and requirements.
Honorary Awards—An honorary award is a gesture of respect given to an employee to recognize his or her performance and value to the organization. Honorary awards are generally symbolic. Many agencies include as part of their overall incentive awards programs a traditional form of high-level, formal “honor awards.” A listing of honor awards sponsored by a variety of federal and nonfederal organizations is at www.opm.gov/perform/honorawd.asp.
Often, such honor award programs do not use monetary recognition, but emphasize providing formal, symbolic recognition of significant contributions and publicly recognizing employees as examples for other employees to follow. They typically involve formal nominations, are granted in limited numbers, and are approved and presented by senior agency officials in formal ceremonies. The items presented, such as engraved plaques or gold medals, are principally symbolic in nature. Many honorary awards are provided along with cash or time-off awards. As mementos, such non-monetary honorary award items may be of only nominal value (for example, simple certificates in inexpensive frames, lapel pins, paperweights). Nonetheless, all items used as honorary awards must meet specific criteria.
Informal Recognition Awards—Informal recognition awards are a type of award that may be given to reward performance that otherwise might not merit an award such as cash, time-off, or an honorary award. Agencies use these awards to provide more frequent and timely informal recognition to employees. Items presented as informal recognition awards must be of nominal value and must take an appropriate form to be used in the public sector and to be purchased with public funds.
Referral Bonuses—Agencies can use the incentive awards authority (5 U.S.C. 4503 and 5 CFR Part 451) to establish a referral bonus program that provides incentives to employees who bring new talent into the agency. A referral bonus goes to the person who refers a job applicant who is selected and successfully employed, not to the new employee.
Referral bonuses can take the form of cash awards or grants of paid time off. For example, a certain amount might be granted for making a referral, an increased amount if the person is hired and an additional increase if the person works for the agency for a defined period. Amounts also may increase for making subsequent referrals.
Each agency must determine whether and under what circumstances using referral bonuses is appropriate. OPM guidance says these bonuses might be suitable for employees whose regular job duties do not include recruitment, but who promote employment with their agency and refer potential new employees to their human resources offices. An agency must ensure that its referral bonus program does not violate the legal requirements for broad public awareness of job openings; recruitment from appropriate sources to seek a workforce drawn from all segments of society; and hiring selections based solely on relative ability, knowledge, and skills after a fair and open competition that assures equal opportunity to all candidates. See www.opm.gov/perform/referralbonuses.asp.
Agencies may recognize the outstanding accomplishments of their employees whose job is to recruit and hire new employees through their regular awards processes.
Non-Foreign Area Allowances and Differentials
Non-Foreign Area COLAs—Through 2009, federal agencies paid cost-of-living allowances (COLAs) of up to 25 percent of basic pay to certain employees stationed in Alaska, Hawaii, Guam and the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. These “non-foreign area” COLAs were not taxable but did not count as basic pay toward retirement benefits. Rates were based on comparisons with living costs in Washington, DC. Most of the affected employees were in the General Schedule, but the program also applied to employees in several high-level salary systems such as the Senior Executive Service as well as to employees paid under the Postal Service Schedule.
P.L. 111-84 of 2009 ordered replacing those COLAs over 2010-2012 with locality pay, which does count toward retirement benefits, under the same system applying to employees in the contiguous 48 states. The COLAs were phased out on a schedule designed to preserve the take-home salaries of those employees as the nontaxable COLA was replaced with taxable locality pay.
Under rules at 5 CFR Part 531, effective in 2011 Alaska and Hawaii were established as separate locality pay areas, while the other non-foreign areas collectively became a separate locality.
Employees who retired during the phase-in period could elect to treat any amount of COLA they received during that period as part of their base pay as if it were locality pay, although they had to pay additional retirement contributions on that amount. See Non-foreign Area Service in Chapter 3, Section 4.
Special provisions apply to certain postal employees, special rate employees, members of the Senior Executive Service, and those in agency-specific personnel systems.
For COLA rates preceding and during the phase-in, see www.opm.gov/oca/cola/COLA10_12.asp.
Post Differentials—Non-foreign post differentials are allowances of up to 25 percent of the employee’s basic pay, paid to compensate employees required to work in areas where there are extraordinarily difficult living conditions, excessive physical hardship, or notably unhealthful conditions. The current rates are 25 percent in American Samoa and its island group, Johnston Island, Sand Island, Midway Islands and Wake Island, and 20 percent in Guam and the Northern Mariana Islands.
Post differentials are subject to income tax. They do not count for federal retirement purposes. See www.opm.gov/oca/cola/postdifferential.asp.
Extended Assignment Incentives
Under 5 U.S.C. 5757 and 5 CFR 575, subpart E, agencies may pay an extended assignment incentive (EAI) to eligible federal employees assigned to positions located in a territory or possession of the United States, the Commonwealth of Puerto Rico, or the Commonwealth of the Northern Mariana Islands to assist the agencies in retaining experienced, well-trained employees in these locations for a longer period than the employee’s initial tour of duty.
The incentive is payable if the employee has completed at least two years of continuous service in one of those areas and the agency determines that replacing the employee would be difficult and that it is in the best interest of the government to encourage the employee to complete a specified additional period of employment with the agency in one of the covered locations. The employee must sign a written service agreement to complete a specified period of additional employment; the total amount of service an employee may perform in a particular territory, possession, or commonwealth under one or more EAI service agreements with an agency may not exceed five years.
The payment may not exceed the greater of 25 percent of the annual rate of basic pay or $15,000 per year in the service period. An EAI is not considered part of an employee’s rate of basic pay for any purpose. See www.opm.gov/oca/pay/html/EAIFacts.asp.
The Secretary of State authorizes danger pay under 5 U.S.C. 5928 for locations in foreign areas in which civil insurrection, terrorism, wartime conditions and similar conditions threaten physical harm or imminent danger to the health or well-being of employees.
Danger pay is authorized at rates of up to 35 percent, in 5 percentage point increments. Danger pay is payable to eligible civilian employees accompanying military members authorized to receive imminent danger pay by the Secretary of Defense. This allowance is the same amount paid to uniformed military personnel, calculated on a daily basis. A list of currently authorized danger pay allowances is at http://aoprals.state.gov/web920/danger_pay_all.asp.
Under 5 CFR 531, a locality rate of pay is considered basic pay for the purpose of computing danger pay allowances for certain employees temporarily assigned to work in foreign areas for which the Department of State has established a danger pay allowance.
Foreign Post (Hardship) Differential
The State Department authorizes a foreign post differential under 5 U.S.C. 5925 when it determines that an overseas location involves extraordinarily difficult living conditions, excessive physical hardship, or notably unhealthful conditions affecting the majority of government employees assigned to the location. Living costs are not considered in the differential determination.
A foreign post differential is authorized at rates of up to 35 percent, in 5 percentage point increments. The differential is payable as a percentage of pay, including applicable locality rates, to individuals officially assigned to a post who are also eligible for a living quarters allowance. Additionally, the differential is payable to employees on detail to such posts after 42 consecutive days at the post. A list of currently authorized foreign post differentials is at http://aoprals.state.gov/web920/hardship.asp.
Foreign Language Proficiency Pay
Some departments and agencies offer foreign language proficiency pay—in some cases, the programs are known by different but similar names—for employees in positions in which proficiency in a language is important to the duties. Terms of the programs vary. In some cases employees are required to pass oral or written proficiency tests and have their fluency rated on a scale.
The pay is given at management’s discretion and may be awarded in terms of a dollar amount per pay period or as a percentage of basic pay up to a cap, commonly 5 percent. The amount can vary according to the level of proficiency, the level of need for proficiency in that language, the difficulty in recruiting and retaining proficient speakers, the extent to which the position requires proficiency, the number of languages in which the employee is proficient, and other factors. In some cases certain terms of the programs are subject to collective bargaining agreements.
The Defense and Homeland Security departments as well as certain intelligence agencies make the greatest use of such pay. The pay is not considered basic pay for any purposes and thus does not count toward retirement, insurance, or any other benefit related to pay.
Hostile Fire Pay
Title 5, U.S.C. 5949 provides the head of an executive agency with discretionary authority to pay an employee hostile fire pay for any hostile action that took place on or after September 11, 2001. The law provides agencies with the authority to pay hostile fire pay at a rate of $150 for any month in which the employee is:
• subject to hostile fire or explosion of hostile mines;
• on duty in an area in which the employee was in imminent danger of being exposed to hostile fire or explosion of hostile mines and in which, during the period of duty in that area, other employees were subject to hostile fire or explosion of hostile mines; or
• killed, injured, or wounded by hostile fire, explosion of hostile mine, or any other hostile action.
Agencies may pay hostile fire pay to an employee hospitalized for the treatment of an injury or wound for not more than three additional months during which the employee is hospitalized. Section 5949 prohibits the payment of hostile fire pay for periods during which an employee receives post differentials, because of exposure to political violence, or danger pay allowances.
Evacuation payments (see 5 U.S.C. 5522-5524, 5 U.S.C. 5526-5527, and 5 CFR Part 550, subpart D) are made to employees or their dependents, or both, who are ordered to be evacuated from or within the United States and certain non-foreign areas in the national interest because of natural disasters or for military or other reasons that create imminent danger to the lives of the employees, their immediate family, or their dependents (note: employees’ same-sex domestic partners and their children qualify, under rules at 5 CFR 550.402, effective July 20, 2012; see Domestic Partners in Chapter 8, Section 4 for qualification standards). The applicable non-foreign areas are listed in the definition of “United States area” in 5 CFR 550.402. Evacuation payments may be made to dependents 16 years of age or older, or to designated representatives, only with prior written authorization from the employee.
When an employee has been ordered to evacuate, agency heads may make advance payments of pay, allowances, and differentials to cover up to 30 calendar days, provided the agency head or designated official determines the payment is required to defray immediate expenses incidental to the evacuation. The initial evacuation payment may cover up to 60 days of pay, allowances, and differentials, including the period covered by the advance payment.
Evacuation payments may be made to cover a total of up to 180 calendar days (including the number of days for which payment has already been made) when employees continue to be prevented from performing their duties by an evacuation order. Employees may also receive additional allowance payments for travel expenses and subsistence expenses (per diem) to offset added expenses they incur as a result of their evacuation or the evacuation of their dependents. (See 5 CFR 550.405.)
Not later than 180 days after the effective date of the order to evacuate, or when the emergency or evacuation is terminated, whichever is earlier, an employee must be returned to his or her regular duty station or reassigned to another duty station. Also see www.opm.gov/oca/pay/html/EVAC.asp.
Under 5 CFR 550.409(b), an agency may provide evacuation payments to an employee who is ordered to evacuate from his or her regular worksite and directed to work from home or an alternative location mutually agreeable to the agency and the employee during a pandemic health crisis. An employee need not have a telework agreement when directed to work from home. Policy on payments in this situation is at www.opm.gov/oca/pay/html/pandevac.asp.
A separate authority applies to employees in foreign areas paid under Chapter 600 of the Department of State Standardized Regulations at http://aoprals.state.gov/web920. Evacuation payments consist of a subsistence allowance to help cover the costs of lodging, meals, laundry, and dry cleaning; local transportation at the safe haven; and an air freight replacement allowance if air freight is not shipped from post. Subsistence amounts are based on the safe haven’s per diem rate if the family is occupying commercial quarters, and vary based on family size. Meals and incidental expenses payments decrease over time. Evacuation payments terminate no later than 180 days after the evacuation order is issued.
Generally, the United States is designated as the official safe haven, and evacuees are required to return to the U.S. to receive allowances. An employee may request designation of an alternate foreign safe haven for special family needs but approval is not guaranteed.
A supervisory differential may be paid to a supervisor under the General Schedule where a subordinate not under the General Schedule, such as a federal wage system employee, otherwise would be earning an equal or greater salary. The supervisor must be providing direct, technical supervision of the subordinate to qualify. Regulations at 5 CFR 475.405 define what types of compensation are used in the comparison.
The differential may not exceed 3 percent of the subordinate’s salary and must be ended when the continuing pay of the supervisor (not including the supervisory differential) exceeds the continuing pay of the highest paid subordinate whose position is not under the General Schedule. The differential also may be terminated or reduced when the agency deems it appropriate under its procedures, such as when the subordinate leaves his or her position or suffers a pay reduction. The reduction or termination of a supervisory differential may not be appealed.
A supervisory differential is not considered part of the supervisor’s rate of basic pay for any purpose.
Physicians Comparability Allowances
Agencies may pay physicians comparability allowances to recruit and retain highly qualified government physicians. In return, the physician must sign at least a one-year service agreement with the agency. The head of an agency determines the size of the allowance, which may not exceed $14,000 yearly for a physician who has served as a government physician for 24 months or less or $30,000 annually for a physician who has served as a government physician for more than 24 months. Office of Management and Budget approval is required. Physicians comparability allowances are basic pay for retirement purposes if certain criteria are met (5 U.S.C. 5948; 5 CFR Part 595). Also see www.opm.gov/oca/pay/html/pca.asp.
Under 5 U.S.C. 5901(a), when federal employees are required to wear a uniform in the performance of their duties—such as police officers, firefighters, customs and border patrol officers and some medical personnel—agencies must pay a uniform allowance, typically of up to $800 a year, or furnish a uniform at a cost not to exceed a similar amount. Specific terms may be set by contract in unionized settings. Agencies have discretionary authority to establish a higher initial (but not recurring) uniform allowance under 5 CFR 591.104. Also see www.opm.gov/oca/pay/html/uniform.asp.
Remote Worksite Allowances
Under 5 U.S.C. 5942, an agency must pay a remote worksite allowance, also known as remote duty pay, of up to $10 a day to an employee who is assigned to non-temporary duty at a site that the agency determines is so remote from the nearest established communities or suitable places of residence as to require an appreciable degree of expense, hardship, and inconvenience beyond that normally encountered in metropolitan commuting. Rules at 5 CFR 591.306(a) also provide for payment of the allowance where daily commuting is impractical because the location of the duty post and available transportation are such that agency management requires employees to remain at the duty post for their workweek as a normal and continuing part of the conditions of employment.
What is Subject to Garnishment—Under 5 CFR Parts 581 and 582, the types of active employee payments that are subject to garnishment pursuant to an order for child support, alimony, or commercial garnishment include virtually all forms of pay, ranging from basic pay to various forms of premium pay, special allowances and awards, overtime, differentials, special pay adjustments, incentives, and severance pay. Also subject to garnishment are retirement benefits, dependents’ or survivors’ benefits, refunds of retirement contributions, employee and government contributions to the Thrift Savings Plan, and injury compensation payments.
However, certain types of payments are not subject to garnishment. These include compensation for death under any federal program, benefit payments under “black lung” programs, and Department of Veterans Affairs-paid pensions and service-connected disability or death benefits. Also exempt are reimbursements for expenses incurred by an individual in connection with employment such as travel, transportation, relocation and storage expenses, per diem, along with such allowances and payments as post differentials and allowances, and allowances for uniforms, living in foreign areas, education for dependents, maintenance, home service transfer, quarters, and remote worksites.
In determining the amount of disposable income that can be garnisheed, certain mandatory payments are excluded. These include payments for debts owed to the United States, mandatory retirement deductions, Medicare deductions, health insurance premiums, and deductions for Basic (but not optional) life insurance under the Federal Employees’ Group Life Insurance program.
Funds deducted to pay for benefits under the Federal Employees Dental and Vision Insurance Program are excluded when calculating pay subject to garnishment because 5 CFR 581.105(d) and 5 CFR 582.103(d) exclude amounts which are “deducted as health insurance premiums.” However, funds deducted and deposited in a health savings account are not excluded because an HSA is not considered insurance but rather a savings product that offers consumers another way to pay for their health care (see IRS Publication 969). Therefore, monies allotted by employees to fund HSAs are included when calculating pay subject to garnishment.
Additional restrictions apply to certain federal benefit payments, including federal retirement and Social Security benefits, that are paid by direct deposit. When a financial institution receives a garnishment order against an account holder who receives such benefits, the institution must leave in the account an amount equal to the lower of: the account balance at that time or the sum of such benefit payments deposited to the account in the prior two months. The provisions affecting federal retirement are at 5 CFR Parts 831 and 841, and those affecting Social Security are at 20 CFR Parts 404 and 416. The same policy applies to certain veterans’ benefits under 38 CFR Part 1.
Debt Owed to the Government—Agencies are allowed to make deductions, within certain limits, from an employee’s wages to help pay a debt owed by the worker to the federal government. Generally, under section 5514 of Title 5, U.S. Code, as amended by the Debt Collection Act of 1982, P.L. 97-365, federal agencies are authorized to liquidate an employee’s government indebtedness by making installment deductions, or requiring the debtor’s employing agency to make such deductions, in amounts not to exceed 15 percent of the employee’s disposable pay. Section 652 of Public Law 110-181 extended this authority to employees of a non-appropriated fund instrumentality of the Department of Defense or United States Coast Guard.
Before any deductions may be withheld, however, the agency generally must notify the employee of its intention to collect the debt by setoff. Before making or requiring such debt-payment deductions, an agency generally must also provide notification of the employee’s right to request reconsideration or a waiver of the indebtedness, and of the employee’s right to an administrative hearing conducted by an individual who is not subject to the control of the head of the claiming agency. (If an agency chooses this alternative, the hearing is before an administrative law judge.)
In the event a debtor-employee retires or resigns or otherwise terminates employment before the amount of the indebtedness is completely collected, agencies are authorized to make deductions from later payments of any nature due the individual (for example, from lump-sum payments for leave or retirement contributions; see 5 CFR §550. 1101 et seq.).
The agency head may (with some exceptions) waive the repayment of an erroneous overpayment of pay or allowances (under 5 U.S.C. §5584). Employees also may question the validity of their indebtedness by filing an appeals claim.
In addition, under §124 of P.L.97-276, the government is authorized to enforce a civil judgment against a federal employee involving debts owed the U.S. government through a setoff action against the worker’s pay, without having to resort to the administrative procedures applicable to a debt collection action under 5 U.S.C. §5514. The limitation on offsets of pay under a civil judgment pursuant to §124 is 25 percent of an employee’s pay. Should the employee retire, resign, or terminate employment before the collection is completed, deductions may be made from later payments due the individual, such as lump-sum leave or retirement payments.
Regulations at 5 CFR §831.1801 govern setoff of an agency debt against money payable to the debtor from the Civil Service Retirement and Disability Fund. OPM’s regulations require certification by the agency claiming the debt that it has complied with the applicable administrative procedures before the setoff can be carried out. Under current regulations, no more than 50 percent of a retiree’s net annuity will be withheld, except in cases of fraud or misrepresentation.
Regulations at 5 CFR Part 831, subpart R govern recovery of an overpayment of annuity. In such a situation, OPM generally notifies the annuitant of the amount of the overpayment, the reason(s) it occurred, the right to request reconsideration, waiver and/or compromise, and entitlement to a hearing, if any exists. There is no set limitation on the amount that may be deducted from annuity payments to recover an overpayment of annuity.
Some departments and agencies participate in the Treasury Offset Program, www.fms.treas.gov/debt/top.html, a centralized debt collection program to assist agencies in the collection of delinquent debts owed to the federal government. Under the program, delinquent accounts are subject to administrative offset of government funds due individuals from various sources such as federal income tax refunds, federal salary offset, and payments from other government agencies. Administrative offset is authorized of 100 percent of the balance of the debt from federal income tax refunds, and 15 percent of monthly disposable income from federal annuity and Social Security Administration payments.
Child Support or Alimony—To enforce alimony and child support obligations, the salaries of federal and postal employees, as well as retirees’ annuity payments and Social Security benefits, are subject to garnishment. See Chapter 7, Section 6.
General or Commercial Garnishment—Federal employee pay can be docked to satisfy private debts and state and local tax indebtedness, under 5 U.S.C. 5520a and 15 U.S.C. 1673 (see 5 CFR Part 582). Under the law, federal employees are entitled to similar legal protections (except for cases of tax indebtedness) afforded private sector workers under the Consumer Credit Protection Act. That law specifies legal procedures to be followed and places limits on the percentage of an employee’s salary that can be dunned.
Agencies must honor orders (writs) from any “court of competent jurisdiction,” in most cases meaning state courts.
A writ must be served on the proper agency officials, who will have to notify the employee within 15 days. Agencies will have to honor writs for the collection of any legal debt of the employee and for recovery of attorney’s fees, interest and court costs.
In most cases, such orders specify the total amount that must be taken from the employee’s salary. Agencies will have to honor those orders up to the limits set by the consumer protection law. Generally this is up to 25 percent of net salary. In some places, however, state law sets different limits.
The percentage limits apply after mandatory deductions such as retirement contributions and taxes are taken out. Virtually all forms of pay except for suggestion awards will be counted toward the salary base.
Child support and alimony orders take priority over orders for collecting private, nonfederal debts. If more than one writ is being served, the first one will take priority.
The law applies to Executive Branch, postal, Legislative, and Judicial employees, but not to retiree annuities. Annuities can be docked only for child support, alimony and debts owed to the government.
Back Pay Awards
Regulations at 5 CFR Part 550, subpart H, carry out Section 5596 of Title 5, United States Code, which authorizes the payment of back pay, interest, and reasonable attorney fees for the purpose of making an employee financially whole when the employee is found by an appropriate authority—such as an appeals agency or a decision arising from an unfair labor practice complaint or a grievance—to have been affected by an unjustified or unwarranted personnel action that resulted in the withdrawal, reduction, or denial of all or part of the pay, allowances, and differentials otherwise due to the employee.
In such cases, the agency must compute for the period covered by the corrective action the pay, allowances, and differentials the employee would have received if the unjustified or unwarranted personnel action had not occurred. The amount is reduced by deductions of the type that would have been made from the employee’s pay such as retirement contributions, Social Security, Medicare and other taxes, and insurance premiums.
Interest begins to accrue on the date or dates (usually one or more pay dates) on which the employee would have received the pay, allowances, and differentials if the unjustified or unwarranted personnel action had not occurred. Applicable interest rates, which are set quarterly, and a calculator program are at www.opm.gov/oca/pay/backpay/backpay.asp.
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Agencies have authority to provide additional direct compensation in certain circumstances to support their recruitment, relocation, and retention efforts. Some of these are at an agency’s sole discretion while others require approval of the Office of Personnel Management and/or the Office of Management and Budget. The following summarizes the main compensation flexibilities.
Agency-Based Discretionary Authorities
Highest Previous Rate—Upon re-employment, transfer, reassignment, promotion, demotion, or change in type of appointment, agencies may set the rate of basic pay of an employee by taking into account a rate of basic pay previously received by the individual while employed in another civilian federal position (with certain exceptions). This rate may not exceed the maximum rate of the employee’s grade. (5 U.S.C. 5334(a); 5 CFR 531.202 (definition of “highest previous rate”) and 531.203(c) & (d) for General Schedule employees. See 5 U.S.C. 5343 and 5 CFR 532.405 for the federal wage system.)
Premium Pay, Exceptions to the Biweekly Limitation—An agency may make an exception to the GS-15, step 10, biweekly limitation on premium pay during emergencies involving a direct threat to life or property. If the agency determines that such an emergency exists, the premium pay paid to an employee performing work in connection with that emergency, when added to the employee’s rate of basic pay (including any locality payment or special salary rate), must not cause his or her total pay to exceed the rate for GS-15, step 10 (including any locality payment or special salary rate), on a calendar year basis. (Note: A different limitation applies to law enforcement officers. This limitation does not apply to overtime pay earned under the Fair Labor Standards Act, or to the federal wage system.) (5 U.S.C. 5547(b); 5 CFR 550.106)
Superior Qualifications/Special Needs—Agencies have the authority to set pay for new appointments or reappointments of individuals to General Schedule positions above step 1 of the grade based on superior qualifications of the candidate or a special need of the agency. Under the federal wage system, special qualification appointments allow an employing agency to set pay at a rate above step 1 of the appropriate grade level for candidates with highly specialized skills in an occupation. Agencies must have documentation and record keeping procedures on making superior qualifications or special qualifications appointments in place to make such appointments. (5 U.S.C. 5333; 5 CFR 531.203(b) for General Schedule employees. See 5 U.S.C. 5341 and 5 CFR 532.403(b) for the federal wage system.) Also see Superior Qualifications and Special Needs Pay-Setting Authority in Section 4 of this chapter.
Travel and Transportation Expenses for Interviews and/or New Appointments—An agency, at its discretion, may pay the travel or transportation expenses of any individual candidate for a pre-employment interview or pay travel and transportation expenses for a new appointee to the first post of duty. For either payment, a decision made for one vacancy does not require a like decision for any similar future vacancies. Before authorizing any payments, the agency must consider factors such as availability of funds, desirability of conducting interviews, and feasibility of offering a recruiting incentive. (5 U.S.C. 5706b; 5 CFR Part 572)
Waiver of Dual Pay Limitation—Agencies have authority to waive the limitation (40 hours per week) on aggregate basic pay, when “required services cannot be readily obtained otherwise” and “under emergency conditions relating to health, safety, protection of life or property, or national emergency.” This authority enables an agency to employ a full-time federal employee in a second job or to schedule a part-time agency employee with multiple part-time appointments to work more than an aggregate of 40 hours during a week. The agency pays overtime only when an individual works more than eight hours per day or 40 hours per week for the same agency. (5 U.S.C. 5533; 5 CFR Part 550, subpart E)
Authorities Available with OPM and/or OMB Approval
Critical Position Pay Authority—Under 5 CFR Parts 531, 535, and 536, the Office of Personnel Management, in consultation with the Office of Management and Budget, may increase the rate of basic pay for a position subject to the limit on aggregate compensation established by 5 U.S.C. 5307 and 5 CFR Part 530, subpart B. Under this authority, employing agencies request such authority and OPM can approve rates of pay typically up to the rate for Level II of the Executive Schedule—Level I in exceptional circumstances and above Level I in rare cases. Critical position pay may be authorized for a position that requires expertise of an extremely high level in a scientific, technical, professional, or administrative field and that is critical to the agency’s successful accomplishment of an important mission. It may be granted only to the extent necessary to recruit or retain an individual exceptionally well qualified for the position and only if an agency documents why it could not otherwise fill the position with someone who could perform the duties in a manner sufficient to fulfill the mission. This authority applies to General Schedule employees, senior level and senior scientific and technical employees, members of the Senior Executive Service, Executive Schedule officials, and certain other designated positions. It does not apply to federal wage system employees. Approval of critical position pay for a position does not change other conditions of employment. The pay is creditable as basic pay for all purposes except pay retention and certain adverse action provisions. It is payable to no more than 800 employees government-wide—no more than 30 of them in the Executive Schedule—at any time. (See 5 U.S.C. 5377 and www.opm.gov/oca/pay/html/CriticalPositionPay.asp.)
Recruitment, Relocation, and Retention Incentive Payments—Upon the request of an agency, OPM may approve enhanced recruitment, relocation and retention incentives. See Recruitment, Relocation, and Retention Payments, below.
Special Rates—OPM may establish higher rates of basic pay for an occupation or group of occupations nationwide or in a local area based on a finding that the government’s recruitment or retention efforts are, or would likely become, significantly handicapped without those higher rates. See Special Salary Rates in Section 1 of this chapter.
Increased Minimum Hiring Rate (Federal Wage System)—The increased minimum hiring rate authority allows a lead agency to establish any federal wage system scheduled rate above step 1 as the minimum rate at which a new employee can be hired. When there is an increased minimum rate authorization for an occupation and grade at a particular location, all appointments must be made at the authorized increased minimum rate. (5 U.S.C. 5341; 5 CFR 532.249)
Special Schedules (Federal Wage System)—The special schedule authority allows OPM to establish a federal wage system schedule of rates that are broader in scope than would normally be authorized under the special rates program. Special schedules are established for specific occupations within a geographic area when rates of pay under regular wage schedules prove insufficient for an agency to recruit or retain employees. (5 U.S.C. 5341; 5 CFR 532.254)
Unrestricted Rate Authority (Federal Wage System)—Upon the request of an agency, OPM may approve exceptions to statutory limitations on annual federal wage system pay adjustments for an occupation or group of occupations in a wage area or part of a wage area. (Requires specific authority in the pay limitation legislation; 5 CFR 532.801)
Physicians Comparability Allowance—Agencies may pay physicians comparability allowances to recruit and retain highly qualified government physicians. See Physicians Comparability Allowances in Section 4 of this chapter.
Title 38 Flexibilities for Health Care Employees—Upon the request of the head of an agency, OPM may delegate the discretionary use of certain Department of Veterans Affairs’ personnel authorities under Chapter 74 of Title 38, U.S. Code, to help recruit and retain employees in health care occupations performing direct patient-care services or services incident to direct patient care. (5 U.S.C. 5371)
Recruitment, Relocation, and Retention Payments
Recruitment, relocation, and retention payments—dubbed the “three Rs”—were authorized by the Federal Employees Pay Comparability Act of 1990 (P.L. 101-509). While these payments were originally and primarily intended for General Schedule positions, the Office of Personnel Management also has approved them (see 5 CFR Part 575) for certain other positions, including senior level (SL), senior scientific or technical (ST), career Senior Executive Service, Federal Bureau of Investigation and Drug Enforcement Administration SES, Executive Schedule, law enforcement officer, and prevailing rate positions (see special eligibility rules for group retention incentives, below).
OPM may approve additional specific categories upon written request from an employing agency. A list of the approved categories of employees is at www.opm.gov/3rs/fact/3Rs_extensions.asp; other information is at www.opm.gov/3Rs.
The incentives may not be paid to: Presidential appointees; non-career appointees in the Senior Executive Service; those in positions excepted from the competitive service by reason of their confidential, policy-determining, policy-making, or policy-advocating natures; agency heads; or those expected to receive an appointment as an agency head.
The authority is in 5 U.S.C. 5753 and 5754. These payments are subject to the limit on aggregate compensation established by 5 U.S.C. 5307 and 5 CFR Part 530, subpart B.
Before paying an incentive, an agency must establish a plan that must include the designation of officials with authority to review and approve the payment of incentives, the categories of employees who may not receive incentives, the required documentation for determining eligibility, the amount, the payment methods that may be authorized, requirements governing service agreements, and record keeping requirements.
An agency may determine that a position is likely to be difficult to fill if the agency is likely to have difficulty recruiting candidates with the competencies (that is, knowledge, skills, abilities, behaviors, and other characteristics) required for the position (or group of positions) in the absence of a recruitment or relocation incentive based on a consideration of the factors listed in 5 CFR 575.206(b). An agency may also determine that a position is likely to be difficult to fill if OPM has approved the use of a direct-hire authority applicable to the position.
For the purpose of calculating an incentive, an employee’s rate of basic pay includes a special rate under 5 CFR Part 530, subpart C, a locality payment under 5 CFR Part 531, subpart F, or similar payment under other legal authority, but excludes additional pay of any other kind, such as night pay and environmental differential pay under the federal wage system.
An incentive is not part of an employee’s rate of basic pay for any purpose.
Before receiving an incentive, an employee generally must sign a written agreement to complete a specified period of employment with the agency (see the exception under Retention Incentives, below). The service agreement must specify the length, commencement, and termination dates of the service period; the amount of the incentive; the method and timing of incentive payments; the conditions under which an agreement will be terminated by the agency; any agency or employee obligations if a service agreement is terminated (including the conditions under which the employee must repay an incentive or under which the agency must make additional payments for partially completed service); and any other terms and conditions.
An agency may unilaterally terminate a service agreement based solely on the management needs of the agency, in which case the employee is entitled to incentive payments attributable to completed service and to retain any payments already received that are attributable to uncompleted service. An agency must terminate a service agreement if an employee is demoted or separated for unacceptable performance or conduct, receives a rating of record lower than “fully successful” or equivalent during the service period, or otherwise fails to fulfill the terms of the service agreement. In such cases, the employee may retain any incentive payments attributable to completed service, but must repay any portion of the incentive attributable to uncompleted service.
An agency must notify an employee in writing when it terminates a service agreement. The termination of a service agreement is not grievable or appealable.
Note: Under Compensation Policy Memorandum 2009-11, agencies must certify that the incentives are paid only when necessary to support agency mission and program needs. CPM 2010-04 set additional standards for justifying payments, ordered agencies to more closely monitor their programs with greater scrutiny of costs and benefits, and began a program of OPM tracking usage on an ongoing basis. See www.chcoc.gov/transmittals.
Recruitment Incentives—An agency may pay a recruitment incentive to a newly appointed employee if the agency has determined that the position is likely to be difficult to fill in the absence of an incentive. “Newly appointed” refers to the first appointment (regardless of tenure) as an employee of the federal government, an appointment following a break in service of at least 90 days from a previous appointment as a federal employee, or, in certain cases, an appointment following a break in service of less than 90 days.
For each determination to pay a recruitment incentive, an agency must document in writing the basis for determining that the position is likely to be difficult to fill in the absence of a recruitment incentive, the amount and timing of the incentive payments, and the length of the service period. The determination to pay a recruitment incentive must be made before the prospective employee enters on duty in the position for which recruited.
An agency may target groups of similar positions that have been difficult to fill in the past or that are likely to be difficult to fill in the future and may make the required determination to offer a recruitment incentive on a group basis.
A recruitment incentive may not exceed 25 percent of the employee’s annual rate of basic pay in effect at the beginning of the service period multiplied by the number of years (including fractions of a year) in the service period (not to exceed four years). With OPM approval, this cap may be increased to 50 percent (based on a critical agency need), as long as the total incentive does not exceed 100 percent of the employee’s annual rate of basic pay at the beginning of the service period. (See 5 CFR 575.109(c).) The incentive may be paid as an initial lump-sum payment at the beginning of the service period, in installments throughout the period, as a final lump-sum payment upon completion, on in a combination of these methods. An incentive may be paid to an individual not yet employed who has received a written offer of employment and signed a written service agreement.
The employee’s required service period may not be less than six months and may not exceed four years. The service period must begin upon the commencement of service with the agency and end on the last day of a pay period. The commencement of the service period may be delayed under certain conditions described in 5 CFR 575.110(b).
Relocation Incentives—An agency may pay a relocation incentive to a current employee who must relocate (permanently or temporarily) to accept a position in a different geographic area if the agency determines that the position is likely to be difficult to fill in the absence of an incentive. A relocation incentive may be paid only when the employee’s rating of record under an official performance appraisal or evaluation system is at least “fully successful” or equivalent.
A position is considered to be in a different geographic area if the worksite of the new position is 50 or more miles from the worksite of the position held immediately before the move. If the worksite of the new position is less than 50 miles away, but the employee must relocate to accept the position, an authorized agency official may waive the 50-mile requirement and pay the employee a relocation incentive. In all cases, an employee must establish a residence in the new geographic area before the agency may pay the employee a relocation incentive.
For each relocation incentive authorized, an agency must document in writing the basis for determining that the position is likely to be difficult to fill in the absence of a relocation incentive, the amount and timing of the incentive payments, the length of the service period, and that the worksite of the new position is in a different geographic area than the previous position. The determination to pay a relocation incentive must be made before the employee enters on duty in the position at the new duty station.
An agency may waive the case-by-case approval requirement when the employee is a member of a group of employees subject to a mobility agreement or when a major organizational unit is being relocated to a new duty station.
A relocation incentive may not exceed 25 percent of the employee’s annual rate of basic pay in effect at the beginning of the service period multiplied by the number of years (including fractions of a year) in the service period (not to exceed four years). With OPM approval, this cap may be raised to 50 percent (based on a critical agency need), as long as the total incentive does not exceed 100 percent of the employee’s annual rate of basic pay at the beginning of the service period. (See 5 CFR 575.209(c).) The incentive may be paid as an initial lump-sum payment at the beginning of the service period, in installments throughout the service period, as a final lump-sum payment upon completion of the service period, or in a combination of these methods.
The service period must begin upon the commencement of service at the new duty station and end on the last day of a pay period. The commencement of the service period may be delayed under certain conditions described in 5 CFR 575.210(b).
Retention Incentives—An agency may pay a retention incentive to a current employee if the agency determines that the unusually high or unique qualifications of the employee or a special need of the agency for the employee’s services makes it essential to retain the employee and that the employee would be likely to leave in the absence of a retention incentive. This determination must be documented in writing.
An agency may pay a retention incentive to an employee who would be likely to leave for a different position in the federal service before the closure or relocation of the employee’s office, facility, activity, or organization, but not because the employee is likely to leave for another agency for any other reason. Incentives also may be paid to an entire group of employees under the same standards. See www.opm.gov/3rs/fact/RETINCFED.asp.
A retention incentive may be paid only when the employee’s rating of record under an official performance appraisal or evaluation system is at least “fully successful” or equivalent.
An agency must establish a single retention incentive rate for the employee, expressed as a percentage of the employee’s rate of basic pay, not to exceed 25 percent. With OPM approval, this cap may be increased to 50 percent (based on a critical agency need). (See 5 CFR 575.309(e).) The incentive may be paid in installments after the completion of specified periods of service within the full period of service required by the service agreement or in a single lump sum after completion of the full period of service required by the service agreement. An agency may not pay a retention incentive as an initial lump-sum payment at the start of a service period or in advance of fulfilling the service period for which the retention incentive is received. A retention incentive installment payment may be computed at the full retention incentive percentage rate or at a reduced rate with the excess deferred for payment at the end of the full service period.
An agency may not offer or authorize a retention incentive for an individual prior to employment with the agency. An agency may not begin paying a retention incentive during the service period established by an employee’s recruitment or relocation incentive service agreement. However, a relocation incentive may be paid to an employee who is already receiving a retention incentive.
For retention incentives that are paid in biweekly installments when no service agreement is required, an agency must review each determination to pay the incentive annually to determine whether payment is still warranted and certify this determination in writing. An agency must reduce or terminate the retention incentive whenever payment at the original level is no longer warranted. In addition, an agency must terminate a retention incentive authorization when no service agreement is required if the employee is demoted or separated for cause, receives a rating of record of less than “fully successful” or equivalent, or the agency assigns the employee to a different position. (See 5 CFR 575.311(g).)
Group Retention Incentives—Group-based retention incentives may be paid under 5 CFR 575 subpart C to eligible individuals who are in General Schedule, law enforcement officer, or prevailing rate positions or other categories for which the payment of retention incentives has been approved by OPM at the request of the head of an employing agency.
An agency may pay a retention incentive to a group or category of current employees if the agency determines that the unusually high or unique qualifications of the employees or a special need of the agency for the employees’ services makes it essential to retain the employees in the group and that there is a high risk that a significant number of employees in the targeted group would be likely to leave in the absence of a retention incentive. This determination must be documented in writing. A retention incentive may be paid to an employee only when the employee’s rating of record under an official performance appraisal or evaluation system is at least “fully successful” or equivalent.
An agency must narrowly define the targeted group of employees to be paid a group retention incentive using factors that relate to the employees’ unusually high or unique qualifications or the special need for the employees’ services that makes it essential to retain the employees in the group and their likelihood to leave. Appropriate factors may be occupational series, grade level, distinctive job duties, unique competencies, assignment to a special project, minimum agency service requirements, organization or team designation, geographic location, and required rating of record.
An agency must establish a single retention incentive rate for each group of employees, expressed as a percentage of the employee’s rate of basic pay, not to exceed 10 percent. With OPM approval, this cap may be increased to 50 percent (based on a critical agency need). (See 5 CFR 575.309(e).)
An agency may pay a group-based retention incentive to any individual in the targeted group if all other conditions and requirements for payment of a retention incentive are met.
In pay banding, also called broad banding, agencies collapse the 15 GS grades into a smaller number of pay ranges or bands. For example, an agency might establish four bands encompassing the GS 1-5, the GS 6-11, the GS 12-13, and the GS 14-15 levels. The number of bands and the way the grades are assigned to the bands vary according to the organization’s mission, values, and culture.
Pay banding gives managers more flexibility in pay setting by creating pay ranges much broader than those of single GS grades. The aim is to enable agencies to hire promising applicants at a higher rate of pay and to retain high-performing employees by increasing their pay at a faster pace than is possible under the GS scale.
The agency determines how employees move within and across pay bands. In pay banding systems, the amount of a pay increase within a band is based on the employee’s skills or competencies, job performance, contributions, or similar measures; most do not have automatic increases within a band. Money earmarked in the GS system for within-grade, general, and quality step increases often is pooled and used to fund the pay increases determined by employee performance evaluations. Commonly, money in the pay pool is paid out according to a shares system, with each share worth a given dollar amount and with higher-rated employees being given more shares. Employees who have already reached their pay band’s cap may receive a bonus, which does not count toward retirement crediting, rather than a pay raise, which does.
A high performing employee could move to the top salary of a pay band much more quickly than is possible in the GS system. In contrast, a low- or marginal-rated employee might get no incentive pay, and only part—or even none—of a general increase.
An employee might move to the next higher band through promotion, or even without a promotion, depending on how the pay banding system is defined.
Another typical feature of pay banding systems is occupational groupings. Similar to the consolidation of General Schedule grades, there typically is consolidation of job classifications into a small number of career paths—for example, science and engineering research; professional and administrative management; engineering, scientific and medical support; business and administrative support; and others as pertinent to the agency. The pay bands for each vary in number but typically correspond to what is deemed under GS classification systems to be entry level, apprentice, journeyman, full performance, and senior level accomplishment in those occupational groups, with a managerial level often added on top.
Also see Section 7 in Chapter 8.
Note: When an employee moves, without a break in service, to a General Schedule position from a non-GS pay system that features pay banding, and that system provides that an employee will be converted to GS equivalent rates immediately before leaving the non-GS pay system, the employee is considered a GS employee in applying the pay-setting provisions of 5 CFR Part 531, subpart B, and the grade and pay retention provisions of 5 CFR Part 536. The conversion-out procedures under these systems vary.
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General Overtime Pay Rights
Overtime pay entitlements for federal employees generally arise under either the Fair Labor Standards Act or Title 5 of the U.S. Code. Most non-supervisory General Schedule and wage system employees, as well as postal employees, law enforcement personnel, and certain employees covered by other federal pay systems, are eligible, whether they are full-time, part-time, or intermittent employees.
In most cases, overtime is paid at a time-and-a-half rate for work performed in excess of daily (eight-hour) or weekly (40-hour) limits, as long as the work is officially ordered and approved by the worker’s supervisor or other management official. Exceptions exist for workers in certain categories—for example, employees for whom the first 40 hours is the basic workweek, employees on an alternative work schedule, and employees receiving annual premium pay (see Administratively Uncontrollable Overtime and see Availability Pay in Section 7 of this chapter).
Note: Special overtime rules apply to firefighters (see Firefighters in Section 1 of this chapter) and non-career employees under Schedule C appointments (see Compensation Policy Memorandum 2009-13 at www.chcoc.gov/transmittals).
In contrast to overtime pay, premium pay is the general term used to describe the additional pay provided to federal employees who work extra hours or whose work involves unusual situations or requirements, such as hazardous duties or night work. See Section 7 of this chapter.
Overtime Pay: Exempt and Nonexempt Status
The Fair Labor Standards Act divides positions into “exempt” and “nonexempt” status. Nonexempt employees are those covered by the act and thus eligible for overtime pay. Exempt employees are not covered by the act’s provisions and thus are not eligible.
The designation of an employee as FLSA exempt or nonexempt typically rests on the duties actually performed by the employee, not merely occupational or organizational title. Certain lower-paid jobs may be eligible even if they involve supervisory duties.
Under the FLSA, employees in executive, administrative, and professional positions, as well as employees in foreign areas, are considered exempt. Rules governing exempt and nonexempt status for federal employees are at 5 CFR Part 551. They specify that:
• An executive is someone who customarily and regularly directs the work of two or more other employees, and has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees.
• An administrative employee is an employee whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, and whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
• A professional employee is one whose primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction or requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor, including learned professionals, creative professionals, and computer employees.
• The foreign exemption applies when an employee is permanently stationed in an area outside the United States or certain U.S. territories and possessions, or spends all hours of work in a given workweek in one or more such areas.
Performing different work or duties for a temporary period may affect an employee’s exemption status.
These policies, set by the Office of Personnel Management, generally mirror those the Labor Department applies for the private sector. However, in the federal government some FLSA-exempt employees, mainly certain managers and supervisors, are compensated for overtime under Title 5 of the U.S. Code. This is commonly known as “Title 5 overtime.”
Also, federal law enforcement officers and firefighters are covered by separate statutes and may be eligible for overtime under those laws even though those in comparable positions outside the federal government would not be eligible under the Labor Department rules. However, law enforcement employees receiving availability pay (see Section 7 of this chapter) are ineligible. See 5 CFR 551.210-213.
Basic Overtime Pay Computations
For overtime work in excess of eight hours a day or 40 hours a week, eligible (that is, nonexempt) employees generally are paid one and a half times their “regular rate” of basic pay. (An exception applies to employees who are exempt under FLSA but who are nonetheless compensated for their overtime work under Title 5, United States Code; they are limited to the greater of one and one half times the hourly rate of a GS-10, step 1, or the hourly rate of their basic pay, whichever is greater. See Overtime Caps, below).
Under the FLSA, overtime pay is determined by multiplying the employee’s “straight time rate of pay” by all overtime hours worked plus one-half of the employee’s “hourly regular rate of pay” times all overtime hours worked. All overtime work that is ordered or approved or “suffered or permitted” must be compensated. (See 5 CFR Part 551.)
An employee’s regular rate of pay for determining “total remuneration” and “straight time rate of pay” when computing overtime pay under the FLSA includes basic pay, locality-based comparability payments, special salary rates, special law enforcement adjusted rate of pay. An employee’s regular rate also includes various forms of premium pay (see Section 7 of this chapter), such as pay for Sunday, night, or holiday work, and hazardous/environmental differentials. The “hourly regular rate” is computed by dividing the “total remuneration” paid to an employee in the workweek by the number of hours in the workweek for which such compensation is paid.
Exempt employees may not receive premium pay that will cause their aggregate pay for a biweekly period to exceed the maximum rate of GS-15, step 10. A separate GS-15, step 10 annual limitation on premium pay applies to employees who are determined to be performing emergency work involving a direct threat to life or property. The maximum biweekly or annual earnings limitations on Title 5 premium pay do not apply to FLSA overtime pay.
The straight time rate of pay is multiplied by all overtime hours worked plus one-half of the employee’s hourly regular rate of pay times all overtime hours worked. (See 5 CFR 551, subpart E.)
The example of overtime pay computation below is based on an annual basic pay rate of $35,752, roughly a mid-level rate for a GS-5 position.
Some employees, mainly certain managers and supervisors, are exempt from the FLSA but may receive overtime pay under Title 5, U.S. Code (“Title 5 overtime”). They are limited in overtime to either one and one half times the hourly rate of a GS-10, step 1, or the hourly rate of the employee's basic pay, whichever is greater, under 5 U.S.C. 5542(a)(2)).
The limitation does not apply to overtime pay calculations resulting from extra hours worked by employees considered nonexempt under the FLSA. In addition:
• Department of Interior and Agriculture employees engaged in wildland fire suppression activities receive 150 percent of their hourly pay for overtime hours regardless of their hourly pay rate under 5 U.S.C. 5542(a)(5).
• Transportation Department non-managerial employees in positions GS-14 or lower who the Secretary determines are critical to the operation of the air traffic control system receive 150 percent of their hourly rate of pay for overtime work under 5 U.S.C. 5542(a)(3).
• Law enforcement officers earn at least their hourly rate of basic pay for overtime work under 5 U.S.C. 5542(a)(4)(B), and firefighters compensated under 5 U.S.C. 5545b earn at least their firefighter hourly rate of pay for all overtime work under 5 U.S.C. 5542(f)(2).
Overtime vs. Compensatory Time Off
Compensatory time off is time off with pay in lieu of overtime pay for irregular or occasional overtime work, or when permitted under agency flexible work schedule programs, time off with pay in lieu of overtime pay for regularly scheduled or irregular or occasional overtime work. Compensatory time off may be approved in lieu of overtime pay for irregular or occasional overtime work for both FLSA exempt and nonexempt employees who are covered by the definition of “employee” at 5 U.S.C. 5541(2). Compensatory time off can also be approved for a federal wage system employee, as defined at 5 U.S.C. 5342(a)(2).
See Compensatory Time Off in Chapter 5, Section 1.
Overtime for Training
Time spent in apprenticeship or other entry-level training outside regular working hours is not considered hours of work, provided no productive work is performed during such periods. However, under 5 CFR 551.423(a)(1), time spent in training during regular working hours is considered hours of work. “Regular working hours” means the days and hours of an employee’s regularly scheduled administrative workweek.
For example, if FLSA-covered employees are scheduled in advance of the administrative workweek to attend a six-day entry-level training class for a specified number of hours, those regularly scheduled training hours the sixth day are “regular working hours” and are considered hours of work for overtime pay purposes.
An employee may not receive compensatory time off in lieu of overtime pay for attending an extended training session or course. Compensatory time off may be approved instead of overtime pay only for irregular or occasional (unscheduled) overtime hours of work. If an employee is scheduled in advance of his or her administrative workweek to attend an extended training course, such training would not be irregular or occasional (unscheduled) overtime hours.
Employees on flexible work schedules may earn compensatory time off for regularly scheduled overtime hours. However, employees usually are not on flexible work schedules during periods of training.
Employees who believe they were incorrectly denied overtime pay may file a Fair Labor Standards Act claim with either their employing agency or with the Office of Personnel Management, but cannot pursue the same claim with both the agency and OPM at the same time. Employees who get an unfavorable decision on an administrative FLSA claim from the agency may still file a claim with OPM. However, the reverse is not true.
An FLSA pay claim is subject to a two-year statute of limitations, except in cases of a willful violation, where the statute of limitations is three years.
For more information, see Section 1 in Chapter 10 and www.opm.gov/flsa.
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The term “premium pay” extends to most types of additional pay received by federal employees for working extra hours or performing work that involves unusual situations or requirements such as hazardous duties or night work. Senior Executive Service employees are not entitled to premium pay under any circumstances.
General Schedule employees may receive certain types of premium pay in a pay period only to the extent that the aggregate of basic pay and premium pay for the pay period does not exceed the greater of the biweekly rate payable for (1) GS-15, step 10 (including any applicable locality payment or special rate supplement), or (2) level V of the Executive Schedule. However, the head of an agency may apply an annual pay cap to certain types of premium pay for any pay period for (1) employees performing work in connection with an emergency, including work performed in the aftermath of such an emergency, or (2) employees performing work critical to the mission of the agency. See Pay Caps in Section 2 of this chapter for details of these and certain other exceptions.
Each separate entitlement to premium pay is computed separately as a percentage of an employee’s rate of basic pay. No compounding occurs if an employee is entitled to more than one type of premium pay for the same hour of work.
Rules for premium pay are at 5 CFR Part 550, subpart A. Fact sheets are at www.opm.gov/oca/pay/HTML/factindx.asp.
General Schedule and wage grade workers whose regular schedules require them to work on a Sunday are entitled to their rate of basic pay, plus premium pay computed at a rate of 25 percent of their basic pay rate. This Sunday premium rate generally is applicable to all non-overtime work (that is not in excess of eight hours per shift), although it also may apply where employees work in excess of eight hours under a fixed compressed work schedule. The Sunday work must be part of an employee’s regularly scheduled basic workweek; intermittent employees may not receive Sunday premium pay because, by definition, they do not perform regularly scheduled work.
An employee on a flexible work schedule who performs regularly scheduled non-overtime work during a period of duty, a part of which is performed on Sunday, is entitled to Sunday pay for the entire period of duty, not to exceed eight hours. A full-time employee on a compressed schedule who performs non-overtime work during a period of duty, a part of which is performed on Sunday, is entitled to Sunday pay for the entire period of duty on that day.
In cases where employees work rotating shifts and the “late hour” Saturday shift extends into Sunday or an “early” Monday tour actually starts on Sunday, such workers are entitled to premium pay for the entirety of both shifts—not to exceed eight hours for each shift—even though a part of the shift work was not actually performed on Sunday. The maximum number of hours of Sunday premium pay that an employee can be paid for one Sunday is 16 hours.
Federal employees must actually perform work on a Sunday in order to be eligible for Sunday premium pay. Employees are not entitled to Sunday premium pay for periods when no work is performed, such as paid leave time, excused absences, holidays, compensatory time off, or time off granted as an incentive or performance award.
Sunday premium pay is not paid for overtime hours of work. An employee under a standard work schedule is entitled to overtime pay for hours of work on Sunday in excess of eight hours in a day or 40 hours in a week. An employee whose flexible work schedule includes work on Sunday is entitled to overtime pay for hours of work in excess of eight hours in a day or 40 hours in a week and which are officially ordered in advance. An employee whose compressed work schedule includes work on Sunday is entitled to overtime pay for hours of work in excess of the employee’s compressed work schedule on that day.
See 5 U.S.C. 5544(a), 5546(a), and 6128(c) and 5 CFR 550.
Part-Time Employees—A May 26, 2009, decision by the U.S. Court of Appeals for the Federal Circuit ruled that part-time employees are entitled to Sunday premium pay for work performed on Sundays under 5 U.S.C. 5546(a), overturning OPM policy in effect up to that time. CPM 2009-21 of 2009, available at www.chcoc.gov/transmittals, ordered that agencies pay part-time employees Sunday premium pay when they meet the requirements, including retroactive pay starting from the date of the court decision.
In addition, employees may file claims with the agency that employed them seeking back pay, with payments covering as long as six years before the claim was filed. The employee must establish that he or she worked part-time, worked on a Sunday during the claims period, and did not receive an appropriate amount of premium pay. Claimants must specify the dates they performed Sunday work without receiving Sunday premium pay and submit evidence such as the employee’s orders, certification of attendance, time and attendance records, employee affidavits, supervisory records or other documents. Those who have retired or separated may file a claim with their former employing agency.
Final regulations revising 5 CFR Parts 532 and 550 to reflect the change in eligibility were published in 2011.
Full-time employees who are not required to work on a holiday receive their rate of basic pay for the applicable number of holiday hours. Employees under flexible work schedules are credited with eight hours towards their 80-hour basic work requirement for the pay period. Employees under compressed work schedules are generally excused from all of the non-overtime hours they would otherwise work on that day and which apply to their “basic work requirement.”
A part-time employee is entitled to a holiday when the holiday falls on a day when he or she would otherwise be required to work or take leave. Those standard work schedules are generally excused from duty for the number of basic (non-overtime) hours they are regularly scheduled to work on that day, not to exceed eight hours. Those under compressed work schedules are generally excused from all of the non-overtime hours they would otherwise work on that day and which apply to their “basic work requirement.”
Employees who work on a holiday during hours that correspond to their normal tour of duty are entitled to receive holiday premium pay equal to their rate of basic pay. If employees work in excess of eight hours on the holiday or if full-time employees work during hours that do not correspond with their normal tour, they are entitled to receive their regular overtime rate of pay for hours worked in excess of eight in a day or 40 in a week.
This means that employees who work on a holiday that falls on one of their regular workdays must be paid twice their rate of basic pay for not more than eight hours of such work. Any hours worked outside an employee’s regularly scheduled tour of duty on a holiday would be paid at the employee’s overtime rate. An employee who is assigned to duty during holiday hours is entitled to pay for at least two hours of holiday work. An employee on a fixed compressed work schedule who is required to work on a holiday is entitled to holiday premium pay for all non-overtime hours of work.
Premium pay for holiday work also will be paid in addition to night pay differential for regularly scheduled non-overtime work at night, as well as for regularly scheduled non-overtime Sunday work when an employee performs work on a holiday that occurs on a Sunday.
Presidents occasionally issue executive orders closing federal agencies for part or all of a workday. Employees are excused from duty during such periods unless they are “emergency employees,” as determined by their agencies. Such orders often provide that the time off will be treated like a holiday for pay and leave purposes. Employees who are required to work during their basic tour of duty on such days are entitled to holiday premium pay.
See 5 U.S.C. 6103, 6104, and 6124, and 5 CFR 550 and 610.
Night Differential Pay
General Schedule—Night pay is a 10 percent differential paid to a General Schedule employee for regularly scheduled work performed at night. It is computed as a percentage of the employee's rate of basic pay (including any applicable locality payment or special rate supplement). This generally involves work scheduled before the beginning of the administrative workweek. However, night pay is also paid for night work on a temporary assignment to a different daily tour of duty during the administrative workweek. Generally, night work must be performed between the hours of 6 p.m. and 6 a.m., including night work under a compressed work schedule. For posts located outside the United States, the head of an agency may designate a time after 6 p.m. and before 6 a.m. as the beginning and end, respectively, of night work to accommodate the customary hours of business in the locality. An employee is entitled to night pay for paid leave only when the total amount of paid leave during a biweekly pay period is less than eight hours. An employee is entitled to night pay when excused from night work on a holiday or another non-workday, although not for an alternative work schedule non-workday.
If a flexible work schedule includes eight or more hours available for work between 6 a.m. and 6 p.m., the employee is not entitled to night pay for voluntarily working flexible hours between 6 p.m. and 6 a.m., including while earning credit hours. An employee also is entitled to night pay for those hours that must be worked between 6 p.m. and 6 a.m. to complete an eight-hour daily tour of duty, and for any non-overtime work performed between 6 p.m. and 6 a.m. during designated core hours.
Night pay is paid in addition to overtime, Sunday, or holiday premium pay. It is not basic pay for any purpose.
See 5 U.S.C. 5545(a) and 6123(c), 5 CFR 550.121-122 and www.opm.gov/oca/pay/html/night.asp.
Wage Grade—Wage grade employees receive night shift differential at the rate of 7.5 percent of their hourly rate for non-overtime work when a majority (five or more hours) of the scheduled hours occur between 3 p.m. and midnight, or 10 percent of their hourly rate for non-overtime work when a majority of the scheduled hours occurs between 11 p.m. and 8 a.m. Night shift differentials are paid for the entire shift and are included in basic pay rates for purposes of computing overtime pay, Sunday pay, holiday pay, severance pay, and amounts of deductions for retirement and life insurance.
A prevailing rate employee regularly assigned to a night shift will receive a night shift differential during periods of leave with pay and is entitled to the differential for periods of excused absence on a holiday, while in official travel status during the hours of the employee’s regular night shift, or on court leave. An employee regularly assigned to a night shift will continue to receive his or her regular night shift differential during a temporary assignment to a day shift or to another night shift with a lower differential.
See 5 U.S.C. 5343 and www.opm.gov/oca/pay/html/night_wg.asp.
Environmental Differential Pay
Wage system employees are entitled under 5 U.S.C. 5343(c)(4) to environmental differentials for duty involving unusually severe working conditions or unusually severe hazards, and for any hardship or hazard related to asbestos, as determined by the Office of Personnel Management. The categories justifying environmental differentials are in Appendix A of 5 CFR Part 532, subpart E. Eligibility due to exposure to asbestos is determined by the permissible exposure limits established by the Occupational Safety and Health Administration.
The amount of the differential is equal to the percentage rate approved by OPM for the particular job category, multiplied by the rate of pay for WG-10, step 2 for the appropriated fund employees and the rate of pay for NA-10, Step 2 for the non-appropriated employees. For example, a wage system employee working on a structure at least 100 feet above the ground, deck, floor or roof of a facility or in the bottom of a tank or pit receives a differential of 25 percent, while another wage system worker performing ground work beneath a hovering helicopter is eligible for a 15 percent differential. Employees entitled to a differential based on actual exposure will be paid a minimum of one hour’s differential pay for the exposure. For exposure beyond one hour, workers are paid in increments of one quarter hour for each 15 minutes or portion thereof in excess of 15 minutes. Employees entitled to a differential based on hours in a pay status will be paid for all hours in the pay status on the day they are exposed.
Environmental differentials are included as part of a wage system employee’s basic rate of pay for computation of overtime, holiday pay, Sunday premium, and the amount of retirement, Thrift Savings Plan, and life insurance deductions. It is not part of basic pay for purposes of lump-sum leave payments and severance pay.
Hazardous Duty Pay
General Schedule employees are entitled under 5 U.S.C. §§ 5545(d) to a hazardous duty pay differential for duty involving unusual physical hardship or hazard, and for any hardship or hazard related to asbestos, as determined by the Office of Personnel Management, that have not already been accounted for in the job classification. The categories justifying hazardous duty pay are in Appendix A of 5 CFR Part 550, subpart I. Eligibility due to exposure to asbestos is determined by the permissible exposure limits established by the Occupational Safety and Health Administration.
“Physical hardship” means a duty that may not in itself be hazardous, but causes extreme physical discomfort or distress and is not adequately alleviated by protective or mechanical devices. Examples of such duties are tasks involving exposure to extreme temperatures for a long period of time, arduous physical exertion, or exposure to fumes, dust, or noise that causes nausea, skin, eye, ear, or nose irritation. Similarly, a “hazard” is a job situation or duty in which an employee runs the risk of suffering an accident that could result in serious injury or death.
Pay differentials for these types of assignments range up to 25 percent, with the majority being set at 25 percent. For example, an employee working in a confined space that is subject to temperatures in excess of 110 degrees is eligible for a 4 percent differential, while an employee arming or disarming a propulsion system will receive a 25 percent differential.
Regulations at 5 CFR 550.904 allow an agency to approve payment of hazardous duty pay when the hazardous duty or physical hardship has not been taken into account in the classification of the position (that is, the knowledge, skills, and abilities required to perform the duty are not considered in the classification of the position). If the hazardous duty has been taken into account in the classification of the position, an agency may authorize payment of hazardous duty pay only when the actual circumstances of the specific hazard or physical hardship have changed from that taken into account and described in the position description; and, when using the knowledge, skills, and abilities required for the position and described in the position description, the employee cannot control the hazard or physical hardship; thus, the risk is not reduced to a less than significant level.
Hazardous duty pay may be paid only to employees who are assigned hazardous duties or duties involving physical hardship for which a differential is authorized. It may not be paid to an employee who undertakes to perform a hazardous duty on his or her own, without proper authorization, either expressed or implied.
When an employee performs a duty for which a hazard pay differential is authorized, the agency must pay the hazard pay differential for all of the hours in which the employee is in a pay status on the day on which the duty is performed. The pay is not included as part of the employee’s basic rate of pay for computation of overtime, holiday pay, Sunday premium, or the amount of retirement, Thrift Savings Plan, and life insurance deductions.
Administratively Uncontrollable Overtime
“Administratively uncontrollable overtime” refers to work in a job that unpredictably requires substantial amounts of irregular or occasional overtime, and in which the employees generally are responsible for recognizing, without supervision, circumstances that require them to remain on duty. GS employees, other than certain criminal investigators (see Availability Pay below) may be granted AUO premium pay on an annual basis if their job requires substantial amounts of irregular or occasional overtime work that cannot be controlled administratively. AUO premium payments are set as a percentage of an employee’s basic pay, but cannot be less than 10 percent or more than 25 percent. Employees who are receiving AUO pay are not eligible for any other kinds of premium pay for irregular or occasional overtime work.
The rate of AUO pay authorized for a position is based on the average number of hours of irregular or occasional overtime work performed per week. For example, a 25 percent rate is authorized for a position that requires an average of over nine hours per week of irregular or occasional overtime work. (See 5 CFR 550.154.) Agency reviews of the percentage of AUO pay paid to employees must be conducted “at appropriate intervals,” commonly every three to six months. The percentage of annual premium pay may be revised or, if appropriate, discontinued. (See 5 CFR 550.161(d).) An employee who receives AUO pay may also receive overtime pay on an hourly basis for regularly scheduled overtime work. Regularly scheduled overtime work creates an entitlement to overtime pay on an hour-for-hour basis and generally must be officially ordered or approved by a supervisor or manager in advance of the employee’s regularly scheduled administrative workweek. (See 5 U.S.C. 5542(a).)
If an employee who is engaged in law enforcement activities (including security personnel in correctional institutions) receives AUO pay and is nonexempt from (covered by) the overtime pay provisions of the Fair Labor Standards Act, he or she is entitled to additional overtime pay equal to 0.5 times the employee’s hourly regular rate of pay for all hours of work in excess of 42.75 hours in a week, including meal periods within the tour of duty. Other nonexempt employees who receive AUO pay and who are not engaged in law enforcement activities are entitled to additional FLSA overtime pay equal to 0.5 times their hourly regular rate of pay for all hours of work in excess of 40 hours in a week, not including meal periods.
Detailed guidance on the relationship between FLSA overtime pay and AUO pay is at www.opm.gov/oca/pay/HTML/flsaovertime.htm.
An employee receiving AUO pay may not receive any other premium pay (for example, night Sunday and holiday pay) for irregular and occasional overtime hours that are compensated by AUO pay. (See 5 CFR 550.163(b).) In addition, hazardous duty pay may not be paid for irregular and occasional overtime hours of work that are compensated by AUO pay. (See 5 CFR 550.905(b).)
Temporary Assignments—Rules at 5 CFR 550.162(c)(1) provide that an agency may continue to pay AUO pay for not more than 10 consecutive workdays on a temporary assignment to other duties in which conditions do not warrant AUO pay and for a total of not more than 30 workdays in a calendar year while on such a temporary assignment. An agency must discontinue an employee’s AUO pay when a temporary assignment exceeds these time limits.
However, rules at 5 CFR Part 550.162 authorize payment of AUO pay during a temporary assignment that would not otherwise warrant the payment of AUO pay if the temporary assignment is directly related to a national emergency declared by the President. Under those rules, an agency may continue to pay AUO pay for a period of not more than 30 consecutive work days for such a temporary assignment and for a total of not more than 90 workdays in a calendar year while on such a temporary assignment. Time during which an employee continues to receive AUO pay under those provisions is not considered in computing the weekly average number of irregular overtime hours used in determining the amount of an employee’s future AUO payments.
Availability pay is premium pay rate granted to certain law enforcement personnel who have criminal investigation responsibilities (see 5 U.S.C. 5542(d) and (e), 5 U.S.C. 5545a, and 5 CFR 550.181-187, 5 CFR 550.103 and 5 CFR 550.111(f)), replacing the use of administratively uncontrollable overtime (AUO) pay for employees in this category.
Under Section 633 of Public Law 103-329, qualified criminal investigators are entitled to availability pay, which is fixed at 25 percent of basic pay (including locality pay). Eligible categories include employees in the GS-1811 (criminal investigations) and GS-1812 (game law enforcement) series, certain pilots employed in customs enforcement, and special agents in the Diplomatic Security Service of the Department of State (under section 407 of Public Law 105-277). Higher graded law enforcement officers may be entitled to a lesser amount if their availability pay causes them to exceed the maximum earnings limitation for law enforcement officers. That limitation is 150 percent of the lesser of the minimum rate of GS-15 (including a special rate of pay or locality pay) or the rate of pay for level IV of the Executive Schedule.
Availability pay must be paid to qualified criminal investigators who meet the legal definition of a “law enforcement officer.” An annual certification must be made by both the criminal investigator and an appropriate supervisory official. The annual certification must stipulate that the investigator works, or is available to work, an annual average of two hours of “unscheduled duty” per regular workday as requested by the employing agency.
An agency may not pay a criminal investigator receiving availability pay annual premium pay for administratively uncontrollable overtime work or regularly scheduled standby duty, or overtime pay under the Fair Labor Standards Act. Receipt of availability pay does not affect a criminal investigator’s entitlement to other types of premium pay (including Title 5 overtime pay) based on regularly scheduled duty hours. However, a criminal investigator receiving availability pay may not be paid any other premium pay based on unscheduled duty hours. Title 5 overtime pay is authorized only for overtime work scheduled in advance of the administrative workweek that is either in excess of 10 hours on a day containing part of the basic 40-hour workweek or on a day that does not include part of the basic 40-hour workweek.
Availability pay is considered basic pay only for purposes of calculating advances in pay, severance pay, workers’ compensation, life insurance and retirement benefits, and Thrift Savings Plan contributions. Also see www.opm.gov/oca/pay/HTML/AP.asp.
Under the Federal Employees Pay Act, 5 U.S.C. 5544-45, employees in positions requiring them regularly to remain at, or within the confines of, his station during longer than ordinary periods of duty, a substantial part of which consists of remaining in a standby status rather than performing work, receive premium pay for the duty. The rules on standby duty are found in 5 CFR 550.112(k), for employees who are exempt from the Fair Labor Standards Act (FLSA), and in 5 CFR 551.431, for FLSA-covered employees.
Regulations at 5 CFR 550.143(a) provide that, in order to trigger an entitlement to premium pay under FEPA, the requirement to remain at, or within the confines of the station must be definite and the employee must be officially ordered to remain at his station. The employee’s remaining at his station must not be merely voluntary, desirable, or a result of geographic isolation, or solely because the employee lives on the grounds.
The regulation further provides that the statutory phrase “at, or within the confines of his station,” may mean in an employee’s living quarters, when designated by the agency as his duty station and when his whereabouts are narrowly limited and his activities are substantially restricted. This condition exists only during periods when an employee is required to remain at his living quarters and is required to hold himself in a state of readiness to answer calls for his services. This limitation on an employee’s whereabouts and activities is distinguished from the limitation placed on an employee who is subject to call outside his tour of duty but may leave his quarters provided he arranges for someone else to respond to calls or leaves a telephone number by which he can be reached should his services be required.
If an employee is actually on duty for a 24-hour shift and meets the requirements in OPM’s regulations for standby duty pay, he or she is entitled to receive pay for at least 16 hours (eight hours of basic pay and eight hours of overtime pay) of the 24-hour shift. Up to eight hours of sleep and meal time may be excluded from a 24-hour shift as long as the employee has a reasonable opportunity to sleep. (See 5 CFR 550.112(m) and 5 CFR 551.432.) Employees receiving overtime pay for standby duty continue to be subject to the biweekly and annual limitations on premium pay. See Pay Caps in Section 2 of this chapter.
If an employee is relieved from duty with minimal restrictions on personal activities, although limited in where he or she may go, the employee may be placed off duty. If an employee is off duty, the off-duty hours are not compensable. Periods during which an employee is required to remain at a work location are not considered compensable hours of work if the employee is detained for reasons not under the control of the agency or not related to work requirements.
General Schedule employees may be eligible for annual standby duty pay if their tour of standby duty is established on a regularly recurring basis over a substantial period of time (generally at least a few months). Annual standby pay rates range from 5 percent up to 25 percent per year of an employee’s basic pay that doesn’t exceed the GS-10, step 1 cap, including any locality pay. The actual amount authorized depends on the nature of an employee’s standby schedule. Employees receiving annual standby duty pay are not eligible for overtime, night, and holiday pay, other than pay for irregular or occasional overtime work.
This type of premium payment is provided to wage system employees who get called back to the worksite to work extra hours after completing a tour of duty. Employees who are called back must receive a minimum of two hours of overtime pay, even if they are sent home without working that amount of time. Call-Back pay rights extend to overtime work performed after hours and on an employee’s scheduled day off. If the call-back occurs during regularly scheduled non-overtime work on a holiday, employees must be paid two hours of holiday premium pay instead of overtime.
Similarly, General Schedule employees who are called back to the worksite to work overtime after completing their tour of duty must receive at least two hours of overtime pay or compensatory time off. This includes overtime work after hours and on days off. If the call-back occurs on a holiday, the two hour minimum also applies and the employee must be paid at least two hours of holiday premium pay. However, if a full-time employee is called back on the holiday outside the normal tour of duty, either before or after, the employee is entitled to receive a minimum of two hours of overtime pay.
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General Rights and Procedures
Permanent employees who have been employed continuously for at least 12 months and who lose their jobs through no fault of their own generally are entitled to severance pay under 5 CFR 550, subpart G. This includes employees who are separated in a reduction in force because of abolishment of their positions, or who decline to accompany their positions in a transfer of function to another commuting area.
Resignations, except for resignations pending separation (see below), are considered voluntary separations and do not carry entitlement to severance pay.
Also, if a separated employee has declined a “reasonable offer” (generally, a position in the same agency, in the same commuting area, of the same tenure and work schedule, and not more than two grades or pay levels below the employee’s current position), the worker usually will not be entitled to severance pay. In addition, severance pay is not paid to an employee who is entitled to an immediate annuity at the time of separation, a reduced annuity under a voluntary employee retirement authority, a disability annuity, or restricted pay earned as a member of the uniformed services. Further, severance pay is not paid to those who separate, either with or without eligibility to retire, and take a voluntary separation incentive payment (“buyout”).
The continuous service may consist of one or more civilian federal positions held over a period of 12 months without a single break in service of more than three calendar days. The positions held must have been under one or more qualifying appointments; one or more non-qualifying temporary appointments that precede the current qualifying appointment; or an appointment to a position in a non-appropriated fund instrumentality of the Department of Defense or the Coast Guard that precedes the current qualifying appointment in the Department of Defense or the Coast Guard, respectively.
The following appointments are qualifying appointments for severance pay eligibility:
• a career or career-conditional appointment in the competitive service or the equivalent in the excepted service;
• a career appointment in the Senior Executive Service;
• an excepted appointment without time limitation, except under Schedule C or an equivalent appointment made for similar purposes;
• an overseas limited appointment without time limitation;
• a status quo appointment, including one that becomes indefinite when the employee is promoted, demoted, or reassigned;
• a time-limited appointment in the Foreign Service, when the employee was assigned under a statutory authority that carried entitlement to re-employment in the same agency, but this right of re-employment has expired; and
• a time-limited appointment (or series of time-limited appointments by the same agency without any breaks in service) for full-time employment that takes effect within three calendar days after the end of a qualifying appointment.
For those separating employees who are eligible, the basic severance pay allowance is computed on the basis of the following formula:
• one week of pay at the rate of basic pay for the position held by the employee at the time of separation for each full year of creditable service through 10 years;
• two weeks of pay at the rate of basic pay for the position held by the employee at the time of separation for each full year of creditable service beyond 10 years; and
• 25 percent of the otherwise applicable amount for each full three months of creditable service beyond the final full year.
For employees who are over age 40, an age adjustment allowance is added to the basic allowance. This over-40 age adjustment calls for computing 2.5 percent of the basic severance allowance for each full three months of age over age 40.
“Rate of basic pay” means the rate of pay fixed by law or administrative action for the position held by the employee, including, as applicable, annual premium pay for standby duty, law enforcement availability pay, straight-time pay for regular overtime hours for firefighters, night differential for prevailing rate employees, locality payments, and special rate supplements. Rate of basic pay does not include additional pay of any other kind.
The weekly rate of basic pay for employees with variable work schedules is determined based on the weekly average for the last position held by the employee during the 26 biweekly pay periods immediately preceding separation. The regulations at 5 CFR 550.707(b) provide specific instructions on calculating the weekly rate for various types of variable work schedules, including part-time work and seasonal work.
The following types of service are creditable for computing an employee’s severance pay:
• civilian service as an employee (as defined in 5 U.S.C. 2105), excluding time during a period of non-pay status that is not creditable for annual leave accrual purposes under 5 U.S.C. 6303(a);
• service performed with the United States Postal Service or the Postal Rate Commission;
• military service, including active or inactive training with the National Guard, when performed by an employee who returns to civilian service through the exercise of a restoration right provided by law, Executive order, or regulation;
• service performed by an employee of a non-appropriated fund instrumentality of the Department of Defense or the Coast Guard and who moves to a civilian position with the Department of Defense or the Coast Guard, respectively, without a break in service of more than three days; and
• service performed with the government of the District of Columbia by an individual first employed by that government before October 1, 1987, excluding service as a teacher or librarian of the public schools of the District of Columbia.
Severance pay accrues on a day-to-day basis following the recipient’s separation from federal employment. Severance payments: must be made at the same pay period intervals that salary payments would be made if the recipient were still employed (except for Defense Department employees, who may elect to receive it as a lump-sum under 5 U.S.C. 5595(i)); are computed using the recipient’s rate of basic pay in effect immediately before separation; are subject to appropriate deductions for income and Social Security taxes; and are the responsibility of the agency employing the recipient at the time of the involuntary separation that triggered the entitlement.
The total severance pay an employee is eligible to receive is limited to one year’s pay at the rate of pay received immediately before separation. This is a lifetime limitation. Therefore, if an employee becomes eligible to receive severance pay for the second time in his federal career, the worker’s severance pay entitlement ends once the sum of the two severance periods reaches 52 weeks.
Severance Payments and Re-Employment
Severance payments end if a recipient is re-employed by the federal government (including the U.S. Postal Service) on a non-temporary basis. Upon such re-employment, the individual begins building severance credits on top of the unpaid, residual severance amount for potential future use.
In the case of temporary federal re-employment, severance payments are suspended. However, they resume when the temporary appointment expires, and continue until new federal re-employment is obtained or the severance payments are exhausted.
If the temporary appointment is full-time and begins within three days after separation from a qualifying non-temporary appointment, severance pay is terminated, not suspended. However, this type of temporary appointment is qualifying for severance pay upon the expiration of the appointment.
In the case of a former federal employee who gains nonfederal employment, the worker’s entitlement to federal severance pay continues until the payments are exhausted.
Resignations Pending Separation—Under 5 CFR 550.706, employees who resign because they expect to be involuntarily separated are considered to have been involuntarily separated for severance pay purposes only if they resign after receiving: a specific written notice stating that the employee will be involuntarily separated by a particular action (for example, a reduction in force) on a particular date; or a general written notice of reduction in force or transfer of function that announces that all positions in the competitive area will be abolished or transferred to another commuting area by a particular date no more than one year after the date of the notice. If the specific or general notice is cancelled before the resignation is effected, the resignation would not be qualifying for severance pay purposes. Other types of resignations do not create an entitlement to severance pay.
Inability to Perform Duties—An employee who is removed for inability to perform his or her duties may receive severance pay if the inability is caused by a medical condition that is beyond the employee’s control. This determination should be made by the employing agency based on acceptable medical documentation provided by the employee.
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Flexible spending accounts, or FSAs, are employer-established benefit plans that reimburse employees for specified expenses. They are funded through salary reduction arrangements under which employees receive less take-home pay in exchange for tax-advantaged contributions to their accounts.
Most federal employees are eligible to enroll in the FSAFEDS program of health care and dependent care FSAs, administered under contract with the Office of Personnel Management by ADP Benefit Services KY, Inc. Certain agencies operate similar programs independently.
All employees with qualified dependents may elect to enroll in a dependent care FSA except temporary employees with no fixed work schedule (“when actually employed” employees) whose tour of duty is six months or less. Annuitants and military personnel are not eligible.
Employees whose appointment conveys eligibility for Federal Employees Health Benefits program coverage generally may elect to enroll in a health care FSA. One exception is that temporary employees are eligible for health care FSAs only after completing one continuous year of service; there is no such restriction on dependent care FSAs.
Participation in both, either or neither type of account is voluntary. Participation, or lack of it, in the government’s premium conversion program—through which FEHB premiums can be paid with pretax money—does not affect participation in FSAs. Nor does participation or lack of it in any other voluntary government benefit program.
A calculator to assist in estimating the FSA contributions and potential annual tax savings, based on individual situations, is at www.fsafeds.com/fsafeds/fsa_calculator.asp.
Note: Because of tax code restrictions, employees enrolled in a Federal Employees Health Benefits program plan with a health savings account (see Chapter 2, Section 1) are generally not eligible for health care FSAs—the exception is “limited” accounts as described below under Health Care Accounts—although they remain eligible for dependent care FSAs.
Federal agencies absorb the fees ADP charges to operate accounts.
Open seasons are conducted concurrent with the annual FEHB open season each autumn, with employee elections effective on a calendar year basis. Enrollment is available through (877) 372-3337, TTY (800) 952-0450, or at www.fsafeds.com. A newly hired employee eligible for FSAFEDS has 60 days from the date of hiring, or until October 1, whichever is earlier, of any plan year to make an election to participate in either of the types of accounts, with the election effective upon its receipt by FSAFEDS. Those hired on or after October 1 are ineligible to participate in that plan year, but can elect an FSA during the open season held that fall for the following plan year.
Belated enrollments are considered on a case-by-case basis from those unable to enroll due to circumstances beyond their control.
Employees must re-enroll each year—enrollment is not carried over from one year to the next—and must elect annually each year how much to put into their accounts. There is no employer contribution.
The maximum annual contribution to a dependent care FSA is $5,000 a year ($2,500 if married but filing separately). The maximum annual contribution to a health care FSA is $2,500 a year (effective in 2013; previously $5,000). If an employee has another health care FSA available through a spouse’s employment, the combined health care FSA allotments to the two accounts may exceed $2,500. Combined amounts for dependent care FSAs may not exceed $5,000. The minimum amount for each type of account is $250 per plan year. ADP Benefit Services KY translates the annual elected amounts into pay date allotments and arranges with agency payroll offices to deduct them and remit them for deposit into the employees’ FSA accounts.
Erroneous Elections—If an employee enrolls in one type of account meaning to enroll in the other, under IRS rules those elections can be corrected via account funds transfer if there is “clear and convincing evidence” that the election was indeed mistaken. Employees discovering such an error should contact ADP Benefit Services KY at the contact points listed at the end of this section (in some cases ADP discovers the error and informs the enrollee).
However, if an employee and his or her spouse both electing a dependent care account with combined elections exceeding the tax law maximum of $5,000 per family, it does not qualify as a mistaken election.
In such cases, the couple may receive reimbursement up to the full election of each person and then resolve the withholding error when they file their federal tax return for that year. They would need to complete IRS Form 2441 and add the excess pretax election back into income. They may be able to use the additional amount to claim a dependent care tax credit.
Changing Elections—In general, elections for a year cannot be changed except when a “qualifying life event” occurs. These include:
• a change in legal marital status, for example due to marriage, divorce, death of a spouse, legal separation, or annulment;
• a change in number of eligible dependents, for example due to birth or adoption of a child, death of a dependent, or a dependent child turns age 13;
• a change in employment status (for employee, spouse or dependent) that affects your eligibility for benefits;
• entering leave without pay status to perform military service;
• a change in cost or coverage, such as a significant increase charged by your current day care provider, or a change in your provider (applies to dependent care accounts only); and
• a change in the number of tax dependents you have (for example, a parent now living with you).
A period of leave without pay itself is not considered a qualified status change unless it is due to military deployment. See Leave Without Pay in Chapter 5, Section 4 for considerations regarding unpaid leave.
ADP determines whether events qualify for changes in FSAs. An enrollment or change of elections due to a qualifying life event must be consistent with the event—for example, increasing a dependent care account on the birth of a child. A change due to the birth or adoption of a child is retroactive to the pertinent date.
You are not permitted to reduce the election to a point where the total allotment for the plan year is less than the amount already reimbursed or on deposit in your account for the plan year.
Only decreases in elections are allowed after September 30 of any year.
Enrollees wishing to make a change due to a change in status must notify ADP between 31 days prior to the event and 60 days afterward by completing a Qualifying Life Event form available at www.fsafeds.com/forms/qscform.pdf or by calling (877) 372-3337, TTY (800) 952-0450.
How Accounts Work
Contributions are not subject to either income or employment taxes. Participation in FSAs reduces the taxable wage base for calculation of Social Security benefits although not for civil service retirement benefits. However, in most cases the reductions are relatively minor compared with the tax savings to the individual.
Money put in FSAs is available on a “use or lose” basis. That is, any money remaining in the account after payment of all claims covering that plan year, plus a 2 1⁄2 month “grace period” into the following calendar year (see Claims, below) is forfeited. Thus, participants need to plan carefully regarding how much money they put into the accounts.
However, the entire amount in health care accounts is available from the start of a plan year, regardless of how much the employee has yet put in through payroll withholding. Thus, a participant could use up the entire amount available in the account and leave employment with no obligation to pay back the difference between what was paid in and what was drawn out in that plan year.
Money in a dependent care account is available on an accrual basis. Claims cannot exceed what the employee has contributed to that account in the plan year at the date of the claim submission.
Dependent Care Accounts
For dependent care expenses, money is typically drawn out from an FSA on a regular basis as costs are incurred, such as through monthly tuition charged by day care programs. Eligible costs are those incurred on behalf of a dependent listed on the participant’s tax return that allow the enrollee and a spouse to work, look for work, or attend school full-time. Eligible dependents include:
• dependent children (including adopted or foster children) under age 13; and
• a person of any age whom you claim as a dependent on your federal income tax return and who is mentally or physically incapable of caring for himself or herself.
An adult (for example, parent, grandparent, adult disabled child) may qualify as a dependent if the employee is providing more than half of that person’s maintenance for the year.
See www.fsafeds.com/fsafeds/eligibleexpenses.asp for a listing of eligible expenses.
The expenses must be paid to a provider—including a day care center, at-home provider, after school program, adult day care or similar providers—that pays federal income taxes on the income they receive for providing the care. The participant must show the provider’s tax identification number. In addition, up-front fees paid to obtain care through employing a dependent care provider, such as an au pair, also are reimbursable, proportionately over the duration of the employment agreement.
Federal employees receiving subsidized child care through their agencies (see Child Care in Chapter 8, Section 4) must deduct the amount of the subsidy from the maximum amount they are eligible to set aside as a dependent care FSA. Thus, an individual getting a $2,000 annual child care subsidy would be eligible only for a $3,000 dependent care FSA.
Health Care Accounts
For health care accounts, money is typically withdrawn on a sporadic basis as costs are incurred on behalf of the enrollee or eligible family members.
In general, allowable reimbursable costs under the medical and dental accounts mirror costs that can be deducted on an individual’s federal tax return when they exceed 7.5 percent of adjusted gross income in a year. These expenses are described in IRS Publication 502, Medical and Dental Expenses. One exception is that while premiums for long-term care insurance are deductible above that threshold, they cannot be paid from pretax FSA accounts.
Reimbursable expenses are those that are:
• related to the diagnosis, treatment or cure of a medical condition, mitigation or prevention of disease that affects any part or function of the body;
• primarily to alleviate or prevent a physical or mental defect or illness;
• not reimbursed by FEHB or any other source; and
• incurred by the enrollee, spouse and/or any eligible child.
An employee enrolled in FSAFEDS may request reimbursement for eligible health care expenses incurred by a natural child, stepchild, adopted child, eligible foster child, or a child who is placed with the employee for legal adoption. The child does not need to reside with the employee or qualify as the employee’s tax dependent.
The ACA also extended the age of a child who may incur eligible expenses under an employee’s health care FSA. Expenses of an employee’s child are covered through the taxable year prior to the taxable year in which the child turns age 27.
Allowable costs include out-of-pocket charges under FEHB such as co-payments and deductibles, certain medical procedures not covered or only partly covered by FEHB, and certain other health-related expenses such as transportation necessary for medical care, home or automobile renovations to accommodate a disability, certain legal fees and other costs. Over-the-counter drugs or medicines are covered only if prescribed by a doctor, with the exception of insulin, for which no prescription is needed. Other eligible over-the-counter items that are not drugs or medicines do not require a prescription.
Insurance premiums of any kind—non-FEHB coverage, Medicare Part B, Tricare, etc.—do not qualify for reimbursement. While premiums under the Federal Long Term Care Insurance Program cannot be paid from an FSA account, long-term care type expenses that are not reimbursed, such as costs incurred above the daily amount chosen for the FLTCIP coverage, can be reimbursed from an FSA.
See www.fsafeds.com/fsafeds/eligibleexpenses.asp for a listing of eligible expenses.
'Limited' Accounts—FEHB enrollees in high-deductible health plans with a funded health savings account (see Chapter 2, Section 1) are ineligible for a standard health care FSA. However, they may enroll in a “limited expense” health care FSA if their FEHB carrier offers one and may set aside up to $2,500 for a year in pretax FSA dollars, the same as non-HSA enrollees. The account can cover eligible dental and vision expenses only, including out-of-pocket costs for such service as cleanings, fillings, crowns, orthodontics, refractions, eyeglasses, contact lenses, and vision correction procedures, as well as certain other related expenses. Other expenses covered by a standard health care FSA are not covered. For more information, go to www.fsafeds.com/fsafeds/summaryofbenefits.asp#LFSA.
FEDVIP Coverage—IRS rules do not allow for reimbursement from an FSA of expenses reimbursed by another insurance program, such as the Federal Employees Dental and Vision Insurance Program. FSAFEDS enrollees who also are enrolled in FEDVIP should not submit claims to FSAFEDS until they are sure that their FEDVIP carrier will not pay the expense. Claims may be submitted to FSAFEDS if an enrollee has used all the benefits available through FEDVIP, or certifies on the FSAFEDS claim form that the expenses will not be submitted to FEDVIP for consideration.
Qualified Reservist Distributions—Reservists may receive a distribution, known as a qualified reservist distribution, of unused health care flexible spending account or limited expense health care flexible spending account funds if they are called to active duty for 180 days or more or for an indefinite time. They may wish to do this rather than risk losing funds under the “use or lose” rule if they believe they might not incur sufficient eligible expenses to deplete the account for the benefit period. Covered reservists are those in the Army National Guard, Air National Guard, Army Reserve, Navy Reserve, Marine Corps Reserve, Air Force Reserve, Coast Guard Reserve or Reserve Corps of the Public Health Service.
A QRD refunds the balance of FSAFEDS allotments in the requestor's account as of the date of the request. This return of funds is taxable income in the year in which it is received. Receipt of a QRD closes the FSAFEDS health-care account for that benefit period. Employees receiving a QRD cannot submit additional claims for that benefit period and cannot re-enroll until the next open season. A QRD can be requested during the period beginning with the date of the order or call to active duty and ending on the last day of the grace period for the FSAFEDS benefit period during which the order or call to active duty occurs.
Employees desiring a QRD from a health care FSA should call FSAFEDS at (877) 372-3337 and be prepared to submit a copy of the order or call to active duty. Employees desiring a QRD from a limited expense health care FSA should contact the plan to inquire about its procedures.
Claims for reimbursement of eligible expenses can be submitted online at www.fsafeds.com (select My Account Summary, then My Claims and follow the instructions), by fax to (866) 643-2245, or by mail to FSAFEDS Program, P.O. Box 36880, Louisville, KY 40233. For fax or mail submissions, include a claim form (available at that site under Claim Forms) and a copy of the required documentation as described on that form. For online submissions, the required documents should be scanned and attached. Health care expense claims must include receipts and show the date(s) of service, the type of service, the amount paid, and the name and address of the provider.
Note: Some FEHB and FEDVIP carriers offer paperless reimbursement systems in which FSAFEDS will automatically reimburse out-of-pocket expenses associated with the claim. FSAFEDS enrollees can choose this option during enrollment and must re-enroll every year. There are differences among the types of claims and services each plan submits. Participating plans and other details are at www.fsafeds.com/forms/paperlessreimb.pdf.
Health Care Expenses—In addition to completing the claim form, the documentation under either item below must be attached:
• Explanation of Benefits statement (EOB). This is the statement you receive each time you, or a health care provider, submit medical, dental, or vision claims for payment to your health, dental, or vision care plan. The EOB will show the amount of expenses paid by the plan and the amount you must pay. For expenses that are partially covered by your (or your dependent’s) medical, dental or vision plans, you must attach the EOB. If you are covered under a HMO or PPO indicate “Co-Pay” on Part II of the claim form under “type(s) of service.”
• All Other Expenses. For expenses not covered at all by your (or your dependent’s) medical, dental or vision plans, reimbursement requests will not be processed without acceptable evidence of your expenses. A cancelled check alone is not considered acceptable evidence. Acceptable evidence includes detailed receipts, which contain the following information: type of service or product provided; date the expense was incurred; name of employee or dependent for whom the service/product was provided; person or organization providing the service; and amount of expense. For the health care FSA, you can receive reimbursement for claims that exceed the current amount in your account, as long as the total doesn’t exceed the total amount of your annual contribution.
Dependent Care Expenses—For allowable dependent care expenses, attach a copy of the bill or signed receipt, or have the provider complete the “Dependent Care Affidavit and Reimbursement Request” for ADP. Requests will not be processed without the Tax ID Number or Social Security Number for all providers.
For the dependent care FSA, you can only receive reimbursement up to the current amount in your account at the time you submit your claim.
Submitting Claims—You may submit claims at any time during the plan year, and up to April 30 of the following year. To be eligible for reimbursement, the expense must have been incurred in the plan year or no later than 21⁄2 months after the end of the plan year (the “grace period”)—typically by March 15 of the following year.
Claims for either health care or dependent care must be for eligible services already rendered and must be submitted by April 30 of the year following the plan year to be considered for reimbursement.
Note: If a plan year’s account balance is not sufficient to reimburse in full an eligible expense incurred during the grace period, the unpaid balance will roll forward to any account the employee established for the succeeding year. If the employee does not have an account in the succeeding year, the expense will not be reimbursed in full.
FSAFEDS reimburses your eligible expenses from your FSA via electronic funds transfer or check payment. On average, turnaround from claim receipt to claim payment is within 10 business days. Payment will be held until your reimbursement due reaches $25, or until the end of the quarter, whichever comes first.
You will receive an Explanation of Benefits (EOB) statement in the mail anytime your claim is not paid in full. Likewise, if you did not provide an e-mail address during enrollment, FSAFEDS will mail you a paper copy of the EOB. If you provided an e-mail address, FSAFEDS will e-mail your EOB. The EOB details how your claim was paid.
Regardless of whether or not you have submitted claims, you will receive information no later than October 31 in the plan year and no later than January 31, after the end of the plan year, notifying you of how much remains in your FSA, as well as summarizing claims paid to date.
You have the right to appeal a claim for benefits that has been denied in whole or in part by writing to ADP Benefit Services KY and requesting reconsideration. All written appeal requests should be sent to FSAFEDS Program, P.O. Box 36880, Louisville, KY 40233, fax (866) 643-2245, within 60 days of the initial decision. Include an explanation of why you disagree with the denial and cite specific provisions of the program or IRS rules, documents that support your claim such as a physician’s letter of medical necessity, explanation of benefits statement or similar evidence. If FSAFEDs denies that request, you have an additional 30 days to request review by the FSAFEDS appeal committee. Its decision is subject to review by an independent third party, whose decision is final and binding.
An automated telephone service is available at (877) 372-3337 to check account balances and the status of a claim, and enrollees can set up an online account with those and other features at www.fsafeds.com.
Status on Separation
If you separate (for retirement or other purposes) before the end of a plan year, a health care FSA terminates on separation. Any expenses incurred before separation will be reimbursable, even if claims are submitted after separation. Any remaining balance in an account is not refunded.
A dependent care account balance will still be available for any eligible expense incurred within the plan year.
If you return to work for the government, your FSA can be reinstated. If you return to work for a participating federal agency within 60 days and before the end of the same calendar year, your previous election will be reinstated. You will not be permitted to change the amount of your allotment unless you experienced a qualified status change within the 60 days.
If you return in another plan year, you may make a new election.
For More Information
ADP Benefit Services KY, not federal personnel offices, is the main point of contact for questions about the program, account balances, status of claims and other administrative matters. Contact FSAFEDS Program, P.O. Box 36880, Louisville, KY 40233, phone (877) 372-3337, TTY (800) 952-0450, fax (866) 643-2245, online www.fsafeds.com. The online site has features including a calculator, sign-up for electronic funds transfer and downloadable forms.
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Compensation paid to federal employees is subject to a number of benefit-related deductions. Most types of compensation are subject to federal, state, and local (if applicable) tax withholding.
Federal Retirement—Not all forms of pay are subject to federal retirement deductions; those not subject to the deductions also are not creditable toward a federal annuity. See High-3 Salary Base in Chapter 3, Section 4.
For CSRS employees, the civil service retirement deduction is 7 percent of pay subject to the deduction. For CSRS Offset employees, the deduction is 0.8 percent.
For FERS employees, the deduction is 0.8 percent except that it is 3.1 percent for those first hired in 2013 or later, or rehired in 2013 or later after a break in service with fewer than five years of prior creditable civilian service. Detailed guidance on coverage under this “FERS Revised Annuity Employees” provision is in Benefits Administration Letter 12-104 at www.opm.gov/retire/pubs/bals/bal12.asp. (Note: That higher level of required contributions does not apply under CSRS because no newly hired employees are placed in that system; it also does not apply under CSRS Offset because by definition employees hired under that system have at least five years of prior service.)
Under each system, employees covered by the special retirement provisions for air traffic controllers, firefighters, and law enforcement officers pay an additional 0.5 percentage points.
Social Security—The Social Security FICA (Federal Insurance Contributions Act) portion (typically 6.2 percent; 4.2 percent in 2011 and 2012) applies to the wages of FERS and CSRS Offset employees up to the Social Security taxable maximum ($113,700 for 2013). Above that threshold, CSRS Offset employees pay a 7 percent deduction but the money goes into the Civil Service Retirement and Disability Fund, not the Social Security Trust Fund. FERS employees pay only their civil service portion above the maximum wage base.
CSRS employees do not pay into Social Security.
Medicare—A deduction of 1.45 percent of salary applies under all retirement systems with no limitation on salary.
Also see Chapter 3, Section 2.
Federal Income Tax—IRS Publication 15-T (at www.irs.gov/pub/irs-pdf/p15t.pdf) shows how to calculate the federal income tax withholding on an employee’s biweekly gross wages. The federal government uses the percentage method of computing withholding. To determine your biweekly income tax withholding, take into account: personal exemptions; Federal Employees Health Benefits program and Federal Employees Dental and Vision Insurance Program premiums paid pretax under premium conversion; Thrift Savings Plan personal investments, including “catch-up contributions” if eligible, made through the TSP’s traditional design; flexible spending account contributions; deductible IRA contributions; and other deductions for which you qualify. See Circular E and Form W-4 for detail. Subtract the appropriate amount from your regular biweekly gross wages and use the result to calculate your withholding tax using the biweekly gross wage table in that publication.
State and Local Taxes—Section 5517 of Title 5, U.S.C., provides for withholding for state income tax purposes where the law of any state requires the collection of such tax and the Secretary of the Treasury has entered into an agreement to withhold state income taxes; Section 5516 of Title 5, U.S. Code provides similar authority for the District of Columbia. See Chapter 14, Section 4, for a listing of states with no income taxes. Section 5520 of Title 5 of the U.S. Code provides for withholding of city or county income or employment taxes. Policies and rates vary; see information from each taxing authority to determine proper withholding amounts.
Over Withholding—Where over withholding (federal and/or state, if applicable) has resulted in large refunds in past years, you may be entitled to claim additional exemptions if a similar refund is anticipated in the current year. Use Form W-4 (and any equivalent state withholding certificate), which has a schedule to compute the exemptions.
Federal employees typically have several types of voluntary deductions withheld from their salaries. These in general fall into one of two categories: those deducted before federal taxes and state taxes (if applicable) are withheld, and those deducted from after-tax pay.Among common pretax payroll deductions for employees are:
• Federal Employees Health Benefits program premiums, if paid under premium conversion (see Chapter 2, Section 1)
• Flexible spending account health care and/or dependent care account withholdings (see Section 9 of this chapter); and
• Federal Employees Dental and Vision Insurance Program premiums (see Chapter 2, Section 4).
Among common after-tax deductions are:
• Federal Employees Health Benefits program premiums, if not paid under premium conversion (see Chapter 2, Section 1);
• Federal Employees’ Group Life Insurance program premiums (see Chapter 2, Section 2);
• Federal Long-Term Care Insurance Program premiums (see Chapter 2, Section 3);
• Union or professional association dues;
• Combined Federal Campaign contributions; and
• Deductions for garnishment, child support, loans, savings programs, savings bond purchases, union dues, or other purposes.
Personal investments under the Thrift Savings Plan’s traditional design, including both regular investments up to the annual IRS-set maximum and “catch-up contributions” for those eligible, are made with pretax money. Roth-type investments are made with after-tax money. See Chapter 6, Section 1.
A listing of the allowable payroll deductions is in a July 30, 2008, memo to agencies at www.chcoc.gov/transmittals. That memo also sets an order of precedence for deductions when an employee’s salary is not sufficient to permit all applicable deductions.
Many of the same deductions can be taken from retiree annuity payments, but there are differences. For example, retirees may not make additional investments in the Thrift Savings Plan nor participate in the FSA program; also, FEHB and FEDVIP withholdings cannot be made from annuities on a pretax basis. Special rules apply to retirees who are re-employed by the government. See Chapter 4, Section 4.