6.536.1  IRS Grade and Pay Retention

6.536.1.1  (10-15-2010)
General Provisions - Purpose

  1. This chapter provides policy guidance on grade and pay retention for General Schedule (GS) employees.

  2. Employees are on either grade or pay retention, but not on both grade and pay retention simultaneously. Each has different regulations and guidance which must be applied.

  3. This chapter is organized consistent with the regulations contained in 5 CFR 536.

    1. The IRS Pay Setting Desk Guide, Document 12626, should be used in conjunction with this chapter and contains helpful examples of pay-setting procedures.

    2. Sample notices informing employees of their eligibility for grade or pay retention are located at http://hco.web.irs.gov/compbenefits/pay/index.html.

    3. Information on compensation issues for positions covered under the IRS Payband System can be found at http://hco.web.irs.gov/apps/payband/.

6.536.1.1.1  (10-15-2010)
Coverage

  1. Subject to exclusions below, this chapter applies to employees in covered pay systems, or moving to a covered pay system from a position not under a covered pay system when the individual was an employee as defined in 5 CFR 536.103. This chapter applies to employees in other pay plans (e.g., IR payband) who are moving into GS or GL (Law Enforcement Officer (LEO)) positions. It does not apply to employees in Senior Executive Service (SES) positions, senior-level positions, positions for which appointees are paid under 5 U.S.C. 9503 (i.e., streamlined critical pay authority), and positions covered by the Federal Wage System (FWS) (e.g., wage grade (WG)).

  2. This guidance should be used in conjunction with 5 CFR 536 and reflects applicable law, regulation, and Comptroller General and OPM Decisions. It is intended to establish Servicewide policies and to ensure consistent application of IRS's discretionary authority.

  3. For employees in bargaining units covered by negotiated agreements, appropriate negotiated agreement provisions relating to subjects in this chapter should also be reviewed. For bargaining unit employees, should any of these instructions conflict with a provision of a negotiated agreement, the agreement will prevail.

  4. The IRS may not provide grade or pay retention to an employee under the exclusionary conditions listed in 5 CFR 536.102(b). The exclusions below typically apply to the IRS and include employees who:

    1. are reduced in grade or pay for personal cause or at their own request;

    2. are on a temporary or term appointment immediately before the action causing the reduction in grade; or

    3. do not satisfactorily complete a supervisory probationary period and are removed from that position.

  5. Grade or pay retention may not be based on the grade or rate of basic pay held by any employee during a temporary promotion or temporary reassignment. An employee's entitlement to grade or pay retention (which is based on the permanent position of record) is not affected by temporary assignment, although a temporary assignment cannot be used to extend a 2-year period of grade retention.

6.536.1.1.2  (10-15-2010)
Definitions

  1. The definitions used in this section are the same as the definitions found at 5 CFR 536.103.

6.536.1.1.3  (10-15-2010)
Reasonable Offer

  1. For the purpose of determining whether grade retention entitlement or eligibility must be terminated (see 6.536.1.2.6), the offer of a position is a reasonable offer when the grade of the offered position is equal to or greater than the retained grade and all of the following conditions are met:

    1. The offer must be in writing and must include the official position description of the offered position;

    2. The offer must inform the employee that the entitlement to grade retention will be terminated if the offer is declined and that the employee may appeal the reasonableness of the offer as provided in 5 CFR 536.402;

    3. The tenure of the offered position must be equal to or greater than the tenure of the position that created the grade retention entitlement (e.g., if prior to grade retention, the employee was a career employee, the offer of a temporary appointment is not considered a reasonable offer);

    4. The offered position must be full-time, unless the employee's position immediately before the action creating entitlement to grade retention was less than full-time; in which case the offered position must have a work schedule of no less than that of the position held before the change; and

    5. The offered position must be in the same commuting area as the employee's position immediately before the offer, unless the employee is subject to a mobility agreement or a published agency policy that requires employee mobility. See listing of IRS commuting areas at http://hco.web.irs.gov/pdf/commuteareas.pdf.

  2. For the purpose of determining whether pay retention entitlement or eligibility must be terminated (see 6.536.1.3.8), the offer of a position is a reasonable offer if the employee's rate of basic pay (includes locality or special rate) in the position would be equal to or greater than the retained rate and all of the following conditions are met:

    1. The offer must be in writing and must include the official position description of the offered position;

    2. The offer must inform the employee that the entitlement to pay retention will be terminated if the offer is declined and that the employee may appeal the reasonableness of the offer as provided in 5 CFR 536.402;

    3. The tenure of the offered position must be equal to or greater than the tenure of the position that created the pay retention entitlement (e.g., if prior to pay retention, the employee was a career employee, the offer of a temporary appointment is not considered a reasonable offer);

    4. The offered position must be full-time, unless the employee's position immediately before the action creating entitlement to pay retention was less than full-time, in which case the offered position must have a work schedule of no less than that of the position held before the change; and

    5. The offered position must be in the same commuting area as the employee's position immediately before the offer, unless the employee is subject to a mobility agreement or a published agency policy that requires employee mobility.

6.536.1.1.4  (10-15-2010)
Comparing Grades Under Different Pay Systems

  1. When an employee moves between different covered pay systems (e.g., GS to WG), the comparison rates of the applicable positions must be compared to determine whether the grade of the new position is higher, equal to, or lower than the grade of the current position. This is necessary to determine:

    1. eligibility for grade retention;

    2. whether grade retention is terminated when placed in another position; or

    3. whether eligibility is lost or grade retention is terminated based on declination of a reasonable offer.

  2. Comparison Rates:

    1. GS, GL, or GM (employees formerly covered by the Performance Management and Recognition System) positions: The rate of basic pay (includes locality or special rate) that applies to the fourth step of the GS, GL, or GM grade.

    2. FWS positions: The rate of basic pay that applies to the second step of the FWS grade.

  3. When an employee is moved from an IRS payband position under 5 U.S.C. 9509 to a GS position, the conversion out rules at 65 FR 79433 will first be used to determine the employee's grade under the GS. If the employee is moving to another pay system (e.g., WL), the GS grade determined under the conversion out rules will be used to establish the employee's comparison rate for the purpose of affording grade retention.

  4. Geographic Conversion: When comparing positions under different pay systems in different geographic locations, the comparison rate of the employee's position of record prior to the move must be determined as if that position of record were located at the official worksite of the new position of record (e.g., if a WG employee in Kansas City is moving to a GS position in San Francisco, the WG and GS comparison rates for San Francisco are used). This conversion process is not necessary for the purpose of comparing grades if the employee is being moved to a position under the same pay system (e.g., GS to GS).

6.536.1.2  (10-15-2010)
Grade Retention

  1. For a period of 2 years, an employee afforded grade retention keeps the benefits of the grade held immediately before being placed in a lower grade. The retained grade is treated as his or her grade for all pay administration purposes even though the employee is assigned to a lower-graded position description and performing lower-graded work. The retained grade is not used for any further reduction in force (RIF) procedure or to determine whether an employee is exempt from the Fair Labor Standards Act (FLSA). At the end of the 2-year period of grade retention, the employee then becomes potentially eligible for pay retention.

6.536.1.2.1  (10-15-2010)
Mandatory Grade Retention

  1. Grade retention is mandatory and a statutory entitlement only when an employee is placed in a lower-graded position as a result of RIF or reclassification action (5 CFR 536.201).

  2. An employee's movement to a lower-graded position is considered to be a result of RIF procedures when he or she receives a specific RIF notice and:

    1. is placed in the position offered in that RIF notice; or

    2. is placed in a position other than that offered in the RIF notice and the position offered is in writing and at management's initiative.

  3. This entitlement applies only to employees who are placed as a direct result of a RIF and not to individual employees placed prior to a RIF.

  4. To be eligible for mandatory grade retention due to RIF, an employee must also have served for at least 52 consecutive weeks in one or more positions at one or more grades higher than the grade of the position to which he or she is being placed. Any 52 consecutive week period will meet this requirement. The 52 consecutive weeks may be in more than one position, grade, or agency (5 CFR 536.203(a)).

  5. An employee's movement to a lower-graded position is considered to be a result of a reclassification process when he or she receives a specific written notice that the position will be reclassified to a lower grade, and:

    1. remains in his or her position after it is reclassified; or

    2. is placed in a different position before the effective date of the reclassification, provided the position was offered in writing at management's initiative (5 CFR 536.201(d)).

  6. An employee is eligible for mandatory grade retention due to a reclassification action if, immediately before the reduction in grade, the employee's position was classified at the existing grade or a higher grade for a continuous period of at least 1 year (5 CFR 536.203(b)).

  7. An employee otherwise eligible for mandatory grade retention who does not meet the above eligibility criteria is not eligible for grade retention but will be eligible for pay retention under mandatory procedures (see 6.536.1.3.1).

6.536.1.2.2  (10-15-2010)
Optional Grade Retention

  1. Current IRS employees are eligible for optional grade retention only if all of the following are met:

    1. Immediately before being placed in the lower grade, the employee 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 lower grade (5 CFR 536.203(c));

    2. The authorized agency official, as outlined in IRM 1.1.4, Organizational Planning, authorized the use of optional grade retention (5 CFR 536.202) to facilitate voluntary placement of directly impacted employees into permanent positions below their permanent position of record grade levels for non-RIF initiatives or before the initiation of official RIF procedures;

    3. Management announces a reorganization or reclassification decision in writing;

    4. The affected employee moves to a lower-graded position on or before the date the announced reorganization or reclassification is effected. The move to a lower-graded position may be initiated by the employee or in response to an offer initiated by management;

    5. The employee is directly impacted by an approved reorganization or competitive sourcing initiative as identified by the business unit; and

    6. The employee voluntarily applies and is selected for a lower-graded position that is equivalent to no lower than three grade levels or three grade intervals below his or her permanent position of record.

  2. Directly impacted employees are those whose positions are identified by the business unit as affected by an approved realignment, reorganization, or by a competitive sourcing initiative. Directly impacted employees in a competitive sourcing initiative are those employees whose positions are included in the competitive sourcing study. Business units may identify directly impacted employees by issuance of a Reassignment Preference Notice (RPN), a Certificate of Expected Separation (CES), a Career Transition Assistance Program (CTAP) notification letter in accordance with 5 CFR 330.607, a process developed by the business unit and coordinated with Human Capital Office's (HCO) Employment, Talent, and Security (ETS) office, or a specific RIF notice.

  3. Business units are responsible for identifying and notifying the directly impacted employees and providing a listing of the employees to the Employment Branch(es).

  4. Employees who accept a change to lower grade to enter a position with a career ladder with greater promotion potential than their permanent position of record will not be granted grade retention.

  5. The determination that a position is no lower than three grade levels or three grade intervals below an employee's permanent position of record is based upon the career ladder line of progression for the employee's permanent position of record (e.g., a GS-12 revenue agent currently temporarily promoted to a GS-14 position will have the three grades or three grade intervals computed from the GS-12 permanent home position).

  6. Once a directly impacted employee accepts a change to lower grade with pay set under this authority, the employee is no longer considered directly impacted. No further grade retention will be afforded unless, in the future, the new position is impacted by another different covered initiative.

  7. Directly impacted employees may apply and accept a voluntary change to lower grade in any worksite/location (i.e., not limited to the commuting area).

  8. Application for a voluntary change to lower grade may be made through the Reassignment Priority Process, CTAP, CES letter, normal competitive process, or other process developed by the business unit and coordinated with the servicing HCO's ETS Employment office.

  9. Optional grade retention is normally afforded in conjunction with preference letters (i.e., for the same period of time as the RPN and CES letters are valid), however, negotiations may specify a different time period unique to a specific initiative.

6.536.1.2.3  (10-15-2010)
Period of Grade Retention

  1. Grade retention is effective for a period of 2 years beginning on the date the employee is placed in the lower-graded position. The personnel action which provided the grade retention must annotate the date the grade retention entitlement terminates.

  2. If the employee is further reduced in grade so that a second entitlement is initiated as a result of mandatory grade retention (RIF or reclassification), the first period of grade retention continues. At the end of the first 2-year entitlement, the employee is then entitled to retain the grade of the position from which the second reduction in grade was made from. The beginning date of the second period is the effective date of the second reduction in grade. Pay retention entitlement rules are to be applied following the end of both periods of grade retention entitlements (see 6.536.1.3.4).

6.536.1.2.4  (10-15-2010)
Applicability of Retained Grade

  1. Except as stated in paragraph (3) below, an employee's retained grade is treated as the employee's grade for all purposes, including pay administration, premium pay, retirement, life insurance, and eligibility for training.

  2. If the employee's actual position of record is under a different pay system, the employee must be treated as being under the pay system associated with his or her retained grade (see 6.536.1.2.5). An employee covered under the FWS (e.g., WG) pay system, moving to a GS position still retains the FWS (e.g., WG) grade and rate. However, an employee in the IR pay system who is placed in a GS or FWS position will first have his or her IR position converted to the GS system. Any applicable grade retention will then be based on that GS equivalent grade and step. Employees moving from an IR payband position to another IR payband position are placed on band retention and remain in the IR pay system.

  3. The employee's retained grade must not be used:

    1. in any RIF procedure;

    2. to determine if an employee has been reduced in grade for the purpose of terminating grade or pay retention (i.e., based on personal cause or at the employee's request);

    3. to determine whether an employee retains status as a GM employee (as defined in 5 CFR 531.203); or

    4. to determine coverage under FLSA.

  4. A GS, GM, or GL employee on grade retention receives the full amount of any approved annual pay adjustment and any within grade increases due in the retained grade. An IR employee on band retention is eligible to earn performance based increases in the higher retained payband based upon performance in the permanent lower paybanded position of record.

6.536.1.2.5  (10-15-2010)
Determining an Employee's Rate of Basic Pay Under Grade Retention

  1. An employee's rate of basic pay must be determined when the employee is placed on grade retention or becomes covered by a different pay schedule (due to a change in position of record, official worksite, or the establishment of a new pay schedule) during the grade retention period.

  2. Preexisting rate within a range (i.e., the employee is not currently receiving a retained rate): When placing an employee on grade retention, the pay schedule of the new position is used to determine the employee's rate of basic pay, using the retained grade and step. This may result in a rate of basic pay higher, lower, or the same as the rate of pay held before the action. If the result is a lower rate, the employee is entitled to pay retention unless the loss of pay resulted solely from a geographic conversion (see 5 CFR 536.206(b)). For example, an employee in a position covered by a special rate (SR) is impacted by a personnel action which initiates entitlement to grade retention to a non-SR covered position where the highest applicable rate range (as defined in 5 CFR 536.103) is now a locality rate of basic pay. The retained rate is based upon the pay schedule for the new position of record, including the locality rate. If when using the grade and step of the former position, the rate of pay in the new position of record is less than the rate of pay for the former position, pay retention rules will be used to set the employee's rate of basic pay (e.g., an employee may hold a GS-11, step 3, in a SR position and after a position change to a non-SR position, retain a locality rate of basic pay for GS-11, step 5).

  3. Preexisting retained rate: If the employee is already on grade retention with a retained rate of pay immediately before the new grade retention action, the employee's payable rate of basic pay is determined under pay retention guidance at 6.536.1.3.

  4. When a grade retention action takes effect on the same date as another pay action, the actions will be processed in the order prescribed in the rules governing the pay system of the employee's permanent position of record prior to the grade retention action. (See 5 CFR 531.206 for GS positions and 5 CFR 532.413 for FWS positions.)

6.536.1.2.6  (10-15-2010)
Loss of Eligibility and Termination of Grade Retention

  1. Eligibility for mandatory grade retention is lost, and grade retention is terminated when any one of the following conditions occurs (see 5 CFR 536.207(a)):

    1. Break in service of 1 workday or more;

    2. Reduction in grade for personal cause or at the employee's request (based on the actual grade of the permanent position of record, not the retained grade);

    3. Movement to a position equal to or higher than the retained grade (temporary promotions do not impact eligibility and are excluded);

    4. Declination of a reasonable offer (see 6.536.1.1.3) (does not include an employee withdrawing consideration or declining a selection from a merit promotion package);

    5. Election, in writing, to terminate the benefits of grade retention; or

    6. Expiration of the 2-year grade retention period.

  2. Eligibility for optional grade retention entitlement is lost, and grade retention is terminated when any one of the following occurs (see 5 CFR 536.207(b)):

    1. Any of the conditions listed above in paragraph (1), except that an employee's request for placement in a lower-graded position, in lieu of displacing another employee at his or her grade under RIF procedures, is not a declination of a reasonable offer for grade retention purposes; or

    2. The employees fails to enroll in, or comply with, IRS written requirements established to assure priority placement consideration in the IRS Priority Placement Program (IRSPPP) (see IRM 6.330.1.3).

  3. If a directly impaced employee declines a reasonable offer of reassignment to any position within the commuting area, eligibility for optional grade retention ceases. However, if the employee is later reduced in grade due to a RIF, entitlement to mandatory grade retention is then activated.

  4. Termination of grade retention takes effect:

    1. At the end of the day upon expiration of the 2-year period of grade retention;

    2. At the end of the day before separation from service if termination is the result of a break in service;

    3. At the end of the day before placement if the termination is the result of placement in another position; or

    4. At the end of the day on the last day of the pay period in which the employee declined a reasonable offer, elects to terminate grade retention, or fails to enroll in, or comply with, written requirements of the IRSPPP.

6.536.1.2.7  (10-15-2010)
Qualification Determinations Under Grade Retention

  1. The qualifications of an employee while on grade retention are evaluated on whichever experience will most likely result in placement. Credit for experience will be provided either:

    1. on the basis of the employee's retained grade and series; or

    2. on the basis of the actual position occupied.

  2. When an employee is no longer on grade retention, the qualifications for the retained grade period are then evaluated on the actual position occupied (i.e., the position of record) (see 5 CFR 337.102).

6.536.1.3  (10-15-2010)
Pay Retention

  1. An employee afforded pay retention retains his or her rate of basic pay when that pay rate would have otherwise been reduced. The retained rate continues until a terminating event occurs (see 6.536.1.3.8).

6.536.1.3.1  (10-15-2010)
Mandatory Pay Retention

  1. Pay retention must be provided to an IRS employee whose payable rate of basic pay would otherwise be reduced (after application of any applicable geographic conversion rule (see 6.536.1.3.3)) as a result of:

    1. Expiration of the 2-year period of grade retention;

    2. A RIF or reclassification action that places an employee in a lower grade when the employee does not meet the eligibility requirements for grade retention (see 6.536.1.2.1);

    3. A management action that places an employee from a SR position to a lower-paid SR position or a non-SR position;

    4. A management action that places an employee under a different pay schedule (e.g., a GS-7, step 10, employee is involuntarily placed in a WG-5 position, and the employee is not entitled to grade retention);

    5. A management action that places an employee in a formal development program generally utilized Governmentwide, such as upward mobility, apprenticeship, and career intern programs; or

    6. A reduction or elimination of SR schedules (excluding a statutory reduction in scheduled rates of pay).

  2. Except for selections covered under (1)e above, a merit promotion announcement is not considered a management action and mandatory pay retention does not apply.

  3. If an employee's official worksite changes in conjunction with an action that may entitle the employee to pay retention, the geographic conversion rule in 6.536.1.3.3 must first be applied before determining whether an employee's rate of basic pay would otherwise be reduced.

6.536.1.3.2  (10-15-2010)
Optional Pay Retention

  1. Embedded Human Resources (HR) Directors are authorized to grant optional pay retention to IRS employees not entitled to mandatory pay retention whose payable rate of basic pay would otherwise be reduced (after application of any applicable geographic conversion rule) as a result of a management action. Examples of management actions where the IRS has provided optional pay retention include:

    1. Employee directly impacted by an approved reorganization who voluntarily accepts a lower-graded position but does not meet the additional eligibility requirements for grade retention (6.536.1.2.2);

    2. Placement of an employee in a lower-graded position due to ill health or becoming disabled when the employee is no longer able to successfully perform the duties of his or her current position; and

    3. Employee accepts a lower-graded position which has been designated in advance as hard-to-fill.

  2. In addition, Embedded HR Directors are also authorized to grant optional pay retention for Department of the Treasury employees selected under the merit promotion process for positions covered by IRS formal training plans not covered in 6.536.1.3.1.e only if the position selected for has the same or higher non-competitive career-ladder promotion potential as the employee's permanent position of record, and all of the following conditions are met:

    1. The position has been reviewed and documented by the Embedded HR Director as meeting all of the following criteria:
      i. Entry-level position is professional or administrative in nature, as defined in the OPM Handbook of Occupational Groups and Families;
      ii. Advertised as a career-ladder position, subject to an official IRS training program; and
      iii. Advertised that pay retention may be applicable.

    2. The employee will be placed on an IRS formal training plan approved by the business unit's HR Director or Learning and Education Director. Provisions of an IRS formal training plan must, at a minimum, include the following:
      i. Training and development requirements throughout the entire period between entrance on duty into the occupation and attaining the full noncompetitive performance level;
      ii. All basic training requirements;
      iii. On-the-Job Training with an assigned coach;
      iv. A minimum of two formal performance discussions between manager and employee (mid-year and final) to address the formal development plan in order to determine completion;
      v. Documentation to verify completion of predetermined learning objectives;
      vi. Requirement that official file copy be maintained by the manager of the employee and servicing Learning and Education Office; and
      vii. Requirement that official file copy be maintained in the employee's performance folder until he or she has been at the journey grade for at least 1 year.

    3. Approved IRS formal training plans must be provided to the servicing employment branch to fill positions identified as formal development and that authorize pay retention. Embedded HR Directors are responsible for maintaining approved training plans for serviced organizations in either hard copy or an electronic database to be available upon request for third-party review.
      i. Once a position receives approval based on the above requirements, pay retention may be granted for all future vacancies located in the same occupation (the same or similar duties) and in the same business unit.
      ii. Embedded HR Directors are responsible for periodically reviewing approvals to ensure that the approvals still meet the needs of the Service.

    4. A current Department of the Treasury employee selected under an IRS formal training plan described above will be provided pay retention when the employee moves to the IRS without a break in Service

  3. All uses of the optional pay retention authority must be documented in writing and must provide the analysis, reason, and approval for granting pay retention. The case file must be maintained by the embedded HR office for a minimum of 2 years from the effective date of the pay retention action. The basis for use of this authority should also be noted in the remarks section of the Personnel Action Request for the affected employee.

6.536.1.3.3  (10-15-2010)
Geographic Conversion

  1. The reduction of a payable rate of basic pay based on the geographic conversion rule is not a basis for entitlement to pay retention (5 CFR 536.303(a)).

  2. If an employee's official worksite changes as part of the initial personnel action which may provide pay retention, the geographic conversion rule must be applied first to determine the rate of basic pay the employee is eligible to retain as follows:

    1. Identify the highest applicable rate range that would apply to the employee's position of record before the pay action as if that position were assigned to the new official worksite; then

    2. Determine the employee's converted payable rate of basic pay based on the step (or relative position in the range for a GM employee) in the range that corresponds to the employee's step (or GM employee's relative range) in the range before the pay action.

    3. The converted rate of basic pay is then treated as if it were the existing payable rate of basic pay before applying pay retention rules (5 CFR 536.303(a)). Example: A GS-11, step 5, employee in Denver is selected for a position in Atlanta. The GS-11, step 5, payable rate of basic pay in Denver is $69,825. In Atlanta, a GS-11, step 5, has a rate of basic pay of $67,985. The converted rate of basic pay, in this case $67,985, is then treated as if it were the existing payable rate of basic pay before applying pay retention rules.

  3. When the official worksite of an employee already receiving pay retention is changed to a new location where different pay schedules apply, the geographic conversion rule must be applied to the retained rate. The converted retained rate will become the existing retained rate in determining the employee's pay retention entitlement in the new position of record at the new official worksite. The steps for conversion are as follows:

    1. Identify the maximum rate for the highest applicable rate range for the employee's current position of record at the current duty station.

    2. Identify the maximum rate for the highest applicable rate range for the employee's current position of record in the new official duty station.

    3. Divide the maximum rate identified in b) by the maximum rate in a). Round the result to the fourth decimal place.

    4. Multiply the result from c) by the employee's current retained rate, rounding up or down to the nearest whole dollar (for an annual rate) or nearest whole cent (for an hourly rate).

    5. The final result is the employee's converted retained rate in the new official duty station (5 CFR 536.303(b)).

6.536.1.3.4  (10-15-2010)
Determining an Employee's Pay Retention Entitlement

  1. When an employee experiences an event that provides pay retention entitlement, the following rules are applied in this order:

    1. Any general pay adjustment that occurs on the same date as the pay retention entitlement must be effected (processed) first;

    2. Then, if applicable, apply the geographic conversion rule to determine a converted rate of basic pay before determining the initial pay retention entitlement.

    3. Convert an hourly rate to an annual rate if the new position is under a pay system that uses only annual rates of pay. Conversely, change an employee's existing annual rate of basic pay to an hourly rate if the employee's new position is under a pay system that uses only hourly rates (e.g., WG).

  2. To determine initial pay retention entitlement, compare the existing payable rate of basic pay to the maximum rate of the highest applicable rate range for the employee's new position of record:

    1. If the employee's existing payable rate of basic pay is less than the maximum rate of the new rate schedule, set pay at the lowest rate on that schedule that equals or exceeds the employee's existing payable rate. Pay retention then terminates.

    2. If the employee's existing payable rate of basic pay is greater than the maximum rate of the new rate schedule, the employee is entitled to a retained rate equal to the existing payable rate of basic pay, and pay retention regulations apply.

  3. A newly established retained rate may not exceed:

    1. 150 percent of the maximum rate of the highest applicable rate range for the employee's new position of record.

    2. the rate payable for Level IV of the Executive schedule.

  4. Pay retention is based upon the rate of basic pay (includes locality or special rate). A change in the position of record, pay schedule, or worksite may change the retained rate or may even impact eligibility to continue pay retention. When such an event results in a new highest applicable rate range, determine the employee's pay retention entitlement under the following rules:

    1. If the employee is moving to a new location, apply the geographic conversion rule to recalculate the retained rate of pay.

    2. If the employee's grade and pay system are not changing, and the employee's existing retained rate is less than or equal to the maximum payable rate of the highest applicable rate range (for the new position of record), then the payable rate is set within the rate range and pay retention terminates.

    3. If the employee's grade and pay system are not changing and the employee's existing retained rate is more than the maximum payable rate of the highest applicable rate range (for the new position of record), then pay retention rules continue to apply and the employee is entitled to the existing retained rate.

    4. If the employee's pay system is not changing, but the employee is being promoted to a higher grade, apply the appropriate promotion rule to determine the payable rate of pay. If the resulting rate is equal to or greater than the retained rate, pay retention terminates. If the resulting rate is less than the retained rate, pay retention rules continue to apply and the employee continues to be entitled to the retained rate.

    5. If the employee is moving to a position under a different pay system whose grade has a higher comparison rate, apply the appropriate pay administration rules to determine the employee's payable rate of basic pay (e.g., move from a GS to WG position may result in applying prevailing rate promotion rules). If the resulting rate is equal to or greater than the retained rate, pay retention is terminated. If the resulting rate is less than the retained rate, pay retention rules continue to apply and the employee continues to be entitled to the retained rate.

    6. If a temporary promotion provides a lesser payable rate than the retained rate, the employee continues to receive the retained rate while on the temporary promotion. A temporary promotion which provides a greater payable rate than the retained rate does not permanently terminate an employee's entitlement to pay retention. When the temporary promotion ends, the employee's pay retention entitlement will be determined as if the employee had not received the temporary promotion.

6.536.1.3.5  (10-15-2010)
Adjusting an Employee's Retained Rate When a Pay Schedule is Adjusted

  1. When a general pay adjustment increases the maximum rate (i.e., step 10) of the highest applicable rate range (includes locality or special rate) for an employee's position of record, an employee on pay retention is entitled to receive 50 percent of the amount of the increase in that maximum rate, subject to the maximum rate limitations (see 6.536.1.3.6).

  2. When the above 50 percent pay adjustment causes the employee's retained rate to be equal to or lower than the maximum rate (i.e., step 10) of the highest applicable rate schedule, the employee's pay is set to the maximum rate (i.e., step 10) and pay retention terminates.

  3. Paragraph (1) of this section does not apply to an increase in the employee's highest applicable rate range due to application of the geographic conversion rule or a change in the employee's position of record.

6.536.1.3.6  (10-15-2010)
Limitation on Retained Rates

  1. A retained rate may not exceed the rate payable for Level IV of the Executive Schedule nor may it exceed 150 percent of the maximum rate (i.e., step 10) of the highest applicable rate range of the employee's new position of record.

6.536.1.3.7  (10-15-2010)
Treatment of a Retained Rate as Basic Pay for Other Purposes

  1. A retained rate is considered to be an employee's rate of basic pay for pay administration purposes to include computing or applying retirement deductions, life insurance premiums, premium pay, severance pay, and other similar provisions as described in 5 CFR 536.307.

6.536.1.3.8  (10-15-2010)
Loss of Eligibility For or Termination of Pay Retention

  1. Pay retention terminates when the employee experiences any one of the following conditions:

    1. Break in service of 1 workday or more;

    2. Entitlement to a rate of basic pay which equals or exceeds the retained rate;

    3. Declination of a reasonable offer (see 6.536.1.1.3(2)) (does not include an employee withdrawing consideration or declining a selection from a merit promotion package);

    4. Demotion for personal cause or at the employee's request;

    5. Movement to a position not under a covered pay system;

    6. Election in writing to terminate grade retention (which also terminates eligibility for pay retention); or

    7. Movement from a position where employee was afforded pay retention based upon either a formal development program (6.536.1.3.1(1)e) or IRS formal training plan (6.536.1.3.2(2)) to a position not covered by pay retention.

  2. Termination of pay retention takes effect:

    1. At the end of the day before separation from service if termination is the result of a break in service;

    2. At the end of the day before the employee becomes entitled to a rate that is equal to or greater than the retained rate;

    3. At the end of the day before placement or movement if the termination is the result of the employee's placement in or movement to another position; or

    4. At the end of the day on the last day of the pay period in which the employee declines a reasonable offer.


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