This IRM must be read and interpreted in accordance with pertinent law, governmentwide regulations, Department of the Treasury (Treasury) Human Resources Directives, as well as applicable case law. The material in this IRM is generally organized consistent with the order of regulations contained in Title 5, Code of Federal Regulations (CFR), Part 536, Grade and Pay Retention.

Law: Title 5, United States Code (USC), Government Organization and Employees, at: http://uscode.house.gov/

Regulations: Title 5, Code of Federal Regulations (CFR) at: https://www.ecfr.gov

Federal Register Notice: OPM Criteria for Broadbanding System, 65 FR 79433, issued December 19, 2000 at https://www.federalregister.gov/documents/2000/12/19/00-31710/opm-criteria-for-irs-broadbanding-system

Delegation of Authority: Delegation Order 6-23, Delegations of Authority to Accomplish Pay Administration, at IRM 1.2.2.7.13

The IRS Human Capital Officer is the executive responsible for this IRM and overall Servicewide policy for grade/band and pay retention.

The HCO, OHRS, P&C develops and publishes content in this IRM.

The HCO, OHRO, TA approves and sets salary for employees who meet eligibility requirements for grade/band and pay retention.

The HCO, OHRO, Labor/Employee Relations and Negotiations (LERN) provides guidance and representation to managers in areas such as grievances, discipline, adverse and performance cases, and contractual obligations with the National Treasury Employees Union (NTEU).

This IRM provides policy and guidance for grade/band and pay retention for the IRS. The P&C office gauges effectiveness of grade/band and pay retention policy based on feedback from customers and program owners about subjects contained in this IRM. During review and publishing of this IRM, sections are revised, added or removed based in part on this process. The P&C office plays an integral role in program management, review and effectiveness.

The P&C office develops and deploys policies, materials and programs to increase Servicewide awareness and understanding of grade/band and pay retention. Additionally, P&C collaborates with other HCO organizations and Servicewide stakeholders to support education and outreach activities as they relate to grade/band and pay retention.

The following activities help to ensure program success:

A complete list of definitions regarding grade/band and pay and retention are found at 5 CFR 536.103, Definitions.

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

OPM Grade and Pay Retention Fact Sheets can be found at: https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/#url=Fact-Sheets

For the purpose of determining whether grade/band retention entitlement or eligibility must be terminated (see IRM 6.536.1.3.6), the offer of a position is a reasonable offer when the grade/band of the offered position is equal to or greater than the retained grade/band.

For the purpose of determining whether pay retention entitlement or eligibility must be terminated (see IRM 6.536.1.4.8), 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.

An offer of a position must meet all the following additional conditions to qualify as a reasonable offer:

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/band of the new position is higher, equal to, or lower than the grade/band of the current position. This is necessary to determine:

Comparison Rates: For comparing grades under different covered pay systems under 5 CFR 536.105, Comparing grades under different pay systems, and after applying any applicable geographic conversion for positions with different official worksites for:

Eligible IR Payband employees reduced to a lower GS grade retain their GS equivalent grade and rate of pay. The GS equivalent grade, identified by application of the conversion-out process, is compared to the GS grade of the position to which placed to determine whether the IR position is higher or lower. Movement of an IR Payband employee to a payband with a lower maximum underlying rate of basic pay than the employee’s former payband is equivalent to a reduction in grade per Section V, paragraph F 2(d) of the OPM Criteria for IRS Broadbanding System.

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.

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).

Grade/band retention is mandatory and a statutory entitlement only when an employee is placed in a lower-graded/banded position because of RIF or reclassification action.

An employee's movement to a lower-graded/banded position is considered to be a result of RIF procedures when they receive a specific RIF notice and:

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

To be eligible for mandatory grade/band retention due to a RIF, an employee must also have served for at least 52 consecutive weeks in one or more positions at one or more grades/bands higher than the grade/band of the position to which they are being placed. Any 52 consecutive week period will meet this requirement. The 52 consecutive weeks may be in more than one position, grade/band, or agency.

An employee's movement to a lower-graded/banded position is considered to be a result of a reclassification process when they receive a specific written notice that the position will be reclassified to a lower grade/band, and:

An employee is eligible for mandatory grade/band retention due to a reclassification action if, immediately before the reduction in grade/band, the employee's position was classified at the existing grade/band or a higher grade/band for a continuous period of at least one year.

An employee impacted by a RIF or reclassification action who does not meet the above eligibility criteria is not eligible for grade/band retention but will be eligible for pay retention under mandatory procedures (see IRM 6.536.1.4.1).

Current IRS employees are eligible for optional grade/band retention only if all the following are met:

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, Applying CTAP selection priority, a process developed by the business unit and coordinated with HCO,TA, or a specific RIF notice.

Business units are responsible for identifying and notifying directly impacted employees and providing a listing of the employees to the employment offices.

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

The determination that a position is no lower than three grade/band levels or three grade/band 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).

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

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

Application for a voluntary change to lower grade/band 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 employment office.

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

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

If the employee is further reduced in grade/band so that a second entitlement is initiated because of mandatory grade/band retention (RIF or reclassification), the first period of grade/band retention continues. At the end of the first two-year entitlement, the employee is then entitled to retain the grade/band of the position from which the second reduction in grade/band was made from. The beginning date of the second period is the effective date of the second reduction in grade/band. Pay retention entitlement rules are applied following the end of both periods of grade/band retention entitlements (see IRM 6.536.1.4.4).

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

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 their retained grade/band (see IRM 6.536.1.4.4).

The employee's retained grade/band must not be used:

A GS or GL employee on grade retention receives the full amount of any approved annual pay adjustment and any within grade increases (WGIs) due in the retained grade.

An IR employee on band retention is eligible to earn performance-based increases (PBIs) in the higher retained payband based upon performance in the permanent lower paybanded position of record. An IR employee reduced to a lower GS grade is no longer entitled to PBIs and may be eligible for annual pay adjustments and WGIs that become due in the retained GS grade.

An employee's rate of basic pay must be determined when the employee is placed on grade/band 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/band retention period.

Preexisting rate within a range (i.e., the employee is not currently receiving a retained rate): When placing an employee on grade/band 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.

Preexisting retained rate: If the employee is already on grade/band retention with a retained rate of pay immediately before the new grade/band retention action, the employee's payable rate of basic pay is determined under pay retention guidance at IRM 6.536.1.4.

When a grade/band retention action takes effect on the same date as another pay action, the actions are processed in the order prescribed in the rules governing the pay system of the employee's permanent position of record prior to the grade/band retention action. (See IRM 6.531.1.2.3, Order of Processing Simultaneous Pay Actions for GS and IR positions, and 5 CFR 532.413, Simultaneous action for FWS positions.)

Eligibility for mandatory grade/band retention is terminated when any one of the following conditions occurs:

Eligibility for optional grade/band retention is terminated when any one of the following occurs:

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

Termination of grade/band retention benefits takes effect:

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

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

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 IRM 6.536.1.4.3)) because of:

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.

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 IRM 6.536.1.4.3 must first be applied before determining whether an employee's rate of basic pay would otherwise be reduced.

Business Based HR Directors and/or Business Unit Heads of Office are authorized to grant optional pay retention to employees within their business unit 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 (see IRM 1.2.2.7.13, Delegation Order 6-23 (Rev. 1), Delegations of Authority to Accomplish Pay Administration). Examples of management actions where the IRS provided optional pay retention include:

The Business Based HR Directors and/or Business Unit Heads of Office are authorized to grant optional pay retention to Treasury employees selected under the merit promotion process for positions covered by IRS formal training plans not covered in IRM 6.536.1.4.1, 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:

All uses of the optional pay retention authority must be documented in writing and provide the analysis, reason, and approval for granting pay retention. The case file must be maintained by the Business Based HR Director’s office and/or the Business Unit Head of Office for a minimum of two 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 (PAR) for the affected employee.

The reduction of a payable rate of basic pay based on the geographic conversion rule is not a basis for entitlement to pay retention.

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.

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 becomes the existing retained rate in determining the employee's pay retention entitlement in the new position of record at the new official worksite.

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

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:

A newly established retained rate may not exceed:

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 official 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:

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% of the amount of the increase in that maximum rate, subject to the maximum rate limitations (see IRM 6.536.1.4.6).

For IR employees on pay retention, they do not receive PBIs as their current retained pay already exceeds the maximum rate of their payband. For IR employees on pay retention, they are entitled to 50 % of the amount of the increase in the highest applicable rate range (includes locality rate), limited to the maximum rate of the payband. The 50% increase is applicable when the maximum rate increase results from an adjustment to the employee's existing pay schedule or the establishment of a new pay schedule, and not applicable when the maximum rate increase results from a change in the employee's position of record or application of the geographic conversion rule.

When the above 50% 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.

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.

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

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, Treatment of a retained rate as basic pay for other purposes.

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

Termination of pay retention takes effect: