6.536.1 IRS Grade/Band and Pay Retention 6.536.1.1 Program, Scopes and Objective 6.536.1.1.1 Background 6.536.1.1.2 Authority 6.536.1.1.3 Roles and Responsibilities 6.536.1.1.4 Program Management and Review 6.536.1.1.5 Program Controls 6.536.1.1.6 Definitions 6.536.1.1.7 Related Resources 6.536.1.2 Coverage 6.536.1.2.1 Reasonable Offer 6.536.1.2.2 Comparing Grades Under Different Pay Systems 6.536.1.3 Grade/Band Retention 6.536.1.3.1 Mandatory Grade/Band Retention 6.536.1.3.2 Optional Grade/Band Retention 6.536.1.3.3 Period of Grade/Band Retention 6.536.1.3.4 Applicability of Retained Grade/Band 6.536.1.3.5 Determining an Employee's Rate of Basic Pay Under Grade/Band Retention 6.536.1.3.6 Loss of Eligibility and Termination of Grade/Band Retention 6.536.1.3.7 Qualification Determinations Under Grade/Band Retention 6.536.1.4 Pay Retention 6.536.1.4.1 Mandatory Pay Retention 6.536.1.4.2 Optional Pay Retention 6.536.1.4.3 Geographic Conversion 6.536.1.4.4 Determining an Employee's Pay Retention Entitlement 6.536.1.4.5 Adjusting an Employee's Retained Rate When a Pay Schedule is Adjusted 6.536.1.4.6 Limitation on Retained Rates 6.536.1.4.7 Treatment of a Retained Rate as Basic Pay for Other Purposes 6.536.1.4.8 Loss of Eligibility For or Termination of Pay Retention Part 6. Human Resources Management Chapter 536. Grade and Pay Retention Section 1. IRS Grade/Band and Pay Retention 6.536.1 IRS Grade/Band and Pay Retention Manual Transmittal May 26, 2021 Purpose (1) This transmits revised IRM 6.536.1, Grade/Band and Pay Retention. Material Changes (1) Title changed from Grade and Pay Retention to Grade/Band and Pay Retention. (2) IRM 6.536.1.1 incorporates the Program Scope and Objectives subsection as required by the Internal Management Documents (IMD) System outlined in 1.11.2, Internal Revenue Manual (IRM) Process. (3) IRM 6.536.1.2 removes sections now contained in Program Scope and Objectives. (4) Sections throughout reorganized, renumbered and updated to include: grade/band and pay retention for the IRS Payband System; simplify and/or clarify language; remove procedural information and refer to other sources for procedures; update division and branch names, references, hyperlinks, and terminology. Effect on Other Documents This IRM supersedes IRM 6.536.1, issued October 15, 2010. Audience All business units Effective Date (05-26-2021) Robin D. Bailey Jr. IRS Human Capital Officer 6.536.1.1 (05-26-2021) Program, Scopes and Objective Purpose: This IRM provides Servicewide policy, standards, requirements, and guidance relating to the administration of grade/band and pay retention. Audience: Unless otherwise indicated, the policies, authorities, procedures, and instructions contained in this IRM apply to all business units. Bargaining unit (BU) employees should review negotiated agreement provisions relating to subjects in the IRM. Should any of these instructions conflict with provisions in the negotiated agreement, the agreement prevails for BU employees. Policy Owner: The IRS Human Capital Officer. Program Owner: The Human Capital Office (HCO), Office of HR Strategy (OHRS), Policy and Compliance (P&C). Program Goals: This IRM provides IRS guidance relating to grade/band and pay retention regulations found in Title 5, CFR, Part 536, Grade and Pay Retention and Office of Personnel Management (OPM) Criteria for IRS Broadbanding System, 65 Federal Register (FR) 79433, issued December 19, 2000. Primary Stakeholders: The HCO, Office of HR Operations (OHRO), Talent Acquisition (TA) and HR Shared Services (HRSS). 6.536.1.1.1 (05-26-2021) Background 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. 6.536.1.1.2 (05-26-2021) Authority Law: Title 5, United States Code (USC), Government Organization and Employees, at: http://uscode.house.gov/ §5361-5366--Grade and Pay Retention Regulations: Title 5, Code of Federal Regulations (CFR) at: https://www.ecfr.gov Part 536 - Grade and Pay Retention 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 6.536.1.1.3 (05-26-2021) Roles and Responsibilities 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). 6.536.1.1.4 (05-26-2021) Program Management and Review 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. 6.536.1.1.5 (05-26-2021) Program Controls 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: Conducting annual policy reviews; Publishing educational articles, such as Leaders Alerts and IRS Headlines; Maintaining accurate and up-to-date program websites; and Providing policy guidance. 6.536.1.1.6 (05-26-2021) Definitions A complete list of definitions regarding grade/band and pay and retention are found at 5 CFR 536.103, Definitions. Employment on a temporary or term basis: employment under an appointment having a definite time limitation or designation as temporary or term. Demotion at an employee’s request: a reduction in grade/band: which is initiated by the employee for their benefit, convenience or personal advantage, including consent to a demotion in lieu of one for personal cause; and which is not caused or influenced by management action. Official worksite: location of the employee’s position of record, as determined in IRM 6.531.1.5.3, Determining an Employee’s Official Worksite (Official Post of Duty (POD)). Payable rate: highest rate of basic pay (including locality or special rate) to which an employee is entitled based on the employee's position of record, official worksite, and step (or relative position in range), or, if applicable, a retained rate. Rate of basic pay: rate fixed for a position before any deductions. Rates of basic pay within IRS include the underlying General Schedule (GS) rate, Law Enforcement Officer (LEO) special base rate, GS locality rate, special rate, IR underlying rate of basic pay, IR locality rate, and a retained rate. Reorganization: planned elimination, addition, or redistribution of functions or duties either wholly within an agency or between agencies. Temporary promotion: promotion with a definite time limitation, and one which the employee is informed in advance is temporary and would normally require the individual’s return to the permanent position at the end of the promotion. Temporary reassignment: reassignment with a definite time limitation, and one which the employee is informed in advance is temporary and would normally require the individual’s return to the permanent position at the end of the reassignment. 6.536.1.1.7 (05-26-2021) Related Resources 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 6.536.1.2 (05-26-2021) Coverage Subject to exclusions below, this IRM 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, Definitions. This IRM applies to employees in other pay plans (e.g., Senior Executive Service (SES)) moving into GS, GL (LEO) or IRS Payband (IR) positions. It does not apply to employees in SES positions, senior-level positions (SL), positions for which appointees are paid under 5 USC 9503, Streamlined critical pay authority, and positions covered by the Federal Wage System (FWS) (e.g., wage grade (WG)). For BU employees covered by negotiated agreements, appropriate negotiated agreement provisions relating to subjects in this chapter should also be reviewed. To be eligible for pay retention, an employee must: be placed in a covered pay system (this includes GS, GL, FWS/Prevailing Rate System (e.g., WG), and IR positions); be serving under a permanent appointment (e.g., career, career-conditional); and meet additional eligibility criteria based upon the personnel action that generates the application of pay retention. The IRS may not provide grade/band or pay retention to an employee under the exclusionary conditions listed in 5 CFR 536.102(b), Coverage. The exclusions below typically apply to the IRS and include employees who: are reduced in grade/band or pay for personal cause or at their own request; are on a temporary or term appointment immediately before the action causing the reduction in grade/band; or do not satisfactorily complete a supervisory probationary period and are removed from that position. Grade/band or pay retention may not be based on the grade/band or rate of basic pay held by any employee during a temporary promotion or temporary reassignment. A temporary promotion or temporary reassignment does not affect an employee's preexisting entitlement to grade or pay retention. However, a temporary assignment cannot be used to extend a two-year period of grade/band retention. (See IRM 6.536.1.3.3) 6.536.1.2.1 (05-26-2021) Reasonable Offer 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: The offer must be in writing and include the official position description of the offered position; The offer must inform the employee that the entitlement to grade/band or pay retention will be terminated if the offer is declined and the employee may appeal the reasonableness of the offer as provided in 5 CFR 536.402, Appeal of termination of benefits because of reasonable offer; The tenure of the offered position must be equal to or greater than the tenure of the position that created the grade/band or pay retention entitlement (e.g., if prior to grade/band or pay retention, the employee was a career employee, the offer of a temporary appointment is not considered a reasonable offer); The offered position must be full-time, unless the employee's position immediately before the action creating entitlement to grade/band or 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 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 requiring employee mobility. 6.536.1.2.2 (05-26-2021) Comparing Grades Under Different Pay Systems 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: eligibility for grade/band retention; whether grade/band retention is terminated when placed in another position; or whether eligibility is lost, or grade/band retention is terminated based on declination of a reasonable offer. 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: GS or GL positions: The rate of basic pay (includes locality or special rate) that applies to the fourth step of the GS or GL grade. FWS positions: The rate of basic pay that applies to the second step of the FWS grade. 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). 6.536.1.3 (05-26-2021) Grade/Band Retention An employee under a covered pay system who is placed in a lower-graded/banded position under the same or different covered pay system (e.g., as a result of a reduction in force (RIF) or when their position is reduced in grade/band as a result of a reclassification) is entitled to retain the grade/band held immediately before the reduction for a period of two years. An employee afforded grade/band retention keeps the benefits of the grade/band held immediately before being placed in a lower grade/band. The retained grade/band is treated as their grade/band for all pay administration purposes even though the employee is assigned to a lower-graded/banded position description and performing lower-graded/banded work. The retained grade/band is not used for any further RIF procedure or to determine whether an employee is exempt from the Fair Labor Standards Act (FLSA). At the end of the two-year period of grade/band retention, the employee then becomes potentially eligible for pay retention. 6.536.1.3.1 (05-26-2021) Mandatory Grade/Band Retention 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: is placed in the position offered in that RIF notice; or 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. 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: remains in the position after it is reclassified; or is placed in a different position before the effective date of the reclassification, provided the position was offered in writing at management's initiative. 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). 6.536.1.3.2 (05-26-2021) Optional Grade/Band Retention Current IRS employees are eligible for optional grade/band retention only if all the following are met: Immediately before being placed in the lower grade/band, the employee served for at least 52 consecutive weeks in one or more positions under a covered pay system at one or more grades/bands higher than the lower grade/band; The authorized agency official, as outlined in IRM 1.1.4, Organizational Planning, authorized the use of optional grade/band retention to facilitate voluntary placement of directly impacted employees into permanent positions below their permanent position of record grade/band levels for non-RIF initiatives or before the initiation of official RIF procedures; Management announces a reorganization or reclassification decision in writing; The affected employee moves to a lower-graded/banded position on or before the date the announced reorganization or reclassification is effected. The move to a lower-graded/banded position may be initiated by the employee or in response to an offer initiated by management; The employee is directly impacted by an approved reorganization or competitive sourcing initiative, as identified by the business unit; and The employee voluntarily applies, and is selected for, a lower-graded/banded position that is equivalent to no lower than three grade/band levels or three grade/band intervals below their permanent position of record. 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. 6.536.1.3.3 (05-26-2021) Period of Grade/Band Retention 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). 6.536.1.3.4 (05-26-2021) Applicability of Retained Grade/Band 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). 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. An employee in an IR Payband position who is placed in a GS or FWS position will first have their IR position converted to the GS system. Any applicable grade/band 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. The employee's retained grade/band must not be used: in any RIF procedure; to determine if an employee has been reduced in grade/band for the purpose of terminating grade/band or pay retention (i.e., based on personal cause or at the employee's request); or to determine coverage under FLSA. 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. 6.536.1.3.5 (05-26-2021) Determining an Employee's Rate of Basic Pay Under Grade/Band Retention 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. Note: 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 are used to set the employee's rate of basic pay (e.g., an employee may hold a GS-11, step 3, in a special rate position and after a position change to a non-special rate position, retain a locality rate of basic pay for GS-11, step 5). 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.) 6.536.1.3.6 (05-26-2021) Loss of Eligibility and Termination of Grade/Band Retention Eligibility for mandatory grade/band retention is terminated when any one of the following conditions occurs: Break in service of one workday or more; Reduction in grade/band for personal cause or at the employee's request (based on the actual grade/band of the permanent position of record, not the retained grade/band); Movement to a position equal to or higher than the retained grade/band (temporary promotions do not affect eligibility and are excluded); Declination of a reasonable offer (see IRM 6.536.1.2.1) (does not include an employee withdrawing consideration or declining a selection from a merit promotion package); Election, in writing, to terminate the benefits of grade/band retention; or Expiration of the two-year grade/band retention period. Eligibility for optional grade/band retention is terminated when any one of the following occurs: Any of the conditions listed above in paragraph (1), except that an employee's request for placement in a lower-graded/banded position, in lieu of displacing another employee at their grade/band under RIF procedures, is not a declination of a reasonable offer for grade/band retention purposes; or The employee does not enroll in, or follow, IRS written requirements established to assure priority placement consideration in the IRS Priority Placement Program (IRSPPP) (see IRM 6.330.1.3, IRS Priority Placement Program (IRSPPP)). 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: At the end of the day upon expiration of the two-year period of grade/band retention; At the end of the day before separation from service if termination is the result of a break in service; At the end of the day before placement if the termination is the result of placement in another position; or 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/band retention, or fails to enroll in, or comply with, written requirements of the IRSPPP. 6.536.1.3.7 (05-26-2021) Qualification Determinations Under Grade/Band Retention 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: based on the employee's retained grade/band and series; or based on the actual position occupied. 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). 6.536.1.4 (05-26-2021) Pay Retention An employee afforded pay retention retains their rate of basic pay when that pay rate would have otherwise been reduced. The retained rate continues until a terminating event occurs (see IRM 6.536.1.4.8). 6.536.1.4.1 (05-26-2021) Mandatory Pay Retention 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: Expiration of the two-year period of grade/band retention; A RIF or reclassification action placing an employee in a lower grade/band when the employee does not meet the eligibility requirements for grade/band retention (see IRM 6.536.1.3.1); A management action placing an employee from a special rate position to a lower-paid special rate position or a non-special rate position; A management action placing 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); A management action placing an employee in a formal development program generally used governmentwide, such as upward mobility, apprenticeship, and career intern programs; Application of the promotion rule for GS or FWS employees results in a payable rate of basic pay that exceeds the maximum rate of the highest applicable rate range for the employee's new position; or A reduction or elimination of special rate schedules or prevailing rate schedules (excluding a statutory reduction in scheduled rates of pay). 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. 6.536.1.4.2 (05-26-2021) Optional Pay Retention 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: Employee directly impacted by an approved reorganization who voluntarily accepts a lower-graded/banded position, but does not meet the additional eligibility requirements for grade/band retention (see IRM 6.536.1.3.2); Placement of an employee in a lower-graded/banded position due to ill health or becoming disabled when the employee is no longer able to successfully perform the duties of their current position; Employee accepts a lower-graded/banded position which designated in advance as hard-to-fill; and Employee accepts a lower-graded position outside the commuting area at the request of management to fill a position requiring the unique skills and qualifications of the employee. 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: The position wasreviewed and documented by the Business Based HR Director and/or Business Unit Head of Office as meeting all the following criteria: i. Entry-level position is professional or administrative in nature, as defined in the OPM Handbook of Occupational Groups and Families at: https://www.opm.gov/policy-data-oversight/classification-qualifications/classifying-general-schedule-positions/occupationalhandbook.pdf; ii. Advertised as a career-ladder position, subject to an official IRS training program; and iii. Advertised that pay retention may be applicable. The employee will be placed on an IRS formal training plan approved by the Business Based HR Director, Business Unit Head of Office or Director, Enterprise Talent, Planning and Development. 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 reaching 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 to determine completion; v. Documentation to verify completion of predetermined learning objectives; vi. Requirement that the official file copy of the above documentation be maintained by the manager of the employee and servicing Learning and Education Office; and vii. Requirement that the official file copy of the above documentation be maintained in the employee's performance folder until they have been at the full working level for at least one year. Approved IRS formal training plans must be provided to the servicing employment office to fill positions identified as formal development and for which optional pay retention may be authorized. The Business Based HR Directors and/or Business Unit Heads of Office are responsible for maintaining approved training plans for serviced business units 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, optional 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. The Business Based HR Directors and/or Business Unit Heads of Office are responsible for periodically reviewing approvals to ensure that the approvals still meet the needs of the IRS. A current Treasury employee selected under an IRS formal training plan described above is provided pay retention when the employee moves to the IRS without a break in service. 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. 6.536.1.4.3 (05-26-2021) Geographic Conversion 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. 6.536.1.4.4 (05-26-2021) Determining an Employee's Pay Retention Entitlement When an employee experiences an event that provides pay retention entitlement, the following rules are applied in this order: Any general pay adjustment occurring on the same date as the pay retention entitlement must be effected (processed) first. Then, if applicable, apply the geographic conversion rule to determine a converted rate of basic pay before determining the initial pay retention entitlement. 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). 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: 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. 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. A newly established retained rate may not exceed: 150% of the maximum rate of the highest applicable rate range for the employee's new position of record; or the rate payable for Level IV of the Executive Schedule. 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: If the employee is moving to a new location, apply the geographic conversion rule to recalculate the retained rate of pay. If the employee's grade/band 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. If the employee's grade/band 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. 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. 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., moving 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. 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 (the retained rate is the highest previous rate (HPR)). 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 is determined as if the employee had not received the temporary promotion. 6.536.1.4.5 (05-26-2021) Adjusting an Employee's Retained Rate When a Pay Schedule is Adjusted 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. 6.536.1.4.6 (10-15-2010) Limitation on Retained Rates 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. 6.536.1.4.7 (10-15-2010) Treatment of a Retained Rate as Basic Pay for Other Purposes 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. 6.536.1.4.8 (10-15-2010) Loss of Eligibility For or Termination of Pay Retention Pay retention terminates when the employee experiences any one of the following conditions: Break in service of one workday or more; Entitlement to a rate of basic pay which equals or exceeds the retained rate; Declination of a reasonable offer (see IRM 6.536.1.2.3) (does not include an employee withdrawing consideration or declining a selection from a merit promotion package); Demotion for personal cause or at the employee's request; Movement to a position not under a covered pay system; Election in writing to terminate grade retention (which also terminates eligibility for pay retention); or Movement from a position where employee was afforded pay retention based upon either a formal development program (IRM 6.536.1.4.1) or IRS formal training plan (IRM 6.536.1.4.2.536.1.3.2(2)) to a position not covered by pay retention. Termination of pay retention takes effect: At the end of the day before separation from service if termination is the result of a break in service; At the end of the day before the employee becomes entitled to a rate that is equal to or greater than the retained rate; 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 At the end of the day on the last day of the pay period in which the employee declines a reasonable offer. More Internal Revenue Manual