Unless otherwise indicated, the policies, authorities, and instructions throughout this IRM apply to all IRS business units. This guidance must be read and interpreted in accordance with pertinent law (United States Code (USC)), governmentwide regulation (Code of Federal Regulations (CFR)), the Human Capital Issuance System (HCIS) Directives, and Comptroller General (CG) and OPM decisions, as applicable.

The material in this IRM is generally organized consistent with the order of the regulations contained in the CFR, beginning with Part 530, Pay Rates and Systems (General).

Laws: USC at: https://uscode.house.gov/

Regulations: Title 5, CFR, at: https://www.ecfr.gov/cgi-bin/ECFR?page=browse:

Executive Order (EO): 12748, Providing for Federal Pay Administration, dated February 1, 1991, revoked in part by EO 13415, Assignment of Certain Pay-Related Functions, dated December 1, 2006, at: https://www.archives.gov/federal-register/executive-orders/2006.html#13415.

The IRS Human Capital Officer is the executive responsible for this IRM and overall Servicewide policy for aggregate limitation on pay and special rate schedules.

The P&C organization is responsible for updating, maintaining, and publishing this IRM.

The HCO, Office of HR Operations (OHRO), HR Shared Services (HRSS) organization is responsible for maintaining records to facilitate the administration of the aggregate limitation on pay. The IRS must provide records to the new employer when an employee covered by this limitation transfers to another bureau or agency.

This IRM provides policy guidance on aggregate limitation on pay and special rate schedules. The P&C organization gauges the effectiveness of this policy based on feedback from customers and staff members about subjects contained in this IRM. During the review and publishing of this IRM, sections are added or deleted based on statutory and/or regulatory changes and based in part on this process.

The P&C organization develops and deploys policies, materials and programs to increase Servicewide awareness and understanding of the aggregate limitation on pay and special rate schedules. Additionally, P&C collaborates with other HCO organizations and Servicewide stakeholders to support education and outreach activities as they relate to aggregate limitation on pay and special rate schedules.

The following activities help ensure program success:

Find a complete list of definitions regarding aggregate limitation on pay and special rate schedules at 5 CFR 530.202 and 530.302.

The aggregate pay limitation is administered in accordance with the provisions at 5 CFR 530.203, Administration of aggregate limitation on pay, except as indicated in paragraphs (2), (3), and (4) of this section. An IRS employee may not receive any allowance, differential, bonus, incentive, award, or other similar cash payment under 5 USC in any CY to the extent such pay, in combination with basic pay, would cause the aggregate compensation of the employee to exceed the rate for Level I of the Executive Schedule at the end of the CY.

Employees in SES positions covered under a performance appraisal system certified under 5 CFR 430, Performance Management, are subject to a limitation on aggregate compensation equal to the total annual compensation payable to the Vice President under 3 USC 104, Salary of the Vice President, at the end of the CY.

The 5 USC, Chapter 95, Personnel Flexibilities Relating to the Internal Revenue Service, sets forth certain personnel flexibilities relating to the IRS, and enabling the Secretary of the Treasury to take the following actions:

The aggregate compensation of an employee receiving any payment under 5 USC 9502, Pay authority for critical positions, 9503, Streamlined critical pay authority, and 9505, Performance awards for senior executives, may not exceed the total annual compensation payable to the Vice President in accordance with 3 USC 104, Salary of the Vice President.

Amounts in excess of limitations described above must be paid to the employee in a lump-sum payment at the beginning of the following CY as provided at 5 CFR 530.204, Payment of excess amounts. This lump sum payment is considered a part of the employee's aggregate compensation for the new CY.

If, in a new CY, any lump-sum payment causes an employee's estimated aggregate compensation to exceed the applicable aggregate limitation for the current CY, the IRS must consider only the employee's rate of basic pay (includes locality based payment under 5 CFR Part 531 Subpart F, Locality-Based Comparability Payments, as well as any special rate under 5 CFR Part 530, Pay Rates and Systems (General)) expected to be paid to determine the extent of the lump-sum payment that may be paid. An agency must defer all other payments in order to pay as much of the lump-sum amount as possible. Any deferred payments (including any portion of the lump-sum payment excess amount that was not payable) are payable at the beginning of the next CY.

Exceptions to the CY deferment:

An employee's coverage under a special rate schedule is subject to conditions established by OPM and may be based on occupation, grade, employing agency, geographic location, or other factors determined by OPM.

The IRS must pay the applicable special rate to any employee who meets the coverage criteria established by OPM. The Commissioner of Internal Revenue can request an exception from the Department of the Treasury (Treasury) to exclude a category of employees within the IRS from coverage under a proposed or existing special rate schedule.

An employee covered by a special rate schedule is not paid a special rate if they are entitled to a higher rate of basic pay under any other legal authority. For example, an employee is not entitled to a special rate if they are entitled to a higher locality rate or a retained rate.

The OPM considers the circumstances and factors listed at 5 CFR 530.304, Establishing or increasing special rates, and 530.306, Evaluating agency requests for new or increased special rates, when evaluating the need for special rates.

The OPM may increase the minimum rates of basic pay to a category of employees to address significant recruitment or retention difficulties.

A minimum special rate may not exceed 30% of the maximum underlying rate for the grade, and the maximum rate may not exceed Level IV of the Executive Schedule.

At any time, the IRS may request that a special rate schedule be established or adjusted through Treasury as provided under 5 CFR 530.305, Agency requests for new or increased special rates. Business units should contact P&C regarding the initiation of such requests.

The development of a request for a special rate schedule requires extensive documentation of activity over an extended timeframe, usually three to five years. The request must include the information required by OPM's Worksheet for Special Rate Requests, Form 1397, at https://www.opm.gov/policy-data-oversight/pay-leave/pay-systems/special-rates-requests/opm1397.pdf.

A completed Worksheet for Special Rate Requests, Form 1397, must be approved by the business unit head of office, or equivalent, to authorize the request and funding while certifying that the requested special rates are considered necessary to ensure staffing adequate to the accomplishment of the IRS mission. The request is then forwarded to the IRS Human Capital Officer for concurrence and submission to Treasury.

The OPM evaluates agency requests for new or increased special rates based on 5 CFR 530.306, Evaluating agency requests for new or increased special rates.

The OPM may review an established special rate schedule at any time. Typically, the OPM requests information from agencies on an annual basis as they review special rate schedules. The OPM will request information for the review directly or designate a lead agency.

When annual GS pay adjustments are applied, the OPM also determines whether they will apply the same annual adjustment to special rates, and if the special rate should be increased, decreased, or discontinued.

At its discretion, the OPM may discontinue special rate schedules at any time.

The P&C organization is the point of contact for any OPM requests on special rates.

Unless otherwise specified under another legal authority, a special rate is considered to be a rate of basic pay for the same purposes for which a locality rate is considered to be a "rate of basic pay" (i.e., retirement and life insurance deductions and benefits, premium pay, severance pay, recruitment, relocation, and retention incentives, cash awards, grade and pay retention, GS promotion provisions, and for other purposes stated in 5 CFR 531.610, Treatment of locality rate as basic pay, except as otherwise provided in (2) and (3) below).

Per 5 CFR 530.308, Treatment of special rate as basic pay, special rates are not considered part of basic pay in computing foreign area post differentials and danger pay allowances.

See 5 CFR 530.308(c), Treatment of special rate as basic pay, when setting pay for employees moving from special rate positions to prevailing rate positions.

Special rates may apply to an entire special rate schedule or to a portion of the schedule. When a locality rate exceeds a special rate schedule or a portion of that schedule, the special rate is terminated. Positions may have a special rate and a locality rate as the highest applicable rate range. This is commonly referred to as a hybrid schedule or range (e.g., GS 5, step 1 to step 4 covered by special rate and GS 5, step 5 and above covered by locality rate).

A special rate may be paid only for those hours for which an employee is in a pay status.

A pay increase caused by an employee becoming entitled to a new or higher special rate supplement is not considered an equivalent increase in pay (5 CFR 531.407(c), Equivalent increase determinations).

A special rate is included in an employee's total remuneration, as defined in 5 CFR 551.511(b), Hourly regular rate of pay, and straight time rate of pay, as defined in 5 CFR 551.512(b), Overtime pay entitlement, for the purpose of overtime pay computations under the FLSA.

The reduction or termination of an employee's special rate supplement, in accordance with the requirements of 5 CFR Part 530, Subpart C, Special Rate Schedules for Recruitment and Retention (which includes a change in worksite where a lower or no special rate exists), is not an adverse action under 5 CFR Part 752, Subpart D, Regulatory Requirements for Removal, Suspension for More Than 14 Days, Reduction in Grade or Pay, or Furlough for 30 Days or Less.

The following rules apply when the employee's current position is affected by a new special rate schedule. They do not cover changes in special rate entitlements based on a change in the employee's position or official worksite (see 5 CFR Part 531, Pay Under the General Schedule, and 5 CFR Part 536, Grade and Pay Retention).

These rules are considered general pay adjustments for the purpose of dealing with the order of precedence for processing simultaneous pay actions.

When special rate schedules are established or increased, the rate of basic pay is set at the step of the new or increased special rate schedule corresponding to the existing step of the grade of the employee’s position of record.

The rate of pay for an employee on pay retention will be increased by 50% of the increase provided to the maximum step of the highest applicable rate range of the grade of the employee's position of record, in accordance with 5 CFR 536.305, Adjusting an employee’s retained rate when a pay schedule is adjusted. This adjustment must be determined based on the employee's position of record and official worksite as in effect immediately before the effective date of the adjustment.

When a special rate schedule for a position is discontinued or decreased, pay is set as follows:

If an employee changes to a worksite with no special rate or a lower special rate, pay retention will not apply. A reduction in an employee's payable rate of basic pay resulting from this geographic conversion is not a basis for entitlement to pay retention (5 CFR 536.303(a), Geographic conversion).