# National Security Personnel System > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3AE8-11364 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** May 22, 2008 - **Citation:** 73 FR 29882 ## Text DEPARTMENT OF DEFENSE OFFICE OF PERSONNEL MANAGEMENT 5 CFR Part 9901 RIN 3206-AL62 National Security Personnel System AGENCY: Department of Defense; Office of Personnel Management. ACTION: Proposed rule. SUMMARY: The Department of Defense (DoD) and the Office of Personnel Management (OPM) are issuing proposed regulations revising the National Security Personnel System (NSPS), a human resources management system for DoD, as originally authorized by the National Defense Authorization Act for Fiscal Year 2004 and amended by the National Defense Authorization Act for Fiscal Year 2008. The proposed regulation governs compensation, classification and performance management under NSPS. NSPS aligns DoD's human resources management system with the Department's critical mission requirements and protects the civil service rights of its employees. DATES: Comments must be received on or before June 23, 2008. ADDRESSES: You may submit comments identified by docket number NSPS-OPM-2008-0081 and/or Regulatory Information Number (RIN) 3206-AL62. Please arrange and identify your comments on the regulatory text by subpart and section number; if your comments relate to the supplementary information, please refer to the heading and page number. There are two methods for submitting comments. Please submit only one set of comments via one of the methods described. • Preferred Method for Comments: The preferred method for submitting comments is through the Federal Rulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. • Alternative Method for Comments: If unable to access the Federal Rulemaking Portal, comments may be mailed to the following address: DOD/OPM/NSPS Public Comments, PO Box 14474, Washington, DC 20044. Instructions: All submissions must include the agency name and docket number or RIN for this rulemaking. Mailed comments must be in paper form. No mailed comments in electronic form (CDs, floppy disk, or other media) will be accepted. The Federal Rulemaking Portal, http://www.regulations.gov , will contain any public comments as received, without change, unless the comment contains security-sensitive material, confidential business information, or other information for which public disclosure is restricted by statute. If such material is received, we will provide a reference to that material in the version of the comment that is placed in the docket. The docket system is an “anonymous access” system, which means that DoD and OPM will not know your identity, e-mail address, or other contact information unless you provide it in the body of your comment. Unless a comment is submitted anonymously, the names of all commenters will be public information. Please ensure your comments are submitted within the specified open comment period. Comments received after the close of the comment period will be marked “late,” and DoD and OPM are not required to consider them in formulating a final decision. Before acting on this proposal, DoD and OPM will consider all comments we receive on or before the closing date for comments. Comments filed late will be considered only if it is possible to do so without incurring expense or delay. Changes to this proposal may be made in light of the comments we receive. FOR FURTHER INFORMATION CONTACT: For DoD, Bradley B. Bunn, (703) 696-5604; for OPM, Charles D. Grimes III, (202) 606-8079. SUPPLEMENTARY INFORMATION: The Department of Defense (DoD or “the Department”) and the Office of Personnel Management (OPM) are proposing to amend the National Security Personnel System (NSPS or “the System”), a human resources (HR) management system for DoD under 5 U.S.C. 9902, as enacted by section 1101 of the National Defense Authorization Act for Fiscal Year 2004 (Pub. L. 108-136, November 24, 2003) and amended by section 1106 of the National Defense Authorization Act for Fiscal Year 2008 (Pub. L. 110-181, January 28, 2008). The following information is intended to provide interested parties with relevant background material about (1) the changes to the regulations, (2) the process used to make the changes, (3) a description of the revised NSPS regulations, and (4) an analysis of the costs and benefits of those proposed regulations. To the extent that this rule is consistent with the rule published in Federal Register dated November 1, 2005 (Volume 70, Number 210) [Rules and Regulations] [Page 66115-66220] ( http://edocket.access.gpo.gov/2005/05-21494.htm ), the supplementary information pertaining to that rule is adopted as part of the supplementary information to this rule. The Need for Change DoD civilian employees are unique in Government: They are an integral part of an organization that has a military function. DoD civilian employees complement and support the military around the world. To support the interests of the United States in today's national security environment, civilian employees must be an integrated, flexible, and responsive part of the DoD team. Just as new threats, new missions, new technology, and new tactics are changing the work of the military, they are changing the work of DoD's 700,000 civilian employees. The Department's experience operating under the current NSPS regulations as well as the 20 years of experience with transformational personnel demonstration projects, covering nearly 30,000 DoD employees, has shown that fundamental change in personnel management has a positive impact on individual career growth and opportunities, workforce responsiveness, and innovation; all these things enhance mission effectiveness. Public Law 108-136 amended title 5, United States Code, to provide the Department with the authority to meet this transformation challenge through development and deployment of the NSPS. Public Law 110-181, while amending Public Law 108-136, continues to promote a performance culture in which the performance and contributions of the DoD civilian workforce are linked to strategic mission objectives and are more fully recognized and rewarded. It also retains flexibilities to streamline the method for classifying positions and to provide a more flexible support structure for both pay and classification in order to help attract skilled and talented workers; retain and appropriately reward current employees; respond to DoD mission requirements; and create opportunities for employees to participate more fully in the total integrated workforce. The System offers the more than 181,000 currently covered employees a contemporary pay banding construct, which includes performance-based pay. NSPS allows the Department to be more competitive in setting salaries and to adjust salaries based on factors, such as labor market conditions, performance, and changes in duties. The updated HR management system rules more specifically govern how retained classification, compensation, and performance management flexibilities will be implemented. The greater level of detail reflects a continued commitment to greater transparency regarding provisions of Pub. L. 110-181 and system improvements in light of operational experience with NSPS. The System retains the core values of the civil service, including merit systems principles and veterans' preference, and allows employees to be paid and rewarded based on performance, innovation, and results. Significant Changes to the Original Law The original NSPS statute was enacted on November 24, 2003, and provided the Secretary of Defense, in regulations jointly prescribed with the Director of OPM, the authority to establish a flexible and contemporary civilian personnel system called the National Security Personnel System. This new civilian personnel system was intended to cover most of the approximately 700,000 DoD civilian employees, including blue-collar employees. Among its features, it provided authority to establish a pay-for-performance system that recognizes and rewards employees based on performance and contribution to the mission; a new pay banding system to replace the General Schedule (GS); a simplified job classification process and flexible processes to assign new or different work; streamlined hiring processes and the ability to offer more competitive, market-sensitive compensation; improved workforce shaping procedures that reduce disruption with greater emphasis on performance as a factor in retention; expedited disciplinary and employee appeals processes for faster resolution of workplace issues, while preserving due process rights of employees; and a labor-management relations system that recognized DoD's critical national security mission and the need to act swiftly to execute that mission, while preserving collective bargaining rights of employees. The changes to labor relations included the ability to negotiate at the national level instead of negotiating with more than 1,500 local bargaining units, and the ability to establish a new independent third party to resolve labor relations disputes in DoD. Public Law 110-181 amended title 5, United States Code, retaining authority for performance-based pay and classification and compensation flexibilities, but substantially modifying other NSPS authorities. The law, among other things— • Brings NSPS under Governmentwide labor-management relations rules. • Excludes Federal Wage System (blue collar) employees from coverage under NSPS. • Requires DoD to collectively bargain procedures and appropriate arrangements for bringing DoD bargaining unit employees under NSPS prior to conversion of these employees. • Brings NSPS under Governmentwide rules for disciplinary actions and employee appeals of adverse actions. • Brings NSPS under Governmentwide rules for workforce shaping (reduction in force, furlough, and transfer of function). • Requires that this rule be considered a major rule for the purposes of section 801 of title 5, United States Code, with advance Congressional notification for OPM/DoD jointly-prescribed NSPS regulations. • Gives these rules the status of Governmentwide rules for the purpose of collective bargaining under chapter 71 when these rules are uniformly applicable to all organizational or functional units included in NSPS. • Mandates that all employees with a performance rating above “unacceptable” or who do not have current performance ratings receive no less than sixty percent of the annual Governmentwide General Schedule pay increase (with the balance allocated to pay pool funding for the purpose of increasing rates of pay on the basis of employee performance). Based on the changes Public Law 110-181 made to Section 9902 of title 5, the proposed rule deletes subparts F, G, H, and I (dealing with workforce shaping, adverse actions, appeals, and labor relations, respectively) of the current NSPS regulations. Subpart E (dealing with staffing) is also removed. Public Law 110-181 also modifies the authority to conduct national-level bargaining and retains the rights of employees to organize, bargain collectively and participate through labor organizations of their own choosing in decisions which affect them, subject to any exclusion from coverage or limitation on negotiability established pursuant to law. It extends and expands exclusions from NSPS coverage for certain DoD laboratories through October 1, 2011. Some of these laboratories operate under demonstration project authorities which provide their own pay-for-performance systems. In establishing the revised System, only certain provisions of title 5, United States Code, may be waived or modified by DoD and OPM: • Chapter 43 (dealing with performance management); • Chapter 51 (dealing with General Schedule job classification); • Chapter 53 (dealing with pay for General Schedule employees and pay for certain other employees), except for certain sections for which waiver or modification is barred by law; and • Subchapter V of chapter 55 (dealing with premium pay), except sections 5544 (dealing with prevailing rate employees) and 5545b (dealing with firefighter pay). Two Years Operational Experience Under NSPS In order to provide consistency and uniformity of application throughout the Department, certain NSPS features previously described in DoD implementing issuances have been incorporated into this regulation. DoD now has more than 2 years of experience with these features and has determined that they effectively support key performance parameters of NSPS. In addition, the regulation includes modifications made to NSPS as a result of operational lessons learned over the last 2 years. Classification Effective Date of Classification of Position The regulation now provides specific details for entitlement to retroactive effective date of a classification decision. While the prior regulation provided for both a classification reconsideration process and a retroactive effective date, more detail has been provided to enhance transparency of the regulation as well as to provide for a uniform and consistent rule. The Table of Changes further addresses this and other changes in the NSPS regulation in the area of Classification. Compensation Compensation Architecture The proposed regulation modifies rules governing the current compensation structure by removing the link between increases in the minimum rate of the rate range and across-the-board increases. This change enables more flexibility in responding to labor market changes that may impact the lower end of a pay range for an occupation, but not the middle or upper ranges. Also, discretionary authority is now provided to give additional general salary increases to designated occupational series within a pay band. This flexibility enables management to adjust pay to recognize market forces when the pay band itself is market competitive, but due to rapidly changing markets, the current salaries paid to employees in certain occupations are not. Pay Administration Several changes have been made in the area of pay administration. Pay setting flexibilities have been expanded to permit discretionary within-grade increase buy-ins when employees from outside of NSPS move to a NSPS position. Safeguards have been incorporated for employees who are moved to NSPS via management-directed actions. In these cases, the regulation now specifies a required within-grade increase buy-in. A significant level of detail has been added to describe how pay is administered upon promotion, reassignment, reduction in band and appointment to the Federal service. Most of this detail reflects the pay setting rules that have been applied during the past 2 years of NSPS operation. These practices are incorporated now to increase transparency in the system and because they have been effective in operation. The proposed rule retains management's flexibility to set pay within a given range, but provides safeguards by placing limitations on the factors management may use in exercising their discretion as well as establishing pay increase limits that cannot be exceeded without higher level review. There have also been some modifications to pay setting practices based on DoD's experience with the System. Most significantly, pay setting rules for employees moving into NSPS from other systems or moving from NSPS positions covered by targeted local market supplements have been revised. Pay for these employees was previously set using the base salary. Pay will now be set using “adjusted salary” (includes base salary plus any applicable locality pay, special rate supplement, or other equivalent supplement) and any physicians' comparability allowance payable for the position held prior to the reassignment. In these cases, when the new position is in a different location, a geographic pay conversion will be processed. These rules allow management to set pay more competitively and equitably compensate employees by permitting pay to be set in a manner that prevents a loss in adjusted salary in certain circumstances. Further changes in NSPS pay setting rules include the discretion to adjust the rate of pay of a teacher moving into NSPS up to 20 percent to take into account the shorter work year incorporated in the annual rate of a teacher paid under 20 U.S.C. 901. Pay Retention Pay retention rules have been modified to provide a “grandfather” clause for employees who are covered by General Schedule grade and pay retention rules at the time they are converted into NSPS. These employees will not be subject to the 104-week limit on pay retention. They will be entitled to pay retention indefinitely subject to specifically identified pay retention termination events. Much detail has been added in the area of pay retention to identify circumstances for which pay retention is mandatory, eligibility requirements for optional pay retention and events leading to termination of pay retention. These rules reflect current practices under NSPS. Accelerated Compensation for Developmental Positions (ACDP) “Treatment of Developmental Positions” (Section 9901.345) has been modified to specify criteria for Accelerated Compensation for Developmental Positions (ACDP) increases, identify the range of pay increases that are permitted under this discretionary authority, and to expand the discretionary use of ACDP to employees in developmental or trainee level positions assigned to the lowest pay band of a nonsupervisory pay schedule. To date, this authority has only been available to employees in developmental or trainee level positions in professional and analytical occupations. The change provides additional flexibility to recognize pay progression patterns in other occupations. Premium Pay A critical feature of NSPS compensation is the ability to modify premium pay in response to current and future needs. This flexibility facilitates the Department's ability to accomplish its diverse mission. The revised regulation incorporates rules governing NSPS premium pay. Premium pay includes pay such as overtime pay, compensatory time off, holiday, Sunday, and standby pay. Among the premium pay features unique to NSPS are: on-call premium pay for health care personnel in specified circumstances, pay for weekend duty for health care personnel, and foreign language proficiency pay. For the most part, the regulations reflect current premium pay policies under NSPS, which include certain modifications to the standard title 5 premium pay laws and regulations to address unique DoD mission requirements and differences in the NSPS classification and pay structure. Conversion/Movement Out of NSPS Regulations have been added to provide a process for converting employees out of NSPS when their position is removed from coverage under the System and to provide a “virtual GS grade” to employees who leave their NSPS position to accept employment in non-NSPS positions. These rules promote more equitable pay setting upon moves to different pay systems. The Table of Changes further addresses these and other changes in the NSPS regulation in the area of Compensation. Performance and Pay Pool Management Higher Level Review The proposed regulation more specifically outlines safeguards to ensure the NSPS performance and pay pool management system is fair and equitable based on employee performance. For example, under Subpart D, the revised regulation now provides for a higher level review of performance expectations. This review helps ensure that assigned employee objectives are reviewed for appropriateness and consistency within and across the organization and/or pay pool. This safeguard at the beginning of the performance management process helps to ensure equity at the end of it when performance payouts are paid from a common pay pool fund. Calculating Annual Payout Rating levels and share distribution ranges are also specified in the revised regulation as well as formulas for share values and calculation of performance payouts. This revised language enhances system transparency for all by providing additional specificity to these elements. The language also clarifies the intended application of a common share value (expressed as a percent of pay) throughout an entire pay pool, to include all sub pay pools. This further preserves equity across a pay pool. Flexibility in Extending Performance Appraisal Periods The authority to extend individual performance appraisal periods to enable employees to meet minimum performance appraisal periods is specified as well as limitations on this authority. By specifically providing for extension of individual rating cycles, valued performers and higher level performing employees moving to NSPS positions can more quickly benefit from the NSPS performance based pay features. Pay Pools The pay pool concept has also been further defined in this regulation by providing parameters for pay pool composition and specifying the roles of pay pool officials within the pay pool process. Much thought was given to achieving the “right” balance between safeguards and management flexibility. For example, although pay pool share ranges have been specified for each rating level, management still has the flexibility to determine assignment of shares within that range. System safeguards were added to ensure fairness, equity, and a performance focus by expressly stating and limiting the factors which may be used in the determination of share assignment. Similarly, management still retains the flexibility and authority to determine the distribution of a performance payout between base salary increase and bonus or a combination thereof. However, to ensure safeguards within the system, the factors management may use in exercising this authority have also been expressly defined and limited to ensure fairness, equity, and a performance focus. While pay pool funding is still determined by management, higher-level reviews have been required to provide internal controls. Reconsideration Process Employee performance reconsideration rights have been expanded to permit reconsideration of individual performance objective ratings in addition to the overall rating of record. This change recognizes that many pay pools use raw performance scores as a guide in determining how many shares to assign to employees. Since raw performance scores may be impacted by individual performance objective ratings, the ability to request review of individual performance objectives enables employees to seek redress on all performance rating decisions affecting their pay. Other Changes Other changes reflected in this regulation include language providing salary increases for employees who did not meet the minimum period of performance due to an approved paid leave status or performance of labor activities on “official time”. These pay adjustments will be based on the modal rating of a pay pool. Likewise, provisions have been made to adjust the pay of employees returning from temporary assignments outside of NSPS or returning from long-term training for which no NSPS performance plan was assigned. These changes ensure that employee pay is not harmed by the failure to meet a minimum performance period or inability to rate performance while they either exercise statutory leave entitlements or fulfill other important roles to the organization. Finally, the regulations permit coverage under NSPS pay setting and classification flexibilities for employees who are appointed for less than 90 days by providing limited coverage of these employees under Subpart D of Performance Management. Providing access to NSPS pay setting flexibilities for these positions enhances DoD's competitive position in the labor market when hiring temporary employees for 90 days or fewer. The Table of Changes addresses these and other changes in the NSPS regulation. Process for Developing Proposed Regulations Working Groups In January 2008, working groups began meeting to revise the current regulations. The working groups were functionally aligned to cover the following human resources program areas: (1) Compensation (classification and pay banding); (2) performance management; (3) hiring, assignment, and pay setting; and (4) workforce shaping. The working groups, staffed by DoD employees and OPM, identified and developed options and alternatives for consideration in the revised design of NSPS. These were then reviewed and approved for incorporation by DoD and OPM senior officials prior to formal coordination and publication in the Federal Register . General Provisions—Subpart A This subpart has been changed to bring NSPS into compliance with the National Defense Authorization Act for Fiscal Year 2008 and incorporate planned changes. Key changes to this subpart include deleting references to subparts that have been removed; revising the list of defined terms; and adding actions that require OPM approval prior to implementation. The following Table of Changes lists, by specific regulatory section, a brief description of each significant change. Citation Description of proposed change § 9901.101(a) Purpose. Amends paragraph to delete reference to a new labor-management system and include a provision enabling the Secretary to establish implementing issuances to supplement any matter covered by the regulation. § 9901.101(b)(1) Amends paragraph to delete reference to a new labor-management system. § 9901.101(b)(2) Amends paragraph to delete references to a labor relations system. § 9901.102(a) Eligibility for coverage. Amends paragraph to remove reference to subparts E through I. § 9901.102(b) Amends paragraph to (1) clarify the Secretary's sole and exclusive discretion to decide to apply coverage to an eligible category or categories of employees; (2) delete reference to subparts E, F, G, and H; (3) incorporate information previously found at § 9901.105(b) requiring DoD to advise OPM in advance when it intends to extend coverage of NSPS to specific categories of employees. § 9901.102(d) Amends paragraph to reflect the interrelationship of the classification, pay, and performance management systems established under NSPS. § 9901.102(e) Amends paragraph to clarify the Secretary's sole and exclusive discretion to decide to rescind coverage of NSPS for a particular category of employees or an organization or functional unit. § 9901.102(f)(3) Amends paragraph to change reference from § 9901.373 to § 9901.371 to reflect number change in another subpart. § 9901.103 Definitions. Deletes definitions for furlough, initial probationary period, in-service probationary period, labor organization, mandatory removal offenses, and MSPB. Adds definitions for appraisal period, comparable pay band or comparable level of work, Component, higher pay band or higher level of work, lower pay band or lower level of work, pay pool, Pay Pool Manager, Pay Pool Panel, and Performance Review Authority. Revises definitions for basic pay, day, implementing issuances, National Security Personnel System, promotion, rating of record, reassignment, and reduction in band to add or delete information and add clarity. § 9901.104 Scope of authority. Amends section to delete paragraphs (a), (f), (g), and (h) and to redesignate the remaining paragraphs. Deletes language allowing the Department to waive portions of chapter 53 related to pay and job grading for Federal Wage System employees. Adds reference to section 5544 (dealing with premium pay for Federal Wage System employees) as another premium pay provision that may not be waived. § 9901.105 OPM coordination and approval. Amends the title of this section to add information on actions requiring OPM approval prior to implementation. Deletes paragraphs (f) and (g). Also, deletes paragraphs (h) and (i) and moves material in those paragraphs to paragraphs (d) and (e), respectively. § 9901.105(a) Amends paragraph to add requirement to request OPM approval in advance of implementation of certain actions. § 9901.105(b) Replaces the former § 9901.105(b) paragraph and adds items previously found at § 9901.105(c), (d), and (e). § 9901.105(c) Revises paragraph to add actions requiring the Director's approval prior to implementation. § 9901.105(d) Places material previously found at § 9901.105(h) in this paragraph. § 9901.105(e) Places material previously found at § 9901.105(i) in this paragraph and notes that some actions require OPM approval. § 9901.106 Relationship to other provisions. Deletes the material formerly at § 9901.106 and replaces with material formerly found at § 9901.107. Removes material related to application of the back pay law in 5 U.S.C. 5596 previously found at § 9901.107(b)(2) and (3). § 9901.106(b)(1) Amends paragraph to include material previously found at § 9901.107(b). Deletes reference to chapters 31, 33, 35, 71, 75, and 77. § 9901.106(b)(2) Amends paragraph to include material previously found at § 9901.107(b)(1). Deletes reference to chapters 31, 33, 35, 71, 75, and 77 and removes reference to subparts E through I. Removes reference to physicians' comparability allowances under 5 U.S.C. 5948 previously found at § 9901.107(b)(1)(iv). § 9901.106(c)(2) Adds paragraph specifying that the authority in 5 U.S.C. 5948 to provide physicians' comparability allowances to GS physicians does not apply to NSPS physicians. § 9901.107 Program evaluation. Moves material previously found at § 9901.108 (and deletes that section) and deletes requirements related to employee representatives. Classification—Subpart B Subpart B provides DoD with the authority to replace the current GS classification and qualifications systems and other current classification systems with a new method of evaluating and classifying jobs by grouping them into occupational categories and levels of work for pay and other related purposes. Under NSPS, DoD (in coordination with OPM) will have the authority to establish qualifications for positions and to assign occupations and positions to broad occupational career groups, pay schedules, and pay bands (or levels). The NSPS classification system fully supports the merit system principle that “equal pay should be provided for work of equal value, with appropriate consideration of both national and local rates paid by employers in the private sector, and appropriate incentives and recognition for excellence in performance.” The pay banding structure replaces artificial limitations created by current classification systems. Broad pay bands provide the ability to move employees more freely across a range of work and provide opportunities that are not possible when bound by traditional narrowly described work definitions. While pay banding provides greater flexibility and agility to the Department, the classification system continues to ensure employees have access to long-established protections related to the classification of their positions. Employees are permitted to request reconsideration of the classification (pay system, career group, occupational series, official title, pay schedule, or pay band) of their official positions of record at any time with DoD and/or OPM, as they can today under the GS system. The system described in subpart B, together with the revised pay system described in subpart C, will provide DoD with greater flexibility to adapt the Department's job and pay structure to meet present and future mission requirements. The following Table of Changes lists, by specific regulatory section, a brief description of each significant change. Citation Description of proposed change § 9901.201(a) Purpose. Amends paragraph to delete reference to prevailing rate system established under 5 U.S.C. chapter 53, subchapter IV. § 9901.201(b)(2) Coverage. Deletes former paragraph which referenced prevailing rate system established under 5 U.S.C. chapter 53, subchapter IV. § 9901.202 Coverage. Deletes former paragraph § 9901.202(b)(2) which referenced prevailing rate system established under 5 U.S.C. chapter 53, subchapter IV, and redesignates remaining paragraphs accordingly. § 9901.203(a) Waivers. Amends paragraph to delete reference to the prevailing rate system under 5 U.S.C. 5346 and 5346(c) and changes reference to § 9901.107 to § 9901.106 to reflect the renumbering of that section. Adds review of pay plan under 5 U.S.C. 5103. § 9901.203(b) Adds reference to 5 U.S.C. 6304(f) (regarding annual leave ceilings for members of the Senior Executive Service (SES) and employees in senior-level positions compensated under 5 U.S.C. 5376 (SL/ST)) to reflect updates to U.S. Code. § 9901.204 Definitions. Modifies definition for classification to include a reference to official title and adds definition of official title. § 9901.205 Bar on collective bargaining. Deletes entire section. § 9901.212(d) Restructures paragraph. Adds information on the Secretary's ability to use OPM qualification standards or establish unique qualification standards for NSPS positions. Deletes reference to § 9901.513. § 9901.221(b)(1) Amends paragraph to delete reference to 5 U.S.C. 5346. § 9901.221(d) Restructures paragraph and incorporates material previously found at § 9901.222(b) regarding retroactive effective dates. § 9901.221(d)(1) Adds paragraph specifying retroactive classification date requirements and retroactive effective dates when § 9901.221(d) is applicable. § 9901.221(d)(2) Adds paragraph specifying that the employee must file an initial request for review of the reduction in pay band or adjusted salary within 15 days to be eligible for retroactive corrective action. § 9901.221(d)(3) Adds paragraph specifying that retroactive date can be established only if the appeal reversal is based on duties and responsibilities performed at the time of reduction. § 9901.221(e) Redesignates former paragraph (d) as paragraph (e). Adds information to specify notification requirements when a classification action results in a reduction in an employee's pay band or adjusted salary. § 9901.222 Review of classification decisions. Revises title for clarity. § 9901.222(b) Revises and restructures paragraph to address what may not be appealed. § 9901.222(c) Adds paragraph to address handling of employee claim that his or her official position description is inaccurate. § 9901.222(d) Relocates language found in paragraph (c) of the current regulations in proposed paragraph (d). Moves language formerly found in paragraph (d) of the current regulations to § 9901.224(d). § 9901.222(e) Revises paragraph to provide that a determination under § 9901.222 will be based on criteria issued by the Secretary. § 9901.223 Appeal to DoD for review of classification decisions. Adds new § 9901.223 outlining DoD classification appeal process. • Establishes and explains employee right to representation. • Establishes the DoD classification appeals process. • States the binding nature of DoD appeal decisions. • Establishes employee and agency cancellation provisions. § 9901.224 Appeal to OPM for review of classification decisions. Adds new § 9901.224 describing OPM's classification appeal process. § 9901.231(a) Introduction to conversion section. Amends paragraph to delete reference to a prevailing rate system. Adds cross reference to § 9901.371, which describes how to set an employee's pay at conversion. § 9901.231(b) Implementing issuances. Adds language specifying that implementing issuances will include work level conversion tables that will be used to convert employees to an NSPS pay band. Deletes language regarding employees with grade retention immediately before conversion. This subject is now addressed in § 9901.231(d). § 9901.231(c) Temporary promotion prior to conversion. Adds paragraph to clarify that an employee on a temporary promotion immediately prior to conversion of the temporary position into NSPS must be returned to his or her permanent position before processing the conversion. § 9901.231(d) Grade retention prior to conversion. Adds paragraph to clarify that employees who are entitled to grade retention immediately before conversion will have their NSPS pay band set using the actual grade of the employee's current position—not the retained grade. Pay and Pay Administration—Subpart C This subpart provides DoD with authority to establish an NSPS pay system in lieu of the GS pay system or other pay systems that would apply to employees but for coverage under NSPS. The subpart has been revised to (1) incorporate changes in the National Defense Authorization Act (NDAA) for Fiscal Year 2008; (2) add more detailed rules drawn from existing NSPS implementing issuances; (3) make policy changes in certain areas; and (4) make technical changes and improvements. Key changes to this subpart include (1) adding a provision to define what constitutes a “rate of pay” for the purposes of applying 5 U.S.C. 9902(e)(9) (this change is explained in the Table of Changes); (2) adding regulations regarding pay limitations; (3) revising rules on NSPS general salary increases (including changes to comply with the NDAA); (4) revising standard local market supplements to be generally equivalent to GS locality pay (as required by the NDAA); (5) adding detailed rules regarding performance payouts from pay pools and other performance-related payments; (6) adding detailed pay administration rules; (7) establishing detailed rules regarding premium pay under NSPS (including identification of specific modifications to standard title 5 premium pay rules); (8) adding more detailed rules on conversions into the NSPS pay system; and (9) establishing new rules regarding conversions out of the NSPS pay system. Modifications to this subpart reflect the unique pay-banding architecture of NSPS; enhance management's flexibilities to respond more competitively to labor markets; facilitate pay setting upon movements between different pay systems; promote performance-based pay; provide the flexibility to facilitate the Department's ability to accomplish its diverse missions; and, in some cases, streamline and simplify pay administration rules. Throughout this subpart, the terms “base salary” and “adjusted salary” are used. The use of the term “salary” is consistent with the terminology that has been used in NSPS since its inception. It is meant to capture the concept of continuing pay, excluding premium pay, bonuses, or other forms of variable pay. The term “base salary” refers to base or basic pay excluding any local market supplement. The term “adjusted salary” refers to an adjusted rate of basic pay that includes any applicable local market supplement. The following Table of Changes lists, by specific regulatory section, a brief description of each significant change. Citation Description of proposed change § 9901.301 Purpose. Modifies to provide reference to waivers listed under § 9901.303. § 9901.302 Prevailing rate employees. Deletes paragraph § 9901.302(b)(2) related to waiver of the statutory provisions establishing pay systems for prevailing rate employees, consistent with 5 U.S.C. 9902(b)(4). Also deletes paragraph (c) to clarify that all employees in the NSPS classification and pay system are automatically covered by the premium pay provisions in §§ 9901.361 through 9901.364, as applicable. § 9901.303(a)(2) Premium pay. Adds a reference to 5 U.S.C. 5544 (dealing with premium pay for prevailing rate employees) as an additional exception to the authority to waive the premium pay provisions in 5 U.S.C. chapter 55, subchapter V. § 9901.303(b) Prevailing rate employees. Adds a paragraph referencing 5 U.S.C. 5341-5349 (dealing with prevailing rate employees) to the list of provisions in 5 U.S.C. chapter 53 that may not be waived. § 9901.303(c) Student loan repayments. Revises existing paragraph to limit the Secretary's authority to modify the student loan repayment benefit provisions in 5 U.S.C. 5379. If necessary to address critical hiring needs, the Secretary may modify the minimum service period and the limitations on the amount of student loan repayment benefits. § 9901.304 Definitions. Adds definitions for the terms adjusted salary, base salary, contributing factor, premium pay, retained rate, and sub pay pool. Also, adds additional cross references to various terms that are defined in subpart A. Makes minor changes in various definitions to use the terms “base salary” and “adjusted salary” (which are currently used in NSPS implementing issuances). (Also, throughout the subpart, the terms “base salary” and “adjusted salary” are used as appropriate.) Revises definition of modal rating so that the group of employees used in determining the modal rating is the entire pay pool, not just a pay band within a pool. Revises definition of performance share value to specify that a share value is always computed as a percentage. Adds sentence to definition of standard local market supplement to conform with 5 U.S.C. 9902(e)(8)(A). Revises definition of targeted local market supplement to clarify that targeted local market supplements apply in place of any lower standard market supplement that is otherwise applicable. Makes minor changes in other definitions. § 9901.305 Rate of pay. Deletes former § 9901.305 and adds a new section providing an explanation of what it means to establish and adjust a “rate of pay” in the context of 5 U.S.C. 9902(e)(9). Under that section of law, “any rate of pay established or adjusted in accordance with [5 U.S.C. 9902] shall be non-negotiable, but shall be subject to procedures and appropriate arrangements of [5 U.S.C. 7106(b)(2)-(3)].” It is appropriate that NSPS regulations issued under authority of 5 U.S.C. 9902(a) address section 9902(e)(9) since section 9902(b) requires that the system established under section 9902(a) meets certain conditions, including the condition in section 9902(b)(5). Section 9902(b)(5) states that collective bargaining is subject to any “limitation on negotiability established pursuant to law,” which would include the limitation in section 9902(e)(9). Proposed § 9901.305 defines the term “rate of pay” to include (1) various pay rates applicable to individual employees (i.e., base salary rate, local market supplement rate, and overtime and other premium pay rates), (2) the pay rates that constitute the structure of the pay system, including the amount or level of those rates and the applicability conditions that define the type and coverage of each rate (including range minimums and maximums, control points, local market supplements, general limitations on maximum base salary or adjusted salary rates, and premium pay rates), and (3) the percentage rate of total base salary payroll representing the portion of a pay pool devoted to performance pay increases. The term “rate of pay” encompasses payments that are paid on a recurring basis at an established level or amount. Thus, variable one-time bonuses are not included. A rate of pay cannot be understood as simply an amount. A rate amount only has meaning in the context of the required set of conditions that define what the rate is and when it applies. Any rate amount is inseparably connected to a set of defining conditions that determine when employees may receive that rate amount. In other words, one cannot establish or adjust a rate of pay for employees without taking into account both the amount of the rate and the required conditions defining applicability of the type and amount of pay in question. For example, it is impossible to establish a local market supplement by merely establishing the percentage amount of that supplement. For the local market supplement to have any meaning, the establishment of the supplement necessarily requires the establishment of the geographic area in which that supplement will apply. Similarly, establishing or adjusting the minimum rate of a band requires that the rate be connected to a particular band that covers a defined group of employees. Also, establishing a new category of hazardous duty pay requires establishing the type of hazardous conditions that are linked to a given percentage rate. Accordingly, § 9901.305 makes clear that, as far as the rates that comprise the pay structure are concerned, a “rate of pay” is comprised of two inseparable components or elements: (1) The intrinsic applicability conditions that define what the rate of pay is and to whom it applies and (2) the amount or level of the rate. Both the amount and the applicability conditions of a rate of pay may be established or adjusted. § 9901.311 Major Features. Amends to reflect (1) the use of the term “salary” instead of “pay”, (2) changes resulting from implementation of NDAA for Fiscal Year 2008 (Public Law 110-181, January 28, 2008) in the area of local market supplements and general salary increases, and (3) a DoD policy change to delink general salary increases from adjustments in the minimum rate of the band. § 9901.312 Maximum rates. Replaces former § 9901.312 with a revised section, which establishes a maximum limitation or cap on adjusted salary rates for NSPS employees (excluding doctors and dentists) equal to the rate for level IV of the Executive Schedule plus 5 percent. In addition, the revised section provides the Secretary with authority to establish a higher adjusted salary limitation for defined categories of employees. Use of this authority is subject to coordination with OPM under § 9901.105. § 9901.313 Aggregate compensation limit. Adds a new section to establish rules governing aggregate compensation limits. Normally, the limit is equal to the rate for level I of the Executive Schedule; however, in special circumstances, the Secretary may establish a cap equal to the Vice President's annual salary for specified categories of employees (subject to coordination with OPM). A special limitation tied to the President's salary applies to doctors and dentists, consistent with the similar pay limit for Department of Veterans Affairs doctors and dentists under title 38. § 9901.314 Compensation comparability. Revises § 9901.314 (formerly § 9901.313) to change references to calendar year 2008 to calendar year 2012, consistent with paragraphs (4)-(5) of new section 9902(e) in title 5, United States Code, as amended by section 1106 of Pub. L. 110-181. § 9901.321(c) Control points. Adds a new paragraph (c) to address control points, which were previously addressed solely in § 9901.342(d). This makes clear that control points (i.e., limitations on pay setting and pay progression within a pay band that apply to specified groups of similar positions) are part of the structure of the pay system. The new paragraph includes a listing of the factors that may be considered in establishing control points: mission requirements, budget, labor market factors, and benchmarks based on duties, responsibilities, competencies, qualifications, and performance. § 9901.322(a) Rate ranges. Clarifies that the term “rate range” refers to the range minimum and range maximum. § 9901.322(e) Adjustment of maximum rates in conjunction with general salary increase. Adds requirement that the maximum rate of all pay bands must be adjusted by no less than the percentage amount of the NSPS general salary increase under § 9901.323(a)(1) effective on the date of that increase. This rule ensures that any eligible employee will receive the full amount of the NSPS general salary increase under § 9901.323(a)(1). Other general salary increases under § 9901.323 could be less than the increase in the band maximum, in which case the general salary increase would be limited by the band maximum. § 9901.323(a) General salary increase. Revises § 9901.323 to provide that general salary increases are no longer linked to increases in the minimum rate of an employee's rate range. Instead general salary increases for employees in various bands will be determined separately, subject to the rules in this section. This section also incorporates in § 9901.323(a)(1) the new statutory requirement in 5 U.S.C. 9902(e)(7), as enacted by section 1106 of Pub. L. 110-181. Under section 9902(e)(7), all eligible employees (i.e., all employees except those with an unacceptable performance rating) in all NSPS pay bands are entitled to a general salary increase at the time of a GS general pay increase under 5 U.S.C. 5303, and that increase may not be less than 60 percent of the GS general pay increase. Under these proposed regulations, the NSPS general salary increase would be the same percentage for all eligible employees, except that the increase for retained rate employees would be fixed at 60 percent of the GS general pay increase (or lowest permitted amount established by law). As required by section 9902(e)(7), the portion of the GS general pay increase amount that is not provided as an NSPS general salary increase must be allocated to NSPS pay pool funding for the purpose of increasing base salary rates on the basis of employee performance. For example, if the GS general pay increase is 2.5 percent and the NSPS general salary increase for eligible employees in all pay bands is 1.5 percent (60 percent of GS general pay increase), the balance of 1.0 percent would be added to the pay pool and used to fund performance-based base salary increases. Proposed new § 9901.323(a)(2) makes clear that the Secretary may provide additional NSPS general salary increases for all eligible employees (except retained rate employees) in a designated occupational series in a pay band at other times to address labor market conditions, staffing difficulties, or mission priorities. This authority is subject to coordination with OPM under § 9901.105. These additional general salary increases are not system-wide increases, but instead are applied as needed. The amount and timing of the increases (if any) may vary by employee category. (Under current regulations, the Secretary could give varying general salary increases for employees in various bands by adjusting the band minimum rates by varying amounts, since adjustments in band minimum rates currently drive general salary increases; thus, a similar flexibility already exists.) § 9901.323(b) Unacceptable performers. Revises paragraph (b) to provide that an employee who is denied a general salary increase based on an unacceptable performance rating, but who receives a rating above unacceptable for a subsequent appraisal period, is eligible to receive the next general salary increase occurring on or after the date the employee is given a rating of record above unacceptable. For example, if an employee is denied a general salary increase under § 9901.323(a)(1) in a given January, and if the next general salary increase occurs in the next January, then the employee will be eligible for that next increase if he or she receives a rating of record above unacceptable on or before the effective date of that next January increase. The employee may not receive the lost general salary increase on a delayed basis, even if the employee receives a mid-cycle rating under § 9901.412(b)(2). § 9901.323(c) Special additional increase. Provides the Secretary with discretionary authority to provide a special additional salary increase for certain employees who are ineligible for a performance payout, such as an employee without an NSPS rating of record because he or she has not been in NSPS for the minimum 90-day period. Eligible employees may receive the system-wide general salary increase under § 9901.323(a)(1) plus an additional increase equal to the difference between the GS general pay increase and the NSPS general salary increase. Retained rate employees are not eligible for this additional increase. § 9901.323(d) Increases limited by band maximum. Provides that a general salary increase under paragraph (a)(2) or paragraph (c) of § 9901.323 may be applied only to the extent that it does not cause an employee's base salary rate to exceed the maximum rate of the employee's band or applicable control point. § 9901.323(e) Increase in conjunction with increase in band minimum. Provides that if the adjustment of a pay band minimum rate causes the base salary of an employee with a rating of record above unacceptable to fall below such minimum rate, the employee's salary will be set at the pay band minimum rate. § 9901.331(b) Computation of local market supplements. Adds a new paragraph describing how local market supplements are computed and are subject to a rate cap. § 9901.331(c) Official worksite. Adds a new paragraph providing that, in administering NSPS local market supplements, DoD will use the same concept of official worksite as used in the GS locality pay program, consistent with the requirements of 5 U.S.C. 9902(e)(8)(A), as enacted by section 1106 of Public Law 110-181. § 9901.331(d) Treatment of local market supplement as basic pay. Redesignates former § 901.332(c) as new § 9901.331(d). Revises paragraph (d)(9) to clarify that a local market supplement is considered basic pay at the point of conversion into or out of the NSPS pay system for the purpose of applying the adverse action provisions in 5 U.S.C. chapter 75, subchapter II. (See also §§ 9901.351(g), 9901.371(d), and 9901.372(f).) Deletes former paragraph (d)(10) dealing with treatment of local market supplements as basic pay in determining internal NSPS payments and adjustments, since the regulations for those NSPS payments and adjustments now clearly address whether base salary or adjusted salary is used. Revises paragraph (d)(11) (formerly (d)(12)) to clarify that other statutory provisions must “expressly” address treatment of local market supplements as basic pay to have an effect. Also, provides that other NSPS regulations may address the basic pay issue. § 9901.332(a) General. Deletes existing paragraph (a) and replaces it with a new paragraph explaining the relationship of standard and targeted local market supplements to 5 U.S.C. 9902(e)(8). § 9901.332(b) Standard local market supplements. Deletes existing paragraph (b) and replaces it with a separate paragraph regarding standard local market supplements, incorporating statutory requirements in 5 U.S.C. 9902(e)(8)(A), as enacted by section 1106 of Public Law 110-181. Under section 9902(e)(8)(A), NSPS must provide standard local market supplements in the same manner as GS locality pay under 5 U.S.C. 5304 and 5304a. The proposed regulations give effect to this provision by requiring that NSPS standard local market supplements (1) be the same percentage amounts as GS locality payments, (2) be linked to the same geographic areas established under the GS locality pay program, and (3) be based on the same “official worksite” concept used in administering the GS locality pay program. In addition, NSPS standard local market supplements will generally be administered in other respects in a manner that parallels the administration of GS locality payments (e.g., a higher targeted local market supplement trumps a standard local market supplement just as a higher GS special rate supplement trumps a GS locality payment), except when differences are required due to differences between the NSPS and GS pay systems. For example, under NSPS, adjusted salary rates (including any local market supplement) are generally capped at the rate for level IV of the Executive Schedule plus 5 percent to accommodate the 5-percent extension of certain base salary ranges, while GS locality-adjusted rates are capped at the rate for level IV of the Executive Schedule. Also, NSPS local market supplements are paid on top of a retained pay rate, while GS locality pay is not. (Instead, locality pay is considered in setting and adjusting a GS retained rate.) In addition, while GS locality pay applies to all GS employees stationed in locality pay areas, NSPS standard local market supplements are not applicable to physicians and dentists, since (1) they are entitled to higher base salary and adjusted salary ranges to achieve comparability with title 38 physicians and dentists in the Department of Veterans Affairs and (2) their adjusted salary rates are designed to apply on a worldwide basis with no variation based on location (consistent with title 38). § 9901.332(c) Targeted local market supplements. Replaces existing paragraph (c) with a new paragraph regarding targeted local market supplements. Targeted local market supplements are similar to GS special rate supplements. They are used to address staffing problems associated with a specific category of employees. They are payable when higher than any otherwise applicable standard local market supplement. Language formerly under paragraph (c) moves to § 9901.331(d). § 9901.333 Setting and adjusting local market supplements. Adds a new paragraph (a) to provide that standard local market supplements are set and adjusted consistent with the setting and adjusting of GS locality payments, as required by 5 U.S.C. 9902(e)(8)(A). Also, merges former paragraphs (a) and (b) into a new paragraph (b), which is revised to focus solely on targeted local market supplements. § 9901.334(b) Unacceptable performers. Revises paragraph (b) to provide that an employee who is denied a local market supplement adjustment based on an unacceptable performance rating, but who receives a rating above unacceptable for a subsequent appraisal period, is entitled to the full amount of any applicable local market supplement effective on the date of the first adjustment in that local market supplement occurring on or after the effective date of that new rating of record, or, if earlier, the effective date of an applicable general salary increase as described in § 9901.323(b). § 9901.341 Performance-based pay system. Modifies paragraph for editorial purposes. § 9901.342(a) Overview of performance payout section. Modifies paragraph (a)(1) to reflect the current implementation state of the NSPS performance-based pay system. Modifies paragraph (a)(2) to: (1) Delete reference to “a more current rating of record, consistent with the former § 9901.409(b)” (while the provision for a mid-cycle rating of record still exists under § 9901.412(b)(2), specific reference to this type of rating of record is not required for that rating to serve as the basis for a performance increase); (2) Limit circumstances for which an employee who is not eligible for a rating of record may receive a payout to the circumstances prescribed in this regulation; and (3) Change cross reference to paragraphs (f) and (g) to reflect new location in paragraphs (i) and (j) and to incorporate reference to additional payout situations in paragraphs (k) and (l). Deletes paragraph (a)(3) as found in current regulations. This material is replaced with more specific information on pay pool officials in proposed § 9901.342(c), (d), and (e). § 9901.342(b) Performance pay pools. Modifies paragraph (b)(1) to incorporate language regarding fair and consistent treatment of employees in the pay pool process, which is found in current regulations at § 9901.342(a)(3). Paragraphs (b)(2) and (b)(3) provide uniform and consistent criteria governing the establishment of performance pay pool structures, including sub pay pools. Paragraph (b)(4) contains language previously found in paragraph (b)(2). Paragraph (b)(5) states the requirement for higher-level approval of pay pool funding floors or ceilings. § 9901.342(c) Pay Pool Panel. Adds a new paragraph describing the roles and responsibilities of the Pay Pool Panel. § 9901.342(d) Pay Pool Manager . Adds a new paragraph describing the roles and responsibilities of the Pay Pool Manager. § 9901.342(e) Performance Review Authority. Adds a new paragraph describing the roles and responsibilities of the Performance Review Authority. § 9901.342(f) Performance shares. Relocates and modifies language found in current regulations at § 9901.342(c). The modifications include: • A table assigning a uniform range of shares to rating levels 3 through 5; • A uniform list of criteria establishing parameters for determination of share assignment within a range; and • Requirement that Pay Pool Managers and Panels review recommendations for share assignment for consistent application of criteria across a pay pool. § 9901.342(g) Performance payout. Relocates and modifies language found in current regulations at § 9901.342(d). The modifications include: • Addition of the formula for determining the value of a share; • Addition of the formula for determining the dollar value of an individual employee's payout; • Addition of a uniform list of criteria that are the only factors that may be considered in determining distribution of a pay pool payout between bonus and base salary increase; • Clarification of effective date of a performance-based pay pool payout under this section; • Addition of uniform eligibility criteria to receive a performance-based payout under § 9901.342; and • Modifications to language concerning performance payouts for employees on retained pay, which clarify that the performance payout must be in the form of a bonus and that the amount of the performance payout is based on the maximum rate of the pay band to which the employee is assigned. § 9901.342(h) Proration of performance payouts. Relocates and modifies language found in current regulations at § 9901.342(e). Modifies cross-referenced paragraphs to reflect redesignations made in this proposed regulation. § 9901.342(i) Adjustments for employees returning after performing honorable service in the uniformed services. Relocates and modifies language found in current regulations at § 9901.342(f). Modifies language to indicate that performance payouts will be based on an employee's “NSPS” rating of record instead of the “DoD” rating of record. This modification recognizes the potential inequities which may occur in comparing the NSPS and non-NSPS performance rating systems. Additionally, clarifies eligibility for performance bonus under specified circumstances and bar on prorating of pay pool payouts due to leave without pay or absence to perform uniformed service under 38 U.S.C. 4301 and § 353.102 of this chapter. § 9901.342(j) Adjustments for employees returning to duty after being in workers' compensation status. Relocates and modifies language found in current regulations at § 9901.342(g). Modifies language to indicate that performance payouts will be based on an employee's “NSPS” rating of record instead of the “DoD” rating of record. This modification recognizes the potential difficulties which may occur in comparing the NSPS and non-NSPS performance rating systems. Additionally, clarifies eligibility for performance bonus under specified circumstances and bar on prorating of pay pool payouts due to leave without pay due to work-related injury under 5 U.S.C. chapter 81, subchapter I. § 9901.342(k) Adjustments for employees in special circumstances. Adds a new paragraph providing a method of determining a performance payout for employees, who due to performance of union-related activities or absence while on paid approved leave, are unable to meet the minimum period for a performance rating of record. § 901.342(l) Adjustments for employees returning from temporary assignments outside of NSPS or from long-term training for which no NSPS performance plan was assigned. Adds a new paragraph providing a method of determining performance pay adjustments for employees who either did not meet the minimum period of performance due to temporary assignment outside of NSPS or long-term training or who met the minimum period and received a rating of record, but were outside of NSPS on the effective date of the payout. § 9901.343 Pay reduction based on unacceptable performance and/or conduct. Modifies section to limit the range of a pay reduction based on unacceptable performance and/or conduct from 1-10 percent of base salary to 5-10 percent of base salary. Additionally, updates cross-referenced paragraphs to reflect modifications to subpart C. § 9901.344 Other performance payments. Modifies section by changing title of Extraordinary Pay Increases (EPI) to Extraordinary Performance Recognition (EPR) and establishing uniform eligibility criteria and methods of payment for Extraordinary Performance Recognition (EPR) and Organizational Achievement Recognition (OAR) payments. § 9901.345 Accelerated Compensation for Developmental Positions. Modifies section by establishing uniform eligibility criteria for Accelerated Compensation for Developmental Positions (ACDP), limiting the form of an ACDP payment to that of a base salary increase, and adding general limits on the amount of ACDP that may be provided. § 9901.351 General rules governing pay administration. Adds a new section providing general pay setting rules. § 9901.351(a) Introduction. Provides that base salary rates are used in pay administration, except when specifically otherwise provided. § 9901.351(b) Geographic recalculation. Provides for a geographic recalculation on pay setting for movements from one geographic area to another geographic area, consistent with the geographic conversion principle described in 5 CFR 531.205. This provision is used in special circumstances when adjusted salary rates are used in applying certain pay administration rules. § 9901.351(c) Within-grade increase (WGI) adjustment equivalent. Provides for a WGI equivalent for employees moving into NSPS, consistent with the conversion process in § 9901.371, under specified conditions. Provides for a WGI equivalent for employees moving into NSPS through a management-directed action, including a management-directed reassignment, realignment, or placement via the Priority Placement Program, Reemployment Priority List, or Interagency Career Transition Assistance Plan. An employee placed in an NSPS position through an employee-initiated reassignment may receive this same WGI equivalent at the discretion of the authorized management official. § 9901.351(d) Minimum rate. Relocates language (with minor modifications) found in current regulations at § 9901.356(a). This provision states that an employee's base salary may not be less than the minimum rate of the employee's pay band, unless the employee does not receive a pay increase under § 9901.323 because of an unacceptable rating. § 9901.351(e) Maximum rate. Relocates language (with minor modifications) found in current regulations at § 9901.356(b). This provision states that an employee's base salary may not be more than the maximum rate of the employee's pay band, unless provided for under the pay retention provisions in § 9901.356. § 9901.351(f) Pay periods and hourly rates. Relocates language (with minor modifications) found in current regulations at § 9901.356(c). This provision states that the Secretary will follow the rules for establishing pay periods and computing pay rates in 5 U.S.C. 5504 and 5505. § 9901.351(g) Rate comparisons upon movement to an NSPS position. Provides for the setting of an employee's NSPS rate of basic pay when the employee moves to an NSPS position by a management-directed action, consistent with the conversion rule in § 9901.371(d). § 9901.351(h) Adjustment of teacher annual rates. Provides authority for an adjustment of up to 20 percent when an individual leaves a teaching position under 20 U.S.C. 901 and moves to NSPS. This adjustment is for the purpose of setting the individual's NSPS pay based on that adjusted rate. This adjustment will take into account the shorter work year applicable to a teacher position. § 9901.352 Setting an employee's starting pay. Revises section (formerly § 9901.351) providing specific rules to be applied in determining an employee's starting pay for individuals who are newly appointed or reappointed to the Federal service. § 9901.352(a) Considerations in setting starting pay. Identifies factors to be considered in setting starting pay for a newly appointed or reappointed employee. § 9901.352(b) Definitions. Defines the terms newly appointed and reappointed and clarifies the term Federal service. Clarifies that to be considered as reappointed, an employee must have been separated from Federal service for at least 1 full workday immediately before employment in an NSPS position. § 9901.353 Setting pay upon reassignment. Revises section (formerly § 9901.352) providing specific rules to be applied in determining an increase or decrease under a reassignment action. § 9901.353(a) General rules governing reassignment increases. Makes minor changes in terminology to use the term “base salary”. Identifies factors to be used in making decision to grant a reassignment increase. Provides that an employee who is reassigned through reduction-in-force procedures will not incur a reduction in base salary and is not eligible for an increase in base salary, except to place the base salary at the minimum rate of the new pay band. § 9901.353(b) 5 percent increase upon reassignment. Provides for an employee's base salary to be increased by up to 5 percent and provides for procedures in setting pay upon a reassignment. The authorized management official may decrease an employee's base salary by any amount determined prior to the reassignment and with the employee's agreement, as long as the employee's base salary does not drop below the minimum of the assigned pay band. Provides for a higher-level approval of any increase or decrease upon a reassignment. Clarifies that an employee may receive only a total of a 5 percent cumulative increase to base salary as a result of employee-initiated action in any 12-month period, unless an exception is approved by a higher-level official. § 9901.353(c) Adjusted salary used for an employee-initiated reassignment. Provides for use of adjusted salary in the pay setting of an employee on a voluntary reassignment. When an employee is voluntarily reassigned from a position with a targeted local market supplement or from a non-NSPS position (e.g., GS, Federal Wage System, Nonappropriated Fund), the authorized management official will set pay considering the employee's adjusted salary (including any applicable locality pay, special rate supplement, or other equivalent supplement) and any physicians' comparability allowance payable for the position held prior to the reassignment. If the NSPS adjusted salary is increased beyond the amount of the employee's current adjusted salary plus any physicians' comparability allowance, the percentage of the increase is counted toward the 12-month limitation. When an employee covered by a targeted local market supplement is changed to a new location where a different local market supplement and/or pay schedules apply, the employee's current adjusted salary must be recalculated in accordance with the rules at § 9901.351(b). § 9901.353(d) Management-directed reassignment. Provides for the adjusted salary to be used in the pay setting of an employee on a management-directed reassignment. There are no limits to the number of times an employee may be reassigned by management, and the employee is eligible for an increase of up to 5 percent with each reassignment. Any increase associated with a management-directed reassignment does not count toward the 12-month limitation. § 9901.353(e) Adjusted salary used for a management-directed reassignment. Provides for use of the adjusted salary in the pay setting of an employee on a management-directed reassignment. When an employee is reassigned by management-directed action from a position with a targeted local market supplement or from a non-NSPS position (e.g., GS, Federal Wage System, Nonappropriated Fund), the authorized management official will set pay considering the employee's adjusted salary (including any applicable locality pay, special rate supplement, or other equivalent supplement) and any physicians' comparability allowance payable for the position held prior to the reassignment. If the NSPS adjusted salary is increased beyond the amount of the employee's current adjusted salary plus any physicians' comparability allowance, the percentage of the increase is counted toward the 12-month limitation. When an employee covered by a targeted local market supplement is changed to a new location where a different local market supplement and/or pay schedules apply, the employee's current adjusted salary must be recalculated in accordance with the rules at § 9901.351(b). § 9901.353(f) Mandatory reduction in pay on reassignment. Provides for a mandatory reduction of at least 5 percent and up to 10 percent to an employee's base salary when an employee is involuntarily reduced in pay via reassignment based on unacceptable performance and/or conduct. This reduction may not cause an employee's base salary to fall below the minimum rate of the employee's assigned pay band. An employee's base salary may not be reduced more than once in a 12-month period based on unacceptable performance, conduct, or both. § 9901.353(g) Expiration or termination of temporary reassignment. Provides that any increase received while on temporary reassignment will be reversed upon return to the employee's prior position. The employee's pay will then be reconstructed to credit the employee with increases he/she would have received if not for the temporary reassignment. § 9901.353(h) Reassigned to an NSPS supervisory position. Provides that any increase received while on reassignment to a supervisory position will be reversed upon return to the employee's prior position due to failure to complete a supervisory probationary period. The employee's pay will then be reconstructed to credit the employee with increases he/she would have received if not for the reassignment to the supervisory position. § 9901.354 Promotion. Revises section (formerly § 9901.353) providing specific rules to be applied in determining an increase under a promotion action. § 9901.354(a) Setting pay upon promotion. Provides for an employee's base salary to be increased from 6 percent not to exceed 12 percent and provides for procedures in setting pay upon a promotion. Revises section to provide for a higher-level approval for any increase above 12 percent. Incorporates the term “base salary”. § 9901.354(b) Criteria used for a promotion. Provides specific criteria used in determining an increase under a promotion action. § 9901.354(c)(1) Temporary promotion made permanent. Provides that an employee's base salary will remain unchanged when a temporary promotion is made permanent, and that no additional increase will be provided. § 9901.354(c)(2) Expiration or termination of temporary promotion. Provides that any increase received while on temporary promotion will be reversed upon return to the employee's prior position. The employee's pay will then be reconstructed to credit the employee with increases he/she would have received if not for the temporary promotion. § 9901.354(d)(1) Promotion from pay retention. Addresses how pay is set for an employee on retained pay who is repromoted to the pay band from which reduced (or comparable band). § 9901.354(d)(2) Promotion calculation for pay retention. Addresses how an employee's retained base salary will be used in calculating the promotion increase. § 9901.355 Setting pay upon reduction in band. Revises section (formerly § 9901.354) providing specific rules to be applied in determining an increase or decrease for setting pay upon reduction in band. § 9901.355(a) General. Provides for an employee's base salary to be increased or decreased, and provides procedures in setting pay upon a reduction in band. § 9901.355(b) Pay reduction. Provides authority to reduce an employee's base salary at least 5 percent and up to 10 percent on a reduction in band based on unacceptable performance and/or conduct. This reduction may not cause an employee's base salary to fall below the minimum rate of the employee's assigned pay band. An employee's base salary may not be reduced more than once in a 12-month period based on unacceptable performance, conduct, or both. § 9901.355(c) Pay increase. Provides for an employee's base salary to be increased by up to 5 percent, consistent with the reassignment increase procedures. An employee who is reduced in band through reduction-in-force procedures or by placement via the Priority Placement Program or Reemployment Priority List is not eligible for an increase in base salary, except to place the base salary at the minimum rate of the new pay band. Provides specific criteria used in determining an increase for setting pay upon reduction in band. § 9901.355(d) Termination of temporary promotion. Provides that this section does not apply to a reduction in band in connection with the termination of a temporary promotion; instead, the rules in § 9901.354(c)(2) apply. § 9901.355(e) Probationary period. Provides that any increase received while on promotion to a supervisory position will be reversed upon return to the employee's prior position due to failure to complete a supervisory probationary period. The employee's pay will then be reconstructed to credit the employee with increases he/she would have received if not for the promotion to the supervisory position. § 9901.356 Pay retention. Revises section (formerly § 9901.355) providing specific rules to be applied in determining an employee's entitlement to pay retention and the factors in terminating pay retention. Incorporates the term “base salary”. § 9901.356(c) Period of pay retention. Clarifies that pay retention will be granted for a period of 104 weeks. § 9901.356(d) Situations triggering eligibility. Identifies specific situations when an employee under NSPS will be granted pay retention. § 9901.356(e) Optional pay retention. Provides for a higher-level approval of any additional situations to grant pay retention. § 9901.356(f) Terminating conditions. Identifies specific situations when pay retention will terminate under NSPS. § 9901.356(g) Pay setting upon termination. Provides that an employee's pay will be set at the maximum rate of the pay band upon expiration of the 104-week period. § 9901.356(h) Pay adjustments after termination. Provides that an employee is eligible for rate range adjustments and performance payouts upon termination of pay retention. § 9901.356(i) Situations when pay retention is not applicable. Identifies specific circumstances when pay retention does not apply. § 9901.356(j) Performance payouts. Provides that an employee on pay retention will receive any performance payouts in the form of bonuses, consistent with § 9901.342(g)(8). § 9901.356(k) Pay adjustments during pay retention. Provides that employees on pay retention are eligible for general salary increases under § 9901.323(a)(1) and are eligible for local market supplement adjustments. § 9901.356(l) Extension of 104-week time limit. Adds a new paragraph that allows for the 104-week time limit on pay retention under NSPS to be extended by the length of time that an employee is subject to a contingency operation or emergency. § 9901.356(m) Grandfather provision. Provides that an employee with a preexisting entitlement to pay retention under 5 CFR part 536 before becoming covered by NSPS, or who obtains the entitlement to pay retention upon becoming covered by NSPS, is entitled to a retained rate without regard to the 104-week limit in § 9901.356(c). § 9901.361(a) Introduction. Clarifies paragraphs providing waiver or modification of premium pay provisions of 5 U.S.C. chapter 55, subchapter V, and adds reference to §§ 9901.363 and 9901.364, which establish new types of premium payments in addition to those found in 5 U.S.C. chapter 55, subchapter V. § 9901.361(b) Provisions not waived or modified. Deletes existing paragraph (b) and replaces it with separate sections, new §§ 9901.362 through 9901.364. Adds new paragraph (b) referencing 5 U.S.C. 5544 (dealing with premium pay for prevailing rate employees) and 5 U.S.C. 5545b (dealing with firefighter pay) to clarify that those premium pay provisions are not waived or modified. § 9901.361(c) Applicability of Fair Labor Standards Act. Deletes existing paragraph (c) and replaces it with separate sections, new §§ 9901.362 through 9901.364. Adds new paragraph (c) to clarify that these regulations do not affect the applicability of FLSA overtime pay provisions. § 9901.361(d) Applying regulations in 5 CFR part 550, subpart M. Clarifies that the reference to “locality pay” in 5 CFR 550.1305(e) must be interpreted to be a reference to a local market supplement. Clarifies that firefighters compensated under subpart M are eligible for compensatory time off for travel or for religious purposes and foreign language proficiency pay. § 9901.361(e) Physicians and dentists. Provides that physicians and dentists (in occupational series 0602 and 0680, respectively) under NSPS are not eligible for premium pay except for compensatory time off for religious observances. § 9901.361(f) Senior Executive Service. Provides that members of the Senior Executive Service (SES) are ineligible for premium pay under NSPS, except for compensatory time off for religious observances. This is consistent with the treatment of SES members under the standard title 5 premium pay provisions. § 9901.362 Modification of standard provisions. Adds a new section that identifies the modifications to the title 5 premium pay provisions and related regulations and any specific additional requirements. § 9901.362(a) Premium pay limitations. Establishes the rules governing the premium pay limitations. The premium pay caps are consistent with title 5. In special circumstances, the Secretary may establish a higher annual premium pay cap equal to the Vice President's annual salary for specified categories of employees and situations on a time-limited basis. § 9901.362(b) Overtime pay. Identifies requirements and modifications pertaining to the overtime pay (including compensatory time off) provisions in 5 U.S.C. 5542 and 5543 and related regulations. The proposed rule modifies the overtime hourly rate cap that applies to FLSA-exempt employees and the method for crediting overtime hours. In addition, time in a travel status does not constitute hours of work for overtime pay purposes unless actual work is performed; however, qualifying travel time not treated as hours of work will generate compensatory time off for travel hours under § 9901.362(j). Finally, any FLSA-exempt employee may be required to receive compensatory time off in lieu of overtime pay for an equal amount of overtime work. § 9901.362(c) Night pay. Identifies the modifications to the night pay provisions in 5 U.S.C. 5545(a) and (b) and related regulations. An employee who performs overtime work at night is entitled to night pay regardless of whether the overtime work is scheduled before or after the administrative workweek begins. Night pay is not payable during paid absences, except for certain types listed in paragraph (c)(2). § 9901.362(d) Sunday pay. Identifies the modifications to the Sunday pay provisions in 5 U.S.C. 5546 and related regulations. Work for which Sunday pay is payable is limited to applicable hours of work that are actually performed on a Sunday. In other words, Sunday pay continues to apply to nonovertime hours of work performed by full-time employees, not to exceed 8 hours for any daily tour of duty (unless the employee is on a compressed schedule); however, unlike the standard title 5 provision, non-Sunday hours within a daily tour of duty that includes Sunday hours do not count as Sunday work. § 9901.362(e) Pay for holiday work. Identifies the modifications to the holiday premium pay provisions in 5 U.S.C. 5546 and related regulations. An employee receives pay that is twice the employee's adjusted salary hourly rate for each hour worked on a holiday, including overtime hours. If hours worked on a holiday are overtime hours, the overtime pay is contained within the double-time holiday pay rate. § 9901.362(f) Standby duty pay. Identifies requirements and modifications for the standby duty provisions in 5 U.S.C. 5545(c)(1) and related regulations. Limits coverage to firefighters ineligible for coverage under subpart M of part 550 and to emergency medical technicians not involved in fire protection activities unless the Secretary extends coverage to other occupations. Modifies the standby duty pay formula by using an employee's adjusted salary to compute standby duty pay. Standby pay attributable to the rate beyond GS-10, step 1, is not creditable for retirement purposes. Also bars receipt of any other premium pay for an employee receiving standby duty pay. § 9901.362(g) Administratively uncontrollable overtime pay. Provides that the administratively uncontrollable overtime pay provision in 5 U.S.C. 5545(c)(2) is waived and is not applicable to NSPS employees. § 9901.362(h) Law enforcement availability pay. Provides that the law enforcement availability pay provisions in 5 U.S.C. 5545a and related regulations apply. § 9901.362(i) Pay for duty involving physical hardship or hazard. Identifies requirements and modifications in connection with the hazardous duty pay provisions in 5 U.S.C. 5545(d) and related regulations. Permits the Secretary to establish new categories of hazardous duty pay (HDP), subject to OPM approval as required by § 9901.106(c). In determining eligibility for HDP, the occupational safety and health standards (OSHA) consistent with the permissible exposure limit (PEL) are generally used. An employee is eligible to receive HDP when he or she performs an assigned duty (as listed in Appendix A) and preventive measures have not reduced the element of hazard below the PEL. However, HDP may not be paid to employees in occupations or jobs in which unusual physical risk is inherent. § 9901.362(j) Compensatory time off for travel. Identifies the requirements and modifications in connection with the compensatory time off for travel provisions in 5 U.S.C. 5550b and related regulations. Employees who are required to travel away from their official worksite when such time is not otherwise compensable are eligible for compensatory time off. If an employee is required to travel on a nonworkday, commuting time more than 1 hour beyond the employee's normal commuting time is creditable travel time. Also provides the procedures for crediting compensatory time off for travel and the treatment of unused compensatory time off when DoD employees move between NSPS and non-NSPS positions. § 9901.362(k) Compensatory time off for religious observances. Identifies requirements and modifications in connection with the compensatory time off for religious observances provisions in 5 U.S.C. 5550a and related regulations. Prohibits payment for any unused religious compensatory time off under any circumstances. § 9901.362(l) Air traffic controller differential. Provides that the air traffic controller differential provisions in 5 U.S.C. 5546a are waived and not applicable to NSPS employees, except for paragraphs (a)(1) and (d) of that section. Authorizes the payment of a 5-percent differential to eligible air traffic controllers. In addition, the Secretary may extend a 10-percent differential to air traffic controllers who perform on-the-job training under certain circumstances. § 9901.363(a) Coverage under premium pay provisions for health care personnel. Adds a new section that provides premium payments for eligible DoD “health care personnel” (as defined in this paragraph) covered under NSPS. These payments include on-call premium pay, night pay, and pay for weekend duty, consistent with parallel provisions that apply to Department of Veterans Affairs health care personnel under title 38, United States Code. § 9901.363(b) On-call premium pay. Allows heads of DoD Components to authorize on-call premium pay for officially scheduled “on-call” time when health care personnel are not otherwise compensated for that on-call time. An employee officially scheduled to be on-call is paid 15 percent of his or her adjusted salary hourly rate for each hour of on-call status. The proposed rule provides the pay administration rules for on-call pay. § 9901.363(c) Night pay for health care personnel. Authorizes night pay for eligible employees who are scheduled to work between 6 p.m. and 6 a.m. An employee is paid 10 percent of his or her adjusted salary hourly rate for each hour worked between 6 p.m. and 6 a.m. This rate is applied to the entire tour if the employee works 4 or more hours between 6 p.m. and 6 a.m. The proposed rule provides the pay administration rules for night pay. § 9901.363(d) Pay for weekend duty for health care personnel. Authorizes pay for weekend duty for eligible employees who are scheduled to work a tour of duty, any part of which falls in the 2-day period between midnight Friday and midnight Sunday. An employee will be paid 25 percent of his or her adjusted salary hourly rate for each hour of work during that period. The proposed rule provides the pay administration rules for pay for weekend duty. § 9901.364 Foreign language proficiency pay. Adds a new section to provide that NSPS employees may be paid foreign language proficiency pay (FLPP) if certified as proficient in foreign languages identified as necessary for national security interests and not in receipt of FLPP under 10 U.S.C. 1596 and 10 U.S.C. 1596a. FLPP is a competency-based premium pay which the Department can pay an employee to maintain his or her skills in a critical language regardless of job. The proposed rule specifies the conditions for payment. § 9901.371 Conversion into NSPS pay system. Consolidates all provisions related to conversion into the NSPS pay system, including provisions found in §§ 9901.371 and 9901.373 in the current regulations. Adds additional detailed rules as noted by paragraph below. § 9901.371(a) Introduction. Provides cross reference to § 9901.231, which contains information on determining an employee's NSPS pay band upon conversion into NSPS. Corrects cross reference to reflect changes made by these proposed regulations. § 9901.371(b) Implementing issuances. Addresses the Secretary's authority to issue implementing issuances prescribing policies and procedures for conversions into NSPS. § 9901.371(c) Bar on pay reduction. Incorporates material previously found at § 9901.373(a). Clarifies that simultaneous actions must be processed before applying this rule, consistent with § 9901.371(e). § 9901.371(d) Rate comparison. Incorporates and clarifies material previously found at § 9901.373(b). § 9901.371(e) Simultaneous actions. Incorporates material previously found at § 9901.373(c). § 9901.371(f) Temporary promotion prior to conversion. Incorporates material previously found at § 9901.373(d), including the requirement to reconstruct pay in the permanent position of record prior to conversion. § 9901.371(g) Grade retention prior to conversion. Addresses how to treat employees who were on grade retention prior to conversion. § 9901.371(h) Pay retention prior to conversion. Addresses how to treat employees who were on pay retention prior to conversion. § 9901.371(i) Conversion adjustments. Provides that the only base salary adjustments that may be made in conjunction with conversion are those listed in paragraphs (j) through (m). § 9901.371(j) Within-grade increase (WGI) adjustment. Provides for a prorated within-grade adjustment for eligible GS employees converting into NSPS to account for the time since their last equivalent pay increase. § 9901.371(k) Special increase for employees on temporary promotion prior to conversion. Authorizes management to preserve an employee's rate of basic pay held on a temporary promotion immediately prior to conversion of that temporary promotion position into NSPS if the employee is placed back into that temporary position after its conversion. § 9901.371(l) Special increases equivalent to a GS promotion increase. Adopts provisions to (1) provide for a one-time base salary increase after conversion for eligible employees that would permit an increase in base salary equivalent to what they would have received in their career ladder position had it not been converted into NSPS, and (2) provide for a base salary increase when an employee has been selected for a position that converts into NSPS before the employee is actually placed in the position that would equal the increase the employee would have received if placed into that position prior to its conversion (e.g., GS-12 employee selected for a GS-13 position that would be a promotion before conversion but a reassignment after conversion). § 9901.371(m) Adjustment for physicians and dentists. Authorizes special conversion adjustment for a GS physician or dentist who was regularly receiving physicians' comparability allowance or premium pay prior to conversion so that his/her base salary at the time of conversion may be increased by the Component to account for the loss of the allowance and premium pay under NSPS. § 9901.372 Conversion or movement out of NSPS pay system . Adds a new section that addresses pay setting when employees convert or move out of the NSPS pay system and are placed in another Federal pay system (e.g., the General Schedule). Additional information on these rules is provided by paragraph below. (Existing § 9901.372 in the current regulations is deleted, since it dealt with the establishment of the initial NSPS pay ranges, which has already occurred.) § 9901.372(a) General. Introduces the new § 9901.372, which now addresses the treatment of an employee who is converted out of NSPS when the Secretary makes a decision to rescind the application of one or more subparts of this part to a particular category of employees or an organization or functional unit or who moves from a position covered by NSPS to a position in a different pay system. Provides definitions of “conversion” and “movement” and related terms. § 9901.372(b) Classification of covered position. Provides for a requirement that prior to converting an employee and his/her position out of NSPS, the position must be classified consistent with appropriate classification guidance and/or other appropriate criteria applicable to the gaining system (usually, the General Schedule). (Such a classification determination is not needed if an employee is moving out of the NSPS by some action other than conversion.) § 9901.372(c) Determining pay under the new system. Establishes a requirement that the pay setting rules of the gaining system be applied when an employee converts or moves out of NSPS. For the purpose of applying those rules, the employee's final pay under NSPS is based on the employee's NSPS permanent position as of the day immediately before the date of conversion or movement out of NSPS. Also, provides that NSPS rules do not apply to any personnel or pay action taking effect on the date of conversion or movement. § 9901.372(d) Virtual GS grade and rate. Prescribes rules for establishing a virtual GS grade and rate of pay to be used for the purpose of applying GS pay administration rules upon conversion or movement from NSPS. § 9901.372(e) GS within-grade increases. States rule that NSPS service is creditable for GS within-grade increase purposes, as required by regulations at 5 CFR part 531, subpart D. § 9901.372(f) Comparison of rates of basic pay. Provides that any reallocation of an employee's adjusted pay between basic pay and any locality payment, local market supplement, special rate supplement, or equivalent supplement in conjunction with conversion or movement out of NSPS does not have adverse action consequences, since such supplements are considered basic pay under 5 U.S.C. chapter 75 at the point of conversion or movement. Performance Management—Subpart D Subpart D regulates performance management for NSPS employees. The regulations have been revised to (1) establish in regulation the performance management system required by 5 U.S.C. 9902, as amended by the National Defense Authorization Act for Fiscal Year 2008, (2) provide for uniform and consistent application of the System within the Department of Defense, and (3) incorporate planned changes. Key changes to this part include (1) revising or adding definitions for clarity or to address concepts added to the regulation (such as appraisal period, minimum period, pay pool manager, pay pool panel, and performance review authority), (2) adding new sections or paragraphs to existing or revised sections to ensure uniform and consistent application of the System (such as minimum period, employees on time-limited appointments, and appraisal periods), and (3) rewriting some sections and paragraphs for regulatory format and clarity. The following Table of Changes lists, by specific regulatory section, a brief description of each significant change. Citation Description of proposed change § 9901.401(b) Performance Management System . Amends paragraph (b) to clarify the system is established in the regulations and its implementation and operation will adhere to the statutory requirements listed in the paragraph. § 9901.402(a) Coverage . Amends paragraph (a) to refer to all of § 9901.102. § 9901.402(c) Applicability . Amends paragraph (c) to allow application of this subpart under provisions specified in § 9901.408 to employees who do not meet the minimum performance period described in § 9901.407. § 9901.404 Definitions . Revises current definition for minimum period to conform to new § 9901.407. Adds cross-reference to new definitions in § 9901.103 for appraisal period, Pay Pool Manager, Pay Pool Panel , and Performance Review Authority . § 9901.405(a) System requirements . Amends the section to clarify that these regulations establish the performance management system required by 5 U.S.C. 9902 and the Secretary may further define the System through implementing issuances. § 9901.405(b)(1) System requirements—coverage . Deletes requirement for an NSPS performance management system to “specify the employees covered by the system(s)” since these regulations establish the system. In accordance with § 9901.102(b)(2), coverage under subpart D is a mandatory requirement for all employees covered by any subpart of this regulation. Subsequent paragraphs under § 9901.405 are redesignated accordingly. § 9901.405(b)(3) System requirements—minimum period . Moves current paragraph (b)(3) on the minimum period and places it in a separate section, new § 9901.407, and redesignates the remaining paragraphs accordingly. § 9901.405(b)(5) System requirements—rating levels . Adds a new paragraph specifying the rating levels that apply to the NSPS performance management system established under this subpart. § 9901.405(c) System requirements—supervisory responsibilities . Rewords paragraph and its paragraphs for regulatory format and clarity. § 9901.406(b) Performance expectations—communication . Restructures for regulatory format and clarity and redesignates the paragraph accordingly. § 9901.406(h) Performance expectations—approval . Adds new paragraph requiring higher-level review of performance expectations. § 9901.406(i) Performance expectations—plan approval . Adds new paragraph specifying an NSPS performance plan is an approved plan when given to the employee in writing. § 9901.407 Minimum period . Adds a new section addressing the minimum appraisal period and eligibility for appraisal. Subsequent sections are renumbered accordingly. § 9901.408 Employees on time-limited appointments . Adds a new section permitting the evaluation of employees on time-limited appointments not expected to exceed 90 days. Subsequent sections are renumbered accordingly. § 9901.409 Monitoring and developing performance . Redesignates and retitles current § 9901.407 and combines it with developing performance. Additional revisions are noted by paragraph below. § 9901.409(a) Monitoring and developing performance—interim review . Amends paragraph (a) to require at least one documented interim performance review while specifying that periods of performance of less than 180 days do not require a documented interim review. § 9901.409(b) Monitoring and developing performance—development . Adds a new paragraph emphasizing the value of developing employee performance. § 9901.410 Addressing performance that does not meet expectations . Redesignates current § 9901.408. Revisions are noted by paragraph below. § 9901.410(a)(1) Addressing performance that does not meet expectations—unacceptable performance . Adds a new paragraph requiring the identification of specific performance deficiencies that employees must improve. § 9901.410(b) Addressing performance that does not meet expectations—taking action . Revises the paragraph to specify adverse actions will be taken under 5 U.S.C. chapter 75 or other applicable procedures, such as those for National Guard Technicians. § 9901.411 Appraisal periods . Adds a new section specifying the dates associated with the annual appraisal period and rating of record. § 9901.412 Rating and rewarding performance . Relocates provisions dealing with rating and rewarding performance from § 9901.409 in the current regulations to a new § 9901.412. Additional revisions are noted by paragraph below. § 9901.412(a) Rating and rewarding performance—forced distribution . Adds a new paragraph prohibiting the forced distribution of ratings. § 9901.412(b) Rating and rewarding performance—additional rating of record . Restructures the paragraph for regulatory format and clarity, amends it to specify that an additional rating of record to reflect sustained improved performance may only be used following an unacceptable rating of record, and specifies the effective date of such a rating. § 9901.412(c) Rating and rewarding performance—assessments . Moves language regarding when a rating of record is final from current § 9901.409(c) to proposed § 9901.412(e). § 9901.412(d) Rating and rewarding performance—impact of misconduct . Adds a new paragraph clarifying that misconduct may impact the rating of record. § 9901.412(e) Rating and rewarding performance—final rating . Adds new language to specify that the Pay Pool Manager is the final approval authority for ratings of record and incorporates the requirement from current § 9901.409(c) regarding when a rating of record is final. § 9901.412(f) Rating and rewarding performance—communication . Moves requirement regarding communication of ratings from current § 9901.409(d) to proposed § 9901.412(f) and otherwise is unchanged. § 9901.412(g) Rating and rewarding performance—approved absence from work . Moves requirement regarding approved absence from work from current § 9901.409(f) to proposed § 9901.412(g) and otherwise is unchanged. § 9901.412(h) Rating and rewarding performance—ratings of record . Restructures for regulatory format and clarity and moves the last sentence from current § 9901.409(b)(1)-(3) into proposed paragraph (h)(3). § 9901.412(i) Rating and rewarding performance—job change . Adds a new paragraph addressing the special situation of employees who change jobs after the end of the appraisal cycle and before the payout date. § 9901.412(j) Rating and rewarding performance—additional appraisal . Moves current paragraph (i) to proposed paragraph (j) and adds a reference to implementing issuances. § 9901.413 Reconsideration . Relocates provisions dealing with reconsideration of ratings of record from § 9901.409 in the current regulations to a new section § 9901.413. Additional revisions are noted by paragraph below. § 9901.413(a) Reconsideration—nonbargaining unit employees . Revises to specify the roles and responsibilities of the deciding officials and to expand topics of reconsideration to include a job objective rating. § 9901.413(b) Reconsideration—bargaining unit employees . Reforms language previously in paragraph § 9901.409(h) to comply with 5 U.S.C. chapter 71, expands topics to include a job objective rating, and restructures and revises for regulatory format and clarity. § 9901.413(c) Reconsideration—revised ratings . Adds a new paragraph addressing revised ratings that result from reconsideration. Next Steps The National Defense Authorization Act for Fiscal Year 2008 requires that this rule be considered a major rule for the purpose of section 801 of title 5, United States Code. As such, before it can take effect, the Department will submit to each House of the Congress and to the Comptroller General a report containing the rule, a general statement relating to the rule, and the proposed effective date of the rule. The rule may not be effective until the date occurring 60 days after the later of (1) Congressional receipt of the report, or (2) the date the rule is published in the Federal Register . Congress has the opportunity to delay implementation of the rule based on the procedures set forth in 5 U.S.C. 801-808. DoD intends to continue implementing the new NSPS HR system in phases or spirals. The Act provides that not more than 100,000 employees may be added to the System in any calendar year. As has been the case from the beginning, NSPS continues to be an event-driven system, and no decisions have been made at this time regarding when or whether additional groups or organizations will be converted to NSPS. Such decisions will be based on the best interests of the Department. The Act also requires the Comptroller General to conduct annual reviews in calendar years 2008, 2009, and 2010. The reviews will address— (1) Employee satisfaction with the National Security Personnel System, and (2) The extent to which the Department of Defense has effectively implemented accountability mechanisms and internal safeguards. DoD will fully support the Comptroller General in any review of the System. E.O. 12866, Regulatory Review DoD and OPM have determined that this action is a significant regulatory action within the meaning of Executive Order 12866 because there is significant public interest in the National Security Personnel System. DoD and OPM have analyzed the expected costs and benefits of the revised HR system, and that analysis is presented below. Among the NSPS requirements is to maintain a system that is competitive, cost effective, and fiscally sound, while also being flexible, credible, and trusted. NSPS will allow DoD to move towards market-sensitive pay, to continue pay increases based on performance, and to have the flexibility to offer competitive salaries. While these flexibilities will improve DoD's ability to attract and retain a high-performing workforce, actual payroll costs under this System are constrained by the amount budgeted for overall DoD payroll expenditures, as is the case with the present GS pay system. The continuing implementation of NSPS will result in some additional program implementation costs. This includes delivering training specifically for NSPS, conducting outreach to employees and other parties, and improving automated systems associated with NSPS performance management. As has been the practice with implementing NSPS and other alternative personnel systems, DoD expects to incur an initial payroll cost related to the conversion of employees to the pay banding system. This includes a within-grade increase (WGI) “buyout,” in which an employee's basic pay, upon conversion, is adjusted by the amount of the WGI earned to date. While this increase is paid earlier than scheduled, it represents a cost that would have been incurred under the current system at some point. However, under NSPS, WGIs no longer exist. Once covered employees are under NSPS, such pay increases will be based on performance. Accordingly, the total cost of the accelerated WGI “buyout” is not treated as a “new” cost attributed to implementation of NSPS, since it is a cost that DoD would bear under the current HR system. The portion of the WGI buyout cost attributable to NSPS implementation is the marginal difference between paying out the earned portion of a WGI upon conversion and the cost of paying the same WGI according to the current schedule. The marginal cost of the accelerated payment of earned WGIs is difficult to estimate, but is not a significant factor in the cost benefit analysis for regulatory review purposes. DoD estimates the overall costs associated with continuing to implement NSPS will be approximately $143 million from Fiscal Years 2009 through 2011. These estimates are based upon past experience, guidance from the Comptroller General, and ensuring that implementation costs are determined in the same way across the services and Defense Agencies and captured in official accounting systems. The primary benefit to the public of NSPS resides in the HR flexibilities that will enable DoD to attract, build, and retain a high-performing workforce focused on effective and efficient mission accomplishment. A performance-based pay system that rewards excellent performance will result in a more qualified and proficient workforce and will generate a greater return on investment in terms of productivity and effectiveness. Taken as a whole, the changes included in these proposed regulations will improve upon the original NSPS regulations and result in a contemporary, merit-based HR system that focuses on performance, generates respect and trust, and supports the primary mission of DoD. This rule has been reviewed by the Office of Management and Budget in accordance with E.O. 12866. Regulatory Flexibility Act DoD and OPM have determined that these regulations would not have a significant economic impact on a substantial number of small entities because they would apply only to Federal agencies and employees. Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) This proposed regulatory action will not impose any additional reporting or recordkeeping requirements under the Paperwork Reduction Act. E.O. 12988, Civil Justice Reform This proposed regulation is consistent with the requirements of E.O. 12988. The regulation clearly specifies the effects on existing Federal law or regulation; provides clear legal standards; has no retroactive effects; specifies procedures for administrative and court actions; defines key terms; and is drafted clearly. E.O. 13132, Federalism DoD and OPM have determined these proposed regulations would not have Federalism implications because they would apply only to Federal agencies and employees. The proposed regulations would not have financial or other effects on States, the relationship between the Federal Government and the States, or the distribution of power and responsibilities among the various levels of government. Unfunded Mandates These proposed regulations would not result in the expenditure by State, local, or tribal governments of more than $100 million annually. Thus, no written assessment of unfunded mandates is required. List of Subjects in 5 CFR Part 9901 Administrative practice and procedure, Government employees, Labor management relations, Labor unions, Reporting and recordkeeping requirements, Wages. Office of Personnel Management. Linda M. Springer, Director, Department of Defense. Gordon England, Deputy Secretary of Defense. Accordingly, under the authority of section 9902 of title 5, United States Code, the Department of Defense and the Office of Personnel Management are proposing to revise part 9901 of title 5, Code of Federal Regulations to read as follows: PART 9901—DEPARTMENT OF DEFENSE NATIONAL SECURITY PERSONNEL SYSTEM (NSPS) Subpart A—General Provisions Sec. 9901.101 Purpose. 9901.102 Eligibility and coverage. 9901.103 Definitions. 9901.104 Scope of authority. 9901.105 OPM coordination and approval. 9901.106 Relationship to other provisions. 9901.107 Program evaluation. Subpart B—Classification General 9901.201 Purpose. 9901.202 Coverage. 9901.203 Waivers. 9901.204 Definitions. Classification Structure 9901.211 Career groups. 9901.212 Pay schedules and pay bands. Classification Process 9901.221 Classification requirements. 9901.222 Review of classification decisions. 9901.223 Appeal to DoD for review of classification decisions. 9901.224 Appeal to OPM for review of classification decisions. Transitional Provisions 9901.231 Conversion of positions and employees to NSPS classification system. Subpart C—Pay and Pay Administration General 9901.301 Purpose. 9901.302 Coverage. 9901.303 Waivers. 9901.304 Definitions. 9901.305 Rate of pay. Overview of Pay System 9901.311 Major features. 9901.312 Maximum rates of base salary and adjusted salary. 9901.313 Aggregate compensation limitations. 9901.314 National security compensation comparability. Rate Ranges and General Salary Increases 9901.321 Structure. 9901.322 Setting and adjusting rate ranges. 9901.323 Eligibility for general salary increase. Local Market Supplements 9901.331 General. 9901.332 Standard and targeted local market supplements. 9901.333 Setting and adjusting local market supplements. 9901.334 Eligibility for pay increase associated with a supplement adjustment. Performance-based Pay 9901.341 General. 9901.342 Performance payouts. 9901.343 Pay reduction based on unacceptable performance and/or conduct. 9901.344 Other performance payments. 9901.345 Accelerated Compensation for Developmental Positions (ACDP). Pay Administration 9901.351 General. 9901.352 Setting an employee's starting pay. 9901.353 Setting pay upon reassignment. 9901.354 Setting pay upon promotion. 9901.355 Setting pay upon reduction in band. 9901.356 Pay retention. Premium Pay 9901.361 General provisions. 9901.362 Modification of standard provisions. 9901.363 Premium pay for health care personnel. 9901.364 Foreign language proficiency pay. Conversion Provisions 9901.371 Conversion into NSPS pay system. 9901.372 Conversion or movement out of NSPS pay system. Subpart D—Performance Management 9901.401 Purpose. 9901.402 Coverage. 9901.403 Waivers. 9901.404 Definitions. 9901.405 Performance management system requirements. 9901.406 Setting and communicating performance expectations. 9901.407 Minimum period of performance. 9901.408 Employees on time limited appointments. 9901.409 Monitoring and developing performance. 9901.410 Addressing performance that does not meet expectations. 9901.411 Appraisal period. 9901.412 Rating and rewarding performance. 9901.413 Reconsideration of ratings. Authority: 5 U.S.C. 9902 Subpart A—General Provisions § 9901.101 Purpose. (a) This part contains regulations governing the National Security Personnel System (NSPS) within the Department of Defense (DoD), as authorized by 5 U.S.C. 9902. Consistent with 5 U.S.C. 9902, these regulations waive or modify various statutory provisions that would otherwise be applicable to affected DoD employees. These regulations are prescribed jointly by the Secretary of Defense and the Director of the Office of Personnel Management (OPM). The Secretary may establish implementing issuances to supplement any matter covered by these regulations. (b)(1) This part is designed to meet a number of essential requirements for the implementation of a new human resources management system for DoD. The guiding principles for establishing these requirements are to put mission first; respect the individual; protect rights guaranteed by law; support the statutory merit system principles in 5 U.S.C. 2301; value talent, performance, leadership, and commitment to public service; be flexible, understandable, credible, responsive, and executable; ensure accountability at all levels; balance human resources system interoperability with unique mission requirements; and be competitive and cost effective. (2) The key operational characteristics and requirements of NSPS, which these regulations are designed to facilitate, are as follows: High-Performing Workforce and Management —employees and supervisors are compensated and retained based on their performance and contribution to mission; Agile and Responsive Workforce and Management —workforce can be easily sized, shaped, and deployed to meet changing mission requirements; Credible and Trusted —system assures openness, clarity, accountability, and adherence to the public employment principles of merit and fitness; Fiscally Sound —aggregate increases in civilian payroll, at the appropriations level, will conform to OMB fiscal guidance; Supporting Infrastructure —information technology support, and training and change management plans are available and funded and Schedule —NSPS will be operational and demonstrate success prior to November 2009. § 9901.102 Eligibility and coverage. (a) Pursuant to the provisions of 5 U.S.C. 9902, civilian employees of DoD are eligible for coverage under one or more of subparts B through D of this part, except to the extent specifically prohibited by law. (b) At his or her sole and exclusive discretion, the Secretary may decide to apply subparts B through D to a specific category or categories of eligible civilian employees in organizations and functional units of the Department at any time in accordance with the provisions of 5 U.S.C. 9902. However, no category of employees may be covered by subparts B or C of this part unless that category is also covered by subpart D of this part. DoD will advise OPM in advance regarding the extension of NSPS coverage to specific categories of DoD employees under this paragraph. (c) Until the Secretary makes a determination under paragraph (b) of this section to apply the provisions of one or more subparts of this part to a particular category or categories of eligible employees in organizations and functional units, those employees will continue to be covered by the applicable Federal laws and regulations that would apply to them in the absence of this part. All personnel actions affecting DoD employees will be based on the Federal laws and regulations applicable to them on the effective date of the action. (d) Any new NSPS classification, pay, and performance management system covering Senior Executive Service (SES) members will be consistent with the policies and procedures established by the Governmentwide SES pay-for-performance framework authorized by 5 U.S.C. chapter 53, subchapter VIII, and applicable OPM regulations. If the Secretary determines that SES members employed by DoD should be covered by classification, pay, and performance management provisions that differ substantially from the Governmentwide SES pay-for-performance framework, the Secretary and the Director will issue joint regulations consistent with all of the requirements of 5 U.S.C. 9902. (e) At his or her sole and exclusive discretion, the Secretary may decide to rescind the application of one or more subparts of this part to a particular category of employees or an organization or functional unit, subject to § 9901.372 and any related implementing issuances. The Secretary will notify affected employees and labor organizations in advance of a decision to rescind the application of one or more subparts of this part to them. (f)(1) Notwithstanding any other provision of this part, but subject to paragraphs (f)(2) and (3) of this section, the Secretary may, at his or her sole and exclusive discretion, decide to apply one or more subparts of this part as of a specified effective date to a category of employees in organizational and functional units not currently eligible for coverage because of coverage under a system established by a provision of law outside the waivable or modifiable chapters of title 5, U.S. Code. (2) Parag [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3AE8-11364. Public record. Not legal advice.