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

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

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

Regulations: Title 5, CFR, Chapter 1, Office of Personnel Management, Subchapter B, Civil Service Regulations, at: https://www.ecfr.gov/cgi-bin/ECFR?page=browse:

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

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

The HCO, Office of HR Strategy (OHRS), Policy & Audits (P&A) organization is responsible for developing, maintaining, and publishing content in this IRM.

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

This IRM provides policy guidance on aggregate limitation on pay and special rate schedules. During the review and publishing of this IRM, sections are revised, added or deleted based in part on statutory and/or regulatory changes and based on feedback from customer and program owners.

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

The following activities help ensure program success:

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

Additional information is available on the IRS Source under the Employee Resources tab, under Pay, on Pay Systems, Salary Tables and Pay Administration page at https://irsgov.sharepoint.com/sites/EmployeeResources/SitePages/Pay-Systems-Salary-Tables-Pay-Administration.aspx.

The OPM Fact Sheets:

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

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

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

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

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

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

Exceptions to the CY deferment:

In the IRS, special rates may apply to GS and GL positions.

Special rate schedules under 5 USC 5305, Special pay authority, do not apply to IR employees. Under certain terms and conditions, if IR employees are assigned to an occupational series and geographic area covered by a special rate schedule, OPM may approve staffing supplements instead of special rate schedules.

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

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

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

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

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

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

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

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

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

A request for a new special rate schedule, as outlined in (3) above, may result in OPM review and approval of staffing supplements for IR employees in the same occupational series and geographic area covered by the request.

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

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

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

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

Any adjustment to a special rate schedule may result in an adjustment to the corresponding staffing supplement for affected IR employees.

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

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

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

Refer to 5 CFR 530.308(c), Treatment of special rate as basic pay, when setting pay for an employee moving from a special rate position to a prevailing rate position.

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

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

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

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

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

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

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

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

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

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

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