Sections 5361-5366--Grade and Pay Retention.

Conducting annual policy reviews;

Publishing educational articles, such as Leaders Alerts and IRS Headlines;

Maintaining accurate and up-to-date program websites; and

Providing policy guidance.

Conversion-out process: The OPM methodology used to determine an employee’s GS equivalent grade level and rate of pay, for pay-setting purposes, when the employee leaves a position covered by the IRS Payband System (IR).

Demotion at an employee’s request: A reduction in grade/band, which is:

Employment on a temporary or term basis: Employment under an appointment having a definite time limitation or designation as temporary or term.

Federal Wage System (FWS): The pay system used in the IRS to pay employees who work in trades, crafts, and skilled/unskilled laborer positions (commonly referred to as “blue-collar” employees). The FWS has wage schedules that are based upon prevailing rates.

General Schedule (GS): The classification and pay system established under 5 USC Chapter 51, Classification, and 5 USC Part III, Subpart D, Chapter 53, Subchapter III, General Schedule Pay Rates.

Geographic conversion rule: When an employee’s official worksite is changed to a new location where a different pay schedule applies, the employee’s current position must first be converted to the applicable pay schedule and rate for the new official worksite, based on the grade and step (or relative position in range) or the position of record before the move and before processing applicable pay setting rules.

Highest previous rate (HPR): Highest underlying rate or LEO special base rate previously paid to an individual while employed as a civilian in any position in a branch of the Federal Government, without regard to whether that position was under the GS pay system.

IRS Payband System (IR): The performance based classification and pay system established under 5 USC Chapter 95, Personnel Flexibilities Relating to the Internal Revenue Service, outlined in OPM criteria, that covers all IRS managers including Senior Managers, Department Managers, and Frontline Managers, referred to as band instead of grade.

Law Enforcement Officer (LEO) special base rate: A special base rate established for GS law enforcement officers at grades 3 through 10 under section 403 of the Federal Employees Pay Comparability Act of 1990 (section 529 of Pub. L. 101-509, November 5, 1990, as amended), which is used in lieu of a GS rate. Identified by GL pay plan.

Official worksite: The official location of the employee’s position of record, as determined in IRM 6.531.1.5.3, Determining an Employee’s Official Worksite (Official POD). Also referred to as official post of duty (POD) and official duty station.

Payable rate: The highest rate of basic pay (including locality or special rate) to which an employee is entitled based on the employee's position of record, official worksite, and step (or relative position in band for an IR employee), or, if applicable, a retained rate.

Pay schedule: A set of rate ranges established for GS, GL, and IR employees. A pay schedule covers a defined category of employees based on established coverage conditions (e.g., official worksite, pay plan, occupation).

Position of record (POR): An employee’s official position, defined by grade/band, occupational series, employing agency, LEO status, and any other condition that determines coverage under a pay schedule (other than official worksite), as documented on the employee’s most recent Notification of Personnel Action (Standard Form (SF) 50) and current position description. A position to which an employee is temporarily detailed is not documented as a POR.

Prevailing rate: A rate used in the FWS, that is established through wage surveys of private employers for jobs that are common to private and non-Federal public sectors and the Federal government. The Department of Defense is the lead agency responsible for conducting FWS wage surveys and issuing wage schedules.

Rate of basic pay: The rate fixed for a position before any deductions. Rates of basic pay within IRS include the underlying GS rate, LEO special base rate, GS locality rate, special rate, IR underlying rate of basic pay, IR locality rate, and a retained rate.

Reduction in force (RIF): In the Federal Government, layoffs are called reduction in force (RIF) actions. When an agency must abolish positions the RIF regulations determine whether an employee keeps their position, or whether the employee has a right to a different position. The regulatory requirements governing RIF are contained in Title 5, CFR Part 351. Federal agencies must follow the procedures contained in the CFR when conducting a RIF.

Reorganization: The planned elimination, addition, redistribution, or restructuring of functions or duties either wholly within an agency or between agencies.

Retained rate: A rate above the maximum rate of the rate range applicable to an employee, which is payable under 5 CFR Part 536, Grade and Pay Retention, or, for a former member of the Senior Executive Service (SES), under 5 CFR 359,705, Pay.

Special Rate: A rate of pay within a special rate schedule established under 5 CFR Part 530, Subpart C, Special Rate Schedules for Recruitment and Retention

Temporary promotion: A promotion with a definite time limitation, which the employee is informed in advance is temporary and would normally require the individual’s return to the permanent position at the end of the promotion.

Temporary reassignment: A reassignment with a definite time limitation, which the employee is informed in advance is temporary and would normally require the individual’s return to the permanent position at the end of the reassignment.

Within-grade increase or step increase (WGI): A periodic increase in an employee’s rate of basic pay from one step to the next higher step within the same grade.

The offer must be in writing and include the official position description of the offered position;

The offer must inform the employee that (1) the entitlement to grade/band retention or pay retention will be terminated if the offer is declined and (2) the employee may appeal the reasonableness of the offer as provided in 5 CFR 536.402, Appeal of termination of benefits because of reasonable offer;

The tenure of the offered position must be equal to or greater than the tenure of the position that created the grade/band retention or pay retention entitlement (e.g., if prior to grade/band retention or pay retention, the employee was a career employee, the offer of a temporary appointment is not considered a reasonable offer);

The offered position must be full-time, unless the employee's position immediately before the action creating entitlement to grade/band retention or pay retention was less than full-time, in which case the offered position must have a work schedule of no less than that of the position held before the change; and

The offered position must be in the same commuting area as the employee's position immediately before the offer unless the employee is subject to a mobility agreement or a published agency (IRS) policy requiring employee mobility.

Eligibility for grade/band retention;

Whether grade/band retention is terminated when placed in another position; or

Whether eligibility is lost, or grade/band retention is terminated based on declination of a reasonable offer.

GS or GL positions: The rate of basic pay (includes locality or special rate) that applies to the fourth step of the GS or GL grade.

FWS positions: The rate of basic pay that applies to the second step of the FWS grade.

Placed in the position offered in that RIF notice; or

Placed in a position other than that offered in the RIF notice and the position offered is in writing and at management's initiative.

Remains in the position after it is reclassified; or

Is placed in a different position before the effective date of the reclassification, provided the position was offered in writing at management's initiative.

The employee served for at least 52 consecutive weeks, immediately prior to being placed in a lower grade/band, in one or more positions under a covered pay system at one or more grades/bands higher than the lower grade/band;

The authorized agency official, as outlined in IRM 1.1.4, Organizational Planning, authorized the use of optional grade/band retention to facilitate voluntary placement of directly-impacted employees into permanent positions below their permanent POR grade/band levels for non-RIF initiatives or before the initiation of official RIF procedures;

Management announces a reorganization or reclassification decision in writing;

The affected employee moves to a lower-graded/banded position on or before the date the announced reorganization or reclassification is effected. The move to a lower-graded/banded position may be initiated by the employee or in response to an offer initiated by management;

The employee is directly impacted by an approved reorganization or competitive sourcing initiative, as identified by the business unit; and

The employee voluntarily applies, and is selected for, a lower-graded/banded position that is equivalent to no lower than three grade/band levels or three grade/band intervals below their permanent POR.

An employee covered under the FWS (e.g., WG) pay system, moving to a GS position, still retains the FWS (e.g., WG) grade and rate.

An employee in an IR position who is placed in a GS or FWS position will first have their IR position converted to the GS system. Any applicable grade/band retention will then be based on that GS equivalent grade and step. Employees moving from an IR position to another IR position are placed on band retention and remain in the IR pay system.

In any RIF procedure;

To determine if an employee has been reduced in grade/band for the purpose of terminating grade/band or pay retention (i.e., based on personal cause or at the employee's request); or

To determine coverage under the FLSA.

Break in service of one workday or more;

Reduction in grade/band for personal cause or at the employee's request (based on the actual grade/band of the permanent POR, not the retained grade/band);

Movement to a position equal to or higher than the retained grade/band (temporary promotions do not affect eligibility and are excluded);

Declination of a reasonable offer (refer to IRM 6.536.1.2.1, Reasonable Offer) (does not include an employee withdrawing consideration or declining a selection from a merit promotion package);

Election, in writing, to terminate the benefits of grade/band retention; or

Expiration of the two-year grade/band retention period.

Any of the conditions listed above in paragraph (1), except that an employee's request for placement in a lower-graded/banded position, in lieu of displacing another employee at their grade/band under RIF procedures, is not a declination of a reasonable offer for grade/band retention purposes; or

The employee does not enroll in, or follow, IRS written requirements established to assure priority placement consideration in the IRS Priority Placement Program (IRSPPP) (refer to IRM 6.330.1, Recruitment, Selection and Placement).

At the end of the day upon expiration of the two-year period of grade/band retention;

At the end of the day before separation from service if termination is the result of a break in service;

At the end of the day before placement if the termination is the result of placement in another position; or

At the end of the day on the last day of the pay period in which the employee declined a reasonable offer, elects to terminate grade/band retention, or fails to enroll in, or comply with, written requirements of the IRSPPP.

Based on the employee's retained grade/band and series; or

Based on the actual position occupied (i.e., the POR).

Expiration of the two-year period of grade/band retention;

A RIF or reclassification action placing an employee in a lower grade/band when the employee does not meet the eligibility requirements for grade/band retention (refer to IRM 6.536.1.3.1, Mandatory Grade/Band Retention);

A management action placing an employee from a special rate position to a lower-paid special rate position or a non-special rate position;

A management action placing an employee under a different pay schedule (e.g., a GS-7, step 10, employee is involuntarily placed in a WG-5 position, and the employee is not entitled to grade retention);

A management action placing an employee in a formal employee development program generally used governmentwide, such as upward mobility, apprenticeship, and career intern programs;

Application of the promotion rule for GS or FWS employees results in a payable rate of basic pay that exceeds the maximum rate of the highest applicable rate range for the employee's new position; or

A reduction or elimination of special rate schedules or prevailing rate schedules (excluding a statutory reduction in scheduled rates of pay).

Is directly impacted by an approved reorganization and voluntarily accepts a lower-graded/banded position, but does not meet the additional eligibility requirements for grade/band retention (refer to IRM 6.536.1.3.2, Optional Grade/Band Retention);

Is placed in a lower-graded/banded position due to ill health or becoming disabled when the employee is no longer able to successfully perform the duties of their current position;

Accepts a lower-graded/banded position which was designated in advance as hard-to-fill; and

Accepts a lower-graded/banded position outside the commuting area at the request of management to fill a position requiring the unique skills and qualifications of the employee.

The position was reviewed and documented by the BBHR director and/or business unit head of office as meeting all the following criteria:
i. Entry-level position that is professional or administrative in nature, as defined in the OPM Handbook of Occupational Groups and Families at: https://www.opm.gov/policy-data-oversight/classification-qualifications/classifying-general-schedule-positions/occupationalhandbook.pdf;
ii. Advertised as a career-ladder position, subject to an official IRS formal employee training program; and
iii. Advertised that pay retention may be applicable;

The employee will be placed on an IRS formal employee training plan approved by the BBHR director, business unit head of office or Director, HCO, Enterprise Talent Development. Provisions of an IRS formal employee training plan must, at a minimum, include the following:
i. Training and development requirements throughout the entire period between entrance on duty into the occupation and reaching the full noncompetitive performance level;
ii. All basic training requirements;
iii. On-the-job training with an assigned coach;
iv. A minimum of two formal performance discussions between manager and employee (mid-year and end-of-year) to determine completion of the formal employee development plan;
v. Documentation to verify completion of predetermined learning objectives;
vi. Requirement that the official file copy of the above documentation be maintained by the manager of the employee and servicing Learning and Education Office; and
vii. Requirement that the official file copy of the above documentation be maintained in the employee's performance folder until they have been at the full working level for at least one year;

Approved IRS formal employee training plans must be provided to the servicing TA EO to fill positions identified as formal development and for which optional pay retention may be authorized. The BBHR directors and/or business unit heads of office are responsible for maintaining approved formal employee training plans for serviced business units in either hard copy or on an electronic database to be available upon request for third-party review.
i. Once a position receives approval based on the above requirements, optional pay retention may be granted for all future vacancies located in the same occupation (the same or similar duties) and in the same business unit.
ii. The BBHR directors and/or business unit heads of office are responsible for periodically reviewing approvals to ensure that the approvals still meet the needs of the IRS; and

A current Treasury employee selected under an IRS formal employee training plan described above is provided pay retention when the employee moves to the IRS without a break in service.

Any general pay adjustment occurring on the same date as the pay retention entitlement must be effected (processed) first.

Then, if applicable, apply the geographic conversion rule to determine a converted rate of basic pay before determining the initial pay retention entitlement.

Convert an hourly rate to an annual rate if the new position is under a pay system that uses only annual rates of pay. Conversely, change an employee's existing annual rate of basic pay to an hourly rate if the employee's new position is under a pay system that uses only hourly rates (e.g., WG).

If the employee's existing payable rate of basic pay is less than the maximum rate of the new rate schedule, set pay at the lowest rate on that schedule that equals or exceeds the employee's existing payable rate. Pay retention then terminates.

If the employee's existing payable rate of basic pay is greater than the maximum rate of the new rate schedule, the employee is entitled to a retained rate equal to the existing payable rate of basic pay and pay retention regulations apply.

150% of the maximum rate of the highest applicable rate range for the employee's new POR; or

The rate payable for Level IV of the Executive Schedule.

If the employee is moving to a new location, apply the geographic conversion rule to recalculate the retained rate of pay.

If the employee's grade/band and pay system are not changing and the employee's existing retained rate is less than or equal to the maximum payable rate of the highest applicable rate range (for the new POR), then the payable rate is set within the rate range, and pay retention terminates.

If the employee's grade/band and pay system are not changing, and the employee's existing retained rate is more than the maximum payable rate of the highest applicable rate range (for the new POR), then pay retention rules continue to apply, and the employee is entitled to the existing retained rate.

If the employee's pay system is not changing but the employee is being promoted to a higher grade, apply the appropriate promotion rule to determine the payable rate of pay. If the resulting rate is equal to or greater than the retained rate, pay retention terminates. If the resulting rate is less than the retained rate, pay retention rules continue to apply, and the employee continues to be entitled to the retained rate.

If the employee is moving to a position under a different pay system whose grade has a higher comparison rate, apply the appropriate pay administration rules to determine the employee's payable rate of basic pay (e.g., moving from a GS to WG position may result in applying prevailing rate promotion rules). If the resulting rate is equal to or greater than the retained rate, pay retention is terminated. If the resulting rate is less than the retained rate, pay retention rules continue to apply, and the employee continues to be entitled to the retained rate.

If a temporary promotion provides a lesser payable rate than the retained rate, the employee continues to receive the retained rate while on the temporary promotion (the retained rate is the highest previous rate (HPR)). A temporary promotion which provides a greater payable rate than the retained rate does not permanently terminate an employee's entitlement to pay retention. When the temporary promotion ends, the employee's pay retention entitlement is determined as if the employee had not received the temporary promotion.

A break in service of one workday or more;

Entitlement to a rate of basic pay which equals or exceeds the retained rate;

Declination of a reasonable offer (refer to IRM 6.536.1.2.1, Reasonable Offer) (does not include an employee withdrawing consideration or declining a selection from a merit promotion package);

Demotion for personal cause or at the employee's request;

Movement to a position not under a covered pay system;

Election in writing to terminate grade/band retention (which also terminates eligibility for pay retention); or

Movement from a position where the employee was afforded pay retention based upon either a formal employee development program (refer to IRM 6.536.1.4.1, Mandatory Pay Retention) or IRS formal employee training plan (refer to IRM 6.536.1.4.2, Optional Pay Retention) to a position not covered by pay retention.

At the end of the day before separation from service if termination is the result of a break in service;

At the end of the day before the employee becomes entitled to a rate that is equal to or greater than the retained rate;

At the end of the day before placement or movement if the termination is the result of the employee's placement in or movement to another position; or

At the end of the day on the last day of the pay period in which the employee declines a reasonable offer.