Which Federal Employees Are Impacted by OPM's Recent Revised Pay Setting Guidance?

By on April 26, 2016 in Current Events, Pay & Benefits with 2 Comments

The U.S. Office of Personnel Management (OPM) recently updated its fact sheet on setting employee’s pay when moving from a nonappropriated fund (NAFI) position to a General Schedule (GS) position.

Probably a number of questions pop into your mind just from reading the previous sentence. One might be: what is an OPM fact sheet? It is guidance issued by OPM to help agencies to apply Federal regulations correctly.

Another question might be: what is a NAFI position? A nonappropriated fund instrumentality (NAFI) is a governmental entity that operates using no funds appropriated by the U.S. Congress. Such entities typically charge a fee for the services they provide to members of the U.S. military services and authorized civilians. The fees charged are the funds that allow these entities to pay for its operations and compensate its employees.

Examples of such entities include the Army and Air Force Exchange Service, Army and Air Force Motion Picture Services, Navy Ship’s Stores Ashore, Navy exchanges, Marine Corps exchanges, Coast Guard exchanges, and others. The primary purpose of these entities is to provide for the comfort, pleasure, contentment, and mental and physical improvement of personnel of the Armed Forces and the U.S. Coast Guard (This definition is drawn primarily from 10 U.S.C. § 1587(a)(1)).

A third question that might form in your mind is: why should I care about this fact sheet? And the answer is that if you are not a NAFI employee or expect never to be a NAFI employee, you may not care.

But if you are a NAFI employee or if you have an inquiring mind you may want to continue reading because the updated fact sheet helps to explain the arcane rules that guide agencies when setting basic pay for employees.

You also may be interested because some of the provisions discussed in the updated fact sheet apply to employees moving from one GS position to another.

And a final reason you may want to continue reading is that this guidance reminds us that agencies have flexibilities in setting employee pay, i.e., there are several permissible ways to determine how basic pay is set when moving from one position to another.

Voluntary Moves

The revised fact sheet divides the guidance into two parts, depending on whether the move from the NAFI position to the GS position is voluntary (most often this means the employee requested the move) or involuntary (typically this means the move was not requested by the employee).

When an employee voluntarily moves to a GS position in DOD or the Coast Guard from a NAFI position in DOD or the Coast Guard, respectively, without a break in service of more than 3 days, the agency may use one of three methods to set the employee’s pay.

  • Pay must be set at the minimum rate in the GS rate range for the GS position to which the employee is moving. For example, a NAFI employee moving to a GS-5 position must have his or her pay set at the minimum rate or step 1.

Alternatively, the agency, at its discretion, may use one of the following methods to set the employee’s rate of basic pay at a higher rate:

  • Pay may be set using the NAFI highest previous rate rule (HPR), discussed below. OR
  • Pay may be set using the maximum payable rate (MPR) rule, if the employee earned a non-NAFI rate of basic pay at some time in the past and if the MPR produces a higher rate that using the employee’s NAFI HPR (See 5 C.F.R. § 531.221). For example, an employee may have earned a GS salary prior to moving to a NAFI position
Involuntary Moves

When an employee involuntarily moves to a GS position in DOD or the Coast Guard from a NAFI position in DOD or the Coast Guard, respectively, with substantially the same duties and without a break in service of more than 3 days, the employee is entitled to an initial rate of basic pay at the lowest step rate of the GS grade that is equal to or greater than the rate of pay the employee received in the NAFI position just before the move. An example of such an action is included in the OPM fact sheet.

Alternatively, the agency, at its discretion may choose one of the following methods to set the initial rate of basic pay of an employee who is moved involuntarily.

  • Pay may be set using the employee’s NAFI HPR, discussed below. OR
  • Pay may be set using the maximum payable rate (MPR) rule, if the employee earned a non-NAFI rate of basic pay at some time in the past if the MPR produces a higher rate than using the employee’s NAFI HPR (see 5 C.F.R. § 531.221) OR
  • Pay may be set using the optional pay retention rule (see 5 C.F.R. § 536.302) when the employee would lose pay as a result of utilizing the other pay setting techniques mentioned in this section.
Determining an Employee’s NAFI HPR

As with most things related to setting an employee’s rate of basic pay, the guidance for determining a NAFI employee’s highest previous rate is divided into two categories.

Same Official Worksite: When the GS position to which the NAFI employee is moving is located in the same official worksite (duty location) as the NAFI position, the agency may set the employee’s basic rate of pay at the lowest step in the grade of the GS position that equals or exceeds the highest previous rate of basic pay the NAFI employee earned.

Different Official Worksite: When the GS rate range for the GS position to which the NAFI employee is moving is different from the one that would have applied if the GS position were located in the same place as the employee’s highest previous NAFI rate, then a multi-step process is needed to determine the employee’s rate of basic pay in the GS position to which she or he is moving. The example that OPM provides in the revised fact sheet involves a DOD NAFI position (DOD NF-3 position earning $38,328 per annum) located in San Diego and a GS position (DOD GS-5 position) located in Washington DC. The GS pay scale that applies in San Diego is different from the one that applies in Washington DC.

Thus, the following steps are used to determine the employee’s rate of basic pay in the GS-5 position located in Washington DC.

  • Compare the NAFI HPR (the employee’s current DOD NAFI pay of $38,328) to the GS pay scale applicable to the GS-5 position in San Diego (i.e., the San Diego GS locality pay schedule).
  • Identify the lowest step in the applicable pay scale that equals or exceeds the employee’s NAFI HPR – in this case the $38,328 falls between steps 3 and 4 of the GS-5 locality pay schedule in San Diego in 2016 (GS-5, step 3 rate $37,601; GS-5, step 4 rate $38,776). Thus, GS-5, step 4 is identified.
  • Convert the rate identified in the previous step (GS-5, step 4) to the rate range that applies to the GS position to which the employee is moving – in this case GS-5, step 4 on the Washington DC locality pay schedule ($38,792 in 2016). This is the maximum payable rate (MPR) based on the employee’s NAFI HPR.

See the example on the updated fact sheet for more detail on the process of determining the NAFI HPR when the position to which the NAFI employee is moving is in an official worksite different from the one where the NAFI position is located.

Other Moves to GS Position

You probably noticed that there were some conditions or requirements established in the guidance discussed in the preceding paragraphs. The first condition was that the employee did not have a break in service of more than 3 days. Another condition was that the employee was moving to a GS position in DOD or the Coast Guard from a NAFI position in DOD or the Coast Guard, respectively. So, you may ask, what happens when those conditions are not met? Suppose there is a break in service of more than 3 days and/or the GS position is not in DOD or the Coast Guard, what methods are used to set the employee’s rate of basic pay upon moving to a GS position?

The revised fact sheet tells us that the agency in which the GS position to which the NAFI employee is moving must set pay at the minimum rate in the GS rate range for the GS position to which the employee is moving. For example, a DOD or Coast Guard NAFI employee moving to a GS-5 position in another Federal agency must have his or her pay set at the minimum rate or step 1.

Alternatively, the agency, at its discretion, may choose one of the following methods to set the initial rate of basic pay of a DOD or Coast Guard NAFI employee moving to a GS position in another Federal agency.

  • Pay may be set using the maximum payable rate (MPR) rule, if the employee earned a non-NAFI rate of basic pay earned at some time in the past (see 5 C.F.R. § 531.221). For example, the employee earned a GS salary before moving to the NAFI position. OR
  • Pay may be set using the superior qualifications and special needs pay-setting authority (see 5 C.F.R. § 531.212).

In closing, I hope that this article helps you to understand the guidance that OPM recently updated. The guidance is designed to ensure that agencies set basic pay for NAFI employees moving to GS positions at a rate that satisfies the applicable regulatory requirements, and does so in a uniform fashion. If you have questions about how pay is to be set for NAFI employees moving to GS positions, please let me know. Or if you have questions regarding other pay setting issues send me an email. Pay setting is an area of Federal human resources practice that has many over lapping rules and can be influenced by agency policy. But I will attempt to answer your questions and, I hope, clarify this complex, some would say byzantine, and sensitive area.

Wayne Coleman is a federal pay expert available to help your agency avoid premium pay claims through on-site training. Contact him for more information.

© 2016 Wayne Coleman. All rights reserved. This article may not be reproduced without express written consent from Wayne Coleman.

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About the Author

Wayne Coleman is a senior consultant who has written about and provided training on overtime and premium pay, on the principles of FLSA coverage and exemption, and on related federal compensation issues at many different Federal agencies for almost 40 years. He can be reached at wayneslyhouse@comcast.net.

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