Issue Briefs

Following are three sets of guidance from OPM regarding the January federal pay raises.

Subject: January 2018 Pay Adjustments
The President has signed an Executive Order to implement the January 2018 pay adjustments.   The Executive Order authorizes a 1.4 percent across-the-board increase for statutory pay systems and locality pay increases costing approximately 0.5 percent of basic payroll, reflecting an overall average pay increase of 1.9 percent.  This is consistent with the President’s alternative pay plan issued under 5 U.S.C. 5303(b) and 5304a on August 31, 2017.  This memorandum reviews relevant portions of the Executive Order and provides general information on the 2018 pay rates.

2018 Salary Tables and Effective Date

We have posted the 2018 salary tables on the U.S. Office of Personnel Management’s (OPM’s) website at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/.  The 2018 pay schedules will become effective the first day of the first applicable pay period beginning on or after January 1, 2018 (January 7, 2018, based on the standard biweekly payroll cycle).

The General Schedule and Other Statutory Pay Systems

The Executive Order provides an across-the-board increase of 1.4 percent in the rates of basic pay for the statutory pay systems––the General Schedule (GS), the Foreign Service schedule, and certain schedules for the Veterans Health Administration of the U.S. Department of Veterans Affairs.  Special base rates for law enforcement officers at GS grades 3 through 10 are also increased by 1.4 percent.  (These law enforcement officers are assigned the “GL” pay plan code.)

Executive Schedule

Under 5 U.S.C. 5318, Executive Schedule (EX) rates of pay will be increased by 1.4 percent (rounded to the nearest $100).  The EX salary table is available on OPM’s website at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2018/executive-senior-level/.  (See also the “Pay Freeze for Certain Senior Political Officials” section, below.)

Senior Executive Service

Under 5 U.S.C. 5382, the minimum rate of basic pay for the Senior Executive Service (SES) rate range will be adjusted to be consistent with the increase in the minimum rate of basic pay for senior-level positions under 5 U.S.C. 5376 ($126,148 in 2018).  The applicable maximum rate of basic pay for the SES will be $189,600 (EX-II) for SES members covered by a certified SES performance appraisal system and $174,500 (EX-III) for SES members covered by an SES performance appraisal system that has not been certified.  An SES member at the minimum rate of the SES rate range must receive a pay increase of not less than 1.4 percent in January 2018, since an SES member may not receive less than the minimum rate of the SES rate range.  Other SES pay adjustments must generally be made based on individual performance, contribution to the agency’s performance, or both, as determined under a rigorous performance management system, pursuant to 5 U.S.C. 5382.  An agency’s determination to adjust the rate of basic pay for an SES member that is approved by the end of the first pay period in January 2018 (January 20, 2018) may be made effective as of the first day of that first pay period (January 7, 2018).  Determinations to adjust SES pay that are approved after January 20, 2018, will become effective at the beginning of the next pay period following the approval.  OPM’s regulations for setting and adjusting SES pay are available at 5 CFR part 534, subpart D.  (See also the “Pay Freeze for Certain Senior Political Officials” section, below.)

Senior-Level and Scientific and Professional Positions

The minimum rate of basic pay for the senior-level (SL) and scientific and professional (ST) rate range will be increased by 1.4 percent ($126,148 in 2018), which is the amount of the GS increase.  The applicable maximum rate of basic pay will be $189,600 (EX-II) for SL or ST employees covered by a certified SL/ST performance appraisal system and $174,500 (EX-III) for SL or ST employees covered by an SL/ST performance appraisal system that has not been certified.  An SL or ST employee at the minimum rate of the SL/ST rate range must receive a pay increase of not less than 1.4 percent in January 2018, since an SL or ST employee may not receive less than the minimum rate of the SL/ST rate range.  Effective at the same time the General Schedule is adjusted (January 7, 2018), agencies must adjust each SL/ST employee’s rate of basic pay by the amount the agency determines to be appropriate based on the employee’s individual performance or contribution to agency performance.  (See 5 CFR 534.507.)  If the agency head decides upon a zero adjustment, the reasons for that decision must be communicated to the employee in writing where required by 5 CFR 534.507(h).  An agency’s determination to adjust the rate of basic pay for an SL/ST employee that is approved by the end of the first pay period in January 2018 (January 20, 2018) may be made effective as of the first day of that first pay period (January 7, 2018).  OPM’s regulations for setting and adjusting SL/ST pay are available at 5 CFR part 534, subpart E.

Pay Freeze for Certain Senior Political Officials

The Consolidated Appropriations Act, 2017, contained a provision that continued the freeze on the payable rates of pay for the Vice President and certain senior political appointees at 2013 levels during calendar year 2017.  Unless extended by new legislation, the pay freeze will end on the last day of the last pay period that begins in calendar year 2017 (i.e., January 6, 2018, for those on the standard biweekly payroll cycle).  For additional information on the 2017 pay freeze for certain senior political officials, see https://www.chcoc.gov/content/continued-pay-freeze-certain-senior-political-officials.  We will issue separate guidance regarding whether this pay freeze will be continued or terminated.

Administrative Law Judges

The Executive Order reflects a decision by the President to increase the rates of basic pay for administrative law judges (ALJs) by 1.4 percent, rounded to the nearest $100.  The rate of basic pay for AL-1 will be $164,200 (equivalent to the rate for EX-IV).  The rate of basic pay for AL-2 will be $160,100.  The rates of basic pay for AL-3/A through 3/F will range from $109,600 to $151,700.  The ALJ salary table is available on OPM’s website at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2018/executive-senior-level/.

Administrative Appeals Judges

Under 5 U.S.C. 5372b, the rates of basic pay for administrative appeals judge (AAJ) positions must be set at a rate not less than the minimum rate of basic pay for level AL-3 and not more than the maximum rate of basic pay for level AL-3 of the ALJ pay system established under 5 U.S.C. 5372.  At 5 CFR 534.603, OPM’s regulations link the structure of the AAJ pay system directly to the structure for level AL-3 of the ALJ pay system.  The AAJ pay system includes six rates of basic pay—AA-1, 2, 3, 4, 5, and 6.  These rates correspond to the rates of basic pay for AL-3/A, B, C, D, E, and F of the ALJ pay system.  The AAJ salary table is available on OPM’s website at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2018/executive-senior-level/.

Locality Payments

The President’s Executive Order reflects the amounts of the 2018 locality payments for GS employees implemented by the President under his alternative pay plan authority.  Locality pay area definitions are available at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2018/locality-pay-area-definitions/.  The 2018 locality pay tables for the General Schedule are available at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2018/general-schedule/.  GS locality rates are limited to the rate for EX-IV.  (See 5 U.S.C. 5304(g)(1) and the “Executive Schedule” section, above.)  Also provided is a chart showing an example of how the 2018 locality rate and total increase are computed for an employee in the Rest of U.S. locality pay area.

Locality Pay Extensions

On November 22, 2017, OPM issued a memorandum on behalf of the President’s Pay Agent (the Secretary of Labor and the Directors of the U.S. Office of Management and Budget and OPM) that continues GS locality payments for ALJs and certain other non-GS employee categories in 2018.  The memo is available at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/continuation-of-locality-payments-for-non-general-schedule-employees-november-22-2017.pdf.  By law, EX officials, SES members, employees in SL/ST positions, and employees in certain other equivalent pay systems are not authorized to receive locality payments.  (Note:  An exception applies to certain grandfathered SES, SL, and ST employees stationed in a nonforeign area on January 2, 2010.  See CPM 2009-27 at https://www.chcoc.gov/content/nonforeign-area-retirement-equity-assurance-act.)

Cost-of-Living Allowance Rates for Nonforeign Areas

As provided under the Nonforeign Area Retirement Equity Assurance Act of 2009 (subtitle B of title XIX of the National Defense Authorization Act for Fiscal Year 2010 (Public Law 111-84, October 28, 2009)), employees in nonforeign areas entitled to cost-of-living allowances (COLAs) have corresponding reductions in their COLAs when locality rates increase.  The locality and COLA rates in each COLA area are available athttps://www.opm.gov/policy-data-oversight/pay-leave/pay-systems/nonforeign-areas/.

Special Rates

We are issuing a separate memorandum announcing the results of OPM’s annual review of special rates and the 2018 special rate adjustments.

Prevailing Rate Pay Adjustments

We are issuing a separate memorandum on pay adjustments for certain prevailing rate (wage) employees.

Aggregate Limitation on Pay

The aggregate limitation on pay for calendar year 2018 will be $210,700 (equivalent to the rate for EX-I).  SES members and employees in SL/ST positions who are covered by a certified performance appraisal system are subject to a higher aggregate limitation on pay of the Vice President’s salary ($243,500 in 2018).  (See 5 U.S.C. 5307 and 5 CFR part 530, subpart B.)

2018 Premium Pay Caps

Under 5 U.S.C. 5547(a) and 5 CFR 550.105, GS and other covered employees may receive certain types of premium pay in a biweekly pay period only to the extent that the sum of basic pay and such premium pay for the pay period does not exceed the greater of the biweekly rate payable for (1) GS-15, step 10 (including any applicable locality payment or special rate supplement), or (2) the rate payable for EX-V ($153,800 in 2018).  In certain emergency or mission-critical situations, an agency may apply an annual premium pay cap instead of a biweekly premium pay cap, subject to the conditions prescribed in law and regulation.  (See 5 U.S.C. 5547(b) and 5 CFR 550.106–550.107.)  We have posted the 2018 biweekly premium pay caps on OPM’s website at https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/#url=Biweekly-Pay-Caps.

Under section 1105 of the National Defense Authorization Act for Fiscal Year 2018, the head of an agency may waive, during calendar year 2018, the premium pay cap under 5 U.S.C. 5547 for civilian employees working in certain overseas locations.  We will issue a separate memorandum with additional information on this authority and other recent legislative changes.

Adjusting Retained Rates

Certain employees are entitled to retained rates above the applicable rate range under 5 U.S.C. 5363 and 5 CFR part 536.  As provided in 5 U.S.C. 5363(b)(2)(B) and 5 CFR 536.305,when the maximum rate of the highest applicable rate range for an employee’s position of record is increased while the employee is receiving a retained rate, the employee is entitled to 50 percent of the amount of the increase in that maximum rate.  An example of adjusting a retained rate in January 2018 can be found in the fact sheet at https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/January-2018-pay-examples.  We have also updated our fact sheet on pay retention for former National Security Personnel System employees at https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/pay-retention-for-former-nsps-employees/.

Post-Employment Restrictions

Agencies are required to notify SES members, SL and ST employees, and other individuals who are paid at a rate of basic pay equal to or greater than 86.5 percent of the rate for EX-II ($189,600 x 86.5 percent = $164,004 in 2018) that they are subject to certain post-employment restrictions in 18 U.S.C. 207(c)(2)(A)(ii).  OPM’s regulations requiring notification of post-employment restrictions are available at 5 CFR part 730.  Agencies may continue to use the sample notice OPM provided in its memorandum of January 6, 2004 (CPM 2004-01), to notify an SES member, an SL or ST employee, or other individual that he or she is subject to the post-employment restrictions in 18 U.S.C. 207(c).  (Agencies will need to update the pay system, salary threshold, and effective date, as appropriate.)  The sample notice is available at http://archive.opm.gov/oca/compmemo/2004/2004-01_attach1.asp.

Order for Processing Pay Actions

The general pay adjustments that take effect in January 2018 must be processed before any individual pay action (e.g., a within-grade increase or promotion) that takes effect on the same date.  General pay adjustments include across-the-board increases under 5 U.S.C. 5303 and increases in locality payments or other geographic adjustments, special rate supplements, and retained rates.  If multiple individual pay actions become effective on the date of the January 2018 pay adjustment, those actions must be processed in the order applicable to the employee’s pay system (e.g., the simultaneous action rule for GS employees in 5 CFR 531.206).

Subject: Fiscal Year 2018 Prevailing Rate Pay Adjustments
Division E of the Consolidated Appropriations Act, 2017 (the fiscal year 2017 Act), contains two provisions that affect the determination of pay adjustments for certain prevailing rate (wage) employees.  The Further Additional Continuing Appropriations Act, 2018, extends into FY 2018 the two provisions of the FY 2017 Act.

As extended, section 737(a) provides that pay increases for certain prevailing rate employees in FY 2018 may not exceed 2.13 percent—the sum of the January 2018 General Schedule (GS) across-the-board percentage adjustment and the difference between the overall average percentage locality payments for GS employees in FY 2017 and FY 2018.  Section 737(b) provides that, notwithstanding section 737(a), pay adjustments for certain prevailing rate employees in FY 2018 may not be less than the January 2018 pay adjustments received by GS employees where they work.  Section 737(a) applies to wage employees covered by 5 U.S.C. 5342(a)(2) or 5348.  Section 737(b) applies to wage employees covered by 5 U.S.C. 5344 or 5348.  Sections 737(a) and 737(b) do not apply to wage employees who negotiate their pay under section 9(b) of Public Law 92-392.

Lead agencies must establish wage rates for affected prevailing rate employees for FY 2018 by determining the maximum rates applicable under the pay limitation provisions of section 737(a), determining the minimum pay increase applicable under section 737(b), and then applying the higher of the rates to affected prevailing rate wage schedules.  In some wage areas, wage schedule adjustments under the minimum increase provisions of section 737(b) will be higher than under the maximum increase provisions of section 737(a).  In addition, as a result of section 737(b), certain prevailing rate wage areas will have more than one wage schedule in effect during FY 2018.

In addition to regular appropriated and nonappropriated fund wage schedules, prevailing rate pay systems have numerous special pay practices that are affected by sections 737(a) and 737(b).
Determining Rates Under Section 737(a)

Section 737(a) provides that pay increases for wage employees in FY 2018 may not exceed 2.13 percent—the sum of the GS across-the-board percentage adjustment and the difference between the overall average percentage locality payments for GS employees in FY 2017 and FY 2018.

If any rate exceeds the rate payable on September 30, 2017, by more than 2.13 percent, or if any rate exceeds the rate payable on September 30, 2017, by more than 2.13 percent due to rounding, that rate must be reduced to the highest rate that does not exceed 2.13 percent.  If the annual wage survey of private sector rates in a given wage area indicates an adjustment of less than 2.13 percent is warranted under section 737(a), the lower prevailing rate will be payable under that section.

Wage schedules issued pursuant to a wage survey under the authority of 5 U.S.C. 5343 are subject to the limitation in section 737(a).  The limitation also applies to wage schedules produced by reference to schedules adjusted pursuant to wage surveys and to wage schedules that have been temporarily set aside from certain provisions of the Federal Wage System (FWS) pending study by the Federal Prevailing Rate Advisory Committee.  The adjustment of a wage rate required pursuant to a change in an applicable Federal, State, or local minimum wage rate is not subject to the limitation in section 737(a).  Rates established as the result of an adjustment in an applicable minimum wage rate will be the basis for determining the limitation on subsequent adjustments indicated by an annual prevailing rate wage survey.
Determining Rates Under Section 737(b)

Section 737(b) provides that adjustments in basic pay that take place in FY 2018 under 5 U.S.C. 5344 and 5348 may not be less than the percentage adjustments under 5 U.S.C. 5303 and 5304 received by GS employees in the same location in January 2018.

The geographic boundaries of appropriated and nonappropriated fund prevailing rate wage areas and of GS locality pay areas are not the same.  Consequently, section 737(b) requires that certain prevailing rate wage areas have more than one wage schedule in effect during FY 2018.  Although a majority of prevailing rate wage areas coincide only with part of the Rest of U.S. (RUS) GS locality pay area, many prevailing rate wage areas coincide with parts of more than one GS locality pay area.

In each situation where the boundary of a prevailing rate wage area coincides with the boundary of a single GS locality pay area boundary, the lead agency for that wage area must establish one wage schedule applicable in the wage area.  For example, the Cascade, MT, nonappropriated fund FWS wage area coincides with part of the RUS GS locality pay area.  In this example, the minimum prevailing rate adjustment for the Cascade wage area is the same as the RUS GS locality pay area adjustment, 1.67 percent.

In each situation where a prevailing rate wage area coincides with part of more than one GS locality pay area, the lead agency for that wage area must establish more than one prevailing rate wage schedule for that wage area.  For example, the boundaries of the Philadelphia, PA, appropriated fund FWS wage area coincide with parts of two different GS locality pay areas—New York-Newark, NY-NJ-CT-PA and Philadelphia-Reading-Camden, PA-NJ-DE-MD.  In this example, the lead agency for the Philadelphia wage area must establish two separate wage schedules for use during FY 2018 in the Philadelphia FWS wage area.  In the part of the Philadelphia wage area that coincides with the New York-Newark, NY-NJ-CT GS locality pay area, the minimum prevailing rate adjustment is 2.10 percent and in the part coinciding with the Philadelphia-Reading-Camden, PA-NJ-DE-MD GS locality pay area, the minimum prevailing rate adjustment is 1.99 percent.

Prevailing rate employees in overseas locations described in 5 U.S.C. 5343(a)(5) also must receive increases at least equal to the increases received by GS employees in the RUS GS locality pay area.
Prevailing rate adjustments under section 737(b) must be rounded upwards when necessary so that such adjustments are not less than the relevant GS percentage adjustments that occur in January 2018.

Effective Date of Retroactive Pay Adjustments
The wage rates on certain FY 2018 wage schedules are effective retroactively to the normal effective date prescribed on the wage schedule by the lead agency.  This uniform date is fixed for all agencies using a wage schedule.  For example, the wage schedule for the Washington, DC, FWS wage area has a normal effective date in FY 2018 of October 15, 2017.  Employees paid from this wage schedule are entitled to pay adjustments retroactive to October 15, 2017.  For wage areas with normal effective dates later in the fiscal year, retroactive adjustments will not be required.  For example, wage schedules for the Savannah, GA, FWS wage area will have a normal effective date in FY 2018 of July 22, 2018.  Employees stationed in this wage area will see their wage schedule adjusted prospectively on July 22, 2018.

Subject: 2017 Annual Review of Special Rates (Results)
The U.S. Office of Personnel Management (OPM) conducts an annual review of special rates established under 5 U.S.C. 5305 to determine the disposition of special rate schedules when General Schedule (GS) pay is adjusted under 5 U.S.C. 5303.  Based on OPM’s annual review, special rate tables may be terminated, decreased, or increased.  (See OPM’s data call memorandum (CPM 2017-07) for further information.)

Based on the 2017 annual review of GS special rates, I have approved a 1.4-percent increase in January 2018 for all title 5 special rate tables equal to the 1.4-percent increase in GS base rates.  Both the increased GS base rates and the increased GS special rates will be effective on the first day of the first applicable pay period beginning on or after January 1, 2018 (January 7, 2018, based on the standard payroll cycle).  All 307 title 5 special rate tables can be found on the OPM website at http://apps.opm.gov/SpecialRates/index.aspx.  These special rates cover about 39,000 employees.

Amount of 2018 Pay Adjustments
In OPM’s August 8, 2017, data call memorandum, the anticipated increase in GS base rates in January 2018 was 1.9 percent, absent any other action.  However, the amount of the 2018 increase in GS base rates was reduced to 1.4 percent in the President’s alternative plan issued under the authority of 5 U.S.C. 5303(b) on August 31, 2017.

Results of 2017 Annual Review
Pursuant to OPM’s instructions, each agency conducted a review of its special rates schedules.  Special rates were to be adjusted at the same time and in the same amount as the base General Schedule, unless an agency requested (1) an adjustment for a special rate schedule different from any 2018 increase in GS base rates or (2) the reduction or termination of a special rate schedule.
No agency requested that a special rate schedule receive an adjustment different from the base GS adjustment, and OPM received only one agency request to terminate a special rate table.  (Further information on that requested termination is provided below in the “Terminated Special Rates” section.)  OPM will increase all title 5 special rate pay tables in tandem with the 1.4-percent across-the-board GS base rate increase effective on the first day of the first applicable pay period beginning after January 1, 2018 (January 7, 2018, based on the standard payroll cycle).

Special Rates in Nonforeign Areas
For the 2017 annual review, we reminded agencies of the results of our analysis of special rates in nonforeign areas during the 2012 annual review, and that special rates in nonforeign areas would be reexamined yearly as part of our overall annual review of special rates.  During the 2017 annual review, no agencies requested termination of special rates or a pay adjustment different from the base GS increase for positions in nonforeign areas.  Accordingly, special rates in nonforeign areas will receive a 1.4-percent increase and will include the Nonforeign Area Retirement Equity Assurance Act of 2009 additional adjustments.

Capped Special Rates
Under 5 U.S.C. 5305(a)(1), the maximum special rate is the rate payable for level IV of the Executive Schedule (EX-IV).  (The EX-IV rate will be increased to $164,200 effective the first day of the first pay period in January 2018.)  Because of the EX-IV limitation, some GS-14 and GS-15 special pay rates for 2018 are capped.

Terminated Special Rates
Special rates are terminated based on OPM’s annual review of special rates when covered agencies report to OPM that applicable special rates are no longer necessary or when GS locality rates of pay exceed special rates at the same grade and step due to increases in locality pay percentages.

The U.S. Department of Agriculture (USDA) reported that Special Rate Table 0707, which covers only USDA, is no longer warranted.  USDA requested termination of Table 0707 and also requested that USDA be removed from the agency coverage of Special Rate Table 0706.  USDA requested these changes fully aware that terminating special rates triggers pay retention provisions for employees covered by the special rates (except for any temporary and term employees).  OPM approves the request, and Special Rate Table 0707 will be terminated and USDA will be removed from the location coverage of Special Rate Table 0706 effective at the beginning of January 7, 2018.

Under 5 U.S.C. 5305(h), an employee’s entitlement to a special rate ends if the employee is entitled to a higher rate of basic pay, such as a locality rate of pay under 5 U.S.C. 5304.  Three special rate tables will terminate effective January 7, 2018, because higher locality rates due to increases in locality pay percentages apply at all steps of each covered grade.  Those three special rate tables are Special Rate Tables 0368, 0378, and 0567.

In addition, some special rate tables will have one or more pay rates that terminate when applicable 2018 locality rates of pay are higher due to January 2018 increases in locality pay percentages.  In such cases, the special rate tables will not show a special rate at the affected grades and steps because higher locality pay rates apply.  Also, for some special rate tables that cover multiple locations, certain locations will be removed from coverage because the 2018 locality rates in those locations are higher than the special rates at all grades and steps.  Termination of special rates in these situations will not result in a loss of pay for covered employees because they will receive a higher locality rate of pay.