Senate sends bill ending Pentagon pay system to president’s desk

President Obama's signature is the only obstacle remaining to a full repeal of the Pentagon's pay-for-performance arrangement, after the Senate passed legislation that would roll back the controversial system and provide members of the armed forces with a 3.4 percent pay raise in 2010.

The Senate on Thursday approved the final version of the fiscal 2010 Defense authorization bill by a vote of 68-29, sending it to the president's desk. In addition to language dismantling the National Security Personnel System and allowing a military pay raise 0.5 percentage points higher than that requested by Obama, the measure contains significant changes to federal retirement law.

The final version of the policy bill repeals NSPS in full and requires that all NSPS employees return to their previous pay system by Jan. 1, 2012. It asks the Defense secretary to begin moving NSPS employees back into their old pay system within six months, and prohibits the Pentagon from decreasing the salaries of employees who got raises under NSPS. Until they are returned to their old pay systems, NSPS employees will be guaranteed the full pay hikes given to General Schedule workers.

The bill also sets the course for changes in how Defense Department employees are evaluated. It directs the Defense secretary to work with the Office of Personnel Management chief to create a "fair, credible and transparent" performance appraisal system for employees and a similar system "for linking employee bonuses and other performance-based actions to performance appraisals of employees." Employees are to receive "performance assistance plans," giving them access to on-the-job training and mentoring.

The bill also gives the Defense secretary the ability to propose new personnel flexibilities, pending congressional approval.

Beyond the Defense Department, the final authorization bill contains governmentwide changes to retirement rules, including a provision that would allow workers in the Federal Employees Retirement System to count unused sick leave toward their retirement. Until Dec. 31, 2013, employees would receive 50 percent credit for unused sick time; they would receive full credit beginning on Jan. 1, 2014.

The bill also allows federal retirees to return to government for limited, part-time appointments without having to take cuts in their annuities. And it will let employees who work part time before they retire use higher salary figures to calculate how that work factors into their retirement benefits. FERS employees who left and returned to government service would be able to redeposit savings in the retirement system and earn credit for years they already worked in government.

In addition, the bill moves federal employees who work outside the continental United States from a cost-of-living-adjustment system into the locality pay system. COLA payments do not count toward retirement calculations, and they are not matched as part of Thrift Savings Plan contributions.

The leaders of federal employee groups praised the legislation, and urged President Obama to sign it swiftly.

"The administration and Congress have tasked federal employees with immense responsibility in the face of an ambitious agenda to restructure the federal government's role in the delivery of services to the American public," said Darryl Perkinson, president of the Federal Managers Association. "We need experienced individuals to lend their expertise as we tackle the challenges ahead and to mentor those who will serve the nation in the future. Signing this bill into law will ensure the federal government builds on its successes as we transition to the next generation of public servants."

Randy Erwin, legislative director for the National Federation of Federal Employees, praised the provision ending NSPS, noting the union has been battling the pay system for six years. "Had NSPS been implemented as first proposed, federal employee unions probably would not even exist today," he said. "DoD would have stripped our right to collectively bargain and we would have disappeared."

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