Leveling Off

The 2010 Defense Authorization Act's mandate to move the 200,000 employees covered by the National Security Personnel System back to their old pay arrangements has created a number of logistical questions. Among them, it was unclear how the Pentagon would handle employees whose salaries increased so quickly under pay for performance that they rose above General Schedule caps for their pay grade. Because the authorization law guaranteed that employees wouldn't receive a pay cut in the process, Defense Department officials had to find another way to even the playing field.

According to a report by Federal Times, Defense has arrived at a solution: Cut annual raises in half for the employees who exceed the cap until GS pay rates have a chance to catch up.

Tim Curry, NSPS' acting program executive officer, on Wednesday confirmed the report, noting that about 4,000 NSPS personnel currently exceed the pay ceiling for their equivalent General Schedule grade. Those above the cap will be put on pay retention and will receive 50 percent of the annual GS increase until their base salary falls into the appropriate range, he said.

Salaries for General Schedule employees are capped at $153,200 annually, or Level VI of the executive pay schedule.

The move from NSPS to the General Schedule won't happen overnight, nor will all employees be converted at once, and Defense doesn't yet have a complete rollout plan. All NSPS employees in January will receive the full GS base salary and locality pay increases, and those rated at Level III, or "valued performer," still will be eligible for performance-based bonuses. Employees with a rating of 1, or "unacceptable," will see no increase. Congressional negotiators on Tuesday evening approved an average pay raise of 2 percent for GS employees, with 1.5 percent dedicated to increases in base pay and 0.5 percent to locality hikes.

Curry added that anyone still under NSPS in January 2011, including those paid above the salary cap, will be compensated according to NSPS regulations.

"The department still is developing its transition timetable and identification of organizations for transition," Curry said. "We are working to move expeditiously to transition employees out of NSPS with minimal impact to mission and employees."

Flexing for Inflation

Federal employees worried about their flexible spending account contributions might be able to breathe a bit easier, if an amendment to the Senate's health care bill offered on Monday stands.

In both the House and Senate versions of the legislation, pretax FSA contributions will be limited to $2,500, as a revenue-raising measure. The House bill, which passed Nov. 7, sets the cap starting in 2013 and allows that annual limit to increase with inflation. The Senate version, which would take effect in 2011, included no such inflation provision. But Sen. Charles Schumer, D-N.Y., filed an amendment on Monday afternoon seeking to add one. If incorporated, the provision will prevent contributions from devaluing over time.

Even if the accounts are indexed for inflation, FSA advocates say capping contributions at $2,500 will adversely affect those with chronic conditions who require extended or expensive care. According to Chris Ryan, chief strategy officer for SHPS Inc., a company that manages client accounts, between 20 percent and 35 percent of federal workers with FSAs currently would allocate more than $2,500.

Jody Dietel, executive director of Save Flexible Spending Plans, an advocacy group lobbying Congress to protect FSAs, and chief compliance officer for WageWorks Inc., which helps manage the accounts, said even with insurance, those with chronic conditions can expect $4,400 in out-of-pocket health care expenses, higher than the proposed limit.