RL34380 – The Executive Schedule IV Pay Cap on General Schedule Compensation, February 15, 2008

“Annual pay adjustments for about 1.3 million employees under the General Schedule (GS) and certain other systems are governed by Section 529 of P.L. 101509, the Federal Employees Pay Comparability Act of 1990 (FEPCA), which generally requires that covered employees receive an annual basic pay adjustment and a locality-based comparability payment. For the GS pay adjustment that took effect in January 2008, the size of the total pay increase (i.e., the annual adjustment plus locality pay) varied across the 32 pay areas, but averaged 3.5% nationwide. In recent years, though, an increasing number of GS employees have not received all of the base and locality pay increases that were designated for their pay areas. By law (5 U.S.C. ?5304(g)(1)), base GS pay and locality pay combined cannot exceed Level IV of the Executive Schedule (EX-IV) — which, for 2008, is set at $149,000. Therefore, GS employees whose total pay was already equivalent to EX-IV could only receive the same amount of pay increase that was provided to employees in the Executive Schedule (which, for 2008, was 2.5%). Any employees whose pay was below EX-IV but, after the increase, would have been above Level IV, could only receive a portion of the total increase scheduled for other employees in their pay area.

For the GS pay adjustment that took effect in January 2008, more than 7,100 GS-15 and equivalent employees in 12 pay areas did not receive all of the pay increase designated for their pay areas — an increase of more than 6,000 “capped” employees from the year before, primarily because the EX-IV cap affected employees in the Washington, DC, pay area for the first time. Some GS-15 employees have been affected by the cap since 2002, and employees in five additional pay areas are likely to be affected in 2009. By 2012, GS-14 employees may also begin to be affected. As a result of the EX-IV cap, the affected employees’ salaries are substantially lower than they would have been had the cap not been in effect, and any pensions that they are due to receive in the future will also be lower. This report provides information on the effect of the EX-IV pay cap on pay for GS employees; and discusses the potential implications of the pay cap on salaries, pensions, and the ability of agencies to recruit and retain staff. The report also provides some background information on the GS and Executive Schedule pay systems and the annual pay adjustment processes in those systems. This report will be updated if policy developments occur or if additional factual information becomes available on the number of employees affected.”