This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

5174

Vol. 62, No. 23

Tuesday, February 4, 1997

OFFICE OF PERSONNEL

MANAGEMENT

5 CFR Parts 293, 351, 430, and 531

RIN 3206–AH32

Reduction in Force and Performance

Management

AGENCY: Office of Personnel

Management.

ACTION: Proposed rulemaking.

SUMMARY: The Office of Personnel

Management (OPM) is proposing

regulations that enhance the

opportunity for Federal employees to

receive retention service credit during

reductions in force based on their actual

job performance. The proposal also

gives agencies with employees who

have been rated under different patterns

of summary rating levels a mechanism

to take this into account when awarding

employees additional retention service

credit for reduction in force. These

proposed regulations also clarifying

certain other retention rights, including

the coverage of employees serving under

term appointments.

DATES: Comments must be received by

April 7, 1997.

ADDRESSES: Send or deliver written

comments to: Mary Lou Lindholm,

Associate Director for Employment

Service, Room 6F08, Office of Personnel

Management, Washington, DC 20415.

FOR FURTHER INFORMATION CONTACT:

Thomas A. Glennon, Jacqueline

Yeatman, or Edward P. McHugh (part

351); (202) 606–0960, FAX (202) 606–

2329; or Barbara Colchao or Doris

Hausser (parts 293, 430 and 531); (202)

606–2720, FAX (202) 606–2395.

SUPPLEMENTARY INFORMATION:

(1) Performance

Crediting Performance in Reductions in

Force

Background to Proposed Regulations

Employee performance is one of four

factors specified in 5 U.S.C. 3502(a), and

regulations in 5 CFR part 351, that

determine an employee’s retention

standing during reductions in force. The

other three factors are tenure of

appointment, veterans’ preference and

length of service. Traditionally,

performance has been recognized in the

reduction in force process by providing

employees with additional years of

retention service credit based on the

average of their three most recent ratings

of record received under the provisions

of 5 CFR part 430, subpart B, during the

4 years prior to the reduction in force.

These proposed changes enhance the

opportunity for Federal employees to

receive retention credit during

reductions in force based on their job

performance. They do not, however,

change the relative importance of

performance vis a` vis the other retention

factors: tenure, veterans’ preference and

length of service. Further, they retain

the present range of additional retention

service credit that is provided to good

performers during reductions in force

(i.e., 12 to 20 years additional retention

service credit) and the requirement that

additional retention service credit be

awarded based on the average of the

three most recent ratings of record

whenever possible.

Current regulations at section

351.504(d) define the specific amount of

additional retention service credit

awarded for each rating level and

require that it be applied in the same

way by each agency subject to the

reduction in force regulations. Twenty

years of additional retention service

credit is specified for a Level 5 rating of

record (i.e., ‘‘Outstanding’’ or

equivalent), 16 years of additional

retention service credit for a Level 4

rating of record (i.e., ‘‘Exceeds Fully

Successful’’ or equivalent), and 12 years

of additional retention service credit for

a Level 3 rating of record (i.e., ‘‘Fully

Successful’’ or equivalent). No

additional retention service credit is

provided for a Level 2 rating of record

(i.e., ‘‘Minimally Successful’’ or

equivalent) or for a Level 1 rating of

record (i.e., ‘‘Unacceptable.’’).

Currently credit is provided on the

basis of the three most recent ratings of

record received during the 4 years prior

to the reduction in force. The sum of the

three most recent ratings is divided by

three and rounded to a whole number.

For example, an employee whose three

most recent ratings are ‘‘Exceeds Fully

Successful’’ (16), Exceeds Fully

Successful (16), and Outstanding (20) is

given 18 years extra seniority (16+16+20

= 52/3 = 17.3 = 18). If employees have

received fewer than three actual ratings

in the last 4 years, agencies are required

to substitute an assumed rating of Fully

Successful for each missing rating.

New Procedures for Increasing Use of

Actual Ratings in RIF

Extending time period during which

ratings are considered. One element of

the proposal addresses the circumstance

where employees have not received

three actual ratings of record in the last

4 years. They may have received two

ratings, or one, or none. This could

occur due to a variety of circumstances;

for example: Employees on extended

assignments on military reserve duty;

employees on official time under

chapter 71 of title 5, United States Code;

employees new to Government service;

or employees who have been absent due

to an on-the-job injury. To minimize the

use of assumed ratings and to maximize

the extent to which additional retention

service credit is based on actual job

performance, OPM is proposing to

lengthen the period of time from which

ratings are taken into account from 4

years to 6 years prior to the reduction

in force. For example, if an employee

has been given two ratings of record

during the previous 4 years, a rating

given in the fifth year prior to the

reduction in force may be taken into

account in order to use three actual

ratings. In all cases, however, the three

most recent ratings of record must be

used. OPM is proposing appropriate

changes to the recordkeeping

requirements in 5 CFR part 293. This

change in the time period for crediting

performance ratings will be phased in to

allow agencies time to change their

recordkeeping procedures. The

implementation schedule for this

provision is explained in the paragraph

below on ‘‘Special implementation/

effective dates.’’

New computation methods for

crediting performance in reduction in

force. OPM is also proposing to remove

the requirement to fill in missing ratings

of record with assumed Fully Successful

ratings when an employee has received

only one or two actual ratings of record

during the 6-year period when ratings

can be credited. Under the proposed

change, the actual rating(s) of record

available will serve as the sole basis of
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Proposed Rules 5175

the employee’s credit, and no assumed

ratings will be used. Consequently, if an

employee has received only two actual

ratings of record during this period, the

value of each rating will be added

together and divided by two to

determine the amount of additional

retention service credit. If the employee

has received only one actual rating

during the period, it will be divided by

one to determine additional retention

service credit. The same computation

method (dividing the rating value by

one) will be used when crediting an

assumed rating when the value is

determined under the procedures

outlined below.

Crediting performance for employees

with no actual ratings. Only in the

unusual situation where an employee

has no actual rating of record in a 6-year

period will an assumed rating be used.

The value of that assumed rating will be

determined on the basis of two factors:

(1) The summary level pattern that

applies to the employee’s official

position of record at the time of the

reduction in force; and (2) the amount

of current continuous service the

employee has.

Employees who have no ratings and

have more than one year of current

continuous service. An employee who

has completed at least one year of

current continuous service at the time

that reduction in force notices are

issued (or by the cutoff date the agency

specifies prior to the issuance of RIF

notices after which no new annual

ratings are put on record) will be given

the additional retention service credit

for the most common, or ‘‘modal’’,

summary rating level, as defined in 5

CFR 351.203, for the summary level

pattern that applies to the employee’s

position at the time of the reduction in

force. The agency may determine the

modal rating using summary ratings in

the competitive area, in a larger

subdivision of the agency, or

agencywide. The applicable modal

rating(s) must be applied uniformly and

consistently within the competitive

area.

For example, if the employee’s

position would be covered under a fivelevel rating pattern, the agency would

compile the summary ratings on record

for the most recently completed

appraisal period that were given to

employees in the competitive area,

subdivision or agency who were rated

under a five-level rating pattern. If the

results were: 78 Outstanding, 153

Exceeds Fully Successful, 129 Fully

Successful, 42 Marginal, and 7

Unacceptable, then the modal rating in

this instance would be Exceeds Fully

Successful. In this example, the

assumed rating for an employee with no

rating in the past 6 years, who has at

least one year of current continuous

service, and whose position is under a

five-level program, would be Level 4.

This employee would be given

additional retention service credit based

on a Level 4 rating.

If, using the same process, the most

commonly given rating for employees

under a four-level summary rating

pattern was determined to be a Level 3

rating, this would be the modal rating

used for employees covered by this

pattern.

Employees without ratings who have

less than one year of current continuous

service: The modal rating is not used for

employees who have completed less

than one year of current continuous

service. Additional retention service

credit is given based on a Level 3 (Fully

Successful or equivalent) rating of

record under the summary level pattern

which applies to the employee’s

position at the time of reduction in

force.

Awarding Retention Service Credit

When Employees in the Same RIF

Competitive Area Have Been Rated

Under More Than One Pattern of

Summary Rating Levels

On August 23, 1995, OPM issued final

regulations, at 60 FR 43936, giving

agencies the option to determine the

pattern of summary rating levels under

their performance appraisal programs.

There are eight possible patterns ranging

from a traditional five-level program to

a two-level program that uses only Level

1 and Level 3. Agencies can design their

appraisal systems to permit the use of

different patterns in different

organizations and can change the

patterns used without prior OPM

approval.

This flexibility in the design of

performance appraisal programs can

affect employees’ relative retention

standing for reduction in force.

Employees compete for retention within

a competitive area. It is possible for a

competitive area to cover two or more

organizations that each use a different

pattern of summary rating levels. Also,

employees may have been transferred or

reassigned into the competitive area

from other agencies with different rating

patterns. Some employees may have

ratings of record from two-level

appraisal programs, while others have

ratings under five-level programs.

During the comment period on the

performance management regulations,

agencies asked for flexibility in

awarding additional retention service

credit when conducting reductions in

force when competitive areas include

employees rated under different

patterns of summary levels. In the final

performance management regulations

published on August 23, 1995, OPM

stated that it would review the existing

reduction in force regulations in 5 CFR

part 351 and consider whether any

changes should be made to address

mixed pattern situations. These

proposed regulations are a result of that

review.

OPM considered the consequences

that could occur as a result of agencies

making maximum use of performance

management flexibilities, resulting in

competitive areas that include

employees with ratings given under

different patterns. OPM concluded that

to credit actual performance more

appropriately when conducting

retention competition among employees

rated under different patterns, agencies

need flexibility to adjust the credit

assigned to rating levels in their

patterns. The proposed regulations

revise 5 CFR 351.504 to require an

agency to take into account different

patterns of summary rating levels when

awarding employees additional

retention service credit in reduction in

force competition based on their

performance.

New agency authority to determine

retention service credit. Under the

proposed regulations, an agency with

employees in a RIF competitive area

who have been rated under different

patterns of summary rating levels must

decide how many years of retention

service credit within the allowable

range of 12 to 20 years to assign to

particular summary rating levels. OPM

has determined that too many potential

combinations of rating patterns within a

competitive area will occur in the future

to mandate any particular crediting

formula. The objective of applying

flexibility should be to give, to the

extent possible, the same credit for

equivalent performance. The

appropriate solution will of necessity be

specific to the RIF competitive area as

the agency takes into account the

combination of rating patterns used and

the relative numbers of employees rated

under each pattern.

For example, one RIF competitive

area is composed of 200 employees,

each with three actual ratings of record.

Of those employees, 180 have been

rated under a five-level performance

appraisal program. Of their ratings, 2

percent were below Fully Successful, 20

percent were Fully Successful, 53

percent were Exceeds Fully Successful,

and 25 percent were Outstanding. The

other 20 employees were rated under a

two-level (pass/fail) program, with 98
5176 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Proposed Rules

percent of their ratings at Level 3 (Pass

or Fully Successful).

Under the current regulations, all the

Fully Successful ratings of record would

receive 12 years of additional retention

service credit, Exceeds Fully Successful

ratings would receive 16 years credit,

and Outstanding ratings would receive

20 years credit. Employees in the twolevel system never had the opportunity

to be rated and receive credit for

performing above the Fully Successful

level, even though their performance

might well have been rated Exceeds

Fully Successful, or even Outstanding,

under a five-level program.

Under the proposed regulations, the

agency may decide, for example, that to

credit performance more appropriately,

the Fully Successful ratings of record

given under the two-level program

should receive the same number of

years additional credit as the Exceeds

Fully Successful ratings given under the

five-level program, because the record

indicates that 78 percent of ratings given

under a five-level program are above

Fully Successful and most of those are

Exceed Fully Successful. Under this

scenario, the agency might use the

flexibility to assign credit based on a

mix of rating level patterns within the

RIF competitive area to provide what

the agency determined to be equivalent

credit for similar performance.

If an agency has RIF competitive areas

in which all employee ratings of records

to be credited were given under the

same pattern of summary levels, it is

required to follow the current

regulations for crediting performance in

a reduction in force which now appear

in paragraph (d) of section 351.504.

Uniform and consistent treatment of

employees in the same RIF competitive

area. In using the proposed regulations,

the agency’s application must be

uniform and consistent within the RIF

competitive area. For example, each

employee covered by a two-level

program within the competitive area

must receive the same amount of

additional retention service credit for

their Level 3 rating of record. Under

proposed paragraph (f) of section

351.504, the agency must establish its

performance crediting procedures for

the applicable reduction in force and

must keep the procedures available for

review. The agency is not required,

however, to apply the same performance

crediting procedures in different

competitive areas, or in different

reductions in force.

The proposed regulations are specific

to the agency conducting the reduction

in force, at the time it carries out the

reduction in force action. Thus an

agency carrying out a reduction in force

may provide different amounts of

additional retention service credit for

ratings of record received in an

employee’s former agency than were

provided by that former organization.

The proposed regulations also include

conforming changes that have been

made throughout section 351.504 to

make consistent the various references

to rating of record and the summary

levels. In addition, the exceptions to a

current rating of record that are

presently in paragraph (e) of section

351.504 are removed and the new

definition of ‘‘Current Rating’’ in section

351.203 clarifies what the current rating

of record is.

Additional Retention Service Credit for

Certain Ratings From Appraisal Systems

Not Covered by the Provisions of 5 CFR

Part 430

Employees in a competitive area may

have been rated under an appraisal

system not established under the

provisions of 5 CFR part 430. OPM is

proposing language in the revised

section 351.504 that will require

agencies to use all ratings of record

given to employees for assigning

additional retention service credit

during a reduction in force. However, a

performance evaluation given to an

employee under an appraisal system not

covered by the provisions of 5 CFR part

430, subpart B, would be considered a

rating of record only if it meets the

conditions specified in the new

paragraph (c) of section 430.201 of the

proposed regulations. The agency

conducting the reduction in force will

make the determination of whether or

not such ‘‘non-430’’ performance ratings

meet the specified conditions.

Related Conforming Amendments

At section 430.201, General, OPM is

proposing a new paragraph, Equivalent

ratings of record, to specify the

conditions which must be met before

performance evaluations given under

evaluation systems not covered by 5

U.S.C. 43 and 5 CFR 430, subpart B, can

be used as the basis for granting

additional retention service credit in a

reduction in force. These conditions in

part address fundamental requirements

comparable to those in statute, such as

communicating performance standards

in advance and evaluating work

performance against those standards. In

some situations, the agency may need to

take the step of identifying a summary

level and pattern based on available

information. OPM expects that some

‘‘non-430’’ performance evaluations will

not meet one or more of the specified

conditions.

At section 430.208, Rating

performance, OPM is proposing

amendments and additional language to

support the use of additional flexibility

for crediting performance in a reduction

in force, as proposed here in section

351.504. Regulatory language is added

to section 430.208, Rating performance,

to include in paragraphs (d)(2) and

(d)(4) designation of the summary level

pattern as an integral part of a rating of

record, and to establish in paragraph

(d)(5) an authority to permit, but not

require, assigning the same rating of

record a different number of years

additional retention service credit in a

different summary level pattern,

competitive area, or reduction in force.

To conform with these changes, OPM is

also revising the definitions of

performance rating and rating of record

regarding a summary level within a

pattern in section 430.203.

Technical Amendments

OPM is proposing to add regulatory

language in the recently issued

regulations on performance appraisal

systems and programs. In two places,

the additions are being made solely to

clarify and state explicitly restrictions

on the use of critical and noncritical

elements that are implicit in the existing

regulations. Other clarifying changes are

being made regarding the appraisal

period and a delay of an acceptable

level of competence determination.

Critical Element Definition

In the first instance, OPM proposes to

amend the definition in section 430.203

of a critical element to clarify that

critical elements may be used to

measure performance only at the

individual level. A corresponding

editorial change is proposed at section

430.206(b)(4) for the description of

elements contained in an employee’s

performance plan. These represent no

substantive change in the regulations

because of the statutory definition of a

critical element. The statutory intent of

chapter 43 is to establish and maintain

individual accountability. At section

4303, the chapter includes a provision

for removing an employee who fails to

meet the established performance

standard for one or more critical

elements. A critical element that

measures performance where individual

contributions and control are not

identifiable would be unusable as a

basis for taking such a performancebased action because we conclude that

individual control over the performance

that meets the standard is a necessary

condition for applying the standard and

taking that action.
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Proposed Rules 5177

Using a group-level critical element

raises the implications of the group or

team failing to meet the element’s

established standards and being

deemed, by statutory definition,

Unacceptable on the element. The

agency would be obligated to carry out

the notification and assistance

provisions of 5 CFR 432.104,

Addressing unacceptable performance,

for each member of the group or team,

irrespective of the caliber of his or her

individual performance. Also, should

the timing of an appraisal period

coincide with the end of their waiting

periods, group members would be

denied within-grade pay increases or

career ladder promotions, once again

without reference to their personal

performance. We do not believe that this

is in accord with the intent of the

statute.

Barring Non-Critical Elements When

Only Two Summary Levels Are Used

In the second instance, OPM proposes

to add explicit regulatory language in

section 430.206(b)(6) prohibiting the use

of non-critical elements in employee

performance plans in ‘‘Pass/Fail’’

summary appraisal situations, and

thereby prevent confusion and

inappropriate use of non-critical

elements in appraisal programs. Adding

this language is not a substantive change

because it merely states a condition that

is the logical consequence of applying

other definitions and restrictions

already included in the regulations.

This logical conclusion operates with

an appraisal program that uses only two

summary levels, Level 1 (Unacceptable)

and Level 3 (Fully Successful or

equivalent), which is commonly

referred to as a ‘‘Pass/Fail’’ program.

The relevant definitions and restrictions

are: (1) the definition at section 430.203

of a non-critical element, which

includes the requirement that it must

affect the summary level; and (2) the

provisions at section 430.208(b) (1) and

(2), which make it clear that a noncritical element cannot have the effect of

summarizing performance as

‘‘Unacceptable.’’

In an appraisal program that uses only

two summary levels, if an employee’s

performance on any or all elements not

designated as critical was appraised as

Unacceptable, but performance on all

critical elements was appraised as better

than Unacceptable, then the assigned

summary level would have to be Level

3. Level 1 cannot be used because no

critical element performance was

Unacceptable. The only summary level

available other than Level 1 is Level 3.

This illustrates that under a two-level

program, the summary level can only be

affected by critical elements. Of course,

additional elements could still be

included in the employee’s performance

plan if it was not appropriate to

designate them as critical elements (e.g.,

they measure performance at the team

or organizational level).

Appraisal Period

In section 430.206(a)(2), a change is

being made to clarify that each appraisal

program can designate only one

appraisal period. The change reflects

OPM’s ongoing position that the

appraisal period chosen for the program

affects the application of all the

program’s other provisions and is one of

the key features that distinguishes one

program from another. The other two

distinguishing features are employee

coverage and pattern of summary levels

for ratings of record.

The appraisal period is a specified

period of time (e.g., 12 months). Within

a single program, agencies are free to

start the appraisal period on different

dates for different employees or groups

of employees.

Delay of an Acceptable Level of

Competence Determination

OPM also is proposing technical

amendments to 5 CFR 531.409(c) to

eliminate any unintended confusion

regarding the delay of an acceptable

level of competence determination

(ALOC) and to make terminology

consistent with the performance

management regulations. The first

change incorporates into regulation

OPM’s longstanding interpretation of

the present regulation, thus clarifying

that the two circumstances described in

the regulations are the only ones under

which the ALOC determination is

delayed. A corresponding change is

being made to the definition of rating of

record in section 430.203 to clarify that

a rating of record done to comply with

5 CFR 531.404(a)(1) is a bona fide rating

of record for all purposes. In addition,

other changes are made to bring the

terminology used into conformance

with the recent changes in the

performance management regulations.

(2) Definitions

‘‘Annual Performance Rating of

Record.’’ Performance is one of the four

factors agencies use to determine an

employee’s retention rights. (The other

three factors are Tenure, Veterans’

Preference, and Service.)

Consistent with final performance

regulations published in the Federal

Register at 60 FR 43936, August 23,

1995, proposed section 351.203 removes

the definition of ‘‘Annual Performance

Rating of Record’’ and adds the

definition of ‘‘Rating of Record’’

consistent with the meaning given that

term in section 430.203 of this chapter.

The new definition also introduces

equivalent ratings of record.

(3) Competitive Area

Agencies establish ‘‘Competitive

Areas’’ to set the organizational and

geographical boundaries within which

employees compete for retention.

Proposed section 351.402(b) clarifies

existing policy on OPM’s minimum

standard for a competitive area. This

regulatory change maintains the same

standard for a minimum competitive

area, but reflects current organizational

structure and terminology in lieu of

existing language.

(4) Competitive Level

Agencies establish ‘‘Competitive

Levels’’ to group interchangeable

positions in the process of determining

employees’ retention rights. Proposed

section 351.403(c) is added to clarify

existing policy that an agency may not

establish a competitive level based

solely upon: (1) A difference in the

number of hours or weeks scheduled to

be worked by other-than-full-time

employees who would otherwise be in

the same competitive level; (2) a

requirement to work changing shifts; (3)

the grade promotion potential of the

position; or (4) a difference in the local

wage areas in which wage grade

positions are located.

(5) Retention Register

Proposed section 351.404(a) clarifies

existing policy that upon displacing

another employee under this section, an

employee retains the same status and

tenure in the new position.

Proposed section 351.404(b)(2)

provides that the name of each

employee in the competitive level with

a written decision of removal under part

432 or 752 of this chapter is listed at the

bottom of the retention register. Under

present section 351.404(b)(2), the name

of each employee in the competitive

level with a written decision of removal

because of ‘‘Unacceptable’’ or

equivalent performance under part 432

is listed at the bottom of the retention

register.

Proposed section 351.405 provides

that the name of each employee in the

competitive level with a written

decision of demotion under part 432 or

752 of this chapter competes for

retention from the position to which the

employee will be or has been demoted.

Under present section 351.405, the

name of each employee in the

competitive level with a written

decision of demotion under part 432
5178 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Proposed Rules

because of ‘‘Unacceptable’’ or

equivalent performance competes for

retention from the position to which the

employee will be or has been demoted.

(6) Retention Subgroups

Retention Groups and Subgroups

include two of the factors (i.e., Tenure

and Veterans’ Preference) that are used

to determine an employee’s retention

standing. Proposed section 351.501(b)(3)

is revised to clarify existing policy that

employees serving under Term

appointments are included in retention

subgroup III.

(7) Release From Competitive Level

Proposed section 351.602 provides

that an agency may not release a

competing employee from a competitive

level while still retaining in that

competitive level another employee

who has received a written notice of

demotion or removal under either part

432 or 752.

(8) Assignment Rights

Proposed section 351.701(f) is added

to clarify existing policy on the

procedures agencies use to determine

the appropriate grade or grade-interval

basis for setting employees’ assignment

rights.

Excepted service employees have no

right of assignment to a position in a

different competitive level. Section

351.705(a)(3) provides that, at its

discretion, an agency may offer

assignment rights to its excepted service

employees. Proposed section

351.705(a)(3) clarifies existing policy

that an excepted service employee may

have a right of assignment on the same

basis (i.e., ‘‘Bump’’ and ‘‘Retreat’’) as

provided to competitive service

employees, and only to another

excepted service position under the

same appointing authority.

(9) RIF Notices

Section 351.504(b)(1) provides that an

employee is entitled to additional

retention service credit based upon the

employee’s three most recent ratings of

record during the applicable 4-, 5-, 6-

year period prior to, as appropriate, the

date the agency issues specific

reduction in force notices or the date the

agency freezes ratings before issuing

reduction in force notices.

Section 351.802(a)(2) presently

provides that an employee’s reduction

in force notice must identify the

employee’s annual performance ratings

of record received during the last 4

years. Proposed section 351.802(a)(2)

provides that the agency must identify

the employee’s three most recent ratings

of record, rather than all ratings of

record received in the applicable

4-, 5-, 6-year period, since only the three

most recent ratings of record are used to

determine the employee’s retention

standing.

Proposed section 351.803(a) is revised

to add a requirement that each

employee who receives a specific notice

of separation by reduction in force must

be given an estimate of severance pay if

eligible, and information on benefits

available under new subparts F and G

(Career Transition Assistance Programs)

of part 330 of this chapter and from the

applicable State dislocated worker

unit(s), as designated or created under

title III of the Job Training Partnership

Act. To increase placement

opportunities for employees affected by

downsizing, the proposed section also

provides that agencies must give

employees receiving a reduction in force

separation notice a form to authorize, at

their option, the release of their resumes

for employment referral to State

Dislocated Worker units and potential

public and private sector employers.

Proposed section 351.804 clarifies

existing policy on when a specific

reduction in force notice expires.

Proposed section 351.805 clarifies

existing policy on when an agency is

required to issue a new or amended

specific reduction in force notice.

Special Implementation/Effective Dates

for New Reduction in Force/

Performance Credit Provisions

Except as noted below, it is OPM’s

intention to make the provisions of

these proposed regulations effective 30

days after the publication of final

regulations. In order to give agencies

adequate lead time to implement some

of the procedural changes outlined in

these regulations, certain provisions

will be implemented as follows:

(a) When implementing proposed

section 351.504(b), which extends the

time period during which ratings are

considered, agencies would have the

option to immediately begin using a 5-

or 6-year period for consideration of the

employee’s three most recent ratings.

The 5-year period would become

mandatory in reductions in force for

which notices are issued or performance

ratings are frozen on or after October 1,

1998. The 6-year period would become

mandatory on October 1, 1999.

(b) The new agency authority to

determine retention service credit when

employees in a competitive area are

rated under multiple rating patterns

described in section 351.504(e) would

apply only to ratings of record that are

put on record, as defined in paragraph

(b)(3) of section 351.504, on or after

October 1, 1997. The agency credits any

ratings of record put on record on or

before September 30, 1997, based on the

governmentwide 12-, 16-, and 20-year

formula for additional retention service

credit currently in effect.

(c) Section 351.504(c)(1)(i), in which

a modal rating is used as an assumed

rating for an employee with no actual

ratings, would become effective October

1, 1997. Until that date, agencies would

apply the provisions of section

451.504(c)(1)(ii) to employees who have

no actual ratings.

Regulatory Flexibility Act

I certify that this regulation will not

have a significant economic impact on

a substantial number of small entities

because it only affects Federal

employees.

Executive Order 12866, Regulatory

Review

This rule has been reviewed by the

Office of Management and Budget in

accordance with Executive Order 12866.

List of Subjects

CFR Part 293

Archives and records, Freedom of

information, Government employees,

Health records, Privacy.

CFR Part 351

Administrative practice and

procedure, Government employees.

CFR Part 430

Decorations, medals, awards,

Government employees.

CFR Part 531

Government employees, Law

enforcement officers, Wages.

U.S. Office of Personnel Management.

James B. King,

Director.

Accordingly, OPM proposes to amend

parts 293, 351, 430, and 531 of title 5,

Code of Federal Regulations, as follows:

PART 293—PERSONNEL RECORDS

1. The authority citation for part 293

continues to read as follows:

Authority: 5 U.S.C. 552 and 4315; E.O.

12107 (December 28, 1978), 3 CFR 1954–

1958 Comp.; 5 U.S.C. 1103, 1104, and 1302;

5 CFR 7.2; E.O. 9830; 3 CFR 1943–1948

Comp.; 5 U.S.C. 2951(2) and 3301; and E.O.

12107.

2. In § 293.404, paragraph (a)(1) is

revised to read as follows:

§ 293.404 Retention schedule.

(a)(1) Except as provided in

§ 293.405(a), performance ratings or

documents supporting them are

generally records and shall, except for
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Proposed Rules 5179

appointees to the SES and including

incumbents of executive positions not

covered by SES, be retained as

prescribed as follows:

(i) Agencies shall retain the three (3)

most recent ratings of record issued to

the employee in the past: 4 years

through September 30, 1998; 5 years

from October 1, 1998, through

September 30, 1999; and 6 years

beginning October 1, 1999;

(ii) Supporting documents shall be

retained for as long as the agency deems

appropriate, but not to exceed 6 years;

(iii) Performance records superseded

(e.g., through an administrative or

judicial procedure) and performancerelated records pertaining to a former

employee (except as prescribed in

§ 293.405(a)) need not be retained for a

minimum of 6 years. Rather, in the

former case they are to be destroyed and

in the latter case agencies shall retain in

accordance with General Records

Schedule 1; and

(iv) Except where prohibited by law,

retention of automated records longer

than the maximum prescribed in this

section is permitted for purposes of

statistical analysis so long as the data

are not used in any action affecting the

employee when the manual record has

been or should have been destroyed.

* * * * *

3. In section 293.405, paragraph (a) is

revised to read as follows:

§ 293.405 Disposition of records.

(a) When the OPF of a non-SES

employee is sent to another servicing

office in the employing agency, to

another agency, or to the National

Personnel Records Center, the ‘‘losing’’

servicing office shall include in the OPF

information for the three (3) most recent

ratings of record issued to the employee

that are 4 years old or less through

September 30, 1998, (5 years old or less

from October 1, 1998, through

September 30, 1999, and 6 years old or

less beginning October 1, 1999). The

information included shall be the

summary pattern within which the

rating of record was assigned, the

summary level assigned, the date the

rating was put on record for reduction

in force purposes, and the ending date

of the appraisal period. Also, the

‘‘losing’’ office will purge from the OPF

all rating of record information that is

more than 4 years old (more than 5

years old from October 1, 1998, through

September 30, 1999, and more than 6

years old beginning October 1, 1999),

and other performance-related records,

according to agency policy established

under § 293.404(a)(2) and in accordance

with OPM Operating Manual, ‘‘The

Guide to Personnel Recordkeeping.’’

PART 351—REDUCTION IN FORCE

4. The authority citation for part 351

continues to read as follows:

Authority: 5 U.S.C. 1302, 3502, 3503.

5. In § 351.203, the definition of

‘‘Annual Performance rating of record‘‘

is removed, and the definitions of

Current rating of record, Modal rating,

and Rating of record are added in

alphabetical order, to read as follows:

§ 351.203 Definitions.

* * * * *

Current rating is the rating of record

for the most recently completed

appraisal period as provided in

§ 351.504(b)(3).

* * * * *

Modal rating is the summary rating

level assigned most frequently among

the actual ratings of record that are:

(1) Assigned under the summary level

pattern that applies to the employee’s

position of record on the date of the

reduction in force;

(2) Given within the same competitive

area, or at the agency’s option within a

larger subdivision of the agency or

agencywide; and

(3) On record for the most recently

completed appraisal period prior to the

date of issuance of reduction in force

notices or the cutoff date the agency

specifies prior to the issuance of

reduction in force notices after which

no new ratings will be put on record.

Rating of record has the meaning

given that term in § 430.203 of this

chapter. For an agency not subject to 5

U.S.C. 43, or part 430 of this chapter, it

means the officially designated

performance rating, as provided for in

the agency’s appraisal system, that is

considered to be an equivalent rating of

record under the provisions of

§ 430.201(c) of this chapter.

* * * * *

7. In § 351.402, paragraph (b) is

revised to read as follows:

§ 351.402 Competitive area.

* * * * *

(b) A competitive area must be

defined solely in terms of the agency’s

organizational unit(s) and geographical

location, and it must include all

employees within the competitive area

so defined. A competitive area may

consist of all or part of an agency. The

minimum competitive area is a

subdivision of the agency under

separate administration within the local

commuting area.

* * * * *

8. In § 351.403, paragraph (c) is added

to read as follows:

§ 351.403 Competitive level.

* * * * *

(c) An agency may not establish a

competitive level based solely upon:

(1) A difference in the number of

hours or weeks scheduled to be worked

by other-than-full-time employees who

would otherwise be in the same

competitive level;

(2) A requirement to work changing

shifts;

(3) The grade promotion potential of

the position; or

(4) A difference in the local wage

areas in which wage grade positions are

located.

9. In § 351.404, paragraph (a)

introductory text, and paragraph (b)(2),

are revised to read as follows:

§ 351.404 Retention register.

(a) When a competing employee is to

be released from a competitive level

under this part, the agency shall

establish a separate retention register for

that competitive level. The retention

register is prepared from the current

retention records of employees. Upon

displacing another employee under this

part, an employee retains the same

status and tenure in the new position.

Except for an employee on military duty

with a restoration right, the agency shall

enter on the retention register, in the

order of retention standing, the name of

each competing employee who is:

* * * * *

(b) * * *

(2) The agency shall list, at the bottom

of the list prepared under paragraph

(b)(1) of this section, the name of each

employee in the competitive level with

a written decision of removal under part

432 or 752 of this chapter.

10. Section 351.405 is revised to read

as follows:

§ 351.405 Demoted employees.

An employee who has received a

written decision under part 432 or 752

of this chapter to demote him or her

competes under this part from the

position to which he or she will be or

has been demoted.

11. In § 351.501, paragraph (b)(3) is

revised to read as follows:

§ 351.501 Order of retention—competitive

service.

* * * * *

(b) * * *

(3) Group III includes all employees

serving under indefinite appointments,

temporary appointments pending

establishment of a register, status quo

appointments, term appointments, and

any other nonstatus nontemporary

appointments which meet the definition

of provisional appointments contained
5180 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Proposed Rules

in §§ 316.401 and 316.403 of this

chapter.

* * * * *

12. Section 351.504 is revised to read

as follows:

§ 351.504 Credit for performance.

(a) Ratings used. (1) Only ratings of

record as defined in § 351.203 shall be

used as the basis for granting additional

retention service credit in a reduction in

force.

(2) For employees who received

ratings of record while covered by part

430, subpart B, of this chapter, those

ratings of record shall be used to grant

additional retention service credit in a

reduction in force.

(3) For employees who received

performance ratings while not covered

by the provisions of 5 U.S.C. 43 and part

430, subpart B, of this chapter, those

performance ratings shall be considered

ratings of record for granting additional

retention service credit in a reduction in

force only when it is determined that

those performance ratings are equivalent

ratings of record under the provisions of

§ 430.201(c) of this chapter. The agency

conducting the reduction in force shall

make that determination.

(b) Time frame. (1) An employee’s

entitlement to additional retention

service credit for performance under

this subpart shall be based on the

employee’s three most recent ratings of

record received during the 4-year period

prior to the date of issuance of reduction

in force notices, except as otherwise

provided in this paragraph (b)(1), and in

paragraphs (b)(2) and (c) of this section.

At its option, an agency may instead use

the employee’s three most recent ratings

of record received during a 5-year or 6-

year period prior to the date of issuance

of reduction in force notices or an

agency established cutoff date after

which no new ratings of record will be

put on record. The 5-year period

becomes mandatory on October 1, 1998.

The 6-year period becomes mandatory

on October 1, 1999.

(2) To provide adequate time to

determine employee retention standing,

an agency may provide for a cutoff date,

a specified number of days prior to the

issuance of reduction in force notices

after which no new ratings of record

will be put on record and used for

purposes of this subpart. When a cutoff

date is used, an employee will receive

performance credit for the three most

recent ratings of record received during

the applicable 4-, 5-, or 6-year period

prior to the cutoff date.

(3) To be creditable for purposes of

this subpart, a rating of record must

have been issued to the employee, with

all appropriate reviews and signatures,

and must also be on record (i.e., the

rating of record is available for use by

the office responsible for establishing

retention registers).

(4) The awarding of additional

retention service credit based on

performance for purposes of this

subpart, including the decision to use a

4-, 5-, or 6-year period for performance

ratings, must be uniformly and

consistently applied within a

competitive area, and must be

consistent with the agency’s appropriate

issuance(s) that implement these

policies. Each agency must specify in its

appropriate issuance(s):

(i) The conditions under which a

rating of record is considered to have

been received for purposes of

determining whether it is within the

applicable 4-, 5-, or 6-year period prior

to either the date the agency issues

reduction in force notices or the agencyestablished cutoff date for ratings of

record, as appropriate; and

(ii) If the agency elects to use a cutoff

date, the number of days prior to the

issuance of reduction in force notices

after which no new ratings of record

will be put on record and used for

purposes of this subpart.

(c) Missing ratings. Additional

retention service credit for employees

who do not have three actual ratings of

record during the applicable 4-, 5-, or 6-

year period prior to the date of issuance

of reduction in force notices or the

applicable 4-, 5-, or 6-year period prior

to the agency-established cutoff date for

ratings of record permitted in paragraph

(b)(2) of this section shall be

determined, as appropriate, under

paragraphs (d) or (e) of this section, as

follows:

(1) An employee who has not received

any rating of record during the

applicable 4-, 5-, or 6-year period shall

receive credit for performance on the

basis of an assumed rating. The value of

that assumed rating will be determined

according to the length of the

employee’s current continuous service

and on the basis of the summary level

pattern that applies to the employee’s

official position of record at the time of

the reduction in force.

(i) An employee who has completed

at least one year of current continuous

service will be given the additional

retention service credit based on the

modal rating for that summary level

pattern.

(ii) An employee who has not

completed at least one year of current

continuous service will be given the

additional retention service credit for a

Level 3 (Fully Successful or equivalent)

rating of record under that summary

level pattern.

(2) An employee who has received at

least one but fewer than three previous

ratings of record shall receive credit for

performance on the basis of the value of

the actual rating(s) of record divided by

the number of actual ratings received. If

an employee has received only two

actual ratings of record during the

period, the value of the ratings is added

together and divided by two to

determine the amount of additional

retention service credit. If an employee

has received only one actual rating

during the period, its value is the

amount of additional retention service

credit provided.

(d) Single rating pattern. If all

employees in a reduction in force

competitive area have received ratings

of record under a single pattern of

summary levels as set forth in

§ 430.208(d) of this chapter, the

additional retention service credit

provided to employees shall be

expressed in additional years of service

and shall consist of the mathematical

average (rounded in the case of a

fraction to the next higher whole

number) of the employee’s applicable

ratings of record, under paragraphs

(b)(1) and (c) of this section computed

on the following basis:

(1) Twenty additional years of service

for each rating of record with a Level 5

(Outstanding or equivalent) summary;

(2) Sixteen additional years of service

for each rating of record with a Level 4

summary; and

(3) twelve additional years of service

for each rating of record with a Level 3

(Fully Successful or equivalent)

summary.

(e) Multiple rating patterns. If an

agency has employees in a competitive

area who have ratings of record under

more than one pattern of summary

levels, as set forth in § 430.208(d) of this

chapter, it shall consider the mix of

patterns and provide additional

retention service credit for performance

to employees expressed in additional

years of service in accordance with the

following:

(1) Additional years of service shall

consist of the mathematical average

(rounded in the case of a fraction to the

next higher whole number) of the

additional retention service credit that

the agency established for the summary

levels of the employee’s applicable

rating(s) of record.

(2) The agency shall establish the

amount of additional retention service

credit provided for summary levels only

in full years; the agency shall not

establish additional retention service

credit for summary levels below Level 3

(Fully successful or equivalent).
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Proposed Rules 5181

(3) When establishing additional

retention service credit for the summary

levels at Level 3 (Fully Successful or

equivalent) and above, the agency shall

establish at least 12 years, and no more

than 20 years, additional retention

service credit for a summary level.

(4) The agency may establish the same

number of years additional retention

service credit for more than one

summary level.

(5) The agency shall establish the

same number of years additional

retention service credit for all ratings of

record with the same summary level in

the same pattern of summary levels as

set forth in § 430.208(d) of this chapter.

(6) The agency may establish a

different number of years additional

retention service credit for the same

summary level in different patterns.

(7) The agency may apply paragraphs

(e)(1) through (e)(6) of this section only

to ratings of record put on record on or

after October 1, 1997. The agency shall

establish the additional retention

service credit for ratings of record put

on record prior to that date in

accordance with paragraphs (d)(1)

through (d)(3) of this section.

(f) Documentation of credit. In

implementing paragraph (e) of this

section, the agency shall specify the

number(s) of years additional retention

service credit that it will establish for

summary levels. This information shall

be made readily available for review.

13. In § 351.602, paragraph (c) is

revised to read as follows:

§ 351.602 Prohibitions.

* * * * *

(c) A written decision under part 432

or 752 of this chapter of removal or

demotion from the competitive level.

14. In § 351.701, paragraph (f) is

added to read as follows:

§ 351.701 Assignment involving

displacement.

* * * * *

(f)(1) In determining applicable grades

(or grade intervals) under

§§ 351.701(b)(2) and 351.701(c)(2), the

agency uses the grade progression of the

released employee’s position of record

to determine the grade (or interval)

limits of the employee’s assignment

rights.

(2) For positions covered by the

General Schedule, the agency must

determine whether a one-grade, twograde, or mixed grade interval

progression is applicable to the position

of the released employee.

(3) For positions not covered by the

General Schedule, the agency must

determine the normal line of

progression for each occupational series

and grade level to determine the grade

(or interval) limits of the released

employee’s assignment rights. If the

agency determines that there is no

normal line of progression for an

occupational series and grade level, the

agency provides the released employee

with assignment rights to positions

within three actual grades lower on a

one-grade basis. The normal line of

progression may include positions in

different pay systems.

(4) For positions where no grade

structure exists, the agency determines

a line of progression for each occupation

and pay rate, and provides assignment

rights to positions within three grades

(or intervals) lower on that basis.

(5) If the released employee holds a

position that is less than three grades

above the lowest grade in the applicable

classification system (e.g., the employee

holds a GS–2 position), the agency

provides the released employee with

assignment rights up to three actual

grades lower on a one-grade basis in

other pay systems.

15. In § 351.705, paragraph (a)(3) is

revised to read as follows:

§ 351.705 Administrative assignment.

(a) * * *

(3) Provide competing employees in

the excepted service with assignment

rights to other positions under the same

appointing authority on the same basis

as assignment rights provided to

competitive service employees under

§ 351.701 and in paragraphs (a) (1) and

(2) of this section.

* * * * *

16. In § 351.802, paragraph (a)(2) is

revised to read as follows:

§ 351.802 Content of notice.

(a) * * *

(2) The employee’s competitive area,

competitive level, subgroup, service

date, and three most recent ratings of

record received in the applicable

4-, 5-, 6-year period, as provided in

§ 351.504(b)(1).

* * * * *

17. In § 351.803, paragraph (a) is

revised to read as follows:

§ 351.803 Notice of eligibility for

reemployment and other placement

assistance.

(a) An employee who receives a

specific notice of separation under this

part must be given information

concerning the right to reemployment

consideration and career transition

assistance under subparts B

(Reemployment Priority List), F and G

(Career Transition Assistance Programs)

of part 330 of this chapter. The

employee must also be given a form to

authorize, at his or her option, the

release of his or her resume and other

relevant employment information for

employment referral to State Dislocated

Worker Units and potential public or

private sector employers. The employee

must also be given information

concerning how to apply both for

unemployment insurance through the

appropriate State program and benefits

available under the State dislocated

worker unit(s), as designated or created

under title III of the Job Training

Partnership Act, and an estimate of

severance pay (if eligible).

* * * * *

18. Section 351.804 is revised to read

as follows:

§ 351.804 Expiration of notice.

(a) A notice expires when followed by

the action specified, or by an action less

severe than specified, in the notice or in

an amendment made to the notice

before the agency takes the action.

(b) An agency may not take the action

before the effective date in the notice;

instead, the agency may cancel the

reduction in force notice and issue a

new notice subject to this subpart.

19. Section 351.805 is revised to read

as follows:

§ 351.805 New notice required.

(a) An employee is entitled to a

written notice of, as appropriate, at least

60 or 120 full days if the agency decides

to take an action more severe than first

specified.

(b) An agency must give a employee

an amended written notice if the

reduction in force is changed to a later

date. A reduction in force action taken

after the date specified in the notice

given to the employee is not invalid for

that reason, except when it is

challenged by a higher-standing

employee in the competitive level who

is reached out of order for a reduction

in force action as a result of the change

in dates.

(c) An agency must give an employee

an amended written notice and allow

the employee to decide whether to

accept a better offer of assignment under

subpart G of this part that becomes

available before or on the effective date

of the reduction in force. The agency

must give the employee the amended

notice regardless of whether the

employee has accepted or rejected a

previous offer of assignment, provided

that the employee has not voluntarily

separated from his or her official

position.
5182 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Proposed Rules

PART 430—PERFORMANCE

MANAGEMENT

20. The authority citation for part 430

continues to read as follows:

Authority: 5 U.S.C. chapter 43.

21. In § 430.201, paragraph (c) is

added to read as follows:

§ 430.201 In General.

* * * * *

(c) Equivalent ratings of record. (1) If

an agency has administratively adopted

and applied the procedures of this

subpart to evaluate the performance of

its employees, the ratings of record

resulting from that evaluation are

considered ratings of record for

reduction in force purposes.

(2) Other performance evaluations

given while an employee is not covered

by the provisions of this subpart are

considered ratings of record for

reduction in force purposes when the

performance evaluation—

(i) Was issued as an officially

designated evaluation under the

employing agency’s performance

evaluation system,

(ii) Was derived from the appraisal of

performance against expectations that

are established and communicated in

advance and are work related, and

(iii) identified whether the employee

performed acceptably.

(3) When the performance evaluation

does not include a summary level

designator and pattern comparable to

those established at § 430.208(d), the

agency may identify a level and pattern

based on information related to the

appraisal process.

22. In § 430.203. the definitions of

Critical element, Performance rating,

and Rating of record are revised to read

as follows:

§ 430.203 Definitions.

* * * * *

Critical element means a work

assignment or responsibility of such

importance that unacceptable

performance on the element would

result in a determination that an

employee’s overall performance is

unacceptable. Such elements shall be

used to measure performance only at the

individual level.

* * * * *

Performance rating means the written,

or otherwise recorded, appraisal of

performance compared to the

performance standard(s) for each critical

and non-critical element on which there

has been an opportunity to perform for

the minimum period. A performance

rating may include the assignment of a

summary level within a pattern (as

specified in § 430.208(d)).

* * * * *

Rating of record means the

performance rating prepared at the end

of an appraisal period for performance

of agency assigned duties over the entire

period and the assignment of a summary

level within a pattern (as specified in

§ 430.208(d)) or in accordance with

§ 531.404(a)(1) of this chapter. These

constitute official ratings of record

referenced in this chapter.

23. In § 430.206, paragraphs (a)(2) and

(b)(4) are revised, paragraphs (b)(6) and

(b)(7) are redesignated as paragraphs

(b)(7) and (b)(8) respectively, and a new

paragraph (b)(6) is added to read as

follows:

§ 430.206 Planning performance.

(a) * * *

(2) Each program shall specify a single

length of time as its appraisal period.

The appraisal period generally shall be

12 months so that employees are

provided a rating of record on an annual

basis. A program’s appraisal period may

be longer when work assignments and

responsibilities so warrant or

performance management objectives can

be achieved more effectively.

(b) * * *

(4) Each performance plan shall

include all elements which are used in

deriving and assigning a summary level,

including at least one critical element

and any non-critical element(s).

* * * * *

(6) A performance plan established

under an appraisal program that uses

only two summary levels (pattern A as

specified in § 430.208(d)(1)) shall not

include non-critical elements.

* * * * *

24. In § 430.208, the introductory text

to paragraph (d)(2) is revised, paragraph

(d)(4) is revised, and a new paragraph

(d)(5) is added to read as follows:

§ 430.208 Rating performance.

* * * * *

(d) * * *

(2) Within any of the patterns shown

in paragraph (d)(1) of this section,

summary levels shall comply with the

following requirements:

* * * * *

(4) The designation of a summary

level and its pattern shall be used to

provide consistency in describing

ratings of record and as a reference

point for applying other related

regulations, including, but not limited

to, assigning additional retention service

credit under § 351.504 of this chapter.

(5) Under the provisions of

§ 351.504(f) of this chapter, the number

of years additional retention service

credit established for a summary level of

a rating of record shall be applied in a

uniform and consistent manner within a

competitive area in any given reduction

in force, but the number of years may

vary:

(i) In different reductions in force;

(ii) In different competitive areas; and

(iii) In different summary level

patterns within the same competitive

area.

* * * * *

PART 531—PAY UNDER THE

GENERAL SCHEDULE

25. The authority citation for part 531

continues to read as follows:

Authority: 5 U.S.C. 5115, 5307, and 5338;

sec. 4 of Pub. L. 103–89, 107 Stat. 981; and

E.O. 12748, 56 FR 4521, 3 CFR 1991 Comp.,

p. 316;

Subpart B also issued under 5 U.S.C.

5303(g), 5333, 5334(a), and 7701(b)(2);

Subpart C also issued under 5 U.S.C.

5304, 5305, and 5553; sections 302 and

404 of FEPCA, Pub. L. 101–509, 104

Stat. 1462 and 1466; and section 3(7) of

Pub. L. 102–378, 106 Stat. 1356;

Subpart D also issued under 5 U.S.C.

5335(g) and 7701(b)(2);

Subpart E also issued under 5 U.S.C.

5336;

Subpart F also issued under 5 U.S.C.

5304, 5305(g)(1), and 5553; and E.O.

12883, 58 FR 63281, 3 CFR, 1993

Comp., p. 682;

Subpart G also issued under 5 U.S.C.

5304, 5305, and 5553; section 302 of the

Federal Employees Pay Comparability

Act of 1990 (FEPCA), Pub. L. 101–509,

104 Stat. 1462; and E.O. 12786, 56 FR

67453, 3 CFR, 1991 Comp., p. 376.

26. In § 531.409, paragraphs (c)(1),

(c)(2)(i), and (c)(2)(ii) are revised to read

as follows:

§ 531.409 Acceptable level of competence

determinations.

* * * * *

(c) Delay in determination. (1) An

acceptable level of competence

determination shall be delayed when,

and only when, either of the following

applies:

(i) An employee has not had the

minimum period of time established at

§ 430.207(a) of this chapter to

demonstrate acceptable performance

because he or she has not been informed

of the specific requirements for

performance at an acceptable level of

competence in his or her current

position, and the employee has not been

given a performance rating in any

position within the minimum period of

time (as established at § 430.207(a) of

this chapter) before the end of the

waiting period; or
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Proposed Rules 5183

(ii) An employee is reduced in grade

because of unacceptable performance to

a position in which he or she is eligible

for a within-grade increase or will

become eligible within the minimum

period as established at § 430.207(a) of

this chapter.

(2) * * *

(i) The employee shall be informed

that his or her determination is

postponed and the appraisal period

extended and shall be told of the

specific requirements for performance at

an acceptable level of competence.

(ii) An acceptable level of competence

determination shall then be made based

on the employee’s rating of record

completed at the end of the extended

appraisal period.

* * * * *

[FR Doc. 97–2686 Filed 2–3–97; 8:45 am]

BILLING CODE 6325–01–M

FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R–0960]

Truth in Lending

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Proposed rule.

SUMMARY: The Board is publishing for

comment proposed revisions to

Regulation Z. The revisions implement

an amendment to the Truth in Lending

Act contained in the Economic Growth

and Regulatory Paperwork Reduction

Act of 1996 affecting the disclosure of

a fifteen-year historical example of rates

and payments. The amendment applies

to variable-rate loans with a term

exceeding one year and secured by the

consumer’s principal dwelling. The

amendment allows creditors either to

disclose a fifteen-year historical

example or to give a statement that the

periodic payment may substantially

increase or decrease together with a

maximum interest rate and payment

based on a $10,000 loan.

DATES: Comments must be received on

or before February 28, 1997.

ADDRESSES: Comments should refer to

Docket No. R–0960, and may be mailed

to William W. Wiles, Secretary, Board of

Governors of the Federal Reserve

System, 20th Street and Constitution

Avenue, N.W., Washington, DC 20551.

Comments also may be delivered to the

Board’s mail room between 8:45 a.m.

and 5:15 p.m. weekdays, or to the

security control room at all other times.

The mail room and the security control

room are accessible from the courtyard

on 20th Street, N.W. (between

Constitution Avenue and C Street) at

any time. Comments will be available

for inspection in Room MP–500 of the

Martin Building between 9:00 a.m. and

5:00 p.m. weekdays, except as provided

in 12 CFR 261.8 of the Board’s rules

regarding the availability of information.

FOR FURTHER INFORMATION CONTACT:

Kyung H. Cho-Miller, Staff Attorney,

Division of Consumer and Community

Affairs, Board of Governors of the

Federal Reserve System, at (202) 452–

3667 or 452–2412; for users of

Telecommunications Device for the Deaf

(TDD) only, contact Dorothea Thompson

at (202) 452–3544.

SUPPLEMENTARY INFORMATION:

I. Background

The purpose of the Truth in Lending

Act (TILA) (15 U.S.C. 1601 et seq.) is to

promote the informed use of consumer

credit by requiring disclosures about its

terms and cost. The act requires

creditors to disclose the cost of credit as

a dollar amount (the finance charge) and

as an annual percentage rate (the APR).

Uniformity in creditors’ disclosures is

intended to assist consumers in

comparison shopping. The TILA

requires additional disclosures for loans

secured by a consumer’s home and

permits consumers to rescind certain

transactions that involve their principal

dwelling. The act is implemented by the

Board’s Regulation Z (12 CFR Part 226).

The credit transactions covered by

TILA and Regulation Z fall into two

categories—open- or closed-end credit

transactions. Open-end credit is defined

as a plan under which the creditor

reasonably contemplates repeated

transactions, which prescribes the terms

of such transactions, and which

provides for a finance charge that may

be computed from time to time on the

outstanding unpaid balance, for

example, credit extended by means of a

credit card (§ 226.2(a)(20)). Closed-end

credit is defined as any credit

arrangement that does not fall within

the definition of open-end credit

(§ 226.2(a)(10)). A mortgage loan with a

definite maturity date is an example of

closed-end credit.

II. Proposed Regulatory Provisions

Under Regulation Z, the timing and

number of disclosures required for

variable-rate loans vary depending on

the term and security for the loan. For

all variable-rate loans, disclosures are

generally provided once—prior to

consummation. However, if the loan

exceeds a term of one year and is

secured by the consumer’s principal

dwelling, creditors are required to

provide disclosures at three different

times—when an application is received

(or when a nonrefundable fee is paid,

whichever occurs earlier), prior to

consummation, and subsequent to

consummation when certain rate or

payment changes occur. (See Regulation

Z, 12 CFR 226.17(b), 18(f), 19, and

20(c).)

Disclosures provided at application

for a variable-rate mortgage include the

Board-prescribed Consumer Handbook

on Adjustable Rate Mortgages (or a

suitable substitute) and a loan program

disclosure for each variable-rate

program the consumer is interested in.

The loan program disclosure consists of

twelve separate items as they apply to

a variable-rate program, including

information such as the identification of

the index or formula to be used for

adjustments and a fifteen-year historical

example of how changes in the index

values or formula used to compute

interest rates would have affected the

interest rates and payments on a

$10,000 loan.

On September 30, 1996, the Economic

Growth and Regulatory Paperwork

Reduction Act of 1996 (Pub. L. 104–208,

110 Stat. 3009) (1996 amendment)

amended the TILA by providing

creditors the option to give a statement

that the periodic payments may increase

or decrease substantially together with

the maximum interest rate and payment

amount for a $10,000 loan in lieu of the

fifteen-year historical example.

The Board proposes to implement the

TILA amendment as discussed below.

III. Section-by-Section Analysis

Subpart A—General

Section 226.19—Certain Residential

Mortgage Transactions

19(b) Certain variable-rate

transactions. Section 226.19(b) requires

the historical example disclosure for

loans exceeding a term of one year that

are secured by a consumer’s principal

dwelling and where the APR may

increase after consummation (such as

when the rate is tied to an index). The

1996 amendment does not explicitly

limit application of the alternative

disclosure to loans that exceed a term of

one year. The Board believes, however,

that the amendment was intended to

apply only to loans where the fifteenyear historical example is currently

required, namely loans that exceed one

year. Accordingly, the Board proposes

to apply the alternative disclosure

option to variable-rate loans with a term

greater than one year and secured by the

consumer’s principal dwelling.

The 1996 amendment uses the term

‘‘residential mortgage transactions,’’ a