United States 

Office of 

Personnel Management 

The Federal Government’s Human Resources Agency 

Benefits Administration Letter 

Number 06 - 104 Date: June 12, 2006

Subject: Change in Crediting Physicians’ Special Pay under Title 38, United States 

Code 

The purpose of this Benefits Administration Letter (BAL) is to advise you of a change in 

crediting physicians’ special pay under title 38 as a result of Public Law 108-445, 

“Department of Veterans Affairs Health Care Personnel Enhancement Act of 2004.” 

BACKGROUND: Section 7431 special pay was authorized by Public Law 102-40 and 

allowed the Department of Veterans Affairs (VA) to pay bonus pay to their physicians 

and dentists who had physician/dentist service for at least 15 years. In order to receive 

the special pay, a physician or dentist entered into a special pay agreement with the VA. 

Each special pay agreement signed by the employee was for at least one year, but not 

more than four years. These agreements began on or after July 14, 1991. Prior to section 

7431 special pay, many VA physicians and dentists received special pay under section 

4118 of title 38, United States Code. 

The amount of 7431 special pay that was creditable for average salary purposes depended 

on several factors, including the type of retirement and how much physician/dentist 

service was performed after July 13, 1991. In non-disability retirement cases, only a 

prorated amount of the special pay was creditable until the physician/dentist acquired 

eight years of physician/dentist service after July 13, 1991. As of this eight year mark, 

the total amount of special pay was credited in the average salary computation. 

Although Public Law 102-40 was intended for physicians and dentists with the 

Department of Veterans Affairs, OPM extended the authority to delegate the use of 

section 7431 special pay to other agencies such as the Departments of Defense, Health 

and Human Services, and Justice. 

Effective January 8, 2006, there is no more "special pay," as it previously existed. 

Public Law 108-445 eliminates the requirement that physician/dentists have 15 years of 

qualified service before their bonus pay can be used for retirement purposes. In addition 

to eliminating the 15 year service requirement, the legislation also eliminates the prorated 

crediting of special pay under title 38. Public Law 108-445 basically creates a whole new 

special pay system for VA physicians and for physicians in other agencies who were 

extended title 38 rules for special pay (such as Department of Defense, Department of 

Justice and Department of Health and Human Services). The new rules: 
• eliminate the 15 year minimum service requirement for physicians and dentists in 

order for their special pay to be considered basic pay for retirement purposes; 

• allow crediting of the full amount of special pay for the average salary 

computation regardless of the number of years the special pay was in effect (that 

is., we no longer prorate special pay based on the two, four, six, and eight year 

increments). Therefore, 100 percent of the special pay, no matter when it was 

earned can be applied to the base pay of a physician/dentist if it falls within the 

average salary period. 

This law does not affect the crediting of physicians comparability allowance (PCA) 

under title 5 (see BAL 03-106 for rules that are still in effect for PCA bonus pay). 

PROCEDURES: 

• Effective January 8, 2006, we will apply 100 percent of the special pay paid to a 

physician or dentist under title 38, United States Code. 

o Physicians/dentists can separate from any position with any agency with 

title to an annuity on or after January 8, 2006. 

o His or her full title 38 special pay, including pay based upon employment 

with another agency that has had title 38 extended to them, must be 

included in the annuity computation. 

o This includes title 38 special pay earned prior to January 8, 2006. 

 

• This new law eliminates the need for completing Form RI 38-133, “Certification 

for Title 38 Physicians and Dentists.” The special pay should be reflected on the 

Individual Retirement Record (IRR). 

• Note that generally, an individual's retirement rights are based on the laws in 

effect at the time he or she separates with title to annuity. 

o If an individual separated prior to the effective date of January 8, 2006, 

having received special pay but not meeting the requirements for 

retirement (for example, not eligible for an immediate retirement but 

eligible for a deferred benefit), this change in law does not apply. 

Crediting of their bonus pay would be done under the previous rules. 

o However, this new crediting will apply if the individual is subsequently 

reemployed and separates after the effective date with an annuity title 

based upon that separation. 
 A FERS covered individual must be under FERS at the time of 

separation. 

 A CSRS-covered individual must not only be separated from a 

CSRS covered position, but the one-out-of-two requirement must 

also be met. 

Robert F. Danbeck 

Associate Director 

 for Human Resources Products and Services