Defense Bill Affects Workers in Many Ways
By Stephen Barr
Every big bill contains lots of small parts.
The fiscal 2004 defense authorization bill, signed by President Bush last week, combines provisions that permit fundamental changes in pay and workforce rules at the Defense Department and make government-wide changes that could affect many employees and retirees.
In a first for the government, the legislation establishes a "human capital performance fund" that is supposed to offer higher pay raises to the best workers. In theory, the fund moves the executive branch a step closer to tying compensation more closely to job performance. Although the government has long offered awards and bonuses to employees, money from the fund counts as base pay and, unlike bonuses, boosts retirement and insurance benefits.
The legislation suggests that the fund receive $500 million next year but leaves it to the congressional appropriations committees to provide the cash. For next year, Congress plans to give the fund only $1 million, congressional aides said. Lawmakers opted for a minimal amount in part because they want more details on the criteria used to reward the best workers and because they were uncertain whether performance-based pay would improve morale inside agencies, the aides said.
Still, the creation of the fund gives the Bush administration a chance to try for more money next year.
In another effort to strengthen the link between pay and performance, the legislation overhauls the system for paying members of the Senior Executive Service, the government's cadre of 6,000 high-level managers and technical experts.
The legislation abolishes the six pay grades of the SES and replaces them with one pay range. It raises the statutory cap on executive pay, increasing maximum base pay from $134,000 to $142,500. And the top pay could go as high as $154,700 if agencies set up management systems that make "meaningful distinctions" in the job performance of their executives.
Another government-wide provision could increase overtime pay for some managers and supervisors. Federal law had capped their overtime pay at 11/2 times the rate for GS-10, step 1, which resulted in those above GS-12, step 5, making less for overtime work than for regular hours. The revision guarantees that they will make at least their regular rate of pay for working overtime.
Federal employees who are military reservists may benefit from new pay flexibility if they are called to duty overseas. Activated employees are guaranteed that for 22 days a year they will receive the higher of either their civil service or military pay, under the legislation. The 22-day provision is an annual entitlement and complements 15 days of paid military leave provided federal employees.
The legislation addresses two government-wide benefit issues in ways that many employees will welcome.
Rather than require employees to cover overhead costs for the new program of flexible spending accounts, agencies are directed to pick up the tab. Most agencies already are paying the fees, which are $4 a month for health care accounts and 1.5 percent of the amount designated for dependent care accounts (up to a maximum of $75 a year).
The legislation expands eligibility for the federal long-term care insurance program. It makes eligible "deferred" annuitants -- people who have left the government but not started collecting their pensions -- and military reservists who have retired but have not started receiving retirement pay. In addition, District of Columbia employees and retirees hired before Oct. 1, 1987, and covered by the Civil Service Retirement System are now eligible to apply for federal long-term care insurance.
Family members of those groups also may apply for coverage if they meet certain requirements.
In a break with decades-old policy, the legislation permits the Defense Department to hire federal retirees without a pay offset. Under previous law, civil service retirees who go back to work in the government generally face a deduction in pay equal to the amount of their annuities. That rule no longer applies at the Defense Department, which pointed out that Congress lifted the so-called double-dip curb on military retirees several years ago.
The legislation gives the Pentagon authority to set up a permanent program of buyouts and early-outs to restructure or reduce its civil service workforce. There's one restriction: Only 25,000 employees -- not counting those caught up in base closings -- could receive a buyout in any fiscal year.