Washington, D.C.
U.S. Office of Personnel Management
Compensation Claim Decision
Under section 3702 of title 31, United States Code
Kimberly A. Steide, DPA
Principal Deputy Associate Director
Agency Compliance and Evaluation
Merit System Accountability and Compliance
07/14/2025
Date
The claimant is a Supervisory Data Analyst, AD-0301-00, with the U.S. Department of Education (ED), Federal Student Aid (FSA), Office of the Chief Operating Officer, Partner Participation and Oversight, Policy Implementation and Oversight Directorate, Reporting and Analysis Group, in Greenville, SC. He requests $38,639.11, representing outstanding retention incentive payments. The U.S. Office of Personnel Management (OPM) received the claimant’s request on January 26, 2024, and the agency administrative report (AAR) on March 19, 2024. For the reasons discussed herein, the claim is granted.
On March 15, 2022, the agency approved a retention incentive for the claimant equaling 16% of his annual salary. The basis for the incentive was the claimant possessed high and unique qualifications and that he recently received a job offer from John’s Hopkins University and he was likely to leave Federal service without the retention incentive. Once approved, the claimant received bi-weekly payment installments for the retention incentive roughly between April 9, 2022, and March 11, 2023.
On May 12, 2023, the claimant’s supervisor was informed that the claimant’s retention incentive required recertification. The agency asserts the claimant was aware that the retention incentive had to be recertified yet he failed to provide additional evidence required. Therefore, the recertification of the retention incentive was not processed.
The claimant challenges the agency’s termination of the retention incentive payments. He asserts the agency failed to follow regulatory and agency requirements and he seeks “the outstanding balance related to the retention incentive.” He asserts that:
“[T]he Department did not provide me with a written termination of the retention incentive until July 26, 2024, and only paid a retention incentive from March 27, 2022, through March 3, 2023. Since the SF-50 does not specify an end date and OPM guidance states that for a bi-weekly retention incentive, the service requirement is continued employment and that termination of the retention incentive only occurs when the agency provides a termination notification in writing, which is done on July 26. 2024.”
Retention incentives are authorized under title 5 of the United States Code (U.S.C.). Specifically, 5 U.S.C. 5754 allows agencies to provide retention incentives when they determine that an employee’s unique qualifications or a special agency need makes it essential to retain them and that in the absence of the incentive, the employee would likely leave the Federal service. OPM has prescribed regulations in title 5, Code of Federal Regulations (CFR) part 575, subpart C to carry out this section of law.
Coverage and eligibility
Under 5 U.S.C. 5754(a)(1), the retention incentive authorities may be applied to employees covered by the General Schedule (GS) pay system or to employees in a category approved by OPM for coverage at the request of the head of an Executive agency. The claimant is covered by an administratively determined (AD) pay system authorized under 20 U.S.C. 1018, which was approved for coverage by OPM in September of 1999.
As an initial matter, a retention incentive may be paid only when the employee's rating of record under an official performance appraisal or evaluation system is at least "Fully Successful" or equivalent. 5 CFR 575.305(d). Although nothing in the record confirms the claimant earned a fully successful (or equivalent) performance rating, we defer to the agency and accept its conclusion.
Agency retention incentive plan
Before paying a retention incentive to an employee, an agency must establish a retention incentive plan or include in its existing retention incentive plan the conditions and requirements governing the use of this authority.
The plan must include the designation of officials with authority to review and approve the payment of these retention incentives. 5 CFR 575.307(a). The record includes the U.S. Department of Education Human Capital Policy, HCP 575-1, dated August 29, 2016. This policy sets forth the established agency retention incentive plan.
Approval criteria
Under 5 CFR 575.308(b), for each retention incentive authorized for an employee, an agency must document in writing:
(1) The basis for determining that the unusually high or unique qualifications of the employee or a special need of the agency for the employee’s services makes it essential to retain the employee;
(2) The basis for determining that the employee would be likely to leave the Federal service in the absence of a retention incentive; and
(3) The basis for establishing the amount and timing of the approved retention incentive payment and the length of the required service period.
The record includes a memorandum titled “Request for Approval of Retention Incentive for [claimant]” submitted to the FSA Chief Operating Officer. The memo, which was approved on March 15, 2022, established the basis for determining the claimant’s high and unique qualifications and that he was likely to leave federal service. However, it did not specify the length of the required service period, as required by 5 CFR 575.308(b)(3).
Service agreement
Under 5 U.S.C. 5754(d) and 5 CFR 575.310, before paying a retention incentive, an agency must require the employee to sign a written service agreement to complete a specified period of employment with the agency. However, a written service agreement is not required when an agency pays an employee a retention incentive in biweekly installments at the full retention incentive percentage rate. See 5 U.S.C. 5754(d)(3)(A) and 5 CFR 575.310(f). In this case, the retention incentive was paid to the claimant in biweekly installments at the full retention incentive rate. Therefore, no service agreement was required or processed.
Payment
Under 5 CFR 575.309(a), an agency must establish a single retention incentive rate for an employee, generally not to exceed 25 percent. As stated earlier, on March 15, 2022, the agency approved an incentive rate equaling 16% of the claimant’s salary.
Annual review
Under 5 CFR 575.311(f)(1), an agency must review each determination to pay a retention incentive to an employee at least annually to determine whether payment is still warranted. An authorized agency official must certify this determination in writing. In this case, in its AAR to OPM, the agency asserts:
On May 12, 2023, [claimant’s supervisor], was informed that the retention incentive required recertification. [Claimant’s supervisor] started the process by providing the written justification to support the recertification process. [Agency employee], Executive Officer for the unit, communicated the approval to [claimant] in June 2023. This information was incorrect and provided to [claimant] before the proper paperwork was submitted to Human Resources. The required form to recertify the retention incentive was not signed until November 2, 2023.
The request for recertification (or second retention incentive request) was not processed by Human Resources because the package was incomplete. Our retention policy requires evidence to establish that the employee would likely leave Federal service in order to grant a retention incentive. [Claimant] was unable to provide the requested documentation to support the retention incentive.
It is accepted that the agency performed an annual review of the retention incentive in May 2023. However, no documentation was provided to OPM showing an authorized agency official certified the determination to terminate the retention incentive payments.
Termination of Retention Incentives
An agency may unilaterally terminate a retention incentive authorization when no service agreement is required based solely on the management needs of the agency, even if the conditions giving rise to the original determination to pay the incentive still exist. 5 CFR 575.311(f)(4).
Under 5 CFR 575.311(f)(3), an authorized agency official must reduce or terminate a retention incentive authorization when no service agreement is required whenever conditions change such that the original determination to pay the retention incentive no longer applies (emphasis added).
Written Notification
Under 5 CFR 575.311(h), if an agency terminates a retention incentive the agency must notify the employee in writing (emphasis added). When a retention incentive is terminated under 5 CFR 575.311(f), the employee is entitled to receive any scheduled incentive payments through the end of the pay period in which the written notice is provided or until the date of separation, if sooner.
Evaluation
As stated, under 5 CFR 575.308(b)(3), an agency must document in writing the length of the required service period. Here, the service agreement length was not documented in the agency’s official approval memorandum.
As stated, under 5 CFR 575.311(f)(1), an agency must review each determination to pay a retention incentive annually to determine whether payment is still warranted and certify this determination in writing (emphasis added). Here, an FSA memorandum, dated November 2, 2023, submitted by the agency human resources office to the Chief Operating Officer shows that the agency conducted an annual review of the retention incentive.
The central issue in this claim is when written notification of the terminated retention incentive was provided to the claimant. On July 26, 2024, an agency representative sent an email to the claimant stating in part:
FSA HR reviewed the records and based on the review and consultation with FSA leadership; it has been determined that the retention agreement has been satisfied. Absent any additional information or signed documents, HR cannot extend the retention incentive.
After carefully reviewing the record, we find the July 26, 2024, email to be the first written notice provided to the claimant stating the retention incentive was terminated. The agency offered no evidence to the contrary. 5 U.S.C. 5754(d)(3)(B) makes clear:
If an agency pays a retention bonus…and makes a determination to terminate the payments, the agency shall provide written notice to the employee of that determination. Except as provided in regulations of the Office, the employee shall continue to be paid the retention bonus through the end of the pay period in which such written notice is provided.
Relying on the explicit language of 5 U.S.C. 5754(d)(3)(B) and 5 CFR 575.311(h), the claimant is entitled to receive retention incentive payments through the end of the pay period in which he was provided written notice (i.e., July 26, 2024). Accordingly, the claim is granted.
This settlement is final. No further administrative review is available within OPM. Nothing in this settlement limits the claimant’s right to bring an action in an appropriate United States court.