United States of America

BEFORE THE FEDERAL SERVICE IMPASSES PANEL

   The Securities and Exchange Commission (Employer or SEC) filed a request for assistance with the Federal Service Impasses Panel (Panel) to consider a negotiation impasse under the Federal Service Labor-Management Relations Statute (Statute), 5 U.S.C. § 7119, between it and the National Treasury Employees Union (Union).

   Following investigation of the Employer’s request for assistance, which arose from negotiations over the parties second compensation and benefits agreement,^1/ the Panel determined that the dispute should be resolved through an informal conference with Panel Member Andrea Fischer Newman. The parties were advised that if no settlement was reached, Member Newman would report to the Panel on the status of the dispute, including the parties’ final offers and her recommendations for resolving the impasse. After considering this information, the Panel would take whatever action it deemed appropriate to resolve the impasse, which could include the issuance of a binding decision.  

    Pursuant to this procedural determination, Member Newman met with the parties on July 6 and 7, 2006, at the Panel’s offices in Washington, D.C. During the course of the meeting, the parties were able to resolve numerous issues. However, they remain at odds over several matters. The parties subsequently were permitted to submit their final offers and supporting statements of position.^2/ The Panel has now considered the entire record.

   The Employer is an independent Federal regulatory agency whose mission is to administer and enforce the Federal securities laws intended to protect investors and maintain fair, honest and efficient markets. The Union represents approximately 2,760 professional and non-professional employees stationed in the Employer’s Headquarters Office in Washington, D.C. and 11 Regional and District Offices throughout the country. Typical bargaining-unit positions include: attorney, accountant, examiner, economist and a variety of administrative positions. In addition to the parties’ first compensation agreement, which was largely imposed by the Panel in 2002, the parties are subject to the terms of a collective-bargaining agreement (CBA) addressing only non-compensation matters that has been in effect since July 2002.

   An overriding issue for the parties is the procedure to be followed in the event that the Employer is unable to meet its financial obligations under the compensation agreement should Congress fail to fully fund the SEC’s budget. Other issues include: (1) the effective date for implementing a pay system with "open ranges"; (2) one-time and annual adjustments to the pay schedule; (3) merit pay; (4) annual pay adjustment for unacceptable performers; (5) value of merit increases; (6) issuance of standards that define fully acceptable performance and higher levels of performance; (7) supervisory support for ratings/merit increase; (8) role of compensation committees; (9) data on distribution of merit increases; (10) health insurance premiums; (11) retirement plans; (12) effective dates for changes to the performance management system and pay and benefits; and (13) the duration of the agreement.

   The Panel should adopt without modification the Employer’s final offer (see Attachment A) which makes narrowly tailored changes to the already superior pay and benefits employees currently receive. Essentially, the Employer contends that its proposal continues and improves upon the framework previously established for a rigorous pay-for-performance system that would ensure the best performers are compensated appropriately. In the event that appropriations enacted by Congress do not allow the SEC to meet its financial obligations under the compensation agreement, however, the Employer would be permitted to determine how best to utilize the financial resources it has been allotted. The phrase "subject to funding and budget limitations" prefaces four areas in the compensation agreement where the Employer would be granted discretion to alter the terms of the agreement when there is a budgetary shortfall: basic pay, local pay rates, merit pay increases and benefits. In the current tight fiscal environment, the Employer should have the discretion to balance the SEC’s three high priority areas--staffing levels, information technology and pay raises--to best ensure that the mission is met. While the proposal would give the Employer the flexibility to allocate its financial resources when budget dollars are scarce, it requires that the SEC not reduce funding for commitments in the compensation agreement below the levels outlined in the President’s budgetary request by an amount that exceeds the difference between he President’s requested funding level and the actual appropriations amount. In such instances, the Employer first would seek to reduce other aspects of the budget that cause "the least adverse impact to SEC operations and employees."

   Under the Employer’s final offer, subject to funding and budget limitations, only employees who are performing acceptably would receive an annual adjustment to pay equal to the across-the-board percentage increase for basic pay in the General Schedule (GS) pay system. Although the SEC no longer is under Title 5 of the U.S. Code for pay purposes, it is willing to provide employees with the same increases as those under the GS pay system, so long as performance is at an acceptable level. Poor performance should not be rewarded. As to the amount or value of merit increases, the Employer would continue current funding levels but eliminate the current cap of 4.5 percent on merit pay increases. Having the flexibility and discretion to provide meaningful performance-based merit increases would help the Employer to appropriately reward high performers and continue to retain critical staff. As with the annual across-the-board increase, employees performing below an acceptable level would not be eligible for merit increases. Compensation committees that are established within each office would make their recommendations in part to ensure that merit increases are based upon an employee’s ability to accomplish the mission and meet the goals of the SEC. The parties already have agreed to certain "safeguards" to make sure that the pay-for-performance system is fair and non-discriminatory. In furtherance of those objectives, the Employer’s proposal concerning compensation committees would require them to identify any "troubling trends" regarding merit increase recommendations, investigate them, and take any warranted remedial action.

   As to benefits, the Employer already provides a generous array that include supplemental contributions to defray the cost of health insurance premiums, matching funds to the Thrift Savings Plan (TSP), dental and vision benefits at no cost to the employee, back-up child care at no charge, a child care subsidy, transit benefits and a student loan repayment program. There is no need to increase the Employer’s contribution to health insurance premiums or provide employees with an optional retirement plan, as the Union proposes, because such incentives are not needed to retain personnel in the current employment environment. With regard to the effective date of the compensation agreement, implementation should take place as soon as reasonably practicable so as not to adversely impact the SEC’s operations. Finally, the agreement should remain in effect for 5 years primarily because a longer duration period than proposed by the Union would allow employees time to adjust to its pay-for-performance aspects.

   The Panel should adopt the Union’s final offer (see Attachment B). By giving the SEC the authority unilaterally to reduce or void its obligations under the compensation agreement if Congress reduces the President’s budget request, the Employer’s final offer essentially would require the Union to waive its statutory right to negotiate over a mandatory subject of bargaining. Therefore, the Panel may not legally impose this aspect of the Employer’s final offer. Even if the issue is not clouded with a duty-to-bargain question, the Employer has not demonstrated a need for provisions that would reduce or eliminate the SEC’s obligations under the compensation agreement. In this regard, the current compensation agreement does not contain a similar provision and the Employer has not provided any evidence to justify such a radical departure from the status quo. Congress often reduces agency appropriations from what is requested in the President’s budget. Nevertheless, agencies are required to meet their obligations to provide pay and benefit increases to their employees; the same requirement should extend to the SEC. If the Employer has to contend with a budget shortfall, the more reasonable approach would be to require it to reopen the compensation agreement so the parties can address the situation. In the alternative, the Union proposes to prioritize the Employer’s funding obligations under the compensation agreement.

   The Union would raise the maximum rates of pay for grades 3 – 12 by 3 percent; employees rated "acceptable" or better in those grades would receive a 1-percent increase in base pay for the next 3 years. This would help close the nearly 10-percent pay gap between the SEC and the FDIC, an agency covered by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). In this regard, in enacting the Capital Markets Fee Relief Act, Congress clearly intended that the SEC develop parity with other FIRREA agencies by directing the SEC to inform FIRREA agencies and Congress of "such compensation and benefits and [] seek to maintain comparability with such agencies regarding compensation and benefits."^3/ To help monitor compensation rates, the Union further proposes that the Employer undertake periodic salary and benefit surveys to assess whether SEC is maintaining comparability in terms of salary and benefits with other FIRREA agencies; the Union would be provided with the survey data and any reports that are issued by SEC.

   As to merit pay increases, while both parties would tie them to employee performance ratings, the Employer’s proposal would allow management to make unilateral decisions on the amount of merit pay. Once again, the Union contends that the Panel cannot legally impose such an outcome because, in essence, it would deprive the Union of its statutory right to bargain over a mandatory subject. The Union’s proposal, on the other hand, offers two options. The first, for an open-range pay system, would involve using pay pools and distribution by shares, with employees receiving 1, 2, or 3 shares depending upon their rating level. Pay pools for each division and region would be funded annually to equal at least 3 percent of the salary budget for employees in the pay pool; the pay pool would not be less than the percentage of salary allocated for merit increases for non-bargaining unit employees. Merit increases would then be determined by dividing the funds in the pay pool by the number of shares and multiplying that figure by the number of shares earned by the employee. Using a pay pool/share approach would ensure that the Employer’s expenses do not exceed available funding. Furthermore, it provides a more reasonable method of controlling the cost of merit increases while avoiding forced distributions of performance-rating scores that determine the merit increase amounts. In the alternative, the Union proposes to maintain the status quo; that is, management would continue to award merit pay using the current step-based pay structure where each employee receives merit increases of 0, 1, 2 or 3 steps, depending on his/her performance rating, with each step equal to 1.5 percent of pay. This approach would be modified only to accommodate changes agreed to by the parties regarding employee performance ratings. The Employer has failed to demonstrate a need to change the current levels of step-based increases or provided evidence of any real or anticipated problem in funding merit pay increases.

   The Union proposes that the Employer define standards of performance for at least two rating levels — at the fully acceptable and at least one higher performance level - so employees would know what is necessary to achieve a merit pay increase. Additionally, a narrative should accompany the supervisor’s recommended rating to provide feedback to employees on their performance. It also proposes that the compensation committees review the recommended distribution of merit pay increases for consistency with organizational performance, to the extent that performance standards incorporate and reflect performance goals. Using the Union’s proposed parameters is more reasonable than the Employer’s approach, which would permit the committees to review merit pay distribution on the basis of "appropriateness," a term whose meaning is nebulous. Moreover, under the Union’s proposal the committees would be required to review recommended merit increases to determine whether their distribution would have an adverse effect on any protected class of employees. Additionally, the Union would be provided with demographic data on the distribution of employee increases. These proposals are intended to prevent discrimination and ensure that merit pay increases have been assessed prior to their finalization to avoid any illegalities.

   With respect to health insurance premiums, the Employer’s additional contribution of $25 for "self" and $50 for "family" coverage under the Federal Health Benefits Program (FHBP) should be indexed annually to provide greater comparability with benefits offered by other FIRREA agencies, particularly the FDIC. Further, the Employer should contribute an extra 3 percent of an employee’s salary to a "Life Cycle Account."^4/ A 3-percent contribution, unlike the Employer’s proposal to contribute 2 percent to the TSP, would provide greater comparability with other FIRREA agencies, such as the OCC, which contributes an additional 3 percent of salary to an employee’s supplemental retirement plan, and the FDIC, which currently matches up to an additional 5 percent of salary in its 401K plan.

   As to the effective date for all pay and benefit changes in the compensation agreement, the Union proposes that they be implemented as soon as reasonably practicably, but no later than January 1, 2007. Furthermore, the performance management cycle should be aligned to the fiscal year. Since doing so would delay employee merit increases due in September 2007 until pay period 1 in January 2008, however, employees should receive a one-time adjustment of their merit increases. This adjustment would be equal to 33 percent of the merit increase that the employee would otherwise receive under the compensation agreement, with such adjustment to be added to the amount of the employee’s merit increase. Finally, the compensation agreement should expire on September 30, 2009, which coincides with the end of the fiscal year. A 3-year term is the norm in the Federal sector, and would provide stability in the parties’ collective bargaining relationship for a reasonable period of time. Under the Employer’s proposal, on the other hand, only the Union would be locked in for a 5-year term because management could reduce or eliminate its obligations under the compensation agreement at any time.

   Having carefully considered the evidence and arguments presented by the parties involving the numerous compensation-related issues raised in this case, we shall order that a modified version of the Employer’s final offer be adopted to resolve the impasse. Overall, the Employer’s approach of narrowly tailoring changes to employee pay and benefits appears to be warranted, particularly in the absence of evidence that it is having difficulties in retaining and attracting qualified employees. Turning to the key issue, the Employer’s final offer includes four provisions that would give the SEC the discretion to comply with the parties’ compensation agreement subject to "funding and budget limitations."^5/ Preliminarily, we reject the Union’s contention that the Panel has no authority to order the adoption of this aspect of the Employer’s final offer. Rather than eviscerating the Union’s right to negotiate over a mandatory subject of bargaining, the Panel is merely exercising its statutory authority to assess the merits of the parties’ proposals on the issue of what should occur if the Employer is unable to meet its financial obligations. In this regard, we do not favor the Employer’s position on its merits and are instead persuaded that this aspect of the parties’ dispute should be resolved on the basis of the alternatives proposed by the Union. Accordingly, the Employer’s final offer shall be modified to include a section (Section V., "Funding and Budget Limitations") that gives it the option of either reopening the agreement for additional negotiations with the Union or fulfilling its obligations by expending the available funds in the following priority: (1) Maintain all current levels of pay and benefits; (2) Payment of annual employee pay increases associated with the increases to the basic pay structure; (3) Payment of employee merit increases; (4) Locality pay increases; and (5) Agency contributions to supplemental retirement plan. In addition, we shall include the following two provisions from the Union’s proposal:

   In our view, the following modifications to the Employer’s final offer are also warranted. In Section II.A.1, "Open Ranges," we shall add to the Employer’s provision the date proposed by the Union. Thus, the provision would read:

   Concerning the issue of whether a narrative should accompany the supervisor’s recommended rating ("Support for Ratings," Section III.E.7. of the Employer’s final offer, and Section III.F.7 of the Union’s), we are convinced that requiring written commentary on employee’s performance would help employees better understand the basis for their ratings and enable them to assess areas where improvements in work performance could be made. Thus, we shall order the adoption of the following provision that includes aspects of both parties’ proposals:

   Pursuant to the authority vested in it by the Federal Service Labor-Management Relations Statute, 5 U.S.C. § 7119, and because of the failure of the parties to resolve their dispute during the course of proceedings instituted under the Panel’s regulations, 5 C.F.R. § 2471.6(a)(2), the Federal Service Impasses Panel, under 5 C.F.R. § 2471.11(a) of its regulations, hereby orders the adoption of the following wording:

• Key results and objectives that the employee needs to achieve.

• The knowledge, skills, and behaviors (competencies) needed to achieve those results.

• A development plan listing activities meant to help the employee grow.

• Measures to track the employee’s progress toward the results.

• Space to document interim review discussions and feedback about the employee’s performance.

The performance plan or supplementary documents will define the performance necessary to obtain an acceptable rating.

October 19, 2006
Washington, D.C.

Attachment A

Italicized language was agreed to and initialed by both parties on July 7, 2006.

 Agency's Best and Final Offer

 Compensation and Benefits Agreement
Between
The U.S. Securities and Exchange Commission ("SEC" or "Employer")
And
The National Treasury Employees Union ("NTEU" or "Union")

July 10, 2006
 

I. Introduction.

Pursuant to Public Law 107-123, the Investor and Capital Markets Fee Relief Act, the SEC "may appoint and fix the compensation of such officers, attorneys, economists, examiners, and other employees as may be necessary for carrying out its functions under the securities laws " The revised pay structure; pay system and benefit programs described herein are designed to meet the SEC's needs, and comply with P.L. 107-123, as well as merit system principles.

II. Pay Rates.

A. Pay Schedule.

1. Open Ranges. The steps within each grade level are eliminated and the pay system will have open ranges with minimums and maximums for each grade at each SEC location.

B. Annual Adjustment of Pay Schedule.

1. Pay Structure. Subject to the funding and budget limitations described in Section V, the pay of all acceptably performing SEC employees will be adjusted annually by a percentage equal to the across-the-board percentage increase for basic pay in the General Schedule (GS) pay system.

2. Compensation Analysis. The SEC may conduct surveys and/or focus groups on a periodic basis to determine whether any additional compensation adjustment is warranted, to remain comparable with agencies covered by the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) or otherwise support the recruitment and retention of quality employees. NTEU will be provided the opportunity for input in the development of any such surveys.

3. Local Pay Rate Adjustments. Subject to the funding and budget limitations described in SectionV, pay rates in each SEC location will be adjusted by a percentage that is equal to locality adjustments applied to the General Schedule.

C. Pay Setting Procedures.

1. Uniform Pay Setting for Promotions. Upon promotion, all employees (with the exception of those described in C. 2. below) including Securities Industry (SI) employees, will receive a salary increase of 6% or to the minimum of the range for the new pay grade, whichever is greater. Thereby, pay setting for promotions will be made consistent and uniform for all employees. Pay setting procedures will adhere to merit principles.

2. Pay Setting For SI Employees Currently In Career Ladder Positions. As an exception to C 1 above, the SEC will continue its past practices regarding pay setting for SI promotions only for those SI employees that occupy a career ladder position on the date this agreement is signed. This exception will only apply to career ladder promotions and will not apply to any promotions outside the particular career ladder position that affected employees currently occupy on the date this agreement is signed.

III. Performance Management and Pay-for-Performance.

A. Pay-For-Performance. The SEC is steadfastly committed to moving away from automatic pay raises and, as such, management must continue to make meaningful distinctions about performance. The SEC will move away from what could be considered a "pass/fail" rating system to a five (5) level pay-for-performance and rating system. This system will have four (4) levels of acceptable performance and one (1) level of unacceptable performance.

B. Merit Increases Shall Be Based On Performance. Employees rated at the lowest acceptable rating will not receive a merit increase.

C. No Merit Increase or Annual Pay Adjustment for Unacceptable Performers. Employees rated unacceptable will not be eligible for a merit increase. Employees rated unacceptable will not receive the annual across-the-board increase to the rates of basic pay.

D. Value of Merit Increases. Subject to budget and funding limitations described in Section V, the SEC will continue current funding levels for merit increases. The SEC will determine the percentage (%) of salary increase associated with merit increases (previously called steps). The value of merit increases will be determined each year and the values will be consistently applied to all employee groups.

E. Performance Management and Pay-For-Performance Procedures.

1. Joint Labor-Management Workgroup. A Joint labor-management workgroup will be established to provide recommendations to management concerning:

· How, consistent with the terms of this agreement, the fairness, transparency, and credibility of the performance management system can be enhanced;

· The establishment of standards that define performance at the acceptable level, provide meaningful distinctions in performance between the various levels, and allow appropriate evaluation of the impact of individual contributions relative to the employee's position;

· The most effective implementation strategies,

The workgroup shall be comprised of an equal number of management and labor representatives.

2. Redesigned Performance Plan. The performance plan form will be redesigned to allow employees and supervisors to work together to create a performance plan that includes or facilitates the use of

· .Key results and objectives that the employee needs to achieve.

· .The knowledge, skills, and behaviors (competencies) needed to achieve those results.

· .A development plan listing activities meant to help the employee grow. .Measures to track the employee's progress toward the results.

· .Space to document interim review discussions and feedback about the employee's performance.

· .The performance plan or supplementary documents will define the performance necessary to obtain an acceptable rating.

3. Training For Employees and Supervisors On Pay-For-Performance. In an effort to ensure the fairness, transparency, and credibility of the performance management system, the SEC will provide performance management training. The SEC will offer the training to all employees and supervisors. In this training, supervisors will be instructed on accurately assessing employee performance and appropriately applying those assessments to determine merit increases. The training will address how to ensure that performance standards adequately incorporate or reflect organizational performance goals. The SEC will make reasonable efforts to ensure that the training and guidance is clear and uniform throughout the SEC.

While the work of the SEC's employees does not lend itself to mathematical evaluation and while supervisors will still need to exercise discretion, supervisors will be issued guidance on how to base their pay-for-performance decisions on their evaluation of the employee's performance as compared to the standards established in the employee's perfol71lance work plan.

4. Establishment of Employee Performance plans. While management retains the right to ultimately establish the content of each performance plan, employees will be given the opportunity to provide input. In that regard, supervisors and employees will be encouraged to work together to reach agreement on performance plans that, to the extent practical, are aligned with or supportive of the SEC's broader strategic priorities and that contain objectives that are specific, measurable, attainable, and time bound. To the extent practicable, performance standards will be uniform for all employees performing in the same position at the same grade level, although expectations for a particular employee may be tailored based on his/her specific assignments.

5. Communication About Performance. Supervisors will be encouraged to provide meaningful performance feedback throughout the rating period. Supervisors will be encouraged to promptly counsel employees when their performance drops below the acceptable level. Supervisors must continue to meet performance management communication obligations established by applicable laws, regulations, and labor agreements.

6. Summary of Accomplishments. . Employees will be encouraged to submit to their supervisors a summary describing their accomplishments during the rating period.

7. Support for Ratings. The performance plan will be marked or annotated to explain the supervisor's recommended rating/merit increase. The performance plan will be marked or annotated to provide feedback representative of the employee's performance. A separate supervisory justification statement may be required to support recommendations for the highest rating level/merit increase.

8. Compensation Committees.

a. The Employer will establish a Compensation Committee within each Division/Office/Field Office to review supervisory merit increase recommendations. The committees will then make recommendations to Division/Office/Field Office heads about merit increases.

b. Compensation Committees will review merit increase recommendations from a broader perspective to ensure the employee's contributions, when compared with others within the reviewed organization, have significant impact to the SEC. Committees will also attempt to ensure that recommendations are fair and consistent and that the distribution of ratings at the various performance levels is generally appropriate.

c. The Compensation Committee's recommendations may also be based upon any committee member's direct knowledge of the employee's performance, the supervisor's recommendations, the performance work plan document(s), the acceptable rating, and the employee's accomplishment summary. The supervisor's justification statement will also be considered.

d. Compensation Committees will normally return the work plan and rating recommendation to the supervisor if they find that the documentation does not contain adequate information to evaluate it.

e. With regard to merit increase recommendations, to the extent that the committee identifies troubling trends, the committee will investigate or refer the issue for investigation. Such investigation will concern whether there is legitimate justification for said trends. Where there is no such justification, appropriate action shall be taken, absent just cause, to evaluate the situation.

f. Where the Compensation Committee recommendation departs from the supervisor's recommendation, the Committee will mark or annotate the recommendation with the general reason for adjustment. This information will be made available to the employee on request. To protect the privacy of other employees, the information will be provided on another form when requested.

9. Deciding Official Approval. The Division/Office/Field Office head or designee will consider the Compensation Committee's recommendations and will approve, deny or modify the committee's recommendations for those employees who are recommended for merit increases. The Deciding Official will serve as an impartial arbiter ensuring that merit pay decisions are fair and non-discriminatory. The Deciding Official shall also ensure that dispersion of merit increases is appropriate. Such decisions may also be influenced by budgetary considerations. Where the Deciding Official's decision departs from the Compensation Committee's recommendation, the Deciding Official will mark or annotate the recommendation with the general reason for adjustment. This information will be made available to the employee on request. To protect the privacy of other employees, the information will be provided on another form when requested.

10. Annual Publication Of The General Dispersion Of Merit Pay Increases. The general dispersion of merit pay increases (e.g., the number of employees at each merit increase level within each Division/Office.) will be published annually. To the extent that employee privacy and business necessity allow, the SEC will endeavor to add transparency to the pay-for-performance process.

IV. Benefits.

A. Health Insurance Premiums. In addition to the standard Employer contribution premiums for employees enrolled in the Federal Employee Health Benefits (FEHB) program, the Employer will continue to contribute an additional $25 per pay period for each full-time employee enrolled in single coverage and an additional $50 per pay period for each full-time employee enrolled with family coverage. These amounts will be pro- rated for part-time employees. In no event shall Employer's contributions exceed the employee's total FEHB premium amount. These additional Employer contributions will be made in such a way so as to avoid any tax liability to the employee, if allowed by law.

B. Dental and Vision Insurance. The Employer will continue to offer dental and vision insurance to all employees with appointments of more than one year as agreed upon by the parties in the SEC-NTEU Agreement on Dental/Vision Plan, dated April 15, 2004.

C. Retirement Plans. The SEC will match up to an additional 2% of salary in TSP contributions (for both CSRS and FERS retirement program participants), subject to necessary changes in legislation, budget limitations, and TSP laws and regulations. This is also subject to the Internal Revenue Service (IRS) maximum elective deferment limits (to be phased out in 2006).

D. Benefits Subject To Budget Limitations. All employee benefit programs shall be subject to the funding and budget limitations described in Section V.

V. Funding and Budget Limitations.

A. The SEC is funded through Congressional budget appropriations. The SEC will vigorously pursue appropriations that allow the SEC to meet as many of the obligations created by this agreement as practicable.

B. If actual SEC appropriations are reduced from the funding level included in the President's request to the Congress, the SEC may not reduce the funding for commitments in this agreement below the levels outlined in the President's request by an amount that exceeds the difference between the President's requested funding level and the actual appropriations amount.

C. Should the SEC's actual budget appropriations be reduced and should the SEC elect to decline to fund or reduce funding for any of the obligations created by this agreement as a result, the SEC will provide NTEU with advance notice and a briefing.

D. Should the SEC's actual budget appropriation be reduced from the funding level in the President's request to the Congress and should the SEC determine that it will reduce or eliminate funding for obligations created by this agreement as a result, in making such budgeting decisions about where to reduce or eliminate funding, the SEC will first seek to reduce or eliminate funding to those obligations where, at the time, reductions or eliminations will cause the least adverse impact to SEC operations and employees.

VI. Effective Dates.

A. These changes to the performance management and pay system shall be implemented as soon as reasonably practicable with due consideration to avoiding adverse impact to the operations of the SEC. To further enhance organizational alignment, the SEC may align the performance management process with the fiscal year.

VII. Duration.

This agreement shall be in effect for five (5) years from the last date of signature. If the Employer determines that either it does not have sufficient funds to comply with this agreement or that continued compliance with this agreement would negatively impact the SEC's mission and goals, the Employer may terminate this agreement after providing the Union thirty calendar days notice. Upon such notice, the Union may request negotiations.

 

NTEU Final Offer                                                       July 10, 2006

II. Pay Rates.

A. Pay Schedule.

1. Open Ranges. Effective Pay period 1 of 2007, the steps within each grade level are eliminated and the pay system is changed to open ranges, with minimum and maximums for each grade at each SEC location.

2. Adjustment of Pay Schedule. For pay grades 3 -12, the maximum rate of the pay schedule for each of these grades will be raised by 3%, effective pay period 1 of 2007 (in addition to the increase provided under Section II B.1). Each employee in Grades 3- 12 rated "acceptable' or better will receive a 1 % increase in base pay in 2006, 2007 and 2008, in addition to the pay increases otherwise provided under the terms of this Agreement.

3. All Employees Shall Be Eligible To Progress To The Top or The Pay Range For Their Grade. The current policy on non-securities industry employees' pay restricts these employees from moving beyond the step 27 is eliminated and all employees will be eligible to progress to the top of their pay range.

B. Annual Adjustment of Pay Schedule.

1. Base Pay Structure. SEC pay ranges will be adjusted annually by a percentage at least equal to the across-the-board percentage increase for basic pay in the General Schedule (GS) pay system, effective pay period 1. The pay of all acceptably performing SEC employees will also be adjusted annually by at least this percentage, subject to the provisions of Section V of this Agreement.

2. Compensation Analysis. The SEC will conduct surveys and/or focus groups on a periodic basis to determine whether any additional compensation adjustment is warranted to remain comparable with Agencies covered by the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) or otherwise support the recruitment and retention of quality employees. NTEU will be provided the opportunity for input in the development of any salary or benefit surveys, and the SEC will provide NTEU with copies of all salary survey data and information used in conducting any surveys involving any pay or benefit-related matters. (e.g., position benchmarks). Any report or recommendations that result from a compensation analysis will be shared with the Union.

3. Locality Pay Rates. Locality rates will be adjusted by a percentage that is no less than that applied to the General Schedule, subject to the funding and budget limitations described in Section V.

C. Pay Setting Procedures.

1. Uniform Pay Setting for Promotions. Upon promotion, all employees (with the exception of those described in C.2. below) including Securities Industries (SI) employees, will receive a salary increase of6% or to the minimum of the range for the new pay grade, whichever is greater. Thereby, pay setting for promotions will be made consistent and unifoffi1 for all employees. Pay setting procedures will adhere to merit principles. [AGREED]

2. Pay Setting for SI Employees Currently in Career Ladder Positions. As an exception to C.1. above, the SEC will continue its past practices regarding pay setting for SI promotions only for those SI employees that occupy a career ladder position on the date this agreement is signed. This exception will only apply to career ladder promotions and will not apply to any promotions outside the particular career ladder position that affected employees currently occupy on the date this agreement is signed. [AGREED]

III. Performance Management and Pay-for-Performance.

A. Pay-For-Performance. The SEC is steadfastly committed to moving away from automatic pay raises and, as such, management must continue to make meaningful- distinctions about performance. The SEC will move away from what could be considered a "pass/fail" rating system to a five-level pay-for-performance and rating system. This system will have four levels of acceptable performance and one level of unacceptable performance. [AGREED)

B. Merit Increases Shall Be Based on Performance. Employees rated at the lowest acceptable level will not receive a merit increase. [AGREED]

C. No Merit Increase or Annual Pay Adjustment for Unacceptable Performers. Employees rated "unacceptable" will not be eligible for a merit increase or annual pay adjustment. However, at such time that an employee's performance improves to an acceptable level (e.g., through successful completion of a performance improvement plan) the employee will receive the increase in base pay provided under Sections II.B.1.

D. Amount of Merit Increases.

1. Each employee will be assigned to one of five performance levels based on his/her rating. Employees rated above the lowest acceptable level (Level 2) in the five-level system) will receive a merit increase, and will be assigned shares based on these rating levels as follows:

• Level 5:        3 shares
• Level 4:        2 shares
• Level 3:        1 share
• Level 2:        0 shares
• Level 1(Unacceptable): 0 shares

2. Pay pools will be established for each division and region. Each pay pool will be funded each year by an amount equal to at least 3% of the salary budget for the employees in the pool (subject to the provisions of Section V). The percentage of salary allocated for merit increases for bargaining unit employees will be no less than the percentage of salary allocated for merit increases for any other group of non-unit employees.

3. Performance based pay increases for employees in each pool will be determined by dividing the funds in the pool (on a percentage of pay basis) by the number of shares, and multiplying this figure by the number of shares earned by each employee. These pay increases shall be made on an annual basis at the time of the annual increase in basic pay, beginning in 2008 and each year thereafter for the life of this agreement. Any pay in excess of the salary grade maximum will be paid as 100 % lump sum payment, including employees on "saved pay."

4. All merit increase determinations will be made by the SEC in a fair and non- discriminatory manner.

Alternative Proposal on Amount of Merit Increases: Retain the status quo by maintaining the current step-based pay system, and providing merit pay increases of one, two or three steps based on performance; these would now be tied to the three highest levels ofperfoffi1ance under the new five-level perfoffi1ance system that the SEC has agreed to develop in accordance with Section III.F., below.

E. Retention of Prior Merit Increases. If an employee who receives a merit pay increase is promoted within the next year to the next highest grade, but the promotion is only to the minimum of the pay range for the higher grade, then the employee's pay will be adjusted by adding the same percentage that he/she received as his/her last merit increase so that the employee will not lose the value of the merit increase.

F. Performance Management and Pay-For-Performance Procedures.

1. Joint Labor-Management Workgroup. A joint labor-management workgroup will be established to provide recommendations to management concerning:

• How, consistent with the terms of this agreement, the fairness, transparency, and credibility of the performance management system can be enhanced;
• The establishment of standards that define performance at the acceptable level, which provide meaningful distinctions in performance between the various levels and allow appropriate evaluation of the impact of individual contributions relative to the employee's position;
• The most effective implementation strategies;

The workgroup shall be comprised of an equal number of management and labor representatives. [AGREED]

2. Redesigned Performance Work Plan. The performance work plan will be redesigned to create a performance plan that includes or facilitates the use of:

• Key results and objectives that the employee needs to achieve;
• The knowledge, skill, and competencies needed to achieve those results;
• A development plan meant to help the employee grow;
• Measures to track the employee's progress toward the results;
  Space to document interim review discussions and feedback about the employee's performance;
• Standards that define performance for at fully acceptable performance (Level 3) and at least one higher level (e.g., Level 4 or Level 5) which provide meaningful distinctions in performance between each of the various levels;

3. Training For Employees and Supervisors On Pay-Far-Performance. In an effort to ensure the fairness, transparency, and credibility of the performance management system, the SEC will provide performance management training. The SEC will offer the training to all employees and supervisors. In this training, supervisors will be instructed on accurately assessing employee performance and appropriately applying those assessments to determine merit increases. The training will address how to ensure that performance standards adequately incorporate or reflect organizational performance goals. The SEC will make reasonable efforts to ensure that the training and guidance is clear and uniform throughout the SEC.

While the work of the SEC does not lend itself to mathematical evaluation and while supervisors will still need to exercise discretion, supervisors will be issued guidance on how to base their pay-for-performance decisions on their evaluation of the employee's performance as compared to the standards established in the employee's performance work plan. [AGREED]

4. Establishment of Employee Performance Plans. While management retains the right to ultimately establish the content of each performance plan, employees will be given the opportunity to provide input.:. In that regard, supervisors and employees will be encouraged to work together to reach agreement on performance plans that, to the extent practical, are aligned with or supportive of the SEC's broader strategic priorities and that contain objectives that are specific, measurable, attainable, and time bound. To the extent practicable, performance standards will be uniform for all employees performing in the same position at the same grade level, although expectations for a particular employee may be tailored based on his/her specific assignments. [AGREED]

5. Communication About Performance. Supervisors will be expected to provide meaningful performance feedback throughout the rating period. Supervisors will be encouraged to promptly counsel employees when their performance drops below the acceptable level. Supervisors must continue to meet performance management communications obligations established by applicable .laws, regulations and labor agreements. [AGREED)

6. Summary of Accomplishments. Employees will be encouraged to submit to their supervisors a summary describing their accomplishments during the rating period.
[AGREED]

7. Support for Ratings. The performance work plan will be marked or annotated to explain the supervisor's recommended rating/merit increase, and will include a narrative providing feedback and examples representative of the employee's performance.

8. Compensation Committees.

a. The Employer will establish a Compensation Committee within each Division/Office/Field Office to review the supervisor's merit increase recommendations. The committees will then make recommendations to Division/Office/Field Office heads about merit increases. [AGREED]

b. Compensation Committees will review merit increase recommendations from a broader perspective to ensure that the assessment of the employee's merit increase level, when compared with similarly situated employees within the reviewed organization, is fair and consistent. To the extent that performance standards incorporate or reflect organizational performance goals, Compensation Committees will also review that employee performance evaluations and merit increase recommendations are consistent with organizational performance. In performing these functions, the Compensation Committees will review

c. The Compensation Committee's recommendation may also be based on any committee member's direct knowledge of an employee's performance, the supervisor's recommendations, the performance work plan document(s), the acceptable rating, and the employee's accomplishment summary. The supervisor's justification statement will also be considered. [AGREED]

d. Compensation Committees will normally return the workplan and ratings recommendation to the supervisor if they find that the documentation does not contain adequate information to evaluate it. [AGREED]

e. Compensation Committees will also review recommended merit increase data to determine if the distribution of merit increases would have an adverse impact on any protected class of employees. To the extent that a statistically significant adverse impact is identified within a group (e.g., the difference between the actual and expected results differs by more than 1.96 standard deviations), the Committee will investigate further to determine whether there is a legitimate business-related justification for such impact. Where there is no such justification, appropriate action will be taken, absent just cause, to correct the situation immediately, e.g. supplemental salary adjustments for adversely impacted employees.

f. Where the Compensation Committee recommendation departs from the supervisor's recommendation, the Committee will annotate the recommendation with the general reason for the adjustment. This information will be made available to the employee on request. To protect the privacy of other employees, the information will be provided on another form when requested. [AGREED]

9. Deciding Official Approval. The Division/Office/Field Office head or designee will consider the Compensation Committee's recommendations and will approve, deny or modify the committee's recommendations for those employees who are recommended for merit increases. The Deciding Official will serve as an impartial arbiter ensuring that merit pay decisions are fair and non-discriminatory. To the extent that performance standards incorporate or reflect organizational performance goals, the Deciding Official will also ensure that employee performance evaluations and merit increase recommendations are consistent with organizational performance.

Where the Deciding Official departs from the Compensation Committee recommendation, the Deciding Official will mark or annotate the decision with the general reason for the adjustment. This information will be made available to the employee upon request. To protect the privacy of other employees, the information will be provided on another form when requested.

10. Annual Publication of Overall Performance Ratings. The SEC will annually publish the general dispersion of merit pay increases (e.g., the number of employees at each merit increase level within each division/office). To the extent that employee privacy and business necessity allow, the SEC will endeavor to add transparency to the pay-for-performance process. [AGREED]

11. Data on Distribution of Merit Increases. Within fourteen days of the final determination of merit increase levels, the Union will be provided an electronic spreadsheet with data on the distribution of merit increases by division/office, location, grade, salary, age, race/national origin, gender, disability and bargaining unit status.

IV. Benefits.

A. Health Insurance Premiums. In addition to the standard Employer contribution premiums for employees enrolled in the Federal Employee Health Benefits (FEHB) program, the Employer will continue to contribute an additional $25 per pay period for each full-time employee enrolled in single coverage and an additional $50 per pay period for each full-time employee enrolled with family coverage; these amounts will be pro- rated for part-time employees. Beginning no later than January 2007, and in each succeeding year, the Employer's additional contribution will be increased by a percentage equal to the average percentage increase in FEHB premiums. In no event shall the Employer's contributions exceed the employee's total FEHB premium amount. These additional Employer contributions will be made in such a way so as to avoid any tax liability to the employee, if allowed by law.

B. Dental and Vision Insurance. The Employer will continue to provide Employer-funded dental and vision insurance to all employees with appointments of more than one year as agreed upon by the parties in the SEC-NTEU Agreement on Dental/Vision Plan, dated April 15,2004. [AGREED]

C. Retirement Plans. Subject to congressional authorization and TSP laws and regulations, the SEC will match up to an additional 3% of salary in TSP contributions (for both CSRS and FERS retirement program participants). However, if this has not been implemented by January 1, 2007, the Employer will, beginning pay period 1 of 2007, contribute an equivalent amount to a Life Cycle Account for each employee. Contributions are subject to all applicable Internal Revenue Service (IRS) rules and regulations.

V. Funding and Budget Limitations.

A. All obligations under this Agreement are subject to the availability of funds through the Agency's appropriations. The SEC will vigorously pursue appropriations that allow the SEC to fully meet the obligations created by this Agreement.

B. For purposes of this Agreement, sufficient funds will not be considered available only if the following conditions are met:

1. The Agency's appropriations for the following year do not increase by an amount sufficient to cover any increases in its expenditures as required by this Agreement;

2. The amount of the Agency's total appropriation, as well as the amount available for employee salaries and benefits, is more than one percent (1 %) less than the amounts requested in the President's budget;

3. There is no contrary indication of Congressional intent in the appropriations bill or accompanying legislative history (e.g., committee reports);

4. The Agency has sought savings in other areas of the budget to the maximum extent practicable; and

5. The Agency has sought other savings within the budget for salaries and benefits (e.g., hiring freezes), to the extent such measures would not interfere with the proper functioning of the agency.

C. If the Agency seeks to modify its obligations under this Agreement based on a lack of sufficient funds, it shall provide notice and a briefing to the Union. In this event, the Agency may elect to reopen this Agreement. Alternatively, it may fulfill its obligations under this Agreement by expending the available funds in the following order of priority:

1. Maintaining all current levels of pay and benefits;

2. Payment of annual employee pay increases associated with the increases to the base pay structure [Sections II.A.2 and II.B.1];

3. Indexing of Agency contributions to health benefits premiums [Section IV .A.];

4. Payment of employee merit pay increases [Section III.D.];

5. Locality Pay Increases [Section ll.B.3.];

6. Agency contributions to supplemental retirement plan or life cycle account [Section IV.C.]

If the Agency can only partially meet its obligation for one of the foregoing items, it shall do so on a pro rata basis.

D. Any changes to the Agency's obligations under this Agreement pursuant to the terms of this Section may only be implemented to the same extent that such practices (e.g., withholding or limiting employee pay increases) are also implemented for non-unit employees.

E. If any of the Agency's obligations are modified pursuant to the terms of this Section, such changes will only be effective for the relevant budget (fiscal) year. However, if funds later become available to the Agency to meet some or all of these original obligations, then such obligations will be fulfilled and made retroactive to the maximum extent possible.

F. In the event the Agency exercises the provisions of this Section to modify its obligations under the Agreement, the Union may re-open the Agreement to propose changes in these procedures for future application.

VI. Effective Dates.

All pay and benefit changes will be implemented as soon as reasonably practicable, but no later than January 1,2007. However, the Parties recognize that all changes to the performance management system may not be completed by this time.

The Parties agree that the SEC will realign the performance management cycle to the fiscal year. Since this would delay the employee merit increases otherwise due in September 2007 until pay period 1 in January 2008, employees will receive a one-time adjustment of these merit increases. This adjustment will be equal to one-third (33%) of the merit increase that the employee would otherwise receive under the terms of this Agreement, such adjustment being added to the amount of the employee's merit increase (as determined under Section III.D.).

VII. Duration.