TOPICS
TOPICS
OPM pushes to extend locality pay to Alaska, Hawaii
Cost-of-living allowances for federal employees in Hawaii, Alaska and the U.S. territories could be replaced with locality payments under a new Bush administration proposal sent to lawmakers Wednesday.
The legislative proposal seeks to correct potential disparities between locality-based comparability payments allowed under a 1990 law and nonforeign area COLAs authorized under general civil service law.
By law, locality pay is available only to employees in the 48 contiguous states and the District of Columbia, while the COLA program covers white-collar civilian federal employees in most other nonforeign areas, such as Alaska, Hawaii, Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands.
COLAs are a major component of total pay for federal employees outside the contiguous states. Such payments are not subject to federal income tax, but also are not creditable for retirement. Locality pay, on the other hand, is counted as basic pay for computing retirement benefits.
In a letter accompanying the proposal, Office of Personnel Management Director Linda Springer said there is a perception that total pay and retirement benefits for employees in nonforeign areas have "eroded gradually" in comparison with those for employees in the contiguous states.
"These perceived disparities between the pay and retirement benefits of those two groups of employees generate actual and potential staffing problems for federal agencies in nonforeign areas, especially in retaining employees near retirement," Springer wrote.
Under the proposal, COLAs would gradually be replaced with locality pay over a seven-year period beginning in 2008.
Springer noted that during the last 20 years, the COLA program has been "fraught with litigation," costing the government hundreds of millions of dollars in settlement payments and attorney fees.
Under one settlement, OPM agreed to implement a new methodology for setting COLAs, including a three-year survey cycle beginning in 2002. The results of that survey confirmed that COLA rates under the current calculations would decrease for many areas, likely causing additional litigation. That, and a potential constitutional challenge to the lack of locality pay in nonforeign areas, opens the possibility of future liabilities, Springer said.
Springer said implementing the proposal would produce modest savings in mandatory expenditures of about $1 million the first year. But the net cost increase over the first five years would be about $2 million, with a total cost of $109 million over the next 10 years.
"We believe this extension of locality pay to the nonforeign areas will appropriately apply effective and contemporary compensation practices to more federal employees and eliminate the inefficiencies and conflicts inherent in the outmoded approach taken by the COLA program," Springer wrote.
Sen. Daniel Akaka, D-Hawaii, said Wednesday that he plans to carefully review the proposal while also seeking input from affected employees.
"Together we can work to ensure that these federal workers are not disadvantaged when it comes to their compensation or retirement," Akaka said.
COMMENTS
- I lived in Anchorage Alaska in 05, since then you have dropped the locality to 23%. I live in Galveston and get a 28% locality pay. It cost me far more to live in Alaska than in Galveston. Whoever stated it cost less living in Alaska than the lower 48 has never lived there. Try it sometime, on a GS 4/10, then we can talk, that will never happen. steven Posted May 6, 2009 4:10 PM
- Why must we bicker on the merits of COLA v. Locality Pay when a simple OPM Regulation change, allowing COLA to be considered a portion of basic pay for retirement, as Locality Pay does, will resolve 90% of the unrest. FERS and Postal employees who depend on the COLA will continue to receive it and those planning retirement will not find it necessary to find a CONUS position to set their high-3. It would appear that under NSPS, management can set employee salary anywhere within a pay band, an NSPS employee is likely to see no raise in salary. The every day cost of living of those in the COLA areas has risen dramatically in recent years, yet the COLA is capped at 25% - dennis Posted October 8, 2008 9:41 PM
- Pay close attention to the comment made by Ida Holtsinger on 6/15: "Locality pay is based on labor market conditions, and especially under NSPS, not all occupations will receive the locality pay or the same locality pay." And note that, in NSPS, the poorly named "locality pay" or "local market supplement" can actually be the same rate for a given occupation regardless of where the position is located. That's what happened to physicians and dentists across the board - the same local market supplement everywhere. For recent conversions to NSPS there wasn't much of a pay jolt for any given individual since whatever they had been paid rolled over into NSPS. The tough time will come in trying to retain current staff or hire to fill vacancies as they arise (DoD is already short-staffed). You may not cry much for doctors/dentists since they're at the high end of the federal pay scale, but if you're a veteran and want to get healthcare at a DoD/VA facility, it may take much longer in the future. Fed26 Posted August 25, 2008 3:17 PM
