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Last week, President Bush announced he was changing the formula used to allocate the locality-based portion of federal employees' annual pay raise. The new method gives more money to cities such as New York and San Francisco that have growing pay gaps between the public and private sectors. Cities such as Cincinnati and Chicago will lose money to make up for it.

Still, assuming Congress passes the 2.2 percent 2007 raise for civilians it already passed for the military, only 0.5 percent will be used for locality pay. The remaining 1.7 percent will go to across-the-board raises for everyone.

Congress likely will not make its final decision on the pay raise until well into 2007, meaning employees will receive the first several weeks' raise retroactively.

Meanwhile, the chart below will help you find your area's likely pay boost and help you to calculate your proposed 2007 salary.

How to Read the Chart

There are 31 cities that have separate locality rates. The remaining locations are grouped into the "Rest of U.S." category. This is the first year that the Kansas City metropolitan area; Orlando, Fla.; and St. Louis are not listed separately in the chart, having been moved back into the Rest of U.S. category.

The first column shows the recommended percentage point increase over the 2006 locality rates. The second column is the net pay increase, which includes the 1.7 percent across-the-board raise all civilian federal employees are expected to receive.

Note that the second column is not simply the first column plus 1.7 percent. It varies because the locality raise is calculated from a different base.

Calculate Your Pay

To calculate your recommended 2007 pay, find your base pay in this chart and multiply that by 1.7 percent, or 0.017. Then add that number to your base pay. Now, take the new number and multiply it by the total locality increase for your area. Add this to the previous number to arrive at your total pay.

For example, if you are a GS 1, Step 1 in Chicago, then you would take the base pay of $16,352 and multiply that by 1.7 percent, getting $278. Adding that to the base pay gets you to $16,630. Now multiply that figure by 21.79 percent, which is the 2007 locality adjustment (up 0.64 percentage points from 2006's 21.15 percent locality adjustment for Chicago). You now have $3,624 in locality adjustments. Add that to $16,630 and you have $20,254.

The calculation works exactly only for employees in Step 1 of any grade level. For other steps, the calculation is close, but not exact to the dollar.

* Wondering why the average locality increase is 0.62 percent and not the 0.5 percent that the president probably will assign for locality pay? That's because only the 48 continental states get locality adjustments. Federal employees in Alaska and Hawaii, and those serving abroad, don't receive these adjustments.

COMMENTS

• Dear Contracting Officer, I’m not positive, but what you imply seems to be both illegal and untruthful. Using my example of earning $60,000 per annum, to my understanding (and the TSP literature), the maximum requirement for my contribution to receive an additional 4 percent pay increase before taxes (due to matching funds) is: $60,000 times 0.05, which equals $3,000. To my knowledge, there is nothing in the TSP rules or literature that says I must give more or over how many pay periods this must be given to receive the promised matching funds. A scenario, if you will: Perhaps I wish to maximize my contributions, fully intend to complete my career with my organization, and contribute $597 per pay period (max for $15,500) to do so. Within six pay periods I have contributed $3,582; in my mind, more than sufficient to qualify for the maximum of $2,400 ($60,000 times 0.04 ) matching funds. But, IAW the CO’s information (and I hope my figures are correct), the TSP will be only contributing $2,400 divided by 26, or $92.31 per pay period for a total of $553.85; anticipating my contribution for another 20 pay periods. Say that despite my intentions, I have a critical family emergency and must terminate my services. I must stop my contributions due to the desperate need for funds elsewhere. At this point, I am going to assume (ouch) that I am fully vested. I will also propose a need for all available and liquid funds. Therefore I will be withdrawing my TSP, despite my best wishes and intentions, and counting every penny. CO, you spoke of fairness and equitability. How fair and/or equitable would it be that in my greatest hour of need, the government kept $1,846.15 ($2,400 minus $553.85) of matching funds owned to me in accordance with all their published rules, regulations, and literature? As I think upon it, and IAW TSP literature, the only folks who will not receive matching funds are: 1. Those who are not contributing their portion (5 percent), or 2. Anyone who does not contribute all 26 pay periods, whether it be due to excessive contributions or a temporary halt in contributions. I.e., if you skip one pay period, for any reason, you’ve probably lost some money. The inequities seem to lie heavily with anyone suffering a temporary need for funds, i.e. the employee. Tip off GovExec.com reader Posted January 9, 2007 11:50 AM
• Taxypayer, Suppose an employee leaves government service prior to maxing out contributions? How would the government recover excess matching contributions? Or, suppose an employee changes agencies? Would it be equitable for the losing agency to have borne a disproportionate share of matching contributions? In the 18 years that I have been a TSP participant, calculations have always been made on a pay period basis, with no problem. This is how private sector 401(k) plans are administered also (I used to be a benefits manager so I know). You are seeing a problem where there is none. Contracting Officer Posted January 4, 2007 3:24 PM
• Tip, I have asked this question over and over and you never get a satisfactory answer. The best I can find is that the payroll people are the ones in this process -- not TSP. If you’re FERS, and I assume you are, this is what you are to receive: 1 percent of your base salary each pay period even if you do not contribute. Next you get a dollar for dollar match on the first 3 percent of your salary that you contribute. Thus, in my mind if your annual salary is $78,000 you can get up to $2,340 in matching funds but I think the payroll people only provide a match of 3 percent of the pay period salary. Because you would only get $3,000 each pay period you would only receive a maximum match of $900 per pay period -- I believe the payroll people do this even if you contribute more than the $900. Thus, assume you contribute $1,500 instead of the $900 -- I believe they only provide matching fund of $900 to cover the 3 percent portion of TSP even though in my opinion they should match the entire amount until the year to date total reaches the $2,340 limit. Next, they match the next 2 percent (after the 3 percent) with 50 cents per dollar contributed). In the above example they would consider the total matched contribution to be 5 percent of the pay period salary for $3,000. They give you $900 for the first 3 percent and then match $300 (2 percent of pay period salary of $3,000 times 50 cents). Therefore, even though you put in $1,500 with plenty of room for more, they only give you a match of $1,200 when they should give you a match of $1,500 because you have not yet reached the limit on your annual pay established by the 3 percent limit. I suggest you only contribute 5 percent of your salary per pay period if you are expecting a match and then the match is not dollar for dollar but dollar for dollar on the first 3 percent and 50 cents per dollar on the next 2 percent. This further is limited because of the withholdings for taxes and benefits so you get limited in many ways. Figure your TSP match and contribution on a pay period basis and not on an annual basis. I ran into this because I contributed much more early in the year to get a longer period for return and saw that they were not matching the amount on the annual limits but calculating on a pay period basis and not the annual basis. Taxpayer Posted December 22, 2006 7:43 AM