WASHINGTON, D.C. - Today, the Senate Homeland Security and Governmental Affairs Committee passed S. 3013, the Non-Foreign Area Retirement Equity Assurance Act (the Non-Foreign AREA Act), sponsored by Senators Daniel K. Akaka (D-HI), Ted Stevens (R-AK), Daniel Inouye (D-HI), and Lisa Murkowski (R-AK).  S. 3013 addresses the retirement inequity of federal workers in Hawaii, Alaska, and the U.S. Territories by phasing out non-foreign cost of living allowances (COLA) and phasing in locality pay over a period of three years.

"I am pleased that the Committee has endorsed these improvements to the retirement benefits of federal employees in Hawaii, Alaska, and the Territories," Senator Akaka said.  "With prices for everything from housing and gasoline to bread and milk constantly rising in the islands, this bill will ensure that federal employees' take-home pay is protected and that they are treated fairly in retirement."

"A big part of this change will be seen in federal employee retirement funds," said Senator Stevens. "Under the COLA system, Alaska retirees were not getting as good a deal as federal employees in the lower 48.  Many Alaskan federal employees nearing retirement have been relocating in order to guarantee a better retirement. With this change Alaska won't be losing those highly skilled, seasoned employees."

Senator Inouye added:  "The Committee's action brings the hard-working federal employees in Hawaii, Alaska, and the U.S. Territories one step closer to receiving equitable retirement benefits.  This is a matter of fairness, and our delegations remain committed to doing what is right to ensure that our federal workers are not penalized simply because of where they work."

"Alaska's federal employees have spoken," said Senator Murkowski. "They have told Washington that they are willing to forego their tax-free cost of living allowances in favor of a salary plan that provides greater benefits after retirement.  The new plan will provide the means for our federal employees, who came to Alaska from all corners of the Nation, to remain in Alaska after retirement.  This legislation is an investment in Alaska's future and theirs."  

Hawaii and Alaska are the only states in which federal employees do not receive locality pay. Because COLA is not taxed, it is not considered as part of an employee's base pay for retirement purposes.  Locality pay, on the other hand, is taxable income, but is part of an employee's base pay.  This means employees in Hawaii, Alaska and the territories had been retiring with much lower pay rates than their those in the lower 48.

The U.S. Office of Personnel Management (OPM) has been seeking to slowly phase out the COLA system in favor of the locality pay system, but the Akaka-Stevens legislation will speed up the process.  The result will be that the new system will be fully in place in three years rather than the seven suggested by OPM.  The legislation is intended to benefit all federal employee groups whose contiguous 48 counterparts currently receive locality pay.  Employees who will soon be forced to retire due to age and those intending to retire in three years or less will be able to buy in to the program to ensure that they may fully participate in the new system.

Two amendments were adopted today by the Committee.  The first was a technical amendment offered by Senators Akaka and Stevens to clarify various provisions of the bill.  The second, offered by Postal Subcommittee Chairman Tom Carper (D-DE), altered the way postal employees would be treated under the legislation. Under the bill as amended, all current and future postal employees in Alaska, Hawaii, and the non-foreign areas would continue to receive Territorial COLA (T-COLA), but the way T-COLA is calculated would change.  As such, postal employees would receive the greater of the T-COLA rates in effect on December 31, 2008, or the locality pay rate in effect for that area.  No employee would receive less than their current T-COLA rate and the 25 percent cap on T-COLA would be removed.

Senator Akaka said: "Although I believe it is best for all employees in the non-foreign areas to be treated the same, I understand the cost concerns of the Postal Service as do the postal employee unions.  I look forward to continued input from affected workers and others as this bill moves forward."

On May 29, 2008, Senator Akaka chaired a hearing in Honolulu, Hawaii on S. 3013.  The bill is now pending action by the full Senate.  Additional information on the bill and related issues can be found by clicking here. 

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