WASHINGTON, D.C. - U.S. Senator Daniel K. Akaka released following statement today on President George W. Bush's FY08 budget proposal, which calls for the phase-out of Non-Foreign COLA pay for federal employees, which would impact employees in Hawaii and Alaska:
"I have asked the Office of Personnel Management, which administers the Non-Foreign COLA allowance, to provide me with a full briefing on the President's proposal. My goal is to ensure that federal workers in Hawaii and the other non-contiguous regions are not disadvantaged when it comes to their retirement," Akaka said.
"Over the years, legitimate concerns have been raised regarding the differences between the pay and retirement benefits of General Schedule (GS) employees in COLA areas and their counterparts in the contiguous United States. Although COLA payments are not subject to federal tax, the allowance does not go toward base pay and retirement as with locality payments given to GS workers on the U.S. Mainland.
"COLA has been added to GS salaries in Hawaii and other non-contiguous areas since 1948. Yet, the introduction of locality pay in 1990, has put Hawaii federal workers at a disadvantage. Since that time, these affected employees have continued to differ on how to protect their annuities.
"I look forward to reviewing the President's proposal thoroughly," Akaka said.
Background on Non-Foreign COLA:
Since 1948, federal employees in Hawaii and the other non-contiguous areas of the U.S. (Hawaii, Alaska, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands) have received an allowance called Non-Foreign COLA to ensure that employees in high cost areas receive comparable pay to their U.S. mainland counterparts. COLA is not subject to federal or Social Security/Medicare taxes. In 1990, the Federal Employees Pay Comparability Act (FEPCA), included provisions for what is termed locality pay which is paid to federal employees in the contiguous United States. Unlike COLA, locality pay is taxed and considered part of base pay, which is used to calculate an employee's retirement annuity. Another difference is that U.S. Postal Service employees receive Non-Foreign COLA if employed by the Postal Service in the non-contiguous areas. However, postal employees in the contiguous United States do not receive locality pay.
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