WASHINGTON, D.C. - The United States Senate passed S. 3013, the Non-Foreign Area Retirement Equity Assurance Act (the Non-Foreign AREA Act), late tonight by unanimous consent.  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 Senate has acted to address the inequity in retirement benefits for 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 Hawaii, this bill will ensure that federal employees' take-home pay is protected and that they are treated fairly in retirement."

Senator Inouye added: "This is an issue of fairness.  It included other factors - such as whether you are a relatively new federal employee with a long path ahead or are fairly near retirement after a productive career - that made the matter more complex.  In the end, this legislation is an important step forward to ensuring that hard-working federal employees in noncontiguous areas are not disadvantaged ." 

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 factored into retirement. This means employees in Hawaii, Alaska and the territories had been retiring with much lower pay rates than their counterparts in the continental U.S.

The U.S. Office of Personnel Management (OPM) in the Bush Administration objected to several provisions in Senator Akaka's legislation that were different from the legislative proposal the agency sent to Congress in May 2007, in particular a provision allowing current federal workers the option of retaining COLA and not receiving locality pay.

"While I believe it is important for federal workers to have a choice in whether to retain COLA or begin receiving locality pay, the Administration insisted that the opt-out provision be removed," Senator Akaka said. "Should this bill be signed into law, I will continue to review the legislation and act to address any issues that may arise. It is imperative that federal workers in Hawaii and the other non-foreign areas not be disadvantaged when it comes to their pay and retirement."

Senator Akaka is Chairman of the Homeland Security and Governmental Affairs Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia.

Senator Inouye is a senior member of the Senate Appropriations Committee.

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