The Federal Managers Association has expressed disappointment that Congress did not complete action this year on a proposal to replace the "nonforeign area" COLA program with locality pay.
In the waning days of its session, the Senate passed S-3031, which would provide locality pay rather than the COLA to affected employees, most of whom work in Alaska and Hawaii. Under the nonforeign area COLA system, employees can get tax-free salary adjustments of up to 25 percent above the general schedule base amount. However, the COLA does not count toward retirement benefits, and there has been extensive anecdotal evidence of employees leaving areas where the COLAs are paid in order to get under the locality pay program applying in the contiguous 48 states, especially late in their careers so that they get a higher "high three" salary base on which retirement benefits are based. In particular, employees are said to be leaving for jobs in the Los Angeles and San Francisco localities, where locality pay is about 25 and about 33 percent above the GS base, and increasing every year.
Both the House and Senate conducted hearings on the issue and OPM favored the reform, noting that there is no cap on locality pay and arguing that most employees would be better off with locality pay rather than COLAs. Several disputes arose, however, including the length of the transition period and whether employees should be given the choice of the two types of payments. The bill as passed by the Senate called for a mandatory phaseout over three years, with guarantees that employees would come out at least as well in the transition. However, the House did not take up the bill.
FMA National President Darryl Perkinson said the COLA system is "outdated and acts as a barrier to federal employment. By acting now and implementing this market-oriented approach to determining local salaries, Congress can arm Hawaii and Alaska federal managers with one more tool to attract and retain today’s highly mobile and talented workforce. We at FMA are extremely disappointed that the House did not see fit to follow in the Senate’s footsteps and consider this legislation before adjournment."
