Non-Foreign Area COLAs Also Targeted

In a separate document, the administration offered a justification for its proposal to end the “non-foreign area” cost-of-living allowance program and replace it with locality pay. That document, part of an assessment of human capital programs, says that the program is “philosophically inconsistent” with federal pay law. Under the program, about 49,000 employees in Alaska, Hawaii, Guam and the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands receive additional pay linked to living costs, where locality pay for general schedule employees is based on local labor market conditions. “The absence of locality pay in the COLA areas, exclusion of COLA payments from retirement benefits, and instability of living cost comparisons with Washington, D.C., over time have fueled complaints and litigation from the COLA areas,” the assessment says. If the switch were made, the new locality pay would count toward retirement, unlike the current COLAs, although employees would be required to contribute toward retirement from that money.