Nonforeign Area COLA Reform Offered

Legislation (S-507) has been reintroduced in the Senate to replace the "nonforeign area" COLA system with locality pay. Those COLAs go to employees in Alaska, Hawaii and U.S. possessions outside the contiguous 48 states and are based on a comparison with living costs in the Washington, D.C. area. Proposals have circulated for several years to replace that system, which has been beset with controversy over how the adjustments are calculated, with locality pay under the system used for GS employees in the contiguous states. Locality pay is taxable while the COLAs are not, but locality pay counts toward retirement benefits while the COLAs do not, and the COLAs are capped at 25 percent above the GS base rate, while locality pay isn’t. The bill mirrors one that passed the Senate last year but that died in the House; it would phase in the change over three years, with guarantees that employees would not come out behind financially.