FMA LAUDS SENATE APPROVAL EXTENDING BENEFITS TO ALL FEDS; HOUSE FAILURE TO FOLLOW SUIT UNACCEPTABLE - October 3, 2008

Federal employees in these remote states deserve the same benefits of their stateside peers

Alexandria, VA – The Federal Managers Association (FMA) commends Senate passage of legislation which would phase-out the current non-foreign cost of living adjustment and phase-in locality pay, but is disappointed by suspension of measure in House.

The United States Senate passed S. 3013, the Non-Foreign Area Retirement Equity Assurance Act, by unanimous consent late Wednesday night as part of its latest effort to extend locality pay benefits to all federal employees. The House, however, has made clear that it will not address the bill during the waning days of the 110th Congress, and FMA is extremely disappointed that this critical legislation affecting many hardworking civil servants will be put on hold. FMA will continue to press the need for final House approval of the measure to provide for equitable federal compensation across the board.

“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 Daniel K. Akaka (D-HI) stated in a press release following the measure’s passage. “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.”

Sponsored by Senators Akaka, 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, combined with an annuity buy-in aimed at stabilizing the current retirement eligible workforce. The legislation also advises a 35 percent offset to COLA to protect the pay of all federal employees as they transition to locality pay.

Federal employees who reside in Alaska and Hawaii receive a tax-free COLA in their pay. However, the federal government fails to credit this COLA to basic pay for retirement purposes and residents outside the contiguous United States do not receive the locality pay benefit most federal employees enjoy. This practice has a devastating effect on the retirement benefits rightly earned by these hardworking civil servants. Federal employees who reside in Alaska and Hawaii are denied these payments solely because they reside in these states, despite the fact the cost of living in Alaska and Hawaii consistently ranks among the highest in the nation.

In testimony presented in May before the Senate Homeland Security and Governmental Affairs Subcommittee on Government Oversight, the Federal Workforce and the District of Columbia, FMA stated, “High locality pay in the continental 48 states lures managers, high-level technicians, and engineers to leave Hawaii and Alaska to seek higher pay and an increased annuity towards the end of their careers. With the Los Angeles area offering a 25.26 percent locality adjustment and the San Francisco area offering 32.53 percent, it is easy to see why employees nearing the end of their careers would be looking to complete their final three years in these cities. Specific data to document this migration is hard to come by, but the stories are endless.”

For the federal government to remain the employer of choice, we must offer a competitive salary. Locality pay takes into account the cost of labor in a given area and was originally enacted to close the gap between public and private sector wages. Today, managers and supervisors in Hawaii are facing real retention and recruitment issues and we need to expedite a COLA to locality pay conversion in order to compete with not only the private sector, but also our federal counterparts on the mainland. With a 35 percent offset in the bill, younger workers will not be adversely impacted by a change in the pay system. Additionally, employees in the Federal Employee Retirement System will see increased eligible matching funds for their Thrift Savings Plan (TSP) because their base pay will be increased by the locality pay amount. In fact, over a career, these matching funds can amount to an estimated $31,000 for a GS-9. The resulting compensation package will make the federal government more competitive in the current tight labor market. This is essential if the highly critical missions of the federal agencies in Hawaii and Alaska are to be met.

FMA National President Darryl Perkinson commented, “COLA served its purpose half a century ago. It is now outdated and acts as a barrier to federal employment." Perkinson went on to say, "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 legislaton before adjournment.”