Increased Pay and Better Retirement Coming to Federal Workers in Alaska, Hawaii, and U.S. Territories
November 6, 2009
Nearly 20 years after the passage of the Federal Employees Pay Comparability Act, legislation that established the federal locality pay structure but left those stationed in Alaska, Hawaii, and the U.S. territories out of the system, federal workers from these areas will soon be getting justly compensated for their service.
In a Defense bill that included major victories such as the repeal of the National Security Personnel System and the establishment of a sick leave retirement benefit for FERS employees, the expansion of locality pay to non-foreign areas seemed like a footnote. However, to those federal employees stationed outside of the contiguous 48 states, this change will make an enormous difference.
Under the new law, the biggest change will be a dramatic increase in the value of employees’ retirement annuities. Currently, workers located outside of the mainland United States receive a cost-of-living allowance that ranges from 13% to 25% depending on the location. While this is a great benefit, the tradeoff for these workers is they don’t get any locality pay whatsoever. In addition, an employee’s “high three,” which is a critical figure used to calculate one’s retirement annuity, is calculated using only a worker’s base pay and locality pay. The cost-of-living allowance is ignored entirely in the annuity calculation. By moving into the locality pay system, an employee’s high three will be increased significantly, and the result will be a much bigger annuity payment for the employee upon retirement.
In time, this change in law will also represent a significant boost in pay for impacted federal employees. These employees will soon receive locality pay in lieu of a yearly cost-of-living allowance. Since pay data must be collected to make a determination on pay gaps, it is not currently possible to say what the locality pay adjustments will be for all the impacted areas, although the pay adjustments are likely to range between the highest and lowest pay adjustments given to current locality pay areas. The minimum locality pay adjustment that these areas will receive is the adjustment given to the Rest of U.S. locality, currently at 13.86%, while the highest possible pay adjustment could go up to or even exceed the San Francisco locality, which currently receives a 34.35% pay adjustment above the base GS pay levels.
The shift into the locality pay system will take place incrementally from calendar years 2010 to 2012.