Non-Foreign COLA Update
Achieving retirement equity for all federal workers

“Federal workers in Hawaii, Alaska, and the Territories now finally have equity in their retirement pay.  For too long, Hawaii federal employees received far less in retirement than
employees on the mainland doing the same jobs.  Those who wished to receive the full retirement benefits had to leave their families and work on the mainland for several years.  That ends with this new law.” 

Senator Akaka believes that retirement benefits for Federal employees in Hawaii, Alaska, and the Territories should be equal with their Mainland counterparts.  Since 1948, Federal employees in the non-contiguous areas of the U.S. have received Non-Foreign Cost of Living Allowances (COLA) to reflect the high cost of living.  COLA is not subject to federal income or Social Security/Medicare taxes, and it does not count for Federal retirement benefits.  Since 1990, the Federal employees on the Mainland have received locality pay, which is taxed and which counts for Federal retirement and Social Security benefits.

Senator Akaka worked tirelessly to achieve retirement equity.  In 2008, he held a series of meetings as well as a hearing on Oahu and Neighbor Islands to closely examine the issue, and then introduced the Non-Foreign Area Retirement Equity Assurance (AREA) Act (S. 3013) incorporating constituent feedback.  His bill passed the Senate in October 2008, but Congress adjourned before the House could act on it.  In March 2009, Senator Akaka reintroduced the Non-Foreign AREA Act (S. 507), cosponsored by Senators Lisa Murkowski (R-Alaska), Daniel K. Inouye (D-Hawaii), and Mark Begich (D-Alaska).  Senator Akaka fought to have the measure included in the National Defense Authorization Act for fiscal year 2010, and President Obama signed it into law on October 28, 2009.  On January 1, 2010, employees in non-foreign areas began receiving locality pay.

Senator Akaka is committed to overseeing the transition from non-foreign COLA to locality pay.  This means working with the Administration and Congress to ensure that Government-wide pay-freezes do not derail the transition to locality pay, and that employees received "saved" or "retained" pay - including Department of Defense (DoD) employees converting out of the National Security Personnel System - are not disadvantaged during the transition.

Latest Locality Pay News

       Retained Rate Employees Receive Same Locality Rate Increase as GS-Counterparts

On December 27, 2010, the Office of Personnel Management (OPM) issued a memorandum to agency heads, informing them of a new rule on pay for retained rate employees in the non-foreign areas during the January 2010 - January 2012 locality phase in.  The special rule requires the retained rate in non-foreign areas be set to reflect the applicable increases in locality pay for that locality pay area.  A copy of this memo is available here: LINK

       Hawaii Locality Pay Area and Rate Announced

The 2011 locality pay rates were announced on November 30, 2010.  Locality pay in Hawaii, Alaska and the U.S. Territories is being phased-in over three years in order to give agencies time to adjust their pay systems and budgets.  In 2011, the second year of the three-year phase-in under the Non-Foreign AREA Act, Hawaii Federal employees receive two-thirds of the new locality rate, and Non-Foreign COLA is reduced by 65 cents for each dollar of locality pay.  The Hawaii locality pay rate was set at 16.51 percent, therefore Federal employees in Hawaii will receive two-thirds of that, or 11.01 percent, in 2011 as the phase-in continues.

In 2010, in light of the economic crisis facing our country, President Obama exercised his authority to freeze locality rates for 2011.  Rates for the 32 existing locality pay areas were frozen at their 2010 levels, and rates for the new Hawaii and Alaska locality pay areas were calculated to be consistent with the frozen rates in other areas.

Frequently Asked Questions on the Transition to Locality Pay

For FAQs about implementation of the Non-Foreign Area Retirement Equity Assurance (AREA) Act, please click here: LINK

Staff from the Oversight of Government Management Subcommittee, the Office of Personnel Management, and the Honolulu-Pacific Federal Executive Board held informational sessions in Hawaii in December 2009 to answer questions. Slides from these presentations are available here: LINK

Constituent Services

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