Non-Foreign Area Retirement Equity Assurance Act of 2008 (S. 3013) Senate Committee on Homeland Security and Governmental Affairs Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia Senator Daniel K. Akaka, Chairman Jennifer Tyree, Chief Counsel Thomas Richards, Professional Staff Member

This bill is a discussion piece This bill is a discussion piece Administration proposed draft legislation on May 29, 2007 Administration proposed draft legislation on May 29, 2007 Senate Subcommittee staff met with Federal employees in Hawaii the week of July 4 th, 2007 Senate Subcommittee staff met with Federal employees in Hawaii the week of July 4 th, 2007 Solicited feedback through FAQs on Solicited feedback through FAQs on

OPM visited Hawaii in January 2008 OPM visited Hawaii in January 2008 Senator Stevens and OPM met with Federal employees in Alaska in March 2008 Senator Stevens and OPM met with Federal employees in Alaska in March 2008 May 13, 2008, Senators Akaka, Stevens, Inouye, and Murkowski introduced S. 3013, the Non-Foreign AREA Act May 13, 2008, Senators Akaka, Stevens, Inouye, and Murkowski introduced S. 3013, the Non-Foreign AREA Act Subcommittee meetings and hearing in the State of Hawaii the week of May 27, 2008 Subcommittee meetings and hearing in the State of Hawaii the week of May 27, 2008

“Together we can work to ensure that these federal workers are not disadvantaged when it comes to their compensation or retirement." “Together we can work to ensure that these federal workers are not disadvantaged when it comes to their compensation or retirement." Senator Daniel K. Akaka May 30, 2007

Senator Akaka’s guiding principles in developing the discussion piece: –Protect employees’ take-home pay –Cover all employees –Incorporate feedback from affected employees –Work with fellow Senators from Alaska and Hawaii

Differences between Administration’s proposal and S Administration Proposal S. 3013, Non-Foreign AREA 7-year phase-in of locality pay. 3-year phase-in of locality pay. 85 percent offset of non-foreign COLA to protect take home pay for less than 50 percent of the workforce. 65 percent offset of non-foreign COLA to protect take home pay for all affected employees. Employees would not have a choice of COLA or locality pay. Current employees would have a choice of COLA or locality pay. New employees would be given locality pay.

Administration Proposal S. 3013, Non-Foreign AREA Does not address employees receiving special pay rates. Protects employees receiving special pay rates from having their pay reduced. Does not address other employees receiving COLA who may not otherwise receive locality pay like Senior Executive Service. Covers all employees currently receiving COLA. Does not address employees facing mandatory retirement like law enforcement officers or employees nearing retirement. Allows all employees eligible to retire in the next three years to buy back their time so they can receive the full retirement benefits of locality pay.

Locality Pay Offset –As locality pay is phased in, COLA is reduced at a slower rate. For every 1 percent of locality phased in,.65 percent of COLA is phased out. Hypothetical calculation: 20% (Locality) * 0.65 (65% of Locality) = 13% (Offset) 25% (COLA) – 13% (Offset) = 12% (COLA) 20% (Locality) + 12% (COLA with Offset) = 32% COLA must equal the offset to go away: 25% (COLA) – 25% (Offset) = 0% (COLA) 25% (Offset) / 0.65 (65% of Locality) = 38.47% (Locality)

Postal Employees –Frozen T-COLA leaves postal employees vulnerable No justification for different T-COLA amounts No justification for different T-COLA amounts No guarantee of how long employees will receive T- COLA No guarantee of how long employees will receive T- COLA –Territorial COLA transitions to Territorial Pay Counts towards retirement and is taxed Counts towards retirement and is taxed Based on employment costs, but not a direct comparability of like occupations Based on employment costs, but not a direct comparability of like occupations

Legislative process –S has been referred to the Homeland Security & Governmental Affairs Committee –Meetings across the State of Hawaii the week of May 27, 2008 –Field Hearing in Honolulu on May 29, 2008

Next Steps –Continue to solicit views from affected employees –Committee consideration and markup –Senate Floor consideration –House consideration –President’s signature or veto

"The legislation we introduce today is the result of the many comments and questions we have received from employees in the non-foreign areas and the collective efforts of Senators Stevens, Inouye, Murkowski, and me to find an equitable solution to a difficult issue that continues to lack a consensus. "The legislation we introduce today is the result of the many comments and questions we have received from employees in the non-foreign areas and the collective efforts of Senators Stevens, Inouye, Murkowski, and me to find an equitable solution to a difficult issue that continues to lack a consensus. “This bill is not the last word, only the latest step forward toward retirement equity. I continue to encourage employees in Alaska, Hawaii, and in the territories to write me or attend our meetings and let me know your questions and concerns.” Senator Daniel K. Akaka May 13, 2008

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