Haley Stevens: “I join my friend from Hawaii in introducing the Non-foreign Area Retirement Equity Act. I thank Senator Akaka for his…”

“I join my friend from Hawaii in introducing the Non-foreign Area Retirement Equity Act. I thank Senator Akaka for his hard work on this important legislation that finally brings retirement equity to the thousands of Federal employees in Alaska and Hawaii. Alaska and Hawaii are the only States in which Federal employees do not receive locality pay. Instead, they receive what is called a nonforeign cost of living allowance, or COLA. COLA was put in place in 1949, before Alaska and Hawaii were States. It is based on the cost of living in an area compared to the cost of living in Washington, DC. COLA was not available to employees in the lower 48 States. When locality pay was established to benefit Federal employees in the lower 48, Alaska and Hawaii were not included because they were already under the COLA system. Locality pay brings Federal salaries closer to private industry salaries in an area. The key difference between these two systems is how it affects a Federal employee's retirement. As you know, a Federal employee's retirement is based on their 'high 3' years of service, usually the final 3 years of their base pay salary. COLA is nontaxable income that cannot exceed 25 percent of the base pay. It is currently being reduced in Alaska and Hawaii by 1 percent each year. Because COLA is not taxed, it is not considered as part of an employee's base pay for retirement purposes.”