Short title

This Act may be cited as the

Non-Foreign Area Retirement Equity Assurance Act of 2008

or the

Non-Foreign AREA Act of 2008

Extension of Locality Pay

(a)

Locality-based comparability payments

Section 5304(f)(1) of title 5, United States Code, is amended by striking subparagraph (A) and inserting the following:

(A)each General Schedule position in the United States, as defined under section 5921(4), and its territories and possessions, including the Commonwealth of Puerto Rico and the Commonwealth of the Northern Mariana Islands shall be included within a pay locality; and

(b)

Allowances based on living costs and conditions of environment

Section 5941 of title 5, United States Code, is amended— (1)in subsection (a), by adding after the last sentence Notwithstanding any preceding provision of this subsection, the cost-of-living allowance rate based on paragraph (1) of this subsection shall be the cost-of-living allowance rate in effect on December 31, 2008, except as adjusted under subsection (c).; (2)by redesignating subsection (b) as subsection (d); and (3)by inserting after subsection (a) the following:

(b)This section shall apply only to areas that are designated as cost-of-living allowance areas as in effect on December 31, 2008. (c) (1)The cost-of-living allowance rate payable under this section shall be adjusted on the first day of the first applicable pay period beginning on or after— (A)January 1, 2009; and (B)on January 1 of each calendar year in which a locality-based comparability adjustment takes effect under section 4 (2) and (3) of the Non-Foreign Area Retirement Equity Assurance Act of 2008. (2) (A)In this paragraph, the term applicable locality-based comparability pay percentage means, with respect to calendar year 2009 and each calendar year thereafter, the applicable percentage under section 4 (1), (2), or (3) of Non-Foreign Area Retirement Equity Assurance Act of 2008. (B)Each adjusted cost-of-living allowance rate under paragraph (1) shall be computed by— (i)subtracting 65 percent of the applicable locality-based comparability pay percentage from the cost-of-living allowance percentage rate in effect on December 31, 2008; and (ii)dividing the resulting percentage determined under clause (i) by the sum of— (I)one; and (II)the applicable locality-based comparability payment percentage expressed as a numeral. (3)No allowance rate computed under paragraph (2) may be less than zero. (4)Each allowance rate computed under paragraph (2) shall be paid as a percentage of basic pay (including any applicable locality-based comparability payment under section 5304 or similar provision of law and any applicable special rate of pay under section 5305 or similar provision of law).

Adjustment of special rates

(a)

In General

Each special rate of pay established under section 5305 of title 5, United States Code, and payable in an area designated as a cost-of-living allowance area under section 5941(a) of that title, shall be adjusted, on the dates prescribed by section 4 of this Act, in accordance with regulations prescribed by the Director of the Office of Personnel Management under section 9 of this Act. (b)

Department of Veterans Affairs

Each special rate of pay established under section 7455 of title 38, United States Code, and payable in a location designated as a cost-of-living allowance area under section 5941(a)(1) of title 5, United States Code, shall be adjusted in accordance with regulations prescribed by the Secretary of Veterans Affairs that are consistent with the regulations issued by the Director of the Office of Personnel Management under subsection (a). (c)

Temporary adjustment

Regulations issued under subsection (a) or (b) may provide that statutory limitations on the amount of such special rates may be temporarily raised to a higher level during the transition period described in section 4 ending on the first day of the first pay period beginning on or after January 1, 2011, at which time any special rate of pay in excess of the applicable limitation shall be converted to a retained rate under section 5363 of title 5, United States Code.

Transition schedule for locality-based comparability payments

Notwithstanding any other provision of this Act or section 5304 or 5304a of title 5, United States Code, in implementing the amendments made by this Act, for each non-foreign area determined under section 5941(b) of that title, the applicable rate for the locality-based comparability adjustment that is used in the computation required under section 5941(c) of that title shall be adjusted effective on the first day of the first pay period beginning on or after January 1— (1)in calendar year 2009, by using 1/3 of the locality pay percentage for the rest of United States locality pay area; (2)in calendar year 2010, by using 2/3 of the otherwise applicable comparability payment approved by the President for each non-foreign area; and (3)in calendar year 2011 and each subsequent year, by using the full amount of the applicable comparability payment approved by the President for each non-foreign area.

Savings provision

(a)

In General

The application of this Act to any employee may not result in the amount of the decrease in the amount of pay attributable to special rate pay and the cost-of-living allowance as in effect on the date of enactment of this Act exceeding the amount of the increase in the locality-based comparability payments paid to that employee. (b)

Sense of Congress

It is the sense of Congress that the application of this Act to any employee should not result in a decrease in the take home pay of that employee.

Application to other eligible employees

(a)

In General

(1)

Definition

In this subsection, the term covered employee means— (A)any employee who— (i)on— (I)the day before the date of enactment of this Act— (aa)was eligible to be paid a cost-of-living allowance under 5941 of title 5, United States Code; and (bb)was not eligible to be paid locality-based comparability payments under 5304 or 5304a of that title; or (II)or after the date of enactment of this Act becomes eligible to be paid a cost-of-living allowance under 5941 of title 5, United States Code; and (ii)except as provided under paragraph (2), is not covered under— (I)section 5941 of title 5, United States Code (as amended by section 2 of this Act); and (II)section 4 of this Act; or (B)any employee who— (i)on the day before the date of enactment of this Act— (I)was eligible to be paid an allowance under section 1603(b) of title 10, United States Code; (II)was eligible to be paid an allowance under section 1005(b) of title 39, United States Code; or (III)was employed by the Transportation Security Administration of the Department of Homeland Security and was eligible to be paid an allowance based on section 5941 of title 5, United States Code; or (ii)on or after the date of enactment of this Act— (I)becomes eligible to be paid an allowance under section 1603(b) of title 10, United States Code; (II)becomes eligible to be paid an allowance under section 1005(b) of title 39, United States Code; or (III)is employed by the Transportation Security Administration of the Department of Homeland Security and becomes eligible to be paid an allowance based on section 5941 of title 5, United States Code. (2)

Application to covered employees

(A)

In general

Notwithstanding any provision of title 5, United States Code, for purposes of this Act (including the amendments made by this Act) any covered employee shall be treated as an employee to whom section 5941 of title 5, United States Code (as amended by section 2 of this Act), and section 4 of this Act apply. (B)

Pay fixed by statute

Pay to covered employees under section 5304 or 5304a of title 5, United States Code, as a result of the application of this Act shall be considered to be fixed by statute. (C)

Performance appraisal system

With respect to a covered employee who is subject to a performance appraisal system no part of pay attributable to locality-based comparability payments as a result of the application of this Act including section 5941 of title 5, United States Code (as amended by section 2 of this Act), may be reduced on the basis of the performance of that employee. (b)

Postal Service employees in nonforeign areas

Section 1005(b) of title 39, United States Code, is amended by inserting and the Non-Foreign Area Retirement Equity Assurance Act of 2008 after Section 5941 of title 5.

Election of additional basic pay for annuity computation by employees

(a)

Definition

In this section the term covered employee means any employee— (1)to whom section 4 applies; (2)who is separated from service by reason of retirement under chapter 83 or 84 of title 5, United States Code, during the period of January 1, 2009, through December 31, 2011; and (3)who files and election with the Office of Personnel Management under subsection (b). (b)

Election

(1)

In general

An employee described under subsection (a) (1) and (2) may file an election with the Office of Personnel Management to be covered under this section. (2)

Deadline

An election under this subsection may be filed not later than December 31, 2011. (c)

Computation of annuity

For purposes of the computation of an annuity of a covered employee any cost-of-living allowance under section 5941 of title 5, United States Code, paid to that employee during the first applicable pay period beginning on or after January 1, 2009 through the first applicable pay period ending on or after December 31, 2011, shall be considered basic pay as defined under section 8331(3) or 8401(4) of that title. (d)

Civil Service Retirement and Disability Retirement Fund

(1)

Employee contributions

A covered employee shall pay into the Civil Service Retirement and Disability Retirement Fund— (A)an amount equal to the difference between— (i)employee contributions that would have been deducted and withheld from pay under section 8334 or 8422 of title 5, United States Code, during the period described under subsection (c) of this section if that subsection had been in effect during that period; and (ii)employee contributions that were actually deducted and withheld from pay under section 8334 or 8422 of title 5, United States Code, during that period; and (B)interest as prescribed under section 8334(e) of title 5, United States Code, based on the amount determined under subparagraph (A). (2)

Agency contributions

(A)

In general

The employing agency of a covered employee shall pay into the Civil Service Retirement and Disability Retirement Fund an amount for applicable agency contributions based on payments made under paragraph (1). (B)

Source

Amounts paid under this paragraph shall be contributed from the appropriation or fund used to pay the employee. (3)

Regulations

The Office of Personnel Management may prescribe regulations to carry out this section.

Election of coverage by employees

(a)

In general

Notwithstanding any other provision of this Act, an employee may make an irrevocable election in accordance with this section, if— (1)that employee is paid an allowance under section 5491 of title 5, United States Code, during a pay period in which the date of the enactment of this Act occurs; or (2)that employee— (A)is a covered employee as defined under section 6(a)(1); and (B)during a pay period in which the date of the enactment of this Act occurs is paid an allowance— (i)under section 1603(b) of title 10, United States Code; (ii)under section 1005(b) of title 39, United States Code; or (iii)based on section 5941 of title 5, United States Code. (b)

Filing election

Not later than 60 days after the date of enactment of this Act, an employee described under subsection (a) may file an election with the Office of Personnel Management to be treated for all purposes— (1)in accordance with the provisions of this Act (including the amendments made by this Act); or (2)as if the provisions of this Act (including the amendments made by this Act) had not been enacted, except that the cost-of-living allowance rate paid to that employee shall be the cost-of-living allowance rate in effect on December 31, 2008, for that employee without any adjustment after that date. (c)

Failure To file

Failure to make a timely election under this section shall be treated in the same manner as an election made under subsection (b)(1) on the last day authorized under that subsection. (d)

Notice

To the greatest extent practicable, the Office of Personnel Management shall provide timely notice of the election which may be filed under this section to employees described under subsection (a).

Regulations

(a)

In General

The Director of the Office of Personnel Management shall prescribe regulations to carry out this Act, including— (1)rules for special rate employees described under section 3; (2)rules for adjusting rates of basic pay for employees in pay systems administered by the Office of Personnel Management when such employees are not entitled to locality-based comparability payments under section 5304 of title 5, United States Code, without regard to otherwise applicable statutory pay limitations during the transition period described in section 4 ending on the first day of the first pay period beginning on or after January 1, 2011; and (3)rules governing establishment and adjustment of saved or retained rates for any employee whose rate of pay exceeds applicable pay limitations on the first day of the first pay period beginning on or after January 1, 2011. (b)

Other Pay Systems

With the concurrence of the Director of the Office of Personnel Management, the administrator of a pay system not administered by the Office of Personnel Management shall prescribe regulations to carry out this Act with respect to employees in such pay system, consistent with the regulations issued by the Office under subsection (a).

10.

Effective dates

(a)

In General

Except as provided by subsection (b), this Act (including the amendments made by this Act) shall take effect on the date of enactment of this Act. (b)

Locality pay and schedule

The amendments made by section 2 and the provisions of section 4 shall take effect on the first day of the first applicable pay period beginning on or after January 1, 2009.