[Federal Register Volume 66, Number 218 (Friday, November 9, 2001)]
[Rules and Regulations]
[Pages 56751-56752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-28057]



  Federal Register / Vol. 66, No. 218 / Friday, November 9, 2001 / 
Rules and Regulations  

[[Page 56751]]


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 591

RIN 3206-AJ40


Cost-of-Living Allowances (Nonforeign Areas); Commissary/Exchange 
Rates; Survey Frequency; Gradual Reductions

AGENCY: Office of Personnel Management.

ACTION: Interim rule.

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SUMMARY: The Office of Personnel Management (OPM) is issuing interim 
regulations to implement recent amendments to Executive Order 10000 
regarding nonforeign area cost-of-living allowances (COLAs). These 
regulations eliminate the separate COLA rate paid to Federal employees 
with commissary and exchange privileges; allow OPM to conduct COLA 
surveys less frequently; and permit OPM to reduce COLA rates gradually 
regardless of the cause of the reduction. These changes will accomplish 
several of the provisions agreed upon under a recent settlement of 
litigation concerning nonforeign area COLAs.

DATES: Effective date: November 9, 2001. Implementation date: First day 
of the first pay period beginning on or after November 9, 2001. Comment 
date: Submit comments on or before January 8, 2002.

ADDRESSES: Send or deliver comments to Donald J. Winstead, Assistant 
Director for Compensation Administration, Workforce Compensation and 
Performance Service, Office of Personnel Management, Room 7H31, 1900 E 
Street NW., Washington, DC 20415-8200; fax: (202) 606-4264; or e-mail: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Donald L. Paquin, (202) 606-2838; fax: 
(202) 606-4264; or e-mail: [email protected].

SUPPLEMENTARY INFORMATION: Section 5941 of title 5, United States Code, 
authorizes the payment of cost-of-living allowances (COLAs) to 
employees of the Federal Government stationed in certain nonforeign 
areas outside the contiguous 48 States whose rates of basic pay are 
fixed by statute. The Government pays nonforeign area COLAs to General 
Schedule, U.S. Postal Service, and certain other Federal employees in 
Alaska, Hawaii, Guam and the Commonwealth of the Northern Mariana 
Islands (CNMI), Puerto Rico, and the U.S. Virgin Islands. The Office of 
Personnel Management (OPM) conducts living-cost surveys in each 
allowance area to determine whether, and to what degree, local living 
costs are higher than those in the Washington, DC, area. OPM sets the 
COLA rate for each area based on the results of these surveys. The 
current COLA rates were set pursuant to the settlement of Caraballo, et 
al. v. United States, No. 1997-0027 (D.V.I), August 17, 2000, and 
became effective in October 2000.
    Executive Order 10000 delegates to OPM the authority to administer 
the nonforeign area COLA program and prescribes certain operational 
features of the program. On April 5, 2001, the President signed E.O. 
13207 (published April 9, 2001, at 66 FR 18399) to amend E.O. 10000 to 
conform to agreements made in the Caraballo settlement. Caraballo was a 
class-action lawsuit in which the plaintiffs contested the methodology 
OPM used to determine COLA rates. The amendments to E.O. 10000 (1) 
remove the requirement that OPM establish separate COLA rates for 
employees who have commissary and exchange privileges; (2) allow OPM to 
conduct COLA surveys less frequently (e.g., once every 3 years in each 
of the allowance areas instead of annually); and (3) allow OPM to 
reduce COLA rates gradually regardless of the cause of the reduction.
    We are issuing interim regulations to implement the amendments to 
E.O. 10000. Pursuant to the Caraballo settlement, we plan to adopt 
several other regulatory changes. We have set out these regulatory 
changes in proposed regulations published separately in this issue of 
the Federal Register.

Commissary/Exchange COLA Rate

    Prior to the recent amendments, E.O. 10000 required that OPM offset 
COLAs when quarters or purchasing privileges are furnished at a cost 
substantially lower than local prevailing costs. The rent for quarters 
is set at local prevailing rates in accordance with Office of 
Management and Budget Circular A-47. For over a decade, OPM has not 
established a lower COLA rate for employees in Government quarters. 
However, OPM established a separate rate category for employees who 
received commissary and exchange privileges as a result of their 
Federal civilian employment.
    As permitted by the Department of Defense, some agencies offer 
commissary and exchange privileges as a recruitment incentive to 
encourage employees to accept positions in the Guam/CNMI allowance 
area. The requirement to take into consideration such privileges and 
set a separate and lower COLA rate for these employees effectively 
undermined the recruitment incentive. The removal of this requirement 
in E.O. 10000 improves the effectiveness of the commissary and exchange 
privileges recruitment incentive.
    Therefore, we are eliminating from OPM's regulations the separate 
rate category applied to employees who receive commissary and exchange 
privileges. This change will currently affect only civilian employees 
in the Guam/CNMI allowance area who receive the 22.5 percent 
Commissary/Exchange COLA rate. Effective with these regulations, all 
Federal civilian employees in Guam will receive the 25 percent COLA 
rate currently set for employees without commissary and exchange 
privileges.

Survey Frequency

    The amendments to E.O. 10000 removed the requirement for annual 
surveys; therefore, we are making a corresponding change in the COLA 
regulations. This change will permit the Government to survey allowance 
areas once every 3 years on a rotational basis.

Gradual Reductions

    Prior to the recent amendments, E.O. 10000 prohibited OPM from 
implementing a COLA rate reduction on a gradual basis unless the 
reduction was because of program or methodology revisions. The 
amendment to E.O. 10000 removed this condition, allowing OPM to reduce 
COLA rates on a gradual basis whether the reduction is due to a change 
in the methodology or a relative change in living costs. This amendment 
conforms to one of the terms of the Caraballo settlement, and we are 
making a corresponding change in the COLA regulations.

Administrative Procedure Act

    As provided under 5 U.S.C. 553(b)(3)(B) and (d)(3), OPM finds that 
good cause exists to waive the publication of proposed rulemaking and 
the 30-day delay in the effective date of this regulation. These 
changes conform OPM regulations to recent amendments to E.O. 10000 
without imposing additional requirements. Moreover, the Government and 
employee representatives cooperated fully in developing and 
recommending the changes, which were incorporated into the stipulation 
for settlement in Caraballo, et al. v. United States. Therefore, we 
believe these changes will benefit both the Government and the affected 
employees and that it is in the public interest to implement the 
changes immediately.

[[Page 56752]]

Executive Order 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because they 
will affect only Federal agencies and employees.

List of Subjects in 5 CFR Part 591

    Government employees, Travel and transportation expenses, Wages.

Office of Personnel Management.
Kay Coles James,
Director.

    Accordingly, the Office of Personnel Management amends 5 CFR part 
591 as follows:

PART 591--ALLOWANCES AND DIFFERENTIALS

Subpart B--Cost-of-Living Allowance and Post Differential--
Nonforeign Areas

    1. The authority citation for subpart B of part 591 continues to 
read as follows:

    Authority: 5 U.S.C. 5941; E.O. 10000, 3 CFR, 1943-1948 Comp., p. 
792; E.O. 12510, 3 CFR, 1985 Comp., p. 338.

    2. In Sec. 591.205, paragraph (a) introductory text and paragraph 
(b)(1)(i) are revised to read as follows:


Sec. 591.205  Comparative cost index.

    (a) OPM calculates allowance rates for each area by comparing costs 
of four categories of expenses in the area to those in the Washington, 
DC, area. The four categories of expenses are:
* * * * *
    (b) * * *
    (1) * * *
    (i) Goods and services surveyed. The types and amounts of 
consumption goods and services to be surveyed at each income level will 
be derived from appropriate consumer expenditure surveys. Whenever 
possible, exact brands and models are priced in each location. Price 
data are obtained from appropriate retail outlets in each area. 
Individual items are grouped into categories according to common 
functions or uses.
* * * * *


Sec. 591.207  [Removed and Reserved]

    3. Section 591.207 is removed and reserved.

    4. Section 591.211 is revised to read as follows:


Sec. 591.211  Periodic review.

    In accordance with Executive Order 10000, OPM reviews from time to 
time the places designated, the rates fixed, and the regulations in 
this subpart that are prescribed for payment of allowances and 
differentials. This review is to make warranted changes to ensure that 
payments under this subpart will continue only during the continuation 
of conditions justifying payment of allowances and differentials and 
will not in any instance exceed the amount justified. However, the rate 
of such additional compensation may be reduced gradually.

    5. Appendix A of subpart B is revised to read as follows:

Appendix A of Subpart B--Places and Rates at Which Allowances Shall 
Be Paid

    This appendix lists the places approved for a cost-of-living 
allowance and shows the authorized allowance rate for each. The 
allowance percentage rate shown is paid as a percentage of an 
employee's rate of basic pay. The rates are subject to change based on 
the results of future surveys.

------------------------------------------------------------------------
                                                              Allowance
                    Geographic coverage                          Rate
                                                              (percent)
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State of Alaska:
    City of Anchorage and 80-kilometer (50-mile) radius by         25.00
     road..................................................
    City of Fairbanks and 80-kilometer (50-mile) radius by         25.00
     road..................................................
    City of Juneau and 80-kilometer (50-mile) radius by            25.00
     road..................................................
    Rest of the State......................................        25.00
State of Hawaii:
    City and County of Honolulu............................        25.00
    County of Hawaii.......................................        16.50
    County of Kauai........................................        23.25
    County of Maui and County of Kalawao...................        23.75
Territory of Guam and Commonwealth of the Northern Mariana         25.00
 Islands...................................................
Commonwealth of Puerto Rico................................        11.50
U.S. Virgin Islands........................................        22.50
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[FR Doc. 01-28057 Filed 11-8-01; 8:45 am]
BILLING CODE 6325-39-P