Cost-of-Living Allowances (Nonforeign Areas)

SUMMARY: The Office of Personnel Management (OPM) is issuing two

regulatory changes in the nonforeign area cost-of-living allowance

(COLA) program. One change will clarify a reference in the regulations

to examples of criteria we use for comparing housing between the

allowance areas and Washington, DC. The second change will allow the

payment of foreign area post differentials without any corresponding

offset from the nonforeign area COLA. OPM is also changing the timing

of living-cost surveys conducted in Hawaii, Guam, Puerto Rico, and the

U.S. Virgin Islands. These changes will improve administration of the

nonforeign area COLA program.

DATES: These regulations are effective October 10, 1995. These

regulations are applicable on the first day of the first pay period

beginning on or after October 10, 1995.

FOR FURTHER INFORMATION CONTACT:

Allan G. Hearne, (202) 606-2838.

SUPPLEMENTARY INFORMATION: Under section 5941 of title 5, United States

Code, and Executive Order 10000, as amended, certain Federal employees

in nonforeign areas outside the 48 contiguous States are eligible for

cost-of-living allowances (COLA's) when local living costs are

substantially higher than those in the Washington, DC, area. Nonforeign

area COLA's are paid in Alaska, Hawaii, Puerto Rico, the U.S. Virgin

Islands, and Guam and the Commonwealth of the Northern Mariana Islands.

OPM published proposed rules on May 11, 1995 (60 FR 25150), to

improve administration of the program by--

(1) Permitting the survey and analysis of living costs at fewer

income levels than the three levels currently used;

(2) Clarifying the types of housing units to be surveyed; and

(3) Allowing the payment of foreign area post differentials without

any corresponding offset from the nonforeign area COLA.

OPM also announced for comment its intention to change the timing

of living-cost surveys conducted in Hawaii, Guam, Puerto Rico, and the

U.S. Virgin Islands, although this change did not require a change in

regulation.

There were five respondents to the proposed regulations. In the

discussion that follows, we address the comments that we received on

each issue and provide our response.

Number of Income Levels Surveyed

We received four comments on the proposal to use only one income

level in the surveying of living costs. Each of the four commenters

expressed concerns about the impact of the proposed change on COLA

rates. One of the commenters favored continued use of the current

three-level surveying methodology because of the possibility that the

proposed change would not accurately reflect the actual costs of COLA

area employees. The other three commenters presented arguments in favor

of further study of the issue.

In light of these comments, we have decided not to make the change

at this time. OPM will review the issue further in preparation for its

report to Congress under the Treasury, Postal Service and General

Government Appropriations Act, 1992 (Pub. L. 102-141), as amended. The

comments received in response to the proposed regulation will be

considered by OPM in its review.

Types of Housing Units Surveyed

We proposed to clarify a parenthetical phrase in current

regulations concerning the types of housing units surveyed. We received

four comments on this issue. Three commenters agreed with the change,

although one said that if the cost index for any COLA area were

unintentionally lowered, the change should be revoked. One commenter

objected to the change, stating that new homes with their modern

architectural preferences, greater amenities, and lower maintenance

needs are more valuable than old homes. The commenter added that a

comparison of new homes in Washington, DC, with old homes in COLA areas

would not be fair and reasonable.

The parenthetical phrase ``(type, size, age)'' in 5 CFR

Sec. 591.205(b)(3) was intended to list examples of the standard

shelter specifications that could be used for comparing housing in the

COLA areas with the Washington, DC, area. Because we were not always

able to obtain age data on the housing units surveyed, we proposed to

remove ``age'' from the listing so as not to give the impression that

age was in fact being used in the calculations.

In response to the comments, we are instead prefacing ``type, size,

age'' with ``e.g.,'' to make clear that these are examples of the

specifications that could be used. We will continue to attempt to

obtain age data and may apply age criteria for comparison of housing.

If this proves feasible, we will provide a description of the exact

procedures in a later Federal Register notice.

Nonforeign Area COLA and Foreign Post Differentials

We further proposed to eliminate the requirement in Sec. 591.210(d)

that an employee's nonforeign area COLA be reduced if the employee also

receives a foreign area post differential and the two payments combined

would otherwise exceed 25 percent of basic pay. This created a

disincentive for employees in nonforeign allowance areas to accept

long-term temporary assignments in foreign areas. The four comments we

received on this proposal all agreed with the change.

Survey Timing

We also announced our intention to change the timing of the summer

COLA surveys to correspond with the winter COLA surveys. This does not

involve a regulatory change.

We received three comments on this proposal, all of which supported

the change, although one respondent reserved full comment pending an

opportunity to review the information upon which we based our decision.

Therefore, in view of the potential benefit to the public and the

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Government of this change and in anticipation of its minimal impact on

COLA rates, OPM plans to conduct its living-cost surveys in Hawaii,

Guam, Puerto Rico, and the U.S. Virgin Islands in the first quarter of

the calendar year beginning with the next survey, which will be

conducted in the first quarter of calendar year 1996.

General Comments

One commenter expressed concern that OPM issued the proposed

regulations at a time when a broad examination of the COLA program is

scheduled. The commenter felt that some of the changes could have a

substantial impact on the program and that the 30-day comment period

was not enough time to fully analyze their effect.

Except for the proposed technical clarification relating to

standard shelter specifications, all of the changes we proposed were

based on comments and recommendations we received on previously

published living-cost survey reports. In fact, this particular

commenter had proposed, on several previous occasions, analyzing living

costs at only one income level, and we had addressed this issue

specifically in several previous Federal Register notices. Therefore,

because we were proposing to adopt recommendations that commenters had

previously provided on issues that were not new, we believed that 30

days was sufficient time to review and comment on our proposals. In the

future, however, OPM will continue to provide, whenever practical, at

least 60 days for interested parties to review and comment on proposals

relating to the COLA program.

One commenter responded generally to the cost of housing and

grocery items in Alaska and expressed concern about any reduction in

COLA rates. These final regulations will have no effect on the COLA

rates payable in Alaska. Furthermore, Pub. L. 102-141, as amended,

prohibits any reductions in COLA rates through December 31, 1996.

Regulatory Flexibility Act

I certify that this regulation will not have a significant economic

impact on a substantial number of small entities because it 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.

James B. King,

Director.

Accordingly, OPM is amending 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, the second sentence in paragraph (b)(3) is

revised to read as follows:

Sec. 591.205 Comparative cost index.

* * * * *

(b) * * *

(3) * * * Standard shelter specifications (e.g., type, size, age)

are selected for each income level. * * *

* * * * *

Sec. 591.210 [Amended]

3. In Sec. 591.210, paragraph (d) is removed and paragraphs (e),

(f), and (g) are redesignated as paragraphs (d), (e), and (f),

respectively.

[FR Doc. 95-22316 Filed 9-7-95; 8:45 am]

BILLING CODE 6325-01-M