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[House Report 110-877]
[From the U.S. Government Publishing Office]

110th Congress                                            Rept. 110-877
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================

 
            FOREIGN SERVICE OVERSEAS PAY EQUITY ACT OF 2008

                                _______
                                

 September 24, 2008.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

    Mr. Smith of New Jersey, from the Committee on Foreign Affairs, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 3202]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Foreign Affairs, to whom was referred the 
bill (H.R. 3202) to amend the Foreign Service Act of 1980 to 
extend comparability pay adjustments to members of the Foreign 
Service assigned to posts abroad, and to amend the provision 
relating to the death gratuity payable to surviving dependents 
of Foreign Service employees who die as a result of injuries 
sustained in the performance of duty abroad, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.

                           TABLE OF CONTENTS

                                                                   Page
The Amendment....................................................     2
Summary..........................................................     3
Background and Purpose for the Legislation.......................     3
Hearings.........................................................     4
Committee Consideration..........................................     4
Votes of the Committee...........................................     4
Committee Oversight Findings.....................................     4
New Budget Authority and Tax Expenditures........................     4
Congressional Budget Office Cost Estimate........................     5
Performance Goals and Objectives.................................     7
Constitutional Authority Statement...............................     7
New Advisory Committees..........................................     7
Congressional Accountability Act.................................     7
Earmark Identification...........................................     7
Section-by-Section Analysis and Discussion.......................     7
Changes in Existing Law Made by the Bill, as Reported............     9

                             The Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Foreign Service Overseas Pay Equity 
Act of 2008''.

SEC. 2. OVERSEAS COMPARABILITY PAY ADJUSTMENT.

  (a) Overseas Comparability Pay Adjustment.--
          (1) In general.--Chapter 4 of the Foreign Service Act of 1980 
        (22 U.S.C. 3961 and following) is amended by adding at the end 
        the following:

``SEC. 415. OVERSEAS COMPARABILITY PAY ADJUSTMENT.

  ``(a) In General.--A member of the Service who is designated class 1 
or below for purposes of section 403 and whose official duty station is 
neither in the continental United States nor in a non-foreign area 
shall receive, in accordance with the phase-in schedule set forth in 
subsection (c), the same locality-based comparability payment under 
section 5304 of title 5, United States Code (stated as a percentage) as 
would be payable to such member if such member's official duty station 
were in the District of Columbia.
  ``(b) Treatment as Basic Pay.--The amount of any locality-based 
comparability payment which is payable to a member of the Service by 
virtue of this section--
          ``(1) shall be considered to be part of the basic pay of such 
        member--
                  ``(A) for the same purposes as provided for under 
                section 5304(c)(2)(A) of title 5, United States Code; 
                and
                  ``(B) for purposes of chapter 8; and
          ``(2) shall be subject to any limitations on pay applicable 
        to locality-based comparability payments under section 5304 of 
        title 5, United States Code.
  ``(c) Phase-In.--The locality-based comparability payment payable to 
a member of the Service under this section shall--
          ``(1) beginning on the first day of the first pay period 
        beginning on or after  the date that fiscal year 2009 
        appropriations are made available by enactment of  the 
        Department of State, Foreign Operations, and Related  Programs 
        Appropriations Act, 2009,  or April 1, 2009, whichever is 
        earlier, be equal to 33.33 percent of the payment which would 
        otherwise apply under subsection (a);
          ``(2) beginning on the first day of the first pay period in 
        fiscal year 2010, be equal to 66.67 percent of the payment 
        which would otherwise apply under subsection (a); and
          ``(3) beginning on the first day of the first pay period in 
        fiscal year 2011 and each subsequent fiscal year, be equal to 
        the payment determined under subsection (a).
  ``(d) Non-Foreign Area Defined.--For purposes of this section, the 
term `non-foreign area' has the same meaning as is given such term in 
regulations carrying out section 5941 of title 5, United States 
Code.''.
          (2) Conforming amendment.--The table of contents set forth in 
        section 2 of such Act is amended by inserting after the item 
        relating to section 414 the following:

``Sec. 415. Overseas comparability pay adjustment.''.

  (b) Conforming Amendments Relating to the Foreign Service Retirement 
Systems.--
          (1) Contributions to the fund.--Effective as of the first pay 
        period beginning on or after October 1, 2010, section 805(a) of 
        the Foreign Service Act of 1980 (22 U.S.C. 4045(a)) is 
        amended--
                  (A) in paragraph (1)--
                          (i) in the first sentence, by striking ``7.25 
                        percent'' and inserting ``7 percent''; and
                          (ii) in the second sentence, by striking 
                        ``The contribution by the employing agency'' 
                        through ``and shall be made'' and inserting 
                        ``An equal amount shall be contributed by the 
                        employing agency'';
                  (B) in paragraph (2)--
                          (i) in subparagraph (A), by striking ``, plus 
                        an amount equal to .25 percent of basic pay''; 
                        and
                          (ii) in subparagraph (B), by striking ``, 
                        plus an amount equal to .25 percent of basic 
                        pay''; and
                  (C) in paragraph (3), by striking all that follows 
                ``Code'' and inserting a period.
          (2) Computation of annuities.--Section 806(a)(9) of such Act 
        (22 U.S.C. 4046(a)(9)) is amended by striking ``is outside the 
        continental United States shall'' and inserting ``was outside 
        the continental United States during the period beginning on 
        December 29, 2002, and ending on the day before the first day 
        of the first pay period beginning on or after October 1, 2010 
        (or during any portion thereof) shall, to the extent that such 
        computation is based on the basic salary or basic pay of such 
        member for such period (or portion thereof),''.
          (3) Entitlement to annuity.--Section 855(a)(3) of such Act 
        (22 U.S.C. 4071d(a)(3)) is amended--
                  (A) by striking ``section 8414'' and inserting 
                ``section 8415''; and
                  (B) by striking ``is outside the continental United 
                States shall'' and inserting ``was outside the 
                continental United States during the period beginning 
                on December 29, 2002, and ending on the day before the 
                first day of the first pay period beginning on or after 
                October 1, 2010 (or during any portion thereof) shall, 
                to the extent that such computation is based on the 
                basic salary or basic pay of such member for such 
                period (or portion thereof),''.
          (4) Deductions and withholdings from pay.--Section 856(a)(2) 
        of such Act (22 U.S.C. 4071e(a)(2)) is amended to read as 
        follows:
  ``(2) The applicable percentage under this subsection shall be as 
follows:

   ``Percentage                          Time Period

              7.5   Before January 1, 1999.
             7.75   January 1, 1999, to December 31, 1999.
              7.9   January 1, 2000, to December 31, 2000.
             7.55   January 11, 2003, to the day before the first day of
                     the first pay period beginning on or after October
                     1, 2010.
              7.5   Beginning on the first day of the first pay period
                     beginning on or after October 1, 2010.''.

  (c) Reporting Requirements.--
          (1) In general.--Not later than October 1, 2010, the 
        Secretary of State shall submit to the appropriate 
        congressional committees an assessment of all allowances 
        provided to members of the Foreign Service under the Foreign 
        Service Act of 1980 or under title 5, United States Code, and 
        in particular, how such allowances have been or will be 
        affected by the amendments to the Foreign Service Act of 1980 
        made by this Act.
          (2) Definition.--For purposes of this subsection, the term 
        ``appropriate congressional committees'' means the Committee on 
        Foreign Affairs of the House of Representatives and the 
        Committee on Foreign Relations of the Senate.

SEC. 3. DEATH GRATUITY.

  The first sentence of section 413(a) of the Foreign Service Act of 
1980 (22 U.S.C. 3973(a)) is amended by striking ``at the time of 
death'' and inserting ``at level II of the Executive Schedule under 
section 5313 of title 5, United States Code, at the time of death, 
except that for employees compensated under local compensation plans 
established under section 408, the amount shall be equal to the greater 
of 1 year's salary at the time of death or 1 year's salary at the 
highest step of the highest grade on the local compensation plan from 
which the employee was being paid at the time of death''.

                                Summary

    H.R. 3202, the Foreign Service Overseas Pay Equity Act of 
2008, establishes an equalized global pay scale for junior 
members of the Foreign Service by resolving the pay discrepancy 
resulting from Washington D.C. based locality pay that is not 
received by Foreign Service personnel stationed overseas. The 
bill also amends the current death gratuity benefit to 
standardize the amount paid to surviving dependents of a 
Foreign Service employee who dies as a result of injuries 
sustained while serving abroad.

               Background and Purpose for the Legislation

    The Foreign Service Overseas Pay Equity Act of 2008 reforms 
the Foreign Service compensation system to eliminate, over a 
three-year period, wage disparities (currently 20.89%) between 
U.S. Government employees who are members of the Foreign 
Service based in Washington D.C. who receive locality pay, and 
those overseas who do not. Locality-based comparability 
payments were initiated for certain Federal Government workers 
under the Federal Employees Pay Comparability Act of 1990 in 
order to make their salaries competitive with comparable 
employment in the private sector.
    These payments were extended to employees of the Foreign 
Service, but only to those based within the United States. When 
low- or mid-level Foreign Service members are transferred from 
Washington D.C. to a post overseas, they experience a nearly 
21% decrease in basic pay. In order to eliminate current and 
future inequalities between Foreign Service members stationed 
in the U.S. and those stationed abroad, H.R. 3202 increases 
overseas base salaries over a three-year phase-in period to 
match those paid to Washington, D.C.-based employees. This 
equitable system will make the Foreign Service more competitive 
with the private sector in recruiting and retaining employees.
    The overseas death gratuity would also be amended to 
provide a more standardized benefit to surviving dependents of 
any Foreign Service employee who dies as a result of injuries 
sustained in the performance of duty abroad. This provision 
recognizes the risks that members of the Foreign Service face 
while serving in increasingly violent posts and situations.

                                Hearings

    There were no Committee hearings on this legislation.

                        Committee Consideration

    On July 16, 2008, the Committee held a markup and 
considered H.R. 3202. A motion to report the bill, as amended, 
to the House, a quorum being present, was agreed to by voice 
vote.

                         Votes of the Committee

    There were no recorded votes on H.R. 3202.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    In compliance with Clause 3(c)(2) of House Rule XIII, the 
Committee adopts as its own the estimate of new budget 
authority, entitlement authority, or tax expenditures or 
revenues contained in the cost estimate prepared by the 
Director of the Congressional Budget Office, pursuant to 
section 402 of the Congressional Budget Act of 1974.

               Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 17, 2008.
Hon. Howard L. Berman, Acting Chairman,
Committee on Foreign Affairs,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3202, the Foreign 
Service Overseas Pay Equity Act of 2008.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sunita 
D'Monte, who can be reached at 226-2840.
            Sincerely,
                                           Peter R. Orszag.
Enclosure

cc:
        Honorable Ileana Ros-Lehtinen
        Ranking Member
H.R. 3202--Foreign Service Overseas Pay Equity Act of 2008.

                                SUMMARY

    H.R. 3202 would increase the compensation of certain 
employees of the Foreign Service who serve overseas. CBO 
estimates that implementing H.R. 3202 would cost $1.3 billion 
over the 2009-2013 period, assuming appropriation of the 
necessary amounts. Enacting the bill would not affect direct 
spending or revenues.
    H.R. 3202 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of H.R. 3202 is shown in the 
following table. The costs of this legislation fall within 
budget function 150 (international affairs).

                           BASIS OF ESTIMATE

    For this estimate, CBO assumes that H.R. 3202 will be 
enacted near the start of fiscal year 2009, that the estimated 
amounts will be appropriated each year, and that outlays will 
follow historical spending patterns for existing programs.

                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                                                    2009   2010   2011   2012   2013   2009-2013
----------------------------------------------------------------------------------------------------------------

CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level                                         84    191    327    373    427       1,403
Estimated Outlays                                                     72    172    300    355    409       1,309
----------------------------------------------------------------------------------------------------------------

Pay for Overseas Postings
    Section 2 would increase compensation for Foreign Service 
Officers (FSOs) who are not members of the Senior Foreign 
Service and are posted overseas. Under current law, FSOs based 
in the United States receive comparability pay in addition to 
their base pay, to reduce the pay disparity between federal and 
nonfederal workers. FSOs who are posted overseas do not receive 
those amounts. (Members of the Senior Foreign Service are 
compensated under a pay-for-performance system that does not 
differentiate pay by posting.)
    Under the bill, FSOs who are posted overseas would be paid 
the same comparability pay received by FSOs posted to 
Washington, D.C. (That comparability pay represented about 17 
percent of total basic pay for D.C. postings in 2008.) The bill 
also specifies a phase-in period: FSOs would receive one-third 
of the increased compensation in 2009, two-thirds in 2010, and 
the full annual amount starting in 2011. (Section 2 would not 
increase retirement benefits, because FSOs who retire from 
overseas postings have their annuities calculated as though 
their official duty station had been Washington, D.C.)
    Recent data from the Department of State indicate that 
roughly 8,300 FSOs are posted overseas and have an average 
basic pay of about $75,000. In comparison, FSOs posted in 
Washington have an average basic pay of about $91,000. 
Eliminating the difference between pay for overseas and D.C. 
postings, and adjusting the new pay level to reflect estimated 
growth in comparability pay (which saw average growth of 9.5 
percent a year over the past three years) yields an estimated 
cost for 2009 of $42 million--one-third of $126 million.
    The above increase in basic pay also would lead to an 
increase in other benefits paid to FSOs, such as life 
insurance, health insurance, hardship pay, and danger pay. 
According to the department, those types of compensation have 
historically averaged about 71 percent of basic pay. Therefore, 
CBO estimates that under the bill, in 2009, the department 
would pay another $30 million--one-third of $89 million--in 
other compensation, for a total cost of $72 million that year. 
After adjusting for inflation, CBO estimates that costs for 
implementing section 2 would total $1.3 billion over the 2009-
2013 period, assuming appropriation of the necessary amounts.
Death Gratuities
    Section 3 would increase the death gratuities payable to 
the surviving dependents of Foreign Service employees who die 
as a result of injuries sustained in the performance of their 
duty overseas. Under current law, the death gratuity equals an 
employee's annual salary at the time of death. Under the bill, 
the department would pay one year's salary at level II of the 
Executive Schedule at the time of death or, if the employee was 
compensated under a local compensation plan, one year's salary 
at highest pay level under that plan at the time of their 
death. Based on historical data from the department, CBO 
estimates that fewer than five death gratuities would be paid 
each year and that implementing this section would cost less 
than $500,000 a year, and total $1 million, over the 2009-2013 
period, assuming the availability of appropriated funds.

              INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT

    H.R. 3202 contains no intergovernmental or private-sector 
mandates as defined in UMRA and would impose no costs on state, 
local, or tribal governments.

                         ESTIMATE PREPARED BY:

Federal Costs: Sunita D'Monte (226-2840)
Impact on State, Local, and Tribal Governments: Neil Hood (225-
        3220)
Impact on the Private Sector: MarDestinee Perez (226-2940)

                         ESTIMATE APPROVED BY:

Peter H. Fontaine
Assistant Director for Budget Analysis

                    Performance Goals and Objectives

    The Act is intended to resolve the current pay discrepancy 
resulting from Washington D.C. based locality pay that is not 
received by Foreign Service personnel stationed overseas. The 
bill also amends the current death gratuity benefit.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, section 8 of the Constitution.

                        New Advisory Committees

    H.R. 3202 does not establish or authorize any new advisory 
committees.

                    Congressional Accountability Act

    H.R. 3202 does not apply to the Legislative Branch.

                         Earmark Identification

    H.R. 3202 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9(d), 9(e), or 9(f) of rule XXI.

               Section-by-Section Analysis and Discussion

Section 1. Short Title.
    This section provides that the short title of the Act is 
the, ``Foreign Service Overseas Pay Equity Act of 2008.''
Section 2. Overseas Comparability Pay Adjustment.
    This section would amend Chapter 4 of the Foreign Service 
Act of 1980 (22 U.S.C. 3961 and following) to stipulate that 
Foreign Service Officers designated class 1 or below, stationed 
outside the continental United States and not in a non-foreign 
area, receive locality-based comparability payments under 
section 5304 of title 5, United States Code, that would be paid 
to a member if his or her official duty station were in 
Washington, D.C.
    Since this is a substantial pay increase for approximately 
7,000 overseas personnel, the adjustment will be phased in over 
3 years. The Congressional Budget Office estimates that the 
cost in FY 2009 will be $72 million, in FY 2010 will be $172 
million, and an average of $300-400 million in subsequent 
years.
    The section also makes conforming amendments to Chapter 8 
of the Foreign Service Act of 1980 to remove certain provisions 
related to the Foreign Service Retirement and Disability Fund 
(the ``Fund '') and Foreign Service Pension System. Foreign 
Service retirement benefits are computed on the basis of basic 
salary, which includes locality pay. Under the current system, 
the provision of locality pay and the higher basic salary 
levels in Washington, D.C. provide a serious disincentive for 
Foreign Service Officers to serve overseas later in their 
careers when their basic salary level directly impacts the 
level of their retirement benefits. The discrepancy has skewed 
incentives to serve overseas.
    Certain changes were made to the Fund and Pension System 
provisions to remove this disincentive by adjusting basic 
salary computations to include locality pay differentials 
solely for purposes of determining retirement benefits. 
Subsection (b) sunsets the application of this overseas 
``virtual locality pay,'' which no longer will be required 
after implementation of the global pay scale. However, virtual 
locality pay in effect before October 2010 will continue to be 
used in computing annuities for employees who retire after the 
new global pay scale takes effect.
    The reporting requirement to the appropriate congressional 
committees includes a specific requirement that the Secretary 
of State provide an assessment as to how all allowances 
provided to members of the Foreign Service under the Foreign 
Service Act of 1980 or under title 5 of the United States Code 
have been or will be affected by the amendments to the Foreign 
Service Act of 1980 made by this Act. The Committee is 
interested in knowing how much the allowances may increase as a 
result of global locality pay, both on an individual basis in 
each country and in the aggregate. The Committee would also 
like the report to include an assessment regarding the level of 
allowances that would be required to recruit Foreign Service 
Officers to hardship, danger and other relevant posts given 
their increased overall salary. The Committee also would like 
an analysis as to whether any increase to allowances creates an 
unintended distortion in the amount of such allowances in 
relation to the purpose for which allowances are intended.
Section 3. Death Gratuity.
    This section amends section 413 of the Foreign Service Act 
of 1980 to provide a more uniform gratuity to the surviving 
dependents of any Foreign Service employee who dies as a result 
of injuries sustained in the performance of duty abroad. 
Currently, the amount of the gratuity is equal to the 
employee's annual salary at the time of death. The amendment 
would adjust the gratuity for all Foreign Service Officers to 
level II of the Executive Schedule under section 5313 of title 
5 of the United States Code at the time of death. Executive-
level II is currently $172,200. Dependents of employees who are 
paid in accordance with a local compensation plan under section 
408 of the Foreign Service Act of 1980 would be paid one year's 
salary at the highest step of the highest grade on that local 
compensation plan or one year's actual salary at the time of 
death, whichever is greater.
    The Committee expects that dependents of personnel at 
overseas posts who are employed by private security contractors 
and pursuant to personal service agreements will receive the 
same gratuity as employees who are paid in accordance with a 
local compensation plan under section 408. The requirement that 
such death gratuity be provided should be included in all local 
contracts covering such personnel.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

                      FOREIGN SERVICE ACT OF 1980

           *       *       *       *       *       *       *
  Sec. 2. Table of Contents.--The table of contents for this 
Act is as follows:

                            TABLE OF CONTENTS

     * * * * * * *

                         Chapter 4--Compensation

Sec. 401. Salaries of chiefs of mission.
     * * * * * * *
Sec. 415. Overseas comparability pay adjustment.

           *       *       *       *       *       *       *

TITLE I--THE FOREIGN SERVICE OF THE UNITED STATES

           *       *       *       *       *       *       *

Chapter 4--Compensation

           *       *       *       *       *       *       *

  Sec. 413. Death Gratuity.--(a) The Secretary may provide for 
payment of a gratuity to the surviving dependents of any 
Foreign Service employee who dies as a result of injuries 
sustained in the performance of duty abroad, in an amount equal 
to one year's salary [at the time of death] at level II of the 
Executive Schedule under section 5313 of title 5, United States 
Code, at the time of death, except that for employees 
compensated under local compensation plans established under 
section 408, the amount shall be equal to the greater of 1 
year's salary at the time of death or 1 year's salary at the 
highest step of the highest grade on the local compensation 
plan from which the employee was being paid at the time of 
death. Any death gratuity payment made under this section shall 
be held to have been a gift and shall be in addition to any 
other benefit payable from any source.

           *       *       *       *       *       *       *

SEC. 415. OVERSEAS COMPARABILITY PAY ADJUSTMENT.

  (a) In General.--A member of the Service who is designated 
class 1 or below for purposes of section 403 and whose official 
duty station is neither in the continental United States nor in 
a non-foreign area shall receive, in accordance with the phase-
in schedule set forth in subsection (c), the same locality-
based comparability payment under section 5304 of title 5, 
United States Code (stated as a percentage) as would be payable 
to such member if such member's official duty station were in 
the District of Columbia.
  (b) Treatment as Basic Pay.--The amount of any locality-based 
comparability payment which is payable to a member of the 
Service by virtue of this section--
          (1) shall be considered to be part of the basic pay 
        of such member--
                  (A) for the same purposes as provided for 
                under section 5304(c)(2)(A) of title 5, United 
                States Code; and
                  (B) for purposes of chapter 8; and
          (2) shall be subject to any limitations on pay 
        applicable to locality-based comparability payments 
        under section 5304 of title 5, United States Code.
  (c) Phase-in.--The locality-based comparability payment 
payable to a member of the Service under this section shall--
          (1) beginning on the first day of the first pay 
        period beginning on or after the date that fiscal year 
        2009 appropriations are made available by enactment of 
        the Department of State, Foreign Operations, and 
        Related Programs Appropriations Act, 2009, or April 1, 
        2009, whichever is earlier, be equal to 33.33 percent 
        of the payment which would otherwise apply under 
        subsection (a);
          (2) beginning on the first day of the first pay 
        period in fiscal year 2010, be equal to 66.67 percent 
        of the payment which would otherwise apply under 
        subsection (a); and
          (3) beginning on the first day of the first pay 
        period in fiscal year 2011 and each subsequent fiscal 
        year, be equal to the payment determined under 
        subsection (a).
  (d) Non-Foreign Area Defined.--For purposes of this section, 
the term ``non-foreign area'' has the same meaning as is given 
such term in regulations carrying out section 5941 of title 5, 
United States Code.

           *       *       *       *       *       *       *

          Chapter 8--Foreign Service Retirement and Disability

subchapter i--foreign service retirement and disability system

           *       *       *       *       *       *       *

  Sec. 805. Contributions to the Fund.--(a)(1) Except as 
otherwise provided in this section, [7.25 percent] 7 percent of 
the basic salary received by each participant shall be deducted 
from the salary and contributed to the Fund for the payment of 
annuities, cash benefits, refunds, and allowances. [The 
contribution by the employing agency shall be a percentage of 
basic salary equal to the percentage in effect under section 
7001(d)(1) of the Balanced Budget Act of 1997 (Public Law 105-
33; 22 U.S.C. 4045 note), and section 505(h) of the Department 
of Transportation and Related Agencies Appropriations Act, 2001 
(as enacted by Public Law 106-346; 114 Stat. 1356A-54), plus 
.25 percent of basic salary, and shall be made] An equal amount 
shall be contributed by the employing agency from the 
appropriations or fund used for payment of the salary of the 
participant. The employing agency shall deposit in the Fund the 
amounts deducted and withheld from basic salary and the amounts 
contributed by the employing agency.
  (2) Notwithstanding the percentage limitation contained in 
paragraph (1) of this subsection--
  (A) the employing agency shall deduct and withhold from the 
basic pay of a Foreign Service criminal investigator/inspector 
of the Office of the Inspector General, Agency for 
International Development, who is qualified to have his annuity 
computed in the same manner as that of a law enforcement 
officer pursuant to section 8339(d) of title 5, an amount equal 
to that to be withheld from a law enforcement officer pursuant 
to section 8334(a)(1) of title 5[, plus an amount equal to .25 
percent of basic pay]. The amounts so deducted shall be 
contributed to the Fund for the payment of annuities, cash 
benefits, refunds, and allowances. An equal amount shall be 
contributed by the employing agency from the appropriations or 
fund used for payment of the salary of the participant. The 
employing agency shall deposit in the Fund the amount deducted 
and withheld from basic salary and amounts contributed by the 
employing agency.
  (B) The employing agency shall deduct and withhold from the 
basic pay of a Foreign Service criminal investigator/inspector 
of the Office of the Inspector General, Agency for 
International Development, who is qualified to have his annuity 
computed pursuant to section 8415(d) of title 5, an amount 
equal to that to be withheld from a law enforcement officer 
pursuant to section 8422(a)(2)(B) of title 5[, plus an amount 
equal to .25 percent of basic pay]. The amounts so deducted 
shall be contributed to the Fund for the payment of annuities, 
cash benefits, refunds, and allowances. An equal amount shall 
be contributed by the employing agency from the appropriations 
or fund used for payment of the salary of the participant. The 
employing agency shall deposit in the Fund the amounts deducted 
and withheld from basic salary and amounts contributed by the 
employing agency.
  (3) For service as a special agent, paragraph (1) shall be 
applied by substituting for ``7 percent'' the percentage that 
applies to law enforcement officers under section 8334(a)(1) of 
title 5, United States Code[, plus .25 percent.].

           *       *       *       *       *       *       *

  Sec. 806. Computation of Annuities.--(a)(1) * * *

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  (9) For purposes of any annuity computation under this 
subsection, the basic salary or basic pay of any member of the 
Service whose official duty station [is outside the continental 
United States shall] was outside the continental United States 
during the period beginning on December 29, 2002, and ending on 
the day before the first day of the first pay period beginning 
on or after October 1, 2010 (or during any portion thereof) 
shall, to the extent that such computation is based on the 
basic salary or basic pay of such member for such period (or 
portion thereof), be considered to be the salary or pay that 
would have been paid to the member had the member's official 
duty station been Washington, D.C., including locality-based 
comparability payments under section 5304 of title 5, United 
States Code, that would have been payable to the member if the 
member's official duty station had been Washington, D.C.

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SUBCHAPTER II--FOREIGN SERVICE PENSION SYSTEM

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  Sec. 855. Entitlement to Annuity.--(a)(1) * * *

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  (3) For purposes of any annuity computation under this 
subsection, the average pay (as used in [section 8414] section 
8415 of title 5, United States Code) of any member of the 
Service whose official duty station [is outside the continental 
United States shall] was outside the continental United States 
during the period beginning on December 29, 2002, and ending on 
the day before the first day of the first pay period beginning 
on or after October 1, 2010 (or during any portion thereof) 
shall, to the extent that such computation is based on the 
basic salary or basic pay of such member for such period (or 
portion thereof), be considered to be the salary that would 
have been paid to the member had the member's official duty 
station been Washington, D.C., including locality-based 
comparability payments under section 5304 of title 5, United 
States Code, that would have been payable to the member if the 
member's official duty station had been Washington, D.C.

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  Sec. 856. Deductions and Withholdings From Pay.--(a)(1) * * *
  [(2) The applicable percentage under this subsection shall be 
as follows:

                                  7.5..............  Before January 1, 1999.
                                  7.75.............  January 1, 1999, to December 31, 1999.
                                  7.9..............  January 1, 2000, to December 31, 2000.
                                  7.55.............  After January 11, 2003.]

  (2) The applicable percentage under this subsection shall be 
as follows:

    Percentage                           Time Period

              7.5   Before January 1, 1999.
             7.75   January 1, 1999, to December 31, 1999.
              7.9   January 1, 2000, to December 31, 2000.
             7.55   January 11, 2003, to the day before the first day of
                     the first pay period beginning on or after October
                     1, 2010.
              7.5   Beginning on the first day of the first pay period
                     beginning on or after October 1, 2010.

                     

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