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[Congressional Record Volume 154, Number 159 (Wednesday, October 1, 2008)]
[Senate]
[Pages S10390-S10394]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

        NON-FOREIGN AREA RETIREMENT EQUITY ASSURANCE ACT OF 2008

  Mr. DURBIN. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of Calendar No. 954, S. 3013.
  The PRESIDING OFFICER. The clerk will report the bill by title.
  The legislative clerk read as follows:

       A bill (S. 3013) to provide for retirement equity for 
     Federal employees in nonforeign areas outside the 48 
     contiguous States and the District of Columbia, and for other 
     purposes.

  There being no objection, the Senate proceeded to consider the 
bill, which had been reported from the Committee on Homeland Security 
and Governmental Affairs, with amendments; as follows:

  (The parts of the bill intended to be stricken are shown in boldface 
brackets and the parts of the bill intended to be inserted are shown in 
italics)

                                S. 3013

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. 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''.

     SEC. 2. 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''.]
       (a) Locality-Based Comparability Payments.--Section 5304 of 
     title 5, United States Code, is amended--
       (1) in subsection (f)(1), 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;'';
       (2) in subsection (g)--
       (A) in paragraph (2)--
       (i) in subparagraph (A), by striking ``and'' after the 
     semicolon;
       (ii) by redesignating subparagraph (B) as subparagraph (C);
       (iii) by inserting after subparagraph (A) the following:
       ``(B) positions under subsection (h)(1)(D) not covered by 
     appraisal systems certified under section 5382; and''; and
       (iv) in subparagraph (C) (as redesignated by this 
     paragraph), by striking ``under subsection (h)(1)(D)'' and 
     inserting ``under subsection (h)(1)(E)''; and
       (B) by adding at the end the following:
       ``(3) The applicable maximum under this subsection shall be 
     level II of the Executive Schedule for positions under 
     subsection (h)(1)(D) covered by appraisal systems certified 
     under section 5307(d).''; and
       (3) in subsection (h)(1)--
       (A) in subparagraph (C) by striking ``and'' after the 
     semicolon;
       (B) by redesignating subparagraph (D) as subparagraph (E);
       (C) by inserting after subparagraph (C) the following:
       ``(D) a Senior Executive Service position under section 
     3132 stationed within the United States, but outside the 48 
     contiguous States and the District of Columbia in which the 
     incumbent the day before the date of enactment of the Non-
     Foreign Area Retirement Equity Assurance Act of 2008 was 
     eligible to receive a cost-of-living allowance under section 
     5941; and''; and
       (D) in clause (iii) in the matter following subparagraph 
     (D), by inserting ``stationed in the 48 contiguous States and 
     the District of Columbia, or stationed within the United 
     States, but outside the 48 contiguous States and the District 
     of Columbia, in which the incumbent the day before the date 
     of enactment of the Non-Foreign Area Retirement Equity 
     Assurance Act of 2008 was not eligible to receive a cost-of-
     living allowance under section 5941; and'' before the 
     semicolon.
       (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).''.

     SEC. 3. 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

[[Page S10391]]

     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.

     SEC. 4. 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.

     SEC. 5. 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)(a) 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.
       (b) Sense of Congress.--It is the sense of Congress that 
     the Bureau of Labor Statistics will conduct separate surveys 
     pursuant to the establishment by the President's Pay Agent of 
     1 new locality area for the entire State of Hawaii and 1 new 
     locality area for the entire state of Alaska, and that upon 
     the completion of the phase in period no employee shall 
     receive less than the Rest of the U.S. locality pay rate.
       (c) Savings Provisions.--
       (1) In general.--During the period described under section 
     4 of this Act, an employee paid a special rate under 5305 of 
     title 5, United States Code, who the day before the date of 
     enactment of this Act was eligible to receive a cost-of-
     living allowance under section 5941 of title 5, United States 
     Code, and who continues to be officially stationed in an 
     allowance area, shall receive an increase in the employee's 
     special rate consistent with increases in the applicable 
     special rate schedule. For employees in allowance areas, the 
     minimum step rate for any grade of a special rate schedule 
     shall be increased at the time of an increase in the 
     applicable locality rate percentage for the allowance area by 
     not less than the dollar increase in the locality-based 
     comparability payment for a non-special rate employee at the 
     same minimum step provided under section 4 of the Act, and 
     corresponding increases shall be provided for all step rates 
     of the given pay range.
       (2) Continuation of cost of living allowance rate.--If an 
     employee, who the day before the date of enactment of this 
     Act was eligible to receive a cost-of-living allowance under 
     section 5941 of title 5, United States Code, would receive a 
     rate of basic pay and applicable locality-based comparability 
     payment which is in excess of the maximum rate limitation set 
     under section 5304(g) of title 5, United States Code, for his 
     position (but for that maximum rate limitation) due to the 
     operation of this Act, the employee shall continue to receive 
     the cost-of-living allowance rate in effect on December 31, 
     2008 without adjustment until--
       (A) the employee leaves the allowance area or pay system; 
     or
       (B) the employee is entitled to receive basic pay 
     (including any applicable locality-based comparability 
     payment or similar supplement) at a higher rate,
     but, when any such position becomes vacant, the pay of any 
     subsequent appointee thereto shall be fixed in the manner 
     provided by applicable law and regulation.
       (3) Locality-based comparability payments.--Any employee 
     covered under paragraph (2) shall receive any applicable 
     locality-based comparability payment extended under section 4 
     of this Act which is not in excess of the maximum rate set 
     under section 5304(g) of title 5, United States Code, for his 
     position including any future increase to statutory pay caps 
     under 5318 of title 5, United States Code. Notwithstanding 
     paragraph (2), to the extent that an employee covered under 
     that paragraph receives any amount of locality-based 
     comparability payment, the cost-of-living allowance rate 
     under that paragraph shall be reduced accordingly, as 
     provided under section 5941(c)(2)(B) of title 5, United 
     States Code.

     SEC. 6. 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,]other provision of law, 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''.]
       (b) Postal Employees in Non-Foreign Areas.--
       (1) In general.--Section 1005(b) of title 39, United States 
     Code, is amended--
       (A) by inserting ``(1)'' after ``(b)'';
       (B) by striking ``Section 5941,'' and inserting ``Except as 
     provided under paragraph (2), section 5941'';
       (C) by striking ``For purposes of such section,'' and 
     inserting ``Except as provided under paragraph (2), for 
     purposes of section 5941 of that title,''; and
       (D) by adding at the end the following:
       ``(2) On and after the date of enactment of the Non-Foreign 
     Area Retirement Equity Assurance Act of 2008--
       ``(A) the provisions of that Act and section 5941 of title 
     5 shall apply to officers and employees covered by section 
     1003(b) and (c) whose duty station is in a nonforeign area; 
     and
       ``(B) with respect to officers and employees of the Postal 
     Service (other than those officers and employees described 
     under subparagraph (A)) section 6(b)(2) of that Act shall 
     apply.''.
       (2) Continuation of cost of living allowance.--
       (A) In general.--Notwithstanding any other provision of 
     this Act, any employee of the Postal Service (other than an 
     employee covered by section 1003 (b) and (c) of title 39, 
     United States Code, whose duty station is in a nonforeign 
     area) who is paid an allowance under section 1005(b) of that 
     title shall be treated for all purposes 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--
       (i) may result in the allowance exceeding 25 percent of the 
     rate of basic pay of that employee; and
       (ii) shall be the greater of--

       (I) the cost-of-living allowance rate in effect on December 
     31, 2008 for the applicable area; or
       (II) the applicable locality-based comparability pay 
     percentage under section 4.

       (B) Rule of construction.--Nothing in this Act shall be 
     construed to--
       (i) provide for an employee described under subparagraph 
     (A) to be a covered employee as defined under subsection (a); 
     or

[[Page S10392]]

       (ii) authorize an employee described under subparagraph (A) 
     to file an election under section 7 or 8 of this Act.

     SEC. 7. 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.]
       (c) Computation of Annuity.--
       (1) In general.--Except as provided under paragraph (2), 
     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.
       (2) Limitation.--The amount of the cost-of-living allowance 
     which may be considered basic pay under paragraph (1) may not 
     exceed the amount of the locality-based comparability 
     payments the employee would have received during that period 
     for the applicable pay area if the limitation under section 4 
     of this Act did not apply.
       (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.

     SEC. 8. ELECTION OF COVERAGE BY EMPLOYEES.

       (a) In General.--Notwithstanding any other provision of 
     this Act (other than section 6(b)), an employee may make an 
     irrevocable election in accordance with this section, if--
       (1) that employee is paid an allowance under section 
     [5491]5941 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).

     SEC. 9. 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).

     SEC. 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.
  Mr. DURBIN. Mr. President, I ask unanimous consent that the committee 
amendments be agreed to as original text, the Collins amendment, which 
is at the desk, be agreed to, the bill, as amended, be read a third 
time and passed, the motions to reconsider be laid upon the table, with 
no intervening action or debate, and that any statements related 
thereto be printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The committee amendments were agreed to.
  The amendment (No. 5689) was agreed to, as follows:

 (Purpose: To strike the provision relating to election of coverage by 
                   employees; and for other purposes)

       On page 7, line 8, strike ``9'' and insert ``8''.
       On page 10, line 12, strike ``the'' and insert ``this''.
       On page 17, line 18, strike ``or 8''.
       On page 21, line 1, strike all through page 22, line 17.
       On page 22, line 18, strike ``SEC. 9'' and insert ``SEC. 
     8''.
       On page 23, line 20, strike ``SEC. 10'' and insert ``SEC. 
     9''.
  The bill (S. 3013), as amended, was ordered to be engrossed for a 
third reading, was read the third time, and passed, as follows:

                                S. 3013

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. 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''.

     SEC. 2. EXTENSION OF LOCALITY PAY.

       (a) Locality-Based Comparability Payments.--Section 5304 of 
     title 5, United States Code, is amended--
       (1) in subsection (f)(1), 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;'';
       (2) in subsection (g)--
       (A) in paragraph (2)--
       (i) in subparagraph (A), by striking ``and'' after the 
     semicolon;
       (ii) by redesignating subparagraph (B) as subparagraph (C);
       (iii) by inserting after subparagraph (A) the following:
       ``(B) positions under subsection (h)(1)(D) not covered by 
     appraisal systems certified under section 5382; and''; and
       (iv) in subparagraph (C) (as redesignated by this 
     paragraph), by striking ``under subsection (h)(1)(D)'' and 
     inserting ``under subsection (h)(1)(E)''; and
       (B) by adding at the end the following:
       ``(3) The applicable maximum under this subsection shall be 
     level II of the Executive Schedule for positions under 
     subsection (h)(1)(D) covered by appraisal systems certified 
     under section 5307(d).''; and
       (3) in subsection (h)(1)--
       (A) in subparagraph (C) by striking ``and'' after the 
     semicolon;

[[Page S10393]]

       (B) by redesignating subparagraph (D) as subparagraph (E);
       (C) by inserting after subparagraph (C) the following:
       ``(D) a Senior Executive Service position under section 
     3132 stationed within the United States, but outside the 48 
     contiguous States and the District of Columbia in which the 
     incumbent the day before the date of enactment of the Non-
     Foreign Area Retirement Equity Assurance Act of 2008 was 
     eligible to receive a cost-of-living allowance under section 
     5941; and''; and
       (D) in clause (iii) in the matter following subparagraph 
     (D), by inserting ``stationed in the 48 contiguous States and 
     the District of Columbia, or stationed within the United 
     States, but outside the 48 contiguous States and the District 
     of Columbia, in which the incumbent the day before the date 
     of enactment of the Non-Foreign Area Retirement Equity 
     Assurance Act of 2008 was not eligible to receive a cost-of-
     living allowance under section 5941; and'' before the 
     semicolon.
       (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).''.

     SEC. 3. 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 8 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.

     SEC. 4. 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.

     SEC. 5. SAVINGS PROVISION.

       (a) 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.
       (b) Sense of Congress.--It is the sense of Congress that 
     the Bureau of Labor Statistics will conduct separate surveys 
     pursuant to the establishment by the President's Pay Agent of 
     1 new locality area for the entire State of Hawaii and 1 new 
     locality area for the entire state of Alaska, and that upon 
     the completion of the phase in period no employee shall 
     receive less than the Rest of the U.S. locality pay rate.
       (c) Savings Provisions.--
       (1) In general.--During the period described under section 
     4 of this Act, an employee paid a special rate under 5305 of 
     title 5, United States Code, who the day before the date of 
     enactment of this Act was eligible to receive a cost-of-
     living allowance under section 5941 of title 5, United States 
     Code, and who continues to be officially stationed in an 
     allowance area, shall receive an increase in the employee's 
     special rate consistent with increases in the applicable 
     special rate schedule. For employees in allowance areas, the 
     minimum step rate for any grade of a special rate schedule 
     shall be increased at the time of an increase in the 
     applicable locality rate percentage for the allowance area by 
     not less than the dollar increase in the locality-based 
     comparability payment for a non-special rate employee at the 
     same minimum step provided under section 4 of this Act, and 
     corresponding increases shall be provided for all step rates 
     of the given pay range.
       (2) Continuation of cost of living allowance rate.--If an 
     employee, who the day before the date of enactment of this 
     Act was eligible to receive a cost-of-living allowance under 
     section 5941 of title 5, United States Code, would receive a 
     rate of basic pay and applicable locality-based comparability 
     payment which is in excess of the maximum rate limitation set 
     under section 5304(g) of title 5, United States Code, for his 
     position (but for that maximum rate limitation) due to the 
     operation of this Act, the employee shall continue to receive 
     the cost-of-living allowance rate in effect on December 31, 
     2008 without adjustment until--
       (A) the employee leaves the allowance area or pay system; 
     or
       (B) the employee is entitled to receive basic pay 
     (including any applicable locality-based comparability 
     payment or similar supplement) at a higher rate,

     but, when any such position becomes vacant, the pay of any 
     subsequent appointee thereto shall be fixed in the manner 
     provided by applicable law and regulation.
       (3) Locality-based comparability payments.--Any employee 
     covered under paragraph (2) shall receive any applicable 
     locality-based comparability payment extended under section 4 
     of this Act which is not in excess of the maximum rate set 
     under section 5304(g) of title 5, United States Code, for his 
     position including any future increase to statutory pay caps 
     under 5318 of title 5, United States Code. Notwithstanding 
     paragraph (2), to the extent that an employee covered under 
     that paragraph receives any amount of locality-based 
     comparability payment, the cost-of-living allowance rate 
     under that paragraph shall be reduced accordingly, as 
     provided under section 5941(c)(2)(B) of title 5, United 
     States Code.

     SEC. 6. 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

[[Page S10394]]

       (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 other provision of 
     law, 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 Employees in Non-Foreign Areas.--
       (1) In general.--Section 1005(b) of title 39, United States 
     Code, is amended--
       (A) by inserting ``(1)'' after ``(b)'';
       (B) by striking ``Section 5941,'' and inserting ``Except as 
     provided under paragraph (2), section 5941'';
       (C) by striking ``For purposes of such section,'' and 
     inserting ``Except as provided under paragraph (2), for 
     purposes of section 5941 of that title,''; and
       (D) by adding at the end the following:
       ``(2) On and after the date of enactment of the Non-Foreign 
     Area Retirement Equity Assurance Act of 2008--
       ``(A) the provisions of that Act and section 5941 of title 
     5 shall apply to officers and employees covered by section 
     1003(b) and (c) whose duty station is in a nonforeign area; 
     and
       ``(B) with respect to officers and employees of the Postal 
     Service (other than those officers and employees described 
     under subparagraph (A)) section 6(b)(2) of that Act shall 
     apply.''.
       (2) Continuation of cost of living allowance.--
       (A) In general.--Notwithstanding any other provision of 
     this Act, any employee of the Postal Service (other than an 
     employee covered by section 1003 (b) and (c) of title 39, 
     United States Code, whose duty station is in a nonforeign 
     area) who is paid an allowance under section 1005(b) of that 
     title shall be treated for all purposes 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--
       (i) may result in the allowance exceeding 25 percent of the 
     rate of basic pay of that employee; and
       (ii) shall be the greater of--

       (I) the cost-of-living allowance rate in effect on December 
     31, 2008 for the applicable area; or
       (II) the applicable locality-based comparability pay 
     percentage under section 4.

       (B) Rule of construction.--Nothing in this Act shall be 
     construed to--
       (i) provide for an employee described under subparagraph 
     (A) to be a covered employee as defined under subsection (a); 
     or
       (ii) authorize an employee described under subparagraph (A) 
     to file an election under section 7 of this Act.

     SEC. 7. 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.--
       (1) In general.--Except as provided under paragraph (2), 
     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.
       (2) Limitation.--The amount of the cost-of-living allowance 
     which may be considered basic pay under paragraph (1) may not 
     exceed the amount of the locality-based comparability 
     payments the employee would have received during that period 
     for the applicable pay area if the limitation under section 4 
     of this Act did not apply.
       (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.

     SEC. 8. 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).

     SEC. 9. 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.

                          ____________________
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