[Federal Register Volume 60, Number 91 (Thursday, May 11, 1995)]
[Proposed Rules]
[Pages 25150-25151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11543]



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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 60, No. 91 / Thursday, May 11, 1995 / 
Proposed Rules
[[Page 25150]]

OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 591

RIN 3206-AG73


Cost-of-Living Allowances (Nonforeign Areas)

AGENCY: Office of Personnel Management.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Personnel Management (OPM) is proposing three 
regulatory changes in the nonforeign area cost-of-living allowance 
(COLA) program. One change would allow us to simplify living-cost 
surveys and analyses used to determine COLA rates by permitting the 
survey and analysis of living costs at fewer income levels than the 
three levels currently used. The second change would clarify the types 
of housing units to be surveyed. The third change would allow the 
payment of foreign area post differentials without any corresponding 
offset for the nonforeign area COLA. OPM is also announcing its 
intention to change the timing of living-cost surveys conducted in 
Hawaii, Guam, Puerto Rico, and the U.S. Virgin Islands and is inviting 
comments on this change in timing.

DATES: Comments must be received on or before June 12, 1995.

ADDRESSES: Send or deliver written comments to Donald J. Winstead, 
Acting Assistant Director for Compensation Policy, Personnel Systems 
and Oversight Group, Office of Personnel Management, Room 6H31, 1900 E 
Street NW., Washington, DC 20415.

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.

Number of Income Levels Surveyed

    To determine COLA rates, OPM conducts living-cost surveys in each 
of the allowance areas and in the Washington, DC, area. Under 
Sec. 591.205(b) of title 5, Code of Federal Regulations, OPM is 
required to estimate living costs at ``several income levels.'' 
Currently, OPM surveys and analyzes living costs at three income 
levels.
    Some COLA recipients have recommended that OPM simplify the COLA 
methodology by using only one income level. Conceptually, a multiple 
income level approach should yield a more balanced measurement of 
living-cost differences. In application, however, the use of multiple 
income levels requires certain subjective assumptions. Therefore, OPM 
believes the overall integrity of the model will not be impaired if 
fewer income levels are used.
    In future COLA surveys and analyses, OPM proposes to use a single 
income level approach. If we adopt this approach, we will use 
Washington, DC, area Consumer Expenditure Survey (CES) data, provided 
by the Bureau of Labor Statistics, Department of Labor, to develop 
category and component expenditure weights for the COLA model. In the 
past, some COLA recipients have criticized OPM for using nationwide CES 
data to develop these weights. (Nationwide CES data are the only data 
known to OPM that provide expenditure information by income level. 
Detailed DC-area CES data are not available by income level.) By 
adopting a single income level approach, OPM would be able to use base 
area expenditure data to develop category and component weights. Since 
Washington, DC, is the reference or base area for living-cost surveys, 
use of DC-area derived weights would be consistent with the overall 
COLA methodology.
    Some COLA recipients have suggested that OPM should use weights 
based on the expenditures of people in the allowance areas. As OPM has 
stated in previous Federal Register notices, OPM is aware of such 
consumer expenditure information for only two allowance areas: 
Anchorage, Alaska, and Honolulu, Hawaii. Although it might be possible 
to use allowance area derived weights for these two areas, OPM would 
not be able to use similarly derived weights for the nine other 
allowance areas. For this reason and because of the methodological 
considerations noted above, OPM proposes to use Washington, DC, area 
weights.

Types of Housing Units Surveyed

    OPM is also proposing to clarify in Sec. 591.205(b)(3) the 
parenthetical phrase ``(type, size, age),'' which modifies ``standard 
shelter specifications.'' We believe it is not practical to obtain and 
compare housing data for each of these three criteria. Since we are 
modifying this paragraph to accommodate the survey of fewer income 
levels, we are using this opportunity to clarify the phrase to read 
``(type and size)''.

Nonforeign Area COLA and Foreign Post Differentials

    OPM is further proposing 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. OPM 
has received comments from Federal employees and agencies who believe 
this regulation can create a disincentive for employees in nonforeign 
allowance areas to accept long-term temporary assignments in foreign 
areas. OPM agrees. Therefore, we are proposing to eliminate the 
requirement that an employee's nonforeign area COLA be reduced if the 
employee also receives a foreign area post differential.

Survey Timing

    OPM is also announcing its intention to change the timing of the 
summer COLA surveys to correspond with the winter COLA surveys. No 
regulatory change is required to make this change, but OPM invites 
comments on the proposed change in timing. Currently, OPM surveys 
Hawaii, Guam, Puerto Rico, and the U.S. Virgin Islands (often called 
``tropical allowance areas'') in the summer and surveys Alaska in the 
winter. The Washington, DC, area is surveyed twice--once in the summer 
and once in the winter.
[[Page 25151]]

    Some Federal employees have suggested that OPM change the timing of 
the tropical area surveys to the winter months. OPM reviewed 
information from the Bureau of Labor Statistics; the Department of 
Defense Per Diem, Travel, and Transportation Allowance Committee; the 
Puerto Rico Department of Labor and Human Resources, and the Guam 
Department of Commerce. With one exception, OPM did not find evidence 
of significant seasonal variation in prices in the tropical allowance 
areas or in the Washington, DC, area. The exception was hotel and motel 
prices, which appear to vary significantly by season in Kauai, Hawaii; 
Maui, Hawaii; San Juan, Puerto Rico; and the U.S. Virgin Islands. In 
terms of lodging prices, the ``peak tourist season'' for these areas 
seems generally to be the months of January through March.
    Although lodging prices may vary significantly by season in some 
areas, the evaluation of available information leads OPM to believe 
that most other prices do not. Therefore, changing the timing of the 
tropical area surveys should have little effect on the COLA rates and 
will address suggestions made by some COLA recipients. In addition, the 
change should reduce the survey's public burden and cost. If both the 
tropical areas and the Alaska areas are surveyed in the January through 
March time frame, Washington, DC, area prices would be surveyed only 
once--not twice, as is currently the case. This will reduce the 
reporting burden of the respondents in the DC area and some of the 
Government's costs associated with the surveys. Therefore, in view of 
the COLA recipients' suggestions, the potential benefit to the public 
and the Government, and anticipated minimal impact, OPM plans to 
conduct 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.

E.O. 12866, Regulatory Review

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

Regulatory Flexibility Act

    I certify that this regulation would not have a significant 
economic impact on a substantial number of small entities because the 
regulation would 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 proposes to amend 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. Section 591.205 is amended by removing the word ``several'' in 
paragraphs (b) and (b)(1) and by adding the words ``one or more'' in 
its place; in paragraph (b)(3) by removing the second and third 
sentences and adding in their place the sentence, ``Standard shelter 
specifications (type and size) and appropriate living communities are 
selected for survey.''; and in paragraph (c) by revising the third 
sentence to read as follows:


Sec. 591.205  Comparative cost index.

* * * * *
    (c) * * * When two or more income levels are used in the analyses, 
the dollar amounts for each income level are weighted into one average 
amount to reflect the GS grade distribution for the allowance area. * * 
*
* * * * *


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. 95-11543 Filed 5-10-95; 8:45 am]
BILLING CODE 6325-01-M