A bill to exclude locality adjustments from average pay for purposes of computing the amount of retirement annuities of new employees.
This bill would change how retirement annuities are calculated for new federal employees by removing locality pay adjustments from the "average pay" used to compute their annuities. It creates a new category called a “revised average pay employee.” For individuals who, after enactment, become federal employees covered by the retirement system and earn creditable civilian service, the retirement annuity would be based on an average pay that excludes locality-based comparability payments (the locality adjustments found in 5304/5304a). The change is prospective only and does not alter benefits for current employees or those who began service before enactment. In practice, this could reduce the future retirement annuities for these new hires and would create a two-tier dynamic between new hires and existing employees.
Key Points
- 1The bill amends Section 8401 of title 5, United States Code to exclude locality-based comparability payments (locality pay) from the calculation of average pay for a revised average pay employee.
- 2It adds a new defined term: "revised average pay employee," meaning someone who, after enactment, becomes a covered federal employee or Member performing service creditable under section 8411.
- 3The exclusion applies only to those who become covered after enactment; it does not change the retirement calculations for current employees or those with pre-enactment service creditable under 8411.
- 4The change is structured by adjusting the existing paragraphs in Section 8401 (including adding a new paragraph 40 and aligning related language in paragraphs 38(B) and 39).
- 5The locality adjustments referenced are the locality-based comparability payments under sections 5304 or 5304a.