Puerto Rico COLA and Locality Rates & Other U.S. Territories
Looking for Puerto Rico COLA and Federal Locality pay rates? Or Locality and COLA for Guam, and other U.S. Territories?
Federal Employees in Non-Foreign Areas are now being transitioned from receiving COLA to Locality Pay. The change started in 2010, and will be complete in 2012.
Locality Pay is being phased in, as COLA is being phased out. However, you will still have some portion of COLA left over.
This 'left over' COLA was designed to offset the taxes associated with Locality Pay. The Federal COLA Locality Adjustment means higher taxes and does affect the take home pay for Federal Employees.
Learn more about
hidden tax increases for Federal Employees in Puerto Rico and Other Non-Foreign Areas
In the graphic below, you can see how Locality Pay is phased in. First at 1/3 of the RUS rate in 2010, then 2/3 in 2011, and at the full RUS rate in 2012.
The Non-Foreign Area Retirement Equity Assurance Act of 2009 outlines the timeline for the change from COLA to Locality Pay.
There's a lot more to know about the transition from COLA to Locality pay and how it affects your...
Click here to learn more about how the transition from COLA to Locality works.
- Take Home Pay
- Your Taxes
- ...and Your Federal Retirement
U.S. Territories, Puerto Rico COLA and Locality Pay Rates
Before the transition, there were two different COLA rates in the U.S. Territories. One rate for Puerto Rico COLA, another rate for COLA in all the other U.S. Territories.
The 2009 COLA rates were frozen. The Puerto Rico COLA rate was frozen at 14%. The COLA rate for the other U.S. Territories was frozen at 25%. These frozen COLA rates play into the formula used for this transition.
While there were two different COLA rates, now Puerto Rico and the other U.S. Territories will all now receive the "Rest of U.S." Locality rate (RUS). The RUS 2011 Locality Rate has been set at 14.16%.
Below you can see two examples, depending on where you work.
The first example shows the transition for Puerto Rico.
The second example shows the numbers for the U.S. Territories of American Samoa, Guam, Northern Mariana Islands and the US Virgin Islands.
Keep in mind the numbers beyond 2012 are just estimates. But it should give you a good idea of how the transition from COLA to Locality works.
Here are the COLA and Locality rates for the U.S. Territories...
COLA and Locality Pay for Puerto Rico...
COLA and Locality Pay for Guam, US Virgin Islands, American Samoa, and Northern Mariana Islands...
Is This Change Good or Bad?
There are pros and cons to the change from COLA to Locality Pay.
The best part of this transition for Federal Employees in Puerto Rico and other Territories is that Locality Pay *is counted* in your High-3 Salary for Retirement. While COLA was tax-free, it didn't count towards your federal retirement.
However, Locality Pay is *taxable*. Moving to Locality Pay increases your taxable income... which means you'll be paying more in taxes.
There is a special rule for Federal Employees who are retiring during the transition that allows you to 'buy back' your COLA and have it count as Locality Pay.
Click here to learn more about how COLA and Locality Pay affect your Federal Retirement
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