New Videos Explain Major Pay and Benefits Changes Coming in 2010 for Federal Employees in Alaska

More than 12,000 Federal Government Employees in Alaska can expect big changes to their pay and retirement benefits in 2010 due to a new law on Alaska Locality Pay. A new series of videos from Plan-Your-Federal-Retirement.com will cover the impact of the transition from COLA to Locality Pay for Federal Employees in Alaska.

Anchorage, AK (PRWEB) November 3, 2009 -- Major changes are coming for more than 12,000 federal employees in Alaska. A new law that takes effect on January 1, 2010 will change the way federal employees in Alaska get paid. This change will affect their take home pay and their federal retirement.

Currently federal employees in Alaska receive a special Cost of Living Allowance (COLA) to supplement their pay for the higher costs of living in Alaska. Starting in 2010, they will be phased out of COLA and into Locality Pay. Locality Pay will still be a supplement to their salaries, but Locality Pay is treated differently when it comes to taxes and retirement calculations.

While COLA is tax-free, it is not included in the pension calculations for federal retirement. Locality Pay is included in calculation of federal retirement pensions, but it is subject to income taxes.

The transition to Locality Pay will have a significant impact on federal employees in Alaska now, and when they retire. This change will mean higher federal retirement pensions in the future, but it will also mean bigger tax bills now.

The new law will mandate a transition from COLA to Locality Pay during a 3 year period from 2010 to 2012. Congress has developed a formula to help minimize the increase in taxes from the move to Locality Pay. However many federal employees will see an increase in their tax bill starting in 2010.

Micah Shilanski, a financial planner who works with federal employees in Alaska and founder of http://www.Plan-Your-Federal-Retirement.com, has been talking with federal employees about this issue.

"The transition from COLA to Locality Pay will have a huge impact on the retirement plans of federal employees in Alaska." said Shilanski. "But most federal employees haven't heard exactly how big of an impact this will have on their current take-home pay."

The new law states that it is the intent of Congress that federal employees take-home pay will not be reduced. However, when Shilanski ran projections to see how the new law would affect his clients, he found that many federal employees would see a reduction in take home pay.

"I contacted members of Congress to see if I had interpreted the bill correctly, or if I was missing something. The response I got was, that "the legislation does not take into account each individual employee’s tax situation. " So some federal employees may indeed see decrease in take-home pay." said Shilanski.

"As the bill is written, the Office of Personnel Management (OPM), has the authority to increase the pay of Alaska's federal employees with a special COLA on top of the new Locality Pay in order to offset the additional taxes owed. However, we just don't know if that is going to happen." added Shilanski.

The shift to Locality Pay will increase the taxable income of federal employees in Alaska. That means more taxes, but it also will cause some to be phased out of things like Roth IRAs.

Federal employees who are close to retirement will be more interested to learn exactly how this new law will affect their federal retirement pensions. Some federal employees will be able to retire several years earlier than they had originally planned.

"Lots of federal employees think they'll have to wait until 2016 to get the biggest impact of Locality Pay, but that's not the case." said Shilanski. "Many federal employees will be excited to learn about the special provisions in the bill for people retiring during the phase in period."

The transition to Alaska Locality Pay will have such a large impact on federal employees in Alaska that Plan-Your-Federal-Retirement.com is launching a special series of videos. The videos will help federal employees understand the new law and how it will affect their personal situation.

While most federal employees have heard about the transition to Locality Pay, there is confusion about exactly how the new law will affect them.

"I've gotten so many questions about Alaska Locality Pay. I discuss the issue one-on-one with my federal employee clients - but there is such a need for this information that we decided to create a special series of videos on Plan-Your-Federal-Retirement.com." said Shilanski.

The videos will be available in a special section of Plan-Your-Federal-Retirement.com devoted to the COLA to Locality Pay issue.

"We're hoping to spread the word about the huge impact Alaska Locality Pay will have on federal employees. We want to help separate the myth from fact and help federal employees understand what these changes will mean to them."

Federal employees in Alaska are encouraged to visit the COLA to Locality Pay section of http://www.Plan-Your-Federal-Retirement.com. They can reach this section directly by following the link to http://www.Plan-Your-Federal-Retirement.com/alaska-locality-pay.html

About Plan-Your-Federal-Retirement.com:

http://www.Plan-Your-Federal-Retirement.com is a nation-wide website providing information that every federal employee needs to know about their retirement. Their goal is to help federal employees understand their retirement benefits and avoid mistakes when planning for their retirement.

About Micah Shilanski:

Micah is a CERTIFIED FINANCIAL PLANNER™ who specializes in helping Federal Employees get the most out of their retirement benefits. More information about Micah's experience is available at http://www.Plan-Your-Federal-Retirement.com/financial-planner-for-federal-employees.html.

Shilanski & Associates, Inc. is an independent financial planning firm in Anchorage, Alaska, that has been in business for nearly 30 years. Securities offered through Summit Brokerage Services, Inc., 980 N. Federal Hwy., BocaRaton, FL 33432, Member FINRA/SIPC. Shilanski & Associates, Inc. is not affiliated with Summit Brokerage Services, Inc.

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