Entitlements to Cost of Living Allowances and Retirement Credits for Nonappropriated Fund Employees

FPCD-79-6: Published: Nov 29, 1978. Publicly Released: Nov 29, 1978.

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The entitlement of nonappropriated fund (NAF) employee stationed overseas, and particularly of George W. Deojay, to cost-of-living allowances (COLA) and retirement credits was questioned. Department of Defense (DOD) guidelines state that U.S. citizens recruited in the United States for NAF employment overseas are entitled to COLA, but NAF employees hired locally in an overseas area are not eligible. This distinction does not apply to appropriated fund employees. Mr. Deojay was hired locally in Germany by NAF activities and, therefore, was not granted the allowance. DOD decided against exceptions to regulations which would allow payment of COLA to local hires, citing additional costs. NAF employees are excluded by law from participation in the U.S. civil service retirement system. The NAF activities have established their own retirement systems, but pension rights among systems are not transferrable except under special circumstances. Mr. Deojay and many other employees lost retirement benefits by transferring between NAF activities.

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