Friday, December 14, 2001

Hawaii State Seal

State stands to get tax windfall
from COLA settlement checks

By Gregg K. Kakesako

The state will get a tax windfall conservatively estimated to be a little more than $5 million this holiday season as 25,000 current and former federal workers here start getting checks from a $90 million court settlement.

The $90 million is part of a $232.5 million settlement for white-collar civilian federal employees in Hawaii, Guam, Alaska, Puerto Rico and the Virgin Islands for a differential in cost-of-living allowances, or COLA.

Ben McConaughy, a Seattle attorney who has been handling the class-action lawsuit for federal employees, said yesterday the checks were sent to 18,571 federal employees here earlier this week.

Part of the delay in sending the checks out was compliance with the state's tax withholding laws, McConaughy said.

Kerry Yoneshige, state taxation services administrator, said that the state's ailing economy could see results of that COLA windfall as early as next month.

On Nov. 30 nearly $47 million in checks were mailed to 15,543 other federal employees, who were not subject to Hawaii tax withholding requirements.

Later this month, another 8,000 former federal workers, who no longer live here but who were subject to Hawaii's withholding laws, will receive their payments.

The back COLA payments have been estimated to range from as little as a few dollars to as much as $20,000, depending on the federal employee's pay grade between October 1990 and October 1998.

The out-of-court settlement was reached last year after federal employees in the Virgin Islands sued, saying COLA allowances were too low. The class-action lawsuit included federal workers living here.

The settlement meant that Oahu's COLA allowance went from 22.5 percent of an employee's salary to 25 percent.

Federal workers on the neighbor islands also got a boost, going to 23.75 percent from 22.5 percent on Maui, to 23.5 percent from 22.5 percent on Kauai and to 16.5 percent from 15 percent on the Big Island. Federal blue-collar workers were not affected.

Hawaii was the only area that taxed COLA payments. The settlement trustee was required to help claimants determine how much should be withheld for state taxes.

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