Currency fluctuations can affect both Overseas Cost of Living Allowance (COLA) and Overseas Housing Allowance (OHA) payments. Military finance centers pay all allowances in U.S. dollars, but many expenses for Service members overseas are in local currency. When exchange rates change, overseas allowance payments are adjusted to ensure that the Service member has the same purchasing power as before.
Exchange rates cannot be predicted. DTMO monitors daily exchange rates using a Currency Adjustment model. It compares the current pay system exchange rate, used by military finance centers, to the currency exchange rate. Exchange rates are reviewed twice a month to adjust the pay system exchange rate. This method ensures that, over time, neither the Service member nor the government is disadvantaged by fluctuating exchange rates.
When a currency adjustment is made, Service members see the changes in their next paycheck. Currency adjustments may result in an increase, decrease or no change to the COLA index and OHA. Adjustments are made exactly the same way whether the dollar is increasing or decreasing in value. The changes in allowances are posted to the DTMO website one day prior to the effective date. Because adjustments are made only once per pay period based on past data, the pay system exchange rate will generally not be the same as the exchange rate at the bank window.
For COLA, only the portion of the index for which local purchases are made is adjusted. Service members can calculate their COLA payment by using the COLA Calculator. The calculator computes the daily COLA rate as well as their semi-monthly payment and is updated with the current COLA amounts each pay period.
OHA is generally set in local currency. Military finance offices use the pay system exchange rate to convert the required amount of local currency (based on the OHA permitted) to U.S. dollars. Payments for OHA depend on dependency status, permanent duty station, grade, and rent payments for privately leased quarters. Service members can calculate their OHA by using the OHA Calculator.