The Overseas Cost-of-Living Allowance (COLA) is paid to Service members to offset high costs of non-housing goods and services when stationed overseas (including Alaska and Hawaii). COLA helps maintain purchasing power so you can purchase similar goods and services overseas as in the Continental U.S. (CONUS). It does not reimburse expenses, but is designed to offset higher overseas prices of goods and services. It does not compensate for remoteness, hardship, loss of spousal income, or non-availability of goods and services.
The Cost of Living index is based on data obtained through several sources, including data furnished by uniformed members assigned to each overseas location. The Department uses two surveys to determine the relative cost of living in an overseas location: (1.) a Living Pattern Survey (LPS) and (2.) a Retail Price Schedule (RPS).
The LPS asks Service members which local stores they utilize to buy a particular market basket of goods and services. The LPS also asks how much of their purchases (the percentage) are bought from particular sources of supply (i.e., on the local economy, at commissaries and exchanges, online, and brought from home). For example, the LPS may show that Service members typically buy 50% of their clothing in local stores (with foreign currency) and 50% at the on-base Exchange (with U.S. dollars).
The aggregate results from the LPS indicate the two or three main stores members utilize for each market basket item and the overall percentages from each source of supply. This data is used by price collectors in each DoD overseas location to conduct an annual market basket survey, or RPS, pricing approximately 120 goods and services from the outlets identified on the LPS.
The market basket prices obtained from an overseas RPS are compared with prices in average CONUS for equivalent goods and services at the same point in time. If the overseas market basket cost is greater than the average CONUS cost, Overseas COLA is paid.
Results of this comparison may show, for example, that the market basket items in average CONUS cost $100 while at your overseas duty station the same items cost $130.00 indicating the cost of living is 30% higher in your area. As a result, you would receive COLA to help pay the extra costs associated with the higher cost of living overseas.
No, because COLA payments are based on spendable income, not total income. Spendable income is total income minus housing expenses, taxes, savings, life insurance, gifts and contributions. The 30% will be applied to the spendable income amount that matches your regular military compensation and number of dependents.
The Department uses data obtained from the Department of Labor's Bureau of Labor Statistics (BLS) to compute spendable income for different family sizes and income levels. The BLS conducts consumer expenditure surveys and the results of these surveys indicate how Service members and their families typically spend their income. This data is used to annually update the spendable income tables used to calculate COLA. Spendable income tables are available at: https://www.defensetravel.dod.mil/site/pdcFiles.cfm?dir=/Allowances/COLA/Compensation_Tables/Pay_Tables/
The data used to calculate spendable income for Overseas COLA payments is derived from the Bureau of Labor Statistics (BLS). The data demonstrates that when family size reaches five dependents, spendable income begins to stabilize. As family size increases, more income is devoted to housing (greater number of rooms/bedrooms), so there is less disposable income left over to spend on COLA items. A Service member with five dependents has reached the point where they have almost maximized the percentage of income they devote to spending on COLA items for dependents.
Yes. If you are a member without dependents living in government quarters such as the barracks or aboard ship, you will receive less COLA to reflect your lower living expenses. If you are a member with command sponsored dependents living in either on-base family housing or off base housing, your COLA will not be affected.
No. COLA and OHA are separate allowances. COLA is designed to offset non-housing expenses; OHA partially reimburses for housing expenses when housing is not provided by the government.
Yes. The Department monitors foreign exchange rates daily. As the amount of foreign currency your dollar "buys" changes, COLA will increase or decrease to maintain your purchasing power.
Overseas COLA is adjusted once a year based on data furnished by the overseas Command. All changes to COLA based on data must be reviewed and approved by representatives of the seven Uniformed Services before implementation can occur. Overseas COLA is adjusted as often as every pay period for currency fluctuations as determined by the appreciation/depreciation of the currency. Currency changes are implemented automatically, without Service approval, and help maintain member’s purchasing power over time.
Overseas COLA is adjusted only for the portion of income that the typical member spends on the local economy (in foreign currency). For example, if the LPS for your area shows that typical members spend 50% of their income on the local economy and 50% on base in U.S. dollars, then only that portion of COLA based on local currency purchases is changed for currency fluctuations. If the value of the dollar depreciates 4% against the local currency, your COLA would increase 2%.
Remember that you receive COLA only when the cost of living in your area is higher than it is in average CONUS. If you were experiencing a lower cost of living in your area, you may feel disadvantaged when the exchange rate becomes less favorable to you, even though costs are still lower than in average CONUS. You can be sure that once average costs exceed those in CONUS, you will receive an appropriate allowance.
