Programs & Services > Allowances > Frequently Asked Questions > Overseas Cost of Living Allowances (COLA)
Overseas Cost of Living Allowances (COLA)
Frequently Asked Questions
Updated: 10/21/10
- What is Overseas COLA?
- Does everyone assigned overseas receive COLA?
- How much COLA will I receive at my new permanent duty station?
- How does the Department of Defense know whether it costs more to live at my overseas duty station than in CONUS?
- So if the cost of living is 30 percent higher at my duty station, will my paycheck be 30 percent larger?
- How does DoD know what my spendable income really is?
- Does the type of housing I occupy affect my COLA?
- I've heard that there also is an overseas housing allowance, or OHA. Does the amount of COLA I receive affect my OHA?
- Is COLA affected by changes in the foreign exchange rates?
- How often is COLA adjusted?
- I know that the value of the dollar has dropped a lot over the past several months, but my COLA hasn't gone up an equal amount to compensate for the drop. Why not?
- What if spending patterns have changed because of changes in the exchange rate?
- My dollar buys less foreign currency than ever, but I still don't receive COLA. How come?
- Why does the Spendable Income Table list only up to five dependents?
1. What is Overseas COLA?
The Cost-of-Living Allowance, or COLA, is paid to Service Members to partially offset high costs when stationed overseas (including Alaska and Hawaii). COLA helps maintain purchasing power so you can purchase about the same goods and services overseas as in 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, or non-availability of goods and services.
2. Does everyone assigned overseas receive COLA?
No. If the cost of living in the overseas area where you are assigned is the same as, or lower than it is in an average area in CONUS, you do not receive COLA.
3. How much COLA will I receive at my new permanent duty station?
A COLA rate query by location is available at http://www.defensetravel.dod.mil/colaCalc.cfm.
4. How does the Department of Defense know whether it costs more to live at my overseas duty station than in CONUS?
The Cost of Living index is based on data furnished by uniformed members assigned to each overseas location. DTMO's Allowances Branch uses two surveys to determine the relative cost of living: a Living Pattern Survey and a Retail Price Schedule.
The Living Pattern Survey asks Service Members which local stores they shop in and how much (the percentage) they buy from the commissary and exchange. For example, the Living Pattern Survey may show that Service Members typically buy half their clothing in local stores (with foreign currency) and half at the exchange (with U.S. dollars).
Using information from the Living Pattern Survey, price collectors in many overseas locations conduct a market basket survey (Retail Price Schedule) each year, pricing about 120 goods and services.
The prices from each overseas survey are compared with prices in the 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, a COLA is paid.
Survey results may show, for example, that in September the market basket items on average in CONUS cost $100 while at your overseas duty station the same items cost $130.00 indicating that the cost of living is 30% higher in your area. As a result and you would receive COLA to help pay the extra costs associated with the higher cost of living overseas.
5. So if the cost of living is 30 percent higher at my duty station, will my paycheck be 30 percent larger?
No, because COLA is figured on spendable income, not total income. Spendable income is total income minus housing expenses, taxes, savings, life insurance, gifts and contributions.
6. How does DoD know what my spendable income really is?
The spendable income used to calculate COLA is based on averages. DTMO's Allowances Branch uses spendable income tables computed for different family sizes and income levels. These tables are based on consumer expenditure surveys from the Department of Labor's Bureau of Labor Statistics that show how people typically spend their income.
7. Does the type of housing I occupy affect my COLA?
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 accompanying dependents living in either on-base family housing or off base housing, your COLA will not be affected.
8. I've heard that there also is an overseas housing allowance, or OHA. Does the amount of COLA I receive affect my OHA?
No. COLA and OHA are separate allowances: COLA partially offsets non-housing expenses; OHA partially reimburses for housing expenses when housing is not provided by the government.
9. Is COLA affected by changes in the foreign exchange rates?
Yes. DTMO's Allowances Branch monitors foreign exchange rates throughout the year. As the amount of foreign currency your dollar "buys" changes, the DTMO's Allowances Branch increases or decreases COLA to maintain your purchasing power.
10. How often is COLA adjusted?
COLA is adjusted once a year based on data furnished by the Commands overseas. For currency fluctuations, DTMO's Allowances Branch can adjust COLA as often as every payday. Of course, just as it takes time to process an allotment change, it takes a while for a COLA change to show up in your pay.
11. I know that the value of the dollar has dropped a lot over the past several months, but my COLA hasn't gone up an equal amount to compensate for the drop. Why not?
Because COLA is adjusted only for the portion of income that the typical member spends on the local economy (in foreign currency). If the living-pattern survey for your area shows that typical members spend 50 percent of their income on the local economy and 50 percent in dollars (i.e., on-base), then only that portion of COLA based on local currency purchases is changed for currency fluctuations. If the value of the dollar against the local currency falls 4%, in this case your COLA would be increased 2%.
12. What if spending patterns have changed because of changes in the exchange rate?
When such changes occur, the Living Pattern Survey will be updated. An event such as the opening/closing of a commissary/exchange also may prompt a survey update.
13. My dollar buys less foreign currency than ever, but I still don't receive COLA. How come?
Remember that you receive COLA only when the cost of living in your area is higher than it is in CONUS. If you have enjoyed 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 CONUS. You can be sure that once average costs exceed those in CONUS, you will receive an appropriate allowance.
14. Why does the Spendable Income Table list only up to five dependents?
In contrast to the CONUS COLA Allowance which only considers whether a Service member has dependents or not, Overseas COLA takes into consideration a Service member's number of dependents (up to five). 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 maximized the percentage of income that they devote to spending on COLA items for dependents.
The methodology for calculating the Spendable Income Table has remained unchanged since 1999. The Bureau of Labor Statistics Consumer Expenditure Survey (CES) provides reliable data that takes into consideration data on family sizes (up to five dependents) and carefully details how military families across a series of income ranges allocate their spendable income across all COLA types of goods and services.
The COLA Spendable Income Table is computed using data derived from BLS. Overseas COLA is calculated based on a Service member's portion of spendable income, not disposable income, used to purchase COLA goods and services. If the table were to be expanded, with a very few exceptions, the payment amounts for members with more than five dependents would not vary significantly from that at five dependents. A larger family size does not increase income. As the number of dependents increases, over five, the overall amount of COLA goods and services purchased tends to remain the same.
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