RAMSTEIN AIR BASE, Germany -- Beginning May 1, American service members and their families based overseas, who receive funds through the Cost of Living Allowance (COLA) program, will see a change on their leave and earnings statement.
The purpose of the overseas COLA is to ensure that service members have the same purchasing power at their overseas duty station as they would if they lived in the U.S.
"The bottom line is that prices in the U.S. are rising at a higher pace than in Europe so the gap has narrowed and COLA is going down accordingly," said Col. Mary L. Ensminger of the U.S. Air Forces in Europe Directorate of Financial Management and Comptroller.
To maintain purchasing power, the Per Diem Committee in Washington, D.C., adjusts the COLA baseline annually dependent on where service members shop and the prices of goods and services they buy. COLA is also adjusted as often as every two weeks based on fluctuation of the local currency relative to the U.S. dollar.
COLA is currently paid based on a 24 percent difference in the price of goods and services between the U.S. and the overseas location. Annual survey data from Germany and inflation data from the U.S. indicate that the purchasing power gap has narrowed from 24 to 16 percent because the prices of goods and services in the U.S. are rising at a greater rate than in Germany.
This assessment led the Per Diem Committee and the Services to adjust Germany's COLA rates downward.
To ease the financial burden on overseas COLA recipients, reductions will take place over four months - May through August. As an example of the decrease, an E-5 with 10 years of service and two dependents will see daily COLA reduced from the current rate of $19.07 to $17.48 May 1 and finally to $12.71 on 01 August, a drop of $190.80 per month. These projections do not consider any changes due to currency fluctuations.
A 2008 decision to lower the KMC/Spangdahlem COLA by 4 points was delayed pending a review that ultimately upheld accuracy of the process used.
For more information on overseas COLA, visit the Per Diem Committee Web site at: http://www.defensetravel.dod.mil/perdiem/allowcol.html
The USAFE FM encourages all personnel to plan accordingly.