COLA allowance properly compensates for overseas living costs

  • Published
  • By Master Sgt. Mona Ferrell
  • USAFE News Service
RAMSTEIN AIR BASE, Germany (USAFENS) --  As the Euro continues to fluctuate in strength against the American dollar, U.S. Air Forces in Europe members can be assured they will continue to be provided with the proper Cost of Living Allowance, said USAFE officials recently.

Foreign currency rate changes are continually reviewed in high-cost living areas and the COLA rate is changed accordingly, said 1st Lt. Jason Werner, USAFE Financial Management chief of command pay and entitlements.

COLA, a monetary allowance provided to members living in high-cost areas, ensures all military members have the same buying power, whether living overseas or in the Continental United States.

“Several factors routinely impact COLA,” Lieutenant Werner said. “A Retail Price Survey is conducted each year to assess the costs and typical local economy buy rate of more than 160 items and services. These items, ranging from groceries to car insurance, are meant to give the true purchase-price picture for goods and services in each high-cost living area.”

The survey results for each area are then provided to the Department of Defense Per Diem Committee in Washington, D.C., he said. The Per Diem Committee analyzes the data and assigns each location an index number indicating the cost difference between purchasing those same items in the United States.

“For instance, the index for Ramstein Air Base, Germany, is currently .36,” said the lieutenant. “This indicates that our military members pay 36 percent more here for those 160 items than they would in the CONUS. This percentage difference is then calculated into the COLA rate.”

A Living Pattern Survey is also conducted every three years to gather information on whether members purchase goods and services on base or on the local economy, said Master Sgt. Keibu Kamarakafego, USAFE Financial Management chief of command travel pay and procedures.

“In this survey, the purchases are weighted in the overall index,” Sergeant Kamarakafego said. For example, car insurance is weighted more then groceries.”

“The past LPS survey indicated Ramstein’s military members make one quarter of their purchases off base,” he said. “This ratio is taken into consideration when calculating the COLA rate here. These purchase percentages, on- or off-base, help determine the impact exchange rate fluctuations have on the overall COLA rate.”

But, the factor that impacts a member’s COLA regularly is foreign currency rate changes, said Lieutenant Werner.

“The Per Diem committee makes updates as often as twice a month, on the first and fifteenth of the month,” he said. “If during that two-week period the cumulative cost of off-base spending has increased or decreased at least five percent, then the index number is changed and members receive an increase or decrease in their cost of living allowance accordingly.”

Although the exchange rate fluctuates daily, it takes two weeks to adjust the military pay computer tables. But, this two-week adjustment works both ways, the lieutenant stressed.

“For instance, let’s say the foreign exchange rate gets better, and the Per Diem Committee determines that a COLA decrease is required,” he said. “That decrease won’t be seen until two weeks later, so during that time we’re getting a COLA rate higher than what it’s costing us to purchase goods. The same could be said if the COLA increases. It takes two weeks to see a change in our paychecks whether the rate increases or decreases. Over time, the COLA rates balance out and we’re getting the money we need to purchase the items we want, where we want.”

The statistics behind COLA may be complicated, but it’s an allowance that’s fair, Sergeant Kamarakafego said.

“USAFE members are affected by the fluctuating Euro exchange rate, however the DOD is taking care of them through COLA adjustments,” he said. “Overtime, all military members, whether living in England , Germany or any other part of Europe , are properly compensated for the costs associated with overseas living.”

More information about COLA rates can be found on the Per Diem Committee Web site located at: http://wwwdtic.mil/perdiem/ocform.html