Refreshing look at 'cola'

  • Published
  • By Col. Mike Monson
  • U.S. Air Forces in Europe Comptroller
What a great overseas benefit this COLA thing is! Not to be confused with popular soft drinks, the Cost of Living Allowance is a non-taxable supplemental pay allowance designed to offset overseas prices of non-housing goods and services.

What does COLA do? Simply put, it generally allows service members and their families to buy the same level of goods (e.g., clothing, housewares and food) and services (e.g., dining out, auto repair and recreation) as if they lived in the contiguous United States.

How is COLA calculated? There are many factors that go into determining COLA rates, including the military member's pay situation, overseas living pattern surveys, overseas retail prices for both on- and off-base goods and services, CONUS prices for similar items, and currency exchange rates.

Will COLA cover all of my out-of-pocket expenses? Probably not, but again it's only designed to offset higher overseas prices, not increase your standard of living comparable to what it would be in the CONUS.

The Top 10 things everyone should know about overseas COLA from the Defense Travel Management Office:
1. COLA rates are based on a military member's rank, time in service, location and number of dependents.
2. COLA is intended to equalize purchasing power between CONUS-based members and their overseas counterparts.
3. COLA can change each pay period due to exchange rate fluctuations.
4. Military members residing off base usually receive higher COLA than their on-base counterparts.
5. COLA is not taxable.
6. COLA is independent of Overseas Housing Allowance -- the amount of OHA you receive does not affect your COLA.
7. COLA is affected by overseas Living Pattern Surveys. Based on military member inputs, these surveys identify shopping patterns at the overseas location. Members report percentage of purchases made at local market outlets, commissary, exchange, mail order, Internet, etc. Service members can have a direct impact on their COLA indexes by participating in a Living Pattern Survey.
8. COLA is affected by the annual Retail Price Schedule. Each year, designated shoppers collect local prices (e.g., off base, Internet and commissary/BX) for a market basket of 120 goods and services, everything from milk to cell phone service -- if the overseas costs are higher than in the U.S., a COLA equal to the difference is calculated.
9. COLA is affected by CONUS Market Basket Updates, which are updated quarterly. For example if the cost of groceries rises in the U.S. compared to your overseas location, your COLA may go down.
10. COLA adjustments are either immediate or made incrementally, depending on whether the payment will increase (immediately) or decrease (incrementally).

To calculate your COLA, visit

For more information, check out the DTMO Web site at or e-mail HQ USAFE/FM at