What is COLA military? COLA, or Cost of Living Allowance, is a financial supplement paid to military personnel to cover differences in living expenses between their assigned service station and the national average cost of living.
Today, we’ll learn more about the types of COLA and shed light on how they cater to military personnel’s specific demands.
We will also go into the elements that influence COLA rates and how these allowances are distributed.
Table of Contents
What is COLA?
The Cost of Living Allowance (COLA) is a benefit given to US military personnel stationed abroad or in high-cost locations within the United States. There is no tax on this monthly allowance.
The purpose of COLA pay is to assist service personnel in adjusting to the increased living costs in certain duty stations. COLA is intended to give military men and women a steady purchasing power regardless of whether they are stationed domestically or abroad.
COLA is affected by a number of factors, such as rank, the number of dependents stationed, living arrangements (off base may receive a higher salary than on base), and the overseas currency to US $ exchange rate.
Given these factors, the COLA amount may vary in response to price changes in certain domestic stations and overseas. These variations guarantee consistent and fair support for the living expenses of service members.
Types of COLA
Military COLA (Cost of Living Allowance) comes in two types. One type is for U.S. service members stationed abroad (OCONUS COLA), and another for service members living in high-cost areas of the country (CONUS COLA).
1. OCONUS COLA
The Overseas Cost of Living Allowance (COLA) is a benefit intended to offset the increased expenses of non-housing goods and services when stationed overseas. The amount of this allowance may change depending on the currency rate from one pay period to the next.
Overseas COLA is not taxed. This COLA ensures that service members have the same purchasing power overseas as they would if stationed within the continental United States. wherever they are.
2. CONUS COLA
Cost-of-Living Allowance in the Continental United States, or CONUS COLA, is a taxable supplementary allowance provided to Service personnel to help offset costs when stationed in expensive CONUS locales.
Suppose the non-housing cost of living in a location is higher than 108% of the national average. In that case, it is considered a high cost. Thus, CONUS COLA is only available to members stationed in places where the non-housing cost of living is at least 8% higher than the average.
It’s important to remember that expenses associated with housing are not included in CONUS COLA and are instead reimbursed by the Basic Allowance for Housing (BAH).
How COLA is determined and paid
The procedure and variables regarding COLA change depending on whether you’re stationed abroad (OCONUS COLA) or in a high-cost region of the United States (CONUS COLA).
1. OCONUS COLA
Three important data elements are analyzed by the DOD (Department of Defense) to establish OCONUS COLA rates:
- Every three years, the Living Pattern Survey (LPS) collects data from Service members and their families to learn more about where and how they make purchases of products and services.
- The Retail Price Schedule is another survey that helps determine OCONUS COLA. In this survey, a 150-item market basket of non-housing goods and services from the stores where Service members shop is measured annually.
- For service members overseas, currency variations are included, altering the purchasing power of the foreign currency compared to the US dollar.
To compute OCOLA for the overseas site, the Department annually compares LPS and RPS data from OCONUS to the same data obtained in CONUS (average CONUS baseline).
The DOD also ensures that military personnel stationed overseas receive precise and equitable adjustments.
Although OCONUS COLA is paid in US dollars each month, foreign exchange usually covers certain expenses. Once a year, the foreign command provides data that is used to update the overseas COLA. Service members overseas may check their COLA pay in this COLA military calculator.
2. CONUS COLA
CONUS COLA locations where a service member is stationed are a major factor in determining the allowance rate.
However, before computing CONUS COLA, there are specific eligibility requirements that service members must meet:
- A service member must be assigned to a high-cost region in the Continental United States (CONUS) l. There are currently 20 of these places in the United States, which are referred to as military housing areas (MHAs).
- A service member’s primary dependent should be living in an expensive area of the continental United States (CONUS) while the personnel is on an unaccompanied tour of duty abroad.
- A service member’s primary dependent resides in a high-cost area of the United States due to the military personnel’s duty location or other conditions.
Note: The service member’s duty station’s ZIP code—not your home address—is used to calculate CONUS COLA. Additionally, members with and without dependents have separate COLA computations performed for them.
CONUS COLA is paid monthly based on a thirty-day period and is CONUS COLA. CONUS COLA is required by law to be adjusted annually.
Service member’s eligibility for CONUS COLA may check their rates here.
Conclusion
This guide about what is COLA military showed the significance it plays in the lives of military members. As we learned the definition and goals of each form of COLA, as well as the determination and payment, it became clear that understanding COLA is essential.
Knowledge of COLA enables military members to make informed decisions, manage their money properly, and adapt to the variable costs of living associated with different duty posts. For civilians, this article provides insight into the financial aspects of military life by understanding the complexities of COLA.
I am Everett Bledsoe, taking on the responsibility of content producer for The Soldiers Project. My purpose in this project is to give honest reviews on the gear utilized and tested over time. Of course, you cannot go wrong when checking out our package of information and guide, too, as they come from reliable sources and years of experience.