RAMSTEIN AIR BASE, Germany -- Airmen stationed throughout Europe will see a change in their overseas cost-of-living allowance December 1, 2023. This latest change is one of two decreases in OCOLA expected to impact Ramstein Airmen with impacts varying based on individual circumstances.
“The overseas cost-of-living allowance is a non-taxable supplemental pay allowance, designed to offset overseas prices of non-housing goods and services,” said Maj. Malachi Thompson III, Branch Chief, Military Personnel Policy and Programs at USAFE-AFAFRICA/A1KM. “When discussing any change in OCOLA, it’s important for Airmen to be aware of what they’re seeing in their paycheck. We want to get the word out now so our Airmen can prepare for what is expected to be a decrease for locations in Europe.”
The National Defense Authorization Act for FY 2023 limited implementation of OCOLA decreases for military members to no more than one decrease every six months or when a member arrives at a new overseas permanent duty station. There is an exception for changes in the dollar-euro exchange rate, which can be implemented on a monthly basis, as required.
The limitation of decreases to only twice a year creates more stability for more than 230,000 servicemembers and their families worldwide who receive OCOLA, said Thompson, but it remains important for financial planning to be aware of when changes could occur. OCOLA varies for each Airman based on his or her location, pay grade, years of service, and number of dependents.
As an example, a captain with four years of service and two dependents had an OCOLA of $124.27 for the pay period running from October 16-31, 2022, and a rate of $311.11 for October 16-31, 2023. If prices of non-household goods and services in the continental U.S. are rising at a greater rate than those overseas, a member’s OCOLA will decrease, and vice versa. However, if prices fluctuate at the same rate, a member’s OCOLA will stay the same. Members only receive a OCOLA if costs are higher at an overseas location than the average location in the U.S.
An Airman’s OCOLA is calculated by comparing the prices of goods and services overseas with average prices for equivalent goods and services in CONUS. The result of this price comparison is an index that reflects a cost of living. An Overseas COLA Rate Lookup Calculator is available on the Defense Travel Management Office website to determine how a decrease might affect their spending. The latest projected decrease will post to the website after November 15 and resulting changes to pay are expected to be reflected in paychecks on December 1, 2023.
“OCOLA can also be affected by dollar-euro exchange rates, but the 2023 NDAA limiting decreases to twice a year means decreases can be sudden instead of gradual,” said Thompson.
According to Thompson, there are two surveys that determine that relative cost of living overseas compared with the U.S. One is the Living Pattern Survey, which asks servicemembers where they shop and what percentage of goods they purchase locally as compared to at the Commissary and Base Exchange, or via online retailers. The other survey is the Retail Price Schedule, or Market Basket Survey, which annually captures prices for nearly 120 goods and services based on outlets identified in the most recent LPS. Thompson said Airmen can have a direct impact on Overseas COLA indexes by participating in the LPS every three years. If Airmen decline to respond to those surveys, then the presumption is that those Airmen are not negatively impacted by any economic differences.
“Airmen shouldn’t see OCOLA as a stable source of finance towards car payments or rent,” said Thompson. “It exists to absorb some of the dollar’s impact as it fluctuates in a larger global economy. Airmen stationed overseas experience the diversity that comes with a global economy on a wider scale, but OCOLA is where they can see its impact every paycheck. Staying aware and informed of why OCOLA shifts is key for an Airman’s economic well-being.”
The Overseas COLA rate calculator can be found at: https://www.travel.dod.mil/Allowances/Overseas-Cost-of-Living-Allowance/Overseas-COLA-Rate-Lookup/