Based on the National Defense Authorization Act for Fiscal Year 2023 (FY23 NDAA) legislation:
- The Department implemented the first phase of OCOLA decreases effective May 15, 2023 and scheduled the next phase of decreases for November 15, 2023. Rate reductions (greater than two index points) based on cost-of living data are implemented in 50% increments, while OCOLA decreases based on currency fluctuations, and data decreases of only two points, are implemented in full in each phase. OCOLA increases are implemented as warranted throughout the year.
- The Department has notified Combatant Commands’ staffs and overseas points-of-contact (POCs) of all approved OCOLA data decreases to ensure Service members have time to financially adjust for the upcoming November 15 changes. Additionally, pending decreases based on currency fluctuations are provided to POCs twice a month.
- Approved OCOLA decreases pending since June 1, 2023, are effective November 15, 2023. POCs will be notified of FINAL November 15 index changes no later than November 13. Service members in affected OCONUS locations will see the decreases in their December 1, 2023, paychecks.
- Implementation dates for decreases after November 15, 2023, will be determined after the FY24 NDAA is signed into law.
For more information, review the November 2023 OCOLA Adjustment Process One-pager [PDF, 1 page]
The Department of Defense released updates to the Overseas Cost-of-Living Allowance (OCOLA) adjustment process which details how future OCOLA adjustments will be applied for locations outside the contiguous U.S. (OCONUS) based on a new statute outlined in the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2023. For more information, see:
The Department collects shopping data directly from Service members through a Living Pattern Survey (LPS). These location-specific surveys are conducted every three years on a rotational basis. Find active surveys.
Representatives at DoD COLA locations also collect local price data on approximately 150 goods and services (market basket items) in what’s known as the Retail Price Schedule (RPS) every year.
The Department compares the overseas LPS and RPS data with similar data obtained in CONUS. Data is obtained from the Bureau of Labor Statistics Consumer Expenditure Survey, which details how U.S. military families allocate their spendable income across all COLA types of goods and services, to set weights or levels of importance within the COLA market basket. This ensures costs for necessities like car insurance, gasoline, and day care, are given stronger consideration than non-necessities in the COLA calculation.
The CONUS weighted average cost for each market basket item is compared to the OCONUS weighted average cost, determined by the LPS and RPS, to produce an index for each item.
The index for each item in the market basket of goods and services is individually weighted and summarized aggregated to reach the final location COLA index. This final index indicates how much more expensive it is to purchase COLA types of goods and services in an overseas OCONUS location than it is to purchase the same level of goods and services in average CONUS (e.g., an index of 120 at an overseas OCONUS location means that it is 20 percent more expensive to purchase COLA types of goods and services than in average CONUS.)
COLA is adjusted annually, based on LPS/RPS data:
- Service Compensation Representatives of the eight Uniformed Services review and approve of all COLA changes based on LPS/RPS data.
- COLA increases are implemented the next pay period.
- In accordance with the FY23 NDAA, COLA decreases are implemented once every 6 months. All OCOLA decreases over 2 points will be implemented in 50% increments on May 16 and November 16.
COLA can also adjust based on currency fluctuations:
- Service Compensation Representatives of the eight Uniformed Services review all COLA changes based on currency fluctuations.
- COLA increases are implemented the next pay period; COLA decreases based on currency are implemented in full on May 16 or November 16.
- Changes in exchange rates (where appropriate) are applied to the portion of the COLA index that reflects local currency purchases. Learn about currency fluctuations and exchange rates.
Overseas COLA is paid as a percentage of spendable income, rather than total income.
- Spendable income is Regular Military Compensation minus housing, taxes, savings, life insurance, gifts and contributions
- Spendable income varies from member to member based on rank, years of service, and number of dependents
- Spendable income is derived from Bureau of Labor Statistics Consumer Expenditure Survey data, which carefully details how military families allocate their spendable income across all COLA types of goods and services.
In some areas OCONUS, a Service member or dependent incurs mandatory and excessive expenses that a Service member based in the CONUS never incurs. Since the expenses are not incurred in the CONUS, they cannot be a part of the ordinary COLA index calculation. For these expenses, payment is a dollar-for-dollar reimbursement for a specifically authorized expense at a designated authorized location.
Locations approved for COLA Unique Expenses are listed in Table 68-2 of the DoD FMR, Volume 7A, Chapter 68 [PDF, 47 pages]. The most up to date locations are:
||1. Mandatory and excessive road tax for one POV
||JUN 2, 2008
|2. Mandatory and excessive registration and transfer fees for one POV