Cost of Living Allowance (COLA) FAQ

1. What is COLA?

2. How is COLA determined?

3. How is COLA paid?

4. Where can I find out about COLA rates for my area?

If you have any questions contact your local Finance Office. 

 Q: What is COLA?

A: Cost of Living Allowance (COLA) is a monetary allowance for members assigned  to high-cost OCONUS areas for the purpose of providing the same buying  power as CONUS-assigned members. The Per Diem Committee in Washington is responsible for COLA computations.

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 Q: How is COLA determined?

A: Each location is assigned an index indicating the cost difference between CONUS and OCONUS of a typical market basket of 160 goods and services. For example the index for Stuttgart is currently 0.42, indicating the market basket costs 42% more than in the US. 
 
Two surveys impact COLA; the Retail Price Survey conducted annually to survey the costs of 160 goods and services on the local economy; Living
Pattern Survey (LPS) conducted every 3 years, to gather information on where members purchase goods and services, on-base or local economy. 

Items are weighted differently in the overall index, i.e. groceries are given more weight than reading material. Plus, these purchase percentages on or off-base determine the impact that exchange rate fluctuations have on the overall COLA rate. For instance, here at Ramstein, the LPS indicates we make 1/4 of our purchases off-base. If we spend $200 each month on goods and services, then we normally would spend $50 per month purchasing these items off-base. 

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Q: How is COLA paid?

A: Foreign currency rate changes drive the most frequent COLA updates which occur twice per month--the 1st and the 15th. When an adjustment is made, the impact will be reflected in pay two weeks later. 

 Example: On 16 Dec, the Per Diem Committee determines based on the exchange rates from 1-15 Dec, a COLA increase is required. The index is adjusted and the COLA change hits paychecks on 1 Jan. Conversely, on 1 Jan, the committee determines the overall exchange rate for 16-31 Dec dictates a decrease in COLA; the decrease hits paychecks on 15 January. Over time, COLA rates balance out and creating equity for the member.

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 Q: Where can I find out about COLA rates for my area?

A: The web site below provides a tool to compute your COLA based