Cost of Living Allowance in Europe drops

By Bruce Anderson, U.S. Army Europe Public Affairs
June 29, 2010

HEIDELBERG, Germany -- The Cost of Living Allowance rate set by the Defense Department for June will result in most service members experiencing at least a 20 percent COLA reduction, depending on the service member’s community. This reduction is a result of the stronger U.S. dollar against most European currencies.

For example, based on June COLA rates for Heidelberg, a Pfc. with two years of service and two dependents is entitled to $265.42, down from $400.17 in May. A married Staff Sgt. with 10 years of service and three dependents will now receive $358.58, down from $540.63. And a Col. with 24 years of service and two dependents gets $593.67 instead of $895.04.

COLA is designed to offset the higher prices of non-housing goods and services overseas, not for purchases made on base, so that service members can afford to purchase the same level of goods and services as if they were
stationed in the U.S. It is designed to ensure economic parity with U.S. counterpart’s spending patterns and levels. It compares prices of goods and services overseas with prices in U.S. for equivalent goods and services.

The allowance is paid as a percentage of a member’s spendable income, not total disposable income. The allowance is also based on a number of factors, including the member’s rank, grade, years of service, family size, location, and the exchange rate. It is designed to offset expenses related to food consumed at home, food consumed away from home, clothing, personal care, tobacco and alcohol, car purchase, household operations, transportation, recreation medical care and telephone.

Currency fluctuations can affect both Overseas COLA and Overseas Housing Allowance (OHA) payments. The exchange rate between the host country currency and the dollar are reviewed twice a month for appropriate adjustments to ensure that neither the Service member nor the government is disadvantaged over time by fluctuating exchange rates.

For a full list of the new COLA rates, visit this website:

http://www.defensetravel.dod.mil/perdiem/