COLA rates set to decrease in March

KAISERSLAUTERN, RP, GERMANY

02.20.2015

Story by Brandon Beach 

21st Theater Sustainment Command

KAISERSLAUTERN, Germany – Cost-of-Living Allowance will drop for many U.S. military service members stationed in Germany starting March 16.

With the dollar rising and the euro falling to as low as $1.12 in recent weeks, the reduction in COLA should come as no surprise, said Lt. Col. Brian Ketz, disbursing officer for the 266th Financial Management Support Center.

“It’s important to remember that while the (COLA) amount will decrease, our buying power will remain the same,” he said.

Several factors contribute to periodic adjustments in COLA. These include a fluxuating dollar-euro exchange rate, as well as changes in overall prices for goods and services sold in U.S. and overseas locations. Here in Germany, for example, prices have fallen, according to the most recent Retail Price Schedule, or COLA report.

“Take, for example, a trip to Garmisch for the weekend,” said Ketz. “The overall cost is 300 euro, but when it comes to actually paying (for the trip) in U.S. dollars it can be different from one month to the next.”

As the name suggests, COLA is a non-taxable “allowance” that helps offset the effects of living in higher overseas cost areas. If prices in those areas fall, COLA is adjusted accordingly. The same happens in reverse if prices go up.

The rates are adjusted based on reviews by the Military Advisory Panel and Principals, a Department of Defense committee. The amount of COLA paid is determined by several criteria including a service member’s rank, years in service, number of dependents and location.

The current change in COLA comes at a time when the Consumer Federation of America, a nonprofit organization based in Washington, DC, rolls out its Military Saves Week campaign Feb. 23-28. The program encourages military families to “save money, reduce debt and build wealth.” In other words, families should build a solid, financial plan. Ketz offers some additional advice.

“You should never include COLA when formulating your monthly budget,” he said. “When you think about your budget, you should include just your base salary, and Basic Allowance for Subsistence -- not your COLA because that changes every month.”

Approximately $2 billion is paid in overseas COLA annually, according to the Defense Travel Management Office website.

For more information on COLA and other financial topics, visit the 266th FMSC website at www.eur.army.mil/21TSC/266FMSC

• Date Taken: 02.20.2015
• Date Posted: 02.20.2015 05:12
• Story ID: 154949
• Location: KAISERSLAUTERN, RP, DE