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Military and Veteran Benefits Affected by Annual Rate Adjustments

Joe Wallace

When you start getting military benefits or veteran benefits, you may notice these are adjusted each year, or at a minimum, are considered for an adjustment.

These changes are intended, in some cases, to offset the rising cost of living, but may also be adjusted in response to economic conditions and national defense priorities.

Which Military and Veteran Benefits are Affected by Annual Rate Adjustments?

Which benefits are affected by annual adjustments? They include, but are not limited to, the following:

Cost-of-Living Adjustment

Cost-of-Living Adjustments (COLA) are an important feature of these benefits. By law, each year the government must adjust benefits like VA Disability Compensation and the Survivors Pension to match the percentage the Social Security Administration calculates using the Consumer Price Index (a measure of inflation.)

COLA also applies to Dependency and Indemnity Compensation (DIC) for survivors, Special Monthly Compensation (SMC) for severe disabilities, and the monthly stipends for the Survivors’ and Dependents’ Educational Assistance (DEA) program.

While the adjustment for military retired pay occurs automatically, Congress must pass legislation each year to authorize the COLA for VA benefits. This step is usually a formality, but it is required by the process.

Legislated and Data-Driven Adjustments

Legislation determines the annual raise for active-duty Basic Pay as part of the National Defense Authorization Act. The Employment Cost Index, a measure of wage growth in the private sector, often serves as a benchmark for the proposed raise. Congress and the President, however, hold the final authority to set the rate.

Specific data adjusts other allowances. Annual surveys of rental housing costs in over 300 Military Housing Areas change Basic Allowance for Housing (BAH) rates. Contractors collect rental data for various housing types, ensuring the allowance accurately reflects local costs for service members living off-base.

Similarly, the Department of Agriculture’s food cost data helps the government adjust Basic Allowance for Subsistence (BAS) each year. For troops overseas, the government periodically reviews the Overseas Cost of Living Allowance (OCOLA) to offset the higher cost of goods in foreign countries.

Need-Based Adjustments

Need, not inflation, adjusts many special pays and bonuses.

The military services review and modify rates for Enlistment Bonuses, Special Duty Assignment Pay (SDAP), and other incentive pays. These adjustments help attract and retain personnel in critical career fields. For example, the services may increase a bonus for a specific technical job to meet recruiting goals.

There may also be adjustments to Hardship Duty Pay for assignments to locations with a low quality of life. Increased Career Sea Pay compensates sailors for extended deployments.

Active Duty Benefits

Which active duty benefits are subject to annual adjustments? They include:

• Basic Pay: The foundational salary for a service member, based on rank and years of service. It’s subject to an annual adjustment.
• Basic Allowance for Housing (BAH): A non-taxable allowance for members not in government housing. Rates are adjusted annually based on local housing costs.
• Basic Allowance for Subsistence (BAS): A non-taxable allowance to cover food costs, adjusted annually.
• Overseas Cost of Living Allowance (OCOLA): A non-taxable allowance for members in high-cost overseas locations, reviewed periodically.
• Family Separation Allowance (FSA): Paid to members with dependents when separated by military orders for more than 30 days. The monthly rate is subject to change.
• Imminent Danger Pay (IDP)/Hostile Fire Pay (HFP): Special pay for service in designated dangerous areas. The rate can be adjusted by Congress.
• Hardship Duty Pay (HDP): Paid for assignments in locations with a substantially lower quality of life. Rates are reviewed periodically.
• Special Duty Assignment Pay (SDAP): A monthly pay for enlisted members in jobs with exceptional responsibility. The rates are reviewed and adjusted.
• Career Sea Pay: Special pay for members on sea duty, which varies by branch, rank, and cumulative time at sea and is subject to revision.
• Aviation Career Incentive Pay (ACIP): Also known as flight pay, for officers in flight operations. Rates are reviewed periodically.
• Diving Duty Pay: For members who perform diving duties. Monthly rates are adjusted periodically.
• Medical and Dental Officer Special Pays: Various bonuses and incentives to recruit and retain medical professionals. The amounts can be adjusted by law.
• Enlistment and Reenlistment Bonuses: Monetary incentives for critical skills. Bonus amounts are adjusted regularly based on each service’s needs.
• Military Tuition Assistance Program: Funds college courses for active-duty personnel. The maximum amount can change with the annual defense budget.

Veteran & Survivor Benefits

A number of veteran benefits may also be subject to annual review, including:

• VA Disability Compensation: A benefit for veterans with service-connected disabilities. Rates receive an annual Cost-of-Living Adjustment (COLA).
• Special Monthly Compensation (SMC): A higher rate of compensation for veterans with specific or severe disabilities. These rates are also adjusted annually with the COLA.
• VA Pension: A needs-based, tax-free benefit for wartime veterans with limited income. The Maximum Annual Pension Rate (MAPR) is adjusted annually.
• Survivors Pension: A needs-based, tax-free benefit for the surviving spouse or children of a wartime veteran who has died. Payment rates are adjusted each year with the COLA.
• Dependency and Indemnity Compensation (DIC): A tax-free monthly benefit for survivors of service members who died from a service-related condition. Rates are adjusted annually.
• Post-9/11 GI Bill Monthly Housing Allowance (MHA): This allowance is based on the DoD’s BAH. Rates are determined by the school’s ZIP code and can be looked up with the GI Bill Comparison Tool.
• Survivors’ and Dependents’ Educational Assistance (DEA): An education benefit for spouses and children of qualifying veterans. The monthly payment rates are adjusted annually.
• Veteran Readiness and Employment (VR&E) Subsistence Allowance: Veterans in the VR&E program receive a monthly subsistence allowance. These rates are adjusted annually.
• Clothing Allowance: An annual allowance for veterans whose clothing is damaged by a prosthetic appliance or prescribed medication. This amount is subject to an annual COLA.
• Automobile Allowance and Adaptive Equipment: A one-time grant to help an eligible veteran purchase a specially equipped vehicle. The grant amount is adjusted annually for inflation.
• VA Burial and Plot Allowance: The VA provides allowances to help cover a veteran’s burial and funeral expenses. The maximum payment amounts are adjusted annually.