If you are active duty military and receive permanent change of station orders to an overseas base, the Overseas Cost of Living Allowance, or OCOLA, is one of the first things you’ll learn about about pay and benefits for overseas troops. But the amount of those OCOLA benefits is shrinking.
The DoD, by law, plans to pay less in Overseas Cost of Living Allowances (OCOLA) to troops stationed at bases outside the Continental United States starting in November 2023. The OCOLA, sometimes known as OCONUS COLA reduction, won’t hit paychecks until 2024, but Defense officials are already warning military families to get ready.
Overseas Cost of Living Allowance Cuts In 2023, 2024
Military families have been warned that OCOLA cuts were coming in May 2023 and November 2024. The cuts from May are already on the books, but the financial pinch from November cuts won’t be felt until 2024, when they kick in. Some 230 thousand military members collect OCOLA.
For a junior enlisted service member with one dependent, the reduced OCOLA could amount to a reduction of more than $100 per month. Military.com reports that an Army Specialist 4 with one dependent could lose $129 monthly.
What Is OCOLA and How Does it Work?
- OCOLA is a non-taxable military allowance completely separate from military retiree and veteran COLA and serves a different purpose.
- OCOLA is meant to offset the increased cost of goods and services at an overseas location and is paid to troops who qualify for the benefit on a monthly basis, like a housing allowance or separate rations.
- What’s different about overseas COLA compared to other benefits? The DoD advises, “OCONUS COLA is not a fixed amount and should not be considered in household budgeting.”
- OCOLA is subject to change, and for 2024, there will be definite changes that could affect the budgets of those serving overseas.
Why the Cuts to Overseas COLA (OCOLA)?
The Overseas Cost of Living Allowance is calculated by comparing the overseas cost of goods and services to stateside equivalents. OCOLA is paid when overseas expenses outweigh stateside ones. If you’re getting the impression that life in the U.S. is getting as expensive as live at an overseas military base, you’re getting the right idea.
The DoD tried to delay these cuts, and laws were passed to further protect the troops. In the 2023 National Defense Authorization Act, OCOLA cuts were restricted to one every six months to avoid a dramatic loss in pay.
What to Know About OCOLA
The Defense Travel Management Office defines the Overseas Cost of Living Allowance as we do above but adds that the benefit “…does not reimburse expenses, compensate for remoteness, hardship, loss of spousal income, or non-availability of goods and services.”
DoD advice on OCOLA includes not counting on it as a fixed, reliable source of income but rather as a supplement to income that can offset overseas living expenses when it’s available.
Related: Financial Planning for Military and Veterans