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***image1***Issue:
I know there are a lot of folks asking this question; that is the reason I am going through the action line. In December the KA stated that our cost of living allowance, or COLA, was going up due to the dollar not being worth much in Europe. I received an e-mail the end of January stating our COLA was back to normal due to the strength of the dollar. The exchange rate hasn’t changed since I have been here. The dollar has been between .73 and .75 compared to €1. I was just wondering how the determination of the COLA rate is processed. I just moved here from Japan and realize after reading a few action line issues, I can see the way things are done here compared to Japan is very different.
Response:
First, COLA is an allowance paid to servicemembers stationed in high-cost areas overseas to help maintain purchasing power. COLA allows you to purchase about the same goods and services overseas as you would in the states. This purchasing power is determined by two surveys: the living pattern survey and retail price survey. The LPS is required every three years and determines what percentage the servicemember purchases their goods and services from on-base or on the local economy. The RPS required annually prices approximately 120 market basket items from food to clothing and compares those to stateside prices.
These two surveys comprise the COLA index, which represents the purchasing power difference between the overseas location and the states. If the costs in the states increased more than your duty location based on the annual RPS, then your COLA would decrease regardless of minor fluctuations of the local exchange rate.
The Per Diem, Travel and Transportation Allowance Committee, or PDTATAC, analyzes the surveys and local exchange rates to determine COLA. IN 2004, the PDTATAC adjusted the local COLA rate 11 times based on the local exchange rates and RPS survey to maintain the purchasing power. Even though the local exchange rate has an effect on the rate of COLA you receive, it is not the only factor in determining the amount.
Please contact the finance customer service section if you have any additional questions or concerns.
