Cost-of-living allowances for service members and their families stationed overseas will decrease starting this month, the Pentagon announced Tuesday, after the Department of Defense spent months repeatedly delaying the cuts.
Service members' overseas cost-of-living allowance, called OCOLA, will decrease on May 15 and Nov. 15, according to senior defense officials who spoke with reporters on the condition of anonymity. Those cuts will be seen in their June 1 and Dec. 1 paychecks. More than 230,000 troops receive the stipend overseas.
"Many of the locations that we will see initially will be in areas such as Hawaii, Guam, Japan," a senior defense official said. "Although we are seeing some fluctuations as well in other locations in Europe and Australia."
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As of early Wednesday afternoon, the OCOLA calculator on the Defense Travel Management Office's website, which is used by service members and their families to figure out what their stipends will be, was not operating properly and wouldn't show the cuts projected for May 15 or later.
The Pentagon told Military.com in an email Thursday after this article was originally published that an E-4 with three years of service stationed in Oahu, Hawaii with two dependents would see a $129 reduction in OCOLA per month starting on May 15th and then it would be reduced by another $129 on November 15.
Additionally, the Pentagon said the OCOLA lookup rate tables used for its online calculator would be available on May 10 and “will contain minor adjustments for currency fluctuations that are occurring during the first half of May.”
The nontaxable OCOLA exists to make living in more expensive areas more affordable for service members by offsetting the cost of daily goods and services to make them comparable to those in the contiguous U.S. With rising prices in the U.S. due to inflation, as well as currency fluctuations, the gap has diminished, leading to the cuts. There is also a separate COLA for the highest-cost locations in the continental U.S.
At the end of last year, Defense Secretary Lloyd Austin put a 90-day hold on implementing scheduled OCOLA cuts.
Additionally, Congress passed a restriction in the National Defense Authorization Act on the DoD cutting the stipends, limiting it to once every six months -- instead of potentially monthly like in the past -- in an attempt to lessen sudden blows to service members' wallets.
The Pentagon has been staving off the cuts for months.
Military.com reported in March that projected cuts ranging anywhere from 50% to 60% to the cost-of-living allowances for service members and their families stationed in Hawaii and Guam were being delayed.
Senior defense officials said that they are now allowing combatant commands to protest the changes, but they must provide data to show that the Pentagon's analysis of prices doesn't accurately reflect the situation on the ground.
"We are now going to be giving the combatant command the opportunity within 45 days of the announcement to submit an appeal to request to review the case," a senior defense official said. "If it's approved, we'll be authorizing new data collections for them that will commence almost immediately."
Senior defense officials argue that recent pay increases -- such as the 4.6% pay increase -- would actually leave service members with more money in their pockets even accounting for the OCOLA decrease, though overall living costs have escalated rapidly with inflation.
"Even [for] those locations where OCOLA rates will start to decline, pay in 2023 is still higher than it was in 2022," the senior defense official said. "So most service members will still have a higher take-home pay even with OCOLA reductions than what they had in 2022."
An E-4 with three years of service stationed in Oahu, Hawaii, had a net monthly income of $5,775 in 2022 after deductions. In 2023, factoring in the pay increase, that net monthly income would be $6,264 starting May 15 and $6,135 starting Nov. 15, per the Pentagon's infographic.
Editor’s Note: The Pentagon contacted Military.com on Thursday to provide detail on when the OCOLA calculator will have updated numbers. Additionally, an example of how much an E-4 stationed in Hawaii’s OCOLA will be cut has been corrected.
-- Thomas Novelly can be reached at thomas.novelly@military.com. Follow him on Twitter @TomNovelly.
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