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Pay Cuts for Military Families Overseas Coming This Month as Pentagon Delays Run Out

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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.

An infographic provided by the Pentagon to detail the impact of the cuts shows that an E-4 with three years of service stationed in Oahu, Hawaii, with two dependents saw a $414 reduction in the monthly allowance in 2022. An additional $19 will be cut on May 15 of this year, bringing the aggregate reduction to $433 per month, as well as another $433 reduction to the monthly total on Nov. 15.

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 the 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.

— Thomas Novelly can be reached at [email protected]. Follow him on Twitter @TomNovelly.

Related: Days Ahead of Massive Allowance Cuts for Some Military Families, Pentagon Allegedly Working on a Fix

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