California Military Alimony: Overseas COLA Adjustments

How California Courts Treat Overseas COLA

California Family Code Section 4058 defines income for support broadly. It includes earnings, salaries, and income from any source. Courts interpreting this statute have held that non-taxable military allowances constitute income when they provide a financial benefit beyond reimbursement of actual expenses. COLA fits this definition because it is paid as a cash supplement to base pay and BAH, not as a direct payment to vendors for specific goods.

Unlike Overseas Housing Allowance (OHA), which pays actual rental costs up to a cap, COLA is paid to the service member without regard to specific purchases. A service member receives COLA whether they buy expensive imported food or shop at the commissary. They receive it whether they live frugally or extravagantly. This discretion over how to spend the allowance is what makes it income rather than reimbursement.

California courts also note that COLA serves a dual purpose. While it offsets foreign living costs, it also incentivizes overseas service by maintaining the service member’s standard of living. This incentive component functions like a bonus or special pay. Courts have held that the incentive portion of any allowance is clearly income, and since courts cannot practically separate the reimbursement component from the incentive component, the full amount is included.

Arguments Against COLA Inclusion and Why They Fail

Service members frequently argue that COLA should be excluded from support calculations because it is entirely consumed by overseas expenses. This argument rarely succeeds in California courts for several reasons.

Commissary and Exchange Privileges. Service members overseas have access to military commissaries and exchanges where goods are sold at stateside prices. A service member who shops exclusively at these facilities receives the full COLA as surplus income because their actual costs match U.S. prices. While not all service members use commissaries exclusively, the availability of subsidized shopping undermines the claim that COLA is fully consumed.

Currency Fluctuations Work Both Ways. When the dollar strengthens against the local currency, COLA payments increase to maintain purchasing power. This increase is not tied to any new expense; it simply ensures the service member does not suffer financially due to exchange rate movements. California courts view this protection as a benefit equivalent to income.

OHA Covers Housing Separately. Service members overseas receive OHA for housing in addition to COLA. Since housing costs are addressed separately, COLA is presumptively available for non-housing expenses. A service member who claims COLA is consumed by housing costs is essentially double-counting housing expenses that OHA already covers.

Calculation Challenges: Volatile Allowances and Support Orders

The primary practical difficulty with COLA inclusion is volatility. COLA rates change monthly based on exchange rate fluctuations and price surveys. A service member’s total compensation might swing by hundreds of dollars from month to month without any change in rank, duty station, or personal circumstances.

This volatility creates problems for California support orders, which typically set fixed monthly amounts. If COLA drops significantly, the service member may struggle to pay support based on a higher COLA rate. If COLA increases, the supported spouse may feel undercompensated. California courts address this through several mechanisms.

Some courts average COLA over six to twelve months to smooth out fluctuations. Others include a base amount plus a percentage of actual COLA, requiring the service member to report changes quarterly. A few courts exclude COLA entirely but impute a fixed overseas adjustment based on the duty station’s historical rates. The best approach depends on the specific location and the stability of local conditions.

OHA vs. COLA: Different Treatment for Different Allowances

While COLA is generally included in full as income, Overseas Housing Allowance receives different treatment. OHA pays actual foreign housing costs up to a location-specific cap. If a service member rents an apartment for the exact OHA amount, there is no surplus. California courts may exclude OHA from income or credit only the surplus above actual rent.

The distinction between OHA and COLA matters because service members sometimes conflate them. OHA is housing-specific and tied to actual expenses. COLA is general purchasing power maintenance and paid regardless of spending patterns. Understanding which allowance is which prevents both overpayment and underpayment of support.

Some locations provide a Post Allowance rather than COLA. Post Allowances serve a similar purpose but may be calculated differently. California courts treat Post Allowances identically to COLA for support purposes. The name of the allowance is less important than its function as discretionary income.

Returning Stateside: COLA Termination and Support Modification

When a service member returns from an overseas assignment, COLA terminates immediately. This represents a significant income reduction that may justify a support modification under California law. Family Code Section 4336 allows modification of spousal support orders when there has been a material change in circumstances. The loss of COLA qualifies as such a change.

However, service members should not assume automatic modification. The supported spouse may argue that the COLA was temporary and the original support order already accounted for its temporary nature. Courts look at whether the original order explicitly included COLA as a separate line item or whether it was folded into a general income calculation.

Service members planning a return to the continental United States should request a support modification before the PCS if possible. This prevents a gap between the income loss and the order adjustment. At minimum, service members should file a modification request simultaneously with their PCS notification to establish the effective date of the change.

Negotiation Strategy: Handling COLA in Settlement

Because COLA is volatile, it creates both risk and opportunity in settlement negotiations. Service members may agree to higher base support in exchange for excluding COLA fluctuations. Supported spouses may prefer a fixed amount that does not depend on monthly exchange rates. Creative settlement structures can address COLA in ways court orders cannot.

One common approach is a COLA step-down provision. The parties agree that support will decrease by a specified amount when the service member returns stateside, with the decrease date tied to the PCS order rather than a calendar date. Another approach caps the COLA component at a fixed monthly amount, with any excess retained by the service member and any shortfall reducing support proportionally.

These provisions require careful drafting to avoid ambiguity. PCS dates change. COLA calculations lag behind actual exchange rates. Service members sometimes extend overseas tours unexpectedly. A well-drafted settlement addresses these contingencies explicitly.

Bottom Line: Count COLA as Income

California courts include Overseas Cost of Living Allowance in military support calculations. This is established law applied consistently across the state. COLA is not a reimbursement for specific expenses but compensation designed to maintain your standard of living abroad. Because you control how it is spent, courts treat it as available for support.

If you are stationed overseas and facing divorce, prepare for COLA inclusion. Gather your LES statements. Calculate your average monthly COLA. Understand that returning stateside will reduce your income and may justify a future modification. Do not hide COLA from opposing counsel or the court. Transparency protects your credibility and prevents future enforcement actions.

At Hayat Family Law, we represent California service members stationed around the world. We understand the complexity of overseas compensation, currency fluctuations, and PCS timing. Whether you need to establish initial support or modify an existing order due to a change in station, we will protect your interests while ensuring compliance with California law.

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. Military divorce involves complex interactions between state family law and federal military regulations. Results vary based on specific circumstances, and past performance does not guarantee future outcomes.

Sources:

• California Legislative Information – Family Code Sections 4058, 4336
• California Courts – Family Law Rules and Forms
• Defense Finance and Accounting Service – Overseas COLA Rates
• Defense Travel Management Office – Overseas Allowances
• Air Force Legal Assistance – Overseas Assignment Resources