37 U.S.C. § 403b — Cost-of-living allowance in the continental United States

(a) Payment Authorized. The Secretary concerned may pay a cost-of-living allowance, or COLA, to eligible members of a uniformed service under that Secretary's jurisdiction. (b) Eligible Members. COLA can go to: a member assigned to a high cost area in the continental United States; a member on an unaccompanied overseas tour whose primary dependent lives in a high cost area in the continental United States; or a member on duty in the continental United States whose Secretary determines that the member's primary dependent must live in a high cost area because of the member's duty location or other circumstances, and that it would be unfair to base the member's eligibility only on the duty location. (c) High Cost Area Defined. An area counts as a "high cost area" for a fiscal year if, over the base period, its uniformed-services cost of living exceeds the average cost of living in the continental United States by at least a threshold percentage. The Secretary of Defense, along with the other administering Secretaries, sets that threshold, which can never be less than 5 percent. The Secretaries may set a higher threshold for a year if needed to keep total COLA payments within the money available for that year. (d) Amount of Allowance. The formula works in steps: start with the member's average spendable income for their regular military compensation level, as determined under subsection (g). Then find a percentage: take the percent by which the member's high cost area exceeds the continental U.S. average cost of living, and subtract the year's threshold percentage from subsection (c). Multiply the average spendable income by that percentage. The result is the member's monthly COLA for that area. (e) Limitation to One Allowance. If a member's primary dependents live apart, in different high cost areas, the member can be paid only one COLA — whichever amount, computed for those areas, is highest. (f) Service Not Covered. COLA cannot be paid for the days a member is authorized to travel in connection with a permanent change of duty station. A reserve-component member is not eligible for COLA unless the member is on active duty under a call or order that either specifies a period of 140 days or more, or states that it supports a contingency operation. (g) Average Spendable Income. The Secretary of Defense must figure out, using whatever methods and assumptions the Secretary considers appropriate, the average "spendable income" of members at various levels of regular military compensation. Spendable income means the part of that compensation left over for buying goods and services, after amounts are set aside for taxes, insurance, housing, gifts and contributions, and savings. (h) Joint Regulations. The Secretary of Defense and the other administering Secretaries must jointly write the regulations that carry out this section. (i) Other Definitions. "Primary dependent" means the member's spouse, or, for an unmarried member, a dependent described in section 401(a)(2) or (4) of this title. "Cost of living" means a price index the Secretary of Defense picks, in consultation with the other administering Secretaries: either the Consumer Price Index (all items, U.S. city average) published by the Bureau of Labor Statistics, or another private-sector index the Secretary of Defense decides is comparable and appropriate. "Uniformed services cost of living" means that index, adjusted as the Secretary of Defense considers appropriate to reflect differences between military members' expenses (taking into account the basic allowance for subsistence) and civilians' expenses, covering: nonhousing costs such as transportation, goods, and services (accounting for savings from using commissaries and exchanges); average income tax paid; and the cost of health care. "Base period" means the 12-month period ending June 30 of the year in which the fiscal year begins. "Administering Secretaries" means: the Secretary of Defense, for the armed forces other than the Coast Guard when it is not part of the Navy; the Secretary of Homeland Security, for the Coast Guard when it is not part of the Navy; the Secretary of Commerce, for the National Oceanic and Atmospheric Administration; and the Secretary of Health and Human Services, for the Public Health Service.