DOE Funded Pension Plans - CAS vs ERISA

The Department of Energy (DOE) has oversight responsibility with respect to defined benefit pension plans sponsored by  DOE contractors under M&O contracts (management and operating contracts) and other facility management contracts (FMCs) where the work was once performed under M&O contracts. These contracts are characterized by successor contractors being required to employ all or part of the former contractor's workforce and to assume sponsorship of the employee defined benefit pension plan.

DOE has oversight responsibility with respect to these defined benefit pension plans. DOE's policy is to reimburse its contractors for minimum contributions required under ERISA (Employee Retirement Income Security Act of 1974). This funding amount sometimes differs from the amount required under CAS (Cost Accounting Standards) 412 and 413.

As a result of the divergence of DOE's policy from the requirements of CAS 412 and 413, COE contractors sometimes find themselves in non-compliance with CAS. Therefore, DOE includes an indemnification clause, so to speak, in their contracts that protects contractors from liability for not complying with CAS. Even if the clause is not in the contract, it is DOE's policy not to disallow costs or otherwise penalize a contractor for CAS non-compliance due to the contractor's compliance with DOE direction.

This indemnification clause does not waive CAS. In only indemnifies the contractor for non-compliance with CAS that are caused by the contractors following DOE written direction. DOE contractors must comply with all other terms of the contract (to the extent not precluded by DOE's direction), including those relating to the timing of funding that are found in the FAR and DOE FAR Supplement (DEAR) cost principles.

DOE has published guidance that before requesting an audit of affected contracts, contracting officers must advise auditors of the divergence of DOE requirements from CAS 412 and 413 and direct auditors to audit to DOE's requirements when incongruities with CAS occur.

Often, the divergence between DOE and CAS are due to budgetary constraints at the DOE level where insufficient funding is available to fund plans according to CAS.