Tuesday, May 11, 2010

Proposed Regulation on Pension Costs

The CAS Board yesterday published a proposed rule for harmonizing Cost Accounting Standards 412 and 413 with the Pension Protection Act of 2006 (PPA). Its a long and detailed read. If your company has a defined benefit pension plan, you should study it and provide comments by the July 9, 2010 deadline for public comments. Even if your company is not subject to CAS, the revised Standards may impact the way in which you allocate pension costs to Government contracts since FAR 31.205-6 pretty much sends you back to CAS for determining allowable pension plan contributions.

There are about eleven features in this proposed rule - some merely affirming requirements that were already part of CAS. One significant change is the period used to amoritize actuarial gains and losses. Currently, CAS requires those losses be amoritized over a 15 year period. Under the proposed rule, the amortization period drops to 10 years (the PPA, by the way, specifies a 7 year amortization period). There are also some specific provisions that apply when contractors fund more than the minimum contribution and less than the minimum contribution. Both events should be "neutral" with regard to determining actuarial gains and losses.

To read the entire proposal, go here.

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