Revision:  October 2004

DCMA Requirements

Use the following calculations to determine the adjustment to previously determined pension costs required under CAS 9904.413-50(c)(12):

Note:  In the event that the specific data needed to perform the following calculations are not available, reasonable surrogates may be used.  However, in such cases, the DCAA auditor and DCMA pension specialist must work together with the contractor to develop the most reasonable representation considering the data available. 

1.  If there is a segment closing surplus and there are no employee contributions; or if there are employee contributions, but none were made after the contractor had to follow revised CAS 413 (Sample 1)

    1.1.  Determine the total pension costs allocated to all contracts and subcontracts subject to the requirements of CAS 413 (including non-CAS covered contracts subject to FAR 31.205-(6)(j)(1)) from the date the contractor first had to follow original CAS 413 until the date of segment closing.
    1.2.  Determine the pension costs allocated to FFP contracts entered into under original CAS 413.
    1.3.  The numerator of the fraction for determining the Government’s share of the segment closing adjustment equals 1.1. minus 1.2.
    1.4.  Determine total employee contributions from the date of the pension plan’s inception until the contractor first had to follow revised CAS 413.
    1.5.  Determine total assigned pension costs for the segment (for both Government and commercial contracts) from the date of the pension plan’s inception until the date of segment closing.
    1.6.  The denominator of the fraction for determining the Government’s share of the segment closing adjustment equals 1.4. plus 1.5.
    1.7.  The Government’s share of the segment closing adjustment equals the total segment closing surplus times 1.3. divided by 1.6. 

2.  If there is a segment closing surplus and employee contributions were made after the contractor had to follow revised CAS 413 (Sample 2):

    2.1.  To allocate the segment closing surplus between the periods before (pre-revised CAS 413 period) and after (revised CAS 413 period) the contractor had to follow revised CAS 413:

        2.1.1.  For the pre-revised CAS 413 period, i.e., from the date of the pension plan’s inception until the contractor first had to follow revised CAS 413, determine total assigned pension costs for the segment (for both Government and commercial contracts) plus total employee contributions.
        2.1.2.  For the revised CAS 413 period, i.e., from the date the contractor first had to follow revised CAS 413 until the date of segment closing, determine total assigned pension costs for the segment (for both Government and commercial contracts) plus total employee contributions.
        2.1.3.  The portion of the surplus attributable to the pre-revised CAS 413 period equals the total segment closing surplus times 2.1.1. divided by the total of 2.1.1. and 2.1.2..
        2.1.4.  The portion of the surplus attributable to the revised CAS 413 period equals the total segment closing surplus times 2.1.2. divided by the total of 2.1.1. and 2.1.2.

    2.2.  Apply original CAS 413 to the pre-revised CAS 413 period portion of the surplus:

        2.2.1.  The numerator of the fraction for determining the Government’s share of the segment closing surplus for the pre-revised CAS 413 period equals the total pension costs allocated to cost-type contracts and subcontracts subject to the requirements of CAS 413 (including non-CAS covered contracts subject to FAR 31.205-(6)(j)(1)) from the date the contractor first had to follow original CAS 413 until the date the contractor first had to follow revised CAS 413.
        2.2.2.  The denominator of the fraction for determining the Government’s share of the segment closing surplus for the pre-revised CAS 413 period equals the total assigned pension costs for the segment (for both Government and commercial contracts) plus total employee contributions each from the date of the pension plan’s inception until the contractor first had to follow revised CAS 413.
        2.2.3.  The Government’s share of the segment closing surplus for the pre-revised CAS 413 period equals the 2.1.3. times 2.2.1. divided by 2.2.2.

    2.3.  Apply revised CAS 413 to the revised CAS 413 period portion of the surplus:

        2.3.1.  Determine the total pension costs allocated to all contracts and subcontracts subject to the requirements of CAS 413 (including non-CAS covered contracts subject to FAR 31.205-(6)(j)(1)) from the date the contractor first had to follow revised CAS 413 until the date of segment closing.
        2.3.2.  Determine the pension costs allocated to FFP contracts entered into under original CAS 413 from the date the contractor first had to follow revised CAS 413 until the date of segment closing.
        2.3.3.  The numerator of the fraction for determining the Government’s share of the segment closing surplus for the revised CAS 413 period equals 2.3.1. minus 2.3.2.
        2.3.4.  The denominator of the fraction for determining the Government’s share of the segment closing adjustment for the revised CAS 413 period equals total assigned pension costs for the segment (for both Government and commercial contracts) from the date the contractor first had to follow revised CAS 413 until the date of segment closing.
        2.3.5.  The Government’s share of the segment closing surplus for the revised CAS 413 period equals 2.1.4. times 2.3.3. divided by 2.3.4.

    2.4.  The Government’s total share of the segment closing surplus equals 2.2.3. plus 2.3.5.

3.  If there is a segment closing deficit: (See Funding Requirement) (Sample 3):

    3.1.  Determine the total pension costs allocated to all contracts and subcontracts subject to the requirements of CAS 413 (including non-CAS covered contracts subject to FAR 31.205-6(j)(1)) from the date the contractor first had to follow CAS 413 until the date of segment closing.
    3.2.  Determine the pension costs allocated to FFP contracts entered into under original CAS 413.
    3.3.  The numerator of the fraction for determining the Government’s share of the segment closing adjustment equals 3.1. minus 3.2.
    3.4.  The denominator of the fraction for determining the Government’s share of the segment closing adjustment equals total assigned pension costs for the segment (for both Government and commercial contracts) from the date of the pension plan’s inception until the date of segment closing.
    3.5.  The Government’s share of the segment closing adjustment equals the total segment closing deficit times 3.3. divided by 3.4.

Sample 1 - Surplus; Plan Overfunded Prior to Revised CAS 413, No Employee Contributions Made Under Revised CAS 413

* “CAS 413 contracts” include CAS covered contracts and subcontracts as well as non-CAS covered contracts and subcontracts subject to FAR 31.205-6(j)(1).

** Per CAS 413.50(c)(12) this amount represents the difference between the market value of assets and the actuarial accrued liability for the segment as of the date of the segment closing.

*** This example assumes that all contracts entered into under original CAS 413 ended on or before 12/31/1995.
 

Surplus; Plan Overfunded After Revised CAS 413, Employee Contributions Made Under Revised CAS 413

Allocate Segment Closing Surplus Between Pre-Revised CAS 413 Period and Revised CAS 413 Period

* “CAS 413 contracts” include CAS covered contracts and subcontracts as well as non-CAS covered contracts and subcontracts subject to FAR 31.205-6(j)(1).

** Per CAS 413.50(c)(12) this amount represents the difference between the market value of assets and the actuarial accrued liability for the segment as of the date of the segment closing.

*** This example assumes that all contracts entered into under original CAS 413 ended on or before 12/31/1995.

**** Since this example assumes all contracts entered into under original CAS 413 ended on or before 12/31/1995; there were no costs allocated to FFP contracts entered into under original CAS 413 during the revised CAS 413 period to deduct.  However, in actual situations, pension costs incurred after 12/31/1995 may be allocated to FFP contracts entered into under original CAS 413.  In that case those pension costs would be deducted here.
 

Deficit

* “CAS 413 contracts” include CAS covered contracts and subcontracts as well as non-CAS covered contracts and subcontracts subject to FAR 31.205-6(j)(1).

** Per CAS 413.50(c)(12) this amount represents the difference between the market value of assets and the actuarial accrued liability for the segment as of the date of the segment closing. 

*** This example assumes that all contracts entered into under original CAS 413 ended on or before 12/31/1995.

Funding Requirement for Pension Deficits

 When there is a segment closing deficit, the Government’s share of the deficit is an allowable cost only if the contractor has funded it no later than the contractor’s Federal income tax deadline for the year of the segment closing (including extensions) in accordance with FAR 31.205-6(j)(1)(i) and (j)(2)(i)(A).  Therefore, any portion of a segment closing deficit not funded by such time should be disallowed.  Even when the segment closing deficit is funded, in certain cases, the contracting officer may have other considerations in determining the amount of contractor recovery (e.g., the limitation of cost/funds clauses found at FAR 52.232-20 (Limitation of Cost) and FAR 52.232-22 (Limitation of Funds)).