[Federal Register: June 3, 2003 (Volume 68, Number 106)]
[Proposed Rules]               
[Page 33325-33327]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[[Page 33325]]


Part V

Department of Defense


General Services Administration


National Aeronautics and Space Administration


48 CFR Parts 31 and 52

 Federal Acquisition Regulation; Deferred Compensation and 
Postretirement Benefits Other Than Pensions; Proposed Rule

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48 CFR Parts 31 and 52

[FAR Case 2001-031]
RIN 9000-AJ67

Federal Acquisition Regulation; Deferred Compensation and 
Postretirement Benefits Other Than Pensions

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.


SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are proposing to amend the 
Federal Acquisition Regulation (FAR) by revising the paragraphs of the 
``compensation for personal services'' cost principle relating to 
deferred compensation and postretirement benefits other than pensions.

DATES: Interested parties should submit comments in writing on or 
before August 4, 2003, to be considered in the formulation of a final 

ADDRESSES: Submit written comments to--General Services Administration, 
FAR Secretariat (MVA), 1800 F Street, NW., Room 4035, ATTN: Laurie 
Duarte, Washington, DC 20405.
    Submit electronic comments via the Internet to--farcase.2001-
031@gsa.gov.    Please submit comments only and cite FAR case 2001-031 in all 
correspondence related to this case.

Building, Washington, DC 20405, at (202) 501-4755 for information 
pertaining to status or publication schedules. For clarification of 
content, contact Mr. Edward Loeb, Procurement Analyst, at (202) 501-
0650. Please cite FAR case 2001-031.


A. Background

    The Councils propose the following changes:
    1. FAR 31.205-6, at paragraph (k), Deferred compensation other than 
pensions, amend the cost principle by--
    a. Deleting the first two sentences of paragraph (k)(l) which 
duplicate the definition of deferred compensation at FAR 31.001, the 
third sentence of paragraph (k)(l) which duplicates requirements at FAR 
31.205-6(a), and paragraph (k)(3) which is obsolete;
    b. Moving the fourth sentence of paragraph (k)(l) to (k)(2); and
    c. Changing the phrase ``measured, allocated, and accounted for'' 
in paragraph (k)(2) to ``measured, assigned, and allocated'' to be 
consistent with the language used in cost accounting standards; and
    d. Making related editorial changes.
    2. FAR 31.205-6, at paragraph (o), Postretirement benefits other 
than pensions, amend the cost principle by--
    a. Moving (and revising) the language in paragraphs (o)(3) through 
(o)(5) to paragraph (o)(2)(iii) because these requirements only apply 
to accrual costing other than terminal funding;
    b. Adding language to the current paragraph (o)(6) (new paragraph 
(o)(3)) specifying how the contractor must handle refunds and credits; 
    c. Making related editorial changes.
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The Councils do not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because most contracts awarded to small entities use simplified 
acquisition procedures or are awarded on a competitive, fixed-price 
basis, and do not require application of the cost principle discussed 
in this rule. An Initial Regulatory Flexibility Analysis has, 
therefore, not been performed. We invite comments from small businesses 
and other interested parties. The Councils will consider comments from 
small entities concerning the affected FAR Parts 31 and 52 in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 601, et seq. (FAR case 
2001-031), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose information collection requirements 
that require the approval of the Office of Management and Budget under 
44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 31 and 52

    Government procurement.

    Dated: May 28, 2003.
Laura G. Smith,
Director, Acquisition Policy Division.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 31 and 
52 as set forth below:


    1. The authority citation for 48 CFR parts 31 and 52 is revised to 
read as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

    2. Amend section 31.205-6 by revising paragraphs (k) and (o) to 
read as follows:

31.205-6  Compensation for personal services.

* * * * *
    (k) Deferred compensation other than pensions. The costs of 
deferred compensation awards are allowable subject to the following 
    (1) The costs shall be measured, assigned, and allocated in 
accordance with 48 CFR 9904.415, Accounting for the Cost of Deferred 
    (2) The costs of deferred compensation awards are unallowable if 
the awards are made in periods subsequent to the period when the work 
being remunerated was performed.
* * * * *
    (o) Postretirement benefits other than pensions (PRB). (1) PRB 
covers all benefits, other than cash benefits and life insurance 
benefits paid by pension plans, provided to employees, their 
beneficiaries, and covered dependents during the period following the 
employees' retirement. Benefits encompassed include, but are not 
limited to, postretirement health care; life insurance provided outside 
a pension plan; and other welfare benefits such as tuition assistance, 
day care, legal services, and housing subsidies provided after 
    (2) To be allowable, PRB costs shall be incurred pursuant to law, 
employer-employee agreement, or an established policy of the 
contractor, and shall comply with paragraph (o)(2)(i), (ii), or (iii) 
of this subsection.
    (i) Cash basis. Costs recognized as benefits when they are actually 
provided, must be paid to an insurer, provider, or other recipient for 
current year benefits or premiums.
    (ii) Terminal funding. If a contractor uses terminal funding the 
contractor shall--

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    (A) Accrue and pay the entire PRB liability to an insurer or 
trustee in a lump sum payment upon the termination of employees (or 
upon conversion to such a terminal-funded plan) to establish and 
maintain a fund or reserve for the sole purpose of providing PRB to 
retirees; and
    (B) Amortize the lump sum over a period of 15 years.
    (iii) Accrual basis. If a contractor uses accrual costing other 
than terminal funding, the PRB costs shall be--
    (A) Measured and assigned in accordance with generally accepted 
accounting principles. However, the portion of PRB costs attributable 
to past service (``transition obligation'') as defined in Financial 
Accounting Standards Board Statement 106, paragraph 110, cannot exceed 
the amount assignable under the delayed recognition methodology 
described in paragraphs 112 and 113 of Statement 106;
    (B) Paid to an insurer or trustee to establish and maintain a fund 
or reserve for the sole purpose of providing PRB to retirees;
    (C) Calculated in accordance with generally accepted actuarial 
principles and practices as promulgated by the Actuarial Standards 
Board; and
    (D) Funded by the time set for filing the Federal income tax return 
or any extension. PRB costs assigned to the current year, but not 
funded or otherwise liquidated by the tax return time, are not 
allowable in any subsequent year. Increased PRB costs caused by delay 
in funding beyond 30 days after each quarter of the year to which they 
are assignable are unallowable.
    (3) The Government shall receive an equitable share of any amount 
of previously funded PRB costs which revert or inure to the contractor. 
Such equitable share shall reflect the Government's previous 
participation in PRB costs through those contracts for which cost or 
pricing data were required or which were subject to subpart 31.2. The 
contractor shall credit the equitable share to the Government either as 
a cost reduction or by cash refund at the option of the Government.
* * * * *


    3. Revise section 52.215-18 to read as follows:

52.215-18  Reversion or Adjustment of Plans for Postretirement Benefits 
(PRB) Other Than Pensions.

    As prescribed in 15.408(j), insert the following clause:

Reversion or Adjustment of Plans for Postretirement Benefits (PRB) 
Other Than Pensions (Date)

    The Contractor shall promptly notify the Contracting Officer in 
writing when the Contractor determines that it will terminate or 
reduce a PRB plan. If PRB fund assets revert or inure to the 
Contractor, or are constructively received by it under a plan 
termination or otherwise, the Contractor shall make a refund or give 
a credit to the Government, at the option of the Government, for its 
equitable share as required by FAR 31.205-6(o)(3). The Contractor 
shall insert the substance of this clause in all subcontracts that 
meet the applicability requirements of FAR 15.408(j).
(End of clause)

[FR Doc. 03-13859 Filed 6-2-03; 8:45 am]