B-150020, DECEMBER 4, 1962, 42 COMP. GEN. 284

B-150020, DECEMBER 4, 1962, 42 COMP. GEN. 284

CONTRACTS - COST-PLUS - EMPLOYEE EXPENSES - RETIREMENT CONTRIBUTIONS UNDER A COST REIMBURSABLE CONTRACT WITH THE STATE OF OHIO AND THE CITY OF COLUMBUS TO DEVELOP A CIVIL DEFENSE SHELTER PLAN IN THE CITY, THE PAYMENTS REQUIRED TO BE MADE TO THE PUBLIC EMPLOYEES RETIREMENT SYSTEM FOR THOSE EMPLOYEES WHOSE SERVICES WERE TERMINATED BEFORE THEY ACQUIRED ANY VESTED RIGHTS IN THE RETIREMENT PLAN ARE PROPERLY REIMBURSABLE TO THE CONTRACTOR STATE WITHOUT DEDUCTION FOR PROSPECTIVE RETIREMENT CREDITS REQUIRED BY THE COST PRINCIPLES INCORPORATED IN THE CONTRACT, FOR WHILE CONTRIBUTIONS TO THE EMPLOYERS' ACCUMULATION FUND FOR THE BENEFIT OF THE PUBLIC EMPLOYEES RETIREMENT SYSTEM ARE MANDATORY, THERE IS NO PROVISION FOR REFUND TO THE EMPLOYER OF AMOUNTS PAID ON ACCOUNT OF EMPLOYEES WHO LEAVE THEIR EMPLOYMENT; THEREFORE, ALL RETIREMENT CONTRIBUTIONS MADE ARE REIMBURSABLE UNDER THE TERMS OF THE CONTRACT.

TO THE COMPTROLLER, OFFICE OF CHIEF OF ENGINEERS, DECEMBER 4, 1962:

REFERENCE IS MADE TO YOUR COMMUNICATION DATED SEPTEMBER 27, 1962, TRANSMITTING A LETTER DATED SEPTEMBER 20 FROM MR. W. T. LEONHART, DISBURSING OFFICER, REQUESTING OUR DECISION OF THE COST FOR "RETIREMENT CREDITS FOR NINE EMPLOYEES" IN THE AMOUNT OF $2,593, UNDER COST REIMBURSABLE CONTRACT NO. CDM-OS-61-39, DATED MARCH 9, 1961, BETWEEN THE UNITED STATES AND THE STATE OF OHIO AND CITY OF COLUMBUS, COVERING A SURVEY OF THE CITY OF COLUMBUS TO FURTHER THE DEVELOPMENT OF A SHELTER PLAN FOR SUCH CITY, AND TO ENCOURAGE AND ASSIST OTHER COMMUNITIES IN THE STATE TO CONDUCT SIMILAR FALLOUT SURVEYS.

IT APPEARS THAT THE U.S. ARMY AUDIT AGENCY IN A REPORT DATED AUGUST 9,1962, QUESTIONED THE AMOUNT OF $2,593 REPRESENTING PAYMENTS MADE BY THE CONTRACTOR TO THE STATE OF OHIO, PUBLIC EMPLOYEES RETIREMENT SYSTEM, FOR THOSE EMPLOYEES WHOSE SERVICES WERE TERMINATED PRIOR TO THEIR SO-CALLED ACQUISITION OF ANY VESTED RIGHTS IN THE RETIREMENT PLAN. IT IS REPORTED THAT SUCH COSTS WERE QUESTIONED IN ACCORDANCE WITH PARAGRAPH 601.2H OF CONTRACT COST PRINCIPLES ISSUED BY THE OFFICE OF CIVIL AND DEFENSE MOBILIZATION WHICH WERE INCORPORATED INTO ARTICLE III OF THE CONTRACT.

ARTICLE I OF THE CONTRACT PROVIDES, IN PERTINENT PART, THAT---

THE CONTRACTOR IN CONSULTATION WITH THE GOVERNMENT, SHALL FURNISH THE NECESSARY PERSONNEL, SERVICES OF OTHERS, FACILITIES AND MATERIALS AND SHALL USE ITS BEST EFFORT TO THOROUGHLY EVALUATE ALL THE FALLOUT SHELTER RESOURCES LOCATED WITHIN THE CITY LIMITS OF THE CITY OF COLUMBUS, OHIO (HEREINAFTER REFERRED TO AS THE "AREA") AND SHALL PREPARE A COMPREHENSIVE REPORT ON THIS EVALUATION AND SURVEY; PROVIDED THAT FEDERAL BUILDINGS, AND INSTALLATIONS, LOCATED WITHIN THE AREA SHALL NOT BE INCLUDED IN EITHER THE EVALUATION OR SURVEY BEING CONDUCTED BY THE CONTRACTOR PURSUANT TO THIS CONTRACT.

ARTICLE III THEREOF, ENTITLED REIMBURSABLE COSTS, PROVIDES FURTHER:

FOR THE PERFORMANCE OF THIS CONTRACT, THE GOVERNMENT SHALL PAY TO THE CONTRACTOR THE COST THEREOF DETERMINED BY THE CONTRACTING OFFICER TO BE ALLOWABLE IN ACCORDANCE WITH PART III, OFFICE OF CIVIL AND DEFENSE MOBILIZATION CONTRACT COST PRINCIPLES, DATED NOVEMBER 17, 1959, AND AS MAY BE PROVIDED FOR HEREIN. IT BEING UNDERSTOOD AND AGREED WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE FOLLOWING SHALL BE CONSIDERED AS ALLOWABLE ITEMS OF COST HEREUNDER, INCLUDING LIMITATIONS THERETO, WHEN INCURRED OR PAID BY THE CONTRACTOR AND WHEN NECESSARY AND REQUIRED AND USED FOR THE PERFORMANCE OF THE WORK HEREUNDER:

A. DIRECT COSTS INCLUDING:

1. EXPENDITURES BY THE CONTRACTOR FOR THE SALARIES AND WAGES OF PROFESSIONAL, TECHNICAL, CLERICAL, SKILLED AND UNSKILLED EMPLOYEES WHEN DIRECTLY ENGAGED IN THE SUBJECT WORK UNDER THIS CONTRACT; AND THE CONTRACTOR WARRANTS THAT THE CONTRACTOR'S RATES OF PAY TO EMPLOYEES ENGAGED FOR THE PURPOSES OF THIS CONTRACT ARE NOT IN EXCESS OF THOSE PAID BY THE CONTRACTOR TO OTHER EMPLOYEES OF THE CONTRACTOR IN SIMILAR OR EQUIVALENT POSITIONS.

(A) INCLUDED ARE: STATE AND FEDERAL PAYROLL TAXES, SOCIAL SECURITY, ALLOWANCES FOR VACATION, HOLIDAY, SICK LEAVE, GROUP HEALTH, ACCIDENT, HOSPITAL AND GROUP LIFE INSURANCE PLANS IN ACCORDANCE WITH THE CONTRACTOR'S ESTABLISHED PRACTICE.

ARTICLE 304 (G) OF THE REFERRED-TO PART III OF CONTRACT COST PRINCIPLES, DATED NOVEMBER 17, 1950, SETTING FORTH EXAMPLES OF ITEMS OF ALLOWABLE COSTS, EXPRESSLY INCLUDES---

(G) PENSION AND RETIREMENT PLANS IN ACCORDANCE WITH THE INTERPRETATION SET FORTH IN PARAGRAPH 601 AND GROUP HEALTH, ACCIDENT AND LIFE INSURANCE PLANS * * *.

THE ARMY AUDIT AGENCY REPORT STATES THAT THE AFOREMENTIONED COSTS WERE QUESTIONED IN ACCORDANCE WITH PARAGRAPH 601.2H OF THE CONTRACT COST PRINCIPLES, WHICH PARAGRAPH, IN DEALING WITH THE SUBJECT OF PENSION AND RETIREMENT PLANS, READS AS FOLLOWS:

CREDITS WHICH BECAME AVAILABLE OR ARE FORESEEABLE MUST BE TAKEN INTO ACCOUNT IN AN EQUITABLE MANNER IN DETERMINING PENSION AND RETIREMENT COSTS SUBJECT TO APPORTIONMENT TO A CIVIL DEFENSE CONTRACT. IN SOME INSTANCES, THIS MAY REQUIRE ADJUSTMENTS TO COSTS IN ANTICIPATION OF THE REALIZATION OF CREDITS. FOR EXAMPLE, SUCH ACTION WOULD NORMALLY BE APPROPRIATE WHERE CONTRACTORS' ORGANIZATIONS ARE SUBSTANTIALLY EXPANDED FOR THE PERFORMANCE OF CIVIL DEFENSE CONTRACTS AND THERE IS A REASONABLE EXPECTATION THAT, UPON COMPLETION OF THE CONTRACTS, THE SERVICES OF PRACTICALLY ALL OR A LARGE NUMBER OF THE ADDITIONAL EMPLOYEES WILL BE TERMINATED WITH THE RESULT THAT CONTRACTORS WILL BENEFIT FROM CONTRIBUTIONS MADE ON BEHALF OF THESE EMPLOYEES, BECAUSE SUCH PERSONNEL WILL NOT ACQUIRE VESTED RIGHTS UNDER THE TERMS OF THE PLANS.

THE AMOUNTS IN QUESTION APPEAR TO HAVE BEEN PAID PURSUANT TO THE REQUIREMENTS OF CHAPTER 145 OF THE REVISED CODE OF THE STATE OF OHIO, WHICH CREATES A PENSION OR RETIREMENT PLAN FOR ALL EMPLOYEES OF THE STATE OR OF ANY SUBDIVISION OR MUNICIPALITY THEREOF.

IN THE ABSENCE OF ANY PROVISION FOR REFUND TO THE EMPLOYER OF AMOUNTS PAID ON ACCOUNT OF EMPLOYEES WHO LEAVE ITS EMPLOYMENT, WE ARE UNABLE TO COMPREHEND THE SUGGESTED APPLICABILITY OF THIS SECTION OF THE CONTRACT COST PRINCIPLES TO THE PAYMENTS MADE TO THE PUBLIC EMPLOYEES RETIREMENT SYSTEM. THE BASIC QUESTION INVOLVED IS WHETHER THE PAYMENTS MADE BY THE STATE OR CITY INTO THE EMPLOYERS' ACCUMULATION FUND AS REQUIRED BY PARAGRAPH 145.23, CHAPTER 145 OF THE REVISED CODE OF THE STATE OF OHIO, ARE PROPERLY REIMBURSABLE TO THE CONTRACTOR STATE. OUR CONCLUSION MUST BE IN THE AFFIRMATIVE FOR THE FOLLOWING REASONS:

PARAGRAPH 145.51, CHAPTER 145 OF THE REVISED CODE, READS, IN PERTINENT PART, AS FOLLOWS:

EACH EMPLOYER DESCRIBED IN DIVISION (D) OF SECTION 145.01 OF THE REVISED CODE, SHALL PAY INTO THE EMPLOYERS' ACCUMULATION FUND, IN SUCH MONTHLY OR LESS FREQUENT INSTALLMENTS AS THE PUBLIC EMPLOYEES RETIREMENT BOARD REQUIRES AN AMOUNT CERTIFIED BY THE BOARD WHICH SHALL EQUAL THE PERCENT OF THE TOTAL COMPENSATION, EARNABLE BY ALL CONTRIBUTORS DURING THE PRECEDING YEAR, WHICH IS THE SUM OF THE NORMAL CONTRIBUTION RATE PLUS THE DEFICIENCY CONTRIBUTION RATE. NINETY DAYS AFTER SUCH A BILLING IS SUBMITTED, ANY AMOUNTS WHICH REMAIN UNPAID SHALL BE SUBJECT TO A PENALTY FOR LATE PAYMENT IN THE AMOUNT OF FIVE PERCENT. IN ADDITION, INTEREST ON PAST DUE AMOUNTS AND PENALTIES MAY BE CHARGED AT THE RATE OF SIX PERCENT PER ANNUM.

WE MIGHT FURTHER POINT OUT THAT IN THE CASE OF THE STATE EX REL. PUBLIC EMPLOYEES RETIREMENT BOARD, ET AL. V. BAKER, ET AL., COUNTY COM RS OF MADISON COUNTY, ET AL., 169 OHIO ST. 499, 160 N.E.2D. 262, THERE WAS PRESENTED TO THE SUPREME COURT OF OHIO THE QUESTION WHETHER A COUNTY IN THE STATE WAS REQUIRED TO CONTRIBUTE TO THE EMPLOYERS' ACCUMULATION FUND, NOTWITHSTANDING THE FACT THAT NO DEDUCTION HAD BEEN MADE FROM THE COMPENSATION OF THE EMPLOYEE FOR HIS CONTRIBUTION TO THE PUBLIC EMPLOYEES RETIREMENT SYSTEM. THE COURT HELD THAT IT WAS MANDATORY THAT THE EMPLOYER PAY TO THE EMPLOYERS' ACCUMULATION FUND THE SAME RATE PERCENT OF THE COMPENSATION OF EACH EMPLOYEE MEMBER EMPLOYED BY IT FOR NORMAL CONTRIBUTION AND FOR THE DEFICIENCY CONTRIBUTION AS THE STATE WAS REQUIRED TO PAY FOR ITS EMPLOYEES, AND IT WAS LIKEWISE MANDATORY THAT THE EMPLOYER DEDUCT THE EMPLOYEE'S CONTRIBUTION FROM HIS SALARY AND PAY IT INTO THE RETIREMENT SYSTEM, AND THE FAILURE TO PAY THE REQUIRED CONTRIBUTION OF AN EMPLOYER OR AN EMPLOYEE DID NOT AFFECT THE OBLIGATION FOR PAYMENT OF THE OTHER.

ALSO, MORE RECENTLY, DURING THE YEAR 1961, THE ATTORNEY GENERAL FOR THE STATE OF OHIO, IN OPINION NO. 2334, RULED THAT WHEN AN EMPLOYEE MEMBER OF THE PUBLIC EMPLOYEES RETIREMENT SYSTEM QUALIFIES FOR CREDIT FOR SERVICE BETWEEN JANUARY 1, 1935, AND THE DATE HE BECAME A MEMBER OF THE RETIREMENT SYSTEM THE EMPLOYER BY WHOM THE EMPLOYEE WAS EMPLOYED AT THE TIME THE SERVICE WAS RENDERED MUST MAKE THE MATCHING EMPLOYER PAYMENT PROVIDED FOR IN PARAGRAPH 145.51, REGARDLESS OF WHETHER OR NOT THE EMPLOYEE IS EMPLOYED BY SUCH EMPLOYER AT THE TIME BILLING FOR THE PAYMENT WAS MADE.

WHILE IT APPEARS THAT AN EMPLOYEE MAY UNDER SOME CIRCUMSTANCES WITHDRAW CERTAIN AMOUNTS PAID INTO THE FUND, WE FIND NO PROVISION FOR WITHDRAWAL OR REFUND OF ANY PART OF THE EMPLOYER'S CONTRIBUTION. SUCH BEING THE CASE, THE CONTRIBUTIONS THUS REQUIRED ARE REIMBURSABLE UNDER THE TERMS OF THE CONTRACT, WITHOUT DEDUCTION FOR ANY PROSPECTIVE CREDIT SUCH AS CONTEMPLATED BY PARAGRAPH 601.2H OF THE APPLICABLE COST PRINCIPLES.