Contractor Pension Plan Costs:

More Control Could Save Department of Defense Millions

PSAD-77-100: Published: May 19, 1977. Publicly Released: May 19, 1977.

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The government incurred pension plan costs that were inequitable and too high because the Department of Defense (DOD) permitted actuarial assumptions or unjustified changes in actuarial cost methods.

Government controls and surveillance over contractors' pension plan practices were not adequate considering the costs involved. Establishing effective controls and surveillance over these practices could save the government millions of dollars. DOD auditing and contracting activities also lacked personnel with actuarial skills to evaluate pension plan costs. Properly implementing the existing requirements of the Cost Accounting Standards Board and the proposed standard on pension plan costs should prevent the increased costs.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should have the Armed Services Procurement Regulation (ASPR) revised to require that pension plan costs charged to the government: (1) are equitably distributed between government and commercial work when different actuarial cost methods are used; (2) reflect allocation of pension fund assets in proportion to contributions; and (3) are allocated by using assumptions based on division or cost center experience instead of companywide experience. The ASPR should also be revised to require that any changes in the policies and procedures affecting allocation of pension plan costs be completely disclosed.

    Agency Affected:

 

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