[Federal Register: November 15, 2007 (Volume 72, Number 220)]
[Proposed Rules]
[Page 64185-64186]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15no07-32]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAR Case 2006-021; Docket 2007-0001; Sequence 10]
RIN: 9000-AK84
Federal Acquisition Regulation; FAR Case 2006-021, Post
Retirement Benefits (PRB), FAS 106
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) are proposing to amend the
Federal Acquisition Regulation (FAR) to permit the contractor to
measure accrued PRB costs using either the criteria in Internal Revenue
Code (IRC) 419 or the criteria in Financial Accounting Standard (FAS)
106.
DATES: Interested parties should submit written comments to the FAR
Secretariat on or before January 14, 2008 to be considered in the
formulation of a final rule.
ADDRESSES: Submit comments identified by FAR case number 2006-021 by
any of the following methods:
Federal eRulemaking Portal: http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov.
To search for any document, first select under ``Step 1,''
``Documents with an Open Comment Period'' and select under ``Optional
Step 2,'' ``Federal Acquisition Regulation'' as the agency of choice.
Under ``Optional Step 3,'' select ``Proposed Rules''. Under ``Optional
Step 4,'' from the drop down list, select ``Document Title'' and type
the FAR Case number ``2006-021''. Click the ``Submit'' button. Please
include your name and company name (if any) inside the document. You
may also search for any document by clicking on the ``Search for
Documents'' tab at the top of the screen. Select from the agency field
``Federal Acquisition Regulation'', and type ``2006-021'' in the
``Document Title'' field. Select the ``Submit'' button.
Fax: 202-501-4067.
Mail: General Services Administration, Regulatory
Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann
Duarte, Washington, DC 20405.
Instructions: Please submit comments only and cite FAR case 2006-
021 in all correspondence related to this case. All comments received
will be posted without change to http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov, including
any personal and/or business confidential information provided.
FOR FURTHER INFORMATION CONTACT: Edward Chambers, Procurement Analyst,
at (202) 501-3221, for clarification of content. For information
pertaining to status or publication schedules, contact the FAR
Secretariat at (202) 501-4755. Please cite FAR case 2006-021.
SUPPLEMENTARY INFORMATION:
A. Background
FAR 31.205-6(o) allows contractors to choose among three different
accounting methods for PRB costs: cash basis, terminal funding, and
accrual basis.
When the accrual basis is used, the FAR currently requires that
costs must be measured based on the requirements of FAS 106.
However, the tax-deductible amount that is contributed to the
retiree benefit trust is determined using IRC 419, which has different
measurement criteria than FAS 106. As a result, the FAS 106 amount can
often exceed the IRC 419 measured costs, and contractors that choose to
accrue PRB costs for Government reimbursement face a dilemma: whether
to fund the entire FAS 106 amount to obtain Government reimbursement of
the costs, regardless of tax implications, or fund only the tax
deductible amount and not be reimbursed for the entire FAS 106 amount
under their Government contracts.
[[Page 64186]]
The Councils are proposing to amend FAR 31.205-6(o) to alleviate
this dilemma. This amendment would provide the contractor an option of
measuring accrued PRB costs using criteria based on IRC 419 rather than
FAS 106, thereby permitting the contractor to fund the entire tax
deductible amount without having a portion disallowed because it did
not meet the FAR's current measurement criteria. The Councils note that
this amendment will not change the total measured PRB costs, i.e., the
total measured PRB costs over the life of the PRB plan would be the
same whether the contractor chose to apply the criteria in FAS 106 or
IRC 419.
The Councils note that the proposed rule may result in the
Government paying higher PRB costs, since under the current rule some
contractors may have chosen to fund the IRC amount rather than the full
FAS amount in current and future accounting periods. Absent this
proposed revision, the resulting difference will be an unallowable
cost. However, the Councils are unable to estimate the specific cost
impact because the number of contractors who may choose to use the
proposed IRC 419 measurement option is unknown. Moreover, the Councils
further note that there may be a cost impact if the rule remains
unchanged. For example, in lieu of funding the lower IRC amount,
contractors could decide to fund the full FAS amount (and forego the
tax benefit), change from accrual to pay-as-you go accounting, or
terminate their PRB plans rather than fund amounts that are not tax
deductible.
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 small entities do not accrue PRB costs for Government
contract costing purposes.
C. Paperwork Reduction Act
The Paperwork Reduction Act does apply; however, these changes to
the FAR do not impose additional information collection requirements to
the paperwork burden previously approved under OMB Control Number 9000-
0013.
List of Subjects in 48 CFR Part 31
Government procurement.
Dated: October 24, 2007
Al Matera,
Director, Office of Acquisition Policy.
Therefore, DoD, GSA, and NASA propose amending 48 CFR part 31 as
set forth below:
1. The authority citation for 48 CFR part 31 continues to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
2. Amend section 31.205-6 by revising paragraphs (o)(2)(iii)(A) and
(B) to read as follows:
31.205-6 Compensation for personal services.
* * * * *
(o) * * *
(2) * * *
(iii) * * *
(A) Measured and assigned in accordance with--
(1) Generally accepted accounting principles. However, the portion
of PRB costs attributable to the transition obligation assigned to the
current year that is in excess of the amount assignable under the
delayed recognition methodology described in paragraphs 112 and 113 of
Financial Accounting Standards Board Statement 106 is unallowable. The
transition obligation is defined in Statement 106, paragraph 110; or
(2) The costs shall--
(i) Be measured using reasonable actuarial assumptions, which may
include a healthcare inflation assumption;
(ii) Be assigned to accounting periods on the basis of the average
future working lives of active employees covered by the PRB plan or a
15 year period, whichever period is longer; and
(iii) Exclude Federal income taxes, whether incurred by the fund or
the contractor (including those taxes associated with any increase in
PRB costs), unless the fund holding the plan assets is tax-exempt under
the provisions of 26 U.S.C. 501(c);
(B) Paid to an insurer or trustee to establish and maintain a fund
or reserve for the sole purpose of providing PRB to retirees. The
assets shall be segregated in the trust, or otherwise effectively
restricted, so that they cannot be used by the employer for other
purposes; and
* * * * *
[FR Doc. 07-5669 Filed 11-14-07; 8:45 am]
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