FAR 52.215-15—Pension Adjustments and Asset Reversions.
Plain-English Summary
FAR 52.215-15, Pension Adjustments and Asset Reversions, addresses what happens when a contractor terminates a defined-benefit pension plan, curtails pension benefits, closes a segment, or otherwise recovers pension plan assets. The clause requires prompt written notice to the contracting officer when the contractor determines it will terminate a defined-benefit plan or recapture pension assets, and it establishes how any resulting pension adjustment is measured, assigned, and allocated under the Cost Accounting Standards (CAS). It distinguishes between contracts and subcontracts subject to full CAS coverage and those not subject to full CAS coverage, while still tying the adjustment to the CAS pension cost allocation rules. The clause also covers situations where pension assets revert to the contractor or are constructively received for any reason, giving the Government the option to require a refund or credit for its equitable share of the gross amount withdrawn. Finally, it requires flowdown of the clause to applicable subcontracts. In practice, this clause protects the Government from paying pension costs that are later recovered by the contractor and ensures that pension-related cost adjustments are handled consistently across covered contracts and subcontracts.
Key Rules
Prompt notice required
The contractor must promptly notify the contracting officer in writing when it determines that it will terminate a defined-benefit pension plan or otherwise recapture pension fund assets. This notice obligation is triggered by the contractor’s determination, not by the final completion of the transaction.
CAS-covered adjustments
For segment closings, pension plan terminations, or curtailment of benefits, the adjustment must be measured, assigned, and allocated under CAS 9904.413-50(c)(12) for contracts and subcontracts subject to full CAS coverage. The clause incorporates the CAS pension accounting method rather than creating a separate calculation rule.
Modified treatment for non-full CAS
For contracts and subcontracts not subject to full CAS coverage, the same CAS measurement rule applies, but the numerator in the allocation fraction is limited to pension plan costs allocated to non-CAS covered contracts and subcontracts that are subject to FAR Part 31.2 or for which certified cost or pricing data were submitted. This narrows the Government’s share to the universe of contracts that actually support recovery under the clause.
Refund or credit on asset reversion
If pension assets revert to the contractor, or are constructively received by the contractor for any reason, the Government may choose to require a refund or a credit for its equitable share of the gross amount withdrawn. The contractor does not get to decide the remedy unilaterally; the Government has the option.
Government share tied to cost participation
The Government’s equitable share must reflect its participation in pension costs through contracts subject to FAR Part 31.2 or contracts for which certified cost or pricing data were submitted. This means the share is based on the Government-funded portion of the pension costs, not on the contractor’s overall business or all pension activity.
Mandatory subcontract flowdown
The contractor must include the substance of the clause in all subcontracts that meet the applicability requirement of FAR 15.408(g). This ensures downstream subcontractors are bound by the same notice and reimbursement rules where applicable.
Responsibilities
Contractor
Promptly notify the contracting officer in writing when it determines it will terminate a defined-benefit pension plan or otherwise recapture pension fund assets. Calculate and apply pension adjustments using the required CAS methodology, determine whether any asset reversion or constructive receipt has occurred, and provide a refund or credit if the Government elects that remedy. Flow the clause down to applicable subcontracts.
Contracting Officer
Receive and evaluate the contractor’s notice, determine the Government’s response when pension assets revert or are constructively received, and ensure the contract administration record reflects any required refund, credit, or adjustment. The contracting officer also relies on the clause to protect the Government’s share of pension-related recoveries.
Government
Exercise the option to require either a refund or a credit when pension assets revert to the contractor or are constructively received. Determine the equitable share based on the Government’s participation in pension costs under the applicable contracts.
Subcontractor
Comply with the clause when it is flowed down under applicable subcontracts, including notice and adjustment obligations tied to pension plan terminations, curtailments, or asset reversions.
Practical Implications
Contractors should identify pension events early, because the notice requirement is triggered when the decision is made, not after funds are distributed. Late notice can create audit, billing, and settlement problems.
The calculation rules are technical and depend on CAS coverage status, so contractors need to coordinate accounting, legal, and contracts staff before any pension termination, curtailment, or reversion event.
A common pitfall is assuming that only a formal cash distribution matters; the clause also covers assets that are constructively received, which can trigger Government recovery rights even without a straightforward payout.
Contractors should maintain clear records showing which contracts received pension cost allocations and whether those contracts were subject to FAR Part 31.2 or supported by certified cost or pricing data, because that information drives the Government’s equitable share.
Flowdown should not be overlooked. If the subcontract meets the applicability threshold in FAR 15.408(g), failure to include the clause can leave the prime contractor exposed to compliance and recovery issues.
Official Regulatory Text
As prescribed in 15.408 (g) , insert the following clause: Pension Adjustments and Asset Reversions (Oct 2010) (a) The Contractor shall promptly notify the Contracting Officer in writing when it determines that it will terminate a defined-benefit pension plan or otherwise recapture such pension fund assets. (b) For segment closings, pension plan terminations, or curtailment of benefits, the amount of the adjustment shall be- (1) For contracts and subcontracts that are subject to full coverage under the Cost Accounting Standards (CAS) Board rules and regulations (48 CFR Chapter 99), the amount measured, assigned, and allocated in accordance with 48 CFR 9904.413-50(c)(12) ; and (2) For contracts and subcontracts that are not subject to full coverage under the CAS, the amount measured, assigned, and allocated in accordance with 48 CFR 9904.413-50(c)(12) , except the numerator of the fraction at 48 CFR 9904.413-50(c)(12) (vi) shall be the sum of the pension plan costs allocated to all non-CAS covered contracts and subcontracts that are subject to Federal Acquisition Regulation (FAR) subpart 31.2 or for which certified cost or pricing data were submitted. (c) For all other situations where assets revert to the Contractor, or such assets are constructively received by it for any reason, the Contractor shall, at the Government’s option, make a refund or give a credit to the Government for its equitable share of the gross amount withdrawn. The Government’s equitable share shall reflect the Government’s participation in pension costs through those contracts for which certified cost or pricing data were submitted or that are subject to FAR subpart 31.2 . (d) The Contractor shall include the substance of this clause in all subcontracts under this contract that meet the applicability requirement of FAR 15.408 (g). (End of clause)