FAR 52.215-18—Reversion or Adjustment of Plans for Postretirement Benefits (PRB) Other Than Pensions.
Plain-English Summary
FAR 52.215-18 addresses what happens when a contractor terminates, reduces, or otherwise changes a postretirement benefits (PRB) plan other than pensions and when PRB plan assets revert to, inure to, or are constructively received by the contractor. Its purpose is to protect the Government’s share of any previously reimbursed PRB costs so the contractor does not retain amounts that should offset contract costs. The clause requires prompt written notice to the Contracting Officer when the contractor decides to terminate or reduce PRB benefits, and it ties recovery of any Government share to the cost principle at FAR 31.205-6(o)(5). It also identifies acceptable recovery methods—such as cost reduction, amortization of the credit with interest, cash refund, or another agreed method—and gives the Contracting Officer authority to choose a method if the parties cannot agree through good-faith negotiations. Finally, it requires flowdown of the clause’s substance to applicable subcontracts, making the rule relevant not only to prime contractors but also to lower-tier arrangements where PRB cost issues may arise. In practice, this clause is about timely disclosure, equitable cost adjustment, and ensuring the Government receives credit when PRB funding changes create a contractor benefit.
Key Rules
Prompt notice of PRB changes
The contractor must promptly notify the Contracting Officer in writing when it determines that it will terminate or reduce the benefits of a PRB plan. This notice obligation is triggered by the contractor’s determination, not by the final completion of the plan change.
Government share must be returned
If PRB fund assets revert to the contractor, inure to the contractor, or are constructively received by the contractor, the contractor must refund or credit the Government for its equitable share. The required treatment is governed by FAR 31.205-6(o)(5).
Recovery method should be negotiated
The parties should consider how the Government’s equitable share will be recovered, including cost reduction, amortizing the credit over several years with appropriate interest, a cash refund, or another mutually agreed method. The clause encourages negotiated resolution rather than a one-size-fits-all approach.
CO decides if no agreement
If the contractor and the Government cannot agree on the recovery method through good-faith negotiations, the Contracting Officer must designate the method of recovery. This gives the Government a final administrative decision point on the recovery mechanism.
Flowdown to applicable subcontracts
The contractor must insert the substance of the clause in all subcontracts that meet the applicability requirements of FAR 15.408(j). This ensures subcontract-level PRB issues are handled consistently where the clause applies.
Responsibilities
Contractor
Monitor PRB plans for terminations, reductions, or other events that may cause assets to revert, inure, or be constructively received. Provide prompt written notice to the Contracting Officer, calculate and return the Government’s equitable share when required, negotiate the recovery method in good faith, and flow down the clause’s substance to applicable subcontracts.
Contracting Officer
Receive and evaluate the contractor’s notice, participate in good-faith negotiations over the recovery method, and if the parties cannot agree, designate the method of recovery. The Contracting Officer also ensures the Government receives the proper equitable share under the applicable cost principle.
Government/Agency
Protect the Government’s financial interest in PRB funding changes by ensuring credits or refunds are properly applied. The agency, through the Contracting Officer, must oversee compliance with the clause and the related cost principle.
Subcontractors
Comply with the flowed-down substance of the clause when the subcontract meets FAR 15.408(j) applicability requirements. They must support any required notice, recovery, or credit actions affecting PRB plan assets.
Practical Implications
Contractors should track PRB plan funding and plan amendments closely, because the notice obligation starts when the contractor determines a termination or reduction will occur, not after the fact.
A common pitfall is failing to identify when assets have reverted, inured, or been constructively received, which can delay or understate the Government’s equitable share.
The recovery method matters financially: cost reduction, amortization with interest, and cash refund can have very different cash-flow and accounting effects, so contractors should be prepared to justify their preferred approach.
If negotiations stall, the Contracting Officer can impose the recovery method, so contractors should document their position and negotiate early and in good faith.
Prime contractors should not overlook subcontract flowdown obligations where applicable, because PRB-related issues can arise at lower tiers and still affect the prime’s compliance and cost recovery obligations.
Official Regulatory Text
As prescribed in 15.408 (j) , insert the following clause: Reversion or Adjustment of Plans for Postretirement Benefits (PRB) Other Than Pensions (July 2005) (a) The Contractor shall promptly notify the Contracting Officer in writing when the Contractor determines that it will terminate or reduce the benefits of a PRB plan. (b) 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 for its equitable share as required by 31.205-6 (o)(5) of the Federal Acquisition Regulation (FAR). When determining or agreeing on the method for recovery of the Government’s equitable share, the contracting parties should consider the following methods: cost reduction, amortizing the credit over a number of years (with appropriate interest), cash refund, or some other agreed upon method. Should the parties be unable to agree on the method for recovery of the Government’s equitable share, through good faith negotiations, the Contracting Officer shall designate the method of recovery. (c) 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)