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Pentagon to Give More Funds for Contractor Pensions

Photo: Defense.gov

The Defense Department may pay more for future contractor programs under a rule requiring the government to increase reimbursements to contractors for pensions, Federal Times reports.

The rule, part of the 2006 Pension Protection Act, takes effect this week and sets standards for companies to calculate pension fund liabilities.

The Pentagon has not budgeted for the additional pension costs but the cost could potentially be in the billions, Pentagon Chief Financial Officer Comptroller Robert Hale said Feb. 23 on “This Week in Defense News.”

The government’s pension reimbursement costs depend on the success of companies’ pension funds in the stock market.

If stocks do not perform well, companies will pay more and so will the Pentagon, the report said.

The new cost accounting rule would allow contractors to collect pensions costs from the government over four years, starting in 2014.

Then, contractors will be able to add 25 percent of the difference between what they pay under the Pension Act and what contractors charge the government.

In 2015, that will increase to 50 percent, 75 percent in 2016 and 100 percent in 2017, according to Federal Times.

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