PRB Costs Allowable Whether Measured Under FAS 106 or IRS Criteria
Client Alert | 1 min read | 09.23.09
To address the "catch-22" confronted by contractors using the accrual method of calculating post-retirement benefit (PRB) costs for financial reporting purposes who have had to choose either to fund the entire amount of PRB costs measured in accordance with Financial Accounting Standard (FAS) 106 in order to be reimbursed for the costs on Government contracts, or to fund only the amount of PRB costs deductible under the Internal Revenue Code (IRC) and thereby forgo reimbursement of the full FAS 106 amount, the FAR has been amended, under a final rule effective January 11, 2010, to allow contractors the option to measure accrued post-retirement benefit (PRB) costs using either the criteria in FAS 106 or the criteria in IRC 419. The final rule also (1) addresses the transition period when a change is made from one accrual accounting method to another by requiring the contractor to treat the change in unfunded accumulated PRB obligation as a gain or loss and demonstrate that there will be no duplicate recovery of costs as a result of the change; (2) expressly states that any prior period unfunded accrual is unallowable under either method of accrual accounting; and (3) clarifies that use of a health care assumption for measurement of costs is required unless prohibited by IRC welfare benefit fund rules.
Insights
Client Alert | 3 min read | 11.21.25
On November 7, 2025, in Thornton v. National Academy of Sciences, No. 25-cv-2155, 2025 WL 3123732 (D.D.C. Nov. 7, 2025), the District Court for the District of Columbia dismissed a False Claims Act (FCA) retaliation complaint on the basis that the plaintiff’s allegations that he was fired after blowing the whistle on purported illegally discriminatory use of federal funding was not sufficient to support his FCA claim. This case appears to be one of the first filed, and subsequently dismissed, following Deputy Attorney General Todd Blanche’s announcement of the creation of the Civil Rights Fraud Initiative on May 19, 2025, which “strongly encourages” private individuals to file lawsuits under the FCA relating to purportedly discriminatory and illegal use of federal funding for diversity, equity, and inclusion (DEI) initiatives in violation of Executive Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity (Jan. 21, 2025). In this case, the court dismissed the FCA retaliation claim and rejected the argument that an organization could violate the FCA merely by “engaging in discriminatory conduct while conducting a federally funded study.” The analysis in Thornton could be a sign of how forthcoming arguments of retaliation based on reporting allegedly fraudulent DEI activity will be analyzed in the future.
Client Alert | 3 min read | 11.20.25
Client Alert | 3 min read | 11.20.25
Client Alert | 6 min read | 11.19.25
