Articles Posted in ERISA

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In the early 2000s, Raytheon underwent a major reorganization, including the sale of several business segments, including AIS, Optical, and Aerospace (segments at issue). As part of each sale, Raytheon retained the assets and liabilities of defined-benefit pension plans associated with the segments. Raytheon also calculated segment closing adjustments as required by CFR Cost Accounting Standards (CAS). Raytheon determined that some of its segments had pension surpluses, but the segments at issue had deficits. Although Raytheon paid the government its share of the surpluses, the government refused to pay its share of the deficits. Raytheon submitted certified claims for recovery of the deficits under the Contract Disputes Act, 41 U.S.C. 7103 (2011). The contracting officer issued final decisions denying these claims, reasoning that the adjustments were subject to the Federal Acquisition Regulation’s timely funding requirement, 48 CFR 31.205-6(j)(2)(i), and the deficits were therefore unallowable because Raytheon failed to fund the full amount of the pension deficits in the same year as the closings and that Raytheon’s segment closing calculations “do[] not comply with CAS 413[.]” The Claims Court awarded Raytheon $59.209,967 and rejected a claim for recovery with respect to one segment, finding that Raytheon applied the wrong asset allocation method in its adjustment calculation. The Federal Circuit affirmed. View "Raytheon Co. v. United States" on Justia Law

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DIRECTV sold business segments. In 1997 it sold defense units to Raytheon, transferring $5,774,655,148 in pension assets and $3,310,028,559 in pension liabilities, a net transfer of $2,464,626,589 in surplus pension assets. In a 2000 sale of satellite business units to Boeing, DIRECTV transferred $1,843,930,981 in pension assets and $1,037,344,156 in liabilities, a net transfer of $806,586,825 in surplus assets. In both transactions, DIRECTV retained a small portion of surplus pension assets. The Government asserted noncompliance with Cost Accounting Standard 413.50(c)(12) (41 U.S.C. 422(f)(1)), which regulates assignment of actuarial gains and losses, valuation of assets of a pension fund, and allocation of pension costs to a contractor’s business segments, and demanded payments of $68,695,891 and of $12,197,704. The Court of Federal Claims granted DIRECTV summary judgment. The Federal Circuit affirmed. The claims court correctly determined that DIRECTV's segment closing obligations could be satisfied by cost savings realized by the Government in successor contracts. The court rejected arguments that the trial court erred by calculating segment closing adjustments based on assets and liabilities of the entire segment, rather than only assets and liabilities that DIRECTV retained and that the Federal Acquisition Regulation required DIRECTV itself to pay any amount due as a segment closing adjustment. View "DIRECTV Group, Inc. v. United States" on Justia Law