DCMC is specially concerned with the treatment of "overfunded" pension plans when a business combination occurs. Overfunding occurs when the market value of the assets of a fund are greater than the actuary liabilities for its benefits. Under a sales agreement of a business or segment, it is quite common for the contractor to attempt to retain all or a disproportionate share of pension assets which include any overfunding. To the extent the Government contributed to the pension assets over the life of the plan through payment of fringe benefits, the Government may be entitled to a credit or refund for a portion of the excess assets in accordance with Cost Accounting Standard 413.

Many questions related to CAS 413 remain unanswered. CAS 413 requires a contractor to make an adjustment of its previously determined pension costs when a "segment is closed". A "segment closing" was never defined and it took a 1995 modification to CAS 413 to clarify that a "sale" of a company unit or division constitutes a "segment closing". An Armed Services Board of Contract Appeals case (Gould Inc., ASBCA 46759) ruled that the 1995 rule modification did not apply retroactively but only prospectively making contractors subject to different versions depending on the date of segment closing. In addition, the ASBCA reasoned that the pre-1995 version of CAS 413 did not mandate an adjustment to contract prices meaning the government was not entitled to an adjustment on fixed-price contracts but that the government was limited to cost adjustments to flexibly-priced contracts only.

Other problems related to the new version of CAS 413 DCMC will be addressing include: (1) some contractors claim that if a plan is underfunded they should be entitled to a recovery of additional costs from the Government (2) for overfunded contracts, many contractors argue that the government is not entitled to recover on fixed price contracts (3) with respect to underfunded contracts, many contractors have put forth the argument that the government is liable on both flexibly-priced and fixed-price contracts.

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