Compliance November 1, 2004

Appeals Court: Kodak Must Return Govt. Pension Payments

January 23, 2003 (PLANSPONSOR.com) - Eastman Kodak Co. has been ordered to give back $9.6 million, plus interest, to the federal government for improperly billing pension costs to the government in the first place, an appeals court ruled.
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The US Court of Appeals for the Federal Circuit said that Kodak had no liability to make a pension contribution between 1984 and 1986 because its plan was overfunded, Washington-based legal publisher BNA reported. So the pension costs did not qualify for reimbursement under government contracts. The latest ruling upholds a July 2001 decision by the Armed Services Board of Contract Appeals (ASBCA).

According to the BNA story, the government paid a share of Kodak’s allocated pension costs as part of a Defense Department contract despite the plan’s overfunded status. However, following Defense Contract Audit Agency audits, a contracting officer determined that Kodak did not comply with cost accounting standards and issued a final decision that Kodak owed the government $9,677,856, plus interest.

Kodak appealed to the ASBCA, which ruled in favor of the government. It said that because Kodak was under no obligation to contribute to its overfunded plan during those years, the costs were not allocable to government contracts under government regulations, which make liability a prerequisite to allocability, the ASBCA said.

The case is Eastman Kodak Co. v. Rumsfeld , Fed. Cir., No. 02-1058, 1/16/03.

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