DoD Issues Final Rule on Expressly Unallowable Fringe Benefit Costs While White House Sets Increased Compensation Cap

The Department of Defense (DoD) issued a final rule amending the DoD FAR Supplement, making certain fringe benefit costs expressly unallowable, thus subjecting defense contractors to possible penalties for charging these costs to defense contracts and noncompliance with Cost Accounting Standard 405. At the same time, the new White House compensation cap increase allows for additional reimbursement for highly compensated employees, but comes with increased calls to reform and limit compensation. Contractors should be aware of both changes to ensure accurate cost reimbursements and to maintain compliance with cost principles.