Review of Medicare Contractor's Overfunded Pension Plan, Blue Cross and Blue Shield Association

This final report provides the results of our review of Medicare Contractor's Overfunded Pension Plan, Blue Cross and Blue Shield Association. During our previous review of the Blue Cross and Blue Shield Association (the Association) (CIN: A-07-95-01109), we determined that the Medicare segment accumulated $492,293 in unabsorbed credits as of January 1, 1994. The unabsorbed credits were created by negative CAS pension costs, which resulted from the overfunded status of the Association's pension plan. Our current review shows that the accumulated unabsorbed credits increased to $710,699 as of December 31, 1995. The increase resulted from appreciation on the accumulated unabsorbed credits, and from additional negative CAS pension costs for 1994 and 1995.

The CAS relating to the accounting for pension costs was revised effective March 30, 1995, and became applicable to the Association on January 1, 1996. The revised CAS requires that accumulated unabsorbed credits and negative CAS pension costs be assigned to subsequent accounting periods, as an "assignable cost credit". Additionally, the revised CAS requires that assignable cost credits be amortized over ten years.

We recommend that the Association identify $710,699 as an assignable cost credit, attributable to the Medicare segment, as of January 1, 1996. The Association accepted our recommendations.