Review of Unfunded Pension Costs of Pennsylvania Blue Shield

This final audit report points out that the Pennsylvania Blue Shield had accumulated $5.5 million in unallowable direct pension costs related to its Medicare segment. These costs represent unfunded pension costs and imputed interest for Plan Years 1986 through 1991. These costs are unallowable because the pension costs were not funded within the required specific time periods set by regulation. Imputed interest on the unfunded costs is also unallowable. The PBS cannot claim any of these unfunded costs in future cost accounting periods.