Audit of Pennsylvania Blue Shield's Unfunded Pension Costs for the Period Covering 1992 Through 1996

EXECUTIVE SUMMARY:

The objectives of this review were to:  (1) determine if the accumulated unfunded pension costs identified in our prior review (A-07-93-00713) have been accounted for properly, (2) determine if pension costs for plan years 1992 through 1996 were funded in accordance with Federal Acquisition Regulations (FAR) and the Cost Accounting Standards (CAS), and (3) identify and properly account for any additional accumulated unfunded pension costs, including the identification of the unallowable and reassignable portions of the accumulated unfunded pension costs.  We found that Pennsylvania Blue Shield (PBS) properly accounted for the accumulated unfunded pension costs identified in our prior review and properly executed its Advance Agreement.  Additionally, PBS funded the pension costs for plan years 1992 through 1996 in accordance with FAR and CAS.  However, PBS did not correctly identify nor properly account for the additional accumulated unfunded pension costs due to the lack of adequate policies and procedures.  We recommended that PBS decrease the accumulated reassignable pension costs of the Medicare segment by $2,154,481 as of December 31, 1996.