Audit of Blue Cross Blue Shield of South Carolina's Unfunded Pension Costs for the Period Covering 1994 Through 2001

EXECUTIVE SUMMARY:

The objectives of our review were to (1) determine if the accumulated unfunded pension costs identified in our prior review were accounted for properly; (2) determine if pension costs for plan years 1994-2001 were funded in accordance with the Federal Acquisition Regulations (FAR) and the Cost Accounting Standards (CAS); and (3) identify and properly account for any additional accumulated unfunded pension costs.  We found that South Carolina properly accounted for the accumulated unfunded pension costs identified in our prior review.  Additionally, South Carolina funded the pension costs for plan years 1994-2001 in accordance with the FAR and the CAS.  However, South Carolina did not correctly identify or properly account for the additional accumulated unfunded pension costs due to a lack of adequate policies and procedures.  The accumulated unfunded pension costs consist of the accumulated unallowable pension costs and the accumulated reassignable pension costs.  South Carolina correctly identified and properly accounted for the accumulated unallowable pension costs.  We recommended South Carolina should (1) decrease the accumulated reassignable pension costs of the Medicare segment by $467,768 as of January 1, 2002; (2) identify the accumulated reassignable pension costs of the Other segment as $3,471,124 as of January 1, 2002; and (3) establish procedures to annually update the reassignable pension costs for the Medicare and Other segments.  South Carolina agreed with our draft report findings and recommendations, and stated it would implement our recommendations.