Audit of Highmark's Unfunded Pension Costs for the Period Covering 1997 Through 2001

EXECUTIVE SUMMARY:

Our objectives were to:  (1) determine if pension costs for the years 1997-2001 were funded in accordance with the Federal Acquisition Regulations (FAR) and the Cost Accounting Standards (CAS) and (2) identify and properly account for any accumulated unfunded pension costs, including allowable and reassignable portions.  We found that Highmark funded the pension costs for plan years 1997 through 2001 in accordance with the FAR and the CAS.   However, Highmark did not identify correctly or account properly for the additional accumulated unfunded pension costs.  We recommended, as of January 1, 2002, Highmark should decrease its accumulated unallowable pension costs by $236,744 ($12,882 for the Medicare Part A segment plus $223,862 for the Other segment).  Highmark did not concur with the OIG's recommendation that it should decrease the accumulated unallowable pension cost by $236,744.