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Series: Contractor Pension Cost Requirements

Announced on  | Last Modified on  | Series Number: SRS-A-25-033
Status
Active
Agency
Centers for Medicare and Medicaid Services

OBJECTIVE

Medicare contractors are eligible to be reimbursed a portion of their pension costs and are required to separately account for the Medicare segment pension plan assets based on the requirements of their Medicare contracts and Cost Accounting Standards. We will determine whether Medicare contractors have calculated and claimed reimbursement for Medicare's share of various employee pension costs in accordance with their Medicare contracts and applicable Federal requirements. We will determine whether contractors have fully implemented contract clauses requiring them to determine and separately account for the employee pension assets and liabilities allocable to their contracts with Medicare. We will also review Medicare contractors whose Medicare contracts have been terminated, assess Medicare's share of future pension costs, and determine the amount of excess pension assets as of the closing dates. Applicable requirements are found in the FAR at 48 CFR Subpart 31.2; Cost Accounting Standards 412 and 413; and the Medicare contract, Appendix B, § XVI. W-00-17-35067

There are 4 projects in this series.

Project titles will remain unpublished until projects are complete and reports are posted.

ACTIVE PROJECTS IN THIS SERIES (1)

Project OAS-25-07-136 • Announced on Jul 9, 2025

COMPLETED PROJECTS IN THIS SERIES (3)

Palmetto Government Benefits Administrator, LLC.

Project A-07-23-00638 • Completed on August 13, 2025

Blue Cross Blue Shield of South Carolina

Project A-07-24-00647 • Completed on August 13, 2025

CGS Administrators, LLC

Project OAS-25-07-051 • Completed on August 12, 2025

TIMELINE

  • August 24, 2023
    Series Number SRS-A-25-033 Assigned
  • August 24, 2023
    Project Announced

    Palmetto Government Benefits Administrator, LLC. - A-07-23-00638

  • August 6, 2024
    Project Announced

    Blue Cross Blue Shield of South Carolina - A-07-24-00647

  • February 11, 2025
    Project Announced

    CGS Administrators, LLC - OAS-25-07-051

  • July 9, 2025
    Project Announced

    Project OAS-25-07-136

  • August 12, 2025
    Project Complete - OAS-25-07-051

    CGS Administrators, LLC has been marked as complete. This audit resulted in 1 recommendation.

  • August 13, 2025
    Project Complete - A-07-23-00638

    Palmetto Government Benefits Administrator, LLC. has been marked as complete. This audit resulted in 2 recommendations.

  • August 13, 2025
    Project Complete - A-07-24-00647

    Blue Cross Blue Shield of South Carolina has been marked as complete. This audit resulted in 2 recommendations.

  • Today
    1 Audit In-Progress
  • Est FY2026
    Estimated Fiscal Year for Series Completion

3 REPORT PUBLISHED

Palmetto Government Benefits Administrator, LLC, Overstated Its Medicare Segment Pension Assets as of January 1, 2022 (A-07-23-00638)
  • Palmetto concurred with and implemented our prior audit recommendation to decrease the Medicare segment pension assets by $2.1 million as of January 1, 2017.
  • Palmetto did not correctly update its Medicare segment pension assets from January 1, 2017, to January 1, 2022, in accordance with Federal requirements. Palmetto identified $89.9 million as its Medicare segment pension assets as of January 1, 2022; however, we determined that those assets were $88 million as of that date. Therefore, Palmetto overstated its Medicare segment pension assets as of January 1, 2022, by $1.8 million.
  • Palmetto’s policies and procedures did not always ensure that it calculated those pension assets in accordance with Federal requirements when updating its Medicare segment pension assets from January 1, 2017, to January 1, 2022.

25-A-07-096.01 to CMS - Open Unimplemented
Update expected on 02/12/2026
We recommend that Palmetto Government Benefits Administrator, LLC, decrease its Medicare segment pension assets by $1,829,164 and recognize $88,028,452 as the Medicare segment pension assets as of January 1, 2022.

25-A-07-096.02 to CMS - Open Unimplemented
Update expected on 02/12/2026
We recommend that Palmetto Government Benefits Administrator, LLC, improve policies and procedures to ensure that going forward, it calculates Medicare segment pension assets in accordance with Federal requirements.

View in Recommendation Tracker

Blue Cross Blue Shield of South Carolina Overstated Its Supplemental Executive Retirement Plan III Medicare Allowable Segment Pension Assets as of January 1, 2022 (A-07-24-00647)
  • BCBS South Carolina did not correctly implement our prior recommendation.
  • BCBS South Carolina did not correctly update its SERP III Medicare Allowable segment pension assets from January 1, 2017, to January 1, 2022, in accordance with Federal requirements. BCBS South Carolina identified $1,072,831 as its SERP III Medicare Allowable segment pension assets as of January 1, 2022; however, we determined that those assets were $1,059,400 as of that date. Therefore, BCBS South Carolina overstated the SERP III Medicare Allocable segment pension assets by $13,431.
  • BCBS South Carolina’s policies and procedures did not always ensure that it calculated those pension assets in accordance with Federal requirements when updating its SERP III Medicare Allowable segment pension assets from January 1, 2017, to January 1, 2022.

25-A-07-095.01 to CMS - Open Unimplemented
Update expected on 02/12/2026
We recommend that Blue Cross Blue Shield of South Carolina decrease its SERP III Medicare Allowable segment pension assets by $13,431 and recognize $1,059,400 as the SERP III Medicare Allowable segment pension assets as of January 1, 2022.

25-A-07-095.02 to CMS - Open Unimplemented
Update expected on 02/12/2026
We recommend that Blue Cross Blue Shield of South Carolina improve policies and procedures to ensure that going forward, it calculates Medicare Allowable segment pension assets in accordance with Federal requirements.

View in Recommendation Tracker

CGS Administrators, LLC, Did Not Claim Some Allowable Medicare Pension Costs Through Its Incurred Cost Proposals (OAS-25-07-051)
  • CGS claimed pension costs of $5.02 million for Medicare reimbursement, through its ICPs, for CYs 2017 through 2021; however, we determined that the allowable Cost Accounting Standards-based pension costs during this period were $5.07 million. The difference, $51,297, represented allowable Medicare pension costs that CGS did not claim on its ICPs for CYs 2017 through 2021.
  • CGS did not claim these allowable Medicare pension costs primarily because it used incorrect indirect cost rates when claiming pension costs for Medicare reimbursement. Specifically, CGS used incorrect allocable pension costs when calculating the indirect cost rates.

25-A-07-090.01 to CMS - Open Unimplemented
Update expected on 02/11/2026
We recommend that CGS Administrators, LLC, work with CMS to ensure that its final settlement of contract costs reflects an increase in Medicare pension costs of $51,297 for CYs 2017 through 2021.

View in Recommendation Tracker
Work Plan Type
Office of Audit Services
HHS Agencies
Centers for Medicare and Medicaid Services
Issue Areas
Contracts Financial Stewardship
Target Groups
Elderly
Financial Groups
Medicare A Medicare B