benefits, not pensions. Also it is 50 years, not 75.
https://www.politifact.com/factchecks/2020/apr/15/afl-cio/widespread-facebook-post-blames-2006-law-us-postal/
The health benefit requirement
The 2006 law also established a fund for Postal Service retiree health benefits. It required prepayment of those benefits according to a 50-year schedule, starting with 10 years of statutorily prescribed payments of roughly $5 billion from 2007 to 2017. Previously, the service funded the benefits on a pay-as-you-go basis.
The act was passed by a Republican-led Congress. But it dealt with retiree health benefits, not pensions, said David Partenheimer, a spokesman for the Postal Service.
There’s also some confusion over whether the Postal Service was forced to prepay benefits "for 75 years," as the Facebook post said. The language of the law doesn’t mention 75 years, and Partenheimer said the Postal Service has not used that timeframe to describe the requirement.
In 2012, the Government Accountability Office said the act "did not require USPS to prefund 75 years of retiree health benefits over a 10-year period" but that the "payments would be projected to fund the liability over a period in excess of 50 years, from 2007 through 2056 and beyond."
Postal Accountability and Enhancement Act
https://en.wikipedia.org/wiki/Postal_Accountability_and_Enhancement_Act
The Postal Accountability and Enhancement Act (PAEA) is a United States federal statute enacted by the 109th United States Congress and signed into law by President George W. Bush on December 20, 2006.
The bill was introduced in the United States House of Representatives by Tom Davis, a Republican from Virginia, and cosponsored by Republican John M. McHugh of New York and Democrats Henry Waxman of California and Danny K. Davis of Illinois.
As the chair of the Senate Oversight committee, Senator Susan Collins of Maine shepherded the bill's passage through the Senate. The bill was approved during the lame duck session of the 109th Congress, and approved without objection via voice vote.
PAEA was the first major overhaul of the United States Postal Service (USPS) since 1970. It reorganized the Postal Rate Commission, compelled the USPS to pay in advance for the health and retirement benefits of all of its employees for at least 50 years, and stipulated that the price of postage could not increase faster than the rate of inflation.
It also mandated the USPS to deliver six days of the week. According to Tom Davis, the Bush administration threatened to veto the legislation unless they added the provision regarding funding the employee benefits in advance with the objective of using that money to reduce the federal deficit. When he signed the bill on December 20, 2006, Bush issued a signing statement that says that the government can open mail under emergency conditions, though Waxman asserted that the government cannot do this without a search warrant.
Retiree Health Benefits Prefunding
https://about.usps.com/who-we-are/financials/annual-reports/fy2010/ar2010_4_002.htm
Challenge
Significant financial losses result from a legislative requirement that the Postal Service pre-fund its retiree health benefits.
SOLUTION
Adopting a traditional “pay-as-you-go” method would produce an average of $5.65 billion in additional cash flow per year through 2016.
Unlike any other public or private entity, under a 2006 law, the U.S. Postal Service must pre-fund retiree health benefits. We must pay today for benefits that will not be paid out until some future date. Other federal agencies and most private sector companies use a “pay-as-you-go” system, by which the entity pays premiums as they are billed. Shifting to such a system would equate to an average of $5.65 billion in additional cash flow per year through 2016, and save the Postal Service an estimated $50 billion over the next ten years. With the announcement of our Action Plan in March, we began laying the foundation for change, requesting that Congress restructure this obligation.
The pre-funding requirement, as it currently stands, contributes significantly to postal losses. Under current law, the Postal Service must follow a mandated pre-funding schedule of $5.5 billion to $5.8 billion per year through 2016. In 2009, Congress granted a much needed deferral, allowing us to pay $4.0 billion less than the orignally required $5.4 billion payment. This year, Congress opted not to provide this deferral.
In the absence of legislative relief, the Postal Service was required to make — and made — this year’s $5.5 billion payment to the Retiree Health Benefit Fund. We had sought a deferral of this payment to minimize the risk of defaulting on financial obligations in fiscal year 2011. This risk remains. Even with the careful stewardship of resources we are committed to in the coming year, current forecasts anticipate insufficient cash to enable the similar $5.5 billion payment in September 2011.
Given the severity of our financial situation and the fact that we already have implemented aggressive cost-cutting and productivity-improving measures, we continue to seek approval from Congress to shift away from our unique retiree health benefits pre-funding mandate. We are committed to upholding our obligation to current and former employees but wish to do so in a way that does not constrain cash flow during difficult financial periods of declining volume.
Ensuring that the Postal Service remains a viable business depends upon elimination of legislatively-imposed constraints that impede our efficient and profitable operation. Congressional action, both to restructure our obligation to pre-fund retiree health benefits and to address overpayment to our Civil Service Retirement System pension fund, is still urgently needed.
|
= new reply since forum marked as read
