Bill seeks multi-billion dollar rebate for US Postal Service
Democrats in the US House of Representatives have put forward legislation to relieve the US Postal Service from a multi-billion dollar financial burden. Massachusetts governor Stephen Lynch, ranking member of the House oversight committee’s postal subcommittee, unveiled HR1351 today in Congress.
The bill seeks to correct the calculation system used to work out payments from the USPS to its Civil Service Retirement System pension pot.
Although the US government’s Office of Personnel Management (OPM) has repeatedly stood by its calculations, federal regulators have estimated that the USPS has overpaid into the pension fund by anything between $50bn and $75bn.
Congressman Lynch’s bill proposal, which has the support of other key Democrats in the House oversight committee, directs the OPM to bring the CSRS calculations up to modern accounting standards.
Any surplus from the recalculated pension fund would then be handed back to the USPS, which would help the struggling organization with some of its other big financial burdens, such as its retiree health benefits liability.
Speaking in today’s oversight committee hearing into the recent USPS-APWU collective bargaining agreement, Congressman Lynch said that over the past two years, the USPS had done well to cut its costs by over $10bn and that since 2008, the size of its work force had decreased by over 100,000.
But he said there were certain aspects of the Postal Service financial problems that were out of its control – specifically, its “overly aggressive” retiree health benefits pre-funding schedule and pension obligations.
The new bill, he said, would help.
Lynch explained said: “HR1351 directs the Office of Personnel Management to update the actuarial methodology to be used to calculate the Civil Service Retirement System liabilities between the Postal Service and the federal government, in accordance with modern actuarial practice and accounting standards.”
“Any resulting surplus in the calculations will then be transferred over to the Postal Service for its retiree health benefit fund.”
Lynch said the bill would also free up an overpayment of nearly $7bn identified in the other Postal Service pension fund, the Federal Employees Retirement System (FERS), which would be refunded “immediately” to allow the USPS to make this year’s $5.5bn payment to its retirement health benefits fund.
The payment is due in September, with the USPS expecting to default on the obligation if a law like Congressman Lynch’s is not enacted.
The rest of the surplus FERS funding would go to help the USPS pay its workers’ compensation adjustment liability, a $1bn payment due in November, while remaining funds would help with USPS debts.
Retiree health benefits
The legislative proposal does not appear to directly address the Postal Service’s retiree health benefit pre-funding requirements, aside from providing funds for the USPS to pay September’s installment.
Today’s oversight hearing saw the USPS calling repeatedly for Congress to make changes to the retirement health benefits system prefunding requirements, which would take the Postal Service to the brink of insolvency this September as it reaches its $15bn government borrowing limit.
The accelerated 10-year payment schedule for the fund was put in place by Congress in 2006, during a time when USPS was making good profits, and it was decided that an accelerated funding of the organisation’s retiree healthcare benefits system would be a good use for those profits.
However, with the downturn in the economy, the USPS then made a $20bn loss for the next four years – with the extra retiree health fund payments accounting for $21bn of its costs.
Louis Giuliano, chairman of the USPS board of governors, said today the issue was “top of the list” in terms of actions needed from Congress to save “this important American institution”.
“We are a responsible employer who has been and will continue to pay our fair share for the health care costs of our employees and retirees,” he said, “but the $5.5bn accelerated payments mandated by the 2006 PAEA are an extraordinary burden that no other organization – public or private – is required to make.”