The Postal Service has defaulted on every RHBF payment since 2010, although it had enough cash to make modest partial payments in the last couple of years. As an example of this position, Ralph Nader said in 2011, The deep hole of debt that is currently facing the U.S. The Service reported that approximately 492,000 active employees received health benefits in 2015, at a cost to the Service of $4.8 billion. [34] After PAEAs enactment, however, the assets of the RHBF built up rapidly. [25] P.L. [3] See, for example, Collective Bargaining Agreement Between American Postal Workers Union, AFL-CIO and U.S. On the other hand, $20.9 billion overstates the cash drain because, as mentioned earlier, the burden was mostly covered by PAEAs repeal of the escrow account. [77] With strong support from other committee members, Rep. Chaffetz hopes to move the bill to the House floor. In the case of the Postal Services retiree health benefit obligations, these unfunded liabilities had built to $74.8 billion by the time PAEA was enacted. For government employers, the funded approach reduces the hazards that unfunded obligations will eventually require large tax increases, such as those being felt now by Chicago property owners as the city tries to shore up dangerously underfunded pensions,[42] drastic cuts in government services, and, in extreme cases like Detroit and Puerto Rico, contribute to bankruptcy or its equivalent. Big Medicare Changes Coming For Postal Service Retirees - Forbes [31] It could have made a partial payment. Congress decided to have a transition period between the new and old financing systems. These plans will continue to pay for healthcare services after age 65, even if retirees dont enroll in Part B. Third, in 2017, OPM is to compute the Services remaining unfunded liability for the retiree health benefits promised to current and former postal workers, and the Service is to amortize the liability over the 40-year period 2017-2056. The Postal Service participates in the FEHB Program, which is administered by OPM. [1] Consequently, some knowledge of the RHBF and the obligations it is intended to finance are essential to properly evaluate the Postal Services financial condition. However, Congress made the wrong call in later years when it failed to permit further adjustments, except for a one-year delay in 2011. This change was news to them and, of course, they had some questions. (PAEA has a provision allowing an exigent rate increase if certain extraordinary or exceptional circumstances are met, and based on that provision, market dominant postal rates exceeded the inflation cap for a limited time, starting in January 2014 and ending in April 2016.) An employers promises to pay future benefits are said to be fully funded if there is a dedicated fund with assets equal to the present value of expected future payments to current and former workers. To compare your FEHB health plan options please go to www.opm.gov/fehbcompare. Clearly it would. If a couple decides not to worry about post-retirement-age expenses during their normal working years, but wait until after they have reached retirement age, that is similar to the pay-as-you-go approach, which may require them to keep working. If the investments encountered a prolonged period of low returns, the Services unfunded liability would mushroom and taxpayers would almost surely have to cover the shortfall. [13] The Service claimed its proposed fund, which would have been a much more limited fund than the one Congress established three years later, addressed the concerns of Congress, the GAO, and the widely respected bipartisan Presidents Commission on the United States Postal Service about its large and growing retiree health care liability. [31] U.S. cit., p. 13. Nov. 17, 2022 at 9:20 a.m. Checkbook's Guide to Health Plans can help you find the right health plan for you and your family. To realize the savings from mandatory Medicare Part D participation, the Postal Service would use a device known as an Employer Group Waiver Plan (EGWP). As a result of prior pay-as-you-go financing, there are legacy costs from past production that must be paid. As a result, career postal workers are generally eligible to receive health coverage through the Federal Employees Health Benefits (FEHB) Program. The comparison tool can help you find the right health plan for you and your family. All rights reserved. The Postal Service promises its workers they will receive health benefits in retirement. In contrast, pay-as-you-go means putting aside nothing when future benefits are promised and, instead, dealing with the costs only when they come due. 18-20. The Postal Service Health Benefits (PSHB) Program is a new, separate program within the Federal Employees Health Benefits (FEHB) Program, administered by the Office of Personnel Management (OPM) which will provide health insurance to eligible Postal Service employees, Postal Service annuitants, and their eligible family members starting in 2025. The Service paid the $3.1 billion but defaulted on the rest. getty You've seen the headlines. 74 and 77, https://about.usps.com/who-we-are/financials/annual-reports/fy2009.pdf. Benefit Plan - Rural Carrier Health Benefit Plan: Maintain a Healthy 3076). [40] GAO agrees this would be a reasonable change if it would improve accuracy, but cautions that independent experts, such as OPMs Board of Actuaries, should be in charge of setting the postal-specific assumptions to ensure objectivity. [53] The military credits mentioned earlier add a wrinkle, but it is still accurate to say that the RHBF contributions were in the rate base. Individuals who qualify for the SEP will receive a separate notification. The House Committee on Oversight and Government Reform, chaired by Rep. Jason Chaffetz (R-UT), recently approved a bill, the Postal Service Reform Act of 2016 (H.R. [51] For the PRCs decision, see Postal Rate Commission, Opinion And Recommended Decision, Docket No. Royal Mail enjoyed a 13-year pension contribution holiday from 1990 to 2003. The RHBF now invests in special government securities. ), * Postal Accountability and Enhancement Act of 2006 (P.L. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years. This does occur during the transition. In fact, the creation of a Postal Service Retiree Health Benefit Fund was originally the Services idea, contained in a proposal it submitted to Congress in 2003. Pay Frequency depends on the Enrollee Type and may be restricted depending on Enrollee Type selected. [49] On the cost side, the Service had achieved major savings by reducing its workforce 12 percent over the period 1999-2006, almost entirely accomplished through attrition, while skillfully maintaining service quality. This strategy will work out nicely if the investments actually do earn high returns, but the danger is that equity investments, precisely because they are tied to the variable earnings of the underlying businesses, sometimes earn low or negative returns. Postal Service, Form 10-K, 2015, op. Checkbooks Guide to Health Plans can help you find the right health plan for you and your family. However, language in the interim final rule should ease concerns. Postal Service, Annual Reports, various issues. For comparison, the Postal Service had total revenue of $68.9 billion in fiscal year 2015. This includes information on copays, deductibles, prescription drug costs and whether dental and vision benefits are . 5707). The Service put aside no money when it promised the future benefits. In addition, $17.1 billion was transferred from the fund holding the CSRS surplus. In her testimony, the Postmaster General says these investments are a component of the Services proposal. [58] As noted earlier, the Service paid $3.1 billion for retiree health care premiums in 2015 and was supposed to contribute $5.7 billion to the RHBF that year. [9] The law permitted the Service to lower its pension contributions and directed that some of the Services savings be used to pay down debt, some go toward delaying a rate increase, and some be held in an escrow account while Congress developed postal reform legislation.[10]. Postal Service, U.S. The reduced contribution in 2009 and the Services multiple defaults have cut actual contributions in half, to $38.0 billion ($20.9 billion from the Postal Service and $17.1 billion from an interfund transfer. The costs have to be paid one way or another, and holding the Service to its promises may be more equitable and efficient than most alternatives. Postal Service, Annual Report, 2007, p. 13, https://about.usps.com/who-we-are/financials/annual-reports/fy2007.pdf. First, if an employers finances are currently weak but expected to become much stronger in the future, putting off obligations until they can be dealt with more easily may be a smart choice. [60] With the switch to the funded approach, those obligations from the past must be paid and, in addition, the full costs of the future retiree health benefits pledged each year in return for current labor services must be reported and paid. 108-173) and were enhanced by the Patient Protection and Affordable Care Act (P.L. [76] Although the Postal Service emphasizes that the extra costs on the Medicare program would be small relative to Medicares total current costs, the percentage is small only because Medicares total costs are so large. The online tool has information about all plans available through the Federal Employees Health Benefits Program (FEHB).. The FEHB Program is more generous to active and retired workers than most employer-provided health insurance in the business and nonprofit sectors. Postal Service, Annual Reports, various issues. In fact, mail volume is increasing.[50] There seemed to be a window of opportunity for fixing the Services largest unfunded liability while the Service was still on the upswing. He enrolled in Part A at age 65 and now she is eligible for Medicare and retiring. As a result of these positives on the revenue and cost sides, 2006 was the fourth year in a row the Postal Service had been profitable, and the government enterprises borrowings from the U.S. Treasury had been cut from $11.3 billion at the end of 2001 to $2.1 billion at the end of 2006. Moreover, even if the Service reduced maintenance and capital spending because of low cash holdings, later RHBF contributions had no effect on maintenance and capital spending since the Service made no later contributions. Checkbook has information about all plans available through the Federal Employees Health Benefits Program. In the "New Enrollment Code" selection area, scroll to and choose the APWU Health Plan you'd like to join . [1] When this paper cites numbers from the Postal Services financial statements, the years are Postal Service fiscal years, which begin on October 1 of the prior calendar year and end on September 30 of the current calendar year. [73] Brennan, op. For a summary of the draft legislation prior to markup, see Draft Postal Service Reform Act of 2016; Summary, House Committee on Oversight and Government Reform, https://oversight.house.gov/wp-content/uploads/2016/06/Summary-of-Postal-Service-Reform-Act-FINAL5.pdf. Notwithstanding warnings about electronic diversion and a temporary dip in volume following 9/11 and the anthrax attacks, total mail volume hit a record of 213.1 billion pieces in 2006, and total revenue increased until 2007. Medicare Parts A and B already substantially reduce the Postal Services retiree health benefit costs since most Medicare-eligible postal retirees participate, but the Service would save more if every Medicare-eligible postal retiree had to enroll.[71]. Accordingly, when Congress enacted the Postal Accountability and Enhancement Act of 2006 (P.L. [54] The Service has tried to narrow its deficits through cost reductions, but its efforts there have been slowed because of various cost-management restrictions it faces as a government enterprise. [42] Tim Novak, 18 Aldermen Avoid Hefty Property Tax Hikes, 5 Pay Less, Chicago Sun-Times, July 30, 2016, http://chicago.suntimes.com/news/watchdogs-18-aldermen-avoid-hefty-property-tax-hikes-5-pay-less. Starting in 2043, the amortization period is to last 15 years instead of ending in 2056. Medicare enrollment is now voluntary for these individuals. During the 2005 and 2006 rate cases, the Services costs included responsibility for the military credits. OPM outlines plan to migrate 1.7M FEHB enrollees into postal-only . Although retiree health benefits are often unfunded or poorly funded, two considerations suggested the Services retiree health care obligations should be funded: they are as firm a commitment as the Services pensions, and they had become enormous (about $75 billion by 2006). The requirement to enroll in Part B does not apply to those who retire before the age of 65. [14] The Service actually offered two proposals, according to whether Congress held it responsible for the higher pension costs of some employees who received credit from the Service for prior military service. By not approving a midcourse correction, Congress forced the 2012 default and emboldened the Service to refuse, since then, to contribute even a cent to the RHBF. Postal Service Alternative Health Care Plan Proposal, FI-MA-12-014, August 22, 2012, https://www.uspsoig.gov/sites/default/files/document-library-files/2015/fi-ma-12-014.pdf. Postal Service, Annual Report, 2009, pp. As a 501(c)(3) nonprofit, we depend on the generosity of individuals like you. plans to offer similar or better prescription drug coverage while providing a source of cost savings for the PSHB plans that will help reduce premiums, all else being equal. [27] If all payments had occurred as originally scheduled, RHBF contributions would have totaled $75.9 billion by the end of 2016. Opinions expressed by Forbes Contributors are their own. 201). In extreme cases like Detroit and Puerto Rico, it can contribute to bankruptcy or its equivalent. Employees can access the guide through the Open Season LiteBlue page. The Service also proposed to require all Medicare-eligible retirees in its health benefit program to enroll in Medicare. Package values up to $50 cost $1.65, package values $50.01-$100 cost $2.05, and the price per additional $100 . When demand suddenly and unexpectedly crashed, revenue plummeted and deficits resulted. Those 65 and older who are retiring before April 2024 can enroll in Part B right away or pay attention and watch for more information about the six-month SEP. Checkbook has published its annual guide to federal benefits for more than 35 years. [81] Ralph Nader, The Manufactured Financial Crisis of the U.S. Although the Service is now sharply critical of the fund, the opposite was once the case. The answer is yes, and that argues for full funding or as close to full funding as the Services finances permit. CareFirst BlueCross BlueShield became the new administrator of the USPS Health Benefits Plan on Jan. 1. [59] Statement of Phillip Herr, Director Physical Infrastructure Issues, Government Accountability Office, U.S. That preserved the element of the plan letting the Postal Service lower its health benefit costs by shifting more of them to Medicare. Looking at several scenarios for the growth of Medicare expenditures, Medicares Trustees write, Growth under any of these scenarios, if realized, would substantially increase the strain on the nations workers, the economy, Medicare beneficiaries, and the Federal budget. (Ibid., p. (Non-FEHB-eligible retirees must enroll in Part B after retirement; otherwise, their coverage will not pay.) It cannot expect rapid future income growth when demand for its most profitable product, First-Class Mail, continues to decline; its future costs for retiree health care are huge; and its promise to provide retiree health benefits is binding. I second BCBS. By the end of fiscal year 2010, the retiree health benefit liability was $91.1 billion but the fund had assets of $42.5 billion. In fact, however, fundamental restructuring of fringe benefits is basically off the table in labor negotiations. Many other noncareer employees are not FEHB eligible, however. If the Postal Service were a private company, we would be engaged in Chapter 11 bankruptcy proceedings.[28] Of course, the Postal Service is not a normal business. The defaults have not affected the benefits of current retirees. What is Medicare and how do the different parts work? - USA TODAY To understand the impact of the change, you need to know about the current system. [52] See Postal Regulatory Commission, Opinion And Recommended Decision, Vol. Critics of the RHBF often level this charge. The main change in markup was revision of a section dealing with the Services Board of Governors. My former clients wife decided to continue with her current FEHB plan and enroll in Medicare Part A, hospital insurance, now. [15] Presidents Commission on the United States Postal Service, Embracing the Future: Making the Tough Choices to Preserve Universal Mail Service, p. 124, July 31, 2003, https://www.treasury.gov/press-center/press-releases/documents/pcusps_report.pdf. Prior to 2006, the Service simply paid retirees health benefit premiums when they came due. But if the RHBF expense was effectively in the rate base, why did the Service plunge into deficit immediately after PAEAs enactment? Plus the premium is $314 a month. Postal Service Retiree Health Benefits Fund | Tax Foundation [29] U.S. Absolutely. [34] U.S. The RHBF also received $17.1 billion from an overfunded pension account. [25] In 2010, Congress rebuffed Postal Service requests for further relief, and the Service made the $5.5 billion RHBF contribution required by PAEA. USPS and the Office of Personnel Management (OPM) have published online FAQs about the new Postal Service Health Benefits Program. Starting January 1, 2025, PSHB plans will be available only to Postal Service employees. The Presidential Commission had previously recommended funding a reserve account to address these [unfunded retiree health benefit] obligations to the extent that Postal Service finances permit in order to improve transparency and so future ratepayers are not forced to pay for postal services delivered to the nation today.[15], After PAEAs enactment, the Service declared in its 2007 Annual Report, This [fund] is a farsighted and responsible action that places the Postal Service in the vanguard of both the public and private sectors in providing future security for its employees, and augurs well for our long-term financial stability upon successful completion of the payments.[16] The only concern the Service expressed at the time (correctly, as later events proved) was that Congress had selected a very rapid funding schedule: In the near term, however, these payments [for 2007-2016] will be a considerable financial challenge.[17]. Congress might also want to ask some questions involving the overall federal workforce. Postal Service, Monthly Review, September 21, 2011, http://mrzine.monthlyreview.org/2011/nader230911.html. Some of the clearest and most accurate came from GAO. [18] P.L. FEHB and Medicare | How They Work Together For the most part it would not. Postal Service That Imply Anti-Competitive Behavior: Historical Parallels and Remedies Across Other Regulated Sectors, Lexington Institute, June 2016, http://lexingtoninstitute.org/wp-content/uploads/2016/06/Anti-Competitive-Behavior.pdf. There is one feature that many retirees find enticing. Open season, the annual period when employees can change their health coverage or enroll in a new plan, will conclude Monday, Dec. 12. Here's what you should know: As with so many decisions, money is likely the driving force. [28] Statement Of Postmaster General/CEO Patrick R. Donahoe, Before the House Subcommittee on Federal Workforce, U.S. The Plan Year Selection Menu will appear. The challenge has been especially great because Congress specified a front-loaded RHBF contribution schedule: yearly payments averaging roughly $5.6 billion during the 10 years 2007-2016, with any remaining unfunded liability to be paid over 40 years starting in 2017. The Services finances would be much brighter if those debts did not exist, but they do exist, notwithstanding the controllable income concept. Its no surprise that FEHB is the largest employer-sponsored health care program in the country, covering more than eight million federal employees and others at a cost of about $59 billion in 2021. cit., esp. Postal Service, Annual Report, 2015, esp. Medicare is a federal health insurance program for people age 65 and older. To help Postal Service employees compare health plans during this years open season, the organization offers access to Checkbooks Guide to Health Plans for Federal Employees. At the Postal Service, however, promises of retiree health benefits are closer to a binding commitment, similar in that respect to pensions. A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Postal Service, Form 10-Q, Quarter II, FY 2016, p. 16, May 9, 2016, http://about.usps.com/who-we-are/financials/financial-conditions-results-reports/fy2016-q2.pdf. For instance, the Postal Services statutory RHBF contribution in 2015 was $5.7 billion. Moreover, the Services CSRS pensions were much better funded than had been feared several years earlier, allowing the Services future pension contributions to be cut significantly. When it comes to retiree health care, the Postal Service Retiree Health Benefits Fund (PSRHBF) is dedicated to paying retired workers their share of health insurance premiums. COVERED 100% Preventive care and screenings Maternity care Accidental injury outpatient services within 72 hours 803. If the Postal Service had made all its RHBF contributions, the retiree health benefits of current and former postal employees would now be close to fully funded. So let's start with some comparisons, based on the USPS's 2019 10-K reports and the annual reports for UPS and FedEx FDX +1.4%, in a summary table: Summary of pension and retiree healthcare. Having set a precedent, the Postal Service also defaulted on its 2013, 2014, and 2015 payments, and has said it will default again in 2016. For example, state governments, on average, have funded less than 10 percent of their retiree health care liabilities. So, Congress passed. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and global levels. Postal Service Is Under Attack, 2016, http://www.apwu.org/sites/apwu/files/resource-files/Our%20U.S.%20Postal%20Service%20Is%20Under%20Attack.pdf. [50] William Burrus, President, American Postal Workers Union, Setting the Record Straight on Postal Reform, Submitted to Senate Homeland Security and Government Affairs Committee, April 14, 2005. Until this significant change, the GEP was the only time federal retirees who initially deferred Part B could enroll, and late enrollment penalties applied. To comply with the Patient Protection and Affordable Care Act (PPACA), the Service offers health insurance outside the federal program and without the retirement benefit to certain noncareer employees. Before making your final enrollment decision, always refer to the individual FEHB brochure which is the official statement of benefits. Their puzzlement is understandable because the fund involves a type of deferred labor compensation and how best to pay for it. This is the biggest difference between the two carriers' policies: all UPS services include up to $100 of carrier liability, while the only services that USPS insures are Priority Mail and Priority Mail Express (both domestic and international). The Postal Service Health Benefits Program begins in 2025. Register now Please do not rely on this chart alone. A recession is a significant and sustained decline in the economy. The Postal Service proposed withdrawing all active and retired postal workers from the federal governments FEHB Program and transferring them into a new health program the Postal Service would oversee. In 2006, as part of the Postal Accountability and Enhancement Act (PAEA), the Postal Service Retirement Health Benefits Fund (RHBF) was established. As can be seen from Table 1, total required RHBF contributions over the period 2007-2015 were $66.1 billion (after the adjustment in 2009), but $17.1 billion of that was a transfer from the fund holding CSRS assets.
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