Under current law the Postal Service is scheduled in fiscal year 2017 to begin paying down whatever retiree health obligations remain over a period of 40 years.20
As of the end of fiscal year 2011, the Postal Service has made $21 billion in retiree health payments. These retiree health payments were in addition to the premium payments the Postal Service made each year on behalf of current retirees. According to data provided to the Committee by the Postal Service, those premium payments totaled $1.7 billion in fiscal year 2007 and are projected to reach $4 billion annually by fiscal year 2016.
The Committee recognizes that the statutorily mandated retiree health payment schedule has been difficult to meet due to the declining revenues of the Postal Service as a result of the electronic diversion of the mail and a major recession that significantly affected mail volume. At the same time, the Committee is aware that easing or eliminating the pre-funding obligation could one day either break promises made to retirees, or leave taxpayers with a significant financial obligation in the event that the Postal Service becomes unable to make the payments itself.
In order to provide the Postal Service with financial relief while maintaining its responsibility for the costs related to its employees, S. 1789 would make three major reforms to the Postal Service‘s current retiree health payment schedule and structure:
1. It would replace the existing payment schedule – the remaining statutory annual payments and the 40-year amortization schedule that will start in fiscal year 2017 – with a new 40-year amortization schedule that would start in fiscal year 2012.
2. It would set the pre-funding goal underlying the new amortization schedule at 80 percent of the obligation (rather than the current 100 percent), in recognition of the fact that the Postal Service, if necessary, has additional assets it could draw upon to meet these obligations.
3. It would allow current retirees‘ premiums to be paid out of the health benefit fund in the Treasury in which the Postal Service‘s pre-funding payments have been deposited since fiscal year 2007. That fund – the Postal Service Retiree Health Benefit Fund – currently includes just over $41 billion.
According to data provided to the committee by the Postal Service, the combination of these three provisions could cut the Postal Service‘s total retiree health payments by roughly half each year.
Postal Service Health Plan
The Postal Service has proposed to sponsor its own health care plan, rather than continue to participate in the Federal Employee Health Benefits program, as a way to reduce health care costs as well as reduce the amount of the retiree health benefits payments.21 The Committee did