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Unfair Burden on the USPS

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A recent report from the USPS Inspector General (OIG) analyzed USPS liabilities for retiree healthcare benefits and reveals the economic trap Congress set for the USPS in 2006 when it required the agency to prefund those benefits.

The Postal Accountability and Enhancement Act (PAEA) passed in 2006 required annual payments of about $5.6 billion for 10 years to 100% prefund future retiree healthcare. From FY 2006 through FY 2012, the Postal Service borrowed $15 billion from the Treasury (the maximum it is allowed to borrow,) while it paid $21 billion to the Health Benefits Fund. In the words of the OIG: “The 15 billion debt to the Treasury is a direct result of the prefunding mandate and has significantly added to the Postal Service’s financial crisis.”

This report echoes a conclusion from the Economic Policy Institute in 2013. The EPI said then: “However, the Postal Accountability and Enhancement Act of 2006 imposed a burden on USPS that is imposed on no other corporation (and no other federal government agency)” a financially disastrous obligation to prefund its retiree health benefits on a ten-year schedule. Over the past six years, beginning in 2007 and through September 30, 2013, USPS as had to set aside $46 billion to pay for the future retiree health benefits (United States Postal Regulatory Commission 2013 – – money that would otherwise have been available to invest in training and new equipment, new technologies, better marketing, or to meet the bottom line.