Funding Retiree Health Benefits

One option is to reduce a certain requirement that Congress has placed on the Postal Service related to its retiree health benefits program. This option has stimulated quite a lot of attention and debate because if Congress were to remove or modify this requirement this would substantially lessen the pressure on the Postal Service’s finances. So we will address it first.

Here is the controversy. For many years the Postal Service paid for the current health insurance costs of employees and people who previously worked for the postal service and are now retired.

In 2006, Congress made a new requirement that the Postal Service also make payments into a fund to cover 100% of:

• the projected future health insurance costs of all current retirees
• the projected future health insurance costs of all current workers for when they retire.

These required payments were, on average, $5.5 billion per year over ten years.

For the first few years the Postal Service was able to make these payments so that the fund reached the level of covering approximately 50% of those projected future costs.

However, with the economic downturn and the other financial problems the Postal Service encountered, the Postmaster General said it did not have the funds to keep making these payments. Thus, it missed several payments and is now $16.7 billion in arrears.

The Postmaster General has requested that the law be changed so that the Postal Service is not required to make further payments to the fund.

So the proposal for you to now consider is for Congress to change the law and either end or reduce the requirement for making these pre-payments for projected future retirement health benefits.