[lotsofpulp]

USPS was simply required to fund accrued post employment benefit obligations, something that all non governmental entities have to do.

The reason governments can offer ridiculous post employment benefit obligations, such as above average defined benefit pensions and retiree healthcare, is that the laws governing funding for these benefits only applies to non governmental entities.

Not a surprise that politicians exempted governments from the same funding rules, opting instead to kick the can down onto future taxpayers and opt for offering voters lower taxes now. The real question is why only the USPS was asked to fund accrued benefits, and not every single other governmental entity in the US.

[ceejayoz]

https://about.usps.com/who-we-are/financials/annual-reports/...

> Unlike any other public or private entity, under a 2006 law, the U.S. Postal Service must pre-fund retiree health benefits.

[lotsofpulp]

This claim by USPS seems false:

>Other federal agencies and most private sector companies use a “pay-as-you-go” system, by which the entity pays premiums as they are billed.

There are very strict rules about how non governmental employers have to calculate deferred compensation liabilities, and how much funding they have to have. The relevant laws are ERISA 1974 and PPA 2006. Once the deferred compensation is accrued, the employer must value the liabilities using certain yield curves for high grade corporate bonds and maintain certain funding levels. It is why private employers stopped offering pensions, it is exorbitantly expensive if you properly account for it, especially with increasing lifespans.

I do not know what USPS means when it says "pre-fund", but the text of the USPS funding law is here in section 802. To me, it indicates that money needs to be set aside for accrued benefits (from the wording "future payments required"). I also do not know if USPS is true in its claims that non government entities do not have to fund retiree healthcare benefits. I am pretty sure it would be covered by ERISA and PPA 2006, just like defined benefit pensions are, OR retiree healthcare benefits are not protected by law and if a company wants to stop paying them, they can.

https://www.congress.gov/bill/109th-congress/house-bill/6407...

>`(d)(1) Not later than June 30, 2007, and by June 30 of each succeeding year, the Office shall compute the net present value of the future payments required under section 8906(g)(2)(A) and attributable to the service of Postal Service employees during the most recently ended fiscal year.

Section section 8906(g)(2)(A) is:

https://www.law.cornell.edu/uscode/text/5/8906

>(A) The Government contributions authorized by this section for health benefits for an individual who first becomes an annuitant by reason of retirement from employment with the United States Postal Service on or after July 1, 1971, or for a survivor of such an individual or of an individual who died on or after July 1, 1971, while employed by the United States Postal Service, shall through September 30, 2016, be paid by the United States Postal Service, and thereafter shall be paid first from the Postal Service Retiree Health Benefits Fund up to the amount contained in the Fund, with any remaining amount paid by the United States Postal Service.

[ceejayoz]

The GAO's report on the law (https://www.gao.gov/assets/gao-13-112.pdf) has details.

> Rather, pursuant to OPM’s methodology, such payments would be projected to fund the liability over a period in excess of 50 years, from 2007 through 2056 and beyond (with rolling 15-year amortization periods after 2041). However, the payments required by PAEA were significantly “frontloaded,” with the fixed payment amounts in the first 10 years exceeding what actuarially determined amounts would have been using a 50-year amortization schedule.

> We also reviewed the prefunding requirements for other organizations that offer retiree health benefits to their employees: private sector entities, state and local governments, and other federal entities. Although other federal, state and local, and private sector entities generally are not required to prefund retiree health care benefits, a few do prefund at limited percentages of their total liability.

> For example, Standard & Poor’s (S&P) reported that 126 of the 296 companies in the S&P 500 that offered “other post-employment benefits” (OPEB)64 prefunded some percentage of the associated liabilities, while the USPS OIG has reported that 38 percent of Fortune 1000 companies that offer retiree health care benefits prefund them, at a median funding level of 37 percent.

[lotsofpulp]

Seems I was wrong about funding for retiree healthcare benefits. But I wonder if there is no funding rules for it because they are not a legally protected benefit like DB pensions.

I would agree that politicians did try to handicap USPS probably to benefit UPS/FedEx. I would also say every entity, government or non government, should be required to fund future promises today, otherwise it should be listed as debt on the balance sheet.

Deferred compensation is used too easily to shift costs from today into the future and keep those costs off the books, either by not accounting for them at all or undervaluing them.