A 2007 union newsletter upends the claim that the 2006 Post Office reform law was the work of USPS-haters. Published by Jane the Actuary View all posts by Jane the Actuary
9 thoughts on “Forbes post, “Post Office Pensions Update: Playing A Game Of Historical Revisionism””
The post office has multiple unions which file many frivolous grievances. These cost the post office large amounts of money. They can not fire bad employees because the union will just get reinstate them. Employees can not cross crafts. Many employees can often be seen standing around while there is a lot of work to do in another craft.
Few are like that most are genuine complaints and I assure you people who are lazy do not last at USPS. Having worked in other places of Government the USPS has the hardest working and most dedicated people outside of maybe the Military. As someone who was in the Military there is far more dead weight there both people wise and equipment wise than USPS.
They cross crafts constantly, saying it’s cheaper to pay out the grievances than to hire. Been a clerk for 30 years, with overtime and grievances, I make a killing…….
This has got to be the biggest load of BS ever written. Is this CNN? The Post Office was making a profit until the Republican lead Congress forced them to prefund retirement for 70 years. Name one other Government Agency that does that?
This is a blatant attempt to sell it off / privatize at the cost to the American Public of higher rates and less service. Ironically this is the only Agency allowed in the US Constitution but I am sure that also has slipped the writers mind.
As a 1979 thru 2016 USPS employee my perspective is based in long term knowledge from a worker’s view. My understanding is that 25 % of postal employees are managerial positions. In what private business does such a ratio exist ? Government bureaucrats at their best. Rural offices in the thousands, that cost hundreds of d ollars per day to operate that bring in a fraction of those costs
You do realize that if the years of 5 billion plus per year payments were given back (yes, it was paid for more than 10 years out of USPS coffers) to postal operations, the immediate mess is solved.
The only laws Congress has managed to pass in USPS terms in the last 10 years was to name post offices….
Allow the USPS to compete…the usps has been profitaby managed to cover the last mile market for years.
If you take the time to look , the USPS minus this paea act costs has been profitable for all but 1 (one) year in all this time for the USPS.
Why put a PMG in place who has 30 million plus privately invested in USPS competition unless you are attempting to gut the USPS for stock holders of the competition?
You do realize that USPS employees are payed comparibly to their competitors….did you look?
Easier to blame the unions, huh?
Regarding this story, “Post Office Pensions Update: Playing A Game Of Historical Revisionism,” I would like to know if this in any way affects CSRS who have more than 41 years 11 months where retirement contributions at that point are accrued in a separate account and paid in a lump sum, tax free, at retirement?
I wish you would have checked with the NALC before characterizing our views on the PAEA.
The story is a lot more complicated. The union choose not to oppose the bill after 12 years of debate/work at the strong urging of its bipartisan authors, despite the unfair prefunding mandate. Two things made that possible: the inclusion of a provision allowing the Postal Service to raise rates one more time before the CPI-price cap went into effect, which would have allowed the Postal Service to build the cost of the prefunding mandate into baseline rates; and the inclusion provisions related to the Postal Service’s pension liabilities — a measure to challenge/audit actuarial methods used by OPM that shift taxpayer pension costs to the Postal Service for pre-1970 service and a provision to automatically transfer pension surpluses (which would be revealed by a proper audit) to the new Retiree Health Benefit Fund.
Sadly, because of mailer opposition, the Postal Service decided not to use its one-time chance to build the cost of the prefunding mandate into baseline rates in 2007, when the economy faltered as the housing market began to collapse. Worse, once the audit revealed a huge surplus in the Postal Service’s CSRS pension account, the newly GOP-controlled Congress blocked a bill (that had 230 House co-sponsors) in 2011 that would have implemented the audit’s findings. That surplus, between $80 and $111 billion according to the most recent analysis by the Postal Service’s Inspector General, would fully fund future retiree health liabilities. See https://www.uspsoig.gov/sites/default/files/document-library-files/2019/RARC-WP-18-009.pdf. If the audit’s recommendations had been implemented, the Postal Service would have recorded profits for the next six years instead of losses.
We are not engaged in a game of “historical revisionism” when we call for repeal of the mandate. We are reacting to policy failures that have crippled the Postal Service. The prefunding mandate was supposed to be built into baseline rates and we expected a CSRS surplus to significantly reduce the burden. Neither happened — and, of course, nobody expected the perfect storm that hit us with the Great Recession. In short, the PAEA did not work out the way most stakeholders expected, and our sclerotic Congress can’t seem take remedial action.
It is not fair to answer “no” to your own question: “Was the requirement to advance-fund retiree medical simply one small concession in a larger bill which achieved union priorities?” In fact, we did have larger priorities, which were achieved — we preserved the public ownership of the USPS, prevented deregulation and preserved our collective bargaining rights. All these key policies were challenged by the Bush administration in the years before the PAEA was adopted.
Finally, there were two (I am sure honest) mistakes in your piece that should be corrected.
“Regular readers will recall that at the time I explained that the retiree healthcare prefunding requirement of the 2006 Postal Accountability and Enhancement Act, despite the enmity so many USPS supporters harbor towards it now, was entirely reasonable at the time, that it may indeed have been appropriate for Congress to cut them some slack when they began to struggle, but that it’s a nonissue now because that contribution schedule is in the past.”
It is not a “non-issue” because the prefunding mandate is still in effect — yes the 10-year schedule of fixed payments ended, but the law still requires the Postal Service to prefund future retiree health benefits in a way no other employer is required. Under the PAEA, starting in 2017, the USPS is required to record a “normal cost” expense for future retiree health premiums and it must amortize any “unfunded” liability for such premiums. Those expenses (averaging $4.5 billion annually since 2017) have continued to drive USPS financial losses. And since the Postal Service is forced by law to invest all its retirement funds (including the Retiree Health Fund) in low-yielding Treasury bonds (a good deal for Uncle Sam, but not for the Postal Service), the unfunded liabilities will continue growing forever.
Also, you wrote:
“What’s this mean? Previously, the Post Office had been required to include in its costs pension accruals of veterans for the time during which they had served in the military; they were relieved of this obligation, used the freed-up cash to fund retiree healthcare, and everyone thought it was a win.”
This is incorrect. The actuarial review we wanted and that was put into the bill had nothing to do with pension costs for prior military service (which were properly returned to the responsibility of the Treasury). It had to do with the issue mentioned above — the pension costs related to pre-1970 service (before the USPS was created as a self-funded independent agency) that are rightly the responsibility of taxpayers, not postage rate payers.
One final point. None of the foregoing is relevant to the current debate on helping the Postal Service survive the pandemic. A lot of folks are using the Postal Service pre-pandemic financial problems as an excuse not to help the agency now. That makes no sense. Once the pandemic is over, we can return to the issue of postal reform. Now, it’s most important to preserve this vital public institution.
I hope you keep covering the Postal Service story. I would love it if you would use your expertise to educate your readers on these complicated financial issues, and I would welcome the chance to discuss our views on ways to solve the Postal Service’s financial problems. I will ask our media and communications director to reach out to you.
Hi, Jim –
Thanks for your comment.
A couple points:
All private-sector companies with retiree healthcare benefits must record the accrual/normal cost for those plans as a part of their expense. This is not a particular burden placed on the Post Office – and this mandate, FAS 106, is what triggered the elimination of these benefits by private-sector companies. In any case, were the USPS to shift to recording its cash expense for paying those benefits, the actual sums would be roughly the same — see https://www.forbes.com/sites/ebauer/2020/04/14/post-office-pensions–some-key-myths-and-facts/#f19545247f5d.
It is true that investing in Treasuries lowers returns, in ordinary circumstances by something under a full percentage point relative to the corporate bonds that are the basis of accounting liabilities. (See https://fred.stlouisfed.org/series/AAA10Y.) In circumstances in which the government keeps government bonds artificially low, the spread is higher, and I would certainly agree that this is a justifiable complaint.
As to the larger issues the Post Office faces at the moment, I can’t really comment. Literally, I can’t comment, via my platform at Forbes, because the terms of my writing on that platform are that I restrict myself to issues related to retirement; hence, I’ve deliberately avoided questions related to USPS rate-setting and overall business model.