Alexandria, Va. – In advance of a House of Representatives’ vote on the United States Postal Service (USPS) Fairness Act, H.R. 2382, legislation to repeal the unprecedented 2006 mandate that the USPS prefund its future retiree health benefits, NARFE National President Ken Thomas issued the following statement:

“For too many years, the United States Postal Service has been operating under an unprecedented, unnecessary and unfair prefunding mandate that only serves to steer cost-cutting strategies, prohibit investments and limit options for legislative reforms. In fact, rather than protecting health benefits, the prefund requirement for future retirees has led to legislative proposals that threatened the benefits of current retirees.

“H.R. 2382 will not solve all of USPS’ financial problems, but it does provide a common sense first step by rescinding an unreasonable mandate and providing breathing room for future reforms. I urge members of the House to pass the legislation.”

Background

The Postal Accountability and Enhancement Act (PAEA) of 2006 mandated annual prefunding payments by USPS into the Retiree Health Benefits Fund (RHBF) over a 10-year budget window from fiscal years 2007-2016, which ranged from $5.4 to $5.8 billion. Congress designed this scheme to allow USPS a refund for $27 billion in overpayments for its share of former veterans’ retirement benefits without creating a budget cost for the bill.

USPS has not made a prefunding payment to the U.S. Treasury since 2010. At the end of the 10-year payment schedule in 2016, the Office of Personnel Management (OPM) revalued the RHBF unfunded liability to $56.9 billion and assessed an annual amortization payments (estimated to be nearly $1 billion annually) through fiscal year 2056 to cover the unfunded liability.  USPS continues to default on mandatory health and retirement payments even with the 10-year budget window closed.

Although USPS has not made these payments, the liability remains current on its balance sheet. This liability and the continued amortization payments are driving cost-cutting strategies at USPS, prohibiting investments that could expand business and save money over the long term and driving the conversation regarding mandatory Medicare coverage.

No other federal agency or private-sector company fully prefunds its retiree health benefits.

NARFE National President Ken Thomas sent a letter to House of Representatives urging passage of the USPS Fairness Act, H.R. 2382. You can access the letter here.