USPS May Run Out of Money for Postal Retiree Health Care Funding

Oct 8, 2018


If Congress does not take action, the United States Postal Service will run out of money to pay for its retiree’s health care funding in 12 years. For the last 10 years, USPS has faced a requirement to prefund health care for future retirees. USPS has defaulted on many of those payments and the Government Accountability Office now describes the financial outlook of the Postal Service Retiree Health Benefits Fund as “poor”. About 500,000 retirees rely on this program and the current law has no contingency plan for what would happen if the agency runs out of money to pay for their care.

USPS has missed $38 billion in required prefunding payments into the retiree health fund since 2010. In 2017, the Office of Personnel Management began tapping the fund to pay for the USPS share of retirees’ health care and payments going out exceeded the interest the agency collected.

Even if the Postal Service were to make $1 billion or $2 billion annual payments into the fund, it would only extend the funds’ shelf life by 2 or 5 years, respectively. Once the health care fund is depleted, Postal employees would remain eligible to participate in FEHBP, but the agency would not be able to fund that participation on a “pay-as-you-go” basis. Now, the USPS has a separate benefit from the regular FEHB program called the Postal Service Health Benefit Program.

That would force Congress to decide how to fund the retirees’ care or make changes to their eligibility. One proposal by GAO was to shift it’s eligible retirees to Medicare as the primary health insurance program. That is the favored approach in Congress and among Postal unions. While the proposal would shift costs to the federal government, supporters said it would add little cost to Medicare expenditures while also saving the USPS.

The Postal Service could force retirees to pay a higher share of the share of their premiums. This strategy “could increase the challenge for retirees to ensure their accumulated resources last throughout retirement,” GAO said.

Other options GAO suggested include shifting Postal retires to a “voluntary employee benefits association” to administer the program outside the government confines or to pursue a more aggressive investment strategy for a retiree health care fund.

“Postal retires have provided a vital service to the nation and resolving a key aspect of their future situation warrants Congressional action,” auditors said. “Failure to address the poor financial outlook of the RHB Fund would pose serious consequences for these retirees as well as USPS, postal customers, and other stakeholders, including the federal government.”

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