Funding of Postal Retiree Health Benefits in the USPS Fairness Act (Section 102 of Postal Service Reform Act of 2022)

Funding of Postal Retiree Health Benefits in the USPS Fairness Act (Section 102 of Postal Service Reform Act of 2022)

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INSIGHTi

Funding of Postal Retiree Health Benefits in
the USPS Fairness Act (Section 102 of Postal
Service Reform Act of 2022)
February 11, 2022
The Postal Accountability and Enhancement Act of 2006 (PAEA; P.L. 109-435) required USPS to make
annual payments into the Postal Service Retiree Health Benefit Fund (RHBF) for 10 years (from FY2007
to FY2016). The PAEA also established a series of payments, starting in FY2017, to cover USPS’s
unfunded liability for retiree health costs through 2056. The intent of the prefunding requirement was to
protect future retiree benefits, recognizing that future postal revenues might be insufficient to cover them.
This Insight provides information on the status of these payments and describes changes to the RHBF that
the USPS Fairness Act (Section 102 of Postal Service Reform Act of 2022, H.R. 3076) would make. H.R.
3076 was reported out by the House Committee on Oversight and Government Reform in July 2021, and
passed by the House on February 8, 2022.
USPS Prefunding Payments
In FY2007, two deposits were made into the fund per the PAEA and the Postal Civil Service Retirement
System Funding Reform Act of 2003 (PCSRS; P.L. 108-18). First, the PAEA required the Office of
Personnel Management (OPM) to calculate USPS’s surplus contributions to the Civil Service Retirement
and Disability Fund and transfer the surplus into the RHBF. OPM determined USPS’s surplus was $17.1
billion and that amount was transferred to the RHBF. Additionally, per the PCSRS, USPS transferred
$2.958 billion into the RHBF from an existing USPS escrow account.
USPS has made four prefunding payments to the RHBF, which total $17.9 billion. USPS defaulted on the
remaining $33.9 billion in payments. USPS’s payments to the RHFB are listed in Table 1 below.
Table 1. Payments to the U.S. Postal Service Retiree Health Benefit Fund, FY2007–FY2016
(in billions of dollars)
Fiscal Year
Payments Made
Payments Missed
FY2007
$5.40
$0.00
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Fiscal Year
Payments Made
Payments Missed
FY2008
$5.60
$0.00
FY2009
$1.40
$0.00
FY2010
$5.50
$0.00
FY2011
$0.00
$0.00
FY2012
$0.00
$11.10
FY2013
$0.00
$5.60
FY2014
$0.00
$5.70
FY2015
$0.00
$5.70
FY2016
$0.00
$5.80
Source: USPS Annual 10-K Financial Reports.
Notes: FY2009 payment was reduced from $5.4 bil ion to $1.4 bil ion by statute (§164 of P.L. 111-68), and FY2011
payment was deferred by Congress until FY2012 (USPS 2015 10-K).
USPS’s contributions to the RHBF total $20.9 billion: $17.9 billion in prefunding payments and $2.98
billion transferred from its escrow account. Since FY2017, USPS has used the money in the RHBF to pay
its portion of retiree health benefit premiums. Before FY2017, USPS paid its portion of retiree health
benefit premium out of its general revenues. As of September 30, 2021, the balance in the fund was $39.1
billion. Annual balances in the RHBF are shown in Table 2 below. Balances reflect accrual of interest and
expenditures from the fund for retiree health premiums.
Table 2. Postal Service Retiree Health Benefit Fund Balances, FY2007-FY2021
(in billions of dollars)
Fiscal Year
Start Balance
End Balance
Change
FY2007
$0.0
$25.5
$25.5
FY2008
$25.5
$32.3
$6.8
FY2009
$32.3
$35.1
$2.8
FY2010
$35.1
$42.1
$7.0
FY2011
$42.1
$43.7
$1.6
FY2012
$43.7
$45.3
$1.6
FY2013
$45.3
$42.3
-$3.0
FY2014
$42.3
$48.5
$6.2
FY2015
$48.5
$45.2
-$3.3
FY2016
$45.2
$51.5
$6.3
FY2017
$51.5
$49.5
-$2.0
FY2018
$49.5
$47.1
-$2.4
FY2019
$47.1
$44.6
-$2.5
FY2020
$44.6
$41.9
-$2.7
FY2021
$41.9
$39.5
-$2.4
Source: Department of the Treasury, Financial Reports of the United States Government, FY2007-FY2021.

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Notes: FY2007 end balance reflects USPS’s $5.4 bil ion prefunding payment, $2.98 bil ion from escrow, and $17.1 bil ion
from CSRS.
Normal Cost and Amortization Payments
USPS’s prefunding payments concluded in FY2016. Under 5 U.S.C. 8909a(d)(2)(B), starting in FY2017,
USPS was required to make annual payments to cover the present net value of future retiree benefits
attributable to current employees. This payment is referred to as “normal costs.” Additionally, under 5
U.S.C. 8909a(d)(2)(B), USPS must make annual amortization payments to pay down the unfunded
liabilities for retiree health benefits.
Table 3. USPS Normal Cost and Amortization Payments for Retiree Health Benefits,
FY2017-FY2021
(in billions of dollars)
Fiscal Year
Normal Costs
Amortization
FY2017
$3.3
$1.0
FY2018
$3.7
$0.8
FY2019
$3.8
$0.8
FY2020
$3.9
$0.8
FY2021
$4.2
$0.9
Total
$18.9
$4.3
Source: USPS Annual 10-K Financial Reports.
Since FY2017, USPS has missed all of its RHBF normal cost and amortization payments, which total
$18.9 billion and $4.3 billion, respectively.
USPS Fairness Act
The USPS Fairness Act (Section 102 of H.R. 3076) would repeal U.S.C. §8909a(d), which requires USPS
to make the prefunding payments shown in Table 1 and the amortization and normal cost payments in
Table 3. This would eliminate USPS’s requirement to make $33.9 billion in defaulted prefunding
payments and $13.2 billion in defaulted payments for RHBF normal cost and amortization payments.
According to statements from USPS, repealing 5 U.S.C. §8909a(d) would remove the defaulted payments
from USPS’s financial balance sheet, but it would not entitle USPS to reimbursement of payments it
already made.
While the Fairness Act would repeal 5 U.S.C. §8909a(d), which governs USPS contributions into the
RHBF, it would not repeal 5 U.S.C. §8906, which governs payments from the RHBF. Under 5 U.S.C.
§8906(g)(2)(A), the fund may be used to pay USPS’s contributions for retiree health benefits (or for a
survivor of a retiree’s health benefits), but not premiums for current USPS employees. The Fairness Act
would allow USPS to continue using the RHBF to pay eligible retiree health premiums until the fund is
depleted. According to OPM estimates, the RHBF will be depleted by FY2030 unless USPS makes future
payments into the fund.
According to the Congressional Budget Office, since USPS is not expected to make any further
prefunding, normal cost, or amortization payments, repealing 5 U.S.C. §8909a(d) is not expected to have
any impact on spending.

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Section 101 of H.R. 3076 includes additional reforms intended to reduce USPS’s future retiree health
liability by requiring eligible postal retirees to enroll in Medicare as part of their health coverage.
Additionally, H.R. 3076 would establish a new mechanism for calculating USPS’s future payments into
the RHBF, based on the amount (if any) that its contributions for retiree health premiums paid from the
RHBF exceeded the estimated net claims costs of enrollees.

Author Information

Michelle D. Christensen

Analyst in Government Organization and Management

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