If they didn't have to prepay pensions (something no other government agency, or private company in the world is required to do, or does), they'd be in great shape.
"The confusion over 75 years may be due to an "accounting" and not an "actuarial or funding" issue. They only have to fund the future liability of their current or former workforce.
1. Pre-fund the pensions of employees who aren't born yet
OR
2. Stop offering the pension before they hire the people who haven't been born yet
Some companies chose to do 2, but without an act of congress the USPS is locked into option #1. This is tautological for any long lived pension plan. It will eventually serve people who haven't been born yet. I don't see why people are so surprised by it.
> If you're promising it, you should book the expense's present discounted value.
Your argument proves way too much. There is no "promise" here. To whom is the commitment made? The beneficiaries of such pensions do not even exist at this time. The most you can say is that there is an expected future expense. But if your claim is that an entity should be presently setting aside money for all anticipatable expenses, no matter how far in the future, then I think you'll find very few CFOs to agree with you.
It is absolutely standard for corporations to be required to fund their pensions, and to include liabilities on their balance sheet that aren't due for 80 years (in what few cases those actually happen in). Edit: Do you know of a rule whereby e.g. such bonds can be left off the balance sheet? I don't.
If other federal agencies (which are different in many other ways) aren't required to fund pensions, they should be -- I agree.
>Your argument proves way too much. There is no "promise" here. To whom is the commitment made?
The workers, to provide pensions for their dependents.
>The most you can say is that there is an expected future expense. But if your claim is that an entity should be presently setting aside money for all anticipatable expenses, no matter how far in the future, then I think you'll find very few CFOs to agree with you.
It's not an "anticipatable" expense, it's one that you have specifically committed to as compensation for labor, every bit as "anticipatable" as having to make this month's payroll. Do you know a CFO that thinks it's fine not to have allocated money for that?
I can't know the state of mind of any CFO. What can I do is look at the record and find companies that have failed allocate money for that. There's no shortage of them in the USA.
This is from 2003, but is fairly indicative of the games played:
https://www.abi.org/abi-journal/underfunded-pension-plans-a-...
Here's a 2017 summary of state public pension funds
https://taxfoundation.org/state-public-pension-plan-funding-...
Here's some 2019 reporting on corporate pension shortfall and congressional efforts (!) to help mitigate the damage to individual pensioners:
https://www.cnbc.com/2019/07/12/these-pension-plans-are-at-r...
So regardless of whether or not it is "absolutely standard for corporations to be required to fund their pensions" (and I don't believe that it is anywhere near as standard or required as you portray it), the facts on the ground are that there are many, many pension funds that are underfunded by many different metrics.
I can also look at the record of corporate bankruptcy proceedings, and note how the obligations towards pensions are handled in comparison with those towards other types of debtors. TLDR: not well.
Finally, there is no specific committment by corporations to pay into a pension fund, only to pay out. They are at liberty to play whatever games they want regarding paying in. The simplest is to declare assumptions about future revenue, and pay in less (or nothing) in the present.
>I can also look at the record of corporate bankruptcy proceedings, and note how the obligations towards pensions are handled in comparison with those towards other types of debtors. TLDR: not well.
Well, yes, that's a reason to require the pensions to be funded (at present discounted value), as the benefits are accrued -- why are you bringing this up to oppose that requirement on the USPS, except to condemn those workers to that possible fate?
>Finally, there is no specific committment by corporations to pay into a pension fund, only to pay out. They are at liberty to play whatever games they want regarding paying in.
This is false; among other places, see the Forbes overview. Many reforms have been enacted and the PBGC has requirements. This isn't the 50s anymore.
https://www.forbes.com/sites/ebauer/2020/04/14/post-office-p...
But there are bunch of games corporations can play to reduce or avoid minimum contributions. Principle among them is to fund too much of the plan via contributions of the company's own stock (limited in scope but large enough to underfund the plan). If the underfunding is limited to 90% of the fund's liabilities, it can take 3 years before an increase in funding is required.
But rather than focus on the rules, I prefer to look at the actual on-the-ground situation. Many corporate DB plans are underfunded. It's not enough to say "the rules say they must fund liabilities as they are accrued" when many corporations demonstrably fail to do this.
Anyway, most people recognize that corporate DB plans are more or less over, so the comparison between corporate pension provisioning and public versions is going to get less and less relevant (probably).
That's…not true? https://www.forbes.com/sites/ebauer/2020/04/14/post-office-p...
The issue for the postal service is that the law was changed so that the USPS would start funding their retirement health care costs since they are promised to the workers and the projected costs had exploded. This was supported by a bipartisan commission, the GAO, and the Postal Service itself:
>...Although retiree health benefits are often unfunded or poorly funded, two considerations suggested the Service’s retiree health care obligations should be funded: they are as firm a commitment as the Service’s pensions, and they had become enormous (about $75 billion by 2006). In 2003, the presidential commission suggested establishing a reserve fund for these obligations, and the Postal Service itself sent Congress a proposal for creating such a fund.
>Prior to 2006, the Service simply paid retirees’ health benefit premiums when they came due. The Service put aside no money when it promised the future benefits. Paying benefits when they come due rather than funding them in advance is known as the pay-as-you-go or unfunded approach.
>Early this century, Congress, the Administration, the U.S. General Accounting Office (GAO), and a bipartisan presidential commission expressed concern about the lack of funding. Although retiree health benefits are often unfunded or poorly funded, two considerations suggested the Service’s retiree health care obligations should be funded: they are as firm a commitment as the Service’s pensions, and they had become enormous (about $75 billion by 2006). In 2003, the presidential commission suggested establishing a reserve fund for these obligations, and the Postal Service itself sent Congress a proposal for creating such a fund.
>In 2002-2003, it was discovered that the Service was contributing far more than necessary to fully fund its pensions, and Congress allowed the Service to contribute less. Congress decided the pension “savings” could help patch the retiree health benefit underfunding. In 2006, as part of the Postal Accountability and Enhancement Act (PAEA), the Postal Service Retirement Health Benefits Fund (RHBF) was established. Most of the Service’s contributions to the new fund could be paid using the pension “savings.” PAEA was bipartisan legislation with broad support.
https://taxfoundation.org/postal-service-reform-postal-servi...
>...If they didn't have to prepay pensions (something no other government agency, or private company in the world is required to do, or does), they'd be in great shape.
In relation to this, the USPS has posted this as part of a fact sheet:
>...More recently, the USPS Fairness Act was passed by the House. It would eliminate the requirement to prefund retiree health benefits and forgive our current defaulted prefunding payments. However, ultimate passage of the bill will not reduce our underlying retiree health benefits liability, nor improve our cash flow or long-term financial position.
https://about.usps.com/news/delivers-facts/usps-delivers-the...
I haven't seen evidence of this, in fact I think it's just coming back to the lack of funding. USPS is a bit of a dead-end job due to how limited its lifespan is (continued calls to defund it from the right) and in its current state it isn't really attracting talent. If the US cared about its post service it could be revived and greatly improved.
Also, just FYI, you folks have it great. I'm a US expat in Canada and CanadaPost is comparatively terrible - it's slow, expensive, and most package delivery happens through the third party companies (like FedEx, UPS, Purolator, DHL whatnot) which are absolute trash up here - without USPS constantly raising the bar the independent delivery services routinely lie about delivery attempts, refuse to deliver to addresses and re-route packages miles away when they have offices down the street.
Since moving up to Canada I've been pretty wowed by the healthcare, but the mail system up here is terrible. I think there are some intensely dedicated souls in USPS still that have managed to keep everything going on their shoestring budget, but they're eventually going to retire and the defunding will probably be capped with USPS being privatized for "costing the tax payers money".
It's okay though - delivery service in DC will be great. And USPS will be the latest example of "failed socialism" and held up as the Dems mismanaging budgets.
I agree with this, and this attention needs to come in more ways than extra $$. As others said, USPS is stuck in a weird state: need to be self-funded with no authority to set prices. So the gov't needs to either subsidize some things or let USPS compete.
However, to fix USPS some of that attention needs to come in the form of hard kicks and forced reorgs. USPS is a dinosaur with a lot of inertia against improving efficiency and modernization. That causes problems, costs a lot of money and drives customers away. USPS is also notorious for advocating for spam senders (who give USPS a lot of revenue) and against people they are supposed to serve. Those are all problems that external "attention" should resolve.
As an anecdata, I was occasionally involved with field testing campaigns which include significant shipping for next day delivery a couple of thousand miles away (something would break or some new hardware would be needed and will be shipped from home ASAP). This provides a non-insignificant revenue to the shipper. We tried USPS, but it just did not work. With FedEx we get accurate, near real time package tracking, so the minute the package is dumped at our hotel we see it and someone can drive out and pick it up. With USPS, their system was showing delivery at the end of the following day. Maybe something changed in the last few years, but I doubt it.