Upon OMB’s recommendation, Congress passed the Postal Pension Reform Act in 2003, a bill that among other things shifted the liabilities for veterans’ pensions from the Defense Department to the USPS to cover up a budget deficit. Then, with the PAEA’s enactment in 2006, they transferred that liability back to the DoD, but included the past cost of the veterans’ pensions in the calculation for the annual payments for the $51.8 billion retiree health benefits fund that PAEA mandated.
This complicated accounting allowed federal budget officials to continue to avoid the increased federal deficit that would have resulted by simply returning pension overpayments to USPS.
From this point until today, USPS could no longer fund the cost of retiree post-retirement health care on an annual basis, as other federal government agencies continue to do.
PAEA mandated that over the 10-year period, from 2007 to 2016, USPS was to make payments into the newly-established reserve fund with a cumulative value of $51.8 billion in 2016. The target amount for those reserves was not established by actuaries based on expected future costs, but rather by politicians seeking to correct an earlier actuarial error while avoiding a federal budget problem.
This tangled mess of political maneuvering has now blown up into a manufactured crisis that is threatening American workers and the future of a beloved public institution. We should be expanding and growing our United States Postal Service, not tearing it down to prep it for privatization.
A pending bill with bipartisan support (H.R. 2382) would eliminate the prefunding mandate. Congress should finally act to fix their manufactured postal crisis.