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By Willoughby Mariano November 11, 2011

Bishop signs letter saying post office faces big pension burden

U.S. Postal Service leaders warn dire budget problems might force them to close offices and lay off 220,000 workers to keep from shutting down completely.

But as ugly as the agency’s $9 billion deficit seems, lawmakers could do one simple thing to help stanch the bleeding, the postmaster general argues. Change laws that make the post office pay for retiree benefits years before the bills come due.  

Recently, U.S. Rep. Sanford Bishop, an Albany Democrat, signed a letter with 81 other members of Congress that echoed this argument.

"The Postal Service would still have positive net revenue today except for the requirement that it prefund 100% of employee retirement and retirement health costs, a requirement that Congress imposed on it in 2006," it said.

"No other public or private business in America faces this onerous and unnecessary requirement, and Congress could give the Postal Service breathing room to recalibrate its business model simply by repealing this retirement prefunding requirement," it continued.

Our sister site PolitiFact National has already written about whether the post office’s financial losses would be solved by changing pension laws.  

What drew PolitiFact Georgia’s attention is the letter’s suggestion that the Postal Service is being singled out unfairly. Is it true that no other public or private business in America must prefund 100 percent of the costs of its retiree pension and health care benefits?

Before we address this question, we should note that the USPS is a unique government organization. It’s a part of the executive branch, but unlike a typical federal employer, it can go belly up.   

And unlike with a typical business, Congress can pass laws that directly dictate how the Postal Service spends billions of dollars.

One of these is the Postal Accountability and Enhancement Act of 2006. It requires the Postal Service to do what’s called "prefund" 100 percent of the health benefits for its future retirees.  The cost: About $5 billion a year until 2017.  

This is how it works. Each year, the federal government estimates how much Postal Service employees earned in pension and health retirement benefits and calculates what the USPS needs to save to pay these bills in the future. By law, the USPS has to store that money in a trust fund.

The federal Office of Personnel Management, which oversees pensions for federal workers, acknowledged in a Feb. 28 study that among federal employers, the retiree health benefit funding rule is unique to the post office.

They also said it’s essential. The USPS could go out of business, sticking the federal government with a bill it cannot pay. This could force the entire federal retiree health program to go broke, the OPM report argued.   

Now, let’s look at Bishop’s claim.

Federal employers:

Under the current retirement system, all federal employers, including the Postal Service, must prefund their pension benefits. And as we explained earlier, the USPS does have unique health benefit funding rules.

It’s therefore accurate that under the current retirement system, no federal employer aside from the Postal Service must prefund 100 percent of both its retiree health and pension benefits.

State and local governments:

No federal or state rules require state or local governments to fully fund pension or health benefits, said Keith Brainard, director of research for the National Association of State Retirement Administrators.

None of the experts we interviewed had heard of cities, towns or counties with health prefunding requirements.

Private industry:

By federal law, private companies must fund their pensions fully, and catch up over time if they fall behind. They don’t have to prefund retiree health benefits.

This means there’s no reason to go postal over the claim by Bishop and others that "no other public or private business in America" except for the USPS must fund 100 percent of employee pension and retirement health costs in advance.

By and large, this statement fits the evidence.

We do take some issue with the claim’s broader point, which is that the retirement funding requirement unfairly singles out the post office. As we noted above, the office that manages federal retiree benefits argues the arrangement could keep the entire federal health benefit fund from going broke.

With this dispute in mind, we rule Bishop’s statement Mostly True.

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Our Sources

Website, U.S. Rep. Gerald Connolly, Letter to Postal Regulatory Commission Chairwoman Ruth Goldway, Sept. 15, 2011

PolitiFact, "Ad from Save America's Postal Service claims rule from Congress is causing USPS's financial problems," Sept. 29, 2011

U.S. Office of Personnel Management, Office of the Inspector General, "A Study of the Risks and Consequences of the USPS OIG's Proposals to Change USPS's Funding of Retiree Benefits," Feb. 28, 2011

Congressional Research Service, The U.S. Postal Service’s Financial Condition: Overview and Issues for Congress, January 19, 2010

United States Postal Service, "Postal Service on the Brink of Default," Sept. 6, 2011

Congressional Budget Office Cost Estimate, Postal Service Retiree Health Benefits Funding Reform Act of 2009, Sept. 14, 2009

Congressional Research Service, Federal Employees’ Retirement System:
Benefits and Financing, Jan. 5, 2011

Congressional Research Service, "The Postal Accountability and Enhancement Act," Jan. 22, 2007

United States Postal Service, "Postmaster General/CEO Patrick R. Donahoe Before the Committee on Homeland Security and Governmental Affairs," Sept. 6, 2011

Congressional Research Service, Memorandum to House Oversight and Government Reform Committee, USPS Funding and Accounting Issues for Retiree Health Benefits, Oct. 12, 2011

Federal Times, "Fed pensions underfunded by $673B," Oct. 16, 2011

United States Postal Service, workplace optimization discussion draft, accessed Nov. 8, 2011

Telephone Interview, David C. John, senior research fellow, Heritage Foundation, Oct. 27, 2011

Telephone interview, Keith Brainard, research director, National Association of State Retirement Administrators, Nov. 4, 2011

Email interview, Paul Fronstin, director, Health Research & Education Program,
Employee Benefit Research Institute, Nov. 8, 2011

Email interview, Andrew D. Eschtruth, associate director for External Relations, Center for Retirement Research at Boston College, Nov. 4, 2011

Email interview, Micah Ragland, spokesman, U.S. Rep. Sanford Bishop, Oct. 28, 2011

Email interview, Philip Dine, spokesman, National Association of Letter Carriers, Oct. 26, 2011

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Bishop signs letter saying post office faces big pension burden

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