USPS IG: Prefunding Benefit Mandate Must Go

The United States Postal Service won’t be able to climb out of the red unless Congress nixes a law that forces the USPS to prefund its projected healthcare and pension liabilities, according to a recent USPS Office of Inspector General report.

According to the report, the USPS suffered “staggering” losses from fiscal years 2007 to 2014 — an eye-popping $51.7 billion in the red.

The IG lays some of the blame for the agency’s fiscal calamities on Congress, who enacted a law requiring the agency to prefund the projected liabilities of its healthcare and pension systems, which is estimated to be nearly $404 billion.

For example, according to FierceGovernment, the USPS is required to pay approximately $5.6 billion annually over 10 years to prefund its retiree healthcare plan.

In short, the IG’s office believes this mandate is ludicrous because “that estimate moves around and is based on assumptions that are highly uncertain and can frequently change over the life of the liability,” according to a column posted on the IG’s blog in February.

On the blog, they likened the mandate to a consumer having to pay in advance on a credit card they haven’t racked up charges on yet.

“What if your credit card company told you: ‘You will charge a million dollars on your credit card during your life; please enclose the million dollars in your next bill payment. It’s the responsible thing to do.’

“Doesn’t seem quite right, does it?”

The IG believes that mandating a 100 percent prefunding requirement on projected liabilities “risks unnecessarily damaging the Postal Service, inflating prices, and overfunding future liabilities.”

“In the past 8 years, the Postal Service’s financial condition has significantly worsened from making large prefunding payments for retiree health care. Postal Service customers were charged for increased postage, in part, because of these prefunding requirements,” according to the report.