The latest report (pdf) from the Postal Service’s inspector general looks at the payment schedule for the retiree health care trust fund. It concludes that the Postal Service is overpaying. A lot.
If the Postal Service continues the payment schedule required by the Postal Accountability and Enhancement Act of 2006 (the Act), our calculations indicate that the Postal Service could overfund its retiree health care liability by $13.2 billion by the end of fiscal year 2016. The Postal Service could pay on average $4.0 billion less each year from FYs 2009 to 2016 to prefund its retiree health benefits and still achieve the same level of funding anticipated under OPM’s assumptions.
The problem, according to the IG, is that the PAEA estimates 7 percent annual inflation for health care costs; most Fortune 500 companies project 5 percent inflation.
This is a huge mistake. Consider the numbers for this year alone. The Postal Service is scheduled to pay $5.4 billion into the trust fund; it has already made half that payment, with the other half due by September 30. But the IG report says the Postal Service should only need to pay $1.6 billion — a difference of $3.8 billion, or more than half the Postal Service’s deficit for the year.
The Postal Service can’t just decide to pay the reduced amount, of course; Congress would have to amend the PAEA. But this IG report gives added weight to the Postal Service’s claim that the trust fund payments are an unfair burden.