The money set aside for the Postal Service Retiree Health Benefits Fund will run out by 2030 if the U.S. Postal Service fails to keep making payments to the fund, according to a Government Accountability Office report publicly released Oct. 1.

As of fiscal year 2017, the agency is behind by $38.2 billion in required payments to the fund, but USPS has said that its current financial outlook has made filing those payments unaffordable.

And USPS finances aren’t projected to get any better. For more than a decade the agency has experienced large operating costs, while finding few ways to increase revenue or cut costs, according to the report.

“If the fund becomes depleted, USPS would be required by law to make the payments necessary to cover its share of health benefits premiums for current postal retirees. Current law does not address what would happen if the fund becomes depleted and USPS does not make payments to cover those premiums,” the report said.

“Depletion of the fund could affect postal retirees as well as USPS, customers and other stakeholders, including the federal government. About 500,000 postal retirees receive health benefits and [the Office of Personnel Management] expects that number to remain about the same through 2035.”

According to the report, even if USPS added $1 billion to the fund every year from now on, the lifespan of the fund would only increase by a couple years, and it would only last until 2035 if the agency added $2 billion per year.

Congress has attempted to remedy the depleting retiree benefit fund through bipartisan legislation that would require USPS retirees to enroll in Medicare alongside their usual benefits.

The bill has received mixed reactions, as some groups applauded the bill’s intent to provide financial relief to the agency, while others claimed that the bill balanced the budget on the backs of government employees.

In addition to the Medicare enrollment requirement, GAO offered seven other options for addressing the insolvency of the retiree health benefits fund:

  1. Supplemental federal appropriations — Once the fund is depleted, Congress could provide USPS with additional appropriations, which would likely increase the federal deficit and become inconsistent with USPS’s status as a self-financing agency.
  2. Reduce eligibility — The agency could make new hires ineligible for retiree health benefits or reduce eligibility for the fund in some other way that would cut down on the obligated payments for the agency.
  3. Increase retiree and employee premiums — Employees and retirees could be asked to pay for a larger percentage of their premiums or pay for their retiree health benefits before retirement.
  4. Change federal contributions to a fixed subsidy — Health benefits could be moved to a defined contribution structure that would include a fixed amount subsidizing health benefits. The subsidy may or may not keep up with actual costs.
  5. Establish a non-federal voluntary employees’ beneficiary association — The VEBA would be located outside the federal government, and its governing board would determine what benefits would be provided to retirees and employees through either initial contribution from the Retiree Health Benefit Fund or the Treasury.
  6. Reduce the required level of prefunding — Legislation could alleviate the current USPS responsibility for prefunding health costs at 100 percent, thereby reducing the agency’s burden but increasing the risk that it would not be able to pay future costs.
  7. Outside investment — Legislation could move 25 percent of the fund’s assets to be invested in outside securities, increasing the chance for return on investment but also increasing the risk of losses in a stock market downturn.

The report recommended that Congress pass legislation to change the USPS retiree health benefits system in some way that would put funding on more stable footing.

USPS agreed that congressional action would be needed to address the problems with the current health benefits fund.

About Jessie Bur

Jessie Bur covers federal IT and management.

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