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?Well, that’s what the U.S. Postal Service’s requirement to prefund its long-term pension and healthcare liabilities is like. The Postal Service is required to pay the full estimate of its liabilities, currently estimated at nearly $404 billion, even as that estimate moves around and is based on assumptions that are highly uncertain and can frequently change over the life of the liability. Our recent white paper, Considerations in Structuring Estimated Liabilities, evaluates these assumptions and other considerations and shows the Postal Service is closer to being fully funded, or potentially overfunded, when certain assumptions are reasonably adjusted or considered.First, let’s look at current funding levels. The Postal Service has set-aside cash totals of more than $335 billion for its pensions and retiree healthcare, exceeding 83 percent of estimated future payouts.
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Its pension plans are nearly completely funded and its retiree healthcare liability is 50 percent funded – much better than the rest of the federal government. But getting to this well-funded position has been painful. The Postal Service’s $15 billion debt is a direct result of the mandate that it must pay about $5.6 billion a year for 10 years to prefund the retiree healthcare plan. This requirement has deprived the Postal Service of the opportunity to invest in capital projects and research and development.As things stand now, retiree healthcare, pensions, and workers’ compensation are unfunded by about $86.6 billion. But our paper says any discussion of unfunded liabilities should take into consideration assets that could be used to satisfy the liabilities, such as real estate. The Postal Service’s real estate assets have a net book value of $13.2 billion. But fair market value of these properties is estimated as high as $85 billion.
Neither is factored into the Postal Service’s ability to meet future liabilities.In addition, the liabilities are not exact or static amounts and they require certain assumptions, such as interest rates and demographic inputs, to estimate the future costs of these programs. For example, interest rates are at historic lows. Even slightly higher interest rate assumptions would reduce or eliminate the estimated liabilities.Our paper details how different assumptions and considerations would affect the liabilities. Basically, if the Postal Service’s real estate assets were considered and one other assumption adjusted, the long-term liabilities would be overfunded.Mandating 100 percent prefunding of future liabilities that are frequently changing and highly uncertain could unnecessarily damage the Postal Service, inflate prices, and overfund future liabilities.Share your thoughts on our paper. Do you agree or disagree with the overall premise of the paper or have additional insight to share?
I’m not sure if you’ve seen the movie Dunkirk or not, but this article reminds me of it. Both show a dire negative outlook without looking at the big picture. The movie Dunkirk shows the horrors on the beach, air, and ocean around the evacuation of Dunkirk, but fail to show its importance in the overall military strategy of the war, the ties to the evils of Nazi Germany, or how this successful retreat enabled the invasion of Normandy to be successful. The movie had no back story, and no context.Anytime someone outside the USPS discusses the financial situation of the Post Office their ignorance is clear as day, but I’m frequently amazed at how little managers within the organization understand and also show little knowledge of its history and context to the current financial situation.
I’m no genius but those who are afraid of privatization or a financial dissolve of the USPS have no idea what is going on.Thank you for explaining in layman’s terms the odd situation that the USPS faces, but I feel that even this article misses the mark. Although this article comes as close to research journalism as I’ve seen, (something the mainstream media has replaced with headline sensationalism.) It shows a dire outlook which lacks context of the overall strategy that appears to be at play.We really should be asking who lobbied congress for the Postal Accountability and Enhancement Act of 2006 and why? Is it really a good thing or not? The USPS is a quasi-government business that has many odd restrictions. Is the USPS allowed to generate a profit? How can an organization this large function with a no profit requirement? What happened to its profits prior to 2006?
If the USPS found a way to legally keep its profits is that good or bad? Since the financial loss is only on paper and only an unmet financial obligation to a legal prefunding requirement there really isn’t a loss at all.
If the USPS can continue to show a financial loss it can continue to improve business processes, limit increased labor expenses, and squeeze unproductive waste out of the organization. While the loss gains media headlines doesn’t it play into the overall strategy of reduction? How much of the legal prefunding requirement is able to be met each year, and if even a portion of that prefunding is met doesn’t that preserve congress from siphoning off the profits? With the current state of social security isn’t it a good thing to mandate savings when the end result is improved productivity, less waste, a sense of urgency, and management leverage over the labor force? The result is also retained “profits,” and future savings something that wasn’t possible prior to the Postal Accountability and Enhancement Act of 2006.Financial reform is needed, but should that reform turn into profits, where do they go?
Who becomes successful in lobbying for them? Decreased shipping prices, increased pay structures to the work force? I wonder is the OIG fully on board with what I believe is a “hidden agenda” in plain sight. The financial conundrum requires deep legal, political, and financial awareness that I often feel is grossly overlooked.
Because of its complexity the media and public will likely never understand or hinder the apparent strategy. May you continue to fight for what is right and prevent fraud, waste, and abuse in the most effective way possible.Aug 14, 2017. Thank you for pointing this out. I recently returned from the National Convention of Postmasters and Managers (in Louisville KY) and the PMG said in her presentation that the USPS lost revenue the last two fiscal years because first class and advertising was dropping.
I don't recall that she ever provided the complete information, as you have, about our entire debt. But, it wasn't a healthy picture she painted for our future. She noted we would eventually become a parcel delivery service. Since the entire world has stopped corresponding via the written word, and children are no longer taught what a letter is or how to write in cursive, hold a pen, address an envelope let alone buy a stamp, it is plain to see what will become of card companies and the USPS.I enjoy the speed with which we can dispatch information via computer, but I am concerned that children at VERY young ages are relying on them as problem solvers perhaps to the detriment of being able to think for themselves.Aug 12, 2017. The politicians, for whatever reason, are trying to privatize our Postal System and for all intents and purposes they have done.
Part of the problem is the competition from UPS, FEDEX, DSL and others. As the USPS has to keep increasing postage to meet the ridiculous mandate set by self serving politicians more business is lost to UPS and other shipping companies.If the politicians would let the post office out from under this unbelivable burden they would be able to improve service, lower postage rates which would stimulate more business for USPS.My husband and I are retired and I don't send Christmas cards anymore because I just can't afford it.The whole situation is absurd and needs to be fixed. We have the best postal system in the world and we would like to keep it.May 30, 2017. I think that it's the craziest thing I ever heard if the rest of the government had to prepay their pension the government was forced to shut down because they are horribly mismanaged.
If the United States Post Office did not have to prepay the pensions and all the liabilities FedEx and UPS would not exist. The post office actually makes money every year but there's no company in the world that has the prepaid a pension and liabilities the way the post office do. I really hope president Trump take a look at this and realize it's hurting business it's hurting their growth and people realize that the post office could be so much more.
Allow for 50% prefunded pensions and watch the post office grow. It's the only government agency that's actually profitable that I can think of.Feb 22, 2017. My close friend who is a veteran and a senoir citizen paid the money for a post offfice box for six months and he had a friend named eddie dehl also fill out paperwork so he could use the box to. Well your staff members failed to put the information in your system even though they paid for it and were told on many occasions the p.o box was fine. Well it wasn't they were never added into the system and Albert the main p.o.
Box holder has been waiting for over a month n a half for this check and is now on the street. It was uour employess mess up and I think the very least u could do is compensate him by either over nighting his check to him free of charge or refund his money. I will be contacting all the news stations about not only the poor treatment but the lack of compassion u showed to a vetran and senior who did nothing wrong but trust you would do your job. It truly discusses me and if anything happens to this poor old man while on the street u can expect a law suit that will not only bury u but show how ruthless u really r. Thank u for your time on this matter.Nov 25, 2016. I believe that corporations which compete with the U.S.P.S.
Have lobbied congress to enact laws which damage our postal service. This is outrageous. Citizens and businesses need a strong U.S. Postal service. I've lived in countries with weak, unreliable and even corrupt postal services and it makes doing business very difficult because customers' products which are mailed often do not arrive. Citizen has a right to affordable and reliable mail.
It is time to end the USPS pre-funding and investigate the corrupt law makers who enacted this law to see what their ties are to Fed Ex, UPS, etc. It is also time to see who is making money off the sale of USPS real estate. In the past I used to vote for CA Senator Feinstein but I am now very concerned about her family's profits relating to post office sales.Oct 25, 2016.
A lot is actually undisclosed to deceive us into thinking differently than what reality actually shows. All of the properties and assets of the post office benefit from not being taxed by the government showing it does not actually compete 'apples to apples' with FedEx and UPS. They are also given the only legal monopoly in the US, a huge advantage over other competitors. Also the employees of the postal service are paid far above the private sector even with all their advantages. The post office should prefund a pension and retirement fund since all indications of its progress are going down due to the internet and electronic management. They are given every advantage possible over competitors and still cannot manage to meet guidelines necessary to stay in the black. They cannot blame it on prefunding either considering their advantages granted to them by the government are approximately a $18 billion dollars in subsidies according to fortune.com.
It does not take a genius to see that the system is not working. Plus take into account the fact that the majority of their mail is not for people but for businesses, another misleading statement, so why should taxpayers bear the burden of the debt if they go under. The bulk of the mail I receive is 'junk' mail as I am pretty sure is the same for most Americans the have a technological connection to the world. Technology is not declining either as older Americans not tech savvy pass away and younger people move into the workforce and pay bills, the traditional mail carrier job will continue to decrease. This situation will only get worse and will end up costing taxpayers a fortune when they finally do fold, which is why prefunding is necessary.
I am sorry to say it as so many employees will be affected but they should be privatized and brought into reality and these employees should be transitioned into this private sector with realistic payscales and benefit plans. No other company in the US gets more advantages than them and they still cannot make it work.Sep 20, 2016. Ryan, you do know that the postal service is not taxpayer assisted at all right!? The post office has been profitable it's average net gain a year has been 4.8 billion dollars but with the mandate that they prefunding a retirement with payment of he amount of 5.8 billion dollars a year for people that haven't even started to work at the post office yet. Does that make since to you?
We have been told that the post office is in trouble well if Congress would stop using it as a slush fund it would be fine. The other problem I have is it was found that the math that Congress was using to calculate the total amount of payments were wrong so the entire time the payments were made it was over funding stopping the post office from valuable funds that could upgrade the technology and training of existing employees and future.
That is why Congress put forth the Postal Reform act of 2016 to fix the the issues that were caused by the Postal Reform act of 2014. The post office needs new vehicle's, new technology and new training for supervisors and employees a like. How do you do that when you are doing something that no other companies (government agency or private sector) is demanded to do or has chosen to prepay pensions for people that haven't even began to work there?Mar 04, 2017. I totally agree with your paper. A year ago I moved from Scottsdale, AZ to Tucson, AZ.
When I mail a bill or letter to someone in Tucson, it first goes to Phoenix and then back to Tucson, taking at least two days. I have known for years that Republicans made the stupid law regarding funding and from time to time have voiced my opinion against it. When I moved to Tucson a year ago and discovered it took two days to have mail delivered locally, I contacted Congresswoman Martha McSally's office to complain. It was only today, August 19, that a representative from Washington, D.C., called me regarding that issue to say they were 'working on it.' Of course someone called me-it is an ELECTION year. I would NEVER vote for a do-nothing obstructionist Republican.
I just wanted to let you know I am aware of the postal service's issue caused by stupid Republicans, and I am on your side.Aug 19, 2016. An indication that the USPS is Ms. Managed, is that it feels it needs to review POSTS and COMMENTS before the post appears, meaning, what is being seen is not entirely the whole picture. My father fought in WWII against such people. The Inspector General in hiding something, is not transparent. Considering, anything the Inspector General has to say is negligible.
Most definitely, they'll have some asinine response to their actions instead of allowing We the People to make that determination. The Inspector General, in so doing, has lost ALL credibility.
If the IG thinks otherwise, clean up it financial woes, tomorrow, 8 am sharp. My company is clean! The IG had DECADES to address this issue and elected NOT to address it. Hence, my children and theirs will PAY for the USPS DEBT, according to the GAO. Fix it tomorrow IF you claim any credibility.Aug 12, 2016. In 1968 when we boys first discussed the Ms.
Management of the USPS, the cost of a stamp was 6 cents. Today, in 2016, the cost is 49 cents that's an 817% difference in 48 years. Below are other daily expenses compared on Google for the same period.Comparatively, on daily consumables:loaf of bread 672%gal of milk 350%eggs 398%automobile 1120%house 1338%This is a pretty good indication that the Citizens of the United States are not managing their country, rather, have allowed others to usurp their power.The USPS is managed by the president, the executive branch of government, through appointments.Considering its position today, it is intellectually deprived and needs to reconsider its method of operation, if it has any hopes of sustainability. The USPS is not postured to reconsider.Aug 12, 2016. $15 mil is the limit, the USPS has not paid off that limit, btw, it is the money of We the People of the United States and we want it back, earning interest for REAL expenses FOR the PEOPLE, about 320,000,000 of them.USPS is at $125 BILLION in unfunded liabilities, that's $25 Bil UP from 2013. If this article wants to RESOLVE the issue, you had plenty of time, FUND the liabilities, tomorrow by 8am sharp.We in high school knew that there was an issue with the USPS back in 1968. If high school boys understood the USPS was on the wrong path, why does the USPS remain CLUELESS?
Donahue walked away with $4 mil in his pockets.Anyone posting here, who thinks otherwise, show us YOUR $4 million cash! You have been challenged.The USPS needs to be MANAGED or shutdown. This issue did not happen overnight. It was on an unsustainable path for decades. My business, decades later, is healthy, comparatively.Stay well,a.t.Aug 12, 2016. Why would they do that?Fedex AND UPS need post office air assets (government subsidized) to stay in bussiness. If the post office went under so would FedEx and UPS.
What people think of as the free market doesn't really exist. They say that capitalism and individual inisative built america, this of courses is propaganda. Free land built america, wether for the railroads or homesteaders or indenteted servants (7years for 50acres). Labor & Land =wealth, capital is a mere force multiplier, when capitalists buy a productive bussiness they are buy a share in other mens labor.
For all the land in the world and all the seed corn besides will not plant its self. All economic and political power is about getting control over labor for without it you can do nothing.Feb 27, 2017. You get home and find a slip saying a certified letter is waiting for you. It could be IRS notifying you they're about to take everything you own. The post office is closed.
The next day, you will hike to the post office. On the front door is a notice saying guns are not allowed inside, but there is nobody there to leave your gun with. Obviously, the sign does nothing to stop a violent criminal, but what about law-abiding citizens? Are we supposed to leave our guns at home? What if we need the gun en route to the post office, or en route home?May 11, 2016. Excellent job in making these payments.
Retirees should never have to worry about the stability of their benefit programs - and their retirement pay.I had read somewhere that this plan was put in to place so that the only solution was to privatized the Postal Service. I guess you don't need to be privatized at this point.I think Congress should do something to drastically reduce these payments because I agree with your analysis.Not knowing much about all of this, I just hope they can't tap in to these funds and put you right back to where you were.Again, excellent job, kudo's all around to the USPS.Nov 27, 2015. Exactly - you don't know much about all of this but as long as you get paid and someone else like Congress will find a way to pay for all of it, great for you, and while the private businesses compete and nothing is certain for their employees.
The USPS is exactly what is wrong with America these days - another government run business that is mismanaged and can't pay its bills and therefore goes into more debt and steals from the taxpayer. And now you are saying kudos for them while they are robbing Peter to pay Paul. Nice one!!Apr 08, 2016. 'The USPS is exactly what is wrong with America these days - another government run business that is mismanaged and can't pay its bills and therefore goes into more debt and steals from the taxpayer' - MattYou don't know what you are talking about and you sure as heck don't know anything about accounting and financing processes for a business.
This is NOT about the post office being able to pay it's bills. If you actually read the article, the post office is operationally profitable.
The ONLY thing that pushes them into the red is the Congressionally-mandated pre-funding for health and retirement accounts.Congress put this burden on the Postal Service KNOWING that the result would be to push them into the red. I challenge you to find ANY large company - and the USPS is a HUGE operation - that has pre-funded their retirement and health-care expenses to 100%. It would be a patently unsound business decision - period. It starves the existing operation, stifling innovation and modernization.I believe that the goal here is to build up a reserve from which Congress can 'borrow' replacing the actual money - with IOUs.
If you remember what happened to Social Security you know how this would work. Somewhere down the road, someone will point with horror at the huge unfunded liability in the pension funds and the tax increase that will be needed to put the money they borrowed back. Basically, they will behave as if, when they replaced the money with IOUs, they had NO INTENTION of EVER making good on them - which, in fact, they didn't.They will blame the post office for mismanagement (just like you did), ignoring the fact that it was THEIR decision to replace the money which had been set aside with (now worthless) IOUs.
They will 'stand strong' against raising taxes on their constituents. They will come up with the solution - give the post office assets and liabilities to a private company, giving the company a monopoly on mail delivery. As a private company, they will be able to set the rates and service levels as they like.
It may cost a nickel send a letter from Chicago to NY City while it costs $7 to send a letter from Chicago to Peoria.It may sound cynical but, it wouldn't surprise me if the selection of which company should get to run this highly-lucrative business were based on say, campaign contributions.Apr 29, 2016.
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