Post Office Can’t Meet Its $11 Billion Payment
The U.S. Postal Service owes $5.6 billion to pay into its unionized workers’ health fund. It does not have the money.
Let’s call this delay what is really is: a default. It is a prelude of things to come to the entire U.S. government budget.
This is the second time in two months that the USPS has missed a deadline. It therefore owes over $11 billion. It is not going to pay. It is busted. It cannot pay.
The USPS’s leadership is trying to get Congress to eliminate Saturday delivery. Second, it wants out of its annual $5 billion payment for future health benefits.
The USPS is expected to record $15 billion in red ink this year.
The USPS has had 6 years to come up with the $11 billion
The unions think they will get retirement health benefits. They won’t.
The union members are as naive as voters who think Medicare will pay for their health care costs. It won’t.
But everybody pretends this can be papered over.
Watch. The government will let the USPS off the hook.
The USPS is out of accounting tricks. It can’t pay. The head of the USPS has said this: “We’ve done a lot to reduce cost out of our system. The problem now is this: There’s nowhere to go.”
The union says Congress is to blame.
No, it isn’t. But the USPS is not a business. It is a federal agency, no matter what anyone says. That’s why it has to come begging to Congress. “More time. We need more time.” The Senate has already voted to let the USPS off the hook for the payments. The House has not passed the bill. It wants to stop Saturday delivery and close tiny rural post offices. So, the bill is stalled. Congress always buckles. It will let the USPS off the hook. It will let the USPS kick the can down the road. The day of default is coming. Technically, the USPS is independent of government, but it is subject to Congressional control. So, it really is an agency of government. When the USPS defaults on its health care obligations and its pensions, the USPS will ask for a bailout through ERISA. It will get it. The taxpayers will be told to pay. They won’t pay. Then the Great Default will come. Continue reading here. ___________________________ Published on October 1, 2012. The original is here. Nothing has changed. In 2016, the Tax Foundation reported: Through 2015, the Postal Service had contributed a total of $20.9 billion to the RHBF and defaulted on $28.1 billion. The RHBF also received $17.1 billion from an overfunded pension account. The RHBF’s unfunded liability was $54.8 billion at the end of 2015. The pay-as-you-go approach can look attractive in the short run because it temporarily hides costs. However, it often leads to future financial problems. In extreme cases like Detroit and Puerto Rico, it can contribute to bankruptcy or its equivalent. At the Postal Service, the debts accumulated during decades of pay-as-you-go financing may be partially responsible for reduced service quality today; they threaten future mail users with rate increases; and they heighten the danger the Service will need a taxpayer bailout. Here is the assessment of the United States Postal Service (September 2017). So, there is no money in these funds. There are only IOU's from the Treasury. These are therefore unfunded liabilities. So, the health insurance fund is only 50% funded. Hahahaha. It is not funded at all. Neither are the retirement funds.
The Postal Service has defaulted on every RHBF payment since 2010, although it had enough cash to make modest partial payments in the last couple of years. The defaults have not affected the benefits of current retirees. While defaults normally have severe repercussions, the Service has incurred no penalties.
The U.S. Postal Service participates in three retirement plans: the Civil Service Retirement System (CSRS), the Federal Employee Retirement System (FERS), and the Postal Service Retiree Health Benefits Fund (PSRHBF). The first two are pension plans, and the third is set up to prefund and provide retiree health benefits. These plans are restricted to government trust funds invested solely in U.S. Treasury securities. They are often regarded as riskless in the sense that there is virtually no possibility of loss of principal.
However, the trade-off for this safety is a low rate of return that has a high probability of not generating adequate investment income to meet all the future obligations of the funds. Currently, the total funding level for all three funds is at 82 percent, and all three funds are underfunded to varying degrees. The CSRS and the FERS are over 90 percent funded (91 and 97, respectively), but the PSRHBF is only 50 percent funded.