On it's face that sounds like an incredibly onerous requirement. Not being a US resident though, it's quite possible it makes sense and my ignorance simply can't tell. Could someone with more insight provide additional context here?
This is a strategy called "Starving the beast". Basically, they impose incredibly harsh financial burdens on the company, and then argue that it's unprofitable.
https://en.wikipedia.org/wiki/Postal_Accountability_and_Enha...
https://ips-dc.org/how-congress-manufactured-a-postal-crisis...
The rhetoric about paying for the next 50 years sounds like somehow the post office is being charged at more than the amount necessary to maintain a steady state. Is it that they would be paying $5500/year/employee, but they have to pay double that for 50 years?
I'm having a hard time wrapping my head around what exactly is the problem and where the unreasonableness lies. I'm sure a Republican would say that the problem is the amount of benefits, and I can imagine that might be disingenuous, but I don't honestly understand what's really going on despite hearing about it for years and years.
Maybe someone can ELI5 why or how there's a gap between the long run average cost of the retirees and the payments.
[1]https://about.usps.com/who-we-are/postal-history/employees-s...
Typically you'd target a result in the future and work backwards off of an average return rate (over years/decades, not months!) to ballpark a "this is what we need now to fund (with interest/returns) our pension obligations in the future".
As one can see from many pensions today though, this setup often falls prey to politics or other mismanagement. I think the "other side" sees it as an attempt to say "USPS can't stay solvent, time to chuck it over to the private sector." while ignoring that other comparable businesses do not and will not have such an explicit cash requirement, which by definition makes them looks better.
i.e. you assume your investments will growth faster than they do, and you assume people will die earlier than they do, then you don't even put in enough to fund the scheme based on your optimistic assumptions.
In the US, state pension schemes tend to use more aggressive growth assumptions than private ones: the government holds private companies to strict standards, but does not impose them on itself.
As far as I know, that is exactly the problem. I don't think any private corporation would be paying $11k per year for each employee for retirement benefits right now. Unless the base salaries are much lower, this is a pretty difficult requirement.
Two separate questions are - is $11K a reasonable cost in general, and is it reasonable for whatever the USPS actually needs to fund? I think it's obviously a reasonable cost for the sort of benefits that I personally would like, and for the sort of retirement most SWE HN participants expect to be able to fund. It could still be a vastly excessive amount for whatever USPS employees actually will get. The number really means nothing out of context.
Head to your favorite search engine, pick any city or state in the US, and then follow it with “pension crisis.”
USPS retirees will be better off than virtually any other non-military government employee.
So I expect pensions to be bailed out. Especially government pensions.
USPS is just forced to already confront reality early, instead of waiting for the bailout later.
And of course because this is America, we are going to end up giving GE some welfare.
See: https://www.congress.gov/bill/109th-congress/house-bill/6407
They’re required to fund the present value of employee retirement benefits.
All pension benefits in well-operated schemes are, by definition, pre-funded. You can't have a pay-as-you-go type of system because, if your company went bankrupt tomorrow, you might have retirees that still have a life expectancy in the decades.
You get an actuary to look at your current and future obligations based on your workforce, schedule of entitlements etc. and they work out how much you need to contribute to the scheme today to make sure that it is funded. The idea is that some disaster could befall your company at any time and retirees would not be out of pocket.
This is what pre-funded means. It doesn't mean "when I join the USPS at age 21 they have to assume I'm going to retire with 40 years of service and immediately put aside cash for that".
Now, typically, retiree health benefits are not included in this setup because they're not guaranteed. i.e. there is nothing in the law that requires them to be maintained.
On the other hand, the USPS is required to provide those retiree health benefits. It can't stop paying them unless Congress passes a law. It does at least seem consistent with the treatment of pension benefits on this basis.
There’s a Federal fund setup specifically to help pay pensions for companies that go bankrupt.
It's funded by insurance premiums paid by companies that offer pensions, not by taxes, and it cuts benefits when it takes over a pension plan.
It's not much different than the post office itself in that regard. It's losing money every year. At some point congress will step in and bail them out. Any time a company goes bankrupt and forces them to take over pension obligations they lose more money.
If PBGC allowed this then companies could abuse it by promising 200% pensions and then only contributing $1 and defaulting.
Funding defined benefit pensions is very expensive, USPS wants to save money by not funding it in order to pay benefits. I’m not sure their argument other than “we don’t have that much money.” It seems they need to reduce pensions or live with sinking tons into it. Not paying pensions shouldn’t be an option, I think.
This is their argument.
1. They are forced to prefund the retiree medical fund in addition to the pension fund. No private company is forced to do this. If a private company runs out of money for retiree medical, they will just stop paying--the post office can't just stop offering this benefit without an act of Congress.
Additionally the retiree medical fund is forced to invest only in U.S. Treasuries, so the interest rate is much lower than it should be--meaning that they need to invest more money than should be necessary to prefund.
2. They were forced to prefund over a 10 year period. When the law was passed in 1974 that forced private companies to prefund plans that had been pay as you go, they gave them 40 years to do so.
I think the issue I have is that this requirement is correcting a previous practice of not funding properly.
I don’t think it’s accurate to compare USPS vs private companies as they are very different. I think it’s more accurate to compare them to other federal agencies who all also have to prefund pensions, including medical pensions. Although federal agencies have reduced pension and medical in the past decades to reduce costs.
Other Federal agencies don't have to finance their own operations, so it makes no sense to compare them to the USPS. In most cases congress just allocated more money to the agency so that pensions could be prefunded.
The closest thing I can think of is if congress had told NASA: "You need to come up with 75 years worth of pensions and health plans within the next 10 years and we weren't going to give you any extra money to do so. Oh and you can't reduce benefits, and you must maintain the exact same level of services. And if you can't do this we are going to sell off your assets and privatize your agency."
If congress had done this it would obviously be because their goal was to privatize NASA. This has never been done to any other agency.
If they were on a defined contribution plan like most of the rest of the economy, this provision would just mean that they actually need to make contributions on time.
Naively, you might want to keep track only of money that flows in and out of your business.
But that can be rather misleading. So typically account for expenses when they are incurred. That means for example that in your accounting you set aside a bit of money for your rent every day, even if the physical cash only leaves your wallet once a month or even once a year.
That way your accounting reflects the economic reality of your business, even if it doesn't reflect how much cash is in your wallet.
The economic reality is important, because even if you have cash on hand now, but predictably won't earn enough money to pay back a debt that's coming due at the end of the year, you better panic early instead of acting all surprised.
See https://www.accountingtools.com/articles/when-are-expenses-i... for more details.
Well, when you promise people a pension dependent on how long they worked for you, it makes sense to make a provision every day they work for you, for the predictable outflow of cash you will have in a few decades.
Typically you build up a fund or some kind of reserve to meet these predictable future outflows. See also https://en.wikipedia.org/wiki/Reserve_(accounting)
In the special case of pensions, you might even go one step further: instead of just having a reserve on your books, you might want to ring fence a specific amount of money and put that part of your balance sheet in a separate investment vehicle or fund. So that for example bankruptcy of the parent company wouldn't imperil pensions already promised.
See also https://en.wikipedia.org/wiki/Pensions_crisis
The opposite of having such reserves is called 'unfunded liabilities'. Sounds nasty, doesn't it?
From the Pension Crisis article:
> In addition to states, U.S. cities and municipalities also have pension programs. There are 220 state pension plans and approximately 3,200 locally administered plans. By one measure, the unfunded liabilities for these programs are as high as $574 billion. The term unfunded liability represents the amount of money that would have to be set aside today such that interest and principal would cover the gap between program cash inflows and outflows over a long period of time.
At the time the requirement to fund pensions through 2050ish was passed it got support from republicans who wanted to make life financially harder for USPS and democrats who wanted to guarantee that employees (union employees, so making sure they get a good deal is even more important) would be provided for and that USPS couldn't weasel out of it's obligations as part of a future bailout, perhaps by a congress that would have given employees the shaft.
I get that he has to take a complex situation and make it into something a nationwide general audience can laugh at but he seemed to go to great lengths to avoid casting shade at city and state politicians (and by proxy voters) who bear a lot of responsibility here.
He didn't say anything wrong but I was really disappointed how one sided it was. I know he's a comedian. I know he has an agenda. But it makes me suspect his other stuff might be tilted.
* "Look, clearly, the police are just one part of a larger system of inequality, and for tonight we're going to focus primarily on them"
* Then spends the next few sentences talking about how TV and film have painted an extremely unrealistic picture of police in the US
* The history of policing and the policies we created it based on (slave patrol)
* The Jim Crow laws & segregation that drove policing
* Racist voters that tried to keet regions white
* The media's whitewashing of the civil rights movement
* Nixon & Regan's drug war + broken window policing
* Stop & frisk policy and how more than 3/4 were black / hispanic
* Then the big bomb at 9:05: "And let's be clear here, Democrats were very much involved in that, from big city mayors all the way up to this guy [shows a supercut of Bill Clinton in '93 promising 100k more police on the streets in various speeches, then "another 50k more in high crime neighborhoods"]"
* This all came hand in hand with cutting every social service possible and pushing all of the extra work onto police
* "So, while we should absolutely be angry at the police right now, let's also be angry at the series of choices that left them as essentially the only public resource in some communities"
So he spent around 15-20% of the total time making it incredibly clear that while this is a police problem not a police only problem.
What I'm more interested in knowing is, are his facts wrong? Or maybe is he leaving out an entirely separate side of things that point to the real issue? That's what I always wonder in the back of my mind.
It doesn’t make particular sense.
A given politician might have their own reasons for wanting to privatize everything (profit, ideology, etc) but it's pretty consistent across the whole party that they aren't fond of any of these programs - I wouldn't actually attribute this to key donors.
The more reactionary donors have a real generational hatred of civil service in general and the post office in particular. Alot of fringe thinking from the 1960s and 70s is front and center today.
Goal is to get the public to perceive it as a money-losing, inefficient operation which should be destroyed and outsourced to private companies (who will immediately hugely raise postage rates, reduce letter carrier pay, reduce delivery speed, and so on).