Retiree Health Benefits Expense |
2008 |
2007 |
2006 |
|
|---|---|---|---|---|
(Dollars in millions) |
||||
Employer Premium Expense |
$ 1,807 |
$ 1,726 |
$ 1,637 |
|
Transfer of 2006 Escrow |
— |
2,958 |
— |
|
P.L. 109-435 |
5,600 |
5,400 |
— |
|
Total |
$ 7,407 |
$ 10,084 |
$ 1,637 |
|
PSRHBF
P.L. 109-435 requires that OPM provide, and that we report, certain information concerning the obligations, costs, and funding status of the PSRHBF. The following table shows the funded status and components of net periodic costs.
Postal Service Retiree Health Benefit Fund Funded Status and Components of Net Periodic Costs as calculated |
2008 |
2007 |
|---|---|---|
(Dollars in millions) |
||
Beginning Actuarial Liability at |
$ 80,786 |
$ 74,815 |
- Actuarial Gain |
(1,136) |
— |
+ Normal Costs |
3,389 |
3,175 |
+ Interest @ 6.25% |
4,977 |
4,676 |
Subtotal Net Periodic Costs |
7,230 |
7,851 |
- Premium Payments |
(1,934) |
(1,880) |
Actuarial Liability at September 30 |
86,082 |
80,786 |
- Fund Balance at September 30 |
(32,610) |
(25,745) |
Unfunded Obligations at |
$ 53,472 |
$ 55,041 |
*Medical Inflation Assumption = 7% |
||
The OPM valuation of Post Retirement Health Liabilities and Normal Costs were prepared in accordance with Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standards (SFFAS) No. 5. SFFAS 5 requires the use of the aggregate Entry Age Normal actuarial cost method.
Demographic assumptions and an interest rate assumption of 6.25% are consistent with the pension valuation assumptions, and decrements are based upon counts or numbers rather than dollars.
The normal cost, which is on a per-participant basis, is computed to increase annually by a constant medical inflation rate which is assumed to be 7% per annum. Normal costs are derived from the current FEHBP on-roll population with an accrual period from entry into FEHBP to assumed retirement. Entry into the FEHBP is generally later than entry into the retirement systems.
The accrued liability is equal to the total liability less future normal payments. The liabilities and normal costs that appear in the OPM financial statements and are used in agency reporting are based upon annuitant medical costs (including administration costs) less annuitant premium payments. The values used in these valuations are based upon the same methodology and assumptions as for the financial statements except the average government share of premium payments for annuitants is substituted for annuitant medical costs less annuitant premium payments. The government share of premium payments has been adjusted to reflect premium payment levels that correspond to actual costs. This amount is assumed to increase at 7% per annum. For current Postal annuitants, this government share of premium payments is adjusted to reflect the pro-rata share of civilian service to total service for which the Postal Service is responsible. Postal annuitant counts include contracts for which the Postal Service makes no payment. The pro-rata adjustment is made by applying calculated factors based upon actual payments that vary by age and Medicare status of the enrollments. For active postal employees, the pro-rata share in retirement is assumed to be 93% of the total.
The following table shows the net assets of the PSHRBF.
Net Assets of Retiree Health Benefit Fund as calculated by OPM |
2008 |
2007 |
|---|---|---|
(Dollars in millions) |
||
Beginning Balance at October 1 |
$ 25,745 |
$ — |
Contributions and Transfers |
5,600 |
25,458 |
Earnings @ 4.8% and 5.0%, respectively |
1,265 |
287 |
Net increase |
6,865 |
25,745 |
Fund Balance at September 30 |
$ 32,610 |
$ 25,745 |