Employees who participate in the FEHBP for at least the five years immediately before their retirement may participate in the FEHBP during their retirement. The Omnibus Budget Reconciliation Act of 1990 requires us to pay the employer’s share of health insurance premiums for all retired postal employees and their survivors who participate in the FEHBP and who retire on or after July 1, 1971. However, we do not include the costs attributable to federal civil service before that date.
In 2006, P.L. 109-435 created the Postal Service Retiree Health Benefits Fund (PSRHBF), which is held by the U.S. Treasury and controlled by OPM but funded by the Postal Service. P.L.109-435 established a ten-year schedule of Postal Service payments into the fund that averaged $5.6 billion per year. However, for 2009, this payment was decreased from $5.4 billion to $1.4 billion due to the enactment of P.L. 111-68. See Note 5, Subsequent Events, for more information. Although P.L. 109-435 dictates the funding requirements through 2016, the amounts to be funded and the timing of funding can be changed at any time with passage of a new law or an amendment of existing law as passed by Congress and signed into law by the President.
These annual payments are additional to our regularly allocated cost of premiums for current retirees, which continue to be payable through 2016. After completion of the scheduled annual payments in 2016, OPM will perform an actuarial valuation and determine whether any further payments into the PSRHBF are required. We paid $1.4 billion into the PSRHBF in 2009 and $5.6 billion in 2008. Beginning in 2017, our share of the health insurance premiums for current and future Postal Service retirees will be paid from the PSRHBF.
P.L.109-435 repealed the escrow provisions of P.L.108-18, which required us to place into an escrow account by September 2006 any “savings” from the change in the retirement provisions created by P.L.108-18. OPM calculated the savings at $2,958 million as of September 30, 2006. P.L. 109-435 required that we pay the 2006 escrowed “savings” to the PSRHBF. In 2007, we expensed the entire amount payable to the PSRHBF. On April 6, 2007, these “savings” were transferred to the PSRHBF.
Total retiree health benefits expenses were $3,390 million in 2009, $7,407 million in 2008 and $10,084 million in 2007. Because of the subjectivity in the determination of the amounts to be paid into the PSRHBF, our retiree health expense may not represent the full cost of the benefits earned by USPS employees. These costs are reflected as Retiree health benefits in our Statements of Operations.
