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The situation of pensions is that the USPS is required by a law created by republicans to pre-pay their retirement fund for the next 75 years, something that no

The situation of pensions is that the USPS is required by a law created by republicans to pre-pay their retirement fund for the next 75 years, something that no company in the world does. Not only this, but the money they pay is being diverted to the general government accounts, so it is possible that in the future the pension money is not there anyway, if the government decide not to provide the money in the future. The law had two draconian results: the USPS has to operate in the red, and the government has additional revenue that facilitated the tax cuts proposed by republicans.

nickff 6y ago
Quote from the Forbes article I linked to: >"FACT: ALL companies are required to fund any pension promises they make to their employees. (The only exceptions are for top executives, who can lose their pensions if a company goes bankrupt, and for entities that aren’t actually “companies” - state and local governments and churches.) NONE of them are permitted to take a “pay as you go” approach but must contribute to a pension fund an amount equivalent to what a worker has accrued that year in benefit promises, regardless of how far into the future that worker will be retiring, and must make up for any shortfalls due to asset losses or other reasons. The USPS and private sector companies use the same general actuarial principles to do so, though there are differences in assumptions, particulars of the calculations, etc."
- coliveira 6y ago
  The lie in this article is hidden here: "though there are differences in assumptions, particulars of the calculations..." Companies need to fund their pension plans, but only for the portion of time the worker has been employed by them. For example, for FY 2020, the company needs to set aside money corresponding to an additional year of work. But for the USPS, the law requires it to set aside money assuming that the worker will work his entire career for USPS, and project all retirement costs 75 years into the future, even for workers that they haven't even hired yet. In actuary, this is the difference between "actual vested liability", and "total projected liability". The result is clearly absurd. Moreover, this money is not staying in USPS retirement accounts, is going to the government. So it doesn't even guarantee that the money will be there for USPS workers. To add to the injury, USPS is allowed only to invest on treasury bonds, which means that they need to raise even more money than a private company, which is free to invest in any high grade bond. https://www.businessinsider.com/usps-rise-fall-post-office-collapse-2020-5 https://www.businessinsider.com/usps-rise-fall-post-office-c...
treis 6y ago
>USPS is required by a law created by republicans to pre-pay their retirement fund for the next 75 years The USPS is required to pre-pay the pension costs they have incurred. It's not pre-paying the retirement fund for 75 years. It's putting money aside so that you have the money to pay your 25 year old worker the money you promised them when they're 100.
- coliveira 6y ago
  Incorrect, please do some research and see that it is not like this. For example, here is the article from Business Insider: "[the law] required the post office to calculate all of its retiree pension and healthcare costs for the next 75 years, including for people it hadn't even hired yet, and put away enough over the next 10 years to cover them. To put this in perspective, that'd be like you only working from age 18 to 28 and then expecting to live on that income until you were 103 years old."
  - treis 6y ago
    >MYTH: the USPS is required to fund pensions for the next 75 years, for workers who haven’t even been born. >“[T]he PAEA required the Postal Service to calculate all of its likely pension costs over the next 75 years, and then sock away enough money between 2007 and 2016 to cover most of them.” The Week, April 16, 2018. >FACT: the actuarial valuation methods used by the USPS are based only on accruals attributed to past service, no different than any other such valuation. >The Postal Service Retiree Health Benefit Fund (PSRHBF) is a USPS-specific fund, and its 10-K report specifies that it uses the “aggregate entry age normal acturarial cost method.” For pension benefits, employees participate in the CSRS and FERS general civil servant pensions, using the same method. In this method, yes, the actuary calculates the value of all benefits to be paid out in the future, due to past and future service, and then subtracts out the value of the future accruals, to calculate the actuarial liability. In addition, the Civil Service Retirement and Disability Fund calculates a projection of liabilities 75 years into the future in its annual report, but this does not mean that 75 years’ worth of future accruals are advance-funded, only that the long-term sustainability of the system is measured over a 75-year period. https://www.forbes.com/sites/ebauer/2020/04/14/post-office-pensions--some-key-myths-and-facts/#29028d8c47f5 https://www.forbes.com/sites/ebauer/2020/04/14/post-office-p...

nickff 6y ago

Quote from the Forbes article I linked to: >"FACT: ALL companies are required to fund any pension promises they make to their employees. (The only exceptions are for top executives, who can lose their pensions if a company goes bankrupt, and for entities that aren’t actually “companies” - state and local governments and churches.) NONE of them are permitted to take a “pay as you go” approach but must contribute to a pension fund an amount equivalent to what a worker has accrued that year in benefit promises, regardless of how far into the future that worker will be retiring, and must make up for any shortfalls due to asset losses or other reasons. The USPS and private sector companies use the same general actuarial principles to do so, though there are differences in assumptions, particulars of the calculations, etc."

coliveira 6y ago
The lie in this article is hidden here: "though there are differences in assumptions, particulars of the calculations..." Companies need to fund their pension plans, but only for the portion of time the worker has been employed by them. For example, for FY 2020, the company needs to set aside money corresponding to an additional year of work. But for the USPS, the law requires it to set aside money assuming that the worker will work his entire career for USPS, and project all retirement costs 75 years into the future, even for workers that they haven't even hired yet. In actuary, this is the difference between "actual vested liability", and "total projected liability". The result is clearly absurd. Moreover, this money is not staying in USPS retirement accounts, is going to the government. So it doesn't even guarantee that the money will be there for USPS workers. To add to the injury, USPS is allowed only to invest on treasury bonds, which means that they need to raise even more money than a private company, which is free to invest in any high grade bond. https://www.businessinsider.com/usps-rise-fall-post-office-collapse-2020-5 https://www.businessinsider.com/usps-rise-fall-post-office-c...

treis 6y ago

>USPS is required by a law created by republicans to pre-pay their retirement fund for the next 75 years The USPS is required to pre-pay the pension costs they have incurred. It's not pre-paying the retirement fund for 75 years. It's putting money aside so that you have the money to pay your 25 year old worker the money you promised them when they're 100.

coliveira 6y ago
Incorrect, please do some research and see that it is not like this. For example, here is the article from Business Insider: "[the law] required the post office to calculate all of its retiree pension and healthcare costs for the next 75 years, including for people it hadn't even hired yet, and put away enough over the next 10 years to cover them. To put this in perspective, that'd be like you only working from age 18 to 28 and then expecting to live on that income until you were 103 years old."
- treis 6y ago
  >MYTH: the USPS is required to fund pensions for the next 75 years, for workers who haven’t even been born. >“[T]he PAEA required the Postal Service to calculate all of its likely pension costs over the next 75 years, and then sock away enough money between 2007 and 2016 to cover most of them.” The Week, April 16, 2018. >FACT: the actuarial valuation methods used by the USPS are based only on accruals attributed to past service, no different than any other such valuation. >The Postal Service Retiree Health Benefit Fund (PSRHBF) is a USPS-specific fund, and its 10-K report specifies that it uses the “aggregate entry age normal acturarial cost method.” For pension benefits, employees participate in the CSRS and FERS general civil servant pensions, using the same method. In this method, yes, the actuary calculates the value of all benefits to be paid out in the future, due to past and future service, and then subtracts out the value of the future accruals, to calculate the actuarial liability. In addition, the Civil Service Retirement and Disability Fund calculates a projection of liabilities 75 years into the future in its annual report, but this does not mean that 75 years’ worth of future accruals are advance-funded, only that the long-term sustainability of the system is measured over a 75-year period. https://www.forbes.com/sites/ebauer/2020/04/14/post-office-pensions--some-key-myths-and-facts/#29028d8c47f5 https://www.forbes.com/sites/ebauer/2020/04/14/post-office-p...