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This is saying basically the same thing in a different language. > In this method, yes, the actuary calculates the value of all benefits to be paid out in the

This is saying basically the same thing in a different language. > 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. I.e., the USPS has to raise the money to fund liabilities for 75 years, and it had to do so in 10 years, which essentially meant that they had to operate in the red making its financial situation even more complicated.

treis 6y ago
No, it's very different. Your cite says they had to put aside money for all their pension costs over the next 75 years. Including people they haven't even hired yet. My cite says that they had to calculate pension costs payable over the next 75 years that they already incurred. That's a much smaller number and matches the requirements for private companies.
- coliveira 6y ago
  What is the part of "calculates the value of all benefits to be paid out in the future, due to past and future service" that you don't understand? Congress required all possible benefits present and future be calculated (subtracting only future accruals, i.e., gains in investments) and then that money had to be raised over 10 years. That is never required from companies, which have to fund only the portion of pensions that they effectively supposed to pay based on current liabilities, not what they will be projected to owe in the future. You can find the explanation in several articles, for example: "[the law] requires the self-supporting U.S. Postal Service, which receives not one dime in taxpayer subsidies, to fully fund its retirees’ health benefits for 75 years into the future. It also requires that money be set aside over a 10-year period, at a rate of more than $5 billion per year. That means the postal service is now paying for the future health care of retirees it has not yet hired, and who in some cases have not yet been born. No other public or private company in the nation bears any kind of financial burden like that. Even worse, none of that money is truly being set aside. Instead, it is going directly into the U.S. government’s general fund, and it’s being spent on current government operations. The set-aside is a theoretical accounting gimmick. Those future retirement liabilities are actually being added to the national debt." https://roanoke.com/news/local/casey-the-most-insane-law-by-congress-ever/article_3c33d5a1-5fd3-5c01-b5bb-5c75046f48f4.html https://roanoke.com/news/local/casey-the-most-insane-law-by-...
  - treis 6y ago
    >What is the part of "calculates the value of all benefits to be paid out in the future, due to past and future service" that you don't understand? Because pensions go up with years of service you have to account for the worker continuing to work when calculating pension liability. As an example, say a pension vests after 5 years. What should the pension cost be for an employee in year 2? The best answer is something like 1/5 of the NPV of their pension. That's what they mean by "benefits to be paid out... due to .. future service". >That means the postal service is now paying for the future health care of retirees it has not yet hired, Did you not see the part of my cite where that is specifically called a myth?
    - coliveira 6y ago
      It is very difficult to debate with someone who doesn't understand the very logic of how pensions work. No company in the world will pay the NPV of a future pension. Like any other person or institution, they will start making contributions over time to meet the requirements of that pension 20, 30, 50 years from now. To require otherwise is absurd. For example, suppose you are retiring 30 years from now. You cannot assume that you have to calculate the NPV of the required pension in 30 years and then contribute that value today. Like any normal person you will setup a plan to contribute towards a pension that will be available 30 from now, with the required amount. The same happens with any company. In fact, when you hear someone calculating the NPV of pensions that will be paid 20 to 50 years in the future, you most probably are talking to a republican who wants to "prove" that public pensions are insolvent. This is the pattern I've seen.
      - treis 6y ago
        >You cannot assume that you have to calculate the NPV of the required pension in 30 years and then contribute that value today ? Did you not read my post where it said: > The best answer is something like 1/5 of the NPV of their pension. Of course nobody is required to pay the entire NPV of the pension today. For an employee that is retiring in 30 years they are required to pay 1/30th of the NPV of their pension each year. That's what the USPS is required to do. They're not being required to pay the entire cost of their employee pensions up front.

treis 6y ago

No, it's very different. Your cite says they had to put aside money for all their pension costs over the next 75 years. Including people they haven't even hired yet. My cite says that they had to calculate pension costs payable over the next 75 years that they already incurred. That's a much smaller number and matches the requirements for private companies.

coliveira 6y ago
What is the part of "calculates the value of all benefits to be paid out in the future, due to past and future service" that you don't understand? Congress required all possible benefits present and future be calculated (subtracting only future accruals, i.e., gains in investments) and then that money had to be raised over 10 years. That is never required from companies, which have to fund only the portion of pensions that they effectively supposed to pay based on current liabilities, not what they will be projected to owe in the future. You can find the explanation in several articles, for example: "[the law] requires the self-supporting U.S. Postal Service, which receives not one dime in taxpayer subsidies, to fully fund its retirees’ health benefits for 75 years into the future. It also requires that money be set aside over a 10-year period, at a rate of more than $5 billion per year. That means the postal service is now paying for the future health care of retirees it has not yet hired, and who in some cases have not yet been born. No other public or private company in the nation bears any kind of financial burden like that. Even worse, none of that money is truly being set aside. Instead, it is going directly into the U.S. government’s general fund, and it’s being spent on current government operations. The set-aside is a theoretical accounting gimmick. Those future retirement liabilities are actually being added to the national debt." https://roanoke.com/news/local/casey-the-most-insane-law-by-congress-ever/article_3c33d5a1-5fd3-5c01-b5bb-5c75046f48f4.html https://roanoke.com/news/local/casey-the-most-insane-law-by-...
- treis 6y ago
  >What is the part of "calculates the value of all benefits to be paid out in the future, due to past and future service" that you don't understand? Because pensions go up with years of service you have to account for the worker continuing to work when calculating pension liability. As an example, say a pension vests after 5 years. What should the pension cost be for an employee in year 2? The best answer is something like 1/5 of the NPV of their pension. That's what they mean by "benefits to be paid out... due to .. future service". >That means the postal service is now paying for the future health care of retirees it has not yet hired, Did you not see the part of my cite where that is specifically called a myth?
  - coliveira 6y ago
    It is very difficult to debate with someone who doesn't understand the very logic of how pensions work. No company in the world will pay the NPV of a future pension. Like any other person or institution, they will start making contributions over time to meet the requirements of that pension 20, 30, 50 years from now. To require otherwise is absurd. For example, suppose you are retiring 30 years from now. You cannot assume that you have to calculate the NPV of the required pension in 30 years and then contribute that value today. Like any normal person you will setup a plan to contribute towards a pension that will be available 30 from now, with the required amount. The same happens with any company. In fact, when you hear someone calculating the NPV of pensions that will be paid 20 to 50 years in the future, you most probably are talking to a republican who wants to "prove" that public pensions are insolvent. This is the pattern I've seen.
    - treis 6y ago
      >You cannot assume that you have to calculate the NPV of the required pension in 30 years and then contribute that value today ? Did you not read my post where it said: > The best answer is something like 1/5 of the NPV of their pension. Of course nobody is required to pay the entire NPV of the pension today. For an employee that is retiring in 30 years they are required to pay 1/30th of the NPV of their pension each year. That's what the USPS is required to do. They're not being required to pay the entire cost of their employee pensions up front.