4 ms·

75 years. USPS is congressionally mandated to fund the pensions of postal workers who have not yet been born.

SilasX 6y ago
It doesn't matter if it's 500 years. The farther it is into the future, the greater the time discount to fund it now. "75 years" just sounds inflammatory as a soundbite, but it's completely reasonable. If you're promising it, you should book the expense's present discounted value.
- pulisse 6y ago
  Why aren't other federal agencies subject to similar requirements? Why isn't such a practice standard in the corporate world? > If you're promising it, you should book the expense's present discounted value. Your argument proves way too much. There is no "promise" here. To whom is the commitment made? The beneficiaries of such pensions do not even exist at this time. The most you can say is that there is an expected future expense. But if your claim is that an entity should be presently setting aside money for all anticipatable expenses, no matter how far in the future, then I think you'll find very few CFOs to agree with you.
  - SilasX 6y ago
    >Why aren't other federal agencies subject to similar requirements? Why isn't such a practice standard in the corporate world? It is absolutely standard for corporations to be required to fund their pensions, and to include liabilities on their balance sheet that aren't due for 80 years (in what few cases those actually happen in). Edit: Do you know of a rule whereby e.g. such bonds can be left off the balance sheet? I don't. If other federal agencies (which are different in many other ways) aren't required to fund pensions, they should be -- I agree. >Your argument proves way too much. There is no "promise" here. To whom is the commitment made? The workers, to provide pensions for their dependents. >The most you can say is that there is an expected future expense. But if your claim is that an entity should be presently setting aside money for all anticipatable expenses, no matter how far in the future, then I think you'll find very few CFOs to agree with you. It's not an "anticipatable" expense, it's one that you have specifically committed to as compensation for labor, every bit as "anticipatable" as having to make this month's payroll. Do you know a CFO that thinks it's fine not to have allocated money for that?
    - PaulDavisThe1st 6y ago
      >Do you know a CFO that thinks it's fine not to have allocated money for that? I can't know the state of mind of any CFO. What can I do is look at the record and find companies that have failed allocate money for that. There's no shortage of them in the USA. This is from 2003, but is fairly indicative of the games played: https://www.abi.org/abi-journal/underfunded-pension-plans-a-looming-crisis-for-corporate-america https://www.abi.org/abi-journal/underfunded-pension-plans-a-... Here's a 2017 summary of state public pension funds https://taxfoundation.org/state-public-pension-plan-funding-coronavirus/ https://taxfoundation.org/state-public-pension-plan-funding-... Here's some 2019 reporting on corporate pension shortfall and congressional efforts (!) to help mitigate the damage to individual pensioners: https://www.cnbc.com/2019/07/12/these-pension-plans-are-at-risk-of-going-broke-lawmakers-need-a-fix.html https://www.cnbc.com/2019/07/12/these-pension-plans-are-at-r... So regardless of whether or not it is "absolutely standard for corporations to be required to fund their pensions" (and I don't believe that it is anywhere near as standard or required as you portray it), the facts on the ground are that there are many, many pension funds that are underfunded by many different metrics. I can also look at the record of corporate bankruptcy proceedings, and note how the obligations towards pensions are handled in comparison with those towards other types of debtors. TLDR: not well. Finally, there is no specific committment by corporations to pay into a pension fund, only to pay out. They are at liberty to play whatever games they want regarding paying in. The simplest is to declare assumptions about future revenue, and pay in less (or nothing) in the present.
      - SilasX 6y ago
        Yes, there is an epidemic of this problem in state/local public pensions. I was speaking of for-profit corporations, for which we collectively have gotten our act together and required it. I totally agree it needs to be fixed for state/local pensions similarly to how it's being fixed for the USPS. >I can also look at the record of corporate bankruptcy proceedings, and note how the obligations towards pensions are handled in comparison with those towards other types of debtors. TLDR: not well. Well, yes, that's a reason to require the pensions to be funded (at present discounted value), as the benefits are accrued -- why are you bringing this up to oppose that requirement on the USPS, except to condemn those workers to that possible fate? >Finally, there is no specific committment by corporations to pay into a pension fund, only to pay out. They are at liberty to play whatever games they want regarding paying in. This is false; among other places, see the Forbes overview. Many reforms have been enacted and the PBGC has requirements. This isn't the 50s anymore. https://www.forbes.com/sites/ebauer/2020/04/14/post-office-pensions--some-key-myths-and-facts/#7734270e47f5 https://www.forbes.com/sites/ebauer/2020/04/14/post-office-p...
WillPostForFood 6y ago
This is completely not true. "The confusion over 75 years may be due to an "accounting" and not an "actuarial or funding" issue. They only have to fund the future liability of their current or former workforce. https://www.cnbc.com/id/45018432 https://www.cnbc.com/id/45018432
Rebelgecko 6y ago
I've seen this claim elsewhere but IMO it's ridiculously misleading. It's technically true that USPS is mandated to fund pensions for people that aren't alive yet. However, they're not required to actually start putting the finds away until those people grow up and start working for USPS.
- r00fus 6y ago
  The absurdity is that it’s not required of any other agency or private company.
  - Rebelgecko 6y ago
    EVERY company (either private or publicly traded) in the US that offers a pension is legally required to do one of two things: 1. Pre-fund the pensions of employees who aren't born yet OR 2. Stop offering the pension before they hire the people who haven't been born yet Some companies chose to do 2, but without an act of congress the USPS is locked into option #1. This is tautological for any long lived pension plan. It will eventually serve people who haven't been born yet. I don't see why people are so surprised by it.

It doesn't matter if it's 500 years. The farther it is into the future, the greater the time discount to fund it now. "75 years" just sounds inflammatory as a soundbite, but it's completely reasonable. If you're promising it, you should book the expense's present discounted value.

pulisse 6y ago
Why aren't other federal agencies subject to similar requirements? Why isn't such a practice standard in the corporate world? > If you're promising it, you should book the expense's present discounted value. Your argument proves way too much. There is no "promise" here. To whom is the commitment made? The beneficiaries of such pensions do not even exist at this time. The most you can say is that there is an expected future expense. But if your claim is that an entity should be presently setting aside money for all anticipatable expenses, no matter how far in the future, then I think you'll find very few CFOs to agree with you.
- SilasX 6y ago
  >Why aren't other federal agencies subject to similar requirements? Why isn't such a practice standard in the corporate world? It is absolutely standard for corporations to be required to fund their pensions, and to include liabilities on their balance sheet that aren't due for 80 years (in what few cases those actually happen in). Edit: Do you know of a rule whereby e.g. such bonds can be left off the balance sheet? I don't. If other federal agencies (which are different in many other ways) aren't required to fund pensions, they should be -- I agree. >Your argument proves way too much. There is no "promise" here. To whom is the commitment made? The workers, to provide pensions for their dependents. >The most you can say is that there is an expected future expense. But if your claim is that an entity should be presently setting aside money for all anticipatable expenses, no matter how far in the future, then I think you'll find very few CFOs to agree with you. It's not an "anticipatable" expense, it's one that you have specifically committed to as compensation for labor, every bit as "anticipatable" as having to make this month's payroll. Do you know a CFO that thinks it's fine not to have allocated money for that?
  - PaulDavisThe1st 6y ago
    >Do you know a CFO that thinks it's fine not to have allocated money for that? I can't know the state of mind of any CFO. What can I do is look at the record and find companies that have failed allocate money for that. There's no shortage of them in the USA. This is from 2003, but is fairly indicative of the games played: https://www.abi.org/abi-journal/underfunded-pension-plans-a-looming-crisis-for-corporate-america https://www.abi.org/abi-journal/underfunded-pension-plans-a-... Here's a 2017 summary of state public pension funds https://taxfoundation.org/state-public-pension-plan-funding-coronavirus/ https://taxfoundation.org/state-public-pension-plan-funding-... Here's some 2019 reporting on corporate pension shortfall and congressional efforts (!) to help mitigate the damage to individual pensioners: https://www.cnbc.com/2019/07/12/these-pension-plans-are-at-risk-of-going-broke-lawmakers-need-a-fix.html https://www.cnbc.com/2019/07/12/these-pension-plans-are-at-r... So regardless of whether or not it is "absolutely standard for corporations to be required to fund their pensions" (and I don't believe that it is anywhere near as standard or required as you portray it), the facts on the ground are that there are many, many pension funds that are underfunded by many different metrics. I can also look at the record of corporate bankruptcy proceedings, and note how the obligations towards pensions are handled in comparison with those towards other types of debtors. TLDR: not well. Finally, there is no specific committment by corporations to pay into a pension fund, only to pay out. They are at liberty to play whatever games they want regarding paying in. The simplest is to declare assumptions about future revenue, and pay in less (or nothing) in the present.
    - SilasX 6y ago
      Yes, there is an epidemic of this problem in state/local public pensions. I was speaking of for-profit corporations, for which we collectively have gotten our act together and required it. I totally agree it needs to be fixed for state/local pensions similarly to how it's being fixed for the USPS. >I can also look at the record of corporate bankruptcy proceedings, and note how the obligations towards pensions are handled in comparison with those towards other types of debtors. TLDR: not well. Well, yes, that's a reason to require the pensions to be funded (at present discounted value), as the benefits are accrued -- why are you bringing this up to oppose that requirement on the USPS, except to condemn those workers to that possible fate? >Finally, there is no specific committment by corporations to pay into a pension fund, only to pay out. They are at liberty to play whatever games they want regarding paying in. This is false; among other places, see the Forbes overview. Many reforms have been enacted and the PBGC has requirements. This isn't the 50s anymore. https://www.forbes.com/sites/ebauer/2020/04/14/post-office-pensions--some-key-myths-and-facts/#7734270e47f5 https://www.forbes.com/sites/ebauer/2020/04/14/post-office-p...

WillPostForFood 6y ago

This is completely not true. "The confusion over 75 years may be due to an "accounting" and not an "actuarial or funding" issue. They only have to fund the future liability of their current or former workforce. https://www.cnbc.com/id/45018432 https://www.cnbc.com/id/45018432

Rebelgecko 6y ago

I've seen this claim elsewhere but IMO it's ridiculously misleading. It's technically true that USPS is mandated to fund pensions for people that aren't alive yet. However, they're not required to actually start putting the finds away until those people grow up and start working for USPS.

r00fus 6y ago
The absurdity is that it’s not required of any other agency or private company.
- Rebelgecko 6y ago
  EVERY company (either private or publicly traded) in the US that offers a pension is legally required to do one of two things: 1. Pre-fund the pensions of employees who aren't born yet OR 2. Stop offering the pension before they hire the people who haven't been born yet Some companies chose to do 2, but without an act of congress the USPS is locked into option #1. This is tautological for any long lived pension plan. It will eventually serve people who haven't been born yet. I don't see why people are so surprised by it.