4 ms·

> prudent USPS has a pension funding burden that no other entity in the USA operates under. Without that they would be doing just fine.

• google234123 6y ago
  Why does anyone provide a pension now? 401ks are much more financially prudent.
  • lotsofpulp 6y ago
    It's mostly taxpayer funded entities that provide defined benefit pensions now, since in the US, they are exempt from any laws about setting aside any money for the future benefits. This works well for politicians and senior government employee union members, who can be promised lavish benefits in the near term, at the same time as advertising low taxes to the non government employee voters since they can just make up numbers for how much they need to save to pay the benefits. They won't do it so brazenly as to simply set aside $0 for benefits promised today, but it happens by using extremely liberal discount rates (~8%) to make future liabilities look less than they are. For reference, non taxpayer funded entities are subject to Pension Protection Act of 2006, which requires pension plans to use highly rated corporate bond yield curves, around ~4%. Each percentage increase in discount rate, roughly, makes the amount of money you need to save today 10% to 20% less (since you're assuming greater investment returns). Legislators can also just not pay the recommended amount. For example, in a government pension plan, the actuaries comes back with a funding recommendation of $1B to pay for the benefits accrued this year (which is already understating costs due to liberal assumptions). The leaders or legislators will just say we don't have $1B this year, but let's do $500M, and then amortize the rest over the next 10 years. Maybe the governor or mayor promised no tax increases, maybe they want to push tax increases or budget cuts to after they move onto their next political office. You can keep this rob the future to pay for today scheme going for a few decades while people are having lots of kids and the tax base is growing and income from taxes is growing. But it comes to a head, like it is now, eventually.
• lotsofpulp 6y ago
  All non taxpayer funded entities operate with similar requirements for funding of deferred benefits such as defined benefit pensions. See Pension Protection Act of 2006 and Postal Accountability and Enhancement Act of 2006. USPS had a pass for a long time and get passed back and forth as government and non government for political purposes, but if you don't have access to the federal government's money printing abilities, there's no reason you should not be subject to funding requirements.
• throwaway0a5e 6y ago
  Considering that damn near every public entity manages to run their pension fund into the ground I would call it prudent. And my whole point is that in light of that burden they're doing fine.
• exolymph 6y ago
  Yeah but the restriction on USPS is good and should apply to the rest as well, not the other way around.
  • vkou 6y ago
    If, for example, the DOD had to pre-fund pensions the way USPS does, either your taxes would go up by ~30%, or half of the actively serving military would be given a pink slip by next Thursday.
    • exolymph 6y ago
      Sounds good to me.
    • sokoloff 6y ago
      In a world where we're running $3.1T/yr deficit, why wouldn't we just crank that number even higher? Either way, it's a future obligation of the federal government, but it doesn't mean it's going to come out of taxes now (even though it perhaps should)