US Postal Service 2003 Annual Report Download - page 50

48 | 2003 annual report united states postal service
notes to the
financial statements
through the end of 2003. In our calculation of present
value, a net discount rate of 1.4% for medical
expenses and 3.0% for compensation claims is used.
The estimate of the total costs of a claim is based upon
the severity of the injury, the age of the injured
employee, the assumed life expectancy of the
employee, the trend of our experience with
such an injury and other factors. See Note 3 for addi-
tional information.
Emergency Preparedness Appropriations
Emergency preparedness appropriations are the funds
received from the federal government to help pay the
costs to keep the mail, postal employees and postal
customers safe. Upon receipt of the funds, we estab-
lish a liability. Upon use of the funds, we recognize
non-operating revenue to the extent of the expendi-
ture. Appropriations received for capital equipment will
be offset against depreciation expense over the life of
the equipment. See Note 11 for additional information.
3 workers’ compensation
At the end of 2003, we estimate our total liability for
future workers’ compensation costs, excluding the
Post Office Department (POD) liability, at $7,114
million. At the end of 2002, this liability was $6,525
million. The payout period for this liability will, for some
claimants currently on the rolls, be for the rest of their
lives. The liability is sensitive to changes in inflation
and discount rates. A change of 1% in the assump-
tions would change our estimate of the liability by
approximately $600 million.
In 2003, we recorded $1,457 million in workers’
compensation expense, compared to the $1,511
million we recorded in 2002 and the $970 million we
recorded in 2001. Our liability for future workers’
compensation costs for POD claims was $122 million
in 2003 and $185 million in 2002. In 2003, we
recorded an expense of $17 million for POD, compared
to the $13 million we recorded in 2002 and $9 million
in 2001.
4 health benefit programs
Career employees of the Postal Service are covered
by the U.S. government health plan, the Federal
Employees Health Benefits Program (FEHBP). The
Office of Personnel Management administers the
program and allocates the cost of the program to the
various participating employers. Our portion of the
cost is based upon the average premium cost of the
various employee coverage choices and the specific
coverage choices made by our employees. The
employees of the Postal Service paid for 16.7% of the
cost in 2003, and we paid the remainder.
Employees of the Postal Service 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 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 civilian service before that date.
We account for post-retirement health benefits as
a participant in a multi-employer plan arrangement
in accordance with the Statement of Financial
Accounting Standards (FAS) 106, Employers’
Accounting for Postemployment Benefits Other Than
Pensions. Our retiree FEHBP costs amounted to
$1,133 million in 2003, $987 million in 2002 and
$858 million in 2001. We include these costs in our
compensation and benefits expense.
5debt and related
interest costs
Under the Postal Reorganization Act, as amended by
Public Law 101-227, we can issue debt obligations.
However, we are limited to net annual increases of $2
billion in our debt for capital improvements and to $1
billion for operating expenses. Our total debt cannot
exceed $15 billion.
Debt is due as follows (dollars in millions):
Year Amount
2004 $7,273
After 2008 1
Total $7,274
Cash outlays for interest were $426 million in 2003,
$339 million in 2002 and $339 million in 2001.
In January, July and August 2003, we repaid debt
with maturity dates that extended to 2031. In
connection with the August transaction, we paid a
premium (debt repurchase expense) of $360 million
which was expensed when incurred.
At year-end, the current estimated market value of
our debt is $7,283 million in 2003 and $11,991
million in 2002 (Note 2). All notes payable to the