US Postal Service 2007 Annual Report Download - page 49

2007 Annual Report United States Postal Service | 49
Notes to the Financial Statements
In addition, P.L.109-435 mandates annual payments into the PSRHBF.
These payments are listed in the following table.
Retiree Health Benefits Commitments
P.L.109-435
Requirement
(Dollars in millions)
2008 $ 5,600
2009 5,400
2010 5,500
2011 5,500
2012 5,600
After 2012 22,800
Total Retiree Health Benefits Commitments $ 50,400
Note 8 – Contingent liabilities
Our contingent liabilities consist mainly of claims and suits resulting from
labor issues, equal employment opportunity issues, environmental issues,
property damage claims, injuries on postal properties, issues arising from
postal contracts, personal claims, and traffic accidents.
Each quarter we review significant new claims and litigation for the
probability of an adverse outcome. If a claim is deemed “probable” for an
unfavorable outcome and the amount of settlement is estimable, we record
a liability. Each quarter we also review and adjust any prior contingencies
for settlements, or revisions to prior estimates. No individual claim is
material to our financial statements when taken as a whole. The following
table summarizes our contingent liabilities provided for in the financial
statements.
Contingent Liabilities 2007 2006
(Dollars in millions)
Labor Cases $ 526 $ 254
Equal Employment Opportunity Cases 57 66
Tort Cases 39 57
Environmental 40 25
Contractual Cases 14 16
Total Contingent Liabilities $ 676 $ 418
We believe that adequate provision has been made for the probable
liabilities from claims and suits. The current portion of this liability at
September 30, 2007 of $248 million is included on the balance sheet
under the heading “Trade payables and accrued expenses”. On September
30, 2006 this amount was $267 million. The long-term portion at
September 30, 2007 of $428 million is accrued under the heading,
“Noncurrent Liabilities: Contingent liabilities and other” in our balance
sheet. On September 30, 2006 the long-term liability was $151 million.
We also have other claims and suits that we deem reasonably possible of
unfavorable outcomes and for which we cannot yet determine the amounts
or a reasonable range of potential losses, if any. No provisions for these are
included in our financial statements.
Note 9 – Health benefit programs
Current Employees
Substantially all of our employees are covered by the Federal Employees’
Health Benefits Program (FEHBP). OPM administers the program and
allocates the cost of the program to the various participating government
agency employers. We cannot direct the costs, benefits, or funding
requirements of the federally-sponsored plan and therefore account for
these costs using multiemployer plan accounting rules.
Our portion of the cost is based upon the weighted average premium
cost of the various employee coverage choices and the specific coverage
choices made by our employees. Our employees paid approximately 17%
of the premium costs in 2007, 2006 and 2005. We paid the remainder of
employee health care expense, which was $5,401 million in 2007, $5,345
million in 2006, and $5,100 million in 2005.
Retirees
Our employees 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 retired
postal 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 civil service before that date.
As discussed in Note 4, Postal Accountability and Enhancement Act,
Public Law 109-435 ( P.L.109-435), resulted in our retiree health benefit
expenses increasing dramatically, to $10,084 million in 2007, compared
to $1,637 million in 2006 and $1,495 million in 2005. These costs are
reflected as Retiree health benefits in our Statements of Operations.
Note 10 – Retirement programs
Pension Programs
Our employees participate in one of the following pension programs based
upon the starting date of their employment with the federal government.
Employee and employer contributions are made to the Civil Service
Retirement System (CSRS), the Dual Civil Service Retirement System/
Social Security (Dual CSRS), or the Federal Employees Retirement
System (FERS), all of which are administered by the Office of Personnel
Management. Employees may also participate in the Thrift Savings Plan
(TSP), which is a defined contribution retirement savings and investment
plan. Postal Service employees are authorized to participate in the TSP
by the Federal Employees Retirement System Act of 1986. The TSP is
administered by the Federal Retirement Thrift Investment Board.