US Postal Service 2011 Annual Report Download - page 81

2011 Report on Form 10-K United States Postal Service - 79 -
As previously reported, on January 14, 2010, the Equal
Employment Opportunity Commission's (EEOC) Office of
Federal Operations certified a class action case against
the Postal Service in a matter captioned McConnell v.
Potter (first instituted in 2006), with the class consisting of
all permanent rehabilitation employees and limited duty
employees who have been subjected to the National
Reassessment Process (NRP) from May 5, 2006, to the
present. The Postal Service used the NRP to ensure that
its records were correct and that employees receiving
workers' compensation benefits were placed in jobs
consistent with their abilities. The case alleges violations
of the Rehabilitation Act of 1973 resulting from the NRP's
failure to provide a reasonable accommodation, the
NRP's wrongful disclosure of medical information, the
creation by the NRP of a hostile work environment, and
the NRP's adverse impact on disabled employees. The
class is seeking injunctive relief and damages of an
uncertain amount on behalf of a yet unidentified
population of employees. If the plaintiffs were able to
prove their allegations in this matter and to establish the
damages they assert, then an adverse ruling could have a
material impact on the Postal Service. However, the
Postal Service disputes the claims asserted in this class
action case and is vigorously contesting the matter.
Based on currently available information, adequate
provision has been made for probable losses arising from
claims and suits. The current portion of this liability is $72
million at September 30, 2011, and $114 million as of
September 30, 2010, and is included on the Balance
Sheets in “Trade payables and accrued expenses”. The
long-term portion of this liability at September 30, 2011,
was $690 million and $200 million at September 30, 2010.
These amounts are accrued in “Contingent liabilities and
other” on the Balance Sheets.
In addition to the amounts accrued in the financial
statements, the Postal Service also has claims and
lawsuits which it deems reasonably possible of an
unfavorable outcome which range from $800 million to
$1,100 million at September 30, 2011. No provisions for
these possible losses are accrued or included in the
financial statements.
NOTE 7 — HEALTH BENEFIT
PROGRAMS
CURRENT EMPLOYEES
Substantially all career 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. The Postal Service cannot direct the
costs, benefits, or funding requirements of the plan and,
therefore, accounts for program expenses using
multiemployer plan accounting rules.
The Postal Service cost is based upon the weighted-
average premium cost of the various employee coverage
choices and the specific coverage choices made by
employees. Employees paid approximately 21% of the
premium costs in 2011, 20% in 2010 and 19% in 2009.
Postal Service employee healthcare expense was $5,222
million in 2011, $5,141 million in 2010, and $5,294 million
in 2009.
RETIREES
Employees who participate in the FEHBP for the five
years immediately preceding their retirement may
participate in the FEHBP during their retirement. The
Postal Service is required 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. Costs
attributable to federal civil service before that date are not
included.
In 2006, P.L. 109-435 created the PSRHBF, which is held
by the U.S. Treasury and controlled by OPM, but funded
by the Postal Service. P.L. 109-435 established a ten-
year schedule of Postal Service prefunding payments into
the fund that ranged between $5.4 and $5.8 billion per
year. However, the 2009 scheduled prefunding payment
was decreased from $5.4 billion to $1.4 billion due to the
enactment of P.L. 111-68. This law affected only the 2009
prefunding payment and did not change the prefunding
payment requirements for subsequent years. The
prefunding schedule was further changed on September
30, 2011, when H.R. 2017, the Continuing Appropriations
Act, 2012, deferred the scheduled 2011 PSRHBF
prefunding payment of $5.5 billion to be due by October 4,
2011. P.L. 112-36, the Continuing Appropriations Act,
2012 extended that deferment to not later than November
18, 2011. As a result, the total required 2012 prefunding
payments are $11.1 billion: $5.5 due by November 18,
2011, plus $5.6 billion due by September 30, 2012. To
date, none of the law changes have addressed the
original prefunding payment requirements for 2012 to
2016.
Although P.L. 109-435 dictates the annual prefunding
requirements through 2016, these amounts and the timing
of funding could be changed at any time with enactment
of a new law or an amendment of existing law. At
September 30, 2011, scheduled prefunding payments to
the PSRHBF are: