US Postal Service 2012 Annual Report Download - page 41

2012 Report on Form 10-K United States Postal Service- 40 -
up to 15 years. The long-term securities bear interest rates ranging from 1.375% to 6.5%, while the short-term securities
bear interest rates of 1.250%.
The assumed rates of return on the CSRS fund balance for 2011 and 2010 were 5.75%, and the actual rates of return
were 4.71% and 5.10%, respectively. For the FERS fund, the assumed rates of return for 2011 and 2010 were 5.75%,
while the actual rates of return were 4.56% for 2011 and 4.77% for 2010. The projected rate of return on the CSRS and
FERS fund balance for 2012 is 5.25%.
OPM estimates the contributions and benefit payments for the next five years as follows:
Projection of CSRS and FERS Contributions and Benefit Payments as calculated by OPM
(Dollars in billions)
2012
$
0.3
$
11.9
$
3.7
$
1.4
2013
0.2
12.3
3.7
1.6
2014
0.2
12.8
3.7
1.9
2015
0.2
13.1
3.7
2.1
2016
0.1
13.5
3.7
2.4
Contributions
Payments
Contributions
Payments
CSRS
FERS
Total Benefit
Total Benefit
HEALTH BENEFITS
Postal employees and retirees may participate in the Federal Employees’ Health Benefit Program (FEHBP), which is
administered by OPM. The Postal Service accounts for current employee and retiree health benefit costs as an expense
in the period the contribution is due. For retiree health benefits, multiemployer plan accounting rules are used.
The drivers of active employee healthcare expense are the number of employees electing coverage and the premium
costs of the selected plans. On average, the Postal Service paid 78% of the premium cost in 2012 and employees paid
the remainder. The average employer contribution was 79% in 2011, and 80% in 2010. We expect the Postal Service
contribution to health benefit premiums to continue to decrease in the future, until they reach the average for the
remainder of the federal government which is currently 72%. The total premium cost for each plan is negotiated annually
by OPM with each insurance carrier. In September 2012, OPM announced average premium increases of 3.4% for
calendar year 2013. Previous increases were 3.8% in 2012, 7.2% in 2011, and 8.8% in 2010.
Total employee health benefit expenses were $5,187 million in 2012, a decrease of $35 million, or 0.7%, compared to
$5,222 million in 2011. The decrease in 2012 expense was driven by the reduction in the number of employees. The 2011
expense of $5,222 million was an increase of $81 million, or 1.6%, from the 2010 health benefits expense of $5,141
million due to the increase in average health premiums of 7.2% which was partially offset by the decrease in employees.
Employee health benefits expense was 10.9%, 10.8%, and 10.5% of total compensation and benefits expenses in 2012,
2011, and 2010, respectively.
RETIREE HEALTH BENEFITS
Eligible employees, those with at least five consecutive years of participation in the FEHBP immediately preceding
retirement, are entitled to continue to participate in FEHBP after retirement. The amount due the PSRHBF for prefunding
in any given year is set by law. That amount, plus our portion of the current premium expense for retirees, is recognized
as an expense when due.
P.L. 109-435 made several changes to the way we fund and report the obligation for post-retirement health benefits. The
law established the PSRHBF, and initially directed that we make annual prefunding payments of between $5.4 billion to
$5.8 billion per year through 2016 into this fund. Although P.L. 109-435 specifies the funding requirements through 2016,
the amounts to be funded and the timing of the funding can be changed at any time with enactment of a new law or upon