US Postal Service 2014 Annual Report Download - page 30

2014 Report on Form 10-K United States Postal Service 26
The OPM estimates the contributions and benefit payments for the next five years as follows:
(in billions)
CSRS
FERS
Contributions
Total Benefit
Payments
Contributions
Total Benefit
Payments
2014
0.2
12.1
3.0
2.0
2015
0.2
12.4
3.3
2.2
2016
0.2
12.7
3.4
2.5
2017
0.1
13.0
3.3
2.8
2018
0.1
13.2
3.3
3.2
Health Benefits - Postal Service employees and retirees may participate in the FEHBP, which is administered by the OPM. The
Postal Service accounts for current employee and retiree health benefit costs as an expense in the period in which the
contribution is due.
Current Employees
Health care expense is most significantly impacted by the number of employees electing coverage and the premium costs of the
selected plans. The employer contribution rate for the majority of our employees is subject to collective bargaining agreements.
On average, the Postal Service paid 76% of the premium costs in 2014, and 78% of the premium costs in 2013 and 2012. Our
employees paid the remainder. In September 2014, the OPM announced average premium increases of 3.2% for Calendar Year
2015. Previous increases were 3.7% in 2014, 3.4% in 2013 and 3.8% in 2012.
Total employee health benefit expenses were $4.8 billion for the year ended September 30, 2014, a decrease of $147 million, or
3.0% from the 2013 expense of $5.0 billion. The decrease in 2014 primarily resulted from the lower career complement levels
throughout much of the year. The 2013 expense decreased by $236 million, or 4.5%, when compared to $5.2 billion of expense
in 2012. The 2013 decrease resulted from a reduction in the number of career employees during that year. Employee health
benefits expense was 10.4%, 10.6% and 10.9% of total compensation and benefits expense in 2014, 2013 and 2012,
respectively.
Retirees
Eligible employees, defined as having at least five consecutive years of participation in the FEHBP immediately preceding
retirement, are entitled to continue to participate in FEHBP after retirement. Our total cost for retiree health benefits consists of
two components: 1) the PSRHBF prefunding payments which are set by law and 2) our portion of the current premium expense
for retirees. These amounts are recognized as an expense when due.
Retiree health benefit premium expense, which excludes prefunding payments to the PSRHBF, has grown every year due to
premium increases and the increased number of retirees. Retiree health benefits premium expense increased 4.8% in 2014, 8.4%
in 2013 and 7.7% in 2012. The number of Postal Service annuitants and survivors participating in FEHBP as of September 30 of
each year was approximately 490,000 in 2014, compared to 491,000 in 2013 and 471,000 in 2012.
The following table shows the components of retiree health benefits expense for 2014, 2013 and 2012:
(in millions)
2014
2013
2012
Retiree health benefits premiums
$
2,985
$
2,850
$
2,629
P.L. 109-435 payment to PSRHBF
5,700
5,600
11,100
Total retiree health benefits
$
8,685
$
8,450
$
13,729
With the passage of P.L. 109-435 in 2006, the PSRHBF was established and the law initially directed that we make annual
prefunding payments through 2016 into the 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
amendment of an existing law.