US Postal Service 2014 Annual Report Download - page 32

2014 Report on Form 10-K United States Postal Service 28
The accrued liability is equal to the total liability less future normal cost payments. The amounts used in these valuations use the
same methodology and assumptions as the OPM’s financial statements, except that the average government share of premium
payments for annuitants is substituted for annuitant medical costs less annuitant premium payments. This amount is assumed to
increase at 4.3% per year as of the valuation date. For current Postal Service annuitants, the government share of premium
payments is adjusted to reflect the pro-rata share of civilian service to total service for which the Postal Service is responsible.
The pro-rata adjustment is made by applying calculated factors based upon actual payments that vary by the age and Medicare
status of enrollees. For active Postal Service employees, the pro-rata share in retirement is assumed to be 93% of the total.
Assets of the PSRHBF are comprised entirely of long-term, special-issue U.S. Treasury securities with maturities of up to 15
years. The long-term securities bear interest rates ranging from 1.38% to 5.00%.
The following table shows the net assets of the PSRHBF as reported by the OPM:
(in millions)
2014
2013
Beginning balance at October 1
$
47,312
$
45,744
Contributions and transfers
—
—
Earnings at 3.4% and 3.6%, respectively
1,538
1,568
*
Net increase
1,538
1,568
Fund balance at September 30
$
48,850
$
47,312
*
*Updated to reflect an additional $20M in interest earned but not received as a result of the government’s
debt issuance suspension period and not reported by the OPM with last year’s earnings and fund balance.
Because calculation of the PSRHBF liability involves several areas of judgment, estimates of the liability could vary
significantly depending on the assumptions used. Utilizing the same underlying data that was used in preparing the estimate in
the table above, the September 30, 2014, unfunded obligation could range from $33 billion to $68 billion, solely by varying the
inflation rate by plus or minus 1% and the 2013 unfunded obligation would range from $35 billion to $64 billion.
Although P.L. 109-435 dictates the annual prefunding requirements through 2016, these amounts and the timing of funding
could change at any time with enactment of a new law or an amendment of existing law. At September 30, 2014, scheduled
prefunding payments to the PSRHBF are as follows:
P.L. 109-435
(in millions)
Requirement
2015*
$
28,100
2016
5,800
2017**
—
2018**
—
2019**
—
Total PSRHBF commitment
$
33,900
*The 2015 commitment includes the $22.4 billion of payments previously defaulted on and $5.7 billion which is due no later than September 30,
2015.
**Effective in 2017, the unfunded liability will be calculated by the OPM. We are obligated to fund the actuarially determined normal cost and the
amortized portion of the unfunded liability.
Workers’ Compensation - Postal Service employees injured on the job are covered by the FECA, administered by the DOL’s
OWCP. We are legally-mandated to participate in the federal workers’ compensation program. We reimburse the DOL for all
workers’ compensation benefits paid to or on behalf of Postal Service employees, plus an administrative fee. Refer to Item 8.
Financial Statements and Supplementary Data, Note 10- Workers’ Compensation.
Under FECA, many types of workers’ compensation claims cannot be settled through lump-sum payments, rather, compensation
must be paid over many years. The FECA benefit structure is often superior to benefits available under normal federal