Financial Reporting:

Accounting for the Postal Service's Postretirement Health Care Costs

AFMD-92-32: Published: May 20, 1992. Publicly Released: May 20, 1992.

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Pursuant to a congressional request, GAO reviewed the U.S. Postal Service's (USPS) reporting of postretirement health care costs in its financial statements.

GAO found that: (1) USPS accounting for postretirement health benefit costs is in accordance with generally accepted private-sector accounting principles; (2) disclosure of the full amount of accrued benefits earned by USPS employees and retirees would provide Congress, the executive branch, and the Postal Rate Commission with more complete information to assess rate change requests, deal with oversight matters, and evaluate performance; (3) USPS estimates indicate that regardless of how health care costs are accounted for and funded, USPS will require at least a 1-cent rate increase for first-class mail by 2003; (4) if health care costs are accrued and fully funded, rates could jump by 3 cents in 1994, increase again by 1 cent by 2011, and then decrease thereafter; and (5) on a pay-as-you-go basis, smaller but more frequent rate hikes would be necessary, an average of about 1 cent every other year after 2011.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Postal Service disagreed with the recommendation and no action is planned.

    Recommendation: The Postmaster General should direct the Assistant Postmaster General, Department of the Controller, to provide a note to the financial statements which, at a minimum, describes the postretirement health care benefits plan, the estimated amounts of postretirement health care benefits earned by employees and retirees since July 1, 1971, to the date of the statements less the related amounts of benefits used, the estimated amounts of benefits attributable to the period(s) covered by the statements, and the assumptions under which the estimates were derived.

    Agency Affected: United States Postal Service

 

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