The Financial Accounting Standards Board proposal requires all abiding firms, including the U.S. Postal Service, to report post-retirement benefit costs in its annual budget. Currently, the Postal Service reports its pension costs on a year-to-year basis, rather than accounting for the entire sum on an accrual basis.
Under the proposed FASB rule, the Postal Service would report a projected $60 billion for retiree health benefits, according to Gene Del Polito, president of the Association for Postal Commerce, a group representing direct mailers. The agency also would have to submit a plan detailing how it would pay for the reported costs. To generate that money, Del Polito said the Postal Service would have to raise its rates.
If the postal legislation in Congress is enacted, the agency will have access to its accruing escrow fund, worth an estimated $3 billion, to help pay retiree benefit costs.
With the FASB accounting rule looming, Del Polito and another source following the legislation contend everyone from mailers wanting to avoid rate increases to the Postal Service aiming looking to get access to its escrow fund will be eager for the bill to get out of conference.
The White House opposes the provision, included in the House and Senate versions, giving the postal service access to the account. The sweeping bill intended to improve the service's finances and change its management structure.
A Postal Service spokesman contended the FASB rule, slated to go into affect at the end of this year, would not apply to the agency since it is considered a "multi-employer." Because multi-employer pensions operate on an annual budget, the postal service would not have to comply with the FASB rule, which applies to single-employer pensions, the spokesman said.
Meanwhile, Bill Tayman, the financial planning manager at the Postal Service, said the agency already discloses its post-retirement benefit costs in its annual report, so the FASB proposal would simply "bring the cost from the footnotes to the actual financial sheets."
Del Polito predicted that if the FASB rule goes into effect before the postal legislation is approved, the Treasury Department would "be compelled" to deem the postal service a single employer in order to "be held harmless" for the agency's retiree liability.