Notes to the Financial Statements
In addition, P.L. 109-435 mandates annual payments into the PSRHBF. These payments are listed in the following table.
| Retiree Health Benefits Commitments | P.L. 109-435 |
|---|---|
(Dollars in millions) |
|
2009 |
$ 5,400 |
2010 |
5,500 |
2011 |
5,500 |
2012 |
5,600 |
2013 |
5,600 |
After 2013 |
17,200 |
Total Retiree Health Benefits Commitments |
$ 44,800 |
Note 8 — Contingent liabilities
Our contingent liabilities consist mainly of claims and suits resulting from labor, equal employment opportunity, and environmental issues, property damage claims, injuries on postal properties, issues arising from postal contracts, personal claims, and traffic accidents.
Each quarter we review significant new claims and litigation for the probability of an adverse outcome. If a claim is deemed “probable” for an unfavorable outcome and the amount of settlement is estimable, we record a liability. Each quarter we also review and adjust any prior contingencies for settlements, or revisions to prior estimates. No individual claim is material to our financial statements when taken as a whole. The following table summarizes contingent liabilities provided for in our financial statements.
| Contingent Liabilities | 2008 |
2007 |
|---|---|---|
(Dollars in millions) |
|
|
Labor |
$ 318 |
$ 526 |
Equal Employment Opportunity |
45 |
57 |
Environmental |
40 |
40 |
Tort |
32 |
39 |
Contractual |
1 |
14 |
Total Contingent Liabilities |
$ 436 |
$ 676 |
We believe that adequate provision has been made for probable liabilities from claims and suits. The current portion of this liability at September 30, 2008, of $198 million is included on the balance sheets under the heading “Trade payables and accrued expenses”. On September 30, 2007, this amount was $248 million. The long-term portion on September 30, 2008, of $238 million is accrued under the heading, “Noncurrent Liabilities, Contingent liabilities and other” in our balance sheet. On September 30, 2007, the long-term liability was $428 million.
We also have other claims and suits that we deem reasonably possible of unfavorable outcomes and for which we cannot yet determine the amounts or a reasonable range of potential losses, if any. No provisions for these are included in our financial statements.
Note 9 — Health benefit programs
Current Employees
Substantially all of our career employees are covered by the Federal Employees’ Health Benefits Program (FEHBP). OPM administers the program and allocates the cost of the program to the various participating government agency employers. We cannot direct the costs, benefits, or funding requirements of the federally sponsored plan, and therefore account for these costs using multiemployer plan accounting rules.
Our portion of the cost is based upon the weighted average premium cost of the various employee coverage choices and the specific coverage choices made by our employees. Our employees paid approximately 18% of the premium costs in 2008, and 17% in 2007 and 2006. We paid the remainder of employee health care expense, which was $5,376 million in 2008, $5,401 million in 2007, and $5,345 million in 2006.
Retirees
Employees who participate in the FEHBP for at least the five years immediately before their retirement may participate in the FEHBP during their retirement. The Omnibus Budget Reconciliation Act of 1990 requires us to pay the employer’s share of health insurance premiums for all retired postal employees and their survivors who participate in the FEHBP and who retire on or after July 1, 1971. However, we do not include the costs attributable to federal civil service before that date.
As discussed in Note 4, Postal Accountability and Enhancement Act, Public Law 109-435 (P.L. 109-435), resulted in our retiree health benefit expenses increasing dramatically beginning in 2007. Total expenses were $7,407 million in 2008 and $10,084 million in 2007, compared to only $1,637 million in 2006. These costs are reflected as Retiree health benefits in our Statements of Operations.