Eligible employees, those with at least five consecutive years participation in the FEHBP immediately preceding retirement, are entitled to continue to participate in these programs after retirement. The amount due the PSRHBF for pre-funding in any given year, plus our portion of the current premium expense, is recognized as an expense when due.
P.L. 109-435 made several changes to the way we fund and report the obligation for post-retirement health benefits. The law established the PSRHBF, and directed that we make annual pre-funding payments of between $5.4 billion to $5.8 billion per year through 2016 into this 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 passage of a new law or upon amendment of an existing law. On October 1, 2009, P.L. 111-68 became law and decreased the scheduled 2009 payment by $4.0 billion — from $5.4 billion to $1.4 billion. Similar legislation was not enacted regarding the 2010 scheduled payment and, accordingly, on September 30, 2010, the Postal Service made a $5.5 billion contribution to the PSRHBF.
Not later than 2017, OPM will conduct an actuarial valuation and determine whether any further payments into the fund are required. If additional payments are required, OPM will design an amortization schedule to fully amortize the remaining liability, if any, by 2056. Beginning in 2017, the PSRHBF will begin to pay the Postal Service’s portion of the retiree health premiums, but also beginning in 2017, we will fund the actuarially determined normal cost.
The 2010, 2009, and 2008 payments to the PSRHBF were $5.5 billion, $1.4 billion, and $5.6 billion, respectively. See Note 7, Health Benefit Programs, in the Notes to the Financial Statements, for further discussion of the accounting treatment for P.L. 111-68.
Under P.L. 109-435, OPM continues to charge us for the premiums for postal retirees participating in FEHBP, and we continue to expense these payments as they become due, until 2017. The major drivers of retiree health benefits premium costs are the number of retirees and survivors on the rolls, the mix of plans selected by retirees, the premium costs of those plans, and the apportionment of premium costs to the federal government for retiree service prior to 1971. Retiree health benefit premium expense, exclusive of the expense for pre-funding the PSRHBF, has increased every year. Retiree health benefits premium expense increased 12.9% in 2010, 10.1% in 2009, and 4.7% in 2008. The number of Postal Service annuitants and survivors has grown to approximately 473,000 in 2010, compared to 463,000 in 2009 and 452,000 in 2008. The average monthly apportionment, the percentage of retiree premiums charged to the Postal Service, has increased from 69.9% in 2008, to 72.0% in 2009, and to 74.9% in 2010.
The following table shows the components of retiree health benefits expense for 2010, 2009, and 2008.
