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3
WORKERS' COMPENSATION
At the end of fiscal
year 2001, we estimate our total liability for future workers' compensation
costs, excluding Post Office Department (POD) liability, at $5,804 million.
At the end of 2000, this liability was $5,560 million. In 2001, we recorded
$970 million in workers' compensation expense, compared to the $911 million
we recorded in 2000 and the $603 million we recorded in 1999. Our liability
for future workers' compensation costs for POD claims was $172 in 2001
and $193 million in 2000. In 2001, we recorded an expense of $9 million
for POD, compared to the $14 million we recorded in 2000 and the $11 million
we recorded in 1999.
In fiscal year 2000,
we refined our methodology used to estimate the present value of the total
amounts we expect to pay for current Postal Service workers' compensation
claims. The major refinement is the use of a life table that reflects
long-term experience with a disabled population to estimate mortality
rates of our permanently disabled population. Previously, we had used
a life table that reflected experience with the general United States
population. In management's opinion, the refinements result in a better
estimation of our liability for future outlays on behalf of Postal Service
workers' compensation claimants. The effect of the refinements was a reduction
of $423 million in the fiscal year 2000 compensation and benefits expense.
In fiscal year 1999,
we adopted a change in the net discount rate used in determining the present
value of estimated future workers' compensation payments for medical claims.
The net discount rate for medical claims was changed from 0.1% to 1.4%.
The effect of the adoption of this rate has been accounted for as a change
in accounting estimate. It resulted in a decrease of $131 million in the
fiscal year 1999 compensation and benefits expense. In management's opinion,
this net discount rate better reflects the excess of rates of return on
government debt instruments of comparable terms relative to expected future
medical inflation.
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