portion of the cost is based upon the average premium cost of the various employee coverage choices and the specific coverage choices made by our employees. The employees of the Postal Service paid 16.7% of the cost in 2004, 2003 and 2002, and we paid the remainder.

Employees of the Postal Service 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 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 civilian service before that date.

We account for retiree health benefits as a participant in a multiemployer plan arrangement in accordance with FAS 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. Our annuitant health benefit expenses amounted to $1,313 million in 2004, $1,133 million in 2003 and $987 million in 2002. We include these costs in our compensation and benefits expense.

Note 5 - debt and related interest costs

Under the Postal Reorganization Act, as amended by Public Law 101-227, we can issue debt obligations. However, we are limited to net annual increases of $2 billion in our debt for capital improvements and to $1 billion for operating expenses. Our total debt cannot exceed $15 billion.

Cash outlays for interest (including the supplemental retirement obligations) were $242 million in 2004, $426 million in 2003 and $339 million in 2002.

In January, July and August 2003, we repaid debt with maturity dates that extended to 2031. In connection with the August transaction, we paid a premium (debt repurchase expense) of $360 million which was expensed when incurred.

At year-end, the current estimated market value of our debt was $1,800 million in 2004 and $7,283 million in 2003. Debt consists of $1,800 million in cash drawn on our line of credit with the FFB.

Our Note Purchase Agreements with the Federal Financing Bank, renewed this year, provide for revolving credit lines of $4 billion. These credit lines enable us to draw up to $3.4 billion with two days' notice and up to $600 million on the same business day the funds are needed. Under these agreements we can also use a series of other notes with varying provisions to draw

Our Debt Consists of the following
(Dollars in millions)

* All debt repurchasable at any time at a price determined by the current FFB rates.
** Weighted average interest rate; prior year's interest rate was 1.026%.

upon with two days' notice. The notes provide us the flexibility to borrow short-term or long-term, using fixed or floating rate debt, and can be either callable or non-callable.

Note 6 - retirement programs

Our employees, retirees and their survivors participate in a pension program of the U.S. government. We account for our involvement in these programs as participation in a multiemployer plan arrangement, in accordance with FAS 87, Employers' Accounting for Pensions.

With certain exceptions, employees participate in one of the following three retirement programs based upon the starting date of their employment with the Postal Service. Employee and employer contributions are made to the Civil Service Retirement System, the Dual System or the Federal Employees Retirement System, which are administered by the Office of Personnel Management. Employees may also participate in the Thrift Savings Plan, which is a defined contribution retirement savings and investment plan. Postal Service employees are authorized to participate in the Thrift Savings Plan by the Federal Employees Retirement System Act of 1986. The Plan is administered by the Federal Retirement Thrift Investment Board.