US Postal Service 2008 Annual Report Download - page 55

2008 Annual Report United States Postal Service | 55
Revenue Forgone Appropriation
Revenue Forgone is an appropriation from Congress, that
covers our cost of providing free and reduced rate mailing
services to groups designated by Congress. The amount
of expense estimated by the Postal Service is submitted
to Congress annually. Congress subsequently approves or
alters the amount and funds the necessary appropriation.
See Note 12, Revenue forgone, in the Notes to the Finan-
cial Statements for additional information.
Emergency Preparedness Appropriation
Emergency preparedness appropriations are funds we re-
ceived from the federal government to help pay the costs
of keeping the mail, postal employees, and postal custom-
ers safe, and are restricted for such use. These funds were
accounted for as deferred revenue upon receipt and were
largely utilized to procure capital equipment. We recognize
revenue for emergency preparedness appropriations at the
same time we recognize depreciation expense for capital
equipment purchased with these appropriations. The emer-
gency preparedness appropriations revenue recognized
during the years ended September 30 was $61 million in
2008, $76 million in 2007, and $85 million in 2006.
Appropriations that have not been recognized as revenue
during the years ended September 30 were $550 million
in 2008 and $611 million in 2007. The current portion is
included in prepaid box rent and other deferred revenue,
and the long-term portion is in deferred appropriations and
other revenue on our balance sheets.
Note 3 — Recent pronouncements
In September 2006, the Financial Accounting Standards
Board (FASB) issued FAS 157, which defines fair value, es-
tablishes a framework for measuring fair value, and expands
disclosures about fair value measurements. The provisions
of FAS 157 are effective as of the beginning of our 2009 fis-
cal year. FAS 157 does not change any of our measurement
or disclosure reporting.
Note 4 — Postal Accountability and
Enhancement Act, Public Law 109-435
(P.L. 109-435)
P.L.109-435, enacted December 20, 2006, made signifi-
cant reforms in the governance of the Postal Service and
significantly altered some of our financial responsibilities,
particularly in respect to the funding of CSRS benefits and
retiree health benefits. The legislation does not change our
parent-subsidiary type relationship as an “independent es-
tablishment of the executive branch of the Government of
the United States.” Our employees and retirees continue to
participate in all federally sponsored retirement and health
benefit plans. Therefore, we continue to account for our
participation in U.S. government–sponsored health benefit
and retirement plans using multiemployer plan accounting
rules in accordance with FAS 106, Employers’ Accounting
for Postretirement Benefits Other Than Pensions, and FAS
87, Employers’ Accounting for Pensions.
A number of major provisions of P.L.109-435 directly impact
our financial statements and are briefly summarized here.
For a complete understanding of the law, one must consult
the full text, which can be found at www.thomas.gov.
P.L.109-435 returned to the U.S. Treasury the obligation
to fund the portion of the CSRS retirement benefit earned
while serving in the military by participants who retire as
postal employees. With the return of this funding require-
ment to the U.S. Treasury, it was estimated by OPM that we
had fully funded our CSRS pension obligation as of Sep-
tember 30, 2006. See Note 10, Retirement programs, in
the Notes to the Financial Statements for more information
on our retirement obligations.
Under P.L. 109-435, the Postal Service Retiree Health Ben-
efits Fund (PSRHBF), which is held by the U.S. Treasury
and controlled by OPM, was created. The PSRHBF will be
used, commencing in 2017, to pay our share of the health
insurance premiums for current and future Postal Service
retirees. The initial funding of the PSRHBF consisted of
$17.1 billion, which was identified by OPM to be the sur-
plus of the Postal Service’s portion of the CSRS as of Sep-
tember 30, 2006. Beginning in 2007, P.L.109-435 required
us to make annual payments into the PSRHBF. The pay-
ment schedule in the law requires us to pay, on average,
$5.6 billion per year into the fund for 10 years, which began
in 2007. This is in addition to our regularly allocated cost
of premiums for current retirees, which will continue to be
payable through 2016. After these annual payments are
complete, OPM will make an actuarial valuation and deter-
mine whether any further payments into the PSRHBF are
required. We paid $5.6 billion into the PSRHBF in 2008 and
$5.4 billion in 2007.
P.L.109-435 repealed the escrow provisions of P.L.108-18,
which required us to place into an escrow account by Sep-
tember 2006, any “savings” from the change in the retire-
ment provisions created by P.L.108-18. OPM calculated
the savings at $2,958 million as of September 30, 2006.
These escrowed funds were shown as restricted cash on