Summary

The U.S. Postal Service's pay-as-you-go accounting for postretirement health benefit costs is in accordance with generally accepted private-sector accounting principles. However, disclosure of the full amount of accrued benefits earned by Postal Service employees and retirees in notes accompanying the financial statement would provide Congress, the executive branch, the Postal Rate Commission, and the public with more complete information to evaluate oversight matters, requests for rate changes, and performance. GAO disagrees with the Postal Service that it would be impractical and confusing to disclose these future costs in notes to the financial statements. Regardless of how health care costs are accounted for and funded, Postal Service estimates show that at least a 1-cent increase in first class mail rates will be needed by the year 2003. If they are accrued and fully funded, first class rates could jump by 3 cents as early as 1994, increase again by only a cent by 2011, and then decrease thereafter. Conversely, smaller but more frequent rate hikes would be needed on a pay-as-you-go basis--an average of about one cent every other year after 2011.

GAO found that: (1) USPS accounting for postretirement health benefit costs is in accordance with generally accepted private-sector accounting principles; (2) disclosure of the full amount of accrued benefits earned by USPS employees and retirees would provide Congress, the executive branch, and the Postal Rate Commission with more complete information to assess rate change requests, deal with oversight matters, and evaluate performance; (3) USPS estimates indicate that regardless of how health care costs are accounted for and funded, USPS will require at least a 1-cent rate increase for first-class mail by 2003; (4) if health care costs are accrued and fully funded, rates could jump by 3 cents in 1994, increase again by 1 cent by 2011, and then decrease thereafter; and (5) on a pay-as-you-go basis, smaller but more frequent rate hikes would be necessary, an average of about 1 cent every other year after 2011.