The US Postal service receives no government funding, but it has a large labor union, and it is a constitutionally mandated government agency, so in an attempt to kill the postal service, Republicans devised a new mandate in 2006 — for the prepayment of health benefits for future retirees, with the Postal Service being forced to pay between $5.5 billion and $5.8 billion annually. The money simply goes into an escrow account, where it is invested in special issue Treasury securities. Thus does it somehow magically help with the deficit. Also, of course, no sooner did the bill become law than first class mail began to fall off the cliff. The prefunding requirement became a noose around the Postal Service’s neck.
It bothers me a bit, because everybody seems to report this incorrectly.
The Post office does not have to prefund retirement for employees that have not been born.
Under the old system, retirement was pay as you go. So in 2012, all funds would have went towards 2012 retirement costs.
Congress wanted to switch it to a system where if somebody will retire after 40 years, then the post office pays 1/40th of their retirement cost each year. So the post office doesn't spend money for retirement of somebody not yet born. They will have to contribute to that employees retirement cost the day they hire them.
You can make a case they shouldn't have to prefund any expenses at all, but I wish more people would at least get their facts right.