Proposed Rule2022-27393
Periodic Reporting
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 19, 2022
Issuing agencies
Postal Regulatory Commission
Abstract
The Commission is acknowledging a recent filing requesting the Commission initiate a rulemaking proceeding to consider changes to analytical principles relating to periodic reports (Proposal Seven). This document informs the public of the filing, invites public comment, and takes other administrative steps.
Full Text
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<title>Federal Register, Volume 87 Issue 242 (Monday, December 19, 2022)</title>
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[Federal Register Volume 87, Number 242 (Monday, December 19, 2022)]
[Proposed Rules]
[Pages 77543-77544]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-27393]
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POSTAL REGULATORY COMMISSION
39 CFR part 3050
[Docket No. RM2023-2; Order No. 6369]
Periodic Reporting
AGENCY: Postal Regulatory Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Commission is acknowledging a recent filing requesting the
Commission initiate a rulemaking proceeding to consider changes to
analytical principles relating to periodic reports (Proposal Seven).
This document informs the public of the filing, invites public comment,
and takes other administrative steps.
DATES: Comments are due: December 27, 2022.
ADDRESSES: Submit comments electronically via the Commission's Filing
Online system at <a href="http://www.prc.gov">http://www.prc.gov</a>. Those who cannot submit comments
electronically should contact the person identified in the FOR FURTHER
INFORMATION CONTACT section by telephone for advice on filing
alternatives.
FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at
202-789-6820.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Proposal Seven
III. Notice and Comment
IV. Ordering Paragraphs
I. Introduction
On December 12, 2022, the Postal Service filed a petition pursuant
to 39 CFR 3050.11 requesting that the Commission initiate a rulemaking
proceeding to consider changes to analytical principles relating to
periodic reports.\1\ The Petition identifies the proposed analytical
changes filed in this docket as Proposal Seven. Proposal Seven proposes
the accounting treatment for the forgiveness of the Postal Service's
retirement health benefit (RHB) prefunding liabilities effected by the
Postal Service Reform Act (PSRA).\2\
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\1\ Petition of the United States Postal Service for the
Initiation of a Proceeding to Consider Proposed Changes in
Analytical Principles (Proposal Seven), December 12, 2022
(Petition).
\2\ Petition, Proposal Seven at 1. See Docket No. RM2023-1,
Order Granting Petition, in Part, for Reconsideration, December 9,
2022, at 1-2 (Order No. 6363).
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II. Proposal Seven
Procedural history. Prior to the Commission's issuance of Order No.
6363, the subject matter of Proposal Seven was raised in multiple
filings with the Commission.
First, the Postal Service filed a letter to the Commission
reflecting how it intended, for accounting purposes, to treat the
PSRA's removal of certain accrued but unpaid retiree health
benefits.\3\ As detailed in Order No. 6363, the Postal Service provided
its rationale as to why the accounting treatment was appropriate.\4\
Second, the Commission responded to the Postal Service's Letter
endorsing most of the substance of the accounting treatment, and noting
that the accounting treatment did not require a rulemaking to change an
accepted analytical principle pursuant to 39 CFR part 3050.\5\ Third, a
group of mailers filed a letter with the Commission asking for
reconsideration of the Commission's endorsement of the Postal Service's
proposed accounting treatment, and requesting the Commission evaluate
the Postal Service's proposed accounting treatment pursuant to 39 CFR
part 3050.\6\ Fourth, the Greeting Card Association (GCA), one of the
13 mailer organizations that was a signatory to the Mailers' Letter,
also filed a petition with the Commission to initiate a rulemaking.\7\
Fifth, the Postal Service responded in opposition to the Petition.\8\
Sixth, a significant portion of the signatories to the Mailers' Letter
filed a reply reiterating its position.\9\
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\3\ Letter to Erica A. Barker, Secretary and Chief
Administrative Officer, August 12, 2022 (Postal Service Letter),
available at <a href="https://www.prc.gov/docs/122/122469/Lttr%20re%20PSRA%20Effects%20ACR%20CRA.pdf">https://www.prc.gov/docs/122/122469/Lttr%20re%20PSRA%20Effects%20ACR%20CRA.pdf</a>.
\4\ Order No. 6363 at 3. The Postal Service also noted that
current year normal cost and amortization payments, as a result of
the PSRA, would be treated consistently between the General Ledger
and the Cost and Revenue Analysis (CRA). Id.
\5\ Letter from Erica A. Barker, Secretary and Chief
Administrative Officer to Richard T. Cooper, Managing Counsel,
Corporate and Postal Business Law, October 7, 2022, available at
<a href="https://www.prc.gov/docs/123/123096/Response%20Letter.pdf">https://www.prc.gov/docs/123/123096/Response%20Letter.pdf</a>. The
Commission noted that the statutory change represented a unique and
non-recurring event, and the accounting treatment appeared
reasonable, opining that incorporating the $56.9 billion adjustment
in the CRA would create nonsensical results and potentially
interfere with the regulatory purposes of the CRA. Order No. 6363 at
4.
\6\ Letter to Erica A Barker, Secretary and Chief Administrative
Officer, October 13, 2022, styled Motion for Reconsideration of
Response to the Postal Service's Proposed Changes to Accepted
Analytical Principles (Mailers' Letter), available at <a href="https://www.prc.gov/docs/123/123145/Motion%20for%20Reconsideration_PropChange_.pdf">https://www.prc.gov/docs/123/123145/Motion%20for%20Reconsideration_PropChange_.pdf</a>.
\7\ Docket No. RM2023-1, Petition for Reconsideration and
Initiation of Proceeding, November 4, 2022 (Reconsideration
Petition). The Petition incorporated arguments from the Mailers'
Letter. Petition, Proposal Seven at 2-3.
\8\ Docket No. RM2023-1, Response of the United States Postal
Service in Opposition to GCA Petition for Reconsideration and
Initiation of Proceeding, November 10, 2022. The Postal Service
responded to the Mailers' Letter noting that procedurally a 39 CFR
part 3050 proceeding is not required where the Commission was
interpreting its own regulations, and substantively that its
proposed accounting treatment was reasonable and supported. Id. at
6-9.
\9\ Docket No. RM2023-1, Reply of Mailer Associations to
Response of the United States Postal Service in Opposition to GCA
Petition for Reconsideration and Initiation of Proceeding, November
21, 2022.
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The Commission ultimately issued Order No. 6363, granting, in part,
the relief sought in the Mailers' Letter and Reconsideration Petition.
Order No. 6363. The Commission withdrew its prior letter endorsing the
proposed accounting treatment, because its acceptance of the Postal
Service's proposed accounting treatment was based upon the expectation
that the ``gain'' would not be treated as a revenue or cost. Id. at 7.
However, in the Postal Service's submission of its FY 2022 Form 10-K
report, trial balance, and statement of revenue and expenses, the $56.9
billion adjustment is treated as a non-cash benefit to net income, and
included within Cost Segment 18. Id. at 7-8. The Commission noted that
in its most recent Annual Compliance Determination, other accrued costs
identified in Cost Segment 18 were treated as institutional costs, and
therefore the accepted methodology was to treat Cost Segment 18 costs
as institutional costs. Id. at 8-9. The Commission further noted that
without a change in analytical principle, the Commission could not
endorse the Postal Service's proposed accounting treatment. Id. at 9.
The Commission directed the Postal Service, should it wish to proceed
with its plans to exclude the PSRA-forgiven defaulted accruals, it must
file a petition seeking to change an accepted analytical principle
pursuant to 39 CFR 3050.11. Id. at 10-11.
The Commission also explained in Order No. 6363 that the arguments
in the Mailers' Letter concerning the Postal Service's proposed
accounting treatment of the repealed amortization and normal cost
payments were in line with accepted analytical principles.\10\
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\10\ Id. at 10. Any deviation from the accepted analytical
principle (accounting for amortization and normal cost payments that
are no longer incurred), would require a petition to change an
analytical principle, which the Commission invited no later than
December 21, 2022, should the proponent of such a petition wish it
to be considered for FY 2022. Id. at 11. Such a petition is outside
the scope of Proposal Seven and this docket.
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Background. Proposal Seven is a proposal to segregate the reversal
of the PSRA forgiveness of RHB prefunding
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payments (that were not made) between September 2012 and September 2021
from the Postal Service's other FY 2022 accounting costs that flow into
its Annual Compliance Review (ACR) regulatory report. Petition,
Proposal Seven at 1. Proposal Seven, in other words, excludes the PSRA
forgiveness of the RHB prefunding payments from institutional cost for
FY 2022. Id.
The Postal Service notes that in the years following the passage of
the Postal Accountability and Enhancement Act, and consistent with
generally accepted accounting principles, it accrued expenses in each
year for scheduled RHB prefunding payments that were required by law.
Id. at 4. The Postal Service contends that such treatment was rational
(as in those years it was treated as any other expenses for that year).
Id. The Postal Service, however, differentiates this steady series of
annual prefunding required payments from the ``sudden and unprecedented
occurrence of a one-time reversal of a decade's worth of unpaid
prefunding expenses from prior years.'' Id. (emphasis in original).
The Postal Service notes the broad agreement among all parties as
to what would result if it were to treat the PSRA forgiveness of the
RHB payments as an offset to institutional costs (that it would result
in institutional costs for FY 2022 being a ``very large negative
number''). Id. at 5. The Postal Service reiterates how that occurrence
creates regulatory issues with the appropriate share provision, and the
calculation of the imputed Federal income tax. Id.
The Postal Service also notes the inadvertent effect (or as it
characterizes, the outcome mailers seek to ensure) of nullifying the
density-based rate authority calculated as part of the FY 2022 ACR
process. Id. The Postal Service explains how nullifying the density
authority due to the PSRA forgiveness of RHB prefunding payments would
interfere and disrupt the regulatory rationale behind the density-based
authority. Id. at 5-7.
The Postal Service proposes one of two methods to effect its
proposal to account for the PSRA forgiven RHB prefunding payments.
First, the Postal Service proposes (as its preferable approach) to
``zero out'' Component 203 in the Cost Segment 18 tab of the
Reallocated Trial Balance by omitting the reallocation of the negative
$56,975,093,943.28 from Trial Balance account 51265.000 into Component
203. Id. at 8. The Postal Service contends that this would result in
``total costs at the bottom of the CRA that differed by the same amount
from the sum of the Total Operating Expenses, Impact of Postal Service
Reform Legislation, and Interest Expense rows of the Postal Service's
Statements of Operations in its form 10-K. Id. Under this methodology
institutional costs for FY 2022 would not be ``inappropriately
affect[ed]'' compared to how they would be without Proposal Seven. Id.
Second, the Postal Service proposes (as an alternative option) the
reallocation of the $56,975,093,943.28 negative expense from Trial
Balance account 51265.000 to the Miscellaneous Items row in the CRA,
but excluding it from the row ``All Other'' that identifies
institutional cost. Id.
Overall, the Postal Service identifies the impact of Proposal Seven
to exclude the ``one-time massive negative RHB expense accrual
triggered by the PSRA from overwhelming routine FY 2022 institutional
costs . . . [and avoiding] the inappropriate detrimental regulatory
consequences of the `nonsensical' result of negative institutional
costs.'' Id. at 10.
III. Notice and Comment
The Commission establishes Docket No. RM2023-2 for consideration of
matters raised by the Petition. More information on the Petition may be
accessed via the Commission's website at <a href="http://www.prc.gov">http://www.prc.gov</a>. Interested
persons may submit comments on the Petition and Proposal Seven no later
than December 27, 2022. Pursuant to 39 U.S.C. 505, Jennaca D. Upperman
is designated as an officer of the Commission (Public Representative)
to represent the interests of the general public in this proceeding.
IV. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket No. RM2023-2 for consideration
of the matters raised by the Petition of the United States Postal
Service for the Initiation of a Proceeding to Consider Proposed Changes
in Analytical Principles (Proposal Seven), filed December 12, 2022.
2. Comments by interested persons in this proceeding are due no
later than December 27, 2022.
3. Pursuant to 39 U.S.C. 505, the Commission appoints Jennaca D.
Upperman to serve as an officer of the Commission (Public
Representative) to represent the interests of the general public in
this docket.
4. The Secretary shall arrange for publication of this order in the
Federal Register.
By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2022-27393 Filed 12-16-22; 8:45 am]
BILLING CODE 7710-FW-P
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</html>Indexed from Federal Register on December 19, 2022.
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