Legislative Action USPS Losses for 2010 YTD

Legislative Action

USPS Losses for 2010: YTD (in millions)

PAEA Pre-funding Payments from USPS to RHBF $5. 4 billion September 30, 2007 September 30, 2008 $5. 6 billion $5. 4 billion $5. 5 billion $5. 6 billion $5. 7 billion September 30, 2009 September 30, 2010 September 30, 2011 September 30, 2012 September 30, 2013 September 30, 2014

OIG Study: USPS’ share of CSRS Pension Responsibility The USPS OIG commissioned the actuarial firm Hay Group to review the allocation of CSRS liabilities between the USPS and the federal government. For employees with service both before and after the Postal Service’s establishment, the federal government and the Postal Service share responsibility for CSRS pensions. The federal government pays for service through 1971, and the Postal Service pays for service after 1971.

OPM Methodology Under OPM’s methodology, the Postal Service is responsible for all pay increases since 1971. OPM assumes no responsibility for inflationary increases to salaries from the Post Office Department era. OPM calculates the government’s share for these employees as if they retired in 1971 at their 1971 salaries.

Pension Allocation Pension contribution calculated based on Federal Government the June 30, 1971 salary USPS Pension contribution calculated based on overall career highest 3 consecutive salaries

OIG Finding Had the more equitable years-of-service allocation methodology been used to determine the value of the Postal CSRS Fund, the OIG estimates its value on September 30, 2009, would have been approximately $273 billion rather than $198 billion -- a difference of $75 billion.

It has been determined that a $10 billion unfunded liability currently exists for the CSRS pension fund. Reducing the $75 billion overpayment by $10 billion still leaves a $65 billion surplus.

The $100 billion balance in the retiree health benefits fund would be more than sufficient to cover the $87 billion OPM estimates the Postal Service has accrued in retiree health liability as of the end of 2009. No further payments to the fund would be needed to cover this liability. OIG PRHBF $65 billion $35 billion

CSRS Basic Annuity Formula Years of Service What You Receive First 5 Years of Service 1. 5 % of your high-3 average salary for each year Second 5 years of service Plus 1. 75% of high-3 average salary for each year All years of service over 10 Plus 2 % of high-3 average salary for each year

Example 1 (High-3 of 30, 000, 30 years service) Accrual of Pension Benefit Accrual Percentage Years of Service Benefit Accrual 1. 50% 5 7. 50% 1. 75% 5 8. 75% 2. 00% 20 40. 00 Total 30 56. 25% Benefit: 56. 25% X $30, 000 = $16, 875

Example 2 High-3 of $30, 000, 30 years of service (15 years USPOD, 15 years USPS, $19, 165 in 1971) Accrual of Pension Benefit Accrual Percentage Years of Service Benefit Accrual 1. 50% 5 7. 50% 1. 75% 5 8. 75% 2. 00% 5 10. 00% Total 15 26. 25% OPM Method: 26. 25% X $19, 165 = $5, 031

$16, 875 - Pension -$5, 031 - OPM Share $11, 844 - USPS Share

Pension Allocation

P. L. 93 -349 The purpose of this legislation is to clearly establish the responsibility of the U. S. Postal Service to finance increases in the liability of the Civil Service Retirement and Disability Fund, caused by administrative action of the Postal Service. . .

USPS appealed to the CSRS Board of Actuaries on the use of frozen 1971 salaries for the allocation of obligations between the U. S. Post Office Department and USPS. The Board noted that the approach used was common in the private sector and upheld the use of the OPM methodology.

P. L. 93 -349 The situation with respect to the Postal Service is quite unique and results from passage of the Postal Reorganization Act. The Congress now has no control -- no oversight whatsoever -- with respect to the pay machinery in the Postal Service. Since each future pay raise, negotiated or otherwise granted to employees in the Postal Service, will result in a specific unfunded liability and a new drain on the retirement fund.

CSRS Board of Actuaries to USPS When private sector plans are transferring participants to a new employer, it is common practice to allocate liabilities by using a method which reflects the fact that all obligations arising from future salary increases are the responsibility of the new employer. We find this approach to be the most appropriate way to determine the obligations of the Postal Service and further confirm our finding that this method clearly follows the intent of Congress in Public Law 93 -349.

Off-budget USPS $5. 6 billion On-budget Postal Retiree Health Benefits Fund

Both Accounts On-Budget Civil Service Retirement & Disability Fund ----Postal Employees Postal Retiree Federal Health Benefits Employees Fund Military Retirement $65 billion

Total Pension Fund Postal Service Assets for CSRS & FERS $764. 8 $273. 6 Liabilities for CSRS & FERS $1, 454. 7 $276. 4 Unfunded Liability $689. 9 $2. 8 Percent Funded 53% 99%

5 -day Delivery H. Res. 173 Expressing the sense of the House of Representatives that the United States Postal Service should take all appropriate measures to ensure the continuation of its 6 -day mail delivery service. Rep. Sam Graves, (R-MO) - 49 cosponsors

FY‘ 2010 Senate Appropriation Language There are services that must be maintained in fiscal year 2010 and beyond. The Committee believes that 6 -day delivery is one of the most important services provided by the Federal Government to its citizens. Especially in rural and small town America, this critical postal service is the linchpin that serves to bind the nation together.

President’s FY’ 2011 Budget Postal Service Provided further, That 6 -day delivery and rural delivery of mail shall continue at not less than the 1983 level.

House Appropriations Committee Subcommittee on Financial Services and General Government Majority Minority Jose Serrano, (D-NY), Chair Jo Ann Emerson (R-MO) Debbie Wasserman Schultz John Culberson (R-TX) Rosa De. Lauro (D-CT) Mark Kirk (R-IL) Chet Edwards (D-TX) Ander Crenshaw (R-FL) Allen Boyd (D-FL) Jerry Lewis (R-CA) Chaka Fattah (D-PA) Barbara Lee (D-CA)

Senate Appropriations Committee Subcommittee on Financial Services and General Government Majority Minority Dick Durbin (D-IL) Susan Collins (R-ME) Mary Landrieu (D-LA) Kit Bond (R-MO) Frank Lautenberg (D-NJ) Lamar Alexander (R-TN) Ben Nelson (D-NE) Thad Cochran (R-MS) Jon Tester (D-MT) Daniel Inouye (D-HI)

Total Career Employees

How Many? If the Postal Service were to receive additional freedoms, like six to five-day delivery, the Postal Service could function with close to 400, 000 employees through streamlining its network and increasing customer access. USPS CFO Corbett, March 2010

HR 4865 Federal Employees and Uniformed Services Retirement Equity Act of 2010 Rep. Stephen Lynch (D-MA) Rep. Jason Chaffetz (R-UT) would allow postal and federal employees to deposit the value of unused annual leave into their TSP account.

HR 4735 to provide that persons having seriously delinquent tax debts shall be ineligible for Federal employment Rep. Chaffetz (R-UT), Rep. Issa (R-CA), Rep. Pitts (R-PA), Rep. Hensarling (R-TX), Rep. Bishop (R-UT) Rep. Foxx (R-NC), Rep. Rooney (R-FL) . . . the term “serious delinquent tax debt” means an outstanding debt under the Internal Revenue Code of 1986 for which a notice of lien has been file in public records. . .

Retiree Health Benefits Funding S. 1507 - A bill to amend chapter 89 of title 5, United States Code, to reform Postal Service retiree health benefits funding, and for other purposes. HR 22 - To amend title 5, United States Code, to reduce the amount that the United States Postal Service is required to pay into the Postal Service Retiree Health Benefits Fund by the end of fiscal year 2009.

Windfall Elimination Provision Government Pension Offset A bill to amend title II of the Social Security Act to repeal the Government pension offset and windfall elimination provisions. S. 484 (Feinstein) has 30 cosponsors and HR 235 (Berman) has 318.

Mail Network Protection Act HR 1686 Rep. Stephen Lynch (D-MA). . . requires USPS to negotiate with the union before awarding any contract with a value of more than $5, 000 or involving more than 50 workyears of work. Contracts in the bill include: • mail processing • mail handling • surface transportation of mail 18 cosponsors