OIG Recommends USPS Increase Postal Employee’s Benefit Costs

 Excerpts from the USPS Office of Inspector General’s Audit Report on Postal Service’s Employee Benefit Programs

This report represents the results of the U.S. Postal Service Office of Inspector General’s (OIG) self-initiated audit of the Postal Service’s Federal Employees Group Life Insurance (FEGLI and Federal Employees Health Benefits (FEHB) programs (Project Number 07YG008HM000). The purpose of this review is to provide the Postal Service with information regarding its current employee benefit costs compared to most other federal and quasi-federal agencies in the same benefit programs. Our overall objective was to determine if the Postal Service programs are comparable to selected federal and quasi-federal government agencies; and if differences exist between the Postal Service’s employee benefit contributions and those provided by the selected agencies. We also determined if changes could be made to the Postal Service’s contributions and the potential costs associated with such charges.

We concluded the Postal Service’s FEGLI and FEHB programs for bargaining and non-bargaining employees are comparable to the six federal and five quasi-federal agencies against which we benchmarked. However, the Postal Service’s contribution rates for both programs were significantly higher compared to most agencies.

For example, the Postal Service pays the full cost of the premiums for almost all employees’ FEGLI basic life insurance and for executives’ Option-A life insurance and FEHB benefits. Most other agencies pay 33 percent of the FEGLI premiums and 72 percent ofthe FEHB premiums for their employees.  We also found the Postal Service made great progress in reducing future FEHB costs when it successfully negotiated with two of its major unions–the American Postal Workers Union (APWU) and the National Postal Mail Handlers Union (NPMHU)–for a reduction in the agency’s FEHB contribution rate of 1 percent for each year of the new collective bargaining agreements. This will result in a $713 million savings for the Postal Service over a 10-year period.

We also determined the Postal Service can change existing FEGLI and FEHB contribution rates through negotiations with its unions (for bargaining employees) and consultations with management associations (for non-bargaining employees). These changes could result in significant savings for the Postal Service. Specifically, we estimate the present value of the Postal Service’s potential savings resulting from further reductions in benefit program contributions to be $1.073 billion over 10 years. This represent $1.073 billion in funds put to better use and will be reported as such in our Semiannual Report to Congress.

This report contains four recommendations that would allow the Postal Service to continue providing employees with benefits that are on par with those provided other federal employees, while significantly reducing the agency’s cost obligations.

Postal Service’s Employee Benefit Program (PDF)