New OIG Study Estimates USPS Has Been Overcharged for the CSRS Pension Fund by $75 Billion

A study just released by the U.S. Postal Service’s Office of Inspector General (OIG) shows that the current system of funding the Postal Service’s Civil Service Retirement System pension responsibility is inequitable and has resulted in the Postal Service overpaying $75 billion to the pension fund. The OIG estimates that if the overcharge was used to prepay the Postal Service’s health benefits fund, it would fully meet all of the Postal Service’s accrued retiree health care liabilities and eliminate the need for the required annual payments of more than $5 billion. Also, the health benefits fund could immediately start meeting its intended purpose — paying the annual payment for current retirees, which was $2 billion in 2009.

This marks the third time the Postal Service has been overcharged. In 2002 it was determined the Postal Service would overfund CSRS by $78 billion. Legislation in 2003 corrected this overfunding. Then it was determined the Postal Service was overcharged $27 billion for CSRS military service credits. In 2006 these funds were returned to the Postal Service by Congress, and the surplus was used to fund retiree health care liabilities.

This study, The Postal Service’s Share of CSRS Pension Responsibility , undertaken in conjunction with the Hay Group, is the third paper sponsored by the OIG that delves into the financial entanglements between the Postal Service and the federal government — generally at the expense of the Postal Service. The latest study describes the inequitable allocation of CSRS costs between the federal government and the Postal Service. The other two reports focus on the Postal Service’s congressionally-mandated retiree health care prefunding payments (Estimates of Postal Service Liability for Retiree Health Care Benefits), and the Postal Service’s interaction with the federal budget (Federal Budget Treatment of the Postal Service).

In this newly released paper, the OIG and Hay Group’s analysis demonstrates that the method used to determine how CSRS pension costs for postal employees with service before 1971 are split between the Postal Service and the federal government is inequitable. As a result, the Postal Service was overcharged by $75 billion for payments to CSRS retirees from 1972 to 2009. The OIG suggests that this amount be returned to the Postal Service’s CSRS pension fund. Any excess above what is needed to fund CSRS liabilities could then be transferred to the Postal Service’s retiree health care fund, which would fully fund its health care liability and eliminate the need for further congressionally-required payments to the fund. All of the Postal Service’s current pension and health care obligations to its employees would then be fully funded.

The report further illustrates the inequity in the methodology used to determine the Postal Service’s contribution to the CSRS fund. Key findings from the report:
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source: U.S Postal Service Office Of Inspector General