Issa Says USPS Needs Reform To Protect Taxpayers From Expensive Bailout
Issa Statement on Postal Service Decision to Stop Making Retirement Contributions
Today, in response to the United States Postal Service (USPS) announcement that they will stop making employer’s contributions for the defined benefit portion of the Federal Employees Retirement System (FERS) for their employees, House Committee on Oversight and Government Reform Chairman Darrell Issa, R-Calif. issued the following statement:
“The United States Postal Service, our nation’s second largest employer, is now past the brink of insolvency. This would not be tolerated in a private company. Incredibly, the unprecedented action to suspend these payments will only offer USPS an additional $800 million through the end of the year in liquidity, not even 10 percent of their projected deficit of $8.3 billion. USPS needs fundamental structural and financial reforms to cut costs and protect taxpayers from an expensive bailout.”
USPS Notifies OPM of Its Intention to Suspend Employer’s Contributions To FERS
Filed under: FERS, opm, postal, postal news, press releases, usps
U.S. Postal Service Institutes Cash Conservation Plan- FERS account surplus valued at $6.9 billion
WASHINGTON — The U.S. Postal Service has informed the Office of Personnel Management (OPM) of its intention to suspend its employer’s contributions for the defined benefit portion of the Federal Employees Retirement System (FERS) to conserve cash and preserve liquidity. The Postal Service has a FERS account surplus valued at $6.9 billion. Read more
OPM Memo: Recredit of Sick Leave for Re-employed FERS Retirees
The following is a Memo released by the Office Of Personnel Management (OPM)
Recredit of Sick Leave for Re-employed FERS Annuitants Who Retire Between October 28, 2009, and December 31, 2013
The U.S. Office of Personnel Management has been asked whether employees covered by the Federal Employees Retirement System (FERS) who retire between October 28, 2009, and December 31, 2013, with 50 percent of their sick leave having been credited toward their FERS annuity computation, could have the remaining 50 percent of their sick leave recredited to their sick leave account if they return to Federal service as reemployed annuitants. The answer is yes. Agencies should recredit reemployed annuitants the 50 percent of sick leave that was not used in their FERS annuity computation. For employees who retire or die in service on or after January 1, 2014, all unused sick leave to the employees’ credit will be creditable for annuity computation purposes. Further, for FERS employees who retire on or after January 1, 2014, 100 percent of their sick leave will be used in the annuity computation, consequently, no sick leave will remain for recredit should the retirees later return to Federal service.
Agencies must take action to identify FERS employees who initially retired on or after October 28, 2009, and who have since returned to Federal service as reemployed annuitants, to ensure that the employees have received recredit of the 50 percent of sick leave that was not used in the computation of their annuities.
Background
Section 1901 of the National Defense Authorization Act for Fiscal Year 2010 (Public Law 111-84, October 28, 2009) amended 5 U.S.C. 8415 to provide that employees covered by FERS who retire on an immediate annuity, or die while in active employment leaving a survivor or survivors, between October 28, 2009 (the date of enactment of the statute), and December 31, 2013, will receive credit for 50 percent of their unused sick leave towards their total creditable service for annuity computation purposes.
Additional Information
For additional information, please refer to Benefits Administration Letter Number 11- 102, Guidance on National Defense Authorization Act for Fiscal Year 2010 Provisions on Sick Leave for FERS Retirees.
Agency Human Resources (HR) Directors may also contact their assigned OPM Human Capital Officers. Reemployed annuitants should contact their agency human resources or benefits offices for assistance.
From: Charles D. Grimes III
Acting Associate Director
OPM Posts New And Revised Leave Fact Sheets
OPM has posted eight revised leave fact sheets on their website:
Sick Leave (General Information)
Sick Leave for Personal Medical Needs
Sick Leave for Family Care and Bereavement
Sick Leave to Care for a Family Member with a Serious Health Condition
Emergency Leave Transfer Program
Voluntary Leave Transfer Program
They have also posted three new fact sheets:
Definitions Related to Family Member and Immediate Relative
Funeral Leave and Other Bereavement Options
***
Most of these duplicate what is in the ELM. In particular postal employees should see “Effect of Extended Leave Without Pay (LWOP) (or Other Nonpay Status) on Federal Benefits and Programs.” This is the best explanation of the effect of LWOP on federal benefits that I’ve seen anywhere.
Don Cheney
How The Government Shutdown May Affect Current and New Federal Retirees
The National Active and Retired Federal Employees Association (NARFE) has compiled information on how a Government shutdown will affect Federal Workers and Annuitants. The information below covers areas which may apply to Postal Workers:
Annuity Benefits: Judging from similar government shutdowns in the past, and the fact that OPM retirement operations are not funded through general revenues, retirees should expect to receive their annuity payments deposited into their accounts or received in the mail, on time as usual. OPM sends annuity payment tapes to the Department of Treasury in the middle of the month prior to the payment date so that Treasury has time to process the payment tapes/cut checks and ensure that annuity payments are received by the first of the month.
Health, Life, and Long-Term Care Benefits: Federal Employee Health Benefits Program, Federal Employees Group Life Insurance, FEDVIP (dental/vision insurance), and Federal Long Term Care Insurance Program premiums will continue to be withheld and paid by OPM. There will be no interruption in insurance coverage.
Retirement Processing: For those newly retired employees, a government shutdown may delay the processing of your paperwork by your agency, prior to your records being sent to OPM. For those recent retirees whose retirement OPM has already begun to process, there should be no additional delay caused by a government shutdown for the reasons given above.
Retirement and Benefits Information: OPM staff responsible for answering the retirement and health benefits questions asked by federal workers and annuitants will be available during the shutdown. If there is a shutdown, NARFE members will continue to have access to this information by calling or e-mailing the NARFE Retirement Benefits Service Department.
Thrift Savings Plan: The Federal Retirement Thrift Investment Board has stated that a federal government shutdown would not affect the Thrift Savings Plan (TSP) since it does not receive annual appropriations from Congress. The TSP would operate during such a period as usual.
Other Federal Benefits
The Department of Veterans Affair’s (VA) operational plans are still being finalized, but our current understanding is the following:
Thanks to advance appropriations (a two-year budget cycle), VA will continue to provide 100 percent of health care services to enrolled veterans through VA medical facilities across the country. Veterans’ medical appointments will not be canceled or delayed in the event of a partial governmentwide shutdown.
Advance appropriations, received from Congress, account for more than 80 percent of the VA’s discretionary appropriations.
While there will be a reduction in benefits staffing, the VA has taken measures to ensure, in the short-term, that veterans currently receiving VA benefits will continue to receive those payments on a timely basis and without interruption.
The VA will also continue to provide final resting places at our national cemeteries in the event of a partial governmentwide shutdown. Some cemeteries may operate on a modified schedule.
Some VA services that may be suspended in the event of a partial governmentwide shut down involve answering consumer inquiries by e-mail, telephone or mail, routine recruiting, hiring and training, and fraud investigations.
Social Security, Medicare and Medicaid: Others, like the Social Security Administration and the Centers for Medicare & Medicaid Services, operate under indefinite appropriations. In such cases benefits payments continue to be issued and honored by the Department of the Treasury because there is no lapse in the relevant appropriations.
Complied by the NARFE Legislation and Retirement Benefits Service Department on April 7, 2011
Open Season Begins For Federal Long Term Care Insurance Program
Washington, DC – The U.S. Office of Personnel Management (OPM) launched the Federal Long Term Care Insurance Program (FLTCIP) Open Season which will run from April 4 to June 24, 2011. This is the first FLTCIP Open Season since 2002.
“The Federal Long Term Care Insurance Program gives enrollees security and peace of mind as they plan for the cost of long term care,” said OPM Director John Berry. “I encourage current Federal and postal service employees, uniformed personnel, and their qualified relatives to learn about this important benefit.”
During the FLTCIP Open Season, all current Federal and U.S. Postal Service (USPS) employees and active members of the uniformed services and their spouses will have the opportunity to apply for coverage with abbreviated underwriting, which means that a minimal number of health questions will be asked during the application process. This is an option not offered during year-round enrollment. In keeping with President Obama’s June 17, 2009 memorandum Federal Benefits and Non-Discrimination, same-sex domestic partners of Federal and USPS employees can also apply with abbreviated underwriting.
The FLTCIP is the largest employer-sponsored long term care program in the country, with over 225,000 current enrollees. Please note, certain medical conditions, or combinations of conditions, will prevent some people from being approved for coverage. If accepted into the program, employees pay 100 percent of the cost.
For additional information on the FLTCIP Open Season or to apply, please visit http://www.opm.gov/insure/ltc/index.asp, or www.ltcfeds.com, or call Long Term Care Partners at 1-800-LTCFEDS (1-800-582-3337).
source: OPM
USPS OIG: OPM’s Long History Of Miscalculations Involving USPS Benefit Funds
Today, the USPS Office Of Inspector General responded to the OPM Office Of Inspector General’s “A Study of the Risks and Consequences of the USPS OIG’s Proposals to Change USPS’s Funding of Retiree Benefits”
OPM’s study concluded:
While we understand that the USPS is having financial difficulties, the OPM’s administration of the law has not caused this situation. The OPM has complied with the law as written on all accounts. To say otherwise is both inaccurate and obscures the true causes of USPS’s current crisis.
We believe that these proposals would have a lasting negative impact upon the retirement programs and trust funds but have little, if any, positive impact upon the USPS’s ultimate long-term profitability. Instead, the result of these proposals would be to shift costs from USPS ratepayers to the American taxpayers.
But the USPS OIG tells a different story:
Our reports focused on the latest of OPM’s long history of miscalculations involving Postal Service benefit funds:
• In 2002, the Postal Service’s pension fund was found to be overfunded by $78 billion. Congress corrected this in 2003.
• In 2003, OPM attempted to make the Postal Service responsible for $27 billion in military service pension obligations for Postal Service employees. Congress refused to accept this attempt.
• In 2009, we found that the OPM used an exaggerated 7 percent health care inflation forecast instead of the 5 percent industry standard, resulting in an overpayment of $13.2 billion by 2016. Congress ordered OPM to review it and they changed it.
• The Postal Service has been overcharged $75 billion for its share of the CSRS pension payments. In essence, for 40 years the Postal Service paid its own and the federal government’s inflationary costs.
OPM typically responded to these findings with initial denial followed by major corrections. In such a history of errors, one would expect to see some balance.
• Errors are normally random, but without exception these have disadvantaged the Postal Service.
• Self discovery by OPM of such substantial miscalculations should have occurred.
• Self correction by OPM, charged with fund administration, would also have been expected.
This is not about the financial condition of the Postal Service, but that the Postal Service was overcharged and subsequently overpaid into benefit funds. In the Unites States there is the rule of law and the accounts must be settled. This issue is fundamentally about righting an inequity.
Read USPS OIG’s full response
U.S. Postal Services OIG’s Response‐‐‐ OPM OIG Issues Study on USPS OIG’s Proposals Regarding the Funding of USPS Retiree Benefits.
Thank you for the opportunity to respond to the OPM Inspector General’s study reviewing our recent reports about the mischarges and overfunding of the Postal Service’s benefit obligations. Both the postal pension and health funds are administered by OPM and are accounted for separately from the federal government’s benefit funds.
Our reports focused on the latest of OPM’s long history of miscalculations involving Postal Service benefit funds:
- In 2002, the Postal Service’s pension fund was found to be overfunded by $78 billion. Congress corrected this in 2003.
- In 2003, OPM attempted to make the Postal Service responsible for $27 billion in military service pension obligations for Postal Service employees. Congress refused to accept this attempt.
- In 2009, we found that the OPM used an exaggerated 7 percent health care inflation forecast instead of the 5 percent industry standard, resulting in an overpayment of $13.2 billion by 2016. Congress ordered OPM to review it and they changed it.
- The Postal Service has been overcharged $75 billion for its share of the CSRS pension payments. In essence, for 40 years the Postal Service paid its own and the federal government’s inflationary costs.
OPM typically responded to these findings with initial denial followed by major corrections. In such a history of errors, one would expect to see some balance.
- Errors are normally random, but without exception these have disadvantaged the Postal Service.
- Self discovery by OPM of such substantial miscalculations should have occurred.
- Self correction by OPM, charged with fund administration, would also have been expected.
Regarding the matter that was reviewed in the OPM report, the Postal Service Office of Inspector General has the following observations:
Our reports concerning the mischarges and overfunding of Postal Service benefits relied on the work of an actuarial firm that was under contract to the OIG. That firm had previously done work for OPM in the benefits fund area. Our work was independently reviewed by a second actuary employed by the Postal Regulatory Commission (PRC). In contrast the OPM characterizes their study as an analysis based on the work of others, but without independent actuarial assistance.
The OPM study makes the following points in their review:
1. The taxpayers will sustain losses if the funds are restored to the Postal Service.
2. The Postal Service would use the returned funds to subsidize operations and not for benefit funds.
3. OPM is unable to correct the overcharges because of their limited authority.
4. The study endorses 100 percent prefunding requirement for Postal Service benefit funds.
In response to the OPM, we have some observations on each of their points:
1. The Postal Service benefit funds are funded entirely by postal employees and postage from American citizens and businesses. Postal Service contributions should not supplement federal employee contributions and federal employee contributions should not supplement Postal Service contributions.
2. If benefit fund overpayments were returned, the money would not be used for Postal Service operations. The proposal is to use the surplus to make annual benefit payments. Using
employee money for postal operations would be as wrong as putting it in the federal employee benefit fund; both are improper.
3. The Postal Inspector General and Senator Collins believe that OPM could correct this funding issue using their own authority. OPM has responsibility for accurately and fairly administering these funds.
4. OPM recommended 100 percent funding levels for both the Postal Service’s retirement and healthcare funds. However, the report is silent on the adequacy of OPM’s government
prefunding level of 40 percent for retirement and 0 percent for healthcare.
This is not about the financial condition of the Postal Service, but that the Postal Service was overcharged and subsequently overpaid into benefit funds. In the Unites States there is the rule of law and the accounts must be settled. This issue is fundamentally about righting an inequity.
source: National League Of Postmasters Of US
White House Budget Outlines Repayment To USPS For FERS Overcharges..But
The White House released the 2012 budget today. In the budget it proposes to reimburse USPS for $6.9 billion in overcharges for FERS retirees. But the repayment is spread over 30 years, including $550 million in 2011.
Here is the summary from the White House 2012 Budget outlining provisions for USPS:
The Administration recognizes the enormous value of the Postal Service to the Nation’s commerce and communications, as well as the urgent need for reform to ensure the future viability of USPS. Therefore, the Budget proposes specific short-term financial relief measures, grounded in principles of fiscal responsibility as well as sound financial management, and the Administration will work with the Congress and postal stakeholders to secure necessary reforms. As to the structure of relief, the Budget would improve USPS financial condition by returning to USPS surplus amounts it has paid into its OPM account for its share of Federal Employee Retirement System costs. OPM has determined this surplus is approximately $6.9 billion, which would be paid back to USPS over 30 years, including an estimated $550 million in 2011. Secondly, the Budget proposes to restructure USPS retiree health benefits payments that were specified by the 2006 Postal Act. This change would still prudently pre-fund retiree liabilities, but on an accruing cost basis rather than the arbitrary amounts fixed in current law, which do not allow for the dramatic shifts in demand or workforce size that USPS has experienced in recent years. This restructuring and near-term deferral would provide USPS with $4 billion in temporary financial relief in 2011. Over the 2011 to 2021 budget period this proposal has an estimated deficit effect of $5 billion. See the Office of Personnel Management section of this Appendix for more information on this proposal.
These steps to provide USPS with the breathing room necessary to continue restructuring its operations without severe disruptions must be coupled with meaningful reforms to its business model to make USPS viable for the medium- and long-term. Postal volumes have dropped precipitously in the last few years due to the economic crisis and longer-run shifts in communication technologies and use shifts that have created new challenges even as they propel innovation and revolutionize our economy. The Postal Service needs the flexibility to adapt to these changes and higher public expectations for customer service. To that end, the Administration’s discussions with the Congress and others will be guided by the goals of allowing the Postal Service to: 1) Realign its infrastructure, facilities, processing and delivery systems to continuously improve efficiency; 2) Promote an adaptive, 21st Century workforce; and 3) Accelerate value creation and enhance service to the public while respecting fair competition in the marketplace.
And from the OPM:
POSTAL SERVICE RETIREE HEALTH BENEFITS FUND
As a result of this health benefits financing system, beginning in 2017, the Postal Service will cease to pay annual premium costs for its post-1971 current annuitants directly to the Employees and Retired Employees Health Benefits Fund. Instead, these premium payments will be paid from amounts that the Postal
Service remits to this fund. Payments for a proportion of the premium costs of Postal Service annuitants’ pre-1971 service would continue to be paid by the General Fund of the Treasury through the Government Payment for Annuitants, Employees Health Benefits account.
The Budget proposes to shift how the Postal Service (USPS) pre-funds its retiree health benefits unfunded liability (UFL). Under current law, from 2011 to 2016, USPS must make a stream of payments set in statute toward paying down retiree health benefit unfunded liabilities, as well as pay annual premiums for current retirees. Also under current law, starting in 2017, USPS must pay the per capita accruing costs (or normal cost) to fund future retiree health benefits of current employees and a 40-year amortization of the remaining UFL for current retirees.
Under the proposal, starting in 2011, USPS would pay the normal costs for the future retiree health benefits of current employees and also a stream of payments associated with paying down the remaining UFL for current retirees. Further, USPS would be provided temporary financial relief as the 2011 payment would be adjusted so that USPS would pay $4 billion less than what it would have paid to this Fund under current law. USPS would make up this $4 billion payment to the Fund by paying larger amounts in future years. Beginning in 2022, USPS would pay the remaining UFL, amortized over 40 year period.
This proposal provides the following benefits to USPS: 1) USPS would be provided temporary financial relief in the form of a lower payment in 2011; 2) The new calculations of normal cost and UFL are based on new actuarial assumptions that reflect that USPS has fewer employees than in 2006, when the prefunding mechanism was originally adopted—therefore the actual annual payments for the normal costs would be reset each year based on the number of USPS employees; 3) This Fund would pay the premiums for current USPS retirees now, rather than starting in 2017—this accelerates what would have occurred anyway in 2017 under current law. See the Postal Service section of this Appendix for further information on this proposal.
OPM: Retirees Fed Tax Withholding Increases, Annuity Check Decreases In 2011
The Office Of Personnel Management issued the following anouncements:
Annuitant Federal Tax Withholding Increase
On December 16, 2010, Congress elected not to extend the “Making Work Pay” credit. The “Making Work Pay” credit, part of the 2009 Stimulus Package, expired on December 31, 2010. This could mean higher federal tax withholding amounts in monthly annuities for federal retirees. The Internal Revenue Service (IRS) issued a notice in December 2010, stating withholding tables for 2011 would no longer be adjusted for the Making Work Pay tax credit and there is no longer an optional additional withholding adjustment for annuities. The adjustment is reflected in the Notice of Annuity Adjustment received by annuitants in January 2011.
With the expiration of the temporary credit, IRS tax withholding tables have changed for 2011 and many retirees may see an increase in the amount of federal tax being withheld from their monthly annuity payments as a result. OPM uses tax withholding tables that are provided by the IRS and questions about changes to those tables must be referred to the IRS, not OPM. The tax rates did not change; only the withholding tax table changed. For more information concerning the 2011 federal tax withholding tables go to www.irs.gov. See IRS Notice 1036, TABLE 4-MONTHLY Payroll Period.
You may change your federal tax withholding by accessing www.opm.gov/retire or calling OPM at 1-888-767-6738 from 7:30am to 8:00pm EST. There is a federal tax calculator on our website that may assist you in determining the amount of federal tax to withhold. Changing the amount of your withholding will not reduce your tax liability at the end of the tax year. You may also want to consider contacting your tax advisor.
Important information about your February 1 annuity payment
The Internal Revenue Service (IRS) did not release the 2011 income tax withholding tables until mid-December 2010. OPM did not receive the tax withholding tables in time to apply them to your January 3, 2011 annuity payment.
The 2011 income tax withholding amounts have now been applied and will affect your February 1, 2011, payment and all subsequent payments in 2011. You will receive a Notice of Annuity Adjustment in late January 2011 describing the February 1, 2011, payment, including information about any new income tax amount withheld from your annuity.
Please note that the tax rates did NOT change; only the withholding table changed.
The amount withheld from your annuity could change because:
- Your annuity amount changed.
- The withholding tables changed.
- You asked OPM to make a change.
For information regarding Federal income tax, please visit the IRS website at www.irs.gov.
OPM Announces Open Season For Long-Term Care Insurance
The Office of Personnel Management (OPM) is announcing an Open Season for the Federal Long Term Care Insurance Program (FLTCIP). All eligible individuals who are not currently enrolled in FLTCIP may apply for coverage, including employees, annuitants, and other members of the Federal family. Active workforce members, their spouses, and same-sex domestic partners of civilian active workforce members will be subject to abbreviated underwriting. The addition of same-sex domestic partners of civilian active workforce members as a new type of qualified relative eligible to apply for FLTCIP coverage is pursuant to the
President’s Memorandum of June 17, 2009 on Federal Benefits and Non-Discrimination which requested that OPM, in consultation with the Department of Justice, extend certain benefits that can be provided to same-sex domestic partners of Federal employees consistent with Federal law. All other qualified relatives will be subject to the Program’s standard requirements for full underwriting of applications.
The Open Season will run from April 4 through May 27, 2011.