OPM IG Releases Study On USPS OIG’s Proposals to Change USPS Funding of Retiree Benefits
Filed under: fehb, oig, opm, postal, postal news, press releases, usps
Press Release from the OPM Office Of Inspector General
Study of the Risks and Consequences of the USPS OIG’s Proposals to Change USPS’s Funding of Retiree Benefits: Shifting Costs from USPS Ratepayers to Taxpayers’
Washington, DC – (Feb. 28, 2011) Today, the U.S. Office of Personnel Management (OPM), Office of the Inspector General (OPM OIG), issued a study analyzing certain proposals issued by the United States Postal Service (USPS), Office of Inspector General (USPS OIG), regarding changes in the manner by which the USPS funds both its retiree annuity and health benefit obligations. The OPM OIG paper, A Study of the Risks and Consequences of the USPS OIG’s Proposals to Change USPS’s Funding of Retiree Benefits: Shifting Costs from USPS Ratepayers to Taxpayers, reviews the impact that the proposals would have upon the trust funds and the Federal benefit programs administered by OPM.
In a series of reports containing these proposals, the USPS OIG has estimated that the USPS has “overpaid” these trust funds by as much as $142 billion. The proposals generally envision changing the law governing the manner in which the USPS’s retiree benefit liabilities are determined and funded.
“We felt that the issues surrounding the USPS OIG’s proposals had not been fully explored,” said Inspector General Patrick E. McFarland. “It was important for us to examine not only the effects that the proposals would have upon the USPS, but also their impact upon the Federal retirement system as a whole. We were also concerned that there was a public perception that OPM may have inappropriately calculated the USPS’s liabilities. In fact, our analysis revealed that OPM has fully complied with the law.”
The OPM OIG study also concludes that generally the proposals would have a lasting negative effect upon the retirement programs and trust funds and have little, if any, positive impact upon the USPS’s ultimate long-term profitability. In addition, the result of these proposals would be to shift costs from USPS ratepayers to the American taxpayers.
While the USPS’s financial situation must be addressed, the OPM OIG study cautions against using the Federal retirement program as a vehicle through which to implement policy objectives unrelated to the Federal retiree benefit programs. “The resolution of the USPS’s financial situation should be fully transparent rather than providing an indirect subsidy from the Federal benefits system,” said Inspector General McFarland.
“While our findings do not support the USPS OIG’s proposals,” stated Inspector General McFarland, “we think that our work, combined with theirs, will help the Congress, the Administration, and the USPS to develop the most efficient and effective resolution of the USPS’s current problems.”
Here’s an interesting little tidbit from the report:
Under the FEHB Program, a portion of a retiree’s health care insurance premium is paid for by the Federal Government (or, in the case of USPS retirees, the USPS) through contributions to the Employees Health Benefits (EHB) Fund.The Federal or USPS retiree contributes the remaining amount of the premium to the fund.
As the USPS OIG’s reports have repeatedly pointed out, the Federal Government does not prefund it s retiree health obligations. Instead, the employer and employee contributions pay only for the costs of the program for that particular year. Consequently, the EHB Fund maintains only a small amount of reserves and thus does not have significant assets that remain in the fund from year to year.
It is unclear, however, what the effect would be upon USPS employees’ or retirees’ rights if the USPS ceased making its required payments into the EHB Fund because the fund does not contain sufficient reserves that could be used to “replace” the USPS’s contributions. Consequently, the fund’s assets would be exhausted very quickly.
In such a scenario, the insurance companies would still be legally entitled to the full amount of the premium negotiated under the contract. The OPM would have to take some sort of action because without the USPS’s contributions, the fund simply would not have enough money to pay every FEHB Program participant’s premium.
Absent an emergency appropriation from Congress, it is possible that the OPM would have to exercise its regulatory authority to disenroll USPS employees and retirees as a class in order to continue providing health care coverage to all other FEHB Program participants.
USPS’s Financial Outlook
While various parties have worked diligently to develop business and operational initiatives geared towards improving the USPS’s business model and financial condition, we have yet see a report that contain s viable projections that it will improve its financial situation.
OPM OIG Study of USPS OIG Proposals Feb 28 2011
APWU Urges PRC To Make Repeal of Prefunding Mandate a Priority
Repealing a provision of the Postal Accountability and Enhancement Act is “so critical to the welfare of the Postal Service” that it should be the exclusive focus of a report to the president and Congress on the effectiveness of the law, the APWU wrote to the Postal Regulatory Commission on Feb. 1. The provision, which requires the Postal Service to pre-fund health benefits, costs the Postal Service more than $5 billion annually and has driven the USPS to the brink of insolvency.
These payments are “unsustainable, inconsistent with the provision of universal service at fair and reasonable rates, and inconsistent with the operation of the Postal Service in an efficient and businesslike manner,” the union’s counsel wrote [PDF] on behalf of the APWU.
There is a “broad consensus among postal industry stakeholders that the most urgent need” for reform of the PAEA is the pre-funding mandate. No other private company or government agency is forced to bear such a burden.
Of almost equal importance – because of the practical link to the pre-funding issue – is the need to provide the USPS access to the substantial amounts it has overpaid into its pension funds, the union said. The APWU urged the commission to ask Congress to grant the Postal Service access to overpayments to the Civil Service Retirement System and the Federal Employees Retirement System. Three independent actuarial studies have confirmed the USPS has a surplus of between $50 billion and $75 billion in its CSRS pension. FERS overpayments are estimated at $6 billion to $7 billion.
The Postal Accountability and Enhancement Act (PAEA) requires the commission to deliver a report to the president and Congress evaluating the law and to suggest legislative measures to improve its effectiveness. The union’s recommendations follow a public forum held by the PRC on Jan. 11 to provide postal industry stakeholders, including the APWU, the opportunity to comment informally.
APWU: Rough Week for USPS Highlights Importance of Bill to Fix Finances
Filed under: APWU, politics, postal, postal news, PRC, retirement, usps
APWU News
The Postal Service suffered two punishing blows this week: The Postal Regulatory Commission (PRC) rejected a request for a rate increase, and Congress refused to give the USPS relief from the requirement to pay $5.5 billion by Sept. 30 to pre-fund future retiree healthcare obligations.
The Postal Service requested the rate increase under the “exigency” provision of the Postal Accountability and Enhancement Act of 2006 (PAEA), which restricts the Postal Service’s authority to increase postage based on its needs. The PAEA limits rate increases to the rate of inflation, except in “exigent” circumstances, which the law defines as “extraordinary or exceptional.”
The PRC accepted the USPS contention that the severity of the recession constituted “extraordinary or exceptional” circumstances, but it said the Postal Service failed to demonstrate that its recent financial losses were caused by the recession.
The mandate to pre-fund retiree healthcare obligations is also a provision of the PAEA.
The APWU vigorously opposed the PAEA, including the limits on the right of the Postal Service to raises rates. “External restrictions on the Postal Service’s right to increase revenue will invariably result in limits on the union’s collective bargaining rights,” APWU President William Burrus explained.
“The PRC ruling fully justifies the APWU’s objection to the PAEA, and stands as stark evidence that the supporters of the legislation erred in their decision to require the Postal Service to pre-pay billions of dollars in future healthcare costs while severely limiting its opportunity to increase revenue,” he said.
Dangerously Low Reserves
The Postal Service now finds itself with dangerously low cash reserves, and estimates a $7 billion loss for Fiscal Year 2010, which ended Sept. 30. Most of the agency’s deficit is caused by the pre-funding requirement, which no other federal agency or private company is required to make. The pre-funding mandate is a provision of the PAEA, which requires such payments annually for 10 years.
This difficult situation makes it urgent that APWU members encourage legislators to support H.R. 5746, a bill that would restore financial stability to the Postal Service, Burrus said. Two recent studies concluded that — as the result of an improper funding formula — the agency overpaid the Civil Service Retirement System (CSRS) billions of dollars. A study by the USPS Office of Inspector General, conducted in January 2010, found that the USPS overpaid $75 billion; a study commissioned by the Postal Regulatory Commission concluded in July that the USPS overpaid $50 billion to $55 billion
H.R. 5746 (the U.S. Postal Service CSRS Modification Act), which was introduced by Rep. Stephen Lynch (D-MA) on July 15, would alter the methodology for allocating the Postal Service’s share of pension costs for employees whose careers spanned the former Post Office Department and the USPS. It also would permit the Postal Service to meet the pre-funding requirement using the surplus in the retirement fund.
“Despite recent assertions by prominent Republicans on the House Oversight and Government Reform Committee, using the overpayment in this fashion would not constitute a bailout,” Burrus noted. “The Postal Service would be using its own money to meet the unreasonable and burdensome pre-funding requirement.”
“Simply put, passage of this bill is vital to the future of the Postal Service,” he said. “We must do everything in our power to see that it becomes law.”
“Our members also must consider the future of the Postal Service when they vote on Nov. 2,” Burrus said. If the Republican Party takes control of Congress in the fall election, the likelihood of passage would be greatly diminished.
In rejecting the Postal Service’s request for an exigent rate increase — which would raise postage costs above the rate of inflation — the PRC said the USPS failed to show that its financial difficulties are the result of the recession. Rather, the commission said, the losses are a direct result of the provision of the congressional mandate to pre-fund retiree healthcare benefits.
“Although the PRC’s ruling will make the Postal Service’s financial situation more difficult,” Burrus said, “it supports our view about the cause of those difficulties.
“We must make it clear to legislators that the future of the USPS hangs in the balance. We must insist that they support H.R. 5746.”
NALC: Mailers And Senator Collins Misreading Congress’ Intent Of USPS Seeking Rate Increases
Filed under: NALC, postal, postal news, postal reform, PRC, rate increase, usps
REPLY OF INTERVENOR NATIONAL ASSOCIATION OF LETTER CARRIERS, AFL-CIO
TO COMMENTS OF AFFORDABLE MAIL ALLIANCE AND SENATOR COLLINS
The AMA argues that the price-cap regulatory system established by the Postal
Accountability and Enhancement Act (“PAEA”) will be “dead” if the Commission interprets the
exigency clause in 39 U.S.C. §3622(d)(1)(E) to apply to the circumstances currently facing the
United States Postal Service (“USPS”). See AMA Comment at 5. Senator Collins echoes that
position, asserting “unequivocally” that the PAEA “does not provide for an exigent rate case”
under the circumstances set forth in USPS’s request.
These comments misconstrue Congress’ intent when it allowed USPS to seek an
exigent rate increase under “extraordinary or exceptional circumstances.” 39 U.S.C.
§3622(d)(1)(E).
Although she now opposes USPS’s exigent rate request, Senator Collins, in an April 6, 2007 letter to the Commission that she co-authored with Senator Carper (see Collins Comment, at Attachment 1), explained that Congress meant the PAEA’s exigency exception to apply to “significant and substantial” declines in mail volume caused by events beyond USPS’s control:
the “extraordinary and exceptional circumstances” referenced in
the language may include terrorist attacks, natural disasters, and
other events that may cause significant and substantial declines in
mail volume or increases in operating costs that the Postal Service
cannot reasonably be expected to adjust to in the normal course of
business.
The letter cited “terrorist attacks” as an example of an event whose impact on
mail volume could qualify under the statute as an exigent circumstance. See id. In her comment,
Senator Collins now explicitly embraces the idea that “the terrorist attacks of September 11,
2001, or the anthrax attacks later that year could serve as the basis for an exigent rate case.”
Collins Comment at 3; see also id. at Attachment 4, at 11 (S. Rep. 108-318 (2004)) (citing
September 11, 2001 and anthrax attacks as examples of exigencies).
The AMA and Senator Collins argue that the PAEA’s exigency clause must be
read narrowly and only to apply to unforeseen events. See AMA Comment at 12-16; Collins
Comment at 3. Even if that were correct, the current circumstances would still apply. That the
business cycle will ordinarily produce crests and troughs may be foreseeable, but no one could
have foreseen the economic tsunami now known as the “Great Recession” and the carnage it
would leave in its wake: a contraction of the GDP in 2008-2009 of nearly 4%, a drop in private
employment of 7.3%, and a fall in real investment spending of 35.7%; the closure of 228 banks
since January 2008; and the majority of the American workforce in the 30 months preceding July
2010 having faced unemployment, experienced a cut in pay or a reduction in hours, or been
forced into part-time status. See July 6, 2010 Statement of Joseph Corbett in Docket No. R2010-
4, at 14.3 That this was no ordinary recession is evidence by Congress having appointed a
special commission to investigate its causes. And while some argue that the mail-volume loss
was aggravated by a long-term migration of communications to the internet, there is no dispute
that the bulk of the loss was due to the macroeconomic nightmare.
In any event, the claim that the PAEA’s exigency clause only applies in the
narrowest of circumstances and only to unexpected events is wrong, and based on a misreading
of the statute’s text and legislative history. In the original Senate bill, introduced in March 2005,
the exigency exception would only have applied to “unexpected and extraordinary
circumstances.” S. 662, 109th Cong. §3622(d)(1)(D) (2005) (emphasis added). But the statute as
enacted in December 2006 lacks the requirement that the exigent circumstances be
“unexpected.” See 39 U.S.C. §3622(d)(1)(E). Congress not only dropped the unforeseeability
requirement, but also broadened the exigency clause by replacing the restrictive conjunctive
language, marked by the word “and,” with the disjunctive phrase “either … or.” Id. (PAEA
referring to “either extraordinary or exceptional circumstances”) (emphasis added).
3 In fact, recent revisions to Commerce Department data show that the recession, with a 4.1%
drop in GDP, was worse than originally thought. See “A Deeper Hole,” The Economist (Aug. 7,
2010), at 28 (confirming that recession was “the worst of the post-war years”).
The April 2005 congressional testimony quoted by Senator Collins that the
exigency clause establishes a “‘very high bar,’” Collins Comment at 2-3 (quoting testimony in
Attachment 5, at 2) is thus inapt, as it expressly refers to the Senate bill that never became law.
See Collins Comment, Attachment 5, at 2. The April 2004 testimony she quotes that exigent
circumstances must be “‘unexpected’” came even earlier in the legislative process and was thus
even further removed from the actual statutory language. See id. at 3 (quoting testimony in
Attachment 6, at 20).
The Commission itself has made clear that exigencies under the PAEA can be
either foreseen or unforeseen. In its original proposed rules on exigent rate cases, the
Commission would have required USPS, when filing for an exigent rate increase, to justify why
“the circumstance giving rise to the request was neither foreseeable nor avoidable by reasonable
prior action.” Order Proposing Regulations to Establish a System of Ratemaking, Docket No.
RM2007-1 (Aug. 15, 2007), at Proposed Rule 3100.61(a)(7) (emphasis added). But the
Commission changed this language after receiving comments that the assumption behind the
proposed rule — that exigent circumstances must be unforeseen — was inconsistent with the
statutory language. The rule as promulgated by the Commission now only requires USPS to
provide an “analysis of the circumstances giving rise to the request, which should, if applicable,
include a discussion of whether the circumstances were foreseeable or could have been avoided
by reasonable prior action.” Commission Rule 3010.61(a)(7) (emphasis added).
Finally, the AMA devotes much of its comment to arguing that current
circumstances cannot qualify as an exigency because, it claims, USPS’s private-sector
competitors weathered the economic storm while USPS, burdened by purportedly above-market
labor costs and other inefficiencies, has floundered.
This argument ignores the fact that, unlike USPS, its private-sector competitors have no
universal service obligation nor do they bear the unique burden of having to pre-fund retiree
health benefits.4 Moreover, AMA’s argument is based on highly contested assertions that raise
issues that are beyond the scope of the instant rate proceeding and unsupported by anything in
the evidentiary record in this case. For example, AMA’s assertion that USPS pays wages above
wages paid for comparable work in the private-sector, see AMA Comment at 30-31, raises
complex legal and economic issues regarding the meaning and application of the comparability
standard in the Postal Reorganization Act (“PRA”). See 39 U.S.C. §1003 (a) (providing for
postal compensation and benefits “on a standard of comparability to the compensation and
benefits paid for comparable levels of work in the private sector of the economy”). NALC and
its economic experts have argued elsewhere that proper application of the comparability standard
requires comparing letter carrier pay to the pay of employees in large, comparable firms such as
employees of other parcel delivery enterprises — not, as others have argued, to the pay of all
employees throughout the private-sector. In any event, the legislative history makes clear that
the comparability standard leaves ample room for differences over how it is to be interpreted and
applied and that such differences are to be worked out in collective bargaining between USPS
and the postal unions or, failing that, in interest arbitration.5 That comparability is beyond the
For a discussion regarding the impact on USPS of the obligation to pre-fund retiree health
benefits, see Frank Clemente and Tom Kiley, “Congressional Mandates Account For Most Of
Postal Service’s Recent Losses,” Economic Policy Institute, Briefing Paper #268 (June 2010).
5 See, e.g., Post Office Reorganization: Hearings on Various Proposals to Reform the Postal
Establishment Before the House Comm. On Post Office and Civil Service, 91st Cong., 1st Sess.
221 (Postmaster General testifying that “there is a wide variety of difference as to what
comparability might mean” and “that has to be bargained between the parties”); 39 U.S.C.
§1207(c) (providing for interest arbitration in the event that collective bargaining fails to produce
an agreement). Under the PRA, the compensation of bargaining unit postal employees is to be
determined through collective bargaining between USPS and the postal unions in accordance
with the applicable principles of the National Labor Relations Act.
Sen. Susan Collins: USPS Proposed Exigent Rate Increases Are Not Justified Under Law
Filed under: postal, postal news, postal reform, press releases, usps
Senator Susan Collins issued the following press release:
SENATOR COLLINS AGREES WITH ARGUMENTS IN MOTION TO BLOCK PROPOSED POSTAL RATE HIKES
Collins Backs Position taken by the Affordable Mail Alliance
WASHINGTON, D.C. – U.S. Senator Susan Collins, Ranking Member of the Senate Homeland Security and Governmental Affairs Committee and author of the landmark postal reform law, the Postal Accountability and Enhancement Act of 2006, issued a statement today in support of the Affordable Mail Alliance’s Motion to Dismiss the U.S. Postal Service’s proposed rate increases.
The Alliance filed its motion with the Postal Regulatory Commission, arguing that the Postal Service’s rationale for its proposed rate hikes does not meet the required criteria to use an exigent rate case – which would allow postal rates to exceed the annual price increase cap.
Senator Collins’ statement follows:
“As the author of the 2006 postal reform law, I completely agree with the Affordable Mail Alliance that the Postal Service’s proposed exigent rate increases are not justified under law.
“Let me be clear. The authority to increase rates under an exigent case can only be used in extreme and unforeseen instances – such as terrorist attacks, natural disasters, and other events that would cause significant and substantial disruptions in service. The law was not meant to be used to remedy poor economic performance or to offset an ongoing marketplace trend, such as the increased use of electronic over traditional mail.
“In addition to not meeting the criteria set forth in the law, the exigent rate case is simply a bad business decision. Rather than help restore postal solvency, an exigent rate increase will worsen the Postal Service’s crisis by further driving down mail volumes and thus revenues. Such action will erode further the Postal Service’s already declining customer base. The Postal Service should be looking at initiatives that will increase volume and attract more consumers. These rate increases will do just the opposite.”
Facts Don’t Lie: Chart Shows True Picture of Postal Service’s Financial Health
Burrus Update 12-2010, July 21, 2010
In a series of recent Updates for union members, I have pointed out that the Postal Service’s current financial difficulties are the result of the Postal Accountability and Enhancement Act of 2006 (PAEA), which imposed on the USPS the onerous burden of pre-funding future retiree healthcare liabilities — in amounts exceeding $5 billion annually over a 10-year period.
Despite the accuracy of my Updates, numerous articles and editorials in the mainstream media have reported somberly on the Postal Service’s desperate financial situation. My response has been that USPS deficits are directly linked to the pre-funding issue, and do not accurately reflect the relationship between postal revenue and expenses related to providing mail service.
A USPS chart [PDF] confirms my analysis: It shows that from 2001 through 2008, minus the pre-funding requirement of the PAEA, the Postal Service experienced a cumulative surplus of more than $14 billion.
This record refutes the screaming headlines that the Postal Service’s financial situation is in need of major surgery if the USPS is to survive far into the future. The chart clearly rebuts the leading sentence of virtually every media report about the Postal Service’ proposed rate increase and the future of mail.
It does not take a genius to look at the true picture of postal finances and conclude that despite the diversion of hard-copy communication and the worst recession in 60 years, the Postal Service has performed admirably. The deficits of 2007 and beyond directly correspond to the future healthcare funding obligation, period.
William Burrus
President
Burrus: A Pig with Lipstick… Is Still a Pig
Burrus Update
The supporters of the PAEA are directly responsible for the precarious financial status of the Postal Service, not reduced mail volume caused by the slumping economy, not the migration of hard-copy mail to computer-driven messages, not the escalation of energy costs.
As president of the largest union of postal employees, my mission is to maximize the rights and benefits of APWU-represented employees. This responsibility creates a natural conflict with those whose mission is to bend postal policy to advance their institutional and corporate goals. Therefore, it is not surprising that postal unions, management, and large mailers often find ourselves on opposite sides of postal issues.
Through the years, my criticism of the USPS has been consistent: Top-level managers have converted the Postal Service — a public service — into an arm of commercial mailers. As a result, the natural tension between the union and the employer has been influenced by management’s bias towards its biggest and most powerful customers.
The cause of the Postal Service’s dire financial condition is the PAEA. Those responsible for its passage must accept responsibility for the current state of affairs.
It is not surprising that on many issues, postal management, large mailers, and postal unions espouse different positions on the state of the Postal Service and its prospects for the future. This is expected and welcome; after heated debate, consensus should settle somewhere between our competing positions.
But on occasion, one of the parties strays beyond the boundaries of civil debate. I was guilty of crossing the line shortly into my service as president of the union, when I compared large mailers to “vermin” for seeking to deny postal workers’ rights in their insatiable appetite for reduced rates. Since then, I have consciously toned down such rhetorical excesses, recognizing that they do a disservice to the debate. (I note that similar excesses have been directed in reverse — I have been accused of behavior like that of the Third Reich!)
This history of rhetorical excesses in the postal debate came into focus recently, when I read an article [PDF] by a leading spokesman for the mailing industry that bitterly protested USPS plans to seek a rate increase next year and defended the Postal Accountability and Enhancement Act of 2006 (PAEA). I read with amazement as facts were distorted and criticisms of postal management were presented as though the Postal Service is free to write its own ticket — as though Congress has no say over the Postal Service’s use of the mailbox monopoly, and as though the Postal Service’s competitors would stand idly by while the USPS launches new services and products.
The mailing industry spokesman apparently believes the imposition of a $65 billion obligation to pre-fund future retiree healthcare liabilities is a trivial matter that could have been overcome through better management. He implies that postage rates have always been limited to the rate of inflation — suggesting that the Postal Service’s intent to use the “exigency” exception in the PAEA to increase rates above the inflation rate would be historic. This is the stuff of fairy tales.
To accept this logic one must have an extremely short memory: As recently as 2005, postage rates were based on the Postal Service’s need for revenue. Prior to enactment of the PAEA, the USPS was required to “break even over time.” I guess the mailing industry spokesman believes he is entitled not only to his own opinion, but to his own facts.
All this obfuscation was in defense of legislation (the PAEA) that by any measure has been a colossal failure. No amount of posturing can change the reality that putting lipstick on a pig doesn’t fundamentally change the pig. Such was the PAEA, a pig with make-up, but still a pig.
The mailing industry spokesman chides the Postal Service for opposing the law, but, in fact, USPS opposition to the PAEA did not surface until very late in the legislative process. Throughout the debate leading up to enactment of the bill, postal management drank the postal “reform” Kool-Aid and encouraged Congress to embrace the legislative proposals that became the PAEA.
Only at the 11th hour did the USPS seem to realize that the pre-funding requirement and the restriction on rate increases outweighed any minimal improvements the bill offered. The elimination of the lengthy adversarial rate-making process and the provision that requires injured employees to use leave when on-the-job injuries force them to miss work paled in comparison to these onerous financial mandates.
The supporters of the PAEA are directly responsible for the precarious financial status of the Postal Service, not reduced mail volume caused by the slumping economy, not the migration of hard-copy mail to computer-driven messages, not the escalation of energy costs. The cause of the Postal Service’s dire financial condition is the PAEA. Those responsible for its passage must accept responsibility for the current state of affairs.
Yes, postal management could have taken many steps in response to the crippling new obligations of the PAEA, each of which would have been vigorously contested. The proponents of the misguided legislation also could have expended their energies in positive endeavors and spared the Postal Service the agony of being pushed to insolvency.
I repeat: A pig with lipstick is still a pig. The Postal Accountability and Enhancement Act is a pig.
William Burrus
President
OIG Report: Postal Execs Pay In Compliance With Postal Reform Act
This report presents the results of our audit of compensation paid or deferred to officers1 based on the limits established in the Postal Accountability and Enhancement
Act of 2006 (Postal Act of 2006) and U.S. Postal Service policies and guidelines (Project Number 10BM001FT001). Initially we performed this work in fiscal year (FY)
2008, in response to an inquiry from the Board of Governors (Board) regarding the audit coverage we provide for officer compensation. We will continue to provide a report annually as part of our ongoing financial statement audit work. See Appendix A for additional information about this portion of the audit
Background
The passage of the Postal Act of 2006 amended Title 39, imposing guidelines on total compensation2 for the Postal Service. Under this provision, the total compensation
payable to any employee is established at three levels:
- Level I of the Executive Schedule or $196,700 for calendar year 2009.
- With the approval of the Board, total annual compensation not to exceed the total annual compensation payable to the vice president of the United States, or
$227,300 for calendar year 2009. - For up to 12 officers or critical employees, compensation up to 120 percent of the total annual compensation payable to the vice president of the United States, or
$272,760 for calendar year 2009.
Further, Postal Service officers receive additional benefits and other perquisites not subject to the compensation cap.
Conclusion
The Postal Service complied with the compensation limits stated in the Postal Act of 2006. Further, while we reviewed deferred compensation as a part of the overall scope, it does not apply to compensation caps. We noted that six of 44 officers were allocated a total of $502,395 in deferred compensation3 during calendar year 2009. Officers may be granted deferred compensation that is distributed after employment ends, or in a year when the payment of previously deferred compensation does not exceed the cap. Title 39 does not limit the Postal Service from devising and implementing deferred compensation provided it does not conflict with either the Federal Employees’ Retirement System or Civil Service Retirement System.
BACKGROUND
The passage of the Postal Act of 2006 amended Title 39, imposing guidelines on total compensation4 for the Postal Service. Under this provision, the total compensation
payable to any employee is established at three levels.
- The first limit provides that no officer or employee may be paid compensation at a rate in excess of the rate for level I of the Executive Schedule. This
compensation limit was set at $196,700 for calendar year 2009. - With the approval of the Board, however, the Postal Service may develop a program to award a bonus or other reward in excess of the above compensation
limit, as long as this does not cause the total annual compensation paid to the officer to exceed the total annual compensation payable to the vice president of
the United States as of the end of the calendar year in which the bonus or award is paid. In approving any such program, the Board must determine that the bonus
or award is based on a performance appraisal system that makes meaningful distinctions based on relative performance. This total compensation limit was
$227,300 for calendar year 2009. - In addition, the Board may allow up to 12 officers or employees of the Postal Service in critical senior executive or equivalent positions to be paid total annual
compensation up to 120 percent of the total annual compensation payable to the vice president of the United States as of the end of the calendar year in which
such payment is received. This compensation limit was $272,760 for calendar year 2009.
Postal Service officers receive additional benefits and other perquisites not subject to the compensation cap, including increased annual leave exchange hours, free financial counseling, parking, life insurance, and health benefits.5 In certain limited cases, officers have contractual benefits in the form of deferred compensation. These items are not generally subject to the compensation guidelines defined in the Postal Act of 2006.
The Postal Accountability and Enhancement Act: Overview and Issues for Congress
Congressional Research Service Report
Summary
President George W. Bush signed the Postal Accountability and Enhancement Act (PAEA; P.L.109-435; 120 Stat. 3198) on December 20, 2006. The PAEA was the first broad revision of the 1970 statute that replaced the U.S. Post Office with the U.S. Postal Service (USPS), a selfsupporting,independent agency of the executive branch.
This report describes Congress’s pursuit of postal reform, and summarizes the major provisions of the new postal reform law. The report also suggests PAEA-related oversight issues for Congress.
Legislatively, the pursuit of reform of the U.S. Postal Service (USPS) began during the 104th Congress, in 1996. A number of factors encouraged the movement for postal reform. Perhaps foremost were the financial challenges of the USPS.
A decade later, Congress enacted the PAEA, which made over 150 changes to postal law. Some of the more significant alterations are defining the term “postal service”; restricting the USPS’s authority to provide nonpostal services; altering the USPS’s budget submission process; requiring the USPS to prefund its future retiree health benefits by establishing the Postal Service Retiree Health Benefits Fund; and replacing the USPS’s regulator, the Postal Rate Commission, with the more powerful Postal Regulatory Commission.
The inherent complexity of lawmaking and the execution thereof invites disagreement and confusion over what a law means and how it should be implemented. In the three years since the enactment of the PAEA, some issues and questions concerning the law’s provisions have arisen. These include, but are not limited to, possible executive branch concerns about the PAEA and the separation of powers; the cost of prefunding USPS future retiree health benefits; the role of the public in the closure of nonretail postal facilities; the USPS’s authority to provide nonpostal products and services, and the viability of the USPS’s business model.
This report will be updated should events warrant.
Mailing Industry Executives Tell Postal Workers to Sacrifice
Burrus Says Postal Reform Act (PAEA) was clearly a colossal blunder
Burrus Update
Are Their Profits Sacred?
Postal unions realize that Congress’ vote last month to give the USPS just a one-year reprieve from a crushing financial obligation means additional legislative action will be needed to help the Postal Service remain viable. So it was no surprise to hear that representatives of trade groups for major mailers say the legislature may be compelled to address postal reform again.
It was shocking, however, to read that the president of the Association for Postal Commerce suggests that “the time has come for postal employees to start sharing some of the sacrifices.”
As APWU members know, postal employees have made tremendous sacrifices as the USPS confronts financial difficulties. More than 40,000 jobs have been wiped out in the last year; thousands of employees have been reassigned to work sites hundreds of miles from their homes; and part-time employees have had their hours slashed.
But the real irony is this: The Postal Service’s financial debacle is the result of the Postal Accountability and Enhancement Act (PAEA), which the Association for Postal Commerce strenuously advocated. The 2006 law requires the agency to pre-fund retiree healthcare benefits at a cost of more than $5 billion a year for 10 years – an obligation no other federal agency or private company bears. This requirement is the reason the Postal Service has been teetering on the edge of insolvency.
The PAEA was clearly a colossal blunder, yet those who fought for it now suggest that postal workers should pay for their mistake. To make matters worse, the Association for Postal Commerce vociferously defends excessive workshare discounts that allow major mailers to reap handsome profits.
I have issued a challenge to the Postmaster General:
Discontinue the exorbitant postage discounts that are offered to large mailers — which are currently as high as 10.5 cents per letter — and allow members of the APWU to perform all mail-processing functions at the rate of 10.4 cents for every letter and flat.