A new audit report from the Office Of Inspector General says that the USPS over-funded its FERS retirement obligations by $6.8 billion. The OIG reported several months ago that USPS overfunded its CSRS retirement obligations by $75 billion.

Excerpts:
Consistent with other retiree benefit obligations, the Postal Service is being unfairly burdened for its share of the FERS pension obligation. The OPM projected a $6.8 billion surplus in the Postal Service’s FERS obligation at the end of FY 2009. The OPM acknowledged that the federal government’s FERS obligation, excluding the Postal Service, was unfunded by $7.4 billion at the end of FY 2008.The funding status for the Postal Service, as well as the federal government, is calculated by subtracting the pension assets from the actuarial accrued liability. A higher liability results in an unfunded status, while a lower liability results in a surplus. According to the OPM, the liability is a projection for current and future benefit obligations and considers contributions paid into and disbursements from FERS. Overall, the liability is based on estimated demographics for the entire federal government, including the Postal Service.

However, the Postal Service’s benefits paid represent actual demographic behavior, such as early career turnover, and not the aggregate, resulting in a surplus status for the Postal Service and an unfunded status for the federal government.

Based on this data, the Postal Service’s overfunding issue is even larger than we previously reported. Similar to what we have noted in other OIG retiree benefit reports, Postal Service Based on this data, the Postal Service’s overfunding issue is even larger than we previously reported. Similar to what we have noted in other OIG retiree benefit reports, Postal Service ratepayers continue to pay more than their fair share of retiree benefits. It is important that the trend of overpayments does not continue. The Postal Service faces a challenging future and its responsibilities and the true cost of funding postal operations needs to be absolutely clear. To address that challenge, the Postal Service is making operational changes to bring costs in line with revenue projections. Additionally, it is pursuing legislative changes to address concerns raised about pension and retiree health benefit payments. We believe management should also consider the FERS overfunding issue as the Postal Service pursues legislative changes.

Having retirement expenses commingled with the federal government’s budget, while being expected to operate as an efficient business, puts the Postal Service in a precarious position. The surplus in the CSRDF effectively subsidizes appropriated tax dollars when it could be used to offset the Postal Service’s current and future business expenses.

Conclusion:

The Postal Service has opportunities to use at least $5.5 billion of the $6.8 billion in FERS surplus funds to address its current and future financial condition. We found the Postal Service continues to overfund its retirement obligations and there is no present legislation to resolve surpluses. Further, it is vital that the Postal Service’s responsibilities be clearly delineated and separated from those of the rest of the federal government. The overcharges associated with CSRS obligations, coupled with the FERS surplus discussed in this report, have adversely affected the Postal Service’s financial position, hindered its ability to operate efficiently in a business-like matter, and hindered its transformation under the Postal Accountability and Enhancement Act (PAEA). Action is needed to prevent a repeat of historical trends in the overfunding of Postal Service retiree benefits.

Read the full USPS OIG report.