US Postal Service 2005 Annual Report Download - page 34

24 | 2005 Annual Report United States Postal Service
expenses. The increase in these expense categories was
partially offset by a $401 million decrease in workers’
compensation expense (see workers’ compensation
discussion on page 26).
In addition to labor and benefits rates, workhours are the
other major component of our compensation and benefits
expense. This year’s growth in costs was driven by an
increase of almost 11 million workhours, the first time in
six years in which workhours increased over the prior year.
The workhour increase involved increased workload due
to the addition of 2 million delivery points and an additional
6 billion pieces of mail. Despite the slight increase in 2005,
we have cumulatively eliminated 686 million workhours
since 2000. This has been the single biggest contributor
to the ongoing achievement of our Transformation Plan
savings targets.
The 2004 increase of $1,693 million in compensation and
benefits expenses was driven by the same factors as the
2005 increase, although COLAs were smaller in 2004.
Average hourly labor rates in 2004 increased by 1.7% over
2003. The increase in compensation and benefits in 2004
was somewhat alleviated by a $234 million decrease
in workers compensation expenses and a 21 million
workhour reduction. Beginning in 2004, we implemented
a change in how we track workhours for employees in
limited duty or rehabilitation assignments. The workhours
for these employees are now included in the functions
(operations) in which they work.
Almost 90% of our career workforce is covered by
collective bargaining agreements. Our major collective
bargaining agreements all have an expiration date of
November 20, 2006, and currently require annual basic
pay increases and semi-annual COLAs.
Our non-bargaining employees receive pay increases only
through a pay-for-performance program that makes mean-
ingful distinctions in performance. These employees do
not receive automatic salary increases, nor do they receive
COLAs or locality pay.
Retirement Expense
With certain exceptions, our employees participate in one
of three retirement programs based on the starting date
of their employment with the Federal Government. These
programs are the Civil Service Retirement System (CSRS),
the Dual CSRS/Social Security System (Dual CSRS), and
the Federal Employees Retirement System (FERS). Each
of these programs is described in further detail in Note 6
of the Notes to the Financial Statements. The programs
are administered by the Office of Personnel Management
(OPM). The expenses of all of our retirement programs are
included in compensation and benefits expense.
In 2005, OPM increased the contribution percentage em-
ployers pay for FERS participants, from 10.7% to 11.2%.
This increase added over $100 million to our retirement
expense in 2005.
The implementation of P.L.108-18 (discussed in detail
below) in May 2003 did not alter the fact that retire-
ment expenses remain a significant portion of our total
expenses. Retirement contributions for current employees
represented 10.3% of our total expenses in 2005, 10%
in 2004, and 9.1% in 2003. In 2003 we benefited from
a one-time reduction in our retirement expenses resulting
from the enactment of P.L.108-18.
As described in Note 6 of the Notes to the Financial
Statements, we account for our involvement in these retire-
ment programs as a participant in a multi-employer plan.
However, OPM does maintain postal specific records that
identify the present value of benefits, the present value of
contributions and the value of the postal fund. The follow-
ing table provides this information for the CSRS and FERS
programs as of September 30, 2004, the most recent data
provided by OPM.
Financial review
Part II
(In thousands) % Change
Workhours 2005 2004 2003 2005-2004 2004-2003
Operations
Operations Support 9,606 9,077 9,102 5.8% -0.3%
Mail Processing 336,210 336,737 347,964 -0.2% -3.2%
Rural Delivery 179,549 171,628 166,873 4.6% 2.8%
City Delivery 471,071 464,683 464,300 1.4% 0.1%
Vehicle Services 31,880 31,947 32,111 -0.2% -0.5%
Limited Duty and
Rehabilitation 3,604 6,356 21,455 -43.3% -70.4%
Plant & Equipment
Maintenance 80,867 81,302 81,807 -0.5% -0.6%
Customer Services
& Retail 233,953 233,237 232,529 0.3% 0.3%
Postmasters &
Installation Heads,
Supervisors,
Administration
and Other 116,513 117,354 117,652 -0.7% -0.3%
Total Workhours 1,463,253 1,452,321 1,473,793 0.8% -1.5%