US Postal Service 2003 Annual Report Download - page 28

26 | 2003 annual report united states postal service
management discussion & analysis
operations
premium increases. As health care costs
continue to increase, so will our health benefits
expense for current employees.
Almost 90% of our career workforce is
covered by collective bargaining agreements.
These agreements have expiration dates from
November 2004 to November 2006 and call
for basic pay increases and cost of living
adjustments (COLAs).
Our non-bargaining employees receive pay
increases only through a pay-for-performance
program that makes meaningful distinctions
in performance. Unlike the rest of the federal
government and our bargaining employees,
these employees do not receive automatic
salary increases, nor do they receive COLAs
or locality pay.
With the conclusion in 2002 of our group
incentive program that covered over 80,000
supervisors, managers, postmasters, execu-
tives and staff throughout the Postal Service,
management met with representatives from
supervisor and postmaster associations and
designed a performance-based pay system
that enhances accountability for individual
contributions to organizational success. The
new system provides clear expectations and
feedback on progress toward established
goals. It is also designed to reward and recog-
nize exceptional individual performance for
achieving challenging objectives.
Retiree Health Benefits
The Postal Reorganization Act of 1970,
which created the Postal Service, allowed the
Postal Service to either participate in the
Federal Employees Health Benefits Program
(FEHBP), or adopt a plan that would be no less
favorable to our employees. The Postal
Service has continued to participate in the
FEHBP. Eligible postal employees with at least
five consecutive years participation in the
FEHBP immediately preceding retirement are
entitled to continue this healthcare coverage
after retirement.
Until 1987, the cost of postal retirees’
health benefits under the FEHBP was paid
from funds appropriated (tax dollars) directly to
the federal Office of Personnel Management
(OPM) or its predecessor. The Omnibus Budget
Reconciliation Act (OBRA) of 1985 made us
responsible for paying the government’s share
of health insurance benefits under the FEHBP
for those postal employees who retired after
September 30, 1986. The OBRAs of 1989 and
1990 retroactively extended our responsibility
for paying health insurance benefits for all
postal retirees and their survivors to July 1,
1971, the date of postal reorganization. The
retroactive payments for this extended liability
were assessed in those years and paid as
required by law.
FEHBP, which provides health benefits to all
federal and postal employees and retirees,
treats all participants as a single group. In addi-
tion, OPM and the various providers negotiate
and control the benefits offered in FEHBP. All
benefits are equally available to all participants.
OPM also negotiates rates with the insurance
carriers and the premiums charged by insurance
carriers are based on the risk characteristics of
the entire population of FEHBP participants.The
Postal Service is billed and pays from postal
revenues the premium cost for postal retirees.
For all other federal agencies, this cost is paid
by the U.S. Treasury through appropriations.
In 1990, the Financial Accounting
Standards Board (FASB) issued its Statement
on Financial Accounting Standards (FAS)
No.106, Employers’ Accounting for
Postemployment Benefits Other Than
Compensation and Benefits Details ($ millions)
2003 2002 Change Percentage
Change
Compensation $37,144 $36,877 $267 0.7%
Retirement 5,877 9,105 (3,228) -35.5%
Health Benefits 4,526 4,201 325 7.7%
Retiree Health Benefits 1,133 987 146 14.8%
Workers' Compensation 1,473 1,524 (51) -3.3%
Other 391 464 (73) -15.7%
Total Compensation and Benefits* $50,544 $53,158 ($2,614) -4.9%
*Equals compensation and benefits plus interest on deferred retirement on the
financial statements
Change in Compensation
and Benefits Costs
2003 2002 2001
-4.9%* 0.4% 3.6%
*Without the retirement system reform
act, increase for 2003 would have
been 1.4%.