US Postal Service 2004 Annual Report Download - page 27

half฀of฀the฀reduction฀over฀the฀two฀years฀was฀in฀mail฀processing.฀
In฀2004,฀we฀experienced฀slight฀growth฀in฀workhours฀for฀city฀
and฀rural฀delivery.฀This฀growth฀was฀driven฀by฀the฀addition฀of฀
almost฀1.8฀million฀delivery฀points฀and฀by฀increased฀volume.฀
In฀ 2003,฀ we฀ reduced฀ workhours฀ in฀ delivery฀ by฀ almost฀ 9฀
million.฀Thus,฀in฀spite฀of฀the฀addition฀of฀over฀three฀million฀deliv-
ery฀points฀since฀2002,฀we฀are฀operating฀with฀fewer฀delivery฀
workhours.฀Cumulatively,฀beginning฀in฀2000,฀we฀have฀elimi-
nated฀about฀510฀million฀workhours.฀This฀is฀the฀single฀biggest฀
contributor฀to฀the฀ongoing฀achievement฀of฀our฀Transformation฀
Plan฀savings฀targets.฀In฀2004,฀we฀made฀a฀change฀in฀how฀we฀
track฀workhours฀for฀employees฀in฀limited฀duty฀or฀rehabilita-
tion฀assignments.฀The฀workhours฀for฀these฀employees฀are฀now฀
included฀in฀their฀functional฀areas.
In฀2003,฀compensation฀and฀benefits฀expenses฀of฀$50,544฀
million฀were฀$2,614฀million฀(4.9%)฀less฀than฀the฀prior฀year฀
due฀to฀the฀impact฀of฀P.L.108-18,฀which฀reduced฀expenses฀by฀
approximately฀$3,500฀million฀and฀to฀a฀reduction฀of฀54฀million฀
workhours,฀or฀approximately฀24,000฀career฀employees.฀The฀
reduction฀in฀our฀retirement฀costs฀generated฀by฀P.L.108-18฀
and฀by฀our฀workhour฀reduction฀completely฀offset฀the฀growth฀in฀
contractual฀wage฀rates,฀COLAs,฀and฀benefits฀expenses.
Almost฀90%฀of฀our฀career฀workforce฀is฀covered฀by฀collec-
tive฀bargaining฀agreements.฀In฀2002฀and฀2003,฀we฀reached฀
agreements฀through฀negotiated฀settlements฀with฀all฀of฀the฀
major฀ unions฀ and฀ in฀ 2004฀ we฀ reached฀ an฀ agreement฀ to฀
extend฀an฀existing฀contract฀ with฀ one฀ union฀through฀2006.฀
These฀agreements,฀which฀have฀expiration฀dates฀ranging฀from฀
November฀20,฀2005฀to฀November฀20,฀2006,฀call฀for฀annual฀
basic฀pay฀increases฀and฀semi-annual฀cost-of-living฀adjust-
ments฀(COLAs).
Our฀ nonbargaining฀ 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฀Postal฀Service.฀These฀programs฀are฀the฀
Civil฀Service฀Retirement฀System฀(CSRS),฀the฀Dual฀CSRS/Social฀
Security฀ System,฀ and฀ the฀ Federal฀ Employees฀ Retirement฀
System฀(FERS).฀Each฀of฀these฀programs฀is฀described฀in฀further฀
detail฀in฀note฀6฀to฀our฀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.
The฀implementation฀of฀P.L.108-18฀in฀May฀2003฀did฀not฀alter฀
the฀fact฀that฀retirement฀expenses฀remain฀a฀significant฀portion฀
of฀our฀total฀ expenses.฀Retirement฀contributions฀ for฀ current฀
employees฀represented฀10.0%฀of฀our฀total฀expenses฀in฀2004.฀
They฀increased฀by฀$697฀ million฀compared฀to฀2003,฀when฀
these฀benefits฀represented฀only฀9.1%฀of฀total฀expenses฀due฀
to฀the฀one-time฀reduction฀in฀our฀retirement฀expenses฀resulting฀
from฀the฀enactment฀of฀P.L.108-18.฀The฀impact฀of฀P.L.108-18,฀
which฀is฀discussed฀below,฀was฀so฀significant฀that฀it฀resulted฀
in฀an฀overall฀reduction฀in฀our฀benefits฀expenses฀in฀2003.฀In฀
2002,฀prior฀to฀the฀enactment฀of฀P.L.108-18,฀retirement฀costs฀
represented฀13.5%฀of฀total฀expenses.฀
Public฀Law฀108-18฀and฀
Proposed฀Legislation฀
The฀Postal฀Civil฀Service฀Retirement฀System฀Funding฀Reform฀
Act฀of฀2003,฀P.L.108-18,฀changed฀the฀way฀we฀fund฀our฀Civil฀
Service฀Retirement฀System฀obligations฀and฀altered฀the฀related฀
schedules฀for฀our฀payments฀to฀the฀CSRDF.฀P.L.108-18฀was฀
enacted฀in฀response฀to฀a฀November฀2002฀review฀of฀estimates฀
and฀the฀Postal฀Service’s฀payments฀into฀and฀returns฀earned฀by฀
the฀CSRDF฀made฀by฀the฀OPM.฀OPM฀determined฀that฀at฀our฀
then฀current฀rate฀of฀funding,฀we฀would฀pay฀substantially฀more฀
than฀would฀be฀needed฀to฀cover฀the฀future฀benefits฀expected฀to฀
be฀paid฀to฀our฀employees฀and฀retirees฀participating฀in฀CSRS.฀
Part II
Fulfilling฀Our฀Mandate
Since฀1971฀our฀total฀revenues฀(equivalent฀to฀$4,200฀for฀every฀person฀in฀the฀U.S.)฀have฀
exceeded฀our฀total฀expenses฀by฀less฀than฀1%฀(that's฀just฀9฀cents฀per฀year฀per฀person).
Total฀Revenue฀ $฀1,237,927,362,433
Total฀Expenses฀ $฀1,237,030,131,433
Net฀Income฀ $฀฀฀฀฀฀฀฀฀฀897,231,000 financial review
n
CUMULATIVE WORKHOUR REDUCTIONS
-2��
-15�
-1��
-5�
�
Cumulative฀reduction฀of฀510฀million฀workhours
-11฀million
-112฀million
-34฀million
-166฀million
-187฀million
2004 annual report united states postal service | 25
-23
-78
-54
-21
(Hours฀in฀millions)
FY2000 FY2001 FY2002 FY2003 FY2004