US Postal Service 2004 Annual Report Download - page 51

2004 annual report united states postal service | 49
Notes to the financial statements
Expense฀Components
The฀following฀table฀lists฀the฀components฀of฀our฀total฀retirement฀
expenses฀that฀are฀included฀in฀our฀compensation฀and฀benefits฀
expense฀and฀related฀interest฀expense฀in฀the฀Statements฀of฀
Operations฀for฀2004,฀2003฀and฀2002.
฀2004฀ 2003฀ 2002
CSRS฀ $1,641฀ $1,128฀ $฀ 740
FERS฀ 2,255฀ 2,172฀฀ 2,121฀
FERS฀—฀Thrift฀฀
฀฀฀Savings฀Plan฀ 877฀ 856฀ 827
Dual฀CSRS฀฀ 76฀ 52฀ 33
Social฀Security฀ 1,610฀ 1,544฀ 1,511
Accrued฀Postal
฀฀฀Supplemental฀Liability+฀ 12฀ ฀9฀ -
Interest฀expense฀
฀฀฀on฀supplemental฀liability+฀ 103฀ 116฀ ฀-
Amortization฀of฀deferred฀cost*:
CSRS฀ ฀-฀ -฀฀ 1,393฀
Annuitant฀COLAs฀ -฀ -฀ 879
Interest฀expense฀
฀฀on฀deferred฀liabilities฀ -฀ -฀ 1,601
Total฀retirement฀expense฀ $6,574฀ $5,877฀ $9,105
*฀Eliminated฀by฀P.L.108-18
+฀Required฀by฀P.L.108-18
Employer฀cash฀contributions฀to฀retirement฀plans฀were฀$4,827฀
million฀in฀2004,฀$4,031฀million฀in฀2003฀and฀$6,013฀million฀in฀
2002.฀These฀amounts฀do฀not฀include฀Social฀Security฀contribu-
tions฀and฀interest฀expense฀on฀deferred฀retirement฀liabilities.
Note 7 – The Postal Civil Service
Retirement System Funding Reform Act of
2003 — P.L.108-18
On฀April฀23,฀2003,฀the฀President฀signed฀into฀law฀the฀Postal฀Civil฀
Service฀Retirement฀System฀Funding฀Reform฀Act฀of฀2003฀—฀
P.L.108-18,฀ which฀ changed฀ the฀ way฀ we฀ contribute฀ to฀ the฀
CSRS฀retirement฀plan.฀Although฀the฀law฀changed฀the฀funding฀
of฀the฀plan,฀we฀determined฀that฀we฀are฀still฀a฀participant฀in฀a฀
multi-employer฀pension฀plan.฀The฀parent-subsidiary฀relation-
ship฀that฀we฀have฀as฀an฀“independent฀establishment”฀of฀the฀
executive฀branch฀of฀the฀United฀States฀government฀allows฀for฀
this฀accounting฀treatment฀under฀FAS฀87.฀As฀a฀subsidiary฀we฀
cannot฀direct฀the฀costs,฀benefits฀or฀funding฀requirements฀of฀the฀
federally-sponsored฀plan.
We฀are฀required฀by฀P.L.108-18฀to฀pay฀an฀additional฀annual฀
amount,฀if฀necessary,฀each฀September,฀beginning฀in฀2004,฀
as฀determined฀by฀OPM.฀The฀additional฀amount฀is฀based฀on฀
a฀calculation฀of฀any฀potential฀“supplemental฀liability”,฀if฀one฀
exists.฀The฀“supplemental฀liability”,฀represents฀the฀excess฀of฀
the฀actuarial฀present฀value฀of฀future฀benefits฀over฀the฀actuarial฀
present฀value฀of฀plan฀assets,฀future฀contributions,฀earnings,฀
and฀other฀actuarial฀factors฀related฀to฀postal฀participants฀in฀the฀
CSRS฀plan.฀
During฀2004,฀OPM฀estimated฀the฀present฀value฀of฀benefits฀at฀
$191.1฀billion,฀contributions฀at฀$15.9฀billion,฀and฀plan฀assets฀
at฀฀$171.7฀billion.฀This฀resulted฀in฀a฀“supplemental฀liability”฀of฀
$3.5฀billion฀as฀of฀September฀2003.฀฀This฀calculation฀assumed฀
general฀salary฀increases฀of฀4.0%,฀COLAs฀of฀3.25%฀and฀inter-
est฀of฀6.25%,฀and฀is฀intended฀to฀provide฀for฀the฀“supplemental฀
liability”฀over฀a฀40-year฀period฀ending฀in฀September฀30,฀2043.
Under฀the฀law฀OPM฀is฀not฀required฀to฀furnish฀the฀final฀actuarial฀
calculation฀of฀the฀September฀30,฀2004,฀liability฀until฀June฀30,฀
2005.฀฀OPM’s฀calculation฀of฀the฀September฀30,฀2004,฀“supple-
mental฀liability”฀payment฀was฀$240฀million.
OPM฀will฀recalculate฀the฀“supplemental฀liability”,฀if฀any,฀on฀an฀
annual฀basis.฀Each฀September฀30,฀we฀will฀make฀any฀required฀
payment฀resulting฀from฀this฀calculation.
Because฀the฀law฀went฀into฀effect฀in฀May฀2003,฀we฀estimated฀
the฀portion฀of฀the฀amount฀payable฀on฀September฀30,฀2004,฀
attributable฀to฀2003฀and฀expensed฀that฀amount฀in฀2003.฀฀This฀
amounted฀to฀$125฀million,฀of฀which฀$116฀million฀was฀included฀
as฀interest฀expense฀on฀our฀2003฀income฀statement.฀The฀2004฀
portion฀of฀the฀supplemental฀retirement฀obligation฀was฀$115฀
million,฀of฀which฀$103฀million฀is฀included฀as฀interest฀expense.฀
Note 8 – revenue forgone
Our฀operating฀revenue฀includes฀accruals฀for฀revenue฀forgone.฀
Revenue฀is฀forgone฀when฀Congress฀mandates฀that฀we฀provide฀
free฀mail฀for฀certain฀mailers.฀Congress฀appropriates฀money฀to฀
reimburse฀us฀for฀the฀revenue฀that฀we฀have฀forgone฀in฀provid-
ing฀these฀services.฀We฀have฀included฀as฀operating฀revenue฀
the฀amounts฀appropriated฀by฀Congress฀for฀revenue฀forgone฀of฀
$36฀million฀for฀2004,฀$31฀million฀for฀2003฀and฀$48฀million฀for฀
2002.฀Legislation฀enacted฀in฀2003฀and฀2002฀delayed฀payment฀
of฀the฀amount฀authorized฀for฀2004฀and฀2003฀until฀the฀first฀day฀
of฀2005฀and฀2004,฀respectively.฀Accordingly,฀we฀have฀recorded฀
these฀amounts฀as฀a฀receivable฀at฀year฀end.
Under฀the฀Revenue฀Forgone฀Reform฀Act฀of฀1993,฀Congress฀is฀
required฀to฀reimburse฀us฀$29฀million฀annually฀through฀2035฀
(42฀years).฀This฀reimbursement฀is฀for฀two฀purposes:฀services฀
we฀performed฀in฀1991,฀1992฀and฀1993฀for฀which฀we฀have฀
not฀yet฀been฀paid;฀and฀for฀shortfalls฀in฀the฀reimbursement฀for฀
the฀costs฀we฀incurred฀for฀processing฀and฀delivering฀certain฀
nonprofit฀mail฀from฀1994฀through฀1998.
(Dollars฀in฀millions)