US Postal Service 2007 Annual Report Download - page 50

50 | 2007 Annual Report United States Postal Service
Notes to the Financial Statements
CSRS
Under the Postal Reorganization Act, officers and career employees hired
prior to January 1, 1984 are covered by the Civil Service Retirement
System, which provides a basic annuity toward which we and the employee
contribute at rates prescribed by law. Effective October 14, 2006,
P.L.109-435 suspends the obligation of making employer contributions
for CSRS employees’ retirement. We do not match TSP contributions for
employees who participate in CSRS. In addition, employees hired before
January 1, 1984, could choose during certain periods in 1987, 1988 and
1998 to switch their participation to FERS.
DUAL CSRS
Employees with prior U.S. government service who were hired between
January 1, 1984, and January 1, 1987, are covered by Dual CSRS, which
consists of a basic annuity and Social Security. We and the employee
contribute to Social Security and the basic annuity at rates prescribed by
law. We do not match TSP contributions for employees who participate in
Dual CSRS.
FERS
Effective January 1, 1987, officers and career employees hired since
December 31, 1983 are covered by the Federal Employees Retirement
System Act of 1986, except for those covered by Dual CSRS. Also included
are employees formerly covered by CSRS who elected in 1987, 1988 and
1998 to participate in FERS.
This system consists of Social Security, a basic annuity plan, and TSP. We
and the employee contribute to Social Security and the basic annuity plan
at the rate prescribed by law. In addition, we are required to contribute to
TSP a minimum of 1% per year of the basic pay of employees covered by
this system. We also match a voluntary employee contribution up to 3% of
the employee’s basic pay, and 50% of a contribution between 3% and 5%
of basic pay.
Employee / Employer Contributions
Employer and employee base contributions, as a percentage of employee
basic pay, are as follows for each of the three plans for 2007, 2006, and
2005.
Retirement Contribution 2007 2006 2005
(Percentage)
CSRS Employer - 17.4 17.4
CSRS Employee 7.0 7.0 7.0
Dual CSRS Employer - 18.0 18.0
Dual CSRS Employee 0.8 0.8 0.8
FERS Employer 11.2 11.2 11.2
FERS Employee 0.8 0.8 0.8
The number of employees enrolled in each of the retirement plans at the
end of 2007, 2006, and 2005 is as follows.
Retirement Enrollment by
Program 2007 2006 2005
(Actual numbers)
CSRS 144,034 157,945 171,958
Dual CSRS 7,716 8,150 8,640
FERS 533,012 530,043 524,118
Expense Components
The following table lists the components of our total retirement expenses
that are included in compensation and benefits expense and related interest
expense in the Statements of Operations for 2007, 2006 and 2005.
Retirement Expense 2007 2006 2005
(Dollars in millions)
CSRS $ 52 $ 1,450 $ 1,533
FERS 2,771 2,652 2,510
FERS Thrift Savings Plan 1,007 960 912
Dual CSRS 3 75 78
Social Security 1,904 1,843 1,750
CSRS “Supplemental Liability” 0 26 27
Total Retirement Expense $ 5,737 $ 7,006 $ 6,810
Employer cash contributions to retirement plans were $3,889 million in
2007, $5,122 million in 2006, and $5,014 million in 2005. These amounts
do not include Social Security contribu tions and interest expense on
deferred retirement liabilities.
P.L.109-435 relieved the Postal Service of the obligation to pay for the
portion of the CSRS pension costs attributable to the military service of
its retirees that was previously imposed by P.L.108-18. The cost of these
benefits was estimated by OPM to be $27 billion in 2003. The elimination
of the military service funding requirement dramatically impacted the
funded status of the portion of the CSRS allocated to the Postal Service.
P.L.109-435 directed OPM to determine the funded status of the CSRS,
without the military benefits, on September 30, 2006 by June 15, 2007.
OPM determined that, as a result of the changes imposed by P.L.109-435,
the Postal Service portion of the CSRS had a surplus of $17.1 billion.
Accordingly, the “supplemental liability” payment required by P.L.108-18
was suspended and no amount was incurred or paid in 2007.
Beginning in 2004, we had been required by P.L.108-18 to pay an
additional annual amount into the CSRS retirement plan, if necessary, each
September, as determined by OPM. The “supplemental liability” represented
the excess of the actuarial present value of the future benefits liability over
the actuarial present value of plan assets, future contributions, earnings,
and other actuarial factors related to postal participants in the CSRS plan.