US Postal Service 2011 Annual Report Download - page 54

2011 Report on Form 10-K United States Postal Service - 52 -
Components of the executive officer compensation and
benefits program are further outlined below.
BASE SALARY
Base salaries provide a level of financial security that is
appropriate for the executive’s position within the Postal
Service. Within the confines of law, base salaries are
scaled within pay ranges designed to be competitive with
the market median. As discussed above, maximum
payouts in a given year are set by federal law. Executive
officer salaries are reviewed at least annually and
adjusted, as appropriate, to reflect factors such as
individual performance, range of responsibilities, value
and contribution to the organization, and experience.
However, as discussed above, the Governors decided to
freeze executive officer salaries for calendar year 2012,
continuing the freeze already in place for calendar year
2011.
ANNUAL INCENTIVE
Annual incentives serve as a mechanism for adjusting
total compensation levels commensurate with the
attainment of planned results, thereby ensuring
affordability and appropriate return to the Postal Service.
As discussed above, the Postal Service uses the NPA
program to set annual corporate performance goals and
metrics. The Governors set the goals and indicators for
the Postmaster General and the Deputy Postmaster
General, and the Postmaster General establishes goals
and indicators for the other executive officers. The
Postmaster General’s and the Deputy Postmaster
General’s performance is determined based on the
degree to which they have achieved the previously -set
goals and metrics. Likewise, executive officers’
individual performance ratings are determined by the
Postmaster General based on the degree to which the
individual has achieved the previously -set individual
goals and metrics. As discussed above, performance
incentives will not be paid for fiscal year 2011 due to the
Postal Service’s dire financial condition.
OTHER COMPENSATION INCENTIVES
Executive officers are also eligible for performance
awards for specific activities that reflect a high degree of
leadership. Only a small number of these individual
awards are given out in a typical year. For fiscal year
2011, no performance awards of this type will be
awarded. In addition, executive officers are eligible for
retention and recruitment incentives designed to attract
and retain highly talented and marketable individuals in
key postal positions. The payment of some of these
awards may be deferred, in whole or in part, due to the
Postal Service’s compensation limits.
RETIREMENT ANNUITIES
Officers are covered either by the Civil Service
Retirement System (CSRS) or the Federal Employees
Retirement System (FERS). Both systems have a
defined benefit component and a defined contribution
component. CSRS and FERS service is creditable for
Medicare coverage. FERS service is creditable for
Social Security.
CSRS Defined Benefit: The CSRS Basic Benefit
annuity is a percentage of the high-3 salary multiplied by
years of service. The percentage is 1.5% for the first 5
years of service, plus 1.75% from 5 years to 10 years of
service and 2% for all years of service thereafter.
Optional retirement thresholds are age 55 with 30 years
of service, age 60 with 20 years of service, and age 62
with 5 years of service, with a requirement of completing
at least 5 years of creditable civilian service. The annuity
is fully indexed to the Consumer Price Index (CPI).
Disability, early retirement, deferred and survivor
benefits are available.
FERS Defined Benefit: The FERS Basic Benefit annuity
is 1 percent of high-3 salary per year of service, or 1.1
percent for retirement at age 62 with at least 20 years of
service. Optional retirement thresholds are the Minimum
Retirement Age (MRA is 55 to 57 depending on year of
birth) with 30 years of service, age 60 with 20 years of
service, age 62 with 5 years of service, or MRA with 10
years of service (at a reduced benefit), with a
requirement of completing at least 5 years of creditable
civilian service. Employees who retire at MRA with 30
years of service, or at age 60 with 20 years of service,
receive a retirement supplement approximating the value
of Social Security benefits attributable to federal service;
this benefit is paid until age 62. Beginning at age 62, the
annuity is indexed to CPI, fully when the CPI increase is
2 percent or less, at 2 percent when the CPI increase is
between 2 and 3 percent, and at CPI - 1 when the CPI is
at least 3 percent. Disability, early retirement, deferred
and survivor benefits are available.
Defined Contribution: The Thrift Savings Plan (TSP) is
similar to 401(k) plans. CSRS and FERS employees
may contribute up to the indexed IRS maximum
($16,500 in 2011). There is no Postal Service
contribution for CSRS employees. For FERS employees,
after an initial waiting period of 6 months to a year, the
Postal Service makes an automatic contribution of 1
percent of basic pay and a matching contribution of up to
4 percent of basic pay, for a total employer contribution
of up to 5 percent of basic pay. Employees who will be at
least age 50 in the year of contribution may make a
separate catch-up contribution up to the indexed IRS
maximum ($5,500 in 2011). TSP investment options are
a government securities fund; index funds that track the
Barclays Capital Aggregate Bond Index, the S&P 500,