US Postal Service 2011 Annual Report Download - page 83

2011 Report on Form 10-K United States Postal Service - 81 -
a liability to FERS for unpaid amounts, pending final
resolution of the funding status of FERS. The total amount
accrued and unpaid of $911 million is included in
Compensation and Benefits Payable. See Note 2-
Liquidity Matters, for further discussion of the suspension
of FERS employer contributions in 2011.
Employer contributions, as a percentage of employee
basic pay for FERS will increase to 11.9% in 2012.
Employee contributions for the past three years, as a
percentage of employee basic pay were 7.0% for CSRS
and 0.8% for Dual CSRS and FERS. The number of
employees enrolled in each of the retirement plans at the
end of 2011, 2010, and 2009 is as follows.
Retirement Enrollment by Program
(Actual numbers) 2011 2010 2009
CSRS 79,014 90,480 110,024
Dual CSRS 4,551 5,206 5,947
FERS 473,686 488,222 507,157
Total Enrollment 557,251 583,908 623,128
EXPENSE COMPONENTS
The following table lists the components of total
retirement expenses included in “Compensation and
Benefits” expense in the Statements of Operations for
2011, 2010, and 2009.
Retirement Expense
(Dollars in millions) 2011 2010 2009
FERS
$ 2,983 $ 2,904 $ 2,962
Social Security 1,856 1,856 1,882
FERS Thrift Savings Plan 1,040 1,049 1,073
Total Retirement Expense $ 5,879 $ 5,809 $ 5,917
Employer cash contributions to retirement plans were
$3,214 million in 2011, $3,944 million in 2010, and $4,024
million in 2009. These amounts do not include Social
Security contributions.
NOTE 9 — WORKERS’
COMPENSATION
Postal employees injured on the job are covered by the
Federal Employees’ Compensation Act (FECA),
administered by the DOL’s Office of Workers’
Compensation Programs (OWCP), which makes all
decisions regarding injured workers’ eligibility for benefits.
However, the Postal Service annually reimburses the
DOL for all workers’ compensation benefits paid to or on
behalf of employees, and pays an administrative fee to
DOL.
An estimation model that combines four generally
accepted actuarial valuation techniques is used to project
future claim payments based upon currently open claims
and past claim payment experience.
A liability is recorded for the present value of estimated
future payments to postal employees, or their qualified
survivors, who have been injured through the end of the
period. The estimated total cost of a claim is based on the
date of the injury, pattern of historical payments,
frequency or severity of the claim-related injury or injuries,
and the expected trend in future costs. The liability for
claims arising more than 10 years ago is determined by
an independent actuary. The FECA benefit structure is
often superior to benefits available under normal federal
retirement, and these more lucrative payments will, in
some cases, be for the rest of the lives of the claimants.
The liability for estimated future workers’ compensation
payments is recorded at its present value. To record the
liability and annual expense, an estimate is made of the
amount of funding that would need to be invested at
current interest rates in order to fully fund all estimated
future payments. Inflation and discount (interest) rates are
updated as of the date of the financial statements to
determine the present value of the workers’ compensation
liability at the balance sheet date in accordance with
GAAP. The impact of changes in the discount and
inflation rates is accounted for as a change in accounting
estimate and included in operating expenses.
The inflation and discount rates used to estimate the
liability at September 30, 2011, 2010, and 2009 are
shown in the following table:
Workers' Compensation Liability
Inflation and Discount Rates 2011 2010 2009
Compensation Claims Liability
Discount Rate 2.3% 2.9% 4.9%
Wage inflation 2.9% 2.9% 3.2%
Medical Claims Liability
Discount Rate 2.4% 3.0% 4.4%
Medical inflation
8.6%
7.4%
3.8%
September 30,