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2012 Report on Form 10-K United States Postal Service- 54 -
LEGAL MATTERS AND CONTINGENT LIABILITIES
An estimated loss contingency is accrued in our financial statements if it is probable that a liability has been incurred and
the amount of the loss can be reasonably estimated. Assessing contingencies is highly subjective and requires judgments
about future events. We regularly review loss contingencies to determine the adequacy of our accruals and related
disclosures. The amount of the actual loss may differ significantly from these estimates. In 2012, the material claim
outstanding is the following.
McConnell v. Donahoe: On January 14, 2010, the Equal Employment Opportunity Commission's (EEOC) Office of
Federal Operations certified a class action case against the Postal Service in a matter captioned McConnell v. Donahoe.
The class currently consists of all permanent rehabilitation employees and limited-duty employees who have been
subjected to the National Reassessment Process (NRP) from May 5, 2006, to July 1, 2011. We used the NRP to ensure
that our records were correct and that employees receiving workers' compensation benefits were placed in jobs consistent
with their abilities. The case alleges violations of the Rehabilitation Act of 1973 resulting from the NRP's failure to provide
a reasonable accommodation, the NRP's wrongful disclosure of medical information, the creation by the NRP of a hostile
work environment, and the NRP's adverse impact on disabled employees. The class is seeking injunctive relief and
damages of an uncertain amount on behalf of a yet-unidentified population of employees. If the plaintiffs were able to
prove their allegations in this matter and to establish the damages they assert, then an adverse ruling could have a
material impact on us. However, we dispute the claims asserted in this class action case and are vigorously contesting the
matter. See Note 7, Contingent Liabilities, in the Notes to the Financial Statements for additional information.
FAIR VALUE MEASUREMENTS
In 2012 and 2011, our financial statements contain fair value disclosures required by GAAP. We did not have any
recognized gains as a result of these valuation measurements in these years. All recognized losses have been
incorporated into our financial statements, and the unrecognized gains and losses are not considered to have a significant
impact upon our operations. See Note 11, Fair Value Measurement, in the Notes to the Financial Statements for
additional information.
LEGISLATIVE UPDATE
Appropriations and Continuing Resolutions
On September 28, 2012, the President signed into law the Continuing Appropriations Resolution, 2013, (P.L. 112-175).
The law provides funding for the Federal government to continue operations, projects, or activities which were conducted
in Fiscal Year 2012 through March 27, 2013. The Postal Service's appropriation for free mail for the blind and overseas
voters remains $78.2 million. No funding was provided for the $29 million payment owed to the Postal Service under the
Revenue Forgone Reform Act of 1993. The language requiring six-day mail delivery frequency remains in effect.
On June 26, 2012, the full House Appropriations Committee reported H.R. 6020 (H. Rept. 112-550), the Financial
Services and General Government Appropriations Bill, 2013. On June 14, 2012, the full Senate Appropriations Committee
reported S. 3301 (S. Rept. 112-177), the Financial Services and General Government Appropriations Act, 2013. The
funding level recommended in these bills for free mail for the blind and overseas voters was $89.1 million. No funding
was provided for the $29 million payment owed to the Postal Service under the Revenue Forgone Reform Act of 1993.
The bills further directs the Postal Service to ensure continuation of the current six-day delivery schedule, and that none of
the funds shall be used to consolidate or close small rural or other small Post Offices in fiscal year 2013. The Senate bill
also directs that the Postal Service shall not execute, prior to FY 2014, any decisions pertaining to the closure or
consolidation of specific mail processing facilities. This includes facilities that were not closed or consolidated before May
15, and facilities for which the Postal Service conducted an Area Mail Processing (AMP) study after January 1, 2006. This
includes AMP studies that were either terminated or concluded that no significant cost savings or efficiencies would result.
The bills now await consideration by the appropriate Congressional chambers.