US Postal Service 2012 Annual Report Download - page 67

2012 Report on Form 10-K United States Postal Service- 66 -
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 2013, continuing the freeze already in place.
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 2012 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. Fiscal year 2012 was the fifth consecutive
year that compensation for officers and executives was in some way affected by a freeze. 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; it has a component that mirrors traditional
401(k) plans and an option similar to Roth plans. CSRS and FERS employees may contribute up to the indexed IRS
maximum ($17,000 in 2012). There is no Postal Service contribution for CSRS employees. For FERS employees, 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 2012). TSP
investment options are a government securities fund; index funds that track the Barclays Capital Aggregate Bond Index,