US Postal Service 2013 Annual Report Download - page 34

2013 Report on Form 10-K United States Postal Service 32
Retirement expense was 12.3%, 12.3%, and 12.2%, of total compensation and benefits expenses in 2013, 2012, and
2011, respectively. The required agency contribution to the FERS retirement plan was 11.9% for 2013 and 2012, and
11.7% for 2011. Reflecting the lower number of employees in 2013, retirement expense of $5,738 million for current
employees was $116 million, or 2.0%, less than the 2012 expense of $5,854 million. In 2012, retirement expense for
current employees decreased by $25 million, or 0.4%, from the 2011 expense of $5,879 million, in-line with a lower
number of FERS employees. The decrease was partially offset by the increase in the required agency contribution to the
FERS retirement plan which grew from 11.7% to 11.9% of employees’ basic pay in 2012.
OPM has announced the contribution rate for 2014 will continue to be 11.9%.
P.L. 109-435 REQUIRED REPORTING
As described in Note 3, Summary of Significant Accounting Policies, in the Notes to the Financial Statements, which is
located in Part IV, Item 15, of this Form 10-K, we account for participation in the retirement programs of the U.S.
Government under multiemployer plan accounting rules. Although the Civil Service Retirement and Disability Fund
(CSRDF) is a single fund and does not maintain separate accounts for individual agencies, P.L. 109-435 requires certain
disclosures regarding obligations and changes in net assets as if the funds were separate. The following information is
provided by OPM and represents the most recent actual data available, which is as of September 30, 2012, with
projections to September 30, 2013.
FUNDING STATUS
As required by P.L. 109-435, the Postal Service discloses OPM provided information regarding the costs and changes in
obligations related to the FERS and CSRS retirement programs. We have reported this information based on OPM-
provided actuarial valuations, the same valuations that are used by the Civil Service Retirement System Board of
Actuaries to establish the normal cost and funding requirements for these retirement programs. The OPM actuarial
valuations utilize the long-term economic assumptions established by the Civil Service Retirement System Board of
Actuaries. These assumptions are not specific to the Postal Service; rather they are prepared for the Federal Government
as a whole.
The Postal Service’s portion of the FERS liability has been overfunded since 1992 and we have, at various times, sought
either a reduction in our required payroll contributions or a refund of the overfunded balance. In June 2011, to conserve
cash and avoid an interruption of mail service, we sought to apply overfunded balances to amounts currently due for
employer contributions and ceased making employer contributions through November 2011. We resumed the regular
biweekly FERS employer’s contributions and remitted all previously withheld payments in December 2011, including $911
million accrued at September 30, 2011. We continue to seek a refund of the overfunded FERS balance.
OPM’s most recent calculation estimates the FERS surplus at $0.9 billion at September 30, 2012, the latest actual data
available. OPM had previously estimated that we had overfunded our FERS obligations by approximately $2.6 billion at
September 30, 2011. This reduction in the estimated surplus resulted primarily from changes to economic and
demographic assumptions made by OPM, as well as actual 2012 experience. OPM currently estimates the FERS surplus
will fall to approximately $0.5 billion by September 30, 2013.
The Postal Service believes that, as a matter of equity, its FERS obligation should be estimated using the best available
data that most accurately reflects Postal Service-specific demographics and expected pay increases. This means that,
instead of using government-wide salary and demographic data to calculate the FERS surplus, which unfairly increases
our present and future costs, actual Postal Service salary and demographic data should be used. The Postal Service’s
FERS surplus would be substantially larger if OPM calculated the liability using available postal data, as experience over
the last decade clearly demonstrates that average Postal Service salary increases are significantly lower than the
remainder of the Federal Government. The Postal Service has reduced its workforce and is exercising relentless
efficiency and cost reduction programs, yet the OPM calculation inappropriately fails to credit the Postal Service for these
initiatives. Instead, government-wide factors are used when the Postal Service cannot manage these costs and workforce
trends, and accordingly, we continue to request OPM to reconsider its use of such government-wide factors.
Under current law, there is no mechanism for addressing a FERS surplus once it has occurred, nor is there a mechanism
for appealing OPM’s valuation of our FERS liability, or the normal cost percentage used to determine required
contributions. However, in the event that OPM publishes new government-wide contribution percentages, then an agency
may appeal to OPM to use agency-specific data, if the agency estimates that its normal cost percentage is at least 10%
lower than the OPM calculation. Legislation returning the OPM-estimated surplus and requiring use of Postal Service-
specific economic and demographic assumptions is being considered in Congress, but has not reached the floor of either