US Postal Service 2014 Annual Report Download - page 77

2014 Report on Form 10-K United States Postal Service 73
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.
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, and this was true in 2014. The Governors decided that a
limited budget would be available for awards made to non-executive officers in 2014, for exceptional accomplishments during
Fiscal Year 2013. 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
($17,500 in 2013). 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 2014). TSP investment options are a
government securities fund; index funds that track the Barclays Capital Aggregate Bond Index, the S&P 500, the Dow Jones
U.S. Completion TSM Index, and the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) stock index;
and lifecycle funds.
Supplemental Non-Qualified Deferred Compensation
Where appropriate and on a highly selective basis, the Postal Service offers supplemental non-qualified deferred compensation
as a recruitment or retention tool.