US Postal Service 2015 Annual Report Download - page 55

2015 Report on Form 10-K United States Postal Service 53
possible losses in its financial statements. The Postal Service is from time to time involved in other litigation incidental to the
conduct of its business, none of which is expected to be material to its business, financial condition or operations.
Class Action Litigation
As previously reported, on January 14, 2010, the Equal Employment Opportunity Commission’s Office of Federal Operations
certified the case McConnell v. Brennan (first instituted in 2006 as McConnell v. Potter) as a class action against the Postal
Service, with the class consisting of all permanent-rehabilitation and limited-duty Postal Service employees who were assessed
under the Postal Service’s National Reassessment Process (“NRP”) between the dates of May 5, 2006, and July 1, 2011. The
NRP was a program the Postal Service utilized to ensure that its records regarding employees injured on the job 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. If the plaintiffs were able to prove their allegations in this matter and to establish the damages they assert, an adverse
ruling could have a material impact on the Postal Service. The Postal Service continues to dispute the claims asserted in the
case and is vigorously contesting the matter.
NOTE 9 - RETIREMENT PLANS
The majority of Postal Service employees participate in one of two U.S. government pension programs, the Civil Service
Retirement System (“CSRS”) or the Federal Employees Retirement System (“FERS”), based on the starting date of employment
with the Postal Service or other U.S. government entities. While CSRS is solely a defined benefit pension plan, “Dual” CSRS
and FERS include Social Security and also have a defined benefit component. These plans are administered by OPM and
generally provide for retirement, death and termination benefits for eligible employees based on specific eligibility and
participation requirements, vesting periods and benefit formulas. Employees may also participate in the Thrift Savings Plan
(“TSP”), a defined contribution retirement savings and investment plan administered by the Federal Retirement Thrift
Investment Board. As indicated in Note 1 - Organization and Summary of Significant Accounting Policies, approximately
91% of Postal Service career employees are covered by collective bargaining agreements.
As government-sponsored benefit plans, CSRS and FERS are not subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended. The Postal Service participates in these plans with other U.S. government entities and
cannot direct the plans’ costs, benefits or funding requirements. The Postal Service therefore accounts for program expenses
for the plans under multiemployer plan accounting rules. Annual funding requirements can fluctuate significantly from year
to year due to changes in federal law or determination by OPM.
CSRS provides a basic annuity plan benefit to employees hired before January 1, 1984. Dual CSRS provides Social Security
benefits in addition to its basic annuity plan for employees hired between January 1, 1984 and January 1, 1987. CSRS and
Dual CSRS employees may participate in the TSP, but do not receive matching contributions from the Postal Service.
PAEA suspended the Postal Service’s employer contributions to CSRS that would otherwise have been required under Title
5, Section 8334(a)(1) of the United States Code until 2017, although CSRS employees continue to contribute to the plan. In
2017, OPM will determine whether additional funding is required by the Postal Service for the benefit of its CSRS participants.
As a result of the contribution suspension, there was no Postal Service’s employer contribution for each of the years ended
September 30, 2015, 2014 and 2013.
Effective January 1, 1987, FERS covers employees hired since December 31, 1983, and includes Social Security and TSP
benefits in addition to its basic annuity plan. For most current FERS employees, the Postal Service’s contribution rates of
participating employees’ base salaries were 13.2% for the year ended September 30, 2015, and 11.9% for years 2014 and
2013. The Postal Service is also required to contribute to the TSP for FERS employees by contributing an automatic 1% of
basic pay and matching a percentage of voluntary employee contributions for up to an additional 4% of basic pay.
During 2015 and 2014, the Postal Service received separate notices from OPM requiring the Postal Service to make additional
payments to the FERS benefit plan for the benefit of active employees, as well as retirees. In accordance with Section 8423
(b) of Title 5. U.S.C., the additional payment obligations are based on actuarial valuations and assumptions to supplement the
FERS plan which are to be made in equal installments over the next 30 years. The annual increase in payment obligation was
$234 million and $7 million for the years ended September 30, 2015, and 2014 respectively. The Postal Service recorded an