US Postal Service 2015 Annual Report Download - page 70

2015 Report on Form 10-K United States Postal Service 68
COMPONENTS OF OFFICER COMPENSATION AND BENEFITS
Base Salary
Base salaries provide a level of financial security that is appropriate for the executive’s position. Within applicable law and
our difficult financial condition, base salaries are to be 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 and when permitted by financial constraints, to reflect individual performance,
range of responsibilities, value and contribution to the organization, and experience. However, as discussed above, officer
salaries have been frozen for five out of the last eight years.
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 performance that benefits us. As discussed above, we use the NPA 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 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 goals and metrics.
Other Compensation Incentives
Executive officers are also eligible for performance awards for specific activities that reflect a high degree of leadership. The
Governors authorized the Postmaster General to specify a limited budget for awards to non-executive officers in 2015, for
exceptional accomplishments during fiscal year 2014. In addition, executive officers are eligible for recruitment, relocation
and retention incentives designed to attract and retain highly talented and marketable individuals in key executive positions.
The payment of some of these incentives may be deferred, in whole or in part, due to the compensation limits imposed on our
employees as more fully discussed above.
Retirement Annuities
Officers are covered either by the CSRS or the 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 based on 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 based on 1.0% of high-3 salary per year of service, or 1.1% for retirement at age 62 with
at least 20 years of service. Optional retirement thresholds are the Minimum Retirement Age (“MRA”) of 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% or less, at 2% when the CPI increase is between 2% and 3%,
and at CPI - 1% when the CPI is at least 3%. Disability, early retirement, deferred and survivor benefits are available.
Defined Contribution
The TSP 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 ($18,000 in 2015). We do not make TSP contributions for CSRS employees.
For FERS employees, we make an automatic contribution of 1% of basic pay and match a percentage of voluntary employee
contributions for up to an additional 4% 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 ($6,000 in 2015). 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