3/10/10

As you have heard, the OIG, in Janaury 2010, found that USPS overfunded the CSRS retirement fund by some $75 billion. As a retired CSRS employee I was curious as to whether or not there was ANY possiblity that postal CSRS contributors could have somehow been overcharged as well. So, I wrote the OIG and the following is their response to my inquiry. However, I still think that the most important thing to remember is that if USPS was overcharged for their CSRS contributions then this money needs to be immediately refunded to USPS…helping with our bottom line.

Hi Rick,

Great question. I checked with our research people who did the white paper, here is their response:

You raise an important issue of the employee contributions into the fund. Both the Postal Service and employees paid into the CSRS fund the standard agency contributions (usually 7 percent each). However, over the years, the Postal Service was also required to make extra payments into the fund. These additional payments for salary increases and retiree COLAs were sizeable. In some years, these extra payments were larger than the total amount of the combined employee and agency contributions.

While the Postal Service and postal employees were paying into the fund, Postal Service employees were also retiring and receiving retiree benefits from the fund. The OIG’s white paper on the overcharge does not deal with the Postal Service’s payments to the fund as much as these payouts to Postal Service employees. Many of these retirees had many years of service for the federal government under the Post Office Department.

The white paper argues that the Postal Service’s share of the fund was overcharged for these payments to retirees. The federal government should have picked up a higher share of the payouts if they were split based on the employee’s years of service. In other words, the paper argues that if an employee worked half of his career with the Postal Service and half with the Post Office Department, the Postal Service’s part of the pension fund should pick up half of the cost of the pension payouts, and the federal government’s part of the pension fund should pick up the other half. Right now, the federal government’s fund pays much less than this.

We estimate that if the federal government’s fund was charged the appropriate share of payments to retirees, there would be $75 billion more in the Postal Service’s pension fund.

The CSRS agency and employee contribution percentages are set by law. The percentages are not calculated or determined by OPM, and we did not look at this issue in our paper. However, it’s important to note that if only the CSRS employee and agency contributions had been made, the Postal Service’s pension fund would still be significantly underfunded.

[End of OIG Letter]

Rick Owens
Postal Employee Network