Updated October 16, 2011    
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How the GAO report supports H.R. 1351

PRC and OIG methods: 'Reasonable’

Oct. 16, 2011 -- The Government Accountability Office (GAO) issued a report on Oct. 13 that reiterated its previously stated view that the Office of Personnel Management’s unreasonable division of Civil Service Retirement System (CSRS) pension obligations associated with employment for the pre-1971 Post Office Department between the USPS and the Treasury Department was “consistent” with the law. It erroneously concluded that, since the actuarial methods used by the OPM to allocate these obligations were “reasonable,” that was no “overpayment” into CSRS by the Postal Service. The advocates of dismantling the Postal Service, who last week pushed H.R. 2309 (the so-called Postal Reform Act of 2011) through our House oversight committee, have argued that the GAO report ends the debate and that Congress should reject H.R. 1351. [Click here to read “H.R. 2309: A plan to dismantle the USPS.] Nothing is further from the truth.

The fact that GAO has reissued a conclusion it reached in 2003 when it worked with the Office of Personnel Management on Public Law 108-18 (the CSRS funding reform law) does not end the debate.* In fact, the latest GAO report, U.S. Postal Service: Allocation of Responsibility for Pension Benefits [PDF], actually bolsters the case for H.R. 1351 despite making a lot of misleading arguments. [Click here to read the NALC’s response to the GAO’s report (PDF).] The GAO report also concluded that the actuarial methods proposed by the Postal Regulatory Commission (PRC) and the USPS Office of Inspector General (OIG) are “reasonable” methods for fairly allocating postal pension costs. “All three methodologies (current, PRC and USPS OIG) fall within the range of reasonable actuarial methods for allocating the costs to time periods.” (See page 14 of the report.) The GAO report goes on to say that this allocation of costs is ultimately a “policy decision” that Congress must decide. In other words, only Congress can end this debate.

On this we can agree. Congress should end the debate by enacting H.R. 1351 or similar legislation, because adopting such legislation is the most reasonable way to fix the financial crisis at the Postal Service that was prompted by Congress itself in 2006 when it mandated that the Postal Service massively pre-fund its future retiree health benefits at a crushing cost of $5.5 billion per year. No other agency or company is required to pre-fund retiree health benefits in the way all companies must pre-fund pension benefits. But the Postal Service faces this burden and the $21 billion in retiree health pre-funding payments between 2007 and 2010 caused 100 percent of the USPS’ reported losses of $20 billion over the past four years.

“The GAO report didn’t end the debate,” NALC President Fredric V. Rolando said. “It started the debate in 2003 when it sided with OPM when OPM insisted on its methods over the objection of the Postal Service.

“The PRC and the OIG audits conducted by truly independent private-sector experts in 2010 came to a much more reasonable conclusion---and that is why 225 members of Congress from both parties have co-sponsored H.R. 1351.”

Congress should enact legislation that embraces the PRC and OIG audits or it should repeal the retiree health pre-funding mandate—these are the essential first steps toward preserving one of America’s greatest institutions.

* That pension funding law, which wrongly shifted the cost of military pension benefits earned by postal employees before they were hired by the USPS to the Postal Service, was corrected by the 2006 postal reform law.

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