Government affairs

Legislative Updates

USPS OIG releases report on CSRS pension responsibility

Following a request from Rep. Stephen Lynch (D-MA), the U.S. Postal Service’s Office of Inspector General (OIG) released a report today (linked here), drafted with support from PRM Consulting Group, to provide estimates of what the Postal Civil Service Retirement System (CSRS) Fund would look like under alternative calculating methods.

In 1971, when the old Post Office Department (POD) transitioned into the U.S. Postal Service, USPS was required to keep the majority of its employees enrolled CSRS. From then on, the federal government and USPS shared the burden of pension costs for the employees who carried over from the old department into the new agency.

How that share is calculated by the Office of Public Management however, has resulted in an uneven split of cost with USPS paying a disproportionate share, according to the report. The current method is referred to as the “frozen accrued benefit method” as it calculates the government’s share for an individual’s pension as if the person retired from the old Post Office Department (POD) in 1971, even if he/she continued to work for the then-new U.S. Postal Service. This method leaves USPS responsible for all increases in CSRS pension costs for employees who worked in the POD prior to 1971. Additionally, current law states that the federal government bears no responsibility for inflationary increases to these employees’ pension costs.

This method has resulted in USPS paying a disproportionate share of CSRS costs for such employees (ex. USPS would be responsible for 70 percent of pension costs for an employee who only worked 50 percent of his/her career for USPS) the report suggests.

Two alternative methods proposed separately by OIG and the Postal Regulatory Commission (PRC) in 2010 split the costs of CSRS obligations more fairly and are updated in this report from the original 2010 calculations. These methods are defined as:

  • Years of Service – assigns costs to USPS and Govt in direct proportion to an individual’s years of service in each organization
    • (ex. 10 years with POD, 15 years with USPS = 40 percent Fed Govt and 60 percent USPS)
  • Benefit Accrual – uses the existing CSRS benefit accrual formula except it calculates the Govt’s share on a final high-three average salary, rather than the “frozen” method.
    • (ex. 10 years with POD, 15 years with USPS = 35 percent Fed Govt and 65 percent USPS)

According to the report, by changing OPM’s current method of calculating pension responsibility to one of the alternative methods, the currently underfunded Postal CSRS Fund could see significant increases, which would then allow for greater future growth and a fairer division of responsibility.

NALC will monitor any action taken by Congress or OPM around this report and keep its members informed of any updates.

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