Postal Pension Funding Reform: Issues Related to the Postal Service's Proposed Use of Pension Savings

GAO-04-238 Published: Nov 26, 2003. Publicly Released: Nov 26, 2003.
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Highlights

In April 2003, Congress enacted the Postal Civil Service Retirement System (CSRS) Funding Reform Act of 2003 (P.L. 108-18), which\ lowered the Postal Service's (Service) annual payment for its CSRS obligation by over $2.5 billion beginning in fiscal year 2003. P.L. 108-18 includes requiring (1) the Service to begin making payments into an escrow account in fiscal year 2006, (2) the Service to issue a report on its proposed use of "savings" resulting from the lower CSRS payments, and (3) GAO to evaluate the Service's report and present its findings to Congress. GAO evaluated whether the Service's proposals were consistent with P.L. 108-18; the impact of the escrow account; and whether the proposals were fair to current and future ratepayers, affordable, and helped achieve transformation goals.

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Recommendations

Matter for Congressional Consideration

Matter Status Comments
To ensure continuing progress in addressing the Service's financial challenges, Congress may wish to consider repealing the escrow requirement after receiving an acceptable plan from the Service describing how it intends to rationalize its infrastructure and workforce and is confident that the Service is making satisfactory progress on transforming itself into a more efficient organization and implementing its transformation goals.
Closed – Implemented
Congress passed comprehensive postal reform legislation in December 2006, which the President signed into law on December 20, 2006 (P.L. 109-435). This legislation addressed USPS's long-term financial obligations by returning the responsibility to the Department of Treasury for funding CSRS pension benefits related to the military service of postal retirees, repealing the escrow account requirement, establishing a Postal Service Retiree Health Benefit Fund and requiring the Postal Service to make annual payments into the new Retiree Health Benefit Fund.
To ensure continuing progress in addressing the Service's financial challenges, Congress may wish to consider directing the Service to fund specific purposes that Congress believes are especially important--such as prefunding the retiree health benefits obligation or supporting and possibly accelerating the Service's transformation efforts--if the Service does not provide an acceptable plan for rationalizing its infrastructure and workforce, or show satisfactory progress in implementing transformation, or if Congress wants greater assurance that the Service will spend funds in a particular manner. In this regard, it was already recommended that the Service provide periodic reports on the status of its transformation initiatives and other Commission recommendations.
Closed – Implemented
Congress passed comprehensive postal reform legislation in December 2006, which the President signed into law on December 20, 2006 (P.L. 109-435). This legislation addressed USPS's long-term financial obligations by returning the responsibility to the Department of Treasury for funding CSRS pension benefits related to the military service of postal retirees, repealing the escrow account requirement, establishing a Postal Service Retiree Health Benefit Fund, and requiring the Postal Service to make annual payments into the new Retiree Health Benefit Fund.
To ensure continuing progress in addressing the Service's financial challenges, Congress may wish to consider addressing implementation issues related to the retiree health benefits obligation. For example, one key issue that would need to be further explored is what options may be available that will allow the Service to amortize its unfunded retiree health benefits obligation over a specified time period (e.g., 20-40 years) and prefund the retiree health benefits obligation for future retirees.
Closed – Implemented
Congress passed comprehensive postal reform legislation in December 2006, which the President signed into law on December 20, 2006 (P.L. 109-435). This legislation addressed USPS's long-term financial obligations by returning the responsibility to the Department of Treasury for funding CSRS pension benefits related to the military service of postal retirees, repealing the escrow account requirement, establishing a Postal Service Retiree Health Benefit Fund and requiring the Postal Service to make annual payments into the new Retiree Health Benefit Fund. This law included a specific schedule for Postal Service payments into the Postal Service Retiree Health Benefits Fund from 2007 through 2016 (ranging between $5.4 and $5.8 billion per year) and a requirement for the Service to establish an amortization schedule for any remaining unfunded obligations and retire them by 2056.

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