A Change to United States Postal Service Pensions is Coming

Oct 27, 2017

pension

The United States Postal Service will finally get a change to its employee pension accounts. These pensions will now be calculated using assumptions from its workforce rather than the federal workforce as a whole.

For years, the Postal Service has argued its payments into FERS/CSRS have been too pricey due to the difference between the demographics of its employees and the rest of the federal government. Salary growth differs significantly from other federal agencies and organizations. Postal workers usually remain in a similar pay grade throughout their careers while non-postal federal employees see significant pay increases.

The Office of Personnel Management finalized a rule that allows the Postal Service to make payments into the pension funds using a calculation based solely on its employees.

Back in December, the USPS and its inspector general asked for their calculation to be based on both its workforce demographics and its wage growth. OPM chose to make the payment calculation specific to USPS for demographics only, saying no rule change is required because the board that determines pension liability will use salary information specific to USPS.

Postal reform advocates, along with the USPS, have said it has overpaid into the accounts by billions of dollars. Billions! A 2017 USPS IG report estimated their FERS liability has been overestimated by $4.1 billion due to a growing gap between the salary of the average postal worker and salaries of other federal employees.

The rule will also make additional calculations specific to each class of FERS contributor. Federal employees currently pay one of three different percentages towards their pensions, based on their hire date, ranging from 0.8% to 4.4% of their paychecks.

In 2013, a standalone bill was introduced to require OPM to create a postal-specific formula to determine its pension fund payments. The agency IG said, “The Postal Service cannot afford to make pension contributions that are necessary for future benefits”, regarding USPS’s fiscal difficulties.

Postal Service advocates have long called for the reform. The National Association of Letter Carriers President Fredric Rolanda called it a “nagging” problem. Megan Brennan, Postmaster General cited pension overfunding as one of four key issues that had to be addressed for her agency to sign off on any reform.

There’s no way to tell if this will help the USPS’s fiscal problems, but hopefully, it’s a step in the right direction.

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