OIG: sustainability at USPS is possible

Prefunding USPS pension plans, says the Postal Service, is breaking them. Lorie Nelson, with the USPS OIG, has some surprising findings.

By Suzanne Kubota
Senior Internet Editor

For months we’ve been hearing that the Postal Service would be able to improve its bottom line if only it changed its prefunding levels for pensions and retiree health benefits.

The Inspector General for USPS has taken the initiative and conducted a review to see for themselves. The office looked at public and private sector benefits and has just released its findings.

“We’re looking at ways, obviously, that the Postal Service can improve its financial condition,” Lorie Nelson told Federal News Radio. She’s the director of financial reporting in the office of audit for the U.S. Postal Service Office of Inspector General. One of issues the office reported on previously was overfunding of pensions and now they have looked at pre-funding requirements.

“We found some very interesting things,” said Nelson.

In determining the level of prefunding of pension plans and health care, Nelson said it’s not the law that’s the problem.

There’s no statute that defines pre-funding. The OPM sets the funding requirements for the CSRS and the FERS pension plans and the Postal Act of 2006 mandates the pre-funding for the retirees’ health care. So it’s really OPM that needs to change and they’ve gone on record as saying they won’t change unless Congress tells them to. So really it’s going to go back to Congress.

The OIG found the median prefunding level for pensions in 2009 was 79% for Standard and Poor companies. In contrast, “the federal government has funded its combined CSRS and FERS pension obligations at only 41 percent of liabilities and the military’s prefunding for pensions is only 24 percent,” according to the report. It concludes that 80 percent prefunding of pensions is reasonable.

Especially, said Nelson, given current conditions. The Postal Service is “in a deep financial crisis. If things would get better, they could opt to fund again at 100%.”

Her office, like USPS management, won’t stop looking for ways to get back to black. She says they are “still aggressively looking at ways that they can increase their volume, reduce their costs, change their cost models and really look at what they need to be as a new postal service in this new world of changing technology.”

The pension prefunding is just another area they’re looking at, said Nelson. “The dollars are big, the opportunities could be great, but again it’s not an end-all means. It’s just one other opportunity they have for cost savings.”

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