US Postal Service 2006 Annual Report Download - page 30

28 | 2006 Annual Report United States Postal Service
In addition to labor and benefits rates, workhours are a major driver of
our compensation and benefits expense. This year’s growth in costs was
slightly tempered by a reduction of almost 5 million workhours or 0.3%.
The 2006 workhour reduction is the sixth year out of seven in which
workhours have been reduced. In 2006, mail processing, customer
service and city delivery workhours decreased 7 million compared to
2005, while rural delivery experienced an almost 7 million increase in
workhours. The rural delivery workhour growth was driven by the addition
of over one million new delivery points and by increased mail volume.
Since 2000, we have cumulatively eliminated 867 million workhours,
which has been the single largest contributor to the ongoing achievement
of our savings targets.
Workhours by Function 2006 2005 2004
(Workhours in thousands)
City Delivery 468,918 471,071 464,683
Mail Processing 332,269 336,210 336,737
Customer Services & Retail * 246,538 247,512 248,097
Rural Delivery 186,164 179,549 171,628
Plant & Equipment Maintenance 81,366 80,867 81,302
Vehicle Services 32,116 31,880 31,947
Operations Support 9,882 9,606 9,077
Limited Duty & Rehabilitation 375 3,604 6,356
Postmasters, Managers,
Supervisors, Administration,
and Other * 101,101 102,954 102,494
Total Workhours 1,458,729 1,463,253 1,452,321
* Due to a change in calculating customer service hours we have adjusted hours to be presented
on a comparable basis. Total workhours are not changed.
More than 85% of our career employees are covered by collective
bargaining agreements. Our major collective bargaining agreements all
expire on November 20, 2006, and currently require annual basic pay
increases and semi-annual COLAs.
Our non-bargaining employees receive pay increases only through a
pay-for-performance program that makes meaningful distinctions in
performance. These employees do not receive automatic salary increases,
nor do they receive COLAs or locality pay.
Retirement Expense
Our employees participate in one of three retirement programs of the
U.S. government based on the starting date of their employment with the
federal government. These programs are the Civil Service Retirement
System (CSRS), the Dual CSRS/Social Security System (Dual CSRS),
and the Federal Employees Retirement System (FERS). See Note 10,
Retirement Programs in Notes to the Financial Statements for additional
information.
The programs are administered by the Office of Personnel Management
(OPM). The expenses of all of our retirement programs are included in
compensation and benefits expense.
The implementation of P.L.108-18, did not alter the fact that retirement
expenses remain a significant portion of our total expenses. Retirement
expenses for current employees, including interest on deferred retirement
obligations, represented 10.1% of our total expenses in 2006 and 10.3%
in 2005.
As described in the Notes to the Financial Statements, Note 2, Summary
of Significant Accounting Policies, we account for our participation in the
retirement programs of the U.S. Government under multi-employer plan
accounting rules, in accordance with Financial Accounting Standard Board
Statement 87, Employers‘ Accounting for Pension Costs. Although the Civil
Service Retirement and Disability Fund (CSRDF) is a single fund and does
not maintain separate accounts for individual agencies, the following table
provides OPM’s estimation of the funding status of the CSRS and FERS
programs for Postal Service participants as of September 30, 2005. This
is the most recent data provided by OPM.
Present Value Analysis of
Retirement Programs CSRS FERS Total
(Dollars in billions as of 09/30/05)
Present Value of Benefits $ 196.9 $ 81.2 $ 278.1
Present Value of Contributions * $ 12.3 36.6 $ 48.9
Current Fund Balance $ 180.9 52.9 $ 233.8
Surplus (Deficit) $ (3.7) $ 8.3 $ 4.6
* Expected employer and employee contributions
Public Law 108-18
The Postal Civil Service Retirement System Funding Reform Act of 2003,
P.L.108-18, changed the way we fund our CSRS obligations and altered
the related schedules for our payments to the CSRDF. The law was
enacted in response to a November 2002 review of funding estimates,
including Postal Service payments and returns earned by the CSRDF. OPM
determined that, at the end of 2002, we had funded more than would be
needed to cover the future benefits expected to be paid to our employees
and retirees participating in CSRS under the current law through 2002.
P.L.108-18 required as of May 2003, that we begin to fund our obligations
to the CSRDF based on dynamic assumptions. The dynamic funding
assumptions include the full value of future benefits to our employees
related to military or volunteer service when calculating the actuarial
present value of future benefits by OPM. Under the previously existing
law, military and voluntary service costs were funded by the United States
Treasury Department.
Financial Section Part II
(3.7)