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Clearing Up the Confusion About CSRS Overfunding
Burrus Update #20-02, Nov. 13, 2002
The Postal Service's recent announcement that the Civil Service Retirement System (CSRS) would soon be "overfunded" has caused confusion among many postal workers. Unfortunately, the Postal Service has not sufficiently informed its employees of the issues involved and the impact overfunding would have on workers whose retirement is covered by the fund.
Many employees have understandably— but mistakenly — concluded that correcting the overfunding will generate additional revenue for the Postal Service, and therefore expect management to share the surplus with employees in the form of higher wages and improved working conditions. USPS news releases on the subject have focused on the need to pass legislation that would permit the Postal Service to reduce their funding, but have not addressed the issues of concern to many postal workers. Following is a synopsis of the issues involved.
The Civil Service Retirement Fund pays - and will pay - the retirement annuities of career employees who were on the rolls prior to Jan. 1, 1984. It is funded through contributions by employees of 7 percent of their salary, a matching 7 percent contribution by the Postal Service, and an additional yearly payment by the USPS for the difference between 14 percent of employee salaries and the expected cost of retirement for CSRS employees and their survivors. The additional payment by the Postal Service is the subject of the current discussions.
According to the Office of Management and Budget (OMB), $172.6 billion must be contributed to the fund in order to guarantee that sufficient funds are available to pay the retirement costs for every postal employee covered by CSRS. To date, contributions to the fund total $152.1 billion. The amount and frequency of the payments to the fund are set in law, and unless the law is changed, payments to the fund would eventually exceed the fund's obligations by as much as $71 billion.
The legislative proposal to modify payments to the fund would continue the employee payment of a 7 percent contribution and would reduce the Postal Service's total payments into the CSRS fund by $2.9 billion in fiscal year 2003 and $2.6 billion in fiscal year 2004. In 2005 and beyond, the Postal Service would contribute 17 percent of employee's pay to the CSRS Fund. Such a change would leave a balance of $5 billion in unfunded liability to be amortized, or spread out, over a 40-year period. The savings generated by the reduced future contributions would be used to reduce the Postal Service's debt, which is currently about $11 billion.
It is uncertain whether or not Congress will enact the legislation necessary to modify postal payments to CSRS. If it does, the Postal Service will not receive any money from the CSRS fund and the savings generated from the reduced payments in fiscal years 2003 and 2004 would be applied to the USPS debt. I repeat, the Postal Service will receive no money as result of the proposed changes.
We are a long way from the passage of legislation that would change USPS payments to the CSRS system. Without the change, the Postal Service will be required to continue payment to the U.S. Treasury at the present level of funding.
For additional information on this subject, please refer to Update #19-02.
William Burrus
President
