USPS Has Been Overcharged 75 Billion, per OIG Study

January 20, 2010
New OIG Study Estimates USPS Has Been Overcharged for the
CSRS Pension Fund by $75 Billion
A study just released by the U.S. Postal Service’s Office of Inspector General (OIG)
shows that the current system of funding the Postal Service’s Civil Service Retirement
System pension responsibility is inequitable and has resulted in the Postal Service
overpaying $75 billion to the pension fund. The OIG estimates that if the overcharge
was used to prepay the Postal Service’s health benefits fund, it would fully meet all of
the Postal Service’s accrued retiree health care liabilities and eliminate the need for the
required annual payments of more than $5 billion. Also, the health benefits fund could
immediately start meeting its intended purpose -- paying the annual payment for
current retirees, which was $2 billion in 2009.
This marks the third time the Postal Service has been overcharged. In 2002 it was
determined the Postal Service would overfund CSRS by $78 billion. Legislation in 2003
corrected this overfunding. Then it was determined the Postal Service was overcharged
$27 billion for CSRS military service credits. In 2006 these funds were returned to the
Postal Service by Congress, and the surplus was used to fund retiree health care
liabilities.
This study, The Postal Service’s Share of CSRS Pension Responsibility, undertaken in
conjunction with the Hay Group, is the third paper sponsored by the OIG that delves
into the financial entanglements between the Postal Service and the federal
government -- generally at the expense of the Postal Service. The latest study describes
the inequitable allocation of CSRS costs between the federal government and the Postal
Service. The other two reports focus on the Postal Service’s congressionally-mandated
retiree health care prefunding payments (Estimates of Postal Service Liability for Retiree
Health Care Benefits), and the Postal Service’s interaction with the federal budget
(Federal Budget Treatment of the Postal Service).
In this newly released paper, the OIG and Hay Group’s analysis demonstrates that the
method used to determine how CSRS pension costs for postal employees with service
before 1971 are split between the Postal Service and the federal government is
inequitable. As a result, the Postal Service was overcharged by $75 billion for payments
to CSRS retirees from 1972 to 2009. The OIG suggests that this amount be returned to
the Postal Service’s CSRS pension fund. Any excess above what is needed to fund CSRS
liabilities could then be transferred to the Postal Service’s retiree health care fund,
which would fully fund its health care liability and eliminate the need for further
congressionally-required payments to the fund. All of the Postal Service’s current
pension and health care obligations to its employees would then be fully funded.
The report further illustrates the inequity in the methodology used to determine the
Postal Service’s contribution to the CSRS fund. Key findings from the report:
• Hay Group demonstrates that the method of splitting CSRS pension costs for postal
employees with service before 1971 between the Postal Service and the federal
government is inequitable, because the Postal Service is made responsible for all
salary increases after 1971.
• In effect, OPM calculates the federal government’s share for these employees as if
they retired in 1971 at their much lower 1971 salaries. An allocation methodology
that burdens the Postal Service with all post-1971 pay increases is not reasonable.
• As an example, Hay Group shows that the Postal Service could be charged
70 percent instead of 50 percent of the pension costs for employees who worked
half their careers with the Post Office Department and half with the Postal Service.
• Because of the inequitable split, the Postal Service was overcharged $75 billion from
1972 to 2009.
The report also offers solutions:
• Fixing the split by using a more equitable years-of-service approach would leave the
Postal Service with $75 billion more in assets as of the end of 2009. The CSRS
pension fund is currently underfunded by $10 billion, so the resulting pension
surplus would equal $65 billion.
• The $65 billion pension surplus could be added to $35 billion already set aside in the
retiree health benefits fund for a total retiree health fund balance of $100 billion.
• A fund balance of $100 billion is more than enough to fully fund accrued retiree
health benefit liabilities of $87 billion. No further payments to the fund would be
needed to cover this liability.
• The current annual payments of more than $5 billion mandated by the Postal
Accountability and Enhancement Act (PAEA) could end.
• Payments for the premiums of current retirees could start to come from the fund
immediately.
• The annual evaluation of the Postal Service’s retiree health benefit assets and
liabilities would continue, and the Postal Service could be assessed if there were
any unfunded liability.
This report takes on increasing significance as the Postal Service faces a challenging
future. When the Postal Service was established, it was intended to be self-sufficient.
Clearly delineating and separating the Postal Service’s responsibilities from those of the
federal government will help in determining the true costs of funding postal operations.
Citizens and businesses should pay no less and no more than what is required to fund
the Postal Service’s operations.


Here is the link to the OIG: http://www.uspsoig.gov/ (it is on their front page)

Full report: http://www.uspsoig.gov/foia_files/RARC-WP-10-001.pdf

Confusion and Fear re: Move Update Compliance

Still confused about the Move Update requirement? Wondering what the consequences for not complying might be? This article will attempt to remove the confusion and fear that is gripping many over the Move Update requirement.

Move Update:
Think of it like your Mom or Dad telling you to eat your vegetables, you may not want to eat them, but you now realize that they are good for you. It’s the same thing here!

Move Update is the requirement that forces mailers of Automation Standard and Commercial First Class Mail™ to do something to make sure that your address lists are up to date when you mail.

Why?• Costs the USPS 2 Billion /Yr to Return/Dispose of Undeliverable mail
• 17% of Consumers and Businesses move every year – 45 Million!
• 24% of all mail have some kind of address problem
• 2.72% of mail is never delivered
• 17% of all mail is delayed
Or, to put this into hard numbers:
• 10 Billion Pieces are affected each year.
• 1.6 Billion are Returned
• 1.985 billion are Forwarded
• 6.0 Billion are Discarded

OK – So how do I comply?
You need to comply with a Pre-Mailing method within 95 days of your mailing and then you can keep your list current by utilizing a Post-Mailing method.

For most of us, the easiest way is to use an NCOA-Link product that will satisfy it quickly and easily. Most Mail management software packages have a NCOA-link solution.

For our Satori Bulk Mailer customers, when they run their lists thru this process, it actually does 5 things to improve the deliverability, all without the hassle of exporting and re-importing the data. Satori is a full service NCOA Provider and will update registered move data up to 48 months old.

Satori’s “Move Update” features:
CASS – 1st step to break the address down to its component parts, Standardizes and corrects the Physical part of the address to USPS specifications
DPV – Delivery Point Validation – Further corrects the address to the actual delivery point and reports back if the secondary address info (Suite #, Unit #, Apt #) is accurate, missing or wrong.
LACS-Link – Changes old Rural Routes into physical delivery address –Helps emergency service providers locate rural addresses.
Suite-Link – Adds or changes Secondary address information for Businesses – (Suite #, Unit #)

Move Update – Fixes the Personal portion of the address by changing the addresses based upon moves registered with the USPS.

Are there other ways I can satisfy the Move Update requirement?
Yes, there are “Post-Mailing” methods such as using Ancillary Service Endorsements, ACS, or One Code ACS (IMB). All of these Post Mailing methods require that the list has gone thru some other “Pre-Mailing” method within 95 days of the mailing, and then you can use these “Post-Mailing” methods to keep the list current.

Pre-Mailing Methods:
NCOA or NCOAlink
Directly Acquired addresses
First-Class Mail used with approved Ancillary Service Endorsement
Fast-Forward

Post-Mailing Methods:
Ancillary Service Endorsements – Correct your data after the fact
ACS
One-Code ACS (IMB)

Exceptions:
Using Alternative Address Formats like “Current Resident/Occupant” are exempt, but not very personal. If the data came directly to you within 95 days of the mailing, like thru your call center, BRM or web site, those addresses would be OK. There are also exceptions if you can prove that your lists are 99% accurate or that you have a "Legal Restriction" prohibiting you from updating the address without authorization.

If you are using a Presort service, they offer a service called Fast-Forward that can apply the DPBC and forwarding address while co-mingling your mail allowing you some presort savings. The drawback is that the information is applied after your mail piece has been created so the corrected information doesn’t directly update your records.

Is there a way for me to take advantage of Better Address Quality without big changes to our I.T. processes?
Yes Document Control Software, can capture your Print Image Files and manipulate them prior to printing. It is mind boggling to see all of the things DCS can be designed to do. Not only can DCS improve address quality but it can merge multiple print streams, change background overlays, add OMR marks for automation processing by a Folder Inserter, add the postage Indicia into the address block and can even include Mail Piece Verification to ensure that every piece makes it into the mailstream.

What are the consequences for not complying with Move Update?
The key thing to realize is that the penalty will be applied to the entire mailing, not just those addresses that fail Move Update. When you sign the 3602 Mailing statement acknowledges that … “who omits information requested on this form may be subject to criminal and/or civil penalties, including fines and imprisonment.” The calculations for failure to comply are a little confusing. It is based upon the percentage of your mail that exceeds the minimum 30%compliance threshold. This percentage is applied to the entire mailing at $.07 per piece.

For example: 5000 piece mailing with 500 COAs (change of address on file with the USPS NCOA system) only 20% (100) were up to date, leaving 400 (80%) un-corrected. In order to comply with Move Update no more than 30% of COAs (150) can have un-corrected addresses. Penalty rate is calculated by subtracting USPS threshold 30% from the 80% not corrected to arrive at percent of mailing subject to a penalty, in this case its 50%.

Apply 50% penalty rate to entire 5000 piece mailing to determine number of pieces subject to .07 penalty in this case 2500 or $175.00


What are the chances of getting caught?
It is getting easier all the time for the USPS to catch this as their focus is absolutely on reducing costs. UAA (Undeliverable as Addressed) and FOE (Forwarding Order has Expired) mail are the biggest areas they have identified to save money. The mail today is becoming “Intelligent” with mailer identification embedded in the IMB (intelligent Mail Barcode) and IBIP (Information Based Indicia Program) meter indicia (All Phase 6 meters) it won’t be hard to find or account for as computers will do the hard work.

So stay compliant with Move Update and your mailing performance will improve, just like a healthy body that eats right and exercises should. Hopefully this has diminished your fears and confusion regarding Move Update requirement, so eat your vegetables, they’re good for you!