USPS loses billions of dollars due to excessive pension contributions

The U.S. Postal Service overfunded its pension accounts by $50 billion, because of the way in which its obligations have been calculated, according to a new audit.

The report submitted to Congress on Wednesday and conducted by the Segal Co. on behalf of the Postal Regulatory Commission, found the agency overpaid between $50 billion and $55 billion to its Civil Service Retirement System account. The overpayment was the result of unclear guidance on how increases in postal salaries affected pension contributions after USPS absorbed the Post Office Department in 1971.

The Office of Personnel Management is responsible for determining the Postal Service's contribution to its pension accounts. The report found that OPM's calculations were appropriate based on 1974 legislation, but PRC is recommending the agency adopt more "modern methods" of allocating funds.

USPS Inspector General David Williams earlier this year reported that the agency had overpaid its CSRS fund by $75 billion. Although the agency could use the funds to pay off its Treasury debt and benefits obligations, adjustments to pension allocations are prohibited by law until 2015 and would require congressional action to change.

"We hope Congress takes this report into consideration as it continues to debate our request to restructure prepayment for retiree health benefits as part of a series of actions the Postal Service has taken to address its current financial situation," said USPS spokeswoman Joanne Veto.

William Burrus, president of the American Postal Workers Union, said OPM first should fix the formula it uses to calculate funding obligations and then figure out how to return the money to the Postal Service.

"How do you recover $55 billion?" Burrus asked. "That's a political question. We'd point out that it confirms allegations all along that the formula was incorrect."

Senate Homeland Security and Governmental Affairs Federal Financial Management Subcommittee Chairman Tom Carper, D-Del., said although the overpayment is a small part of the Postal Service's projected deficit, PRC's conclusion is an important step toward financial relief for the agency.

"This discovery couldn't have come at a better time, as the Postal Service is facing a serious financial crisis," he said. "Both of these things -- financial relief and more aggressive cost cutting -- must take place in the very near future if we want a Postal Service capable of continuing to deliver the goods and services millions of Americans depend on."

According to the Postal Regulatory Commission, OPM must reconsider its calculation of the Postal Service's pension funds and report back to the commission, USPS and Congress. OPM did not respond to a request for comment.