A pension-fund surplus the U.S. Postal Service has been counting on to help dig out of its financial hole is smaller than previously estimated because of lower interest rates.
The projected excess in the Federal Employees Retirement System for benefits covering about 471,000 current postal employees shrank to $2.6 billion from $10.9 billion a year earlier, John Berry, director of the U.S. Office of Personnel Management, said in an Oct. 30 letter to Postmaster General Patrick Donahoe.
The lower estimated pension surplus adds to the financial woes of the Postal Service, which is scheduled on Nov. 15 to report its loss for the fiscal year ended Sept. 30. The agency has said it may lose $15 billion in fiscal 2012, during which it exhausted its borrowing authority from the U.S. Treasury. The service skipped two payments due to the U.S. Treasury totaling $11.2 billion for health benefits of future retirees, saying it couldn’t afford them.
Postal legislation the Senate passed in April would refund what was then an estimated $11 billion FERS account surplus and allow the post office to create its own health-benefits system. The Senate legislation would determine the repayment amount based on OPM’s analysis, meaning that sum would be less under the new estimate than it was when the bill passed.
Senator Tom Carper, a Delaware Democrat who is a sponsor of the Senate bill, is reviewing the OPM’s latest calculation, Emily Spain, a spokeswoman, said.
“During this process, it will be necessary to look at whether OPM is using the correct assumptions to calculate this new surplus and if using USPS-specific assumptions would result in a more accurate assessment of what USPS is owed from the Federal Employees Retirement System,” she said in an e-mail.
The Postal Service has said it would use any refund to shore up its finances as it tries to cut costs and find new revenue sources as it handles less mail volume.
Berry said the pension surplus estimate was reduced because actuaries recommended lowering projected long-term interest rates to 5.25 percent from 5.75 percent.
“We are committed to ensuring the financial viability of the Postal Service and welcome the opportunity to discuss ways we can help,” Berry wrote.
The Postal Service has said it’s overpaid the Civil Service Retirement System as much as $75 billion, though the fund is now estimated to have a $17.8 billion shortfall for postal employee benefits, according to Berry’s letter.
House Oversight and Government Reform Committee Chairman Darrell Issa, a California Republican, has said the FERS surplus is a temporary budget projection and shouldn’t be relied on for planning the service’s future.
“Any projection is only as good as the assumptions that underlie it,” the committee’s Republicans say on a website about their postal overhaul legislation. “One obvious factor is historically low inflation rates. When the projection changes, the surplus may melt away leaving the Postal Service with a deficit it cannot afford to pay back without serious reform.”
The service last year asked the U.S. government for permission to leave the federal employee and civil service plans, as well as the health benefits program for U.S. government employees.
It’s also tried to get refunds of money paid into both retirement accounts. The personnel management agency has supported returning to the Postal Service some of the surplus paid to FERS. The agency has said it doesn’t have the legal authority to refund money paid into the CSRS plan.
“We have received OPM’s annual financial reporting data relating to the Postal Service’s pension obligations under the Civil Service Retirement System and the Federal Employees Retirement System,” Susan McGowan, a Postal Service spokeswoman, said in an e-mail. “We are currently reviewing and analyzing their latest pension liability estimates.”