Early Retirements at the Postal Service

Today, the PostCom website reported that Bob McLean, Executive Director of the Mailers Council, notified the Council members that the Postal Service has requested Voluntary Early Retirement Authority (VERA) from the Office of Personnel Management (OPM) so that it may seek early outs for 40,000 postal employees. Info posted on ruralinfo.net indicates that the Postal Service would like to see all early retirements happen before the end of the calendar year, December 31, 2008. Now what does this mean?

1. The Postal Service, if is granted this authority, will have the opportunity to deal with the challenge of too many employees working a declining volume of mail. Given that the Postal Service's business has become more economically sensitive as it has become more reliant on advertising and parcels; the Postal Service's problem is greatest in those regions of the country that have had the most significant declines in economic activity.
2. The Postal Service's request for Early Retirement authority suggests that it believes that the decline in volume goes beyond just the turndown in the economy and will be a continuing challenge going into FY 2009 and FY 2010.
3. Given that employees will not be leaving the payroll until next fiscal year, the Postal Service has few options for stemming its losses this year and will likely still have fiscal challenges next year.
4. Early retirement will be voluntary. Given the age and years of service of postal employees, it probably can get a significant number of employees taking early retirement even without incentives. Most eligible CSRS employees probably are old enough and have sufficient number of years of service to receive full benefits. Similarly, a significant portion of FERS employees may be eligible.
5. The number of eligible employees that take the incentives may be tempered because of the slowdown in the economy.
6. Early retirement will be limited to those employees who meet criteria of age and years of service. At a minimum the early retirement program will require an employee to be over 50 with at least 20 years of service with the Federal Government or any age with 25 years of service with the federal government. Early retirement benefits are somewhat larger for those over 55 and/or with 25 years of service.
7. As of June 2008, the Postal Service had 37.3% of its employees with at least 20 years of service and 16.3% with 25 years of Service. It is not clear from the Postal Service's Active employee Statistical Summary if that is employment with the Postal Service or employment with the Federal Government.
8. As of June 2008, 46.5% of the Postal Service's employees were over 50 and 25.4% were over 55.
9. As of June 2008, the Postal Service had 140, 525 CSRS employees. It is likely that all of these CSRS employees that work in a geographic area and craft made eligible for early retirement will be eligible. These employees were hired before 1983 and therefore have 25 years of government service or more. While many may be under 60, few are likely to be under 50.
10. As of June 2008, the Postal Service had 465,258 FERS employees, Many FERS employees may also be eligible, but their number depends greatly upon their current age and years in Federal Service. In all likelihood, they would need 20 years of Federal Service to be eligible.
11. If the Postal Service offers early retirement opportunities, it will be following United Parcel Service that just paid nearly $1.7 billion to reestablish an employee's pension benefit that allowed retirement with 30 years of service with full benefits prior to normal retirement age. This benefit extension was limited to the geographic region covered by the Central States Pension Fund. However, this region covers all of the states east of the Rockies, west of Pennsylvania and south of Virginia. As such, it covers most of country most affected by the decline in automobile industry sales, as well as areas in the Midwest and Southeast that were severely affected by the real estate bubble.

Mailers will need to watch how the early retirement program is handled. Reducing staff too quickly may create service challenges in the next calendar year. Reducing staff too slowly could create a fiscal crisis that could cause the Postal Service to need to raise rates beyond what is permitted by the cap to remain fiscally solvent.