Monday, March 21, 2011

Comparing Benefits to the Private Sector

Most of the comparisons made on health benefits compare what the Postal Service offers to what other Federal Employees receive.  There are two parts of this benefit.   First there are benefits that exist while a person is working for the Postal Service.  The second are benefits that accrued while the person works but are payable when they retire. 

A similar comparison needs to be made on retirement benefits.  While up until the signing of the APWU contract the retirement benefit structure of Postal Service and other federal government employees is the same, it is not clear if the hourly cost per employee is the same as the mix of employees in CSRS and FERS may differ and the contribution rates of Postal Service and Federal Government employees into retirement programs with an employer match may also differ

Postal employees like UPS's teamster employees have both pre- and post-retirement health benefits.   FedEx employees only have health benefits while they are working for FedEx.

United Parcel Service has a defined benefit pension plan for most of its Teamster employees.  (Those teamsters who participate in the Western States Teamster Pension plan have a hybrid between a defined contribution and defined benefit pension plan.)  FedEx offers a retirement plan that includes a defined contribution pension and a 401-K plan which had recently seen its corporate match restored.   The Postal Service retains its defined benefit pension for employees hired before 1975 and has a plan similar to what FedEx offers for employees hired since then.   The new APWU creates a new retirement plan for non-career employees which is a 401-K plan without an employer match.

As I noted in the post displaying the information from the Teamster Union comparing FedEx and UPS wages and compensation, no comparison has been made comparing these wages and benefits to what the Postal Service offers recently.   

One of the biggest complaints about Postal compensation being too high relates to the fact that its share of the health insurance costs is higher than what other Federal agencies pay.   The estimate of FedEx costs for health and pension costs of $3.33 gives a benchmark that can be used to compare costs that the Postal Service offers to employees hired since 1975 1984.  (Given that this is 36 27 years ago it must include most current employees.)   (Correction made 1/21/2011 12:40 p.m.)

Under the current APWU contract the Postal Service pays 81% of the total insurance cost.   With the figures supplied in the APWU PowerPoint, this works out to $517.80 per month average.  If one assumes that an APWU member is employed for 2080 hours in a year then the hourly cost of his health insurance is $2.99.  If this was reduced to the 72% of the insurance premium paid for federal workers, the hourly cost of health insurance would drop $0.33 per hour to $2.66.  The APWU contract reduces the hourly cost to $2.80 or $0.19 per hour by the end of the contract. (This assumes no health inflation, so it is possible that the cost per hour at the end of the contract will be higher even if the Postal Service's share is lower.)

The difference of a few pennies is small but significant.  Reducing health insurance costs by a cent per hour saves the Postal Service $12 million corporate wide annually.   The impact of a similar cut for just APWU members is likely around $4 million annually. 

What this exercise shows though is that while cutting the Postal Service's share of its health care insurance contribution will reduce costs, discussing this issue may have more merit in scoring political points than solving the severe financial problems of the Postal Service.   Even an immediate shift to federal employee levels of insurance contribution would not be enough to get compensation levels down to the point that the Postal Service can be self-sustaining.   It is time for those who focus on this issue to look at additional options, including many contained in the APWU contract to do the job.

1 comment:

Anonymous said...

FERS applies to all employees hired since 1/1/84 not 75.