USPS-OIG responds to the OPM-OIG

The following is the response of the  USPS-OIG to the report of the Office of Personnel Management - Office of Inspector General. 

For more information about the Office of Personnel Management - Office of Inspector General Report See the following posts on this blog:

• Dueling Inspector Generals or Revenge of the Creditor
• Could Postal Employees Lose Retiree Health Benefits?

****************************************************************************************
Thank you for the opportunity to respond to the OPM Inspector General’s study reviewing our recent reports about the mischarges and overfunding of the Postal Service’s benefit obligations. Both the postal pension and health funds are administered by OPM and are accounted for separately from the federal government’s benefit funds.
Our reports focused on the latest of OPM’s long history of miscalculations involving Postal Service benefit funds:

• In 2002, the Postal Service’s pension fund was found to be overfunded by $78 billion. Congress corrected this in 2003.
• In 2003, OPM attempted to make the Postal Service responsible for $27 billion in military service pension obligations for Postal Service employees. Congress refused to accept this attempt.
• In 2009, we found that the OPM used an exaggerated 7 percent health care inflation forecast instead of the 5 percent industry standard, resulting in an overpayment of $13.2 billion by 2016. Congress ordered OPM to review it and they changed it.
• The Postal Service has been overcharged $75 billion for its share of the CSRS pension payments. In essence, for 40 years the Postal Service paid its own and the federal government’s inflationary costs.

OPM typically responded to these findings with initial denial followed by major corrections. In such a history of errors, one would expect to see some balance.

• Errors are normally random, but without exception these have disadvantaged the Postal Service. 
• Self discovery by OPM of such substantial miscalculations should have occurred.
• Self correction by OPM, charged with fund administration, would also have been expected.

Regarding the matter that was reviewed in the OPM report, the Postal Service Office of Inspector General has the following observations:

Our reports concerning the mischarges and overfunding of Postal Service benefits relied on the work of an actuarial firm that was under contract to the OIG. That firm had previously done work for OPM in the benefits fund area. Our work was independently reviewed by a second actuary employed by the Postal Regulatory Commission (PRC). In contrast the OPM characterizes their study as an analysis based on the work of others, but without independent actuarial assistance.

The OPM study makes the following points in their review:

1. The taxpayers will sustain losses if the funds are restored to the Postal Service.
2. The Postal Service would use the returned funds to subsidize operations and not for benefit funds.
3. OPM is unable to correct the overcharges because of their limited authority.
4. The study endorses 100 percent prefunding requirement for Postal Service benefit funds.

In response to the OPM, we have some observations on each of their points:

1. The Postal Service benefit funds are funded entirely by postal employees and postage from American citizens and businesses. Postal Service contributions should not supplement federal employee contributions and federal employee contributions should not supplement Postal Service contributions.
2. If benefit fund overpayments were returned, the money would not be used for Postal Service operations. The proposal is to use the surplus to make annual benefit payments. Using employee money for postal operations would be as wrong as putting it in the federal employee benefit fund; both are improper.
3. The Postal Inspector General and Senator Collins believe that OPM could correct this funding issue using their own authority. OPM has responsibility for accurately and fairly administering these funds.
4.  OPM recommended 100 percent funding levels for both the Postal Service’s retirement and healthcare funds. However, the report is silent on the adequacy of OPM’s government prefunding level of 40 percent for retirement and 0 percent for healthcare.

This is not about the financial condition of the Postal Service, but that the Postal Service was overcharged and subsequently overpaid into benefit funds. In the Unites States there is the rule of law and the accounts must be settled. This issue is fundamentally about righting an inequity.