• on Dec 10th, 2012 in Finances: Cost & Revenue | 0 comments
    To borrow a saying often attributed to Yogi Berra, “It’s tough to make predictions, especially about the future.” Whenever people make estimates about liabilities for long- term expenses, such as pension and retiree health payments, they’re making predictions about the future. The problem is that predictions are based on the present, and the present is always changing. Since 1992, the Postal Service has had a surplus in the Federal Employees’ Retirement System (FERS) program, according to the Office of Personnel Management (OPM). A surplus occurs when assets exceed the amount of the liability. In October, the OIG released a white paper called Causes of the Postal Service FERS Surplus. The paper, produced with the assistance of Hay Group actuarial firm, examined the reasons behind the FERS surplus. Hay Group found that the surplus had emerged in part because of differences between the Postal Service and the rest of the federal government and recommended using assumptions based just on the Postal Service population rather than everyone in FERS. Hay Group developed an estimate of the surplus under Postal Service-specific assumptions. After the OIG released the paper, the Office of Personnel Management (OPM) released a new estimate of the FERS surplus as it does every autumn. In this new estimate, OPM used a different prediction for future interest rates and also made changes to demographic assumptions such as how long postal employees and retirees will live. OPM’s estimate of the FERS surplus declined substantially. To take into account this new information, the OIG asked Hay Group to update their previous estimate of the surplus to reflect OPM’s assumption changes and new 2011 data. Hay Group also included the most recent Postal Service-service forecasts about future salary increases. Hay Group found the projected surplus under Postal Service-specific assumptions to be $12.48 billion as of fiscal year (FY) 2012; whereas OPM, using FERS-wide assumptions, projected the surplus to be $3.0 billion.In either case, the Postal Service’s FERS fund is more than 100 percent funded, while Fortune 1000 companies are on average only 80 percent funded according to 2010 data. You can read more about the FERS surplus in the update to the original paper on our website.
  • on Dec 3rd, 2012 in Delivery & Collection | 6 comments
    The U.S. Postal Service is about the best in the world at providing its core service of mail delivery. In fact, its ability to deliver mail and return undeliverable mail to the sender effectively makes the United States government one of the most efficient in the world, according to a working paper by National Bureau of Economic Research. A group of economists rated the efficiency of the world's governments with a simple test of their postal systems. The group mailed fake letters to nonexistent businesses in 159 countries and waited a year to see which were sent back to a professor at Dartmouth College in New Hampshire. The goal was to use a simple, universal service to explore why, other than corruption, developing countries tend to have poorly performing governments. All the letters went to countries that subscribe to the Universal Postal Union, which requires that incorrectly addressed mail be returned within a month. The United States was one of only four countries to send the undeliverable letters back within 90 days, along with El Salvador, Czech Republic, and Luxembourg. In fact, the U.S. had the fastest return rate at 16 days, although it may have benefited from returning the letters to an address in the United States. It also returned 100 percent of the fake-addressed letters. The study was not intended to assess the Postal Service, but the results do highlight some of its key strengths, at least compared to foreign posts. Foremost, better classification systems for addresses tended to result in faster returns, the economists noted. The Postal Service uses uniform address standards and its address database is among the most robust in the world. Again, this was not the study’s intention, but the results seem to support the Universal Postal Union’s (UPU) position that a national addressing system is essential to the economic and social advancement of countries. In its recent white paper, “Addressing the World – An Address for Everyone,” the UPU says that in many developing countries, physical addresses exist only in city centers. Without physical addresses, it is difficult to impossible for public services and businesses to reach their intended targets. “A quality address infrastructure must be considered as an essential part of a country’s socio-economic infrastructure, not only for improving public services, but also facilitating business, trade and, consequently, national development,” the UPU says. How important is an addressing infrastructure to government efficiency and business development? What parts of addressing does the Postal Service do particularly well? What could be improved? Share your thoughts.

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