You don’t concentrate on risks, you concentrate on rewards, said aviation hero Chuck Yeager, who knew a thing or two about risks.

The government, on the other hand, is not inherently risk-oriented. You see this especially when it comes to investing employees’ retirement funds. We explored this issue in a whitepaper last year.

Our more recent audit report also suggests it might be time to rethink risk when it comes to the management of the U.S. Postal Service’s retirement investments.

The Office of Personnel Management (OPM) administers the Postal Service’s three retirement plans: The Civil Service Retirement System, the Federal Employees Retirement System, and the Postal Service Retiree Health Benefits (RHB). The first two are pension plans, and the third is set up to fund RHB premiums. OPM, along with the U.S. Department of Treasury, also manages the plans’ investments.

Investments are restricted to government trust funds invested solely in fixed-rate U.S. Treasury securities, often regarded as riskless because loss of principal rarely, if ever, happens. However, the trade-off is a low rate of return that may not generate enough income to meet future obligations, especially if inflation increases.

Unlike fixed-rate Treasury securities, however, Treasury Inflation-Protected Securities (TIPS) investments increase in step with inflation, thereby countering the effects of higher inflation on underfunded liabilities. We looked at the impact of investing USPS retirement fund assets in TIPS and found it could reduce the risk inflation poses and increase returns on the three funds. We estimated Postal Service retirement funds could earn about $1.4 billion annually over the next two years by exchanging a portion of its fixed-rate retirement assets for TIPS.

Other funds, such as the Military Retirement Fund, have purchased TIPS directly from Treasury.

Comments (2)

We welcome your comments related to the topic on this page. Complaints about the Postal Service, including lost, stolen or mishandled mail, that are unrelated to the content on this page, will not be posted. Please visit the Contact Us page for information on where to file formal complaints with our agency or the Postal Service.

Leave a comment

CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
  • anon

    You just have to big screen....

    Dec 20, 2018
  • anon

    many suggestions are good, the management knows the best.

    Dec 18, 2018

Poll

Do you think USPS should invest in Treasury Inflation-Protected Securities?

Recent Comments

  • 1 day 4 hours ago
    Hello, Bridgette. Thank you for your interest in the U.S. Postal Service Office of Inspector General. Please visit our website and select the "Work for Us" tab on the top of the screen to...
  • 1 day 23 hours ago
    Coming from the postal inspection service and 18 year federal employee I can clearly see that mis-management, the equitable and consistent distribution of workload and the ability to utilize...

Share this post


Monthly Archive