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What is the debate about the Postal Service’s share of pension costs?

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The debate about the Postal Service’s share of pension costs involves the Civil Service Retirement System or CSRS, the older defined-benefit pension program for federal workers. CSRS was replaced by a new federal pension program in 1987.

When the Postal Service was created from the Post Office Department on July 1, 1971, postal workers continued participating in the CSRS program. Every time those employees received a pay increase at the Postal Service, their CSRS pension benefits grew in value.

The Postal Service and the federal government are responsible for splitting the costs of these pensions; however, under the current method of calculation, the Postal Service is responsible for all of the increased pension costs due to employee pay increases after the start of the Postal Service.

This method of allocation results in much higher pension costs for the Postal Service than the federal government. For example, the Postal Service could be responsible for 70 percent of the pension costs for an employee who worked the same number of years for the Postal Service and the Post Office Department.

Both the OIG and a contractor hired by the Postal Regulatory Commission to analyze the issue have proposed alternative methods that would more fairly allocate these pension costs. You can read more about these methods in the OIG’s 2018 white paper, Update on the Postal Service’s Share of CSRS Pension Responsibility.