Section 101 of S.1789, the 21st Century Postal Service Act of 2011, requires the Office of Personnel Management to both 1) calculate the surplus in the Federal Employee Retirement System Account (FERS) account and 2) transfer that amount to the Postal Service for each of fiscal years 2011 through 2014. To minimize the impact on the Federal budget, the bill restricts the use of these funds to payments of other Postal Service obligations to the Federal Government. While this is a step in the right direction it is not a permanent solution and will need to be addressed by a future Congress

The problem with S.1789 is that it asumes that the FERS surplus is a short-term problem. However, there is no reason to suspect that overfunding the FERS account will end in in 2014 especially with the FERS contribution rate rising to 11.9% in FY 2012.

My concern about overfunding beyond FY2014 is because the annual increase in the surplus is not trivial. In fiscal year 2010 the surplus grew by $1 billion and in FY 2011 it grew by another $0.5 billion. The increase in the surplus represented almost 1/3 of the FERS payments in FY 2010 and 16% of payments in FY 2011. Requiring the Postal Service to pay $0.5 billion or more annually beyond what is neccessary to fully fund a retirement account will make it more difficult for the Postal Service to continue to provide mail and parcel delivery services at the prices and level of service quality that mailers now expect without cuts in employee compensation.

There two changes in law that will allow Congress to avoid dealing with this issue in the future

1. For Fiscal year 2015 forward, allow the Office of Personnel Management and the Postal Service to develop a new FERS contribution schedule each year to reflect the Postal Service’s expected increase in obligations for the coming year. S.1789 requires the Office of Personnel Management to develop a new payment schedule annually for the Postal Service Retiree Health Benefit Fund.
2. Extend the requirement that the Office of Personnel Management refund surpluses that exist in years 2015 and beyond.

These changes do not appear to be the subject of any of the amendments to S.1789 that will be considered by the Senate. I urge those stakeholders concerned about the prices the Postal Service charges, the quality of service that it can delviver and the the compensation that it can offer its employees to find a way to make the FERS overfunding fix permanent.