We account for retirement benefits as a participant in a multi-employer plan arrangement, in accordance with FAS Statement No. 87, Employers’ Accounting for Pensions.

With certain exceptions, employees participate in one of the following three retirement programs based upon the starting date of their employment with the Postal Service. Employee and employer contributions are made to the Civil Service Retirement System, the Dual System or the Federal Employees Retirement System, which are administered by the Office of Personnel Management. Employees may also participate in the Thrift Savings Plan, which is a defined contribution retirement savings and investment plan. Postal Service employees are authorized to participate in the Thrift Savings Plan by the Federal Employees Retirement System Act of 1986. The Plan is administered by the Federal Retirement Thrift Investment Board. We and all employees also contribute to Medicare at the rate prescribed by law.

Civil Service Retirement System (CSRS)
Under the Postal Reorganization Act, officers and career employees are covered by the Civil Service Retirement System, which provides a basic annuity. The CSRS fund covers substantially all employees hired prior to January 1, 1984. We do not match contributions to the Thrift Savings Plan for employees who participate in the CSRS.

Dual Civil Service Retirement System (Dual CSRS)/Social Security System
Employees with prior U.S. government service who were hired between January 1, 1984, and January 1, 1987, are covered by the Dual Civil Service Retirement System/Social Security System. We and the employee contribute to Social Security at the rate prescribed by law. We do not match contributions to the Thrift Savings Plan for employees who participate in the Dual System.

Federal Employees Retirement System (FERS)
Effective January 1, 1987, officers and career employees hired since December 31, 1983, except for those covered by the Dual System, are covered by the Federal Employees Retirement System Act of 1986. In addition, employees hired before January 1, 1984, could choose during certain periods in 1987, 1988 and 1998 to participate in the FERS. This system consists of Social Security, a basic annuity plan, and a Thrift Savings Plan.

We and the employee contribute to Social Security and the basic annuity plan at the rate prescribed by law. In addition, we are required to contribute to the Thrift Savings Plan a minimum of 1% per year of the basic pay of employees covered by this system. We also match a voluntary employee contribution up to 3% of the employee’s basic pay, and 50% of a contribution between 3 and 5% of basic pay.

Percentages of employer and employee contributions are as follows for each of the three plans for 2002, 2001 and 2000:

		2002	2001	2000
	CSRS
	Employer	7.0	7.0	7.0
	Employee	7.0	7.0	7.4
	DUAL CSRS
	Employer	7.0	7.0	7.0
	Employee	0.8	0.8	1.2
	FERS
	Employer	10.7	10.7	10.7
	Employee	0.8	0.8	1.2

The number of employees enrolled in each of the retirement plans at the end of 2002, 2001 and 2000 is as follows:

		2002	2001	2000
	CSRS	230,632	248,347	263,383
	Dual CSRS	10,828	11,440	12,021
	FERS	510,237	514,870	510,509

Deferred Retirement Costs
Deferred retirement costs consist of the following (dollars in millions):

		2002	2001
	CSRS basic pay increases	$24,602	$24,843
	CSRS retirees' and survivors' cost of living adjustments	7,629	7,180
	TOTAL	$32,231	$32,023

There are no deferred retirement costs associated with FERS.

Deferred Retirement Liability —
Civil Service Retirement System
When we increase CSRS employees’ current basic pay, we are, by law, liable for the estimated additional deferred retirement liability. The Office of Personnel Management determines the estimated increase in the deferred liability of the Civil Service Retirement and Disability Fund (CSRDF) resulting from basic pay increases. We amortize and pay this amount in 30 equal annual installments, which includes interest computed at a rate of 5% per year. We make the first payment at the end of the year in which employees receive their pay increase.

The increase in our deferred liability for retirement benefits under the CSRS as a result of basic pay increases was $1,153 million in 2002, $313 million in 2001 and $1,635 million in 2000.

Deferred Retirement Liability —
Retirees’ and Their Survivors’ Cost of Living Adjustments (COLAs)
Congress determines the COLAs granted to our retirees. Under the Omnibus Budget Reconciliation Act of 1990, we are liable, by law, for our share of the COLAs granted to those retirees, and their survivors, retiring on or after July 1, 1971. We are not responsible for any costs due to federal civilian service before that date.

Each year the Office of Personnel Management determines the estimated increase in our share of the liability of the CSRDF under this law for the current year. We amortize and pay each year’s amount in 15 equal annual installments, which include interest computed at a rate of 5% per year.

The increase in our deferred liability for our retirees’ COLAs was $1,329 million in 2002, $1,668 million in 2001 and $1,056 million in 2000.

Future Minimum Payments
The future minimum payments we have to make in order to fund CSRS benefits and retirees’ COLAs as of September 30, 2002, are as follows (dollars in millions):

	Year	Amount
	2003	$ 3,796
	2004	3,675
	2005	3,585
	2006	3,280
	2007	3,162
	After 2007	30,421
		47,919

Less amount representing interest	15,688
Total future minimum payments	32,231
Less: Portion classified as a current liability in compensation and benefits	2,185
Long-term portion of future minimum payments	$30,046

Expense Components
The following table lists the components of our total retirement expenses that are included in our compensation and benefits expense and related interest expense in the Statements of Operations for 2002, 2001 and 2000 (dollars in millions):

		2002	2001	2000
	CSRS	$  740	$  769	$  795
	FERS	2,121	2,046	1,944
	FERS — Thrift Savings Plan	827	789	750
	Dual CSRS	33	33	35
	Social Security	1,511	1,498	1,427
	AMORITIZATIONOF DEFERRED COST:
	CSRS	1,393	1,333	1,327
	Annuitant COLAs	879	814	683
	Interest expense     on deferred liabilites	1,601	1,603	1,568
	TOTALRETIREMENT     EXPENSE	$9,105	$8,885	$8,529

Employer cash contributions to retirement plans were $6,013 million in 2002, $5,799 million in 2001 and $5,516 million in 2000. These amounts do not include Social Security contributions and interest expense on deferred retirement liabilities.