NOTICE

Flexible Spending Accounts 2006 Open Season
November 13 – December 31

The 2006 Flexible Spending Accounts (FSAs) Open Season is scheduled for November 13 through December 31, 2006, 5:00 P.M. Central Time (CT). Eligible career employees who elect to participate in the FSA program must enroll via PostalEASE during this time. Enrollments made during this FSA Open Season are effective for the 2007 plan year - January 1 through December 31, 2007 - plus a grace period that extends until March 15, 2008. Enrollment ends sooner, of course, for participants who separate or have extended leave without pay.

FSAs allow employees to set aside a portion of their pre- tax earnings for certain types of out-of-pocket health care and dependent care expenses. The money withheld for FSAs is not subject to income, Medicare, or Social Security taxes. United Healthcare administers the FSA program for the Postal ServiceTM.

The booklet FSA BK1, Flexible Spending Accounts (November 2006), which is being mailed to all employees, provides a good overview of FSAs.

New Features for 2007 FSAs

The FSA for 2007 offers these new features, fully explained in the FSA booklet, that are intended to make FSAs more convenient for participants:

• With the new FSA Consumer Accounts Card, certain purchases of FSA-eligible expenses are now paperless - participants do not file a claim form.

• Participants have a new way to manage FSA accounts - on the Internet, at www.myuhc.com.

• Participants now have the option to have FSA payments made by direct deposit to a bank account.

• A new Limited FSA is intended for the use of employees enrolled in high-deductible health plans in the Federal Employees Health Benefits Program.

Grace Period, New Last Year, Still in Effect

Last year for the first time employees with FSAs - Health Care and/or Dependent Care - were able to use any balance remaining in an FSA at the end of the plan year to cover expenses incurred during the 2 1/2 months following that plan year. For the 2006 plan year, the grace period extends until March 15, 2007. For the 2007 FSA plan year, then, the grace period will extend until March 15, 2008. With the grace period, employees don't have to schedule services or procure items in an end-of-year rush to avoid losing money in the account. Of course, participants have to spend the previous year's balance by March 15 or forfeit the money under the use-it-or-lose-it rule.

The grace period is available only to FSA participants who are still participating on December 31 of the plan year. Most FSA participants remain participants through December 31, but an employee who retires before (on December 30, for example) is not eligible for the grace period.

The deadline for filing claims has not changed - the FSA Customer Service Center must receive all claims by September 30 of the year after the plan year.

For full details, refer to FSA BK1, Flexible Spending Accounts (November 2006).

Using PostalEASE to Enroll

To enroll in FSA during open season, employees have four options:

1. Go to https://liteblue.usps.gov.

2. Use an employee self-service kiosk.

3. Go to http://blue.usps.gov, click on Employee Self- Service, and then click on PostalEASE.

4. Call the PostalEASE toll-free number at 877-4PS- EASE (877-477-3273).

Publicity

Poster

To publicize FSA Open Season, all offices must post the open season notice provided on page 16 on bulletin boards through December 31, 2006.

Direct Mailings to Employees

Headquarters Compensation is coordinating FSA Open Season mailings to career employees at their mailing addresses of record. Employees receive a leaflet, postcards, and an enrollment kit consisting of an FSA brochure, a PostalEASE FSA worksheet, and a withdrawal request form. See details on page 14.

Undeliverable mailed kits are returned to the employing office of record. When an office receives a returned kit, the office should encourage the employee to update his or her address. Employees with access to Employee Change of Address on the Postal Service Intranet (from the Blue page) or to an employee self-service kiosk should use those entry methods. Other employees should submit an updated PS Form 1216, Employee's Current Mailing Address, to the Human Resources Shared Services Center (HRSSC).

Order PS Form 1216 from the Material Distribution Center (MDC) by using touch tone order entry (TTOE): Call 800-273-1509.

Note: You must be registered to use TTOE. To register, call 800-332-0317, option 1, extension 2925, and follow the prompts to leave a message. (Wait 48 hours after registering before placing your first order.)

Use the following information to order PS Form 1216:

PSIN: PS 1216
PSN: 7530-02-000-7354
Unit of Measure: SE
Quick Pick Number: 118
Bulk Pack Quantity: 4,000
Minimum Order Quantity: 1
Price: $0.0187
Edition Date: 06/05

Review of Basic FSA Provisions

Eligibility to Participate

Participation in the FSA program is limited to career employees. To enroll, a career employee must have completed at least 26 full pay periods of Postal Service career service during the current appointment by the end of pay period (PP) 26-06 (December 22, 2006). A career employee, who is in a leave without pay status that has lasted for eight consecutive full pay periods as of December 22, 2006, is not eligible to participate in the FSA program, unless he or she is returning from uniformed military service.

Election Opportunities - Health Care FSA and Dependent Care

Eligible career employees may elect to participate in one, or both, of two FSAs - the Health Care FSA and the Dependent Care FSA. Each FSA covers eligible expenses for services that are received during the employee's period of participation during the 2007 plan year (for most employees this will be January 1, 2007, through March 15, 2008). Annual contributions to the Dependent Care FSA are limited to $5,000 for a family and $2,500 for a married employee filing a separate income tax return. FSA BK1, Flexible Spending Accounts, describes eligible and ineligible expenses and provides guidelines for estimating 2007 expenses.

Reminder: Health care expenses for dependents must be included in the Health Care FSA contribution amount and not in the Dependent Care FSA.

FSA Contribution Withholding

Contributions for each FSA are withheld in equal amounts through payroll deductions covering 26 pay periods (PP 01-07 through PP 26-07). The minimum annual contribution employees may make to either FSA is $130 ($5 per pay period).

Qualified Life Status Change Enrollment and Elections

Participants may neither cancel enrollments nor change contribution levels during the plan year except following qualified life status changes, as explained in FSA BK1, Flexible Spending Accounts. In those cases HRSSC specialists determine a participant's eligibility to enroll or to change contribution levels during the plan year and respond to employee inquiries about that eligibility.

FSA Claims

Participants mail or fax Form FSA1, Flexible Spending Accounts (FSA) Withdrawal Request, directly to the FSA Customer Service Center in El Paso, Texas, as explained on Form FSA1.

Open Season Materials

Direct Mailings to Career Employees

Each career employee receives the following items at his or her mailing address of record during the FSA Open Season:

• Publicity postcards:

• A postcard with instructions on how to obtain a USPS Personal Identification Number (PIN).

• Postcards on other topics such as using FSAs to cover over-the-counter medications and other eligible expenses.

• A postcard with a reminder of the closing date.

• FSA LF1, Flexible Spending Accounts Overview (October 2006). This leaflet provides an overview of the advantages of the FSA program.

• An enrollment kit that includes the following items:

• FSA BK1, Flexible Spending Accounts (November 2006), a brochure that explains plan policies and provisions.

• The FSA PostalEASE worksheet.

• FSA1, Flexible Spending Accounts (FSA) Withdrawal Request (November 2006), a form used to request withdrawal of funds from an FSA for payment of eligible expenses for services received during the period of participation.

Additional Supplies of Materials

During November, Headquarters Compensation coordinates the distribution of extra supplies of the leaflet and enrollment kit and copies of the worksheet and withdrawal request forms to Human Resources (HR) Local Services at district offices, area offices, processing and distribution centers, bulk mail centers, airport mail centers, remote encoding centers, the Office of Inspector General, Inspection Service divisions, Headquarters, and selected Headquarters field units.

Additional copies of the following FSA items will be available from the MDC but not until the distribution of extra supplies has been completed. The relevant ordering information follows:

• Flexible Spending Accounts Overview and Tax Savings Estimator

PSIN: FSA LF1
PSN: 7610-04-000-5138
Unit of Measure: EA
Quick Pick Number: N/A
Bulk Pack Quantity: 2,100
Minimum Order Quantity: 1
Price: $0.00
Edition Date: 10/06

• Flexible Spending Accounts

PSIN: FSA BK1
PSN: 7530-02-000-9910
Unit of Measure: EA
Quick Pick Number: N/A
Bulk Pack Quantity: 250
Minimum Order Quantity: 1
Price: $0.00
Edition Date: 11/06

• Flexible Spending Accounts (FSA) Withdrawal Request

PSIN: FSA1
PSN: 7530-02-000-9911
Unit of Measure: EA
Quick Pick Number: N/A
Bulk Pack Quantity: 2,000
Minimum Order Quantity: 1
Price: $0.00
Edition Date: 11/06

Further Information

FSA Customer Service Center Toll-Free Hotline

For inquiries about FSAs, employees should call the FSA Customer Service Center's toll-free hotline at 800-842-2026. Following enrollment, participants may use the hotline to do the following:

• Make account inquiries.

• Discuss expenses that are eligible for payment through the FSA program.

• Obtain other plan information.

The FSA Customer Service Center also provides a teletype (TTY) line at 866-649-4869 and 866-206-7810. The Customer Service Center encourages employees who want to use the TTY line to have a colleague place an advance call to the toll-free hotline.

Tax Advice

A section of FSA BK1, Flexible Spending Accounts, presents certain tax information related to FSAs. Otherwise participants with tax questions must refer them to their tax advisors or to the IRS toll-free information line at 800-TAX-1040 (800-829-1040).

— Compensation,
Human Resources, 11-9-06

Flexible Spending Accounts (FSA) 2006 Open Season

Enrollment for 2007 FSAs begins: November 13, 2006
Enrollment ends: December 31, 2006 (5:00 P.M. CT)
Enrollments are effective: January 1, 2007

New FSA Features

• New FSA Consumer Accounts Card. Certain purchases of FSA-eligible expenses are now paperless - you don't file a claim form.

• New way to manage your FSA account on the internet, at www.myuhc.com.

• New option to have your FSA payments made by direct deposit to a bank account of your choice.

• New Limited FSA for employees enrolled in high-deductible health plans in the Federal Employees Health Benefits Program.

Refer to FSA BK1, Flexible Spending Accounts, November 2006, page 16.

Who Can Enroll

Only career employees are eligible to enroll in FSAs for 2007.

How to Enroll

To use the Employee Web - the easiest way to use PostalEASE - access the system in any of these ways:

• At an employee self-service kiosk.

• On the Intranet at http://blue.usps.gov. Under "Employee Resources," select Employee Self Service and then PostalEASE.

• On the Internet at https://liteblue.usps.gov. Under "Employee Self Service," select PostalEASE.

To use the telephone, call the Employee Service Line at 877-4PS-EASE (877-477-3273).

If you have a medical condition that interferes or for another reason cannot successfully complete your transaction using PostalEASE, contact the Human Resources Shared Services Center (HRSSC) for assistance.

How to Get Your USPS Personal Identification Number (PIN)

To use PostalEASE, you must enter your Employee ID and USPS® PIN. If you don't know your USPS PIN, you can get it any one of these ways:

• Request it from an employee self-service kiosk. Just follow the instructions.

• On the Intranet at http://blue.usps.gov, under Employee Resources, select Employee Self Service and then PostalEASE.

• Call PostalEASE and, when prompted to enter your PIN, simply pause. The system provides an option to have your USPS PIN mailed to your address of record the next business day.

Details Are in the Mail

A leaflet and a brochure, FSA BK1, Flexible Spending Accounts, with a PostalEASE FSA worksheet included, are being mailed to all career employees. If you do not receive yours by November 27, 2006, contact the HRSSC.

Questions

Hotline for FSA questions: 800-842-2026.

TTY line for employees who are deaf or hard of hearing: 866-649-4869 or 866-206-7810. Advance call to hotline encouraged.

Please Post on All Bulletin Boards Through December 31, 2006.