4. Compensation and Benefits

        a. Pay Comparability

            1. Bargaining Unit Employees’ Pay and Benefits
The average pay and benefits for career bargaining unit employees (excluding corporate-wide expenses) is $54,481 per work year.

In an attempt to achieve compensation rates comparable to those in private industry, negotiations between the Postal Service and its unions for the various bargaining units that have reached negotiated settlements continue to apply the principle of moderate restraint set forth in past interest arbitration awards.

            2. Non-bargaining Unit Employees’ Pay and Benefits
Pay for supervisors, postmasters, and other nonbargaining staff employees generally meets or exceeds private sector levels. It also provides an adequate and reasonable differential between first-line supervisors and bargaining unit clerks and carriers.

In FY 2001, of the Pay for Performance Program (formerly the EVA Variable Pay Program) for EAS employees aligned this pay practice with PCES executives and corporate success measures as established under the CustomerPerfect! process. This pay package provided management the framework to drive the necessary behavioral changes that make the Postal Service competitive in the marketplace.

            3. Executive Pay and Benefits
Due to the limit imposed on Executive Schedule I salaries by the Postal Reorganization Act, pay and benefits for Postal Service officers and some key executives do not meet private sector comparability standards. During 2001, the average salary for Postal Service officers was $141,593. The average executive salary was $105,494.

The Postal Service continued to focus on corporate objectives through the 2001 Pay for Performance Program, which recognizes the significant role that postal executives and EAS employees play in achieving corporate success. The Pay for Performance Program awards payouts for achieving breakthrough performance.

Furthermore, by using the same performance measures for officers, executives, and EAS employees, participants become stakeholders in the success of the Postal Service. To focus on continuous improvements and long-term results, the 2001 payments consisted of a percentage of prior year’s reserve account and the current year’s earned credit. In 2001, award payouts averaged $2,270 for exempt nonbargaining EAS employees, $876 for nonexempt nonbargaining employees, and $8,858 for executives. While the program was designed to recognize team performance, provisions were made to exclude individual employees who did not contribute to the performance of the organization.

            4. Merit Pay Performance Evaluation
In 2001, the Postal Service continued to emphasize the importance of the Merit Performance Evaluation process. This process evaluates and rewards the performance of professional and managerial personnel. The process employs indices and measurements tied to the work unit’s mission when establishing employee objectives for the year. These indices and measurements are used to assess an the employee’s success in meeting these mutually agreed-upon objectives. As with last year’s program, the Merit Performance Evaluation process continues to be closely aligned with the CustomerPerfect! philosophy. It provides a mechanism to link employee contribution to corporate goals.

In 2001, an individual Merit Performance Evaluation process covering executives was continued. Its primary purpose is to promote individual accountability to support both corporate goals and certain critical indicators that contribute to the success of the Postal Service. One critical indicator emphasizes diversity and requires executives to develop individual goals that promote diversity, while taking into account the specific activities identified in their organizational affirmative action plan when setting specific targets for success. Like the performance evaluations for professional and managerial employees, the executive evaluations also link contributions to the overall achievement of corporate goals.

        b. Leave Programs
Postal Service employees are provided both sick and annual leave at the same rate as other fed-eral sector employees. However, postal employees have a higher annual leave carryover limit than their federal sector counterparts. Postal employees used an average of 8.4 days of sick leave per employee during 2001.

Earned annual leave may be donated to other career or transitional Postal Service employees who have exhausted their own leave and have a serious health problem.

Under the Family and Medical Leave Act, eligible employees may take up to 12 weeks off from work for covered conditions. Postal Service employees may use annual leave, sick leave, or leave without pay for covered conditions in accor-dance with applicable collective bargaining agreements and current leave policies.

Postal Service career nonbargaining unit employees and some bargaining unit employees can participate in a leave exchange program through which a portion of annual leave that would otherwise be earned in the following leave year can be exchanged for cash.

The Postal Service allows the use of 80 hours of accrued sick leave for dependent care under a policy available to all career employees.

        c. Health Insurance
Health care contributions totaled $3.2 billion, or 6.3 percent of the Postal Service's total pay and benefits during 2001.

The Postal Service continued to pay most of the premium cost of employee health benefit coverage. Career employees are automatically enrolled to pay their share of health benefit premium contributions with pre-tax payroll deductions.

Under the Omnibus Budget Reconciliation Act of 1990, the Postal Service is required to fund the annuitants’ share of the Federal Employee Health Benefit premiums. The cost of funding the health care benefits for postal annuitants and their survivors was $858 million.

        d. Life Insurance
The Federal Employees Group Life Insurance program provides life insurance coverage for Postal Service employees. The Postal Service assumes the full cost of basic life insurance for eligible employees. During 2001, Postal Service costs for employee life insurance were $198.6 million and the cost of funding life insurance for postal annuitants and their survivors was $7.6 million.

        e. Retirement Systems
Postal Service career employees, like federal career employees, are covered by one of three retirement systems administered by the U.S. Office of Personnel Management.

At the end of 2001, there were 774,657 career employees covered by a federal retirement program. Of this total, 514,870 employees (66.4 percent) were covered by the Federal Employees Retirement System (FERS); 248,347 employees (32.1 percent) were covered by the Civil Service Retirement System (CSRS); 11,440 employees (1.5 percent) were covered by CSRS Offset.

CSRS is a defined benefit retirement system. Annuity benefits are based on an employee’s high-three average salary and years of service. CSRS Offset is similar to CSRS but requires Social Security contributions. Upon Social Security eligibility, the CSRS annuity is reduced (offset) by any Social Security benefit resulting from periods of CSRS Offset service, to produce a benefit equivalent to what would have been received under CSRS.

FERS is a retirement system with both defined benefit and defined contribution components. Under FERS, employees receive retirement benefits from a federal retirement annuity, Social Security, and the Thrift Savings Plan. The FERS annuity benefit, while also based on an employee’s high-three average salary and years of service, produces a smaller benefit than CSRS does.

The Postal Service and career employees make retirement contributions to the Civil Service Retirement and Disability Fund. For 2001, CSRS employees contributed 7.0 percent of basic pay to the Fund. FERS and CSRS Offset employees con-tributed 0.8 percent of basic pay to the Fund and 6.2 percent of gross pay to Social Security.

        f. Thrift Savings Plan
All career employees may participate in the Thrift Savings Plan (TSP), which is administered by the Federal Retirement Thrift Investment Board. The rules for TSP participation differ depending on the employee’s retirement system. For FERS employees, the Postal Service contributes one percent of basic pay to TSP, fully matches employee contributions up to 3 percent of basic pay, and matches one-half of employee contributions from 3 to 5 percent of basic pay. In 2001, FERS employees could contribute up to 11 percent of basic pay to TSP on a tax-deferred basis, subject to IRS maximum limits. The Postal Service does not match CSRS or CSRS Offset employee contributions to the TSP. In 2001, CSRS employees’ contributions were limited to 6 percent of basic pay. At the end of 2001, 417,511 FERS employees and 147,019 CSRS and CSRS Offset employees participated in TSP.

        g. Flexible Spending Accounts
Employees continue to take advantage of Flexible Spending Accounts (FSAs) to pay for certain health care and dependent care expenses with contributions made through pretax payroll deductions. FSAs were first offered in 1992 to certain nonbargaining unit employees and now include all employees. In 2001, 55,273 employees were enrolled in health care FSAs (a 4.1 percent increase from 2000), with an average contribution of $1,393. In 2001, 5,743 employees were enrolled in dependent care FSAs (a 3.6 percent decrease from 2000), with an average contribution of $2,691. The projected 2001 savings for the Postal Service resulting from the FSA program is approximately $2.7 million (net of administrative expenses). Employees experience tax savings as well, which vary according to the individual’s con-tribution amounts and marginal tax rates.