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 $54,225 per work year (tentative).

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


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 2002, a new pay consultation with management associations continued the focus on market-based and performance-driven pay systems. The salary structure was increased to accommodate merit awards that will recognize 2002 and 2003 performance. The Pay for Performance Program (formerly the EVA Variable Pay Program) for EAS employees was discontinued. Reserves built up from the six years of the incentive program were paid as scheduled in October 2002. Pay consultations with the management associations will occur in 2003 for development of a new incentive plan for 2004.


3. Executive Pay and Benefits

Due to the limit imposed on PCES salaries by the Postal Reorganization Act, pay and benefits for Postal Service officers and many executives do not meet private sector comparability standards. During 2002, the average salary for Postal Service officers was $152,000. The average executive salary was $111,000.

In 2002, the Pay for Performance Program (formerly the EVA Variable Pay Program) for PCES officers and executives was discontinued. Reserves built up from the six years of the incentive program were paid as scheduled in October 2002. A new incentive plan will be implemented for 2003 consistent with the Postal Service Transformation Plan objective to build a performance-driven culture.


4. Merit Pay Performance Evaluation

In 2002, 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 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 contributions to corporate goals.

The Postal Service Transformation Plan calls for the continuation of the CustomerPerfect! management cycle of Establish, Deploy, Implement, and Review. Goals developed under this process will serve as the foundation for a new National Performance Assessment System that will have employee line-of-sight performance measures throughout the organization. Officers and executives will be evaluated under the new system beginning in 2003, and nonbargaining employees will begin in 2004.


b. Leave Programs

Postal Service employees are provided both sick and annual leave at the same rate as other federal sector employees. However, Postal Service employees have a higher annual leave carryover limit than their federal sector counterparts. Postal Service employees used an average of 9.88 days of sick leave per career employee during 2002 (tentative).

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 accordance 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 $3.7 billion or 7.1 percent of the Postal Service's total pay and benefits during 2002.

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 pretax 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 in 2002 was $987 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 2002, Postal Service costs for employee life insurance were $200.7 million and the cost of funding life insurance for postal annuitants and their survivors was $7.4 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 2002, there were 751,697 career employees covered by a federal retirement program. Of this total, 510,237 employees (67.9 percent) were covered by the Federal Employees Retirement System (FERS); 230,632 employees (30.7 percent) were covered by the Civil Service Retirement System (CSRS); 10,828 employees (1.4 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 2002, CSRS employees contributed 7.0 percent of basic pay to the Fund. FERS and CSRS Offset employees contributed 0.8 percent of basic pay to the Fund and 6.2 percent of gross pay to Social Security (up to the Social Security wage maximum).


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 1 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 2002, FERS employees could contribute up to 12 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 2002, CSRS employees’ contributions were limited to 7 percent of basic pay. At the end of 2002, 426,303 FERS employees and 139,676 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 2002, 60,491 employees were enrolled in health care FSAs (a 9.4 percent increase from 2001), with an average contribution of $1,425. In 2002, 5,588 employees were enrolled in dependent care FSAs (a 2.7 percent decrease from 2001), with an average contribution of $2,689. The projected 2002 savings for the Postal Service resulting from the FSA program is approximately $3.1 million (net of administrative expenses). Employees experience tax savings as well, which vary according to the individual’s contribution amounts and marginal tax rates.