As required by P.L.109-435, the Postal Service discloses OPM-provided information regarding the costs and changes in obligations related to the FERS and CSRS retirement programs. Prior to this year, we have reported this information based on OPM-provided actuarial valuations; the same valuations that are used to establish the normal cost and funding requirements for these retirement programs. The OPM actuarial valuations utilize the long-term economic assumptions established by the Civil Service Retirement System Board of Actuaries. This information provides valuable insight concerning our current funding status and the outstanding obligations of the CSRS and FERS programs.
In 2010, the OPM adopted Statement of Federal Financial Accounting Standards 33; Pensions, Other Retirement Benefits, and Other Postemployment Benefits: Reporting the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates (SFFAS 33). SFFAS 33 only applies to federal entities that report liabilities and expenses for federal employee pensions, retiree health benefits, and other postemployment benefits on their financial statements. Although SFFAS 33 does not apply to the Postal Service’s financial reporting, OPM changed to using the SFFAS 33 approach to report Postal Service CSRS and FERS obligations.
SFFAS 33 provides guidance for selecting historical average interest rates, salary growth rates, inflation rates, and COLA assumptions used to calculate and report CSRS and FERS valuations on federal financial statements. The assumptions used for SFFAS 33 reporting are different from those used by OPM to determine the funding requirements and actuarial valuation of CSRS and FERS. These differences were significant. For the CSRS program, the differing assumptions resulted in a $12.3 billion difference in the September 30, 2009 unfunded liability. For FERS, the difference was a $4.0 billion reduction in the September 30, 2009 surplus.
The table below illustrates the differences in the funding levels of the Postal Service’s portion of the two programs as of September 30, 2009 (the latest date available) calculated using SFFAS 33 assumptions and the assumptions used for the actuarial valuations:
The Postal Service believes that the most appropriate basis for evaluating the funded status of its obligation to CSRS and FERS is to use the actuarial valuations based on the assumptions established by the Civil Service Retirement System Board of Actuaries, since these provide the legally-mandated basis for determining the appropriate funding of both programs.
The following table provides OPM’s estimate of the funding status under SFFAS 33 of the CSRS and FERS programs for Postal Service participants as of September 30, 2009 and 2008, and the projected Postal Service obligation as of September 30, 2010.
