annual installments, which included interest computed at a rate of 5% per year. We made the first payment at the end of the year in which employees received 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 and $313 million in 2001.

Deferred Retirement Liability —
Retirees' and Their Survivors' Cost of Living
Adjustments (COLAs)

OPM determines the COLAs granted by Congress to our retirees. Under the Omnibus Budget Reconciliation Act of 1990, we were liable, by law, for our share of the COLAs granted to those retirees, and their survivors, retiring on or after July 1, 1971. We were not responsible for any costs due to federal civilian service before that date.

Prior to Public Law 108-18 (see Note 7) each year OPM determined the current portion of the increase in our share of the estimated liability of the CSRDF and billed us for COLAs granted for the current year. We expensed those billed amounts as they became payable in 15 equal annual installments, which included 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 and $1,668 million in 2001.

Deferred Retirement Costs

We have expensed all billed amounts for CSRS through 2002. The amounts reported as a deferred asset and a deferred liability on the balance sheet for 2002 represented OPM's calculation of the amounts payable in the future.

(dollars in millions):
2002
CSRS	$24,602
CSRS retirees' and survivors' cost of living adjustments	7,629
Total	$32,231

There are no deferred retirement costs associated with FERS. For information on supplemental costs of CSRS after April 2003 see Note 7.

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 2003, 2002 and 2001 (dollars in millions):

	2003	2002	2001
CSRS	$1,128	$  740	$  769
FERS	2,172	2,121	2,046
FERS — Thrift
Savings Plan	856	827	789
Dual CSRS	52	33	33
Social Security	1,544	1,511	1,498
Accrued Postal Supplemental Liability	9	–	–
Amortization of deferred cost: CSRS	–	1,393	1,333
Annuitant COLAs	–	879	814
Interest expense on deferred liabilities	116	1,601	1,603
Total retirement expense	$5,877	$9,105	$8,885

Employer cash contributions to retirement plans were $4,031 million in 2003, $6,013 million in 2002 and $5,799 million in 2001. These amounts do not include Social Security contributions and interest expense on deferred retirement liabilities.

7   The Postal Civil Service
     Retirement System Funding
     Reform Act of 2003 — Public
     Law 108-18

On April 23, 2003, the President signed into law Postal Civil Service Retirement System Funding Reform Act of 2003 — Public Law 108-18 (PL108-18), which changed the way we fund our CSRS retirement plan. Although the law changed the funding of the plan, postal management determined that we are still a participant in a multi-employer pension plan. The parent-subsidiary relationship that we have as an "independent establishment" of the executive branch of the United States government allows for this accounting treatment under FAS 87. As a "subsidiary" we cannot direct the costs, benefits or funding requirements of the federally-sponsored plan.

In November 2002, the Office of Personnel Management (OPM) advised us that it had completed a review of estimates and our then current scheduled funding of the Civil Service Retirement and Disability Fund (CSRDF). OPM determined that at our current