Civil Service Retirement System (CSRS)

Under the Postal Reorganization Act, officers and career employees hired prior to January 1, 1984, are covered by the Civil Service Retirement System, which provides a basic annuity toward which we and the employee contribute. We do not match contributions to the Thrift Savings Plan for employees who participate in the CSRS.

Dual Civil Service Retirement System/ Social Security System (Dual CSRS)

Employees with prior U.S. government service who were hired between January 1, 1984, and January 1, 1987, are covered by the Dual Civil Service Retirement System/Social Security System, which consists of a basic annuity and Social Security. We and the employee contribute to Social Security and the basic annuity at the rate prescribed by law. We do not match contributions to the Thrift Savings Plan for employees who participate in the Dual System.

Federal Employees Retirement System (FERS)

Effective January 1, 1987, officers and career employees hired since December 31, 1983, except for those covered by the Dual System, are covered by the Federal Employees Retirement System Act of 1986. In addition, employees hired before January 1, 1984, could choose during certain periods in 1987, 1988 and 1998 to participate in the FERS. This system consists of Social Security, a basic annuity plan, and a Thrift Savings Plan. We and the employee contribute to Social Security and the basic annuity plan at the rate prescribed by law. In addition, we are required to contribute to the Thrift Savings Plan a minimum of 1% per year of the basic pay of employees covered by this system. We also match a voluntary employee contribution up to 3% of the employee's basic pay, and 50% of a contribution between 3% and 5% of basic pay.

Employer and employee base contributions, as a percentage of employee basic pay, are as follows for each of the three plans for 2004, 2003 and 2002:

*As of May 2003, Public Law 108–18 changed our base contribution level for the CSRS. See note 7.

The number of employees enrolled in each of the retirement plans at the end of 2004, 2003 and 2002 is as follows:

Deferred Retirement Liability — Civil Service Retirement System

Prior to Public Law 108-18 (see note 7), when we increased CSRS employees' current basic pay we were liable for the estimated additional deferred retirement liability. The Office of Personnel Management determined and billed us for the current portion of the increase in the estimated deferred liability of the Civil Service Retirement and Disability Fund (CSRDF) resulting from basic pay increases. We expensed as billed those amounts as they became payable in 30 equal 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.

Our retirement expense payment in 2002 under the CSRS as a result of basic pay increases was $1,393 million plus interest of $1,242 million.

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 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.

Our retirement expense payment in 2002 for our retirees' COLAs was $879 million plus interest of $359 million.