Financial Section Part II
Retirement Expense
Our employees participate in one of three retirement programs of the U.S. government based on the starting date of their employment with the federal government. These programs are the Civil Service Retirement System (CSRS), the Dual CSRS/Social Security System (Dual CSRS), and the Federal Employees Retirement System (FERS). The programs are administered by the OPM. See Note 10, Retirement programs, in the Notes to the Financial Statements for additional information.
The expenses of all of our retirement programs are included in compensation and benefits expense. Our retirement expenses for current employees represented 7.2% of our total operating expenses in 2007 and 9.8% in 2006. The decrease in 2007 was mainly due to the enactment of P.L.109-435, which suspended our CSRS retirement contribution as of October 14, 2006.
As described in Note 2, Summary of significant accounting policies, in the Notes to the Financial Statements, we account for our participation in the retirement programs of the U.S. government under multiemployer plan accounting rules, in accordance with Financial Accounting Standard Board Statement 87, Employers’ Accounting for Pension Costs. Although the Civil Service Retirement and Disability Fund (CSRDF) is a single fund and does not maintain separate accounts for individual agencies, the following table provides OPM’s estimation of the funding status of the CSRS and FERS programs for Postal Service participants as of September 30, 2006. This is the most recent data provided by OPM.
| Present Value Analysis of Retirement Programs as Calculated by OPM (9/30/06 latest data available) | CSRS | FERS | Total |
| (Dollars in billions) | |||
| Present Value of Benefits | $193.7 |
$86.6 |
$280.3 |
| Present Value of Contributions* | 3.2 |
37.3 |
40.5 |
| Current Fund Balance | 207.6 | 58.0 | $265.6 |
| Surplus | $17.1 |
$8.7 |
$25.8 |
| Transferred to PSRHBF in 2007 | (17.1) | - | $(17.1) |
| Adjusted Surplus | - | 8.7 | $8.7 |
| *Expected employer and employee contributions | |||
Health Benefits
We participate in the Federal Employees Health Benefits Program (FEHBP), which is administered by OPM. We account for our employee and retiree health benefit costs as an expense in the period our contribution is due and payable to FEHBP using multiemployer plan accounting rules in accordance with Financial Accounting Standards Board Statement 106 (FAS 106), Employers’ Accounting for Postretirement Benefits Other Than Pensions.
The drivers of our active employee health care costs are the number of employees electing coverage and the premium costs of the plans they select. In 2007, health benefit expenses for active employees were $5,401 million, an increase of $56 million over 2006. This was 6.7% of our total operating expenses. The 2006 expense of $5,345 million was 7.5% of our total operating expenses, and increased by $245 million, or 4.8%, over 2005.
Premiums for each plan participating in FEHBP are determined annually by OPM. OPM announced average premium increases effective in January 2007 were 1.8%, 6.6% in January 2006, and 7.9% in January 2005. In September 2007, OPM announced an average premium increase of 2.0% for January 2008. The low level of premium increases in 2007 and those announced for 2008 are the result of lower plan costs, and the application of plan reserves to lower premiums.