By Nick Thornton
The U.S. Postal Service
’s inspector general has recommended the implementation of a 401(k)-type of retirement program for the more than 484,000 federal employees of the service.
According to a post on the IG’s blog, the Postal Service requested a study of the service’s benefit programs. The IG benchmarked the USPS’s defined benefit plan against eight other retirement plans — six in the private sector and two in government.
The report found that retirement benefits represent about 12 percent of annual compensation at the USPS, including benefits costs, compared to the private sector, where retirement costs average 3.7 percent of total comp. State and local governments spend an average of 9.4 percent on retirement benefits.
The Postal Service operated at a $5 billion deficit in fiscal 2013. More than $47 billion in compensation and benefits expenses were incurred. About $6 billion of that was in retirement benefits.
The IG noted that seven of the eight organizations compared have transitioned to defined contribution plans
, reducing forward pension liabilities by as much $5 billion.
Roughly 80 percent of Postal Service employees contribute 4 to 4.5 percent of their pay to their pension programs.
The Postal Service has been open about its need to create a new retirement system for future employees. But change is far more easily proposed than done. Federal law requires all federal employees — including postal employees — to be covered by one of two government-sponsored retirement plans: the Civil Service Retirement System or FERS. Unlike private-sector companies, federal agencies like the Postal Service don’t have the authority to change retirement benefits for their employees; only Congress can.
The IG also examined cost savings in modernizing the service’s generous leave program, which allows postal employees to carry over 55 days of leave a year.
Originally published on BenefitsPro.com