The Postal Service Pension System and alternative methods for providing long-term financial welfare to retirees

Abstract

The United States Postal Service continues to face difficult financial conditions, due primarily to electronic diversion of mail volume. The largest component of the Postal Service's cost structure is labor, with retirement benefits representing a significant portion of those costs. This thesis provides a historical retrospective of the development of the pension system that the Postal Service currently participates in, and assesses the impact that the pension system has had on the Postal Service through history. The ultimate objective of this thesis is to study the United States Postal Service pension system as it relates to its current obligations to the United States federal government, provide a review of alternative pension arrangements operating in other sectors, and analyze the leading alternatives as they apply to the Postal Service to understand their potential impact on the finances of the United States Postal Service. Two simulations models are developed in the study, based on an analysis of the current workforce, historical and projected retirement patterns, and the current pension contribution profiles of workers. The models are used to assess the impact of various plan designs on the Postal Service's cost structure, and on a typical individual employee's post-retirement income.