1. CSRS LEGISLATION PUBLIC LAW 108-18 CSRS LEGISLATION PUBLIC LAW 108-18

2. Overview  Changes Postal Service CSRS Funding to Prevent $105 Billion Over Payment Under Existing Legislation  Transfers $27 Billion CSRS Cost of Military Service to USPS  Places “Savings” (Difference Between New and Old CSRS Payments) in Escrow Beginning in FY 2006 PUBLIC LAW 108-18

3. Reports Required by Law  USPS Use of “Savings” Beyond FY 2005  Funding CSRS Cost of Military Service – USPS or U.S. Treasury to Pay? PUBLIC LAW 108-18

4. Responsibility Should Revert to U.S. Treasury $17B Relates to Treasury Payments Made Between 1971 and 2002 90% Relates to Military Service Prior To 1971 Establishment of USPS USPS Position on Military Service Costs USPS Only Agency Charged This Cost President’s Commission: “Taxpayers, Not Ratepayers, Should Finance Military Pensions” PUBLIC LAW 108-18

5. Use of “Savings” 2003/04 -- Liquidation of Debt 2005 -- Fund Expense Growth or Liquidate Debt PUBLIC LAW 108-18 2006 & Beyond – Hold in Escrow Pending Legislative Change

6. Law Requires Consideration of: Debt Repayment; Pre-funding Post Retirement Health Benefits; Cost Saving Capital Investments; Delaying/Moderating Increases in Postal Rates; Any other Matter; and Work of President’s Commission PUBLIC LAW 108-18 Use of “Savings” After 2005

7. “…because the Postal Service still faces substantial obligations related to post- retirement health benefits for its current and former employees, some portion of the savings …should be used to address those unfunded obligations” PUBLIC LAW 108-18 Sense of Congress Stated in Act

8.  Escrow Requirement Creates New Over-Funding  $3.2B Required to Fund FY 2006 Escrow  USPS Opposes Escrow Requirement PUBLIC LAW 108-18 USPS Position on Escrow Requirement

9. With Obligation for Military Service Costs Returned to U. S. Treasury, Pre-Fund Postretirement Health Benefit Costs of Employees and Retirees. PUBLIC LAW 108-18 USPS Preferred Proposal  Responds to “Sense of Congress” and GAO Concerns re Recognizing and Funding Costs when Earned.

10. Should USPS Be Required to Fund Military Service Costs:  Pre-Fund Retiree Health Benefit Cost for New Hires Since FY 2002  Liquidate Debt  Fund Cost Saving Capital Investments  Pay Annual Retiree Health Benefit Premium Costs PUBLIC LAW 108-18 USPS Alternate Proposal

11.  $3.2B Escrow Requirement: Increases Rates 5.4% Increase  USPS Preferred Proposal: Increases Rates 1.5% to 2.0% PUBLIC LAW 108-18 FY 2006 Rate Impact of Proposals  USPS Alternate Proposal: Increases Rates 0.3%

12.  Military Service Costs: GAO Evaluation of USPS, OPM and Treasury Proposals Due November 29, 2003. PUBLIC LAW 108-18 Next Steps  Disposition of Savings: - GAO Evaluation of USPS Proposal Due November 29, 2003. - Congress to Revisit Savings Issue Within 180 Days of Receiving GAO Report.