USPS Underestimates How Many Employees Will Take the Money and Run, Poll Says

The majority of voters in a Dead Tree Edition poll predict that more than 20,000 APWU members will accept incentives to quit.

Of the 1,577 votes in the poll that ended tonight, only 16% agreed with a postal executive's recent estimate that 16,000 to 20,000 of the 115,000 eligible employees would accept the buyout package. Nearly 62% of voters predicted a higher number.

But voters also concluded that the "in the range of 35,000" estimate from William Burrus, former APWU president, is too high. Only one-fifth of voters predicted that more than 30,000 members of the Postal Service's largest labor union would call it quits.

The buyout package includes $15,000 and, for many employees, an even more valuable opportunity to take Voluntary Early Retirement.

Dead Tree Edition estimates that, if successful, the buyout program could reduce the Postal Service's compensation costs by more than $1 billion annually. But USPS seems to be doing little to present the buyout package in the best light, for example sending thousands of employees inaccurately low estimates of their retirement benefits.

Ironically, the APWU, which stands to suffer a significant loss of dues income as a result of the buyouts, is doing more than USPS to clear up the confusion about retirement benefits that may dampen response to the offer.

For example, it sent out a bulletin today informing members about the FERS annuity supplement, about which the Postal Service has been mostly silent. And Burrus urged those considering retirement to "take the money and run" because the Postal Service is unlikely to offer them a similar incentive in the future.

Related articles:

• USPS Seeks 'Soft Landing' For Downsized Employees, Donahoe Says 
• USPS Planning Retirement Incentives To Help Downsizing, Donahoe Testifies
• Response to Buyout Offer Better Than USPS Expected  
• New Poll: How Many Postal Workers Will Take the USPS/APWU Buyout Incentive?
• The Hidden Benefit of Postal Service Retirement 

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Politicking Leads To Profitable October for USPS

Bolstered by election-related mailings, the U.S. Postal Service experienced something unusual in October -- profitability.

USPS released preliminary financial results late yesterday showing net income of $61 million last month, the first month of Fiscal Year 2013, versus a budgeted loss of $244 million and last year's loss of $139 million.

If not for a $467 million charge for prefunded retiree health benefits, the agency's net would have been $528 million -- a profit margin of more than 8% on revenues of $6.03 billion. Those prepayments have been likened to an interest-free loan to the federal treasury that are designed to obscure the true size of the federal budget deficit. (See Congress Hears the Truth About Postal Service Finances.)

The volume of Standard mail -- derided as "junk mail" by critics -- was up 16% over October 2011. Standard class revenue rose only 10%, evidence that the big volume increase was concentrated in the kind of low-priced mass mailings of letters used by political campaigns.

Also helping the bottom line was better productivity: The Postal Service delivered 9% more mail pieces than in October 2011 but needed only 3% more work hours to accomplish that.

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The Hidden Benefit of Postal Service Retirement

Question: When does $16,638 actually equal nearly $30,000?

Answer: When a U.S. Postal Service employee compares the retirement annuity the USPS says he will receive to the payments he will actually get. Ignorance of the additional payments has hindered employees from accepting early-retirement incentives that are so crucial to the Postal Service’s cost-cutting efforts.

Consider the case of “Joan”, an APWU member who is eligible for Voluntary Early Retirement (VERA) and a $15,000 incentive to quit as part of a major USPS downsizing effort. In early October, as part of the incentive program, USPS sent her a notice that her retirement annuity would be $16,638 annually.

After factoring in her other potential income sources, Joan at first decided she couldn’t afford to quit her $53,000-per-year job. But fortunately, she dug a little further and talked to experts in the arcane world of USPS retirement benefits.

An additional $13,000
That’s how Joan learned that if she took the VER she would be eligible for an additional “FERS annuity supplement” of $13,020 annually when she turns 56 in a few years, says Don Cheney, who for years has been helping fellow APWU members understand their various retirement benefits.

“With this new information, she is taking the VER,” Cheney says.

The FERS annuity supplement is “a quasi-Social Security payment prior to the start of the actual Social Security benefit at age 62,” writes Robert Benson, who runs the FedBens web site that calculates FERS annuity supplements and other federal benefits. (USPS has declined to license the software.)

Contrary to USPS strategy
Although thinning its ranks is one of the Postal Service’s major strategic thrusts, USPS does not tell employees how much their FERS annuity supplements will be until after they make an irrevocable commitment to retire.

“Who in their right mind would sign a Statement of [Retirement] Irrevocability before getting all the facts needed for a decision to retire?” Cheney asks. The failure to provide such information, says Cheney, is dampening response to the current early-out program aimed at approximately 115,000 clerks, mechanics, and other APWU-represented employees. If successful, the buyout program could save USPS more than $1 billion annually, as explained in New Poll: How Many Postal Workers Will Take the USPS/APWU Buyout Incentive?

APWU members who were hired before 1984 “are leaving in droves,” says Cheney. As participants in the CSRS retirement program, “they get accurate annuity estimates.” “FERS postal employees were hired after January 1, 1984 and are hesitant to leave. They get incomplete annuity estimates that omit the monthly FERS annuity supplement.”

“The FERS annuity supplement typically ranges from $700 to $1,000 per month from age 56 to 62,” Cheney says. “It dwarfs the measly $15,000 incentive the Postal Service offers. Employees want to know: Are they eligible for it? When will they start getting it? How much is it?”

Afraid to retire
"I'm always surprised at the incredible misconceptions that our employees have about their retirement plan,” writes Roseanne Jefferson, a retired USPS benefits manager who pens the Postal Retirement column for PostalMag.com. “Particularly in the last years of their employment, they are so sure of their retirement benefits, and are so surely wrong. It has always amazed me how our organization is OK with the understanding that employees are afraid to retire, because they don't trust the HRSSC to get their retirement correct."

Jefferson wrote recently that she is being deluged with emails from APWU-represented employees workers who are considering the buyout. Many are confused about their benefits.

This message exemplifies the confusion, “Roseanne, I am leaving with the early out, I am a FERS employee and I am 58 and have 25 years. I don't know if I can afford to retire, my annuity is only going to be $1400 per month, I have to wait until I am 62 to collect my social security, and then I still have to wait until I am 59 and a half to begin my TSP [Thrift Savings Plan payout].”

Wrong on all counts, Jefferson replied. Immediately upon retirement, this particular employee is also eligible for a FERS supplement of about $800 per month and TSP payments of $397 per month, Jefferson wrote.

Unlike most federal agencies, the Postal Service does not offer individual counseling to employees who are considering retirement, even when it is using incentives to encourage them to retire. What it’s offering retirement-eligible APWU members, says Cheney, is “a group phone seminar with ten people plus their spouses that covers general questions only, not the specific ones that people have.”

Related articles:

• Response to Buyout Offer Better Than USPS Expected  
• Confusion, Misinformation Could Hinder USPS's Early-Retirement Push  
• USPS Retirement Mess: A Major Barrier To Downsizing
• Here's How the Postal Service Can Get Back Its Pension and Benefits Overpayments

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Congress Is Fixin' To Fix the Postal Service

Word is spreading of a bipartisan, bicameral effort among Congressional leaders to fix the U.S. Postal Service. Before anyone gets too excited, let's remember that "fix" can also mean:

• Castrate or spay
• Restore or repair
• Kill and preserve a specimen so that it can be studied under a microscope
• Give someone a dose of an illegal drug
• Take revenge (as in, "I'll fix him!")
• Arrange an outcome dishonestly, such as with a bribe or by stuffing a ballot box
• Establish something in a way that prevents it from changing (such as a fixed rate)

I'm just sayin'.

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Response to Buyout Offer Better Than USPS Expected

Unless a lot of postal workers get cold feet in the next couple of weeks, more employees will accept a $15,000 incentive to quit than postal executives had expected.

About 20,000 APWU-represented employees have already signed up for the buyout, Federal Times quoted Postmaster General Patrick Donahoe as saying today. That's at the top end of the 15,000-to-20,000 expected range the U.S. Postal Service provided last month and then reiterated last week.

Those who have signed up can back out before the Dec. 3 decision deadline, Federal Times' Sean Reilly noted. But it seems unlikely that many who signed up so far in advance would have a change of heart. Among the early sign-ups are some who had decided months or even years ago to leave as soon as a buyout was offered.

Thousands of the approximately 115,000 eligible employees are probably still digging through the complexities of postal pensions, annuities, Thrift Savings Plan payouts, tax implications, payments for unused leave, etc. to decide whether to take the money and run. Thanks to the incomplete information and lack of guidance USPS provides to potential retirees, the more postal workers learn about their various retirement benefits the better retirement usually looks.

So expect the number of employees who take the buyout to exceed 20,000. By Dead Tree Edition's rough calculations, that means the buyout could end up reducing USPS costs by more than $1 billion annually.

A slight majority of voters in a Dead Tree Edition poll so far believe the USPS estimate is too low. As the number of votes reached passed 1,000 this evening, 52% predicted that more than 20,000 would take the buyout. And 20% predicted the number would be above 30,000. Current results, and the chance to cast your own vote, are near the top of the right-hand column.
  
For more information on the buyout offer, see:

• Confusion, Misinformation Could Hinder USPS's Early-Retirement Push  
• Take the Money and Run, Burrus Tells Postal Workers  
• New Poll: How Many Postal Workers Will Take the USPS/APWU Buyout Incentive?

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New Poll: How Many Postal Workers Will Take the USPS/APWU Buyout Incentive?

Offering 115,000 APWU-represented employees $15,000 to quit will clearly be one of the best investments the U.S. Postal Service has ever made.

What's not clear is how big the investment and payback will be. In other words, how many eligible employees will take the buyout? Dead Tree Edition is asking its readers to make their own prediction (the poll is near the top of the right-hand column) on the early-out incentives that could yield $1 billion or more in annual savings.

When it announced the program a month ago, USPS said it expected 15,000 to 20,000 employees to participate.

Former APWU President William Burrus soon countered with his a much higher estimate -- "in the range of 35,000" -- and advised postal workers not to hold out for something better. (See Take the Money and Run, Burrus Tells Postal Workers.) But the Postal Service's chief human resources officer indicated recently that his estimate had hardly changed; it's now 16,000 to 20,000.

Eliminating a position held by a full-time career postal worker probably saves USPS at least $60,000 annually. And a new employee is likely to cost USPS only half of what a veteran career worker does, according to Burrus.

That means that if half of the early retirees are replaced, a total of 15,000 buyouts would save USPS nearly $700 million annually. But if 35,000 take the package, the savings could be nearly $1.6 billion.
So here are the five choices in the poll, with a description of each one:

1. "Fewer than 16,000": Who can afford to retire in this economy?
2. "16,000-20,000": This is what USPS officials predict, so it must be true.
3. "20,001-30,000": USPS has underestimated how badly some employees want out.
4. "30,001-40,000": Bill Burrus nails it on the head.
5. "More than 40,000": Katie bar the door!

Voting ends on Nov. 28.

Related articles:

• Confusion, Misinformation Could Hinder USPS's Early-Retirement Push  
• USPS Planning Retirement Incentives To Help Downsizing, Donahoe Testifies  
• Postal Service Can No Longer Afford Money-Saving Tactics, Study Says  
• It's Official: Postal Service Has More Older Workers Than Any Fortune 500 Company  
• How Does the Postal Service Discourage Early Retirement? Let Me Count the Ways

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Superstorm Sandy's Seven Lessons About Print Media

Many readers in the mid-Atlantic region report a new appreciation for print media in the wake of Sandy’s mayhem. Among the observations they passed along are:

1. The best photos are still created for print media. Iwan Baan rented a helicopter to capture the stunning image that graced the cover of New York magazine’s post-storm issue. No one goes to those kinds of lengths, or expense, to produce a photo that will only appear in digital media. 
2. Print works just fine when the power is out. 
3. Print’s battery doesn’t die. 
4. If you own a printed product, you don’t need a wifi connection to access it. 
5. This came from a New York reader: "When I awoke to what looked like a war zone Tuesday [Oct. 30], I thought I was completely cut off from the outside world – no power, no Internet, no phone, no battery-operated or hand-cranked radio (since rectified). But when I ventured outside my apartment building, I spotted a newspaper box with an amazing sight: that day’s edition of the New York Daily News. It had obviously ‘gone to bed’ too early the previous evening to have all the news of the storm, but I eagerly dug in. At that moment print was clearly the superior technology for conveying news."
6. A New Jersey resident wrote: "We didn’t get enough rain Monday night [Oct. 29] to cause any flooding, but by the next morning most major roads were blocked by downed power lines and utility poles and practically the whole town had no electricity. The whole region was such a mess that the local daily newspaper didn’t even try to publish that day. Our street was eerily quiet most of the morning until we heard the familiar whirr of a motor. There was our letter carrier coming up the street, delivering mail as if nothing had happened. It was days before UPS and FedEx got their deliveries to our area straightened out, and my neighbor was still complaining a week after the storm about not being able to access the books and magazines she had bought for her e-reader (‘How’s that Kindle workin’ for ya now, sweetheart?’). We received several magazines by mail after the storm and never missed a mail delivery during the week the power was out. 
7. And another Jerseyan: “Our Republican governor pointed out that we seem to be getting a 'Storm of the Century' every couple of years. NOW do you believe in global warming?” Yep, the storm should be a wake-up call that it's time to move beyond simplistic slogans like “Go green, go paperless” and “Paper is all natural” and dig in to the serious work of making our media choices more earth friendly. 

Related articles:

• Print vs Digital: Who Survives The Zombies: A really fun infographic 
• Going Paperless Doesn't Mean Going Green, The New York Times Proves  
• 10 Questions About Toshiba's No-Print Day  
• 12 Telltale Signs That You Are A Printing Geek

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FSS Is Saving Big Bucks, USPS Claims

The troubled Flats Sequencing System is saving hundreds of millions of dollars annually, according to a U.S. Postal Service claim.

Based on information USPS filed recently in a lawsuit, the agency’s $1.3 billion FSS investment will pay for itself after barely three full years of operation.

“The Postal Service saves approximately $325,408 for each month of operation of each FSS machine,” USPS said in response to a lawsuit filed against it by the key FSS vendor, Northrop Grumman. “This is the monthly amount the Postal Service would have to pay employees to manually sort flats to delivery point sequence if the Postal Service did not use the FSS machine, minus the additional cost of operating the FSS machine.”

FSS was supposed to revolutionize the sorting of difficult-to-handle flat pieces like catalogs, magazines, and large envelopes. Mailers hoped the efficiency gains from automating mail sortation that was done by letter carriers would reduce pressure on the Postal Service to increase postal rates for flat mail, but now they fear that FSS isn't paying off. (See FSS Is Increasing USPS's Costs, Expert Says and FSS Machines Running Far Slower Than Planned.)

Because the 100 FSS machines were deployed an average of 12 months later than required by contract, USPS claims Northrop Grumman owes it $393.7 million for lost savings. USPS is seeking an additional $17 million from Northrop for other alleged breaches of contract, such as a lack of spare parts, error-plagued maintenance handbooks, and failure to honor warranty claims.

The USPS filing also denies Northrop Grumman claims that USPS “improperly wrested design control” over the machines from Northrop and thereby caused the delayed implementation and other problems. (For more on Northrop’s claims, see Flats Litigation System: USPS and Vendor Battling It Out Over Huge FSS Machines.)

High rate of return
If the Postal Service’s numbers are accurate, the money it invested in the football-field-sized machines will have a hefty 27% “internal rate of return” if the machines last for only 10 years.

But extensive cost estimates like this rely on assumptions and judgment calls. Because the context of the lawsuit gives USPS the incentive to make the FSS savings seem as large as possible, its estimate begs a few questions:

• Does the net savings of $325,000 per month represent a best-case scenario -- for example, a machine that runs well with no major hiccups -- or is it truly an average for all machines in all months?
• Postal officials stated recently that only 60% of flat mail in FSS zones was being sorted on FSS machines. Is the $325,000 estimate based only on the best-utilized machines or also on the machines that are underperforming their intended capacity?
• As Dead Tree Edition reported in September, FSS machines’ “erratic performance sometimes results in carriers spending just as much time preparing the mail, or even more” and last winter “led to many carriers delivering mail after dark – definitely not a high-productivity environment.” Do the USPS savings estimates include the cost of such downstream disruptions?
• Mailers, especially magazine publishers, report many customer complaints about the “Flats Shredding System” damaging mail. Is the Postal Service factoring in the lost revenue from those customers not renewing or switching to digital media? (If your answer is “Yes”, contact me about a really sweet deal on a bridge I can sell you.)
• Postal officials have recently reported improved FSS operations, especially in regard to machine reliability. Does that mean the monthly savings per machine will be even greater than $325,000?
• Now that the Postal Service has had such a major falling out with the contractor it relied on for such key functions as documentation, training, and modifications, how long will it be able to operate the massive machines effectively on its own? 

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