(Slip Opinion)

1

Whether the United States Postal Service Bears 

Responsibility for the Cost of Certain Civil Service 

Retirement Benefits Paid to Its Employees

The United States Postal Service is responsible for the full cost of retirement benefits 

owed to its employees under the Civil Service Retirement System attributable to pay 

increases that USPS granted on and after the date it was established, including with 

respect to increases in benefits accrued during those employees’ years of service at 

USPS’s predecessor, the Post Office Department.

March 26, 2024

MEMORANDUM OPINION FOR THE GENERAL COUNSEL

OFFICE OF PERSONNEL MANAGEMENT

In 1970, Congress abolished the Post Office Department (“POD”) 

and replaced it with the United States Postal Service (“USPS”). Postal 

Reorganization Act, Pub. L. No. 91-375, 84 Stat. 719 (1970); see 39 

U.S.C. § 201. POD employees, like most other federal employees at 

the time, participated in the Civil Service Retirement System 

(“CSRS”), a defined-benefit pension plan. See 5 U.S.C. § 8331 et seq.

You have asked us whether USPS is “required to pay the full cost” of 

CSRS benefits “attributable to pay increases” on and after the date 

USPS was established, for USPS employees who also accrued CSRS 

benefits through service with POD. Letter for Christopher H. 

Schroeder, Assistant Attorney General, Office of Legal Counsel, from 

Webb Lyons, General Counsel, Office of Personnel Management 

(“OPM”) at 1 (Feb. 22, 2023) (“OPM Letter”). For the reasons explained below, we conclude that USPS is so required.

I.

A.

The U.S. Government calculates CSRS benefits using two factors: employees’ years of creditable federal service, and their “high-three” salary—meaning their average pay during the three consecutive years of 

employment when they were highest paid. 5 U.S.C. § 8339; see id. 

§ 8331(4). Specifically, employees covered by CSRS get an annual pension equal to their high-three salary multiplied by an amount established 
48 Op. O.L.C. __ (Mar. 26, 2024)

2

by statute, which for most employees is 1.5 percent for the first five years 

of employment, 1.75 percent for the next five, and 2 percent after that. Id.

§ 8339(a). 

This formula helps explain the stakes of the dispute over who must pay 

the cost of CSRS benefits “attributable to [post-1971] pay increases.”

OPM Letter at 1. When USPS grants a pay increase to an employee who 

previously worked at POD and that pay increase sets a new high-three 

salary, that high-three salary applies to all the employee’s years of service, including at POD. Consider a hypothetical employee who worked 

for the federal government for 30 years—15 at POD and 15 at USPS—

whose high-three salary was $19,165 at POD and $30,000 at USPS.1

Thanks to the USPS-granted pay raises, the employee’s high-three salary 

would be $30,000 for all their years of service, including the 15 years at 

POD, and the employee would receive an annual benefit of $16,875.2

Significant financial implications flow from the method of allocating 

responsibility between USPS and POD for the greater pension costs 

resulting from USPS-granted pay raises. One approach would be to make 

USPS responsible for the entire cost of the pay raise, including any increase resulting from the higher pay being applied to the years of service 

at POD. This approach can be implemented via what is known as the 

“frozen benefit” methodology, which identifies the “frozen benefit” an 

employee would have earned had they retired the day POD ceased to exist 

(June 30, 1971) and makes USPS responsible for the remainder. Applying 

that approach to our hypothetical employee, POD would be responsible 

for just under $5,031 of the annual benefit,3 and USPS would be responsible for the remaining $11,844. 

1 These amounts assume that the employee had an overall high-three salary of $30,000 

and received a 3.25 percent raise every year between their start date at USPS (July 1, 

1971) and retirement 15 years later. See Hay Group, U.S. Postal Service: Evaluation of 

the USPS Postal CSRS Fund for Employees Enrolled in the Civil Service Retirement 

System at 9 (Jan. 11, 2010). 

2 This annual pension is equal to $30,000 multiplied by the statutory amounts noted in 

the text—specifically, $2,250 for the first five years of service at POD (5 x 0.015 x 

$30,000); $2,625 for the second five years of service at POD (5 x 0.0175 x $30,000); 

$3,000 for the final five years of service at POD (5 x 0.02 x $30,000); and $9,000 for the 

15 years of service at USPS (15 x 0.02 x $30,000).

3 This annual pension is equal to $19,165, the hypothetical employee’s high-three salary at POD, multiplied by the statutory amounts noted in the text—specifically, $1,437.38 
Responsibility for the Cost of Certain USPS Retirement Benefits

3

An alternative approach, known as the “service ratio” approach, would 

split the costs of USPS-granted pay raises according to the “percentage of 

civilian service before and after July 1971.” Letter for Kay Cole James, 

Director, OPM, from Richard J. Strasser, Jr., Chief Financial Officer & 

Executive Vice President, USPS, Re: Postal Service Comments and 

Request for Reconsideration of OPM Draft Plan for Computation of 

Amounts Saved Under Public Law 108-18, at 2 (July 22, 2003) (“2003 

Strasser Letter”). Using this approach, USPS would be responsible for 

half of our hypothetical employee’s retirement benefit—$8,437.50—

because the employee spent half their career at USPS. Other allocations 

are also possible. But the “frozen benefit” and “service ratio” approaches 

helpfully frame the leading options and demonstrate the significance of 

the choice. 

Funding for CSRS benefits comes from two main sources: pay deductions, 5 U.S.C. § 8334(a)(1)(A), (c), and agency matching contributions, 

id. § 8334(a)(1)(B)(i). These amounts go into the Civil Service Retirement 

and Disability Fund (“Fund”), where they earn interest—which also 

becomes part of the Fund. See id. §§ 8334(a)(2), 8348. But these sources 

typically do not cover the full cost of benefits, see, e.g., OPM, Civil 

Service Retirement and Disability Fund Annual Report: Fiscal Year 

Ended September 30, 2021, at 25 (Mar. 2022), with the shortfall known as 

the “unfunded liability,” 5 U.S.C. § 8331(19). In technical terms, the 

unfunded liability is the amount by which the present value of all future 

benefits that must be paid exceeds the current Fund balance, plus the 

present value of expected future employee deductions and future employer contributions. Id. For USPS employees, this unfunded liability is “attributable mainly to increases in future CSRS benefits that result from” 

pay raises and cost of living adjustments (“COLAs”). Patrick Purcell & 

Nye Stevens, Cong. Research Serv., RL31684, Funding Postal Service 

Obligations to the Civil Service Retirement System at 3 (updated Mar. 28, 

2003) (“2003 CRS Report”). 

for the first five years of service at POD (5 x 0.015 x $19,165); $1,676.94 for the second 

five years of service (5 x 0.0175 x $19,165); and $1,916.50 for the final five years of 

service (5 x 0.02 x $19,165).
48 Op. O.L.C. __ (Mar. 26, 2024)

4

B.

Although the Postal Reorganization Act allowed former POD employees to continue to participate in CSRS, it did not resolve the consequential 

question of how to allocate responsibility for the retirement benefits 

attributable to pay increases granted by USPS to former POD employees.

See OPM Letter at 5. Since then, however, Congress has enacted three key 

statutes relevant to that issue.

1.

Congress first addressed the issue in 1974, when it enacted a provision 

that expressly made USPS responsible for increases in CSRS’s unfunded 

liability attributable to pay increases USPS granted to its employees:

Notwithstanding any other statute, the United States Postal Service 

shall be liable for that portion of any estimated increase in the unfunded liability of the Fund which is attributable to any benefits payable from the Fund to active and retired Postal Service officers and 

employees, and to their survivors, when the increase results from an 

employee-management agreement under title 39, or any administrative action by the Postal Service taken pursuant to law, which authorizes increases in pay on which benefits are computed.

Pub. L. No. 93-349, § 1, 88 Stat. 354, 354 (1974) (“1974 Act”).The 1974 

Act made these provisions retroactive to July 1, 1971—the date USPS 

was established—but reimbursed USPS for the portion of the unfunded 

liability incurred during its first three years. Id. § 3. The 1974 Act also 

tasked OPM’s predecessor, the Civil Service Commission, with estimating USPS’s liability as a result of the 1974 Act and required USPS to pay 

that amount in 30 equal annual installments. Id. § 1. 

USPS and OPM agree that the 1974 Act made USPS fully responsible 

for any increases in CSRS benefits attributable to USPS actions that 

increased its employees’ pay. See Letter for Christopher H. Schroeder, 

Assistant Attorney General, Office of Legal Counsel, from Thomas J. 

Marshall, General Counsel & Executive Vice President, USPS at 3 (June 

28, 2023) (“USPS Letter”); OPM Letter at 6. They agree, too, that this 

responsibility included increases in benefits that also related to USPS 

employees’ years at POD. See USPS Letter at 3; OPM Letter at 6.
Responsibility for the Cost of Certain USPS Retirement Benefits

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USPS recognized at the time that the 1974 Act shifted “enormous 

costs” onto it. Letter for Thaddeus J. Dulski, Chairman, Committee on 

Post Office & Civil Service, U.S. House of Representatives, from Louis 

A. Cox, General Counsel, USPS (Mar. 27, 1973), reprinted in H.R. Rep. 

No. 93-120, at 9 (1973). Yet USPS supported the legislation. Id. As 

USPS’s General Counsel explained, “[a]fter careful consideration—and in 

full awareness of the financial burdens enactment of the bill will impose—the Postal Service has concluded that it is proper, as a matter of 

principle, for these costs to be imposed on postal ratepayers rather than 

the taxpayers.” Id. The “principle of postal self-sufficiency,” he stated, 

“calls for those who use postal services to bear the costs of those services.” Id. at 10.

Consistent with this principle, in a series of statutes adopted between 

1989 and 1993, Congress imposed additional costs on USPS by making 

USPS responsible for COLAs paid to former employees who were CSRS 

beneficiaries, retroactive to the date USPS was established. See 2003 CRS 

Report at 4 & n.10 (listing statutes). Congress made these changes because it concluded that requiring the Department of the Treasury (“Treasury”) to pay for these costs improperly “subsidized” costs that were 

properly allocated to USPS. See H.R. Rep. No. 100-656, pt. 1, at 12–13 

(1988).

2.

Beginning in the 1990s, USPS’s financial status deteriorated, and by 

the early 2000s, financial concerns about USPS had become acute. E.g., 

Gen. Acct. Office, GAO-01-598T, U.S. Postal Service: Transformation 

Challenges Present Significant Risks (Apr. 4, 2001). The Senate Committee on Governmental Affairs thus asked the General Accounting Office 

(“GAO”)4 to review USPS’s finances. 2003 CRS Report at 4. In turn, 

GAO asked OPM to determine whether USPS “was paying more or less 

than appropriate to cover payments for [CSRS] for which it [was] responsible.” H.R. Rep. No. 108-49, at 5 (2003). 

4 In 2004, GAO’s name was changed from the General Accounting Office to the Government Accountability Office. See GAO Human Capital Reform Act of 2004, Pub. L. 

No. 108-271, § 8, 118 Stat. 811, 814. We use the acronym “GAO” to refer to both entities.
48 Op. O.L.C. __ (Mar. 26, 2024)

6

In November 2002, OPM’s analysis brought “good financial news” to 

USPS: USPS would eventually overfund its CSRS liability “by approximately $71 billion” over the lifetime of the program—although no overfunding had “occurred to date,” and about “$20.5 billion in future benefits 

remain[ed] to be funded.” Letter for John E. Potter, Postmaster General, 

from Kay Coles James, Director, OPM at 1–3 (Nov. 1, 2002) (“2002 

James Letter”). The overfunding was due to several factors, including that 

the Fund had earned “excess interest”—i.e., interest “in excess of the 5 

percent that was assumed under the” statute. S. Rep. No. 108-35, at 3 

(2003). 

In reaching these conclusions, OPM used the frozen benefit methodology described above. See Report on Methodology for Postal Service 

Funding Study (July 31, 2003) (“Methodology Report”), reprinted in

Continuing to Deliver: An Examination of the Postal Service’s Current 

Financial Crisis and Its Future Viability: J. Hearing Before the H. Subcomm. on Fed. Workforce, Postal Serv., & D.C. & the H. Comm. on 

Oversight & Gov’t Reform, 111th Cong. 262–63 (2010) (“Continuing to 

Deliver”). This methodology was then reviewed by the Board of Actuaries 

for the Fund, staff at Treasury and the Office of Management and Budget 

(“OMB”), and GAO. See 2002 James Letter at 2; GAO, United States 

Postal Service: Review of the Office of Personnel Management’s Analysis 

of the United States Postal Service’s Funding of Civil Service Retirement 

System Costs: Briefing for Congressional Requesters at 42–55 (Jan. 30, 

2003) (“2003 GAO Analysis”). The Board “agreed with [OPM’s] findings,” and Treasury and OMB “concurred.” 2002 James Letter at 2. And 

while GAO disagreed with some of OPM’s assumptions, it reviewed and 

did not question OPM’s “methodologies for allocating estimated benefit 

payments and other expenses between service rendered before and after 

July 1, 1971—the effective date of the Postal Reorganization Act.” 2003 

GAO Analysis at 53.

To address the impending overfunding, OPM drafted—and staff at 

OMB, Treasury, and USPS reviewed—a proposal that became the Postal 

Civil Service Retirement System Funding Reform Act of 2003, Pub. L. 

No. 108-18, 117 Stat. 624 (“2003 Act”). See 2002 James Letter at 1; see 

also 2003 CRS Report at 8–9. The 2003 Act aimed to ensure that USPS 

was only paying for the costs of CSRS benefits for “which it is responsible,” H.R. Rep. No. 108-49, at 5, and it did so by adopting a two-pronged 
Responsibility for the Cost of Certain USPS Retirement Benefits

7

approach modeled after the Federal Employees’ Retirement System 

(“FERS”), i.e., the retirement system for most federal employees hired 

after December 31, 1983. Federal Employees’ Retirement System Act of 

1986, Pub. L. No. 99-335, 100 Stat. 514 (codified as amended at 5 U.S.C. 

§ 8401 et seq.); see GAO, GAO-12-146, U.S. Postal Service: Allocation 

of Responsibility for Pension Benefits Between the Postal Service and the 

Federal Government at 29 (Oct. 2011) (“2011 GAO Report”). 

In the first prong, the 2003 Act changed the way USPS funded its 

matching contributions (for employees who were still paying into CSRS) 

to the method used by FERS, which makes more accurate assumptions 

about the full cost of benefits, “includ[ing] the effects of employee pay 

raises and retiree cost-of-living-adjustments.” 2003 CRS Report at 4; see 

5 U.S.C. § 8423(a); 2002 James Letter at 2. Specifically, the Act required 

USPS to make contributions pegged to the “normal-cost percentage” for 

relevant employees, minus the amount deducted from employees’ pay. 

2003 Act § 2(b)(1). The Act defined “normal-cost percentage” as the 

“entry-age normal cost computed by [OPM] in accordance with generally 

accepted actuarial practice and standards (using dynamic assumptions) 

and expressed as a level percentage of aggregate basic pay.” Id. § 2(a)(1) 

(codified at 5 U.S.C. § 8331(17)). And the Act defined “dynamic assumptions” as “economic assumptions that are used in determining actuarial 

costs and liabilities of a retirement system and in anticipating the effects 

of long-term future—(A) investment yields; (B) increases in rates of basic 

pay; and (C) rates of price inflation.” Id. § 2(a)(3) (codified at 5 U.S.C. 

§ 8331(29)). As amended by the 2003 Act, USPS’s matching contributions thus took account of “the effects of future employee pay raises and 

retiree COLAs.” S. Rep. No. 108-35, at 2. Because of these changes, the 

existing provisions that required USPS to make separate payments to 

cover CSRS costs attributable to pay raises and COLAs were “no longer 

. . . necessary,” and the 2003 Act repealed these provisions. Id.; see 2003 

Act § 2(c), (d). 

In the second prong, the 2003 Act established a “Postal supplemental 

liability,” modeled after a similar aspect of FERS, which required USPS 

to make deposits for “any retirement costs not covered by past or future 

[USPS] or employee payments.” S. Rep. No. 108-35, at 6–7; see 2002 

James Letter at 2. The Act defined the Postal supplemental liability as the 

“actuarial present value of all future benefits payable from the Fund” that 
48 Op. O.L.C. __ (Mar. 26, 2024)

8

are “attributable to the service of current or former employees of the 

[USPS],” minus the present value of all CSRS revenues that USPS and its 

employees could be credited with—namely, (1) the “actuarial present 

value” of deductions to be withheld from the future pay of USPS employees and “future contributions” to be made by USPS; (2) the portion of the 

Fund balance “attributable to payments to the Fund by [USPS] and its 

employees, including earnings on those payments”; and (3) “any other 

appropriate amount, as determined by [OPM] in accordance with generally accepted actuarial practices and principles.” 2003 Act § 2(c). 

The Congressional Budget Office (“CBO”) estimated that the 2003 Act 

would save USPS between $3 and $5 billion a year. H.R. Rep. No. 108-

49, at 7. OPM, again using the frozen benefit methodology to calculate 

the financial impact on USPS, put that amount at between $2.5 and $2.9 

billion a year, or about $78 billion overall. See 2002 James Letter at 2; 

Methodology Report, reprinted in Continuing to Deliver at 259–60, 262–

63; S. Rep. No. 108-35, at 2–3. 

The 2003 Act also made one change that increased USPS’s costs: It 

made USPS either wholly or partially responsible for CSRS costs attributable to the “military and volunteer service (i.e.[,] Peace Corps, VISTA, 

etc.)” of its employees. S. Rep. No. 108-35, at 7; see 2003 Act § 2(c). 

This decision represented a departure from the way FERS operates, under 

which Treasury is responsible for these costs. See 2003 CRS Report at 8. 

And it sparked controversy. Some Members of Congress thought it “unfair to make postal customers and ratepayers fund military retirement 

benefits.” 149 Cong. Rec. 8795 (2003) (statement of Rep. Tom Davis). As 

a result, Congress instructed USPS, Treasury, and OPM to each submit a 

report detailing “whether and to what extent” Treasury or USPS should be 

responsible for these benefits. 2003 Act § 2(e)(1).

3.

Discussion of USPS’s financial condition continued. The 2003 Act 

directed OPM to submit a report detailing its methodology to compute 

the savings that would accrue to USPS from the 2003 Act. See 2003 Act 

§ 3(b). In July 2003, OPM submitted its report, reaffirming that its November 2002 analysis had used the frozen benefit methodology and 

emphasizing that, going forward, it would continue to do so. Methodology Report, reprinted in Continuing to Deliver at 259–61. 
Responsibility for the Cost of Certain USPS Retirement Benefits

9

USPS objected, arguing that the frozen benefit methodology assigned 

an “unreasonable portion of the benefit to be paid” to USPS. 2003 

Strasser Letter at 1. USPS asked OPM to reconsider and proposed instead 

using the service ratio method, which USPS estimated would save it $86 

billion. Letter for Board of Actuaries, CSRS, from John E. Potter, Postmaster General at 2 (Jan. 26, 2004) (“2004 Potter Letter”). OPM rejected 

USPS’s request. Id. 

USPS also asked the CSRS Board of Actuaries to review OPM’s 

methodology. See id. at 1. The Board “reconsidered in detail” OPM’s 

methodology and concluded that it was the “most appropriate way to 

determine [USPS’s] obligations.” Letter for Ronald P. Sanders, Associate 

Director for Strategic Human Resources Policy, OPM, from Douglas C. 

Borton, Chairman, Board of Actuaries, CSRS at 1 (Aug. 18, 2004). The 

Board also “confirm[ed] [its] prior finding that this method clearly follows the intent of Congress.” Id. 

Meanwhile, Congress continued to hear testimony and receive reports 

from experts and others detailing additional proposals that could shore up 

USPS’s finances. Answering the Administration’s Call for Postal Reforms—Parts I, II, and III: Hearings Before the Special Panel on Postal 

Reform & Oversight of the H. Comm. on Gov’t Reform, 108th Cong. 

(2004). Several witnesses asked Congress to take “action to clean up the 

misallocation of billions of dollars” by changing the “allocation methodology for retirement benefits earned by USPS workers before 1971.” Id. 

at 410 (statement of Gary M. Mulloy, Chairman & CEO of ADVO, Inc.), 

see also, e.g., id. at 133–34 (statement of William Burrus, President of 

American Postal Workers Union, AFL-CIO). Other witnesses testified 

about whether to continue to make USPS responsible for CSRS costs 

attributable to its employees’ military service. See, e.g., id. at 41–42 

(statement of Postmaster General John E. Potter); id. at 73, 106 (statement of Comptroller General David M. Walker). As required by the 2003 

Act, see 2003 Act § 2(e), Congress also received separate reports on the 

allocation of military retirement benefits from OPM (joined by Treasury), USPS, and GAO. See OPM & Treasury, Report to Congress on the 

Financing of Benefits Attributable to the Military Service of Current and 

Former Employees of the Postal Service (2003); USPS, Postal Service 

Proposal: Military Service Payments Requirements, P.L. 108-18 (2003); 
48 Op. O.L.C. __ (Mar. 26, 2024)

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GAO, GAO-04-281, Postal Pension Funding Reform: Review of Military 

Service Funding Proposals (Nov. 2003).

Ultimately, in 2006, Congress adopted further reforms. See Postal Accountability and Enhancement Act, Pub. L. No. 109-435, 120 Stat. 3198 

(2006) (“2006 Act”); H.R. Rep. No. 109-66, pt. 1, at 43–45 (2005). 

These reforms included adopting one pension-related recommendation 

from the 2004 hearings: Congress eliminated the provision of the 2003 

Act that directed OPM to include the costs of CSRS benefits attributable 

to USPS’s employees’ military service, by amending the “Postal supplemental liability”—renamed the “Postal surplus or supplemental liability”—to make USPS responsible for only CSRS costs “attributable to” its 

employees’ “civilian employment with [USPS].” 2006 Act § 802(a)(2)

(emphasis added).

These changes resulted in an “immediate overfunding of [USPS’s] 

portion of the CSRS Fund” of about $20.3 billion. H.R. Rep. No. 109-66, 

pt. 1, at 69, 82. To remedy this overfunding, Congress “terminate[d] the 

Postal Service’s obligation to make CSRS [matching] contributions.” Id.

at 69; see 2006 Act § 802(a)(1). The 2006 Act did not, however, address 

the other pension-related issue that had featured at the 2004 hearings: 

OPM’s decision to use the frozen benefit methodology in calculating the 

Postal supplemental liability.

C.

Since 2006, debate has continued over the allocation of responsibility 

for the retirement benefits of former POD employees who continued with 

USPS. In January 2010, USPS’s Office of Inspector General (“USPSOIG”) commissioned a report reviewing the allocation of CSRS liabilities 

between USPS and Treasury. See USPS-OIG, The Postal Service’s Share 

of CSRS Pension Responsibility (Jan. 20, 2010) (“USPS-OIG Report”). In 

USPS-OIG’s view, the report showed that the frozen benefit methodology 

“assigned an unfair share of CSRS liabilities” to USPS. Id. at 3. USPSOIG estimated that if OPM had used the service ratio method, USPS 

would receive credit for another $75 billion as of 2009. Id. at 3; see also 

Hay Group, U.S. Postal Service: Evaluation of the USPS Postal CSRS 

Fund for Employees Enrolled in the Civil Service Retirement System at 2, 

18–21 (Jan. 11, 2010).
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The USPS-OIG Report “quickly sparked interest on Capitol Hill.” Michael Schuyler, Institute for Research on the Economics of Taxation, 

Congressional Advisory: Does the U.S. Treasury Owe $75 Billion to the 

Postal Service? at 2 (Mar. 14, 2011). Some legislators likened USPSOIG’s claim “to finding a winning lottery ticket,” while others “forcefully 

expressed opposition.” Id. at 2, 3. Several legislators introduced bills that 

would have precluded OPM from using the frozen benefit methodology, 

including a House measure that attracted 144 co-sponsors. See H.R. 5746, 

111th Cong. § 2 (2010); see also S. 3831, 111th Cong. § 2 (2010); S. 

4000, 111th Cong. § 101(a) (2010). Congress did not adopt any of them.

In April 2010, Congress held another hearing about USPS’s finances, 

and the frozen benefit methodology arose again. OPM’s Director of 

Planning and Policy Analysis stated that it was “clear that Congress had 

no intention to absolve the Postal Service for increases in retirement costs 

due to pay increases” when it adopted the 2003 Act, “but rather that 

Congress understood that the inclusion of such costs was an inherent 

aspect of the funding mechanism it had established.” Continuing to Deliver at 180 (statement of John O’Brien, Director of Planning & Policy 

Analysis, OPM). He explained that while adopting USPS’s service ratio 

method “may be worthy of future consideration by the Congress,” OPM 

“believe[d] that it [was] not possible based upon current legislation.” Id. 

at 178. 

In June 2010—consistent with procedures created in the 2006 Act, see 

2006 Act § 802(c)(1)—the Postal Regulatory Commission submitted an 

independent actuarial report authored by The Segal Company to Congress, OPM, and USPS. Letter for John Berry, Director, OPM, from Ruth 

Y. Goldway, Chairman, Postal Regulatory Commission (June 30, 2010), 

enclosing The Segal Group, Inc., Report to the Postal Regulatory Commission: Civil Service Retirement System Cost and Benefit Allocation 

Principles (June 29, 2010) (“Segal Report”). The report stated that both 

the frozen benefit and service ratio methodologies were “within the range 

of acceptable allocations.” Segal Report at 2. It also suggested yet another 

methodology—the “benefit accrual” methodology—which it stated would 

be “fair and equitable.” Id. at 14.5 Using this methodology, the Segal 

5 Under the benefit accrual methodology, the employing agency’s contribution is equal 

to the overall high-three salary across all of an employee’s federal service multiplied by 
48 Op. O.L.C. __ (Mar. 26, 2024)

12

Report estimated that USPS had overfunded CSRS by $50–$55 billion as 

of 2010. Id. at 13. 

OPM reconsidered its use of the frozen benefit methodology in light of 

the Segal Report, as required by another provision of the 2006 Act. See 

Letter for Ruth Y. Goldway, Chairman, Postal Regulatory Commission, 

from John Berry, Director, OPM (Sept. 24, 2010). OPM declined to 

modify its methodology, in a letter copied to the relevant congressional 

committees. Id. at 4. OPM stated that it “d[id] not have the authority to 

make a reallocation in the manner suggested by the Segal report.” Id. And 

a few months later, OPM’s Office of the Inspector General (“OPM-OIG”) 

concurred in OPM’s view: OPM-OIG stated that the service ratio and 

benefit accrual methodologies would “involve a radical revision” to 

Congress’s allocation decisions, and that it would be “highly inappropriate for the OPM to unilaterally make such a decision without a clear 

statutory direction from Congress.” OPM-OIG, A Study of the Risks and 

Consequences of the USPS OIG’s Proposals to Change USPS’s Funding 

of Retiree Benefits at 32–33 (Feb. 28, 2011) (emphasis omitted). 

Congressional committees then asked GAO to examine whether OPM’s 

methodology was “consistent with the law.” 2011 GAO Report at 2. GAO 

found it was. Id. at 6–9. GAO reasoned that while the 2003 Act required 

OPM to “change the funding methodology for USPS,” it did not “change 

the underlying allocation of benefit responsibility between USPS and the 

federal government.” Id. at 8. GAO also examined the proposals to use 

the service ratio methodology or benefit accrual methodology. Id. at 9–19. 

GAO concluded that “[a]ll three” fell “within the range of reasonable 

the statutory rate for the years the employee spent at the agency (i.e., 1.5 percent for the 

first five years of employment, 1.75 percent for the next five, and 2 percent after that, see 

5 U.S.C. § 8339(a)). Compared with OPM’s frozen benefit methodology, USPS’s expected contributions would be less under the benefit accrual methodology. That is because 

the benefit accrual methodology assumes that POD (and thus Treasury) will cover the 

costs of benefit increases attributable to all pay increases, even those that USPS is responsible for (that is, the methodology would attribute to our hypothetical employee a $30,000 

high-three salary as to employment at POD, even though the employee only earned this 

amount at USPS). Compared with USPS’s service ratio methodology, USPS’s expected 

contributions would be more under the benefit accrual methodology. That is because 

former POD employees typically accrued greater benefits during their years at USPS 

owing to the fact that they were at USPS in later stages of their careers. See supra Part 

I.A.
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13

actuarial methods.” Id. at 14. But GAO emphasized that the decision of 

which methodology to use was a “policy choice” and that, in its view, 

Congress had required OPM to use the frozen benefit methodology. Id. at 

9. GAO also noted that using a different methodology would “result in a 

significant transfer of pension costs”—between $56 and $85 billion—“to 

the federal government and thereby to taxpayers.” Id. at 2, 9, 10.

GAO’s report did not end Congress’s involvement with USPS’s finances. Since that report, OPM’s use of the frozen benefit methodology has 

come before Congress again and again.6 Legislators from both chambers 

have introduced additional bills that would have forbidden OPM from 

using the frozen benefit methodology, with one House measure gathering 

230 co-sponsors.7 But none have become law, while Congress has taken 

steps to relieve USPS of other financial responsibilities. In 2009, Congress reduced the amount that USPS must contribute to the Postal Service 

Retiree Health Benefits Fund under the 2006 Act from $5.4 billion, see 

2006 Act § 803(a)(1)(B), to $1.4 billion, see Continuing Appropriations 

Resolution, 2010, Pub. L. No. 111-68, div. B, § 164(a), 123 Stat. 2023, 

2043, 2053 (2009). After 2009, USPS failed to make several payments to 

the Postal Service Retiree Health Benefits Fund as required under the 

2006 Act. H.R. Rep. No. 117-89, pt. 1, at 19 (2021). In 2022, Congress 

eliminated USPS’s obligation to do so, as part of a package of reforms 

designed to help USPS “remain financially viable.” Id. at 17; see USPS 

Fairness Act, Pub. L. No. 117-108, § 102(c)(1), 136 Stat. 1127, 1138, 

1139–40 (2022).

6 See, e.g., Kevin R. Kosar, Cong. Research Serv., R41024, The U.S. Postal Service’s 

Financial Condition: Overview and Issues for Congress at 9–11 (Jan. 27, 2012); Katelin 

P. Isaacs & Annie L. Mach, Cong. Research Serv., R43349, U.S. Postal Service Retiree 

Health Benefits and Pension Funding Issues at 8–10 (updated Jan. 7, 2015); USPS-OIG, 

Update on the Postal Service’s Share of CSRS Pension Responsibility at 1–7 (May 7, 

2018) (estimating that, as of 2016, USPS’s portion of CSRS assets would have been 

$110.8 billion larger under the service ratio method and $79.8 billion under the benefit 

accrual method); Legislative Proposals to Put the Postal Service on Sustainable Financial 

Footing: Hearing Before the H. Comm. on Oversight & Reform, 117th Cong. 11, 14 

(2021). 

7 See H.R. 1351, 112th Cong. § 2 (2011); see also H.R. 3174, 112th Cong. § 2 (2011); 

S. 1853, 112th Cong. § 101 (2011); H.R. 3591, 112th Cong. § 101 (2011); S. 1688, 112th 

Cong. § 3 (2011); S. 1649, 112th Cong. § 2 (2011); H.R. 630, 113th Cong. § 101 (2013); 

S. 316, 113th Cong. § 101 (2013).
48 Op. O.L.C. __ (Mar. 26, 2024)

14

II.

Current law requires USPS to “pay” the “Postal . . . supplemental liability” calculated by OPM—which is based in part on what CSRS “benefits 

payable . . . to current or former [USPS] employees” are “attributable to 

civilian employment with” USPS. 5 U.S.C. § 8348(h)(1)(A), (h)(1)(B), 

(h)(2)(B), (E) (emphasis added). This dispute concerns what benefits are 

“attributable to” USPS employment, and in particular, whether USPS is 

required to pay the full cost of CSRS benefits that result from pay raises 

that USPS granted former POD employees after it became independent. 

USPS Letter at 1–2. As noted at the outset, we believe USPS is so required.

A.

As discussed above, Congress has enacted three key statutes addressing 

the allocation of responsibility for pay raises that USPS granted former 

POD employees. In all three, we believe Congress allocated to USPS the 

responsibility to fund the full cost of any CSRS benefits increases resulting from pay raises USPS granted to former POD employees.

1.

Congress first spoke to this issue in the 1974 Act, which explicitly addressed the question we have been asked to answer. That Act provided 

that “[n]otwithstanding any other statute,” USPS “shall be liable for that 

portion of any estimated increase in the unfunded liability of the Fund 

which is attributable to any benefits payable from the Fund” to active and 

retired USPS officers and employees (and their survivors) when the 

increase resulted from USPS actions that “authorize[d] increases in pay on 

which benefits are computed.” 1974 Act § 1. As we have explained, USPS 

and OPM agree that under this provision USPS bore responsibility “for 

the full CSRS effects of [its] employees’ pay increases, including effects 

of those pay increases on benefits attributable to transitional employees’ 

years with the POD.” USPS Letter at 3; see OPM Letter at 6–7 (similar).
Responsibility for the Cost of Certain USPS Retirement Benefits

15

2.

Congress returned to this issue in 2003, when it repealed the provision 

in the 1974 Act that discussed the allocation of responsibility for pay 

increases and replaced the provision with a two-prong system modeled 

after FERS. USPS argues that these actions granted OPM “discretion to 

make a fresh determination regarding an appropriate allocation methodology.” USPS Letter at 2. Conversely, OPM maintains that the new twopronged system continued to require the same allocation. OPM Letter at 

13. Like GAO before us, we agree with OPM. When read in context, we 

think the controlling text makes clear that Congress did not confer on 

OPM the discretion USPS claims. 

We begin with the first prong of Congress’s 2003 system. The text of 

the 2003 Act expressly changed USPS’s matching contributions to specify 

that USPS “shall” “contribute[]” an amount based on “dynamic assumptions”—defined to include “increases in rates of basic pay” and “rates of 

price inflation.” 2003 Act § 2(a)(1), (a)(3), (b)(1). We agree with GAO 

that “[b]ecause these dynamic assumptions include projections of future 

pay increases, the consequence of the 2003 Act was to leave the underlying 1974 allocation unchanged, notwithstanding the removal of the explicit allocation provision.” 2011 GAO Report at 29. In particular, by requiring USPS to make contributions based on projected “increases in rates of 

basic pay,” 2003 Act § 2(a)(3), without exception, this text is hard to 

square with USPS’s position. That position posits that the 2003 Act authorized OPM to determine that USPS should not bear responsibility for 

costs associated with pay increases for USPS’s former POD employees. 

Moreover, the legislative history confirms that Congress understood 

this provision to have mooted the need for the separate payments required 

by the repealed 1974 Act provision. Because USPS’s contributions to 

CSRS under the 2003 Act would “include[] the effects of future employee 

pay raises and retiree COLAs, the separate payments that USPS [was] 

required to make under [the 1974 Act] to fund the future increases in 

CSRS annuities that result from pay raises and COLAs would no longer 

be necessary.” S. Rep. No. 108-35, at 2. “Consequently” the 2003 Act 

“repeal[ed] the provisions of [the 1974 Act]” expressly requiring those 

separate payments. Id. (emphasis added). Congress thus did not repeal the 

1974 Act provision in order to give OPM “discretion” to set a different 
48 Op. O.L.C. __ (Mar. 26, 2024)

16

allocation between USPS and Treasury, as USPS claims. USPS Letter at 

2. Congress did so because it understood the 2003 Act, via a different 

mechanism, to continue to dictate the same allocation. 

We are unpersuaded by USPS’s attempt to dismiss the significance of 

this provision. Per USPS, the argument we have just sketched “conflates 

two separate concepts: the allocation of funding responsibility between 

Treasury and the Postal Service, and the methodology for computing 

[USPS’s] allocated share.” Id. at 11. But while USPS is right that those 

issues differ, this provision of the 2003 Act provides a rule that governs 

both: When it specifies that USPS contributions must include costs reflecting “increases in rates of basic pay,” 2003 Act § 2(a)(3), it simultaneously dictates that USPS—rather than Treasury—is responsible for those 

amounts and provides a methodology for computing USPS’s share. 

The second prong of Congress’s 2003 system—the Postal supplemental 

liability—also did not confer on OPM the discretion that USPS claims. 

That provision states that the Postal supplemental liability is “the actuarial 

present value of all future benefits . . . attributable to the service of current or former employees of the United States Postal Service”—i.e., the 

cost of the CSRS benefits owed—minus the amount of CSRS revenues 

credited to USPS and its employees, which included the present value of 

future pay deductions and contributions, the portion of the Fund attributable to payments already made by USPS and its employees (including 

earnings on those payments), and “any other appropriate amount, as 

determined by [OPM] in accordance with generally accepted actuarial 

practices and principles.” Id. § 2(c). 

Read literally, the cost side of this provision could make USPS responsible for the cost of all CSRS benefits accrued by USPS employees—

whether accrued while working for USPS, POD, or some other component 

of the federal government whose employees participated in CSRS. At the 

time the 2003 Act was adopted, as today, the word “service” meant “employment creditable under [5 U.S.C. §] 8332.” 5 U.S.C. § 8331(12) 

(2000). And section 8332 provided that an employee’s “service . . . shall 

be credited from the date of original employment to the date of separation 

on which title to annuity is based in the civilian service of the Government.” Id. § 8332(b) (Supp. III 2003) (emphasis added). To be sure, OPM 

has not adopted such a literalist reading, and the legislative history cuts 

strongly against reading the 2003 Act to work so drastic a change: As the 
Responsibility for the Cost of Certain USPS Retirement Benefits

17

report from the Senate Committee on Governmental Affairs makes clear, 

the 2003 Act “continue[d] the Postal Service’s liability for the retirement 

costs attributable to its employees covered by the CSRS, which was 

imposed when the [POD] became the self-supporting [USPS] in July 

1971.” S. Rep. No. 108-35, at 3 (emphasis added). But certainly, neither 

the text nor the legislative history supports USPS’s position that the 2003 

Act worked a drastic change in the opposite direction and permitted OPM 

to lift USPS’s responsibility for costs attributable to post-1971 pay increases. 

USPS does not rely solely on the cost side of the 2003 Act’s Postal 

supplemental liability. Instead, USPS also focuses on the revenue-side 

provision requiring OPM, when calculating the Postal supplemental 

liability, to take into account “any other appropriate amount, as determined by [OPM] in accordance with generally accepted actuarial practices 

and principles.” 5 U.S.C. § 8348(h)(1)(B)(iii). In USPS’s view, this provision allows OPM to calculate the supplemental liability using “modern 

actuarial and accounting principles,” USPS Letter at 11, and to change the 

method of attributing CSRS costs for former POD employees as between 

USPS and Treasury. 

We disagree, as this revenue-side provision ill fits the purpose to which 

USPS would put it. To begin, the cost side, not the revenue side, governs 

the allocation of responsibility for benefits for former POD employees. In 

addition, the 2003 Act lifted this provision wholesale from the statutory 

scheme governing FERS. 2011 GAO Report at 29; see OPM Letter at 17–

18. According to OPM, “[i]n calculating the supplemental liability under 

FERS since its enactment in 1986, OPM has interpreted the phrase ‘any 

other appropriate amount’ narrowly and uses it to apply to overdue payments.” OPM Letter at 18. We do not think this revenue-side FERS transplant can plausibly be read to authorize OPM to change the basic allocation of CSRS costs as between USPS and Treasury. Congress generally 

does not “alter the fundamental details of a regulatory scheme in vague 

terms or ancillary provisions—it does not, one might say, hide elephants 

in mouseholes.” Whitman v. Am. Trucking Ass’ns, Inc., 531 U.S. 457, 468 

(2001). 

Moreover, widening the lens to capture the 2003 Act’s broader history 

makes clear that Congress did not intend to work a revolution in the basic 

allocation of responsibility. That history starts with the problem the Act 
48 Op. O.L.C. __ (Mar. 26, 2024)

18

sought to solve. As we have explained, the Act grew out of GAO’s request that OPM determine whether USPS “was paying more or less than 

appropriate to cover payments for [CSRS] for which it [was] responsible.” 

H.R. Rep. No. 108-49, at 5. And when that analysis resulted in “good 

financial news” for USPS and showed an overfunding of more than $70 

billion, OPM drafted legislation to correct that overfunding. 2002 James 

Letter at 1, 3; S. Rep. No. 108-35, at 2–3. No part of the problem Congress sought to solve concerned the allocation of benefit costs for USPS 

employees who worked at POD.

That history also includes—critically—how OPM calculated USPS’s 

overfunding. OPM did so based on the same USPS/Treasury allocation 

that had endured since 1974: namely, USPS would continue to bear responsibility for all increases in CSRS benefits attributable to pay increases that USPS granted, including as to increases in benefits accrued for 

service at POD. See Methodology Report, reprinted in Continuing to 

Deliver at 262–63. Nor did this assumption simply lurk, undisclosed, in 

OPM’s files. The Board, Treasury, and OMB all reviewed OPM’s methodology and either “agreed with” or “concurred in” OPM’s findings. 2002 

James Letter at 2. And while GAO disagreed with OPM’s assumptions in 

other respects, GAO—in analysis provided to Congress itself—did not 

question OPM’s “methodologies for allocating estimated benefit payments and other expenses between service rendered before and after . . . 

the effective date of the Postal Reorganization Act.” 2003 GAO Analysis 

at 53. Absent a clearer signal, we will not read the 2003 Act to have 

upended this shared understanding. 

Finally, the relevant history encompasses the dollars-and-cents effects 

Congress anticipated the 2003 Act would yield. As we have explained, 

OPM estimated that the Act would save USPS between $2.5 and $2.9 

billion a year, see 2002 James Letter at 2, or about $78 billion total, see 

Methodology Report, reprinted in Continuing to Deliver at 260; S. Rep. 

No. 108-35, at 2–3. CBO projected a similar magnitude: “$3 billion to $5 

billion a year.” S. Rep. No. 108-35, at 10. Yet under USPS’s reading, the 

Act could have saved USPS—and thus cost Treasury—more than twice as 

much: an additional $110.8 billion (using the service ratio method) or 

$79.8 billion (on the benefit accrual method). See USPS-OIG, Update on 

the Postal Service’s Share of CSRS Pension Responsibility at 1–7 (May 7, 

2018); cf. S. Rep. No. 108-35, at 2–3. With the 2003 Act so focused on 
Responsibility for the Cost of Certain USPS Retirement Benefits

19

USPS’s finances, we are reluctant to adopt a reading that “would knock 

. . . entirely out of whack” the “public budgetary assumptions relied on by 

all actors during the enactment process.” Abbe R. Gluck, Congress, 

Statutory Interpretation, and the Failure of Formalism: The CBO Canon 

and Other Ways That Courts Can Improve on What They Are Already 

Trying to Do, 84 U. Chi. L. Rev. 177, 189 (2017); cf. Heckler v. Turner, 

470 U.S. 184, 206 (1985) (“hesitat[ing]” to adopt an interpretation at odds 

with Congress’s “budgetary objectives . . . particularly when the information provided Congress by its own Budget Office, on which it presumably relied, belies that conclusion”). 

3.

The last key piece of legislation is the 2006 Act, which USPS claims 

granted OPM the discretion to revise the allocation methodology when it 

eliminated the matching-contribution provision of the 2003 Act that 

expressly made USPS responsible for costs stemming from “increases in 

rates of basic pay” granted by USPS. USPS Letter at 11. 

Again, we do not agree that this change—to the first prong of the 2003 

Act’s two-prong system—changed the settled allocation of responsibility 

for costs attributable to USPS’s pay increases. Instead, the change addressed a different issue entirely: USPS employees’ military and volunteer service. As we have explained, Congress in 2006 reversed its 2003 

decision to make USPS responsible for the CSRS costs attributable to 

that service. See H.R. Rep. No. 109-66, pt. 1, at 69. So Congress tweaked 

the second prong of its allocation system to peg the supplemental liability 

to the “present value of all future benefits payable” to current or former 

USPS employees “attributable to civilian employment” with USPS. 2006 

Act § 802(a)(2) (emphasis added). And because that change resulted in 

an “immediate overfunding of [USPS’s] portion of the CSRS Fund” of 

about $20.3 billion, H.R. Rep. No. 109-66, pt. 1, at 69, 82, Congress 

eliminated the matching-contribution requirement, see 2006 Act 

§ 802(a)(1). Neither change, however, altered the basic allocation that 

had endured since 1974. Hence, after the 2006 Act as before, costs resulting from USPS-granted pay increases remained “attributable to” USPS. 

Once more, the legislative history reinforces this conclusion. As we 

have explained, OPM put its position on this issue before Congress in a 

July 2003 report on the methodology it would use in calculating the 2003 
48 Op. O.L.C. __ (Mar. 26, 2024)

20

Act’s savings for USPS—a report that sparked an exchange of letters 

among OPM, USPS, and the CSRS Board of Actuaries. Methodology 

Report, reprinted in Continuing to Deliver at 262–63; see supra Part 

I.B.3. Then, witnesses at the hearings that yielded the 2006 Act complained about both the frozen benefit methodology and about forcing 

USPS to pay for costs related to military and volunteer service. Supra

Part I.B.3. Yet Congress in the 2006 Act addressed only the second set of 

complaints. Nothing we have found in the Act’s text or legislative history 

indicates that Congress understood the Act to permit a change in USPS’s 

responsibility for the costs related to post-1971 pay raises. And again, the 

cost estimates confirm that Congress foresaw no such thing. Congress 

received OPM’s and CBO’s estimate that, thanks to the 2006 Act’s 

changes to the CSRS funding methodology, USPS had already overfunded its CSRS obligations by about $20.3 billion. H.R. Rep. No. 109-66, pt. 

1, at 82–83. But had the Act also relieved USPS of responsibility for 

post-1971 pay increases, by USPS’s calculations, it could have yielded 

around an additional $86 billion for USPS. See 2004 Potter Letter at 2. 

We do not think the 2006 Act can reasonably be read to permit so stark a 

departure.

B.

Post-2006 events confirm our conclusion. Congress has known about 

OPM’s consistent interpretation for decades, since it enacted the 2003 and 

2006 Acts. Supra Parts I.B.3 and I.C. And in the years since the 2006 Act, 

OPM’s decision to use the frozen benefit methodology has come before 

Congress again and again—in a GAO report, Congressional Research 

Service reports, USPS-OIG reports, and at hearings. See supra Parts I.B.3 

and I.C and note 6. Yet Congress has not enacted any of the 11 bills that, 

since 2010, members of Congress have introduced to prohibit OPM from 

using the frozen benefit methodology, including a House measure that 

attracted 230 co-sponsors. See supra Part I.C and note 7. And all the 

while, Congress has acted to relieve USPS of other obligations to address 

urgent concerns about USPS’s financial health, including (in 2009 and 

2022) reducing USPS’s required contributions to the Postal Service Retiree Health Benefits Fund. See Pub. L. No. 111-68, div. B, § 164(a), 123 

Stat. at 2053; Pub. L. No. 117-108, § 102(c)(1), 136 Stat. at 1139–40. 
Responsibility for the Cost of Certain USPS Retirement Benefits

21

It is thus “hardly conceivable that Congress . . . was not abundantly 

aware of what was going on.” Bob Jones Univ. v. United States, 461 U.S. 

574, 600–01 (1983). Its failure to act thus “provides added support for 

concluding” that Congress has “acquiesced” in OPM’s longstanding and 

consistent approach. Id. at 601. Moreover, even as Congress has repeatedly declined to adopt legislation that would have overridden OPM’s allocation of responsibility for post-1971 pay increases, it has relieved USPS of 

certain other financial obligations. “Taken together, these actions by 

Congress” further “preclude” USPS’s argument that OPM has discretion 

to revisit the matter. FDA v. Brown & Williamson Tobacco Corp., 529 

U.S. 120, 155 (2000); see id. at 155–56 (distinguishing “simple inaction” 

that “purportedly represents [Congress’s] acquiescence” from when 

Congress has “affirmatively acted to address” a problem by other means); 

see also Legal Authority of the Department of the Treasury to Issue Regulations Indexing Capital Gains for Inflation, 16 Op. O.L.C. 136, 155–56 

(1992) (explaining that, where Congress has long been aware of an issue 

created by an agency’s construction and addressed it through other means, 

it is a “particularly compelling case for concluding that Congress has 

ratified” the agency’s interpretation).

III.

We conclude that USPS is required to pay the full cost of CSRS benefits attributable to USPS’s actions to increase its employees’ pay since 

July 1, 1971, including with respect to increases in benefits accrued 

during those employees’ years of service at POD.

CHRISTOPHER C. FONZONE

Assistant Attorney General

Office of Legal Counsel