The U.S. Postal Service (USPS) maintains a cadre of employees known as the Postal Career Executive Service (PCES). PCES employees are intended to fill "key management positions" within USPS, which employed 645,950 people as of the end of FY2011. As of May 18, 2012, USPS employed 640 employees in the PCES in addition to the PMG. Of those employees, 36, known as "officials," serve at the pleasure of the Postmaster General (PMG) and include senior-level positions like area vice presidents and the Deputy Postmaster General. The remaining 604, known as "executives," perform duties such as district manager or bulk-mail center manager. The PMG is not a member of the PCES. Pay for PCES employees and the PMG is capped at $276,840 in FY2012. A PCES employee or the PMG may earn more than that statutory cap if he or she qualifies for a performance-based pay bonus. Any merit-based pay earned in excess of the pay cap can be retained as "deferred pay" and collected upon retirement. Former Postmaster General John E. Potter, for example, had an $815,788 aggregate balance in deferred pay as of September 30, 2011. The deferred pay currently is and will continue to be paid out in annual installments—as opposed to a lump sum. In addition to pay, PCES employees receive benefits that are not provided to other federal employees, including free life insurance provided at a value equal to salary; periodic physical examinations; financial counseling; parking; and membership in up to two airline clubs. Additionally, PCES employees have no cap on the number of annual leave days they can accrue. Federal employees in the Senior Executive Service (outside of the Postal Service) cannot accrue more than 90 days of annual leave. Since 1971, USPS has been a self-supporting, wholly governmental entity. Although the USPS does receive an annual appropriation, the agency does not rely on appropriations to operate. Its annual appropriation is about $100 million per year, approximately 0.1% of USPS's $75 billion operating budget. After running modest profits from FY2004 through FY2006, USPS lost $25.4 billion between FY2007 and FY2011. Were it not for congressional action to reduce certain statutorily required health benefits payments, USPS would have lost an additional $9.5 billion. As USPS's finances have deteriorated, its ability to absorb operating losses has been diminished. Between FY2005 and FY2011, USPS's debt rose from $0 to $13 billion. (The statutory debt limit is $15 billion (39 U.S.C. §2005(a)(2)(C)).) In July 2009, the Government Accountability Office (GAO) added the USPS's financial condition "to the list of high-risk areas needing attention by the Congress and the executive branch. " Media reports and some Members of Congress have expressed concerns that the pay of USPS executives is too high and should be reduced—especially considering USPS's current financial condition. USPS and others, however, have argued that compensation rates are needed at their current levels to attract talented employees to maintain a Postal Service that delivers mail and packages to homes and businesses throughout the United States with limited appropriations. The total estimated cost to pay for PCES employees' compensation and benefits in FY2012 is $126.2 million, or less than 0.5% of the Postal Service's annual budget. Postal Officers within the PCES are estimated to cost the Service $11.0 million in FY2012, or less than 0.02% of the annual USPS budget. The 112 th Congress has introduced two bills that would limit USPS executive pay in some way. S. 1789 , for example, would remove certain "fringe benefits" and cap pay at Level I of the Executive Schedule ($199,700 in 2012). H.R. 2309 would prohibit PCES employees from receiving bonuses in years when USPS expenses eclipsed revenues and would cap pay at Executive Schedule Level I in certain years. On April 25, 2012, S. 1789 was passed by the Senate. On January 17, 2012, H.R. 2309 was reported by the House Committee on Oversight and Government Reform. On March 29, H.R. 2309 was reported by the House Committee on Rules and placed on the Union Calendar. No further action has been taken on either bill. This report examines the authorities governing executive compensation at USPS. It examines pay rates for other public-sector employees as well as certain private-sector employees to analyze how the pay of the Postmaster General and other Postal Service executives might compare. This report does not address the pay and benefits of bargaining USPS employees. It also does not examine the trends in workforce size and delineation within USPS. Federal authorities that govern USPS employee pay rates do not use the term PCES. Instead, the laws use the terms "officers," "employees," "executives," and "critical senior executives or equivalent positions." Pursuant to 39 U.S.C. §1003(a), USPS has the authority to "maintain compensation and benefits for all officers and employees on a standard of comparability to the compensation and benefits paid for comparable levels of work in the private sector of the economy" (emphasis in original). Concurrently, 39 U.S.C. §1003(a) caps USPS pay at the rate for level I of the Executive Schedule, a pay level that dictates pay for high-ranking federal employees, including most Cabinet secretaries. Level I of the Executive Schedule is $199,700 in 2012. Postal executives, however, are eligible for annual one-time bonuses that can push their total compensation levels above the Executive Schedule cap. Pursuant to 39 U.S.C. §3686(a)-(b), executives may receive bonuses provided the employee's total compensation for the year does not "exceed the total annual compensation payable to the Vice President … as of the end of the calendar year in which bonus or award is paid." The Vice President's pay is $230,700 in 2012. The USPS Board of Governors, however, must verify that the performance appraisal system used to determine if the award is warranted "makes meaningful distinctions based on relative performance." Moreover, 39 U.S.C. §3686(c) gives the USPS Board of Governors authority to select up to 12 USPS officers "in critical senior executive or equivalent positions to receive total compensation … not to exceed 120 percent of the total annual compensation payable to the Vice President." As noted above, the pay rate of the Vice President is $230,700 in 2012, and the Vice President does not qualify for performance-based pay bonuses. The cap on critical senior executive positions in USPS selected to receive this level of compensation, therefore, is $276,840 in 2012. Within 30 days of selecting those who should receive this salary level, the USPS Board of Governors is required to provide written notification to Congress and the Director of the Office of Personnel Management of whom they selected. According to USPS, as of May 1, 2012, there are eight employees currently serving in critical executive positions who are eligible for this level of compensation. According to USPS, its Board of Governors has annually contracted a private consulting firm to assist in setting compensation levels for postal executives. This firm attempts to compare USPS executive pay levels to "market pay and compensation design practices for executive officers in other companies." According to USPS, finding private-sector executives with identical duties that could be used to compare pay rates "was challenging because no other organization shares the same mission, scope of operations, and legislative oversight as the Postal Service." Despite these concerns, the private consulting firm found that in 2010, "USPS executive base salaries are significantly below market when compared against published survey data or comparable jobs in the private sector." In addition to salary, USPS executives and officials can earn bonuses for meeting annual performance goals. According to USPS, the "goals and metrics … vary among executive officers and are weighted to reflect appropriately the degree to which an executive is able to influence the overall performance of the Postal Service." Generally, the Board of Governors determines the bonus metrics for the PMG and the Deputy PMG. The PMG then determines the metrics for performance bonuses for the other USPS executives and officials. Because of the Postal Service's current financial condition, no performance incentives were awarded for FY2011. Table 1 shows the FY2010 pay levels for selected federal executive officers within USPS. All of the employees in this table are among those selected by the USPS Board of Governors to receive compensation capped at 120% of the Vice President's total annual compensation. In the 112 th Congress, two bills that seek to reduce the pay and benefits provided to USPS executives have been introduced: S. 1789 and H.R. 2309 . S. 1789 , the 21 st Century Postal Service Act of 2012, includes a section that seeks to reduce USPS executive pay. Pursuant to Section 108 of S. 1789 , USPS executive pay would be capped at level II of the Executive Schedule, which is $179,700 in 2012. S. 1789 would authorize the Board of Governors to select up to six USPS employees in "very senior executive positions" to receive pay equivalent to Executive Level I ($199,700 in 2012). The bill limits "fringe benefits" of senior executives to that of other supervisors or managers who are not PCES, and prohibits USPS from providing an award or bonus to senior executives during years when USPS "has not implemented the measures needed to achieve long-term solvency." H.R.