Workers' comp disparities called 'perverse': at a recent hearing, Postmaster General John Potter illustrated the disparities in the United States Postal Service's workers' comp benefit system

Risk & Insurance, May, 2004 by Kathleen Filipczyk

Two workers, each age 55, each with 30 years of service at the end of 1993, and each of the same rank end up with very different benefits.

One selects optional retirement from the active workforce and the other continues to receive workers' comp benefits. But over a 10-year period, the one who continued on workers' comp benefits received $95,000 more than the employee who retired.

"This disparity in payment actually serves as a disincentive to retire, driving up workers' compensation costs for the Postal Service," said Potter.

Lawmakers plan more hearings to examine how to modernize the USPS and provide a fix for alleviating issues such as workers' compensation costs. Making the USPS system "on par" with those in the private sector "merits careful consideration," according to Comptroller General David Walker.

The current approach "is costly and provides certain perverse incentives," Walker said in a General Accounting Office report, U.S. Postal Service Key Elements of Comprehensive Postal Reform. Walker said workers' comp costs have been "difficult to control" and instead proposed that Congress adopt an annuity structure to help the USPS.

According to Walker, the Postal Service reported nearly $1.5 billion in workers' comp expenses in FY 2003 and its unfunded liability for workers' comp rose $526 million to a record $7.2 billion.