The U.S. Postal Service is by law forced to use a lower risk, but also potentially lower return, strategy than its foreign counterparts when investing employees’ retirement assets, according to a new watchdog report.
USPS participates in the governmentwide Civil Service Retirement System and the Federal Employees Retirement System, and assets from those plans are held in a trust fund managed by the Office of Personnel Management and the Treasury Department, the U.S. Postal Service Inspector General said in the white paper. OPM and Treasury are legally required to invest the assets from this fund in special-issue, fixed rate Treasury securities or other interest-bearing obligations of the U.S. government, the report said.
This strategy is not risky, the IG noted. “However, this investment approach comes at a price–low returns at a time when retirement assets do not fully fund retirement liabilities by billions of dollars,” the white paper stated. “For example, in a previous OIG report on retirement funds investment strategies, we projected the 20-year annual compounded rate of return for special issue Treasury securities at 3.3%, while the compounded returns on medium-risk diversified portfolios was 5.4% to 6.4%.”