This was 20 years ago and a lot of people were paid by check. So the only way to reclaim the money from them was to underpay folks. They probably just handled it that way for everyone.

Even now, at my Federal government job when someone is overpaid we issue them a "debt letter" and then reduce their pay until the account is balanced. I assume it's because of the same reg/statute that fixes the clawback to 16.7%.

I can't speak to what specifically you signed, but there is a process guide available here: https://about.usps.com/manuals/elm/html/elmc4_027.htm

It suggests that even if technically and/or legally the option exists to recover the money directly from you, it's not part of the procedures that govern this type of thing (...as of today. It may have been in the past. Indeed, these procedures may well have been drawn up pursuant to the event discussed in TFA).