The U.S. Postal Service says it will suspend the employer’s contributions to the defined benefit portion of the Federal Employees Retirement System (FERS).
With a $6.9 billion surplus in the Postal Service’s FERS account, the suspension will not affect employees or retirees, according to postal officials.
“The Postal Service believes there will be no impact on employees. Also, the action will have no impact on current retirees,” said David A. Partenheimer, a Postal Service spokesperson.
The Postal Service will continue to send employees’ FERS contributions to the Office of Personnel Management and also “will continue to transmit employer automatic and matching contributions and employee contributions to the Thrift Savings Plan,” said Anthony Vegliante, chief human resources officer and executive vice president of USPS.
Although the sub-headline on a Postal Service press release says “payment to FERS suspended,” some legal questions about that move apparently remain. The Office of Personnel Management said it and USPS “have agreed to seek a resolution of the important legal issues surrounding the Postal Services’ decisions by submitting a request for a legal opinion to the Office of Legal Counsel (OLC) at the Department of Justice.”
That leaves open the possibility that Justice could block the Postal Service move.
If that happens, USPS, according to OPM, has given “assurance it will make the FERS annuity contributions it is now ceasing if OLC disagrees with its position.”
House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) said the USPS action is an example of the agency’s poor financial situation, which it is doing little to correct.
“The United States Postal Service, our nation’s second largest employer, is now past the brink of insolvency. This would not be tolerated in a private company,” he said. “Incredibly, the unprecedented action to suspend these payments will only offer USPS an additional $800 million through the end of the year in liquidity, not even 10 percent of their projected deficit of $8.3 billion. USPS needs fundamental structural and financial reforms to cut costs and protect taxpayers from an expensive bailout.”
The head of a postal service labor organization vowed to make sure the suspension of FERS payments does not hurt employees.
“We will take every step necessary to ensure that retirement benefits are protected. We are currently evaluating the best course of action,” said American Postal Workers Union President Cliff Guffey. “Postal workers did not cause USPS financial problems and their retirement benefits should not be jeopardized to solve them.”
The suspension of payments, which will save about $800 million this fiscal year, takes effect on Friday. USPS sends $115 million to OPM every other week for the FERS annuity.
Suspending the FERS payments is part of the Postal Service’s cash conservation plan. USPS is projected to lose $8.3 billion by the close of its fiscal year at the end of September.
“The Postal Service continues to cut costs significantly with initiatives to reduce the size of its labor force, the number of mail processing facilities and administrative overhead,” according to a statement from USPS. “Over the last four fiscal years, the Postal Service has reduced its size by 110,000 career positions and saved $12 billion in costs.”
Postal officials also are pushing Congress to eliminate the current mandate requiring USPS to pre-pay retiree health benefits and to allow Postal Service overpayments to the Civil Service Retirement System and FERS to be used for the health benefit fund. Officials have also pressed Congress to permit USPS to determine the frequency of mail delivery, which likely would mean delivery five days a week, instead of six.