The U.S. Postal Service took another step that demonstrates its abysmal financial state when it suspended its contribution to the defined-benefit portion of the Federal Employees Retirement System.
Fortunately, the suspension will not affect employees or retirees because of a $6.9 billion surplus in the Postal Service’s FERS account. “The Postal Service believes there will be no impact on employees. Also, the action will have no impact on current retirees,” spokesman David A. Partenheimer said.
But the move also will have no substantial impact on the agency’s financial situation.
“This is cash conservation, and it is short-term,” Postmaster General Patrick R. Donahoe said in a telephone interview. “It in no way gets us out of the financial bind we are in.”
That bind is so bad that Donahoe said that the USPS could be out of cash to make payroll and pay suppliers by October. It does not use tax dollars for operating expenses.
The suspension of payments, which will save about $800 million this fiscal year, takes effect Friday, unless the Justice Department intervenes. The USPS sends $115 million to the Office of Personnel Management every other week for the FERS annuity.
Although the subheadline on a Postal Service news release says “Payment to FERS suspended,” some legal questions about that move apparently remain. OPM said it and the 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 move.
If that happens, the 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’s action points to the need for major structural changes in the agency.
“The United States Postal Service, our nation’s second-largest employer, is now past the brink of insolvency,” 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.”
House Democrats also called for legislative action on a bill introduced by Rep. Stephen Lynch (D-Mass.) that is designed to correct USPS overpayments to the Civil Service Retirement System and FERS. “While a suspension of FERS payments may help now, the Postal Service will be unlikely to regain financial stability absent legislative action,” Lynch and Rep. Elijah Cummings (D-Md.), a member of Lynch’s committee, said a statement.
The head of a postal service labor organization vowed to make sure that the FERS payment suspension does not hurt employees.
“Postal workers did not cause USPS financial problems, and their retirement benefits should not be jeopardized to solve them,” American Postal Workers Union President Cliff Guffey said.
The Postal Service will continue to send employees’ FERS contributions to OPM and will transmit employer and employee contributions to the Thrift Savings Plan, said Anthony J. Vegliante, chief human resources officer and executive vice president of the USPS.
Postal officials also are pushing Congress to eliminate the mandate requiring the 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 the USPS to determine the frequency of mail delivery, which probably would mean five days a week instead of six — a plan members of Congress shun. In fact, the House Appropriations Committee planned a vote Thursday on legislation requiring six-day delivery to continue.
But something, something big, needs to be done — and soon.
“This move underscores the need for Congress to make bold, quick and substantive reforms to the Postal Service,” said Art Sackler of the Coalition for a 21st Century Postal Service, which represents the private-sector mailing industry. “The USPS is hanging by a thread, along with 8 million private sector jobs that depend on the mail.”
Staff researcher Eric Yoder contributed to this report.