The U.S. Postal Service plans to resume payments to the defined-benefit portion of a federal worker retirement fund next month, saying it has enough cash to make the payments.
A decision by the Postal Service in June to suspend the payments had no impact on postal employees because of a roughly $6.9 billion surplus in its account with the Federal Employee Retirement System. The move was considered a cost-saving measure to keep enough money available through the end of its fiscal year.
Postal officials announced Tuesday that the USPS lost about $5.1 billion in the last fiscal year, driven primarily by declining volume and growing labor costs.
Postal Service Chief Financial Officer Joseph Corbett said payments to the retirement system would resume on the advice of the Justice Department, which was consulted by the Postal Service and the Office of Personnel Management over whether the USPS had the legal right to stop the retirement payments. Although he declined to elaborate on the specifics of the opinion, Corbett suggested to reporters Tuesday that a legal opinion by the Office of Special Counsel ran counter to the Postal Service’s plans.
Elaine Kaplan, OPM’s general counsel, said Wednesday that her agency welcomes the decision to resume payments.
“We can assure U.S. Postal Service retirees that they will receive full credit for their service, notwithstanding the delay in the U.S. Postal Service’s contributions,” Kaplan said.
Corbett said the USPS has “sufficient cash on hand” to make biweekly payments to the federal retirement System and once again warned that postal coffers run the risk of going dry soon.
“We will likely nearly run out of money at the end of fiscal 2012,” he told reporters Tuesday. “If the economy turns south, or we’re unable to achieve our plan, we could run out of cash earlier.”
That plan includes cutting $20 billion in operational costs in the next five years. Postal officials are relying on Congress and the White House to help achieve those goals. Among other things, the Postal Service is asking to scale back payments made to prefund future retiree benefits, currently about a $5.5 billion annual charge. It also wants greater flexibility to end Saturday mail deliveries and close post offices.
House and Senate committees have approved different bills that would grant the Postal Service greater managerial flexibility and eventually lead to the end of Saturday mail. But the measures differ on how to overhaul postal finances. A House Republican version would establish a financial control board; the Senate version would refund about $7 billion in money the Postal Service paid into the retirement fund to help pay for worker buyouts and other costs.
“I think it’s fair to say that in terms of the cost reductions that we need to be solvent long-term; none of the bills gets us to where we need to go,” Deputy Postmaster General Ron Stroman said Tuesday. “We’re hopeful that, moving forward, we’ll be able to work with the House and Senate to improve the bills.”
Neither the House nor Senate bill is expected to be scheduled for a full vote in the near future, according to congressional aides.