USPS halts contributions to federal pension fund

The cash-strapped US Postal Service has alerted the federal government that it intends to stop making employer’s contributions into the federal pension fund from Friday. As a desperate attempt to keep afloat as its $15bn debt ceiling rapidly approaches, the loss-making USPS has informed the US Office of Personnel Management (OPM) that it will suspend payments for the defined benefit portion of the Federal Employees Retirement System (FERS).

The move would be effective from June 24, and should, USPS believes, save around $230m a month.

Up to the end of the Postal Service’s current fiscal year, it would mean avoiding around $800m in payments.

“We will continue to transmit to OPM employees’ contributions to FERS 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.

The Postal Service told Post&Parcel this morning that there would be no impact on its current employees or on benefits paid out to current retirees.

Spokesman Mark Saunders said: “As far as retired employees and current employees and their contributions, nothing changes.” The USPS spokesman added that the goal was for its employer’s contributions to the FERS fund to be covered by the $6.9bn surplus currently in the fund.

OPM was not immediately available for comment this morning, but the USPS spokesman said the Postal Service was working with the OPM to resolve the issue.

Despite cutting its costs by $12bn since 2007, the Postal Service is on track to make a $8.3bn loss in its current fiscal year, which ends in September, following an $8.5bn loss reported last year.

Its $15bn limit on government borrowing is set in law, and would require Congress to step in to provide more breathing space.


USPS has been urging Congress for months to allow it access to its multi-billion dollar pension fund overpayments, eliminate requirements to pre-fund health benefits for future retirees and gain the power to reduce delivery frequency to match declining mail volumes.

Two bills have been issued by US Senators on either side of the political divide proposing the required changes, along with two bills on the Democrat side of the House.

Congressman Darrell Issa, chairman of the powerful House Oversight Committee, who is said to be drawing up his own postal reform bill, issued a statement today calling for fundamental structural and financial reforms to “protect taxpayers from an expensive bailout” of USPS.

Issa said: “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. 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.”

The mail industry said this morning it was now “critical” for the US Congress to act to maintain the Postal Service’s solvency in the short-term with reforms to pension and benefit obligations, and boost the long-term health of USPS by allowing it to streamline its network.

“The U.S. Postal Service is hanging by a thread, and 8 million private sector jobs along with it,” said Art Sackler, coordinator of the industry lobby group Coalition for a 21st Century Postal Service. “This underscores the need for Congress to make quick, bold and substantive reforms to the Postal Service.”

Sackler said there was still time to reform the Postal Service to preserve jobs in an industry that accounts for 7% of America’s GDP, “but that time is rapidly coming to a close,” he warned.

About The Author

Ian Taylor

Ian Taylor is the Editor of Triangle’s Mail & Express Review Magazine and the portal. Ian has been a business journalist for almost 30 years, editing and writing for a wide range of magazines and newspapers with a particular focus on the transport and logistics industries.

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