The cash-strapped US Postal Service is to suspend its payments towards certain employee pensionfunds from tomorrow as an emergency measure to preserve liquidity.
USPS informed the Office of Personnel Management (OPM) yesterday of its intention to suspend itsemployer’s contributions for the defined benefit portion of the Federal Employees Retirement System(FERS) “to conserve cash and preserve liquidity”, stressing that it had a FERS account surplusvalued at $6.9 billion.
The Postal Service pays about $115 million every two weeks to OPM for the FERS annuity.Suspension of payments from 24 June will free about $800 million in the current fiscal year, USPSsaid.
Anthony Vegliante, chief human resources officer and executive vice president, said: “We willcontinue to transmit to OPM employees’ contributions to FERS and also will continue to transmitemployer automatic and matching contributions and employee contributions to the Thrift SavingsPlan.”
USPS said it was continuing to cut costs significantly, with initiatives to reduce the size ofits labor force, the number of mail processing facilities and administrative overhead. Over thelast four fiscal years, the Postal Service has reduced its size by 110,000 career positions andsaved $12 billion in costs.
The Postal Service also is generating new revenue by opening cost-effective new retail locationsin places where people already shop, including grocery stores, drug stores and office supplystores, and introducing other new product and pricing initiatives.
But despite significant cost reductions in the areas within its control, and even with thisemergency action, USPS said it needed Congress to enact legislation that would return the PostalService to financial stability. It said legislation needed to eliminate the current mandatesrequiring retiree health benefit pre-payments; allow the Postal Service to access Civil ServiceRetirement System and FERS overpayments; and give the Postal Service the authority to determine thefrequency of mail delivery.
The American Postal Workers Union said it was “working fervently” to make certain that thePostal Service’s decision to suspend employer contributions to FERS does not negatively affect thenation’s postal employees, and called for an end to the requirement on USPS to overfund its FERSand CSRS retirement accounts and pre-fund the healthcare benefits of future retirees, which itclaimed was the main cause of USPS’s financial woes.
APWU president Cliff Guffey said: “We will take every step necessary to ensure that retirementbenefits are protected. We are currently evaluating the best course of action.”
He said there was a solution to the Postal Service’s financial crisis: “The USPS has overfundedits FERS and CSRS retirement accounts by billions of dollars. It is the only employer — public orprivate — that is required to pre-fund the healthcare benefits of future retirees. This obligationdrains more than $5 billion annually from the USPS budget, and is the principal cause of the PostalService’s dire financial circumstances.
Guffey edded: “Congress must act now to correct these inequities. It can start by passing H.R.1351, which would allow the Postal Service to apply pension overpayments to the pre-fundingobligation. This bill would provide the USPS relief from its financial crisis at no cost totaxpayers.”
He said the Postal Service’s financial predicament was the result of flawed legislation — thePostal Accountability and Enhancement Act of 2006 — that Congress can and must correct.
“Postal workers did not cause USPS financial problems and their retirement benefits should notbe jeopardized to solve them,” he added.
