Reform on the Horizon for USPS

Although it is too early to know what will come of Sen. Tom Carper’s legislation to reform the U.S. Postal Service, it is safe to say that the Postal Service’s growing deficit in funding for employee pensions and medical benefits will be addressed.

This has been an ongoing issue for the USPS. However, prior to the financial crisis, Congress felt the problem had been solved. The Postal Accountability and Enhancement Act of 2006 was meant to stabilize the pension and benefits system for at least 50 years. In this act the Postal Service was required to pay from $5.4 billion per year to $5.8 billion per year from 2007 to 2016 to get out in front of funding the costs for benefits. Then the financial crisis hit. Volumes for first-class mail decreased and, because of increased use of email and other digital communications, has not recovered.

As a result, the Postal Service, which before had only been breaking even, has lost money every year. The Postal Service has not made its annual payment since 2011, and does not expect to make its $5.8 billion payment for 2016. Now, more than $50 billion in the red, there is talk of eliminating the payments altogether. Some suggest the prefunding payment schedule is too high and that the deficit can be solved by getting rid of it altogether. Some suggest more action is needed.

Carper’s legislation would eliminate the requirement that the Postal Service prefund its retirement benefits and cancel any outstanding payments. In his plan, the Postal Service would be required to fund 80 percent of its expected retirement costs and gradually write off their initial costs over the next 40 years. In addition it would create a new Postal Service benefits program within the Federal Employees Health Benefits Program, which serves Congress and much of Washington.

While changing the payment schedule is a large part of the solution, there are other ideas to consider. For example, there are provisions in the Carper bill which would allow shipment of alcohol by mail and entry into other side businesses. Others are looking at the possibility of autonomous vehicle technology.

Whatever is decided, it is clear change is on thehorizon for USPS pension and benefits. Make certain you are getting the most out of your benefits by contacting the team at MyFedBenefits. We will answer any questions you may have about the new reform and walk you through the more complex parts of the benefits puzzle.