What You Need To Know About Postal Service Reform

USPS employees may be facing new changes to their retirement benefits with the introduction of a possible new bill

The new proposed H. R. 756 bill is attempting to salvage the U.S. Postal Service by drastically cutting costs and driving up revenue.

Though the bill still has to pass both the House and Senate before it becomes law, the pressure is mounting to fix the USPS which has been struggling for a decade. It’s important to be aware of potential changes now so you can confidently plan for retirement.

Why Postal Service Reform is Necessary
The USPS typically performs best during the first quarter of its fiscal year, from October 1 to December 31 due to the holiday season.

In 2016, the postal service’s Q1 resulted in a $200 million net loss, according to a USPS Press Release. This is on top of a $5.6 billion net loss in the fiscal year 2016 and the 10th consecutive year for losses, according to the US Government Accountability Office. As a result, the office has listed the USPS on its “High Risk List.”

Due to these financial difficulties, the USPS is struggling to support its retiring employees. Its unfunded liabilities totaled about $121 billion at the end of fiscal year 2016, and a majority of the money it’s lacking is slated for retiree health and pension benefit obligations.

Furthermore, USPS now must begin paying the $33.9 billion it owes to the Postal Service Retiree Health Benefits Fund (PSRHBF), which it defaulted on from 2012-2016.

Reducing Losses while Increasing Retiree’s Health Care Costs
In an attempt to shrink these ever-growing losses, the bill calls for significant cuts and increased innovation to drive up revenues, including:

• Streamlining delivery services by setting up cluster mailboxes
• Increasing the price of a First-Class stamp by 1 cent, or 2.15%
• Eliminating state and national political committees’ eligibility for nonprofit mail rates
• Authorizing non-postal services
• Establishing a Chief Innovation Officer

In addition, the bill addresses the health care costs of postal service retirees directly, calling for:

• Developing a plan specifically for postal service employees within the Federal Employees Health Benefits Program (FEHBP) by January 2019
• Requiring almost all those who elect coverage through FEHBP to enroll in one of the new postal FEHBP plans
• Automatically enrolling eligible retirees into Medicare Part A and B
• Gradually reducing the portion of Medicare Part B premiums it pays for current retirees, covering 0% by year 4

(Read a detailed summary of the bill here.)

Next Steps for H.R. 756 and USPS Employees
This bill, and the related H.R. 760, were approved as amended on March 16, 2017 by the House Oversight and Government Reform committee. Now, the House and Senate must approve the same version of the bill – lest it face negotiations by a Conference Committee – before the president can sign it into law.

This process is made even more complicated by Congress’ already full agenda as they attempt to tackle health care reform and a tax code overhaul under President Trump.

Still, with a Republican sponsoring the bill, along with 7 Democrats and 6 Republicans co-sponsoring it, both sides appear dedicated to reforming the USPS.

With approval of some version of this bill likely, it is important for all Postal Service employees and retirees to understand how it may impact your benefits package. MyFEDBenefits can help. We offer a free benefits review for postal employees, or you can contact a benefits specialist near you.