USPS Temporarily Suspends Pension Contributions
The United States Postal Service (USPS) declared on Thursday that it will halt employer contributions to the Federal Employees Retirement System pensions for the time being. However, this will not impede payroll, supplier payments, or mail deliveries.
Additionally, the Postal Service is looking to raise postage rates. This includes a proposed increase in the price of First Class Mail Forever stamps from 78 cents to 82 cents. A notification was filed with regulators on Friday, but formal approval is still pending.
Luke Grossman, Chief Financial Officer of the Postal Service, addressed employees in an internal note, explaining that the decision to suspend pension payments is a strategic move aimed at preserving cash and liquidity amid what he described as a “severe financial crisis.” USPS officials have indicated the service may exhaust its cash reserves by February 2027.
Despite the suspension of contributions beginning Friday, Grossman reassured employees that current and future retirees won’t feel the immediate effects of this decision.
“The risks to the Postal Service and the American people from a lack of liquidity significantly outweigh any long-term risks to the pension funds,” he stated. Interestingly, the USPS had deferred payments previously during the 2011 financial crisis.
The company has confirmed it will continue to remit employee retirement contributions to the Federal Office of Personnel Management and maintain Thrift Savings Plan contributions, which include both automatic and matching funds. Contributions to Social Security will also remain intact.
Brian Renfroe, who heads the National Association of Letter Carriers, acknowledged the “not ideal” situation regarding pension payments but mentioned that members understand the financial hurdles the Postal Service is encountering. “Given the various options available, which are all unfavorable, they would prefer this course of action over something that could have an immediate negative impact on them or the service provided to the public,” he added.
It’s noteworthy that nearly all USPS career employees—99%—are enrolled in the Federal Employees Retirement System.
In a related action, the Postal Regulatory Commission has authorized USPS to redirect billions in revenue that was originally designated for retiree benefits, allowing more flexibility to implement emergency measures and prevent cash shortages.
Just last month, Postmaster General David Steiner mentioned the need to raise the current $15 billion borrowing cap to $34.5 billion, granting the long-established postal service more financial breathing room. “This will allow us the time needed to make necessary corrections and keep moving forward,” he remarked. Steiner also advocates for increased flexibility in investing retirement funds and the ability to raise postage rates sufficiently to offset losses.
The advocacy group Keep Us Post, representing consumers and enterprises involved in catalog and greeting card shipping, has urged Congress to limit rate increases to one per year. They further emphasize the importance of maintaining six-day-a-week postal service and enhancing regulatory control over service modifications.
The proposed postage rate increments would also apply to postcards and international mail, although they would still position USPS rates among the most affordable globally. The organization primarily funds its operations through postage and services sales.
As more communication and bill payments shift online, USPS’s annual volume has declined from about 220 billion packages in 2006 to approximately 110 billion today.
For fiscal 2025, the USPS reported a net loss of $9 billion, despite a slight increase in total operating revenue of $916 million, or about 1.2%, largely attributed to Ground Advantage transportation services. In comparison, the net loss for fiscal year 2024 stood at $9.5 billion.
