The Postal Service Suspends Pension Payments Amid Financial Woes
The Postal Service is halting payments to the government-wide pension system after informing Congress that it could run out of funds within a year. This decision, announced on Thursday, involves withholding contributions to the Federal Employees Retirement System (FERS), a tactic aimed at conserving cash in the short term.
Since 2007, the USPS has reported billions in losses almost every year, relying on similar measures in the past to cut costs. Notably, it had previously paused employer contributions to FERS back in June 2011 during a time of significant financial strain, though that suspension only lasted a few months before payments resumed.
Additionally, USPS indicated plans to raise the price of first-class permanent stamps from 78 cents to 82 cents starting on July 12. This follows a trend of rate increases that have occurred almost every January and July since 2020, though recent regulations now restrict the USPS to adjusting prices just once a year through September 2030, pending approval.
Postmaster General David Steiner expressed to the House Oversight and Government Reform Committee that if lawmakers don’t intervene soon, the USPS might deplete its cash reserves within a year, making mail delivery impossible. He emphasized the urgency of the situation during a hearing on March 17.
Without support from Congress, the USPS may have to explore reducing delivery times or closing post offices—options that would likely face substantial public backlash. Legislation passed four years ago had already alleviated some of USPS’s massive debt but mandated that it continue to deliver mail six days a week.
USPS Chief Financial Officer Luke Grossman stated that this temporary withholding of funds is not expected to harm current or future retirees significantly. He mentioned that the immediate liquidity issues facing the agency pose a greater risk to the Postal Service and the public than potential long-term impacts on pension funds.
The agency plans to continue making employee contributions to FERS and regular payments to the Thrift Savings Plan, which functions like a 401(k) for federal workers. By suspending some contributions, the USPS aims to free up about $2.5 billion this fiscal year for other expenses.
The USPS has received considerable financial backing from Congress in the past, including a reform bill in April 2022 that enables $107 billion in potential savings. However, with the ongoing coronavirus pandemic, the agency has also highlighted that it stands on the edge of financial collapse, having received $10 billion in relief funds.
In a separate move, the Postal Regulation Commission has granted an exemption allowing USPS to use billions typically reserved for retiree benefits, providing it with approximately $2.4 billion in revenue in fiscal year 2026. This flexibility removes the $3 billion spending cap until the fiscal year 2030 ends, giving the USPS a bit more breathing room for its operating costs and potential investments.
However, the agency needs to inform the Treasury and regulatory bodies when it opts to leverage this exemption. This waiver might extend the timeline before funds run dry.
Don Maston, president of the National Rural Mail Carriers Association, criticized the USPS for unilaterally deciding to suspend FERS payments, indicating a lack of prior negotiation with the union. He urged Congress to take decisive action to address the financial hurdles facing the Postal Service. Maston also noted the NRLCA’s support for legislative measures that fortify the USPS without detracting from service quality or employee benefits.
In response to its challenges, USPS is advocating for Congress to extend its current borrowing limit with Treasury and to allow for more flexible investments of pension funds into low-risk bonds, as well as adjustments to contributions for the Civil Service Retirement System impacting many older federal and postal employees.
Both the USPS and its Office of Inspector General acknowledged that the agency has made overpayments to the CSRS Fund since its restructuring in 1971 as a self-funded entity outside the presidential cabinet.
