USPS Temporarily Suspends Pension Contributions Amid Financial Crisis
The U.S. Postal Service announced on Thursday that it has informed federal budget officials about a temporary halt in employer contributions to Federal Employees Retirement System pensions. This move aims to ensure continuous payroll processing, supplier payments, and mail deliveries.
In conjunction with this, the Postal Service is looking to raise postage rates, specifically increasing the price of First Class Mail Forever stamps from 78 cents to 82 cents.
While USPS submitted a notification to regulators, it still requires their approval for these changes.
Luke Grossman, the Chief Financial Officer of USPS, communicated to employees that the decision to suspend pension contributions is a measure taken to maintain cash flow amid what he described as an “ongoing and severe financial crisis.” Concerns have been raised that the USPS could deplete its cash reserves by around February 2027.
Despite this suspension starting Friday, Grossman assured that current and future retirees won’t feel any immediate impact.
“The risks to the Postal Service and the American public from a lack of liquidity significantly outweigh the long-term risks to the pension funds,” he stated.
This isn’t the first time the Postal Service has deferred payments; a similar situation occurred in 2011 during the last financial crisis.
The Postal Service will continue making employee retirement contributions to the Federal Office of Personnel Management, as well as Thrift Savings Plan contributions, including employer automatic funds and matching contributions. Social Security contributions will also remain unaffected.
Brian Renfroe, president of the National Association of Letter Carriers, remarked that while suspending pension payments is “not ideal,” it won’t immediately impact their members, who are aware of the financial strains faced by the Postal Service. He noted that, given the situation, this was perhaps the most palatable option among a list of undesirable choices.
Almost all USPS career employees, about 99%, are covered under the Federal Employees Retirement System.
In a related development, the Postal Regulatory Commission authorized the Postal Service to redirect billions in revenue previously designated for retiree benefits, which gives it some flexibility to address cash shortages.
Postmaster General David Steiner recently indicated that the 250-year-old service needs to increase its borrowing limit from $15 billion to $34.5 billion to secure more cash for its operations.
“This would allow us to make necessary corrections and maintain our path forward,” he mentioned.
Steiner has also called for changes, such as more flexible retirement fund investments, adjustments to pension obligations, and the capability for USPS to raise postage rates sufficiently to offset losses.
Renfroe pointed out that the decision to halt employer contributions directly arises from Congress’ persistent inaction on resolving the “legal constraints” impacting the Postal Service.
The advocacy group Keep Us Post, representing various consumer interests, has urged Congress to limit any rate hikes to once a year and to preserve six-day delivery, while also seeking enhanced regulatory control over service changes.
The proposed increases would affect postcards and international letters as well, although the USPS maintains that rates will still be among the most affordable globally.
The Postal Service’s operations are primarily funded through the sale of postage, products, and services.
With a shift towards online communication and bill payment, annual volume has decreased dramatically from approximately 220 billion packages in 2006 to around 110 billion today.
In fiscal year 2025, USPS reported a net loss of $9 billion, despite an increase in total operating revenue of $916 million, primarily attributed to Ground Advantage transportation services. The net loss for fiscal year 2024 was noted as $9.5 billion.
