The U.S. Postal Service (USPS) has revealed that it will cease employer pension contributions starting Friday due to a looming financial crisis.
This decision pertains to the Federal Employees Retirement System (FERS) and comes shortly after the USPS alerted Congress about the critical funding situation, which could deplete within a year unless significant reforms are enacted, including modifications to pension funding and adjustments to stamp pricing.
Despite this suspension, the USPS reassured that current and future retirees won’t be immediately affected.
“The temporary halt in regular FERS contributions won’t negatively impact current or future retirees right away,” said Luke Grossman, Chief Financial Officer of the Postal Service, in a statement.
Post Office warns of potential cash depletion if trends persist
The USPS has reported substantial losses over the years, totaling a staggering $118 billion since 2007, with first-class mail volume, which is its most profitable segment, now at its lowest point since the late 1960s.
Complications have arisen from global tariffs, high inflation, recent gas price surges, and fierce competition from private delivery services like Amazon, which has taken on many package deliveries.
Typically, the USPS transfers approximately $200 million biweekly to the Office of Personnel Management (OPM) to manage pension expenses.
By pausing these contributions, the agency anticipates saving around $2.5 billion this fiscal year.
Importantly, while the employer contributions are on hold, employee payroll deductions for retirement accounts will continue as usual.
USPS may scale back services in specific regions to save costs
The agency also clarified that the Thrift Savings Plan (TSP)—a retirement savings plan akin to a 401(k)—will remain unaffected.
The USPS will keep processing employee contributions and matching funds for the TSP, and it noted that employees will be able to contribute more starting in 2026 due to new IRS limits.
Postmaster General David Steiner communicated to Congress in March that without urgent changes, the Postal Service may exhaust its funding within a year.
Steiner outlined various cost-cutting strategies, such as expediting six-day delivery, increasing first-class postage from 78 cents to more than a dollar, and expanding the USPS’s borrowing capabilities once it reaches a $15 billion debt ceiling.
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“To keep going beyond next year, we need to enhance our borrowing capacity to avoid running out of funds,” Steiner stated in his prepared remarks. “Not doing so could spell the end of the Postal Service as it currently operates.”
