USPS Pauses Pension Contributions Amid Looming Cash Shortfall

Authored by Bill Pan via The Epoch Times,

The U.S. Postal Service (USPS) has temporarily suspended its employer contributions to a government-wide pension plan after warning Congress that, without changes, it could run out of cash within the next year.

On Thursday, USPS told the Office of Personnel Management—the federal government’s human resource division—that it would pause its biweekly employer contributions to the Federal Employees Retirement System, or FERS.

The move is expected to conserve about $2.5 billion through Sept. 30, the end of the current fiscal year, according to USPS. The mail agency typically pays about $200 million every other week into the plan.

USPS Chief Financial Officer Luke Grossmann said the temporary withholding would have no “immediate detrimental impact” on current or future retirees. He said the agency would continue forwarding employees’ own FERS contributions, as well as all regularly scheduled payments to the Thrift Savings Plan, another retirement program for federal workers.

“The risk to the Postal Service and the American public from insufficient liquidity for postal operations dramatically outweighs any longer-term risk to the pension funds from not making the currently due payments,” Grossmann said.

Although USPS is generally required by law to make the payments, the Postal Regulatory Commission granted the agency a waiver that gives it flexibility to catch up later.

The cash-saving measure comes as postal officials warn Congress of the agency’s deteriorating finances. At a March 17 hearing, Postmaster General David Steiner told the House Oversight and Government Reform Committee that USPS could become unable to continue delivering mail by February 2027 if it keeps paying all of its bills on time under the current structure.

“Less than a year from now, the Postal Service will be unable to deliver the mail if we maintain the status quo,” he said in his testimony.

According to Steiner, USPS has already had to rely on extraordinary cash-conservation measures, and he warned that lawmakers might have to consider steps such as reducing delivery frequency from six days a week to five or fewer. He also floated the idea of hiking first-class stamp prices to as high as 95 cents.

“At 78 cents, the U.S. First-Class Stamp is the lowest-priced in the industrialized world,” Steiner told lawmakers at the hearing.

“If we were to change the stamp price to 90 to 95 cents, which is still less than half of the cost of most foreign posts, that would largely solve our controllable loss.”

USPS has struggled financially for years as first-class mail volumes continue to decline and operating costs rise. According to a report published in March by U.S. Government Accountability Office, it has lost money every fiscal year but one since 2007, accumulating a staggering $118 billion in net losses over that time.

The agency has also turned to temporary price hikes to help cover operation costs. The Postal Regulatory Commission has approved an 8 percent temporary increase on priority mail and package prices beginning April 26 and lasting through Jan. 17, 2027.