Cash-strapped US Postal Service suspends contributions to pension plan
The U.S. Postal Service said Thursday it will temporarily suspend employer payments for a federal pension program to conserve cash amid a severe financial crisis.
USPS told the White House Office of Personnel Management that effective Friday it will stop making $200 million payments every other week for its employer contributions for the defined benefit portion of the Federal Employees Retirement System. USPS warned Thursday that without reforms it could run out of cash as soon as February.
USPS estimated it will save $2.5 billion with the action through September 30 and said there would not be any immediate detrimental impact on current or future retirees if the payments are temporarily withheld.
The service has reported net losses of $118 billion since 2007 as first-class mail, its most profitable product, has fallen to its lowest volume since the late 1960s. USPS in February reported a quarterly loss of $1.25 billion.
“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,” USPS said.
Earlier this week, USPS won approval from the Postal Regulatory Commission for a temporary 8% price hike for priority mail and package deliveries, effective April 26, to deal with rising transportation and fuel costs. USPS plans for the surcharge to be in effect through January 17.
U.S. Postmaster General David Steiner told Congress last month that hiking first-class mail stamp prices to 95 cents or $1 or more, up from the current 78 cents, would provide added revenue and help it cut losses.
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