Federal Retirement System

Joe Davidson

The U.S. Postal Service took another step that demonstrates its abysmal financial state when it suspended its contribution to the defined-benefit portion of the Federal Employees Retirement System.

Fortunately, the suspension will not affect employees or retirees because of a $6.9 billion surplus in the Postal Service’s FERS account. “The Postal Service believes there will be no impact on employees. Also, the action will have no impact on current retirees,” spokesman David A. Partenheimer said.

But the move also will have no substantial impact on the agency’s financial situation.

“This is cash conservation, and it is short-term,” Postmaster General Patrick R. Donahoe said in a telephone interview. “It in no way gets us out of the financial bind we are in.”

That bind is so bad that Donahoe said that the USPS could be out of cash to make payroll and pay suppliers by October. It does not use tax dollars for operating expenses.

The suspension of payments, which will save about $800 million this fiscal year, takes effect Friday, unless the Justice Department intervenes. The USPS sends $115 million to the Office of Personnel Management every other week for the FERS annuity.

Although the subheadline on a Postal Service news release says “Payment to FERS suspended,” some legal questions about that move apparently remain. OPM said it and the USPS “have agreed to seek a resolution of the important legal issues surrounding the Postal Services’ decisions by submitting a request for a legal opinion to the Office of Legal Counsel (OLC) at the Department of Justice.”

That leaves open the possibility that Justice could block the move.

If that happens, the USPS, according to OPM, has given “assurance it will make the FERS annuity contributions it is now ceasing if OLC disagrees with its position.”

House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) said the USPS’s action points to the need for major structural changes in the agency.

“The United States Postal Service, our nation’s second-largest employer, is now past the brink of insolvency,” he said . “Incredibly, the unprecedented action to suspend these payments will only offer USPS an additional $800 million through the end of the year in liquidity, not even 10 percent of their projected deficit of $8.3 billion. USPS needs fundamental structural and financial reforms to cut costs and protect taxpayers from an expensive bailout.

Postal Service | Federal Employees Retirement System | Darrell ...

The United States Postal Service announced Wednesday that, faced with an ever-mounting debt, it would cease payment of employer’s contributions into the Federal Employees Retirement System for postal workers.

The move is being made to “conserve cash and preserve liquidity,” according to a press release issued by USPS.

The Postal Service currently expects an $8.3 billion deficit for this fiscal year. At a hearing in March, Postmaster General Patrick Donahoe said that, at that time, USPS will also “reach its statutory borrowing limit” at which point “the Postal Service will be forced to default on a financial obligation to the federal government, due at the close of the fiscal year on September 30, 2011.”

Postal Service officials have long insisted that that financial insolvency could be put off if USPS were given access to the surplus funds it has overpaid into FERS, which, it says, amounts to $6.9 billion.

The suspension of payments will be effective beginning Friday, and according to a USPS press release, will free up “about $800 million in the current fiscal year.”

USPS will still permit employees to contribute to FERS.

“We will continue to transmit to OPM employees’ contributions to FERS and also will continue to transmit employer automatic and matching contributions and employee contributions to the Thrift Savings Plan,” said Anthony Vegliante, chief human resources officer and executive vice president.

(Post office had $329 million loss in first quarter)

USPS listed several other steps that it felt Congress needed to take in order to keep the Postal Service afloat: “Eliminate the current mandates requiring retiree health benefit pre-payments;” “Allow the Postal Service to access Civil Service Retirement System and FERS overpayments;” and “Give the Postal Service the authority to determine the frequency of mail delivery.”

The House Oversight Committee, which has jurisdiction over the Postal Service, has made clear that it is unlikely to accept such reforms without accompanying structural changes.

(Incorrect Statue of Liberty printed on $880 million worth of stamps)

In a statement issued today, Oversight Committee Chairman Darrell Issa reiterated that stance.

“The United States Postal Service, our nation’s second largest employer, is now past the brink of insolvency,” he said. “This would not be tolerated in a private company. Incredibly, the unprecedented action to suspend these payments will only offer USPS an additional $800 million through the end of the year in liquidity, not even 10 percent of their projected deficit of $8.3 billion. USPS needs fundamental structural and financial reforms to cut costs and protect taxpayers from an expensive bailout.

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