USPS Defaults on Retiree Payments

The U.S. Postal Service will not make mandated prefunding retiree health benefit payments to the U.S. Treasury of $5.5 billion due Aug. 1, 2012 or the $5.6 billion payment due Sept. 30.

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It appears that Congress won’t act on pending postal reform legislation this year, according to Gene Del Polito, the president of the trade group Association for Postal Commerce.

Del Polito isn’t surprised by this at all and he said it means Congress likely won’t deal with postal reform legislation – which would address the prefunding of retiree health benefits – until 2013. “The USPS says it has enough money to be viable until 2013,” Del Polito said. “Congress won’t act unless it was an absolute crisis like you can’t pay your workers.”

Del Polito said he would’ve been surprised if Congress acted on postal reform legislation during an election year.

The USPS issued a statement on the default.

“This action will have no material effect on the operations of the Postal Service,” the statement reads.”We will fully fund our operations, including our obligation to provide universal postal services to the American people. We will continue to deliver the mail, pay our employees and suppliers and meet our other financial obligations. Postal Service retirees and employees will also continue to receive their health benefits. Our customers can be confident in the continued regular operations of the Postal Service.”

The pending Senate bill addresses the prefunding of retiree health benefits while the Republican-led House of Representatives bill does not.

The USPS was profitable from 2004 through 2006 – when postal reform legislation passed. The USPS has lost $25.4 billion from 2007-2011. In the first half of 2012, USPS had an operating loss of $6.4 billion.
Despite reducing its workforce by nearly 22% since 2006, the USPS has said it would have to eliminate Saturday mail delivery, close hundreds of local post offices and other facilities if Congress doesn’t fix the prefunding retiree health benefits issue.

Fredric Rolando, president of the National Association of Letter Carriers (NALCO), issued a statement, blaming Congress for the USPS default situation.

“Rather than fixing the problem it created, Congress wants to degrade the world’s most affordable delivery network by reducing services to the American people and America’s businesses, which will only worsen the financial problems by driving customers away and reducing revenue,” Rolando said in the statement.

Rolando added that the “ultimate irony” regarding the default is that the USPS already has $45 billion set aside for future retiree health benefits — more than any other organization in America.

Jim Tierney (jim.tierney@penton.com) is a senior writer for Multichannel Merchant. You can connect with him on Twitter (TierneyMCM) and LinkedIn, or call him at 203-358-4265.

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