Congress Seeks to Cut USPS Prefunding

USPS truck in snow feature

Yet another effort is underway in Congress to eliminate the costly prefunding of U.S. Postal Service retiree healthcare benefits that have been an albatross for the USPS since a 2006 reform measure, and this time appears to have some more bipartisan momentum.

A reform act that would eliminate the prefunding, which has cost the USPS many billions over the years, passed the House in 2020 but was hung up in the Senate. Now senators Brian Schatz (D-HI) and Steve Daines (R-MT) have reintroduced the measure, according to Federal News Network.

A companion bill has been proposed by House Oversight and Reform Committee Chairwoman Carolyn Maloney (D-NY) and House Transportation and Infrastructure Committee Chairman Peter DeFazio (D-OR), along with Reps. Brian Fitzpatrick (R-PA), Tom Reed (R-NY) and Colin Allred (D-TX).

“There is no reason we should be requiring the USPS to prefund its future health and retirement benefits,” Schatz said in a statement. “It’s an unnecessary burden that is jeopardizing its financial health. This is an easy fix that will dramatically improve USPS’s finances and ensure mail delivery can continue uninterrupted.”

Every quarter, the USPS gives two sets of numbers for its financial results – one with and one without so-called uncontrolled costs, most of which is caused by the unfunded mandate of prefunded retiree healthcare benefits. As of 2020, the USPS has funding $56.2 billion of the $72 billion called for in the reform measure.

Without the obligation, the governmental agency would have been operating in the black at times in the past. For the most recent quarter, announced in November, the “controllable” loss would have been $3.8 billion, compared to a $9.2 billion loss overall.

Contributing to the loss were package delivery, up $2.3 billion in the November quarter, and a $1.2 billion increase in compensation, driving by paid leave, overtime and hiring due to the pandemic and package delivery costs, as well as transportation costs which rose $630 million.

The USPS, which next reports its quarterly results on Tuesday, had a particularly rough peak holiday season, with some packages showing up weeks into the new year.