The U.S. Postal Service (USPS) will stop making employer contributions to the Federal Employees Retirement System (FERS) Friday, officials say.
The USPS is planning to suspend contributions to come up with some of the cash needed to make a $5.5 billion contribution to a retiree health benefits contribution fund, officials say.
If the USPS does not win congressional approval to delay the retiree health benefits contribution, the postal service faces insolvency, officials say.
The FERS system includes a defined benefit component and a defined contribution component. The USPS hopes to save about $800 million per year by suspending contributions for the defined benefit component, officials say.
The system now covers 85% of career postal workers.
Congress passed a law in 2006 that requires the USPS -- and only the USPS -- to prefund retiree health benefits.
Postmaster General Patrick Donahoe warned in May, during a hearing organized by the Federal Financial Management Subcommittee of the Senate Committee on Homeland Security and Governmental Affairs, that the requirement could push the USPS over the brink.
The USPS has been asking Congress to change to health benefits prefunding rules, and it also has asked for access to $50 billion to $75 billion in what it says are overpayments made to the Civil Service Retirement System (CSRS) and what it says are $6.9 billion in overpayments to the Federal Employees Retirement System (FERS).
Rep. Dan Issa, R-Calif., says the state of the USPS pension system would not be tolerated if the USPS were a private company.
"Our nation's second largest employer, is now past the brink of insolvency," Issa says. "Incredibly, the unprecedented action to suspend these [FERS] payments will only offer USPS an additional $800 million through the end of the year in liquidity, not even 10% 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."
Sen. Tom Carper, D-Del., put out a statement calling the USPS FERS contribution suspension announcement a "canary in the coal mine moment." He noted that he has introduced a proposal, the POST Act bill, for overhauling the agency's finances.
If Congress does not act quickly to fix the problems of the USPS, the postal service "as we know it will cease to exist in the very near future," Carper says. "Possibly by the end of this fiscal year."