Postal Service Facing Default on Future Retiree Health Benefits Payments

Postmaster General Patrick Donahoe testified before a Senate subcommittee on May 17 that in its current financial state, the Post Office does not have the funds necessary to make a $5.5 billion pre-payment for retiree benefits due later this year.

The financial woes of the USPS continue. According to testimony from Postmaster General Patrick Donahoe, the Post Office does not have the money on hand to make a $5.5 billion pre-payment for future retiree health benefits due on September 30.

Donahoe made the admission before a Senate subcommittee on May 17. He also said that the shortfall could extend to operational expenses.

The Postal Service has been asking Congress for the past three years to alter the payment schedule of a mandate that requires pre-funding retiree health benefits that equate to roughly $5.5 billion. It has also asked for access to $50 to $75 billion in overpayments made to the Civil Service Retirement System and $6.9 billion to the Federal Employees Retirement System.

Donahoe’s testimony was done in support of persuading Congress to act on one or both of these measures. He did say that he believes the Postal Service can return to profitability if action is taken.

At least some legislation designed to aid the Postal Service has been introduced. Senator Tom Carper (D-DE) introduced the Postal Operations Sustainment and Transformation (POST) Act of 2011. The POST Act proposes a series of provisions including: easing postal employee pension and retiree health costs; addressing postal employee wages and benefits; allowing partnerships with state and local governments; continuing and enhancing efforts to preserve its existing business; and giving the Postal Service leeway to close post offices, market certain non-postal items, and eliminate Saturday delivery.

Additional details about the POST Act

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.