Senate Postal Bill Includes Pension and Federal Workers Compensation Reforms

Bipartisan legislation has been introduced in the Senate to reform the Postal Service across areas such as health care and pensions. The legislation also includes a proposal to overhaul the federal workers compensation program for all federal employees.

Legislation has been introduced in the Senate to reform the ailing Postal Service.

The Postal Reform Act of 2013, introduced by Tom Carper (D-DE) and Tom Coburn (R-OK) would make a number of changes to the organization, such as health care and pension reforms. The act would also reform the workers compensation program for all federal employees.

Some of the key components of the legislation include the following:

Pension Reforms

The PRA would require that the Office of Personnel Management (OPM) use data in determining how much the Postal Service must pay into the two federal pension programs – the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) – that more accurately reflects the amount of the Postal Service’s projected liability, in light of differences between the postal and non-postal federal workforces. This reform is expected to reduce the amount the Postal Service pays into both FERS and CSRS and to result in a Postal Service FERS surplus. The Postal Service would be permitted to request and receive up to $6 billion of any surplus, which could be spent to retire Postal Service debt and give it needed liquidity.

In addition, the bill would allow the Postal Service and postal unions to bargain over the extent of new postal employees’ participation in FERS and the Thrift Savings Program (TSP).

Health Care Reforms

The PRA would eliminate the Postal Service’s statutory retiree health pre-funding and replace it with a less aggressive 40-year amortization of the Postal Service’s retiree health liability. This provision, combined with language allowing premiums for current retirees to come out of the account containing health care funds that the Postal Service has already pre-funded, could reduce the Postal Service’s total retiree health costs by roughly half. Those costs could be reduced even further through the implementation of provisions in the PRA requiring that 1) health plans be created to meet the needs of postal retirees enrolled in Medicare parts A and B, some of whom currently purchase full Medicare and Federal Employees Health Benefit Plan (FEHBP) coverage; and 2) postal retirees not enrolled in Medicare be given the opportunity to do so penalty-free. Participation in Medicare parts A and B and these new health plans would be voluntary, but these two provisions are expected to increase Medicare enrollment among postal retirees and significantly reduce the Postal Service’s long-term retiree health liabilities.

In addition, the PRA would also allow the Postal Service and the postal unions to bargain over the creation of a new health plan for postal employees, either within or outside of FEHBP.

Service Changes

  • The Postal Service last year proposed a service standard change for certain classes of mail that would have largely eliminated the overnight delivery of mail and led to the closure or consolidation of a significant number of mail processing plants. The PRA would place a moratorium on service standard changes and plant closings for two years, keeping all plants open as of the date of enactment in operation for the duration of the moratorium.
  • The PRA would codify the Postal Service’s current plan to find savings in its retail operations without closing post offices.
  • The PRA would preserve Saturday delivery for at least a year.
  • The PRA would require the Postal Service to use the most cost effective means of mail delivery, requiring centralized or curbside delivery for new addresses and business addresses. It would also require the Postal Service to seek to convert residential addresses from door delivery to centralized or curbside delivery on a voluntary basis.

Revenue and Innovation

  • The PRA would streamline the current rate-setting process, giving the Postal Service more authority to set prices on its own while preserving a more flexible CPI rate cap until 2016, when the rate cap would expire.
  • The PRA would give the Postal Service enhanced authority to innovate and introduce new non-postal products that take advantage of its retail and mail processing, transportation, and delivery network.
  • The PRA would authorize the Postal Service to offer services on behalf of federal, state, or local government agencies.
  • The Postal Service is prohibited under current law from shipping beer, wine, and distilled spirits. The PRA would lift this prohibition and allow the Postal Service to deliver beer, wine and distilled spirits under the same rules as private sector shippers.

Federal Workers Compensation Reform

Benefits would be cut for federal workers injured on the job once they reach retirement age.

Workers compensation currently provides federal employees 66 2/3% of their basic salary tax-free once they reach retirement age, and 75% if employees have dependents. Related medical expenses are also covered.

Under the proposed legislation, federal employees would get 50% of their salary once they reach retirement age, and additional compensation for dependents would no longer be provided.

Speaking on the legislation, Senator Carper said, “One year ago, the United States Postal Service defaulted for the first time in its history. Although the situation is dire, it isn’t hopeless. The bill that Dr. Coburn and I introduced last night presents a comprehensive and bipartisan solution to the Postal Service’s financial challenges that would prevent collapse, protect millions of mailing industry jobs, and enable this critical institution to serve the American public for years to come. This bill isn’t perfect and will certainly change as Dr. Coburn and I hear from colleagues and stakeholders, including postal employees and customers. But the time to act is now. It is my hope that Congress and the Obama Administration can come together to enhance this plan in order to save the Postal Service before it’s too late.”

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.