Legislation Introduced to Reform Postal Employees’ Benefits

Legislation has been introduced in the House that would make a number of reforms to the Postal Service including changes to current and retired Postal employees’ benefits.

Legislation has been introduced in the House to make a number of reforms to the Postal Service.

The Postal Service Reform Act of 2017 (H.R. 756) would make pension funding reforms, allow for postal rate increases and even allow the Postal Service to provide non-postal services in some cases. The bill is being introduced by Congressman Jason Chaffetz (R-UT) and is co-sponsored by Reps. Elijah Cummings (D-MD), Mark Meadows (R-NC), Dennis Ross (R-FL), Gerry Connolly (D-VA), and Stephen Lynch (D-MA).

With regards to reforming the Postal Service’s pension program, the bill would do the following:

  • Calculates the Postal Service’s pension costs and liabilities using the salary growth and demographic assumptions that are specific to the Postal Service population instead of the government-wide population, as in current law.
  • Any surplus within the Postal Service’s Civil Service Retirement System or Federal Employees Retirement System accounts must be amortized over 30 years and returned to the Postal Service.

The bill also addresses health benefits of current and retired Postal workers:

  • Establishes separately rated postal plans within the Federal Employees Health Benefits Program (FEHBP) beginning in January 2019.
  • FEHBP carriers currently insuring at least 1,500 postal employees and retirees, as well as any other carriers may offer postal plans.
  • Almost all postal employees and retirees who elect coverage through FEHBP must enroll in one of the postal FEHBP plans.
  • Medicare eligible Postal Service retirees and family members are automatically enrolled in Medicare Part A and B.
  • The Postal Service will cover a decreasing portion of the Medicare Part B premium for current retirees transitioned into Medicare as a result of the legislation over a 4-year transition period: 75% in the first year; 50% in the second year; 25% in the third year; and 0% in the fourth year.
  • Requires the Postal Service to make actuarially-based Retiree Health Benefit (RHB) prefunding payments to cover 100% of the cost of the Postal Service’s RHB liability within 40 years.
  • Addresses the prefunding schedule established in the Postal Accountability and Enhancement Act of 2006.

The bill also allows for a 1 cent increase (2.15%) for a first class stamp, and it authorizes the Postal Service to provide non-postal services to state, local, and tribal governments and other federal agencies.

On the latter point, the legislation is vague on the services that might be provided, however, it suggests that the Postal Service would have some leeway on determining such services. The bill states that the Postal Service must provide on its public website “a business plan that describes the specific service to be provided, the enhanced value to the public, terms of reimbursement, the estimated annual reimbursement to the Postal Service, and the estimated percentage of attributable Postal Service costs that will be covered by reimbursement.”

In a statement on the legislation, the sponsoring and co-sponsoring lawmakers said:

This bipartisan measure will make the policy changes that are most urgently needed to put the Postal Service on sound and sustainable long-term financial footing. This collaborative reform effort places the Postal Service on a path toward a viable future.

The National Active and Retired Federal Employees Association (NARFE) quickly came out in opposition to the proposed legislation.

In a statement, NARFE president Richard G. Thissen said:

There are simple solutions to the financial problems facing the U.S. Postal Service, such as eliminating the prefunding requirement outright, but this bill takes a more complicated route – forcing current postal retirees and survivors who are satisfied with their current health insurance coverage to pay an additional $134 per month or more through Medicare to keep it.

Why not allow the USPS to pay its health insurance bills when they are due, and not before, by ending the burdensome prefunding requirement? Unfortunately, this bill avoids making those more difficult decisions, and instead unfairly places the full burden of balancing the Postal Service’s books on the backs of 76,000 postal retirees and their survivors.

NARFE has offered an alternative that is simple, fair and reasonable: maintain automatic enrollment of current postal retirees into Medicare Part B, but provide them with a short opt-out window of 60 or 90 days. Without this option, the bill breaks a promise regarding postal retiree health benefits and replaces the individual postal retiree’s choice of health insurance with a paternalistic requirement, at significant cost to the Medicare program.

The House Committee on Oversight and Government Reform has focused on the issue of Postal benefits reform in the past. In a hearing last year, the Committee heard testimony on requiring Postal retirees to participate in Medicare.

There is some concern, however, that taking this step could open the door to moving all federal retirees out of FEHB and into Medicare. As FedSmith.com author Michael Wald noted, “Forcing postal retirees to participate in Medicare may open the path to making Medicare mandatory for all Federal retirees, although the majority of Federal retirees age 65 and older already voluntarily participate in Medicare.”

This new legislation appears to be a continuation in pursuit of some of the ideas presented at last year’s hearing.

About the Author

Ian Smith is one of the co-founders of FedSmith.com. 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.