Legislation Introduced to End USPS Pre-Funding Mandate

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By on May 2, 2019 in Pay & Benefits with 0 Comments
Postal Service letter carrier sorting mail inside of a company mail van

Legislation has been introduced in the House that would end the requirement of the Postal Service to pre-fund the future health benefits of its retirees.

The USPS Fairness Act (H.R. 2382) was introduced by Congressman Peter DeFazio (D-OR). He says the pre-funding requirement is “unfair” because the Postal Service is the only agency with such a mandate.

The Dire State of USPS Finances

The Postal Service is now going on 12 straight years of losses, often well into the billions. It reported a net loss of $1.5 billion in the first quarter of the current fiscal year.

DeFazio says that the pre-funding requirement is the largest contributing factor to the Postal Service’s losses. He said in a press release on the bill, “Since 2007, this unfair mandate is responsible for more than 90 percent of USPS’s financial losses and 100 percent of losses over the past six years.”

Other FedSmith readers have echoed this sentiment. Often when we post an article on the financial state of the Postal Service, comments from our readers indicate that they think this requirement is the underlying cause of most of the agency’s financial woes.

President Trump’s USPS Task Force

The Postal Service has been defaulting on these required pre-funding payments for some time now. The Trump administration warned recently that if things don’t change at the Postal Service, it is likely heading for a taxpayer funded bailout.

President Trump formed a task force to address the poor finances at the Postal Service and make recommendations for ways to turn it around. It may shock some readers to know that the task force did not recommend doing away with the pre-funding mandate. The task force stated:

The Task Force does not believe that this general policy [funding retiree health benefits] should change or that the liability for USPS retiree health benefits should be shifted to the taxpayers. The Task Force believes that this obligation, including the $43 billion in pre-funding payments that the USPS failed to pay into the Postal Service Retiree Health Benefits Fund and the unfunded actuarial liability for retiree health benefits, must be restructured with the payments re-amortized with a new actuarial calculation based on the population of employees at or near retirement age.

It made other recommendations which it believed would ultimately be more financially beneficial for the agency over the long term, such as removing Postal employees’ compensation from the collective bargaining process and more closely aligning their salaries with the private sector.

Past Legislative Proposals

Past bills introduced in Congress took a variety of reform efforts besides what DeFazio has proposed.

Some bills would have allowed the Postal Service to start shipping alcoholic beverages in an attempt to generate a new source of revenue.

The House and Senate introduced similar bills that both addressed retiree benefits among other proposed reforms. One thing they had in common was requiring Medicare eligible Postal retirees to enroll in Medicare. The bills had the support of the Postal Service.

The Postal Service has not been shy about blaming Congress for its financial problems. Postmaster General Megan J. Brennan said in a statement last year, “The root cause of our financial instability is a flawed business model that is imposed by law. We encourage the Congress to engage in a broad public policy discussion and pass postal reform legislation.”

Most everyone seems to agree that something needs to be done to help the Postal Service, but they cannot seem to agree on what to do. Until that happens, it appears doubtful anything will change.

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About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce.

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