USPS defaults on second payment in two months, awaits legislative help

Authored By Chloé Morrison

For the second time in two months, the United States Postal Service defaulted on a mandated payment to prefund retiree health benefits.

Leaders said they are still awaiting legislative action, which is needed for long-term financial stabilization of the self-supporting government enterprise.

The USPS recently ended the third quarter with a $5.2 billion loss.

“As part of its business plan, USPS has proposed sponsoring its own health care program,” spokesman David Walton said via email. 

A program that is independent from other federal health insurance programs would provide USPS employees and retirees with the same level of coverage or better, and the cost would be reduced, he said. 

Consultants estimate USPS could save $8 billion in five years and get rid of the annual $5.5 billion prefunding payments by moving to its own health care plan.

In 2006, Congress passed the Postal Accountability and Enhancement Act, which requires the Postal Service to prepay future retiree health benefits, according to archives.

Senate members passed a postal bill in April that would help the situation, in part by reducing annual health payments and refunding $11 billion that the USPS made to the federal pension fund, according to the The Christian Science Monitor.

But House leaders haven’t moved their version through yet.

Alek Vey, press secretary for Rep. Chuck Fleischmann, R-Tenn., said that the congressman frequently uses the services himself and appreciates the Postal Service’s importance to many East  Tennesseans.

“However, the USPS must be a financially sustainable business going forward so that it can effectively serve its mission,” Vey said.

Walton said that Congress and administration leaders are aware of the reasons for default, so USPS leaders don’t expect any legal ramifications from the lack of payment.

USPS leaders have been in limbo for more than a year. They have proposed possible cost-cutting measures, such as closing some processing and distribution centers and eliminating Saturday delivery.

Last May-after requests from multiple senators to delay closings and consolidations until May 15-several senators urged the postmaster general to move forward with the USPS’ cost-savings plan even though Congress hasn’t agreed about the details of reform.

Sens. Bob Corker, John McCain and Tom Corburn said in a letter to Postmaster General Patrick Donahoe that they thought it would be unlikely that Congress would meet the May 15 deadline.

Also in May, The Washington Post reported that House members don’t seem to feel a sense of urgency about the approaching deadline, and one senator has set up a website with a ticker counting down until the May 15 deadline.
For now, USPS leaders are monitoring cash receipts and disbursements daily, Walton said.

Leaders are predicting low cash levels throughout fiscal year 2013, potentially less than the USPS biweekly payroll cost of $1.8 million, Walton said.

“We are confident that Congress and the administration would act to avoid any potential payroll or operational disruptions,” Walton said. “The long-term solution to our financial crisis is comprehensive reform of the laws governing the Postal Service. It is urgently needed in order for the Postal Service to fully implement its five-year business plan and return to long-term financial stability.”

Updated @ 2:33 p.m. on 10/01/12 to add more information as it became available.