Press Releases | Retirement

News from EPI Retiree health pre-funding is primary cause of USPS’ short-term deficit problem

For Immediate Release: Thursday, July 22, 2010
Contact: Karen Conner or Eve Turow, 202-775-8810

The United States Postal Service suffers from an onerous and unfair requirement that it pre-fund retiree health benefits at a time when it needs more flexibility to plan for a viable future, a new report by the Economic Policy Institute finds.  The report also finds that restoration of the $75 billion in overpayments the Postal Service has made to the Civil Service Retirement System would enable the agency to fully fund its future retiree health obligations and to retire the debt it has accrued since 2006.

The Postal Accountability and Enhancement Act (PAEA), enacted in 2006, required the USPS to pay an average of $55.8 billion into the Postal Service Retiree Health Benefit Fund over a 10-year period.  This requirement, a 75-year obligation, has produced the worst financial crisis in the agency’s history and is the primary cause of the Postal Service’s short-term deficit.  Furthermore, the USPS is the only government agency required to pre-fund retiree health benefits, let alone at an accelerated rate.

The report, Congressional Mandates Account for Most of Postal Service’s Recent Losses, demonstrates that the retiree health pre-funding requirement places a severe burden on the USPS at a time when all business entities are struggling because of the recession.  Indeed, the mandate has caused such financial pressure that the Postmaster General has proposed cutting Saturday mail delivery, which could result in the loss of 80,000 part-time, full-time and full-time equivalent jobs.

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