DMA Supports USPS' Phased Rate Plan

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The Direct Marketing Association sent a letter yesterday to the U.S. Postal Service supporting a plan unveiled last month by postal officials for phased rate increases.

The postal service's plan would implement new rates no earlier than April 2004, with a second rate increase scheduled for spring 2005. If a traditional, non-phased rate case is filed, the postal service has said rates would increase in fall 2004.

Though phased rates would be more frequent, many mailers like them because the increases would be smaller and more predictable, allowing mailers to better plan the increases into their budgets.

Jerry Cerasale, DMA senior vice president of government affairs, expressed support for the plan in a letter to USPS associate general counsel Dan Foucheaux, with several conditions, including:

· That all proposed rates would be based on two increases set at least one year apart.

· The Board of Governors should state that any negative change in the postal service's financial condition will not lead to a reduction in the time between phased rate increases.

The USPS plan backed by the DMA also calls for no less than one year between phased increases, 90-day notice of any increase, rates no higher than what they would be under a traditional rate case and phased increases as equal as possible.

In response to concerns about inconveniences imposed by phased rates on individuals using stamps, Cerasale recommended that the USPS consider in any phased rate proposal a date for a single, unphased rate increase for First-Class single-piece mail.

At last month's meeting, the USPS said that it wants to receive comments from the mailing community on the issue as soon as possible. The USPS is basically looking at three rate case options:

· Phasing, with an earlier filing and implementation.

· Keeping the nonphased process.

· Keeping the existing process for the next increase with the possibility of phased rates for the next increase.

Of course, there is still a chance that there will be no rate increase until at least 2006 if Congress will allow the USPS to reduce its scheduled contributions to the Civil Service Retirement System.

A review of funding of the CSRS in October found that it was almost fully funded, and a GAO review announced last week said the postal service has already overfunded the Civil Service Retirement System by $4.1 billion.

The USPS estimates it could save $2.9 billion in fiscal year 2003 and $2.6 billion in FY '04 by lowering its CSRS contributions.

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