Inspector general: Pension payment reform could cure Postal Service financial woes
The US Postal Service could fully meet its financial obligations, extinguish debt and have substantial cash flow if Congress rectifies the organization's possible overfunding of its pension and retiree healthcare funds, the USPS' Office of Inspector General (OIG) said in a summary report.
The OIG has issued four reports in the past year on the Postal Service's possible overfunding of its pension funds and retiree healthcare fund. One report found that the USPS has overpaid the Civil Service Retirement System by about $75 billion since 1972 because of an outdated calculation method. Another report found that if the Postal Service is allowed to prefund its pension obligations at levels benchmarked to private-sector companies, it could recover more than $50 billion.
“If our proposals to recover the overfunded amounts were placed in effect, the Postal Service could potentially recover $142.4 billion,” the OIG summary report stated.
The report said that if the overfunding is rectified, the Postal Service would no longer be required to prefund the Postal Service Retiree Health Benefits Fund by about $5.6 billion a year. It could prefund pensions and retirees' health benefits at benchmarked levels and pay existing retirees' health insurance premiums from the retiree health fund. It could also extinguish its $10 billion debt to the US Treasury Department.
The proposals also could provide significant cash for operations, the OIG said in the report.
Postmaster General John Potter said last week that the Postal Service expects to report a $6 billion loss for fiscal year 2010, with about $5.5 billion of that loss due to its statutorily required payment into the Retiree Health Benefits Fund. Without that payment, the USPS had a $500 million operating loss in FY 2010 despite a drop in mail volume of about 7 billion pieces.
The issue of how to fund the Postal Service's long-term liabilities is expected to play out on Capitol Hill in either a lame-duck session of this Congress or with a new Congress next year.
Sen. Thomas Carper (D-DE) recently introduced a comprehensive postal reform bill that would permanently address the pension and retiree health benefit issues. In its decision to reject the USPS' proposed “exigent” rate increases for 2011, the Postal Regulatory Commission cited the aggressive retiree health benefits payment schedule as a structural problem causing the Postal Service's liquidity crisis.