The U.S. Postal Service (USPS) is pulling more levers as it attempts to stave off a possible cash crisis, temporarily suspending pension contributions in a move that will free up to $2.5 billion this year.
Starting Friday, the beleaguered government agency will pause employer contributions for annuities paid out by the Federal Employees Retirement System (FERS) through Sept. 30, the end of the fiscal year. The decision will allow the firm “to conserve as much cash as possible so we can keep delivering the mail” and continue making payroll and paying suppliers.
The USPS contributes about $400 million a month to its employee pension plan, the agency said in a statement.
The Postal Service also wants to increase postage rates, including raising the price of a First-Class Mail Forever stamp from 78 cents to 82 cents for standard letters. Domestic postcards will increase from 61 cents to 65 cents, while international standard letters and postcards will see a five-cent hike from $1.70 to $1.75.
USPS filed notice Friday with the Postal Regulatory Commission (PRC), who still needs to approve the price changes. If approved, they would go into effect July 12.
The proposed stamp hikes follow last month’s unveiled plans to temporarily add an 8 percent surcharge to cover mounting fuel costs due to the Iran war. Those fees are set to take effect April 26, and will remain in place through Jan. 17, 2027. The decision to tack on fuel-related surcharges is a first for USPS.
“The Postal Service is using all available tools, including available regulatory pricing authority, to ensure we can continue to fulfill our universal service obligation and serve the American public,” the USPS said in a press release.
The PRC passed the multi-year waiver required to lift the pension funding requirements on Thursday, noting that it could potentially free up an extra $15 billion at the USPS by the end of the 2030 fiscal year.
In a statement, Postal Service chief financial officer Luke Grossmann said there will not be any immediate detrimental impact to current or future retirees if normal FERS cost payments are temporarily withheld. Ninety-nine percent of career USPS employees fall under FERS.
“The risk to the Postal Service and the American public from insufficient liquidity for postal operations dramatically outweighs any longer-term risk to the pension funds from not making the currently due payments,” said Grossmann. “It must be noted that our pension systems remain much better funded than other agencies.”
Of the $9 billion in net losses the USPS racked up last year, $2.2 billion came from payments tied to its long-term pension obligations under FERS.
Brian Renfroe, president of the National Association of Letter Carriers (NALC), confirmed the pause in contributions does not immediately impact the union’s more than 295,000 active and retired members.
Postmaster General David Steiner has been adamant that the national courier expects to run out of cash by February 2027, calling on Congress to consider lifting its debt limit that has been in place since 1992 from $15 billion to $34.5 billion.
Renfroe agreed that the pause in FERS contributions “would not be necessary” if there was an increase in the agency’s borrowing authority.
During the suspension, the Postal Service will continue to transmit postal employees’ contributions to FERS.
This suspension will not affect the Thrift Savings Plan (TSP), which is the federal government’s version of a 401(k)-style tax-advantaged retirement savings plan. The carrier will also keep transmitting USPS automatic contributions, employee contributions and USPS matching contributions to TSP.
Although the Postal Service had a implemented a 10-year turnaround plan in 2021 under former Postmaster General Louis DeJoy to reduce expenses and restore profitability, the agency still faces a bleak financial future as mail volume continues to decline and delivery costs rise.
The Postal Service’s mail volumes have contracted by more than 104 billion pieces of mail per year since 2006, which equates to about $81 billion at the stamp price of 78 cents, Steiner told a House subcommittee hearing in March.
Under Steiner’s leadership, the USPS has sought to focus on revenue growth through the introduction of a bidding system that has allowed retailers, brands and logistics providers to gain access to its facilities for last-mile delivery.
That process appeared to vex Amazon, the delivery partner responsible for generating $6 billion of $80.5 billion in revenue last year. After a period of tenuous negotiations ahead of their Oct. 1 contract expiration date, the parties were able to come to a new deal, but it will see Amazon volumes through the USPS network be cut by 20 percent from current levels.
