Postal Service Faces Massive Unfunded Liabilities for Retiree Benefits

Report: USPS fiscal situation ‘high-risk’

USPS carrier
/ The Rocky Mount Telegram via AP
January 25, 2016

The U.S. Postal Service is incurring unsustainable deficits and its financial condition has been classified as high-risk, according to a Government Accountability Office report.

The Postal Service incurred a net loss of $5.1 billion in fiscal year 2015, the ninth year in a row the post office incurred losses. The federal watchdog first placed the service on its high-risk list in July 2009, where it remains today today.

The report finds that the agency’s financial condition continues to worsen because of two major factors: declining mail volume and rising expenses.

The volume of First-Class Mail, a major source of revenue for the service, is expected to decline as electronic alternatives are available for communication and payment of bills. In addition, the agency’s expenses, including salary and benefits, are increasing at an unsustainable rate.

"USPS’s financial condition makes it unlikely it will be able to fully make its required retiree health and pension payments in the near future," the report states. "Large unfunded liabilities for postal retiree health and pension benefits—which were $78.9 billion at the end of fiscal year 2015—may ultimately place taxpayers, USPS employees, retirees, and their beneficiaries, and USPS itself at risk."

Postmaster General Megan Brennan expressed concerns about the service’s financial health at a Senate committee hearing on the topic.

"Our debt is at an unsustainable level and while we continue to pursue available management actions to reduce our costs even further, there are limited remaining initiatives that will result in substantial cost savings without threatening our ability to continue to provide prompt, reliable and efficient postal services," Brennan said. "We have reached our borrowing limit and have a cash reserve that is wholly inadequate for an organization of our size."

In response to its fiscal situation, the service’s leadership has proposed legislation that would require Medicare integration in postal retiree health plans and implement price increases for "market-dominant" products, a class that includes its most popular services.

"With legislation enacted that includes these provisions, the Postal Service can achieve an estimated $27 billion in combined cost reductions and new revenue over the next five years," Brennan said. "Together with other important initiatives, this would make us financially stable."