Patrick Donahoe, postmaster general, on Tuesday asked a Senate panel to allow the U.S. Postal Service to hold off on making required contributions to the federal pension system and to switch new hires to a defined contribution retirement plan.
“We need the ability to operate more as a business does,” Mr. Donahoe said in written testimony before the Senate Committee on Homeland Security and Governmental Affairs.
One of the biggest obstacles to avoiding fiscal default by the end of the month, he said, was that USPS is still required by law to make contributions despite having a $6.9 billion surplus in the Federal Employees Retirement System. Postal officials want to use those overpayments to help offset a congressionally mandated $5.5 billion retiree health prepayment bill due this month, and to help offset operating losses projected to reach $8 billion by the end of the 2011 fiscal year on Oct. 1.
On June 24, USPS officials suspended their defined benefit contributions to FERS, citing both the surplus and what they claim are improper pension calculations that fail to reflect ongoing salary increases in the government's share of the share of pension obligations, which got shifted to USPS.
On Tuesday, Thomas D. Levy, senior vice president and chief actuary of The Segal Co., told the Senate panel that his firm's 2010 analysis of the Office of Personnel Management's pension allocation principles found that a failure to reflect future salary increases “we did not believe … was fair and equitable.” Segal estimated that proper allocations would save USPS $6 billion to $8 billion in future payments.
Many members of Congress, including Sen. Thomas R. Carper, D-Del., who chairs the Senate Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security, which has jurisdiction over the USPS, are sympathetic to changing the pension calculations and recognizing the pension surplus, but are caught between other legislators who see the crisis an opportunity for structural reforms, including labor concessions.
A bill sponsored by Mr. Carper would let USPS use the $6.9 billion pension overpayment for health care and debt payment, among other reforms.
“Congress really created the cash crisis, so they have to fix that,” Jim Sauber, National Association of Letter Carriers chief of staff, said in an interview. NALC is one of several postal worker unions that negotiate with USPS. “We understand that we're going to have to do our part to address the economic realities. Congress should do its part and we'll do ours.”
