(Bloomberg News) The U.S. Postal Service, facing insolvency without approval to delay a $5.5 billion payment for worker health benefits, will suspend contributions to an employee retirement account to save $800 million this year.
The Postal Service will stop paying employer contributions to the defined-benefit Federal Employees Retirement System, which covers about 85 percent of career postal workers, it said today in an e-mailed statement. The $115 million payment, made every other week, will stop on June 24, the statement said.
Suspending payments to the retirement account will help "conserve cash and preserve liquidity," the statement said. The agency estimates it has overpaid by $6.9 billion and has asked Congress to pass legislation to return that money.
Congress must "make bold, quick and substantive reforms," said Art Sackler, executive director of the Washington-based Coalition for a 21st Century Postal Service, which represents corporate mail customers. "The USPS is hanging by a thread."
The Postal Service said the suspension will save $800 million through the end of the fiscal year. The agency and U.S. Office of Personnel Management will ask the Justice Department's Office of Legal Counsel to analyze the decision, said David Partenheimer, a Postal Service spokesman.
"Regardless of the outcome of the Office of Legal Counsel review, the Postal Service believes there will be no impact on employees," Partenheimer said in an e-mail.
Ending Saturday Delivery
Postal Service Inspector General David Williams said in January 2010 that the agency had been overcharged for its pension obligations. The Postal Service had overpaid by $75 billion, and if that was returned, it would create a surplus that could be transferred to a health-benefits fund, he found.
The service wants the authority to reduce pre-payment of health benefits for retirees and has said it will not be able to make a $5.5 billion payment due Sept. 30 for health benefits for future retirees. It also wants to end Saturday delivery.
The Postal Service reported a loss of $8.5 billion in its 2010 fiscal year. It also reported a widening second-quarter loss, to $2.6 billion, on declining volumes of first-class mail.