The USPS’s plan for profitability: Get Retirees off FEHBP, on Medicare

Getty Images – Picture by Andrew Burton

By Eric Pfahler – August 6, 2015
Email, e-commerce and even drones are modifying the way people conduct business and interact with out-of-towners.

And few industries feel the effects of the increasingly digital world more than the mail system.

The overall economy took a big downward turn right as the U.S. Postal Service committed billions and billions of dollars to pre-pay health benefits for future retirees since a law passed in 2006 mandating the Postal Service to do so.

Money problems could get worse if the office cannot keep stamp prices at the 49-cent level, the Washington Post reported recently.

Despite eight straight years of losses, however, officials with the Postal Service are optimistic that solutions are near.

People and businesses still rely on the Postal Service to annually deliver billions of pieces of mail from magazines to advertising to birthday cards.

So why have the losses mounted, and why are officials optimistic?

“Every year it comes up and every year they make it sound as if the Postal Service is losing money, the Postal Service is going away, that we’re a dinosaur,” said Daniel Toth, the national business agent for National Association of Letter Carriers Region 11. “Nothing could be further from the truth.”

The problem for USPS

For all of the concerns about a world transitioning to a paperless society, the Postal Service’s top financial issue has nothing to do with email and websites.

Instead, the biggest issue for the Postal Service is a Congress mandate to pay for health benefits well in advance.

The Postal Service does not run on tax money, though the government does give a tiny fraction of the service’s revenues to pay for items the government uses such as military mail.

The cost to pay for future benefits is enormous and tends to be more than $5.5 billion annually. Congress passed the law in 2006 to entirely cover the cost for future benefits — what has become a $94 billion liability.

The Postal Service has put in nearly $51 billion for the benefits, but has missed payments as the economy receded.

USPS CFO Corbett says "relatively simple fix to the pre-funding problem" - get Medicare to cover retiree health benefits

USPS CFO Corbett says “relatively simple fix to the pre-funding problem” – get Medicare to cover retiree health benefits

“It’s just a position no organization should be in to be forced to default when there are actually solutions to that,” said Joe Corbett, the USPS chief financial officer. “But nonetheless, that’s the biggest driver for the losses that we’ve been incurring over the last few years.”

The Postal Service’s operating profit has grown when excluding items that are unrelated to operations such as the health-care benefit, according to the second-quarter financial report released in May.

But the losses attributed to the payment are large. Here are the net losses for the Postal Service since it made $900 million in net income in 2006:Postal_Service_losses

Corbett, however, said there is a relatively simple fix to the pre-funding problem. If retirees could file through Medicare — which Postal Service employees pay into — the tab for the pre-funding health benefits could be eliminated.

Toth said he is on board with getting Medicare to cover costs.

More/Source: The U.S. Postal Service’s plan for profitability – News Sentinel Story

One thought on “The USPS’s plan for profitability: Get Retirees off FEHBP, on Medicare

  1. Union and NAME of Local/Branch
    Philadelphia, PA Area Local #89 / Retiree Chapter
    Office held, if any
    Member / Rogue Rank and File Activist and Advocate

    Of course we all know that is what the agency would like. But what is disturbing here is that Daniel Toth, a national business agent for NALC is “on board with getting Medicare to cover costs.” As a retiree, I say keep your F**king hands off of my health benefits. If Toth’s opinion is representative of NALC HQ, then this certainly does not bode well for “A Grand Alliance!”

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