Thursday, September 8, 2011


NALC FACT SHEET Department of Legislation and Political Action — National Association of Letter Carriers, AFL-CIO
100 Indiana Ave. NW —Washington, DC 20001-2144 — 202-393-4695 — © NALC

 Congressional Mandates and the Great Recession Have Caused the Postal Service’s Recent Financial Challenges

The U.S Postal Service (USPS) is facing long-term financial
challenges due to the increased use of the Internet as a substitute
for first-class mail. In order to survive the Postal Service will
need to transform its business model to succeed in the 21st century.
But use of the Internet is not the principal cause of the Postal Service’s
losses of nearly $12 billion over the last three years. Those
loses are due to the Great Recession, which is temporary, and to a requirement
mandated by Congress that the Postal Service aggressively
pre-fund its future retiree health benefits. No other government
agency or company has such a requirement.

The USPS needs to change, but it should not be forced to make
short-sighted decisions under duress. Near-term, fiscally responsible
reforms are needed to give the Postal Service breathing room to devise
a more successful long-term business plan.

1. The requirement to massively pre-fund retiree health benefits
over 10 years combined with the Great Recession has caused
the recent financial challenges.

The Postal Service averaged about $2.3 billion a year in profits from
2003 to 2006. It did not have to pre-fund retiree health benefits in
those years.

The Postal Service ran surpluses in 2007 ($3.3 billion) and 2008 ($2.8
billion), which were erased because it had to set aside $5.5 billion each
year to pre-fund retiree health benefits.

In 2009 the Postal Service lost $2.4 billion after a $1.4 billion payment
to pre-fund retiree health benefits. This loss was largely due to its revenue
plummeting more than 9% from the year before during the worst
recession in 80 years.

From 2011 to 2017 the congressional mandate to pre-fund retiree
health benefits will consume 9% of the Postal Service’s annual
budget. Yet these benefits will be spent out over 75 years. No business
could survive long with such a burden even in good times.

2. This congressional mandate is exceptional and unfair to the
Postal Service.

The Postal Service’s retiree health benefits are 41% pre-funded. No
other federal agency has pre-funded its employees’ health benefits,
and companies are not required to pre-fund retiree health benefits.

Nearly two-thirds of Fortune 1000 companies do not pre-fund retiree
health benefits. Of those companies that do pre-fund, the funding level
is just 28%.

3. The Postal Service has overpaid $75 billion to the federal government’s
pension system. The money should be refunded.

The Postal Service’s Inspector General has found that $75 billion has
been overpaid to the federal government’s pension system because
of errors in the way the Office of Personnel Management (OPM) calculates
the Postal Service’s obligations.

Congress should direct OPM to fairly calculate the USPS obligations
and transfer the resulting pension surplus to the postal Retiree Health
Benefits Fund. This would allow the Postal Service to fully pre-fund
retiree health benefits as mandated by Congress.

This transfer of pension assets would not alter the government’s fiscal
condition, as it represents a shift from one government retiree trust
fund to another.

The transfer of pension assets also would not affect the Postal Service’s
pension plans, which are already 99.5% funded. By comparison,
the rest of the government’s plans are funded at 41.5% and the
average funding level at large companies is about 80%.

Please write your Representative to Congress and demand a Fair and Accurate Accounting of the Postal Service's Health and Pension Funds.

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