Is benefits law dragging down the Postal Service?
August 18th, 2011
11:18 PM ET

Is benefits law dragging down the Postal Service?

The U.S. Postal Service is in a precarious financial situation, telling Congress it faces the "equivalent of Chapter 11 bankruptcy." Losing billions of dollars a year, it is considering whether to close more than 3,600 post offices and lay off tens of thousands of workers.

The service faces many problems, including a drop in mail volume in recent years. But the service, which employs nearly 572,000 people, says some of its difficulties are inflicted by the federal government through a law governing how the agency funds workers' retirement health benefits.

In 2006, Congress passed a law requiring the Postal Service to wholly pre-fund its retirement health package  that is, cover the health care costs of future retirees, in advance, at 100%. The Postal Service, which is a corporation owned but not funded by the federal government, is the only government-related agency required to prefund retirees' health benefits.

"No one prefunds at more than 30%," said Anthony Vegliante, the service's executive vice president.

Sally Davidow, spokeswoman for one of the unions that represents postal workers, calls it a "a ridiculous requirement."

"(The requirement is) so ridiculous, Congress doesn't do it. No other government agency does it. No private businesses do it," she said. "It's $5.5 billion a year, every year, for 10 years. That's what is causing the problem.

"The law was passed in 2006 and lo and behold, ever since 2007, the Postal Service has been suffering a tremendous debt."

The Postal Service reported a net loss of $8.5 billion last fiscal year.

The American Postal Workers Union and the National Association of Letter Carriers don't want to lose the benefits. But Davidow says a solution is possible.

Click the audio player to hear the rest of the story from CNN Radio's Jim Roope, and hear what Davidow says should be done, and why some legislators oppose the plan:

You can also listen to the CNN Radio Reports podcast on itunes or subscribe to the podcast here.

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soundoff (431 Responses)
  1. mejazzbo

    What goes around comes around... bye bye!

    August 19, 2011 at 10:39 am | Report abuse |
    • mejazzbo

      What's "dragging down the Postal Service" are postal employees.

      August 19, 2011 at 10:44 am | Report abuse |
  2. vmaxnc

    Where do the $$$billions in losses come from? Is the USPS borrowing to cover those losses, or is the government funding them? I know the article says the govt doesn't fund the USPS, but where does that money come from?

    It's just stupid to be driven out of business by a ridiculous law. The USPS needs to be sold to a private investor. Then maybe it will be run as a business should.

    August 19, 2011 at 10:43 am | Report abuse |
    • IceT

      I completely agree, It's just stupid to be driven out of business by a ridiculous law. That's how ALL business owners feel, but yet it keeps happening, & is getting worse. The post office is no different.

      August 19, 2011 at 10:49 am | Report abuse |
    • Dano

      vmaxnc..it isnt the law that is driving them out of business..again do the BASIC Math

      They are spending 5.5 billion a year funding retirement ..if they didn't fund it at all they are still LOSING 3 BILLION a Year

      They will lose 8.5 BILLION this year ..subtract the 45.5 billion retirement(pretend you just wont pay it) = 3 BILLION Loss

      August 19, 2011 at 10:59 am | Report abuse |
  3. Ivan Bial

    wake up–revenue is the issue e-mail and the internet has eliminated the need for most mail

    August 19, 2011 at 10:43 am | Report abuse |
    • Terri

      Yep, but no one will pay attention to logic. The USPS, like most other areas, has lost the need for employees thanks to technology.

      August 19, 2011 at 10:53 am | Report abuse |
  4. zhawk88

    *sigh* ... Congress is great ain't it?

    August 19, 2011 at 10:43 am | Report abuse |
  5. Reality Check

    The horse & buggy unions fought like kids in the back of a station wagon too, but eventually reality has to set in. Problem is they are owned by the Gov. where reality has little to do with economics.

    August 19, 2011 at 10:45 am | Report abuse |
  6. Dano

    simple math

    The Postal Service reported a net loss of $8.5 billion last fiscal year.

    If they didn't fund Retirement at all ... $5.5 Billion

    8.5 Billion – 5.5 Billion = 3 Billion a Year Loss

    The Postal Office has been a create Foundation of our Country but it is no longer relevant in our high tech Society

    August 19, 2011 at 10:45 am | Report abuse |
    • Don F.

      But the cost of retirement is only part of the issue. What about the revenue side? The USPS should be generating enough revenue to cover reasonable operating costs. Now what is reasonable is open to debate. The giant subsidy for the junk mail industry is not reasonable by any measure.

      August 19, 2011 at 10:51 am | Report abuse |
    • Don F.

      What other industry is the cost of retirement greater than 50% of revenue. My cost is less than 50% of my salary and total compensation is less than 50% of the revenue. So my plan is below 25% of revenue.

      August 19, 2011 at 11:07 am | Report abuse |
  7. Bellabiv Devot

    Gotta love the guvment!!!

    August 19, 2011 at 10:46 am | Report abuse |
  8. Ted from NY

    "Low and behold"? Doesn't anyone speak or write correct English anymore?

    August 19, 2011 at 10:47 am | Report abuse |
    • Chicagojulep

      I thought the same thing.

      August 19, 2011 at 10:54 am | Report abuse |
    • Hugo Ahlquist

      You must be new to the Internet. Precise, concise and correct English is long gone from here.

      August 19, 2011 at 11:01 am | Report abuse |
  9. Terri

    Why do ANY government employees still get a pension? The private sector realized this was not sustainable years ago yet the private sector still pays taxes to supply a pension for government employees. We have to put money back for our own retirement, ALL government employees should as well.

    August 19, 2011 at 10:48 am | Report abuse |
    • Don F.

      Not sustainable? If it is truely not sustainable then it can't work for individuals either. What is not sustainable is non-prefunded plans - i.e. plans that do no set aside funds each year on a actuarially sound basis. Paid my employer or employee is only a smoke and mirrors game as is health insurance. Someone has to pay and if it is not paid on an ongoing basis it is not sustainable and if it is rising higher than inflation it is not sustainable.

      August 19, 2011 at 10:55 am | Report abuse |
    • vfr800cr250

      If it's not sustainable for an employer, why is it sustainable for an employee? I don't think sustainability has anything to do with it. Profitability has everything to do with it.

      Middle class income has remained virtually unchanged (in adjusted dollars) for more than 30 years. Upper class income has doubled in the same time. If you want to help the rich enjoy your retirement though, you go right ahead.

      August 19, 2011 at 10:57 am | Report abuse |
    • Terri

      Don F, insurance works (until the market crashes) because they invest the money they get for your premium just like a 401k.

      August 19, 2011 at 11:05 am | Report abuse |
  10. Daveil

    "Hi! I'm from the Government and I'm I here to help! You need to make gold plated buggy whips as the demand will absorb the costs."

    August 19, 2011 at 10:51 am | Report abuse |
  11. earlbowden

    "(The requirement is) so ridiculous, Congress doesn't do it. No other government agency does it. No private businesses do it,"
    "The law was passed in 2006 and low-and-behold, ever since 2007, the Postal Service has been suffering a tremendous debt."

    NO mention of why they had to introduce the law – so it's tough to argue the point. But, if it's going to sink the business, make another law getting rid of it, or at least get the percentage down to what most everyone else is doing.

    August 19, 2011 at 10:52 am | Report abuse |
  12. NobodyCare

    I have never seen an organization as dyfunction as the Postal Service. The people there are just lazy and slow. The customer service is so poor that if you have an alternative choice you just don't return. The Postal Service reflects how this country has been run in the past and present.

    August 19, 2011 at 10:52 am | Report abuse |
  13. Will

    The postal service is the second largest employer of Americans only behind walmart at 572,000 employees. Yes, the postal service does pay VERY good wages, AND those good wages help support the US economy in a HUGE way. Just think about the service or product YOUR company produces, postal service employees are much more likely to be able to afford your product or service at their current salaries. So don't be so quick to say "cut their wages". That's not always the answer.

    August 19, 2011 at 10:53 am | Report abuse |
  14. Tom

    [youtube=http://www.youtube.com/watch?v=U5X4N2exOsU&w=640&h=390]

    August 19, 2011 at 10:54 am | Report abuse |
  15. brain trepaning

    Some contractual agreements should not be legal through email or fax. Make certain contracts require delivery in a date-stamped envelope to be legally binding and that would put a bit more business in the postal service. Also, jack up the costs, the price of sending letters is too cheap.

    August 19, 2011 at 10:54 am | Report abuse |
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