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. Darth Cheney

    In 2006, Republicans owned every branch of government. Would I sound cynical to suggest that this law was specifically designed to destroy the Postal Service?

    August 19, 2011 at 8:28 am | Report abuse |
    • Ryan

      Yep – blame it on republicans. You ALWAYS hear republicans talking about how the government should be forced to give MORE to the unions. You remind me of the tin foil hat crowd that regularly listens to folk like Glenn Beck.

      This was a democrat piece of legislation that was given to them by the Bush administration so that they would continue to allow Bush to pursue the funding for this wars. You see, democrats are just as greedy as the republicans. You throw a couple of stupid pieces of special interest legislation in their face and they take it without caring about what happens to the MAJORITY of people who dont live within these special interest groups.

      Gotta love sheeple......

      August 19, 2011 at 8:40 am | Report abuse |
    • coder

      not really, but then again – no 'previous' branch of government will ever accept any responsibility – and that's the problem with politicians – they have zero accountability. When they screw the country, they go work as a lobbyist or a board member making outrageous salaries for the damage they have inflicted on america.

      August 19, 2011 at 8:44 am | Report abuse |
    • Havildar

      That was the idea by Cheney/Bush nuts in congress. It was selectively applied to the USPostal Service only not FedEx UPS or even to Congress and other Federal Agencies/ Private Corporations. Why not??

      August 19, 2011 at 8:48 am | Report abuse |
  2. William Demuth

    Lets be honest.

    The Post Office is an advertising company. Its service is to shuffle meaningless enviormentaly damaging junk mail that isn't even addressed to a specific individual.

    Close it and our enviorment IMMEDIATLEY gets a huge shot in the arm.

    As for the union worker, perhaps we could offer them routes in Kabul? That would certainly reduce long term benifits issue.

    August 19, 2011 at 8:30 am | Report abuse |
    • Ryan

      So why dont we harken back to the Paul Revere days and deliver mail on horseback? It appears as if the main argument for keeping the post office going is because it will put more people out of work. Hmmmm – with this mentality we might as well eliminate all computers and type letters on a typewriter, throw away cellphones and bring back the old school "switchboard" land line phones, etc. etc. You get the point.

      If the Post Office wasnt so much entwined with special interest politics – it would have been re-orged a long time to fit the needs of today. This would include only 4 days of delivering mail and rolling back their unsustainable retirement packages.

      August 19, 2011 at 8:43 am | Report abuse |
    • Havildar

      It seems that William Demuth has just applied for a route in Kandhar. But due to his poor education he might not qualify even for a Job in a 3 rd world nation.

      August 19, 2011 at 8:50 am | Report abuse |

      Sounds like you are jealous that you aren't a union worker and not being paid like you should be. This is why America is like it is. Be that way towards people who really make money like the millionaires and billionaries instead of union workers who just make enough to be in the middle class range. That is a great idea you have to make everyone in the country either rich or poor and do away with the middle class. Who will pay the bills then? They goverment has to give the poor money and the rich don't pay taxes. You are an IDIOT!

      August 19, 2011 at 9:34 am | Report abuse |
  3. Craig

    Does anyone remember last year's Census? The heavy volume of field work administrative materials (including sensitive stuff like workers' fingerprints) was not handled by the USPS but by FEDEx contract.

    August 19, 2011 at 8:30 am | Report abuse |
    • itsjustme

      Um, OUCH?

      Sheesh....sure the benefits are killing it for them! And us mainstream people who are out looking for another job are finding out that the companies are too damn cheap to go for ice water; $14 an hour for an admin assistant job and don't even ask how lousy the benefits are - and this bunch in the Post Office is walking away with what? Come ON!

      August 19, 2011 at 8:34 am | Report abuse |
    • Havildar

      Even FedEx sends it's stuff by USPS to places that it does not deliver. Think it comes to you be magic?

      August 19, 2011 at 8:59 am | Report abuse |
  4. Common Sense

    To the Union rep claiming funding need only be 30%, rather than wonder if the funding percentage should be 100% per the rule or 30% like other agencies, shouldn't the funding percentage be that which is adequate to cover the future liability, with a little cushion thrown in to cover market downturns? This is another poorly written article in which the reporter doesn't understand the issue and, therefore, is unprepared to ask the appropriate questions.

    August 19, 2011 at 8:31 am | Report abuse |
    • steve

      Of course you are correct. By not funding or at least recording the liability they could pretend (like the fed govt does) that the expense will never exist and promise benefits without any corresponding revenue. What a concept – that leads to a trainwreck later.

      August 19, 2011 at 8:35 am | Report abuse |
    • Havildar

      What is left out that the retirement fund is running a gaint SURPLUS as the pool of civil service retires keeps getting smaller each year. By the way remember the Bush era Anthrax attacks?

      August 19, 2011 at 9:02 am | Report abuse |
  5. lee banks

    i had a thank u note ,mailed from friends that live 6 miles away ,but the letter went from our city to a main hub 120 miles away then back to us. that may be another reason for their loss of revenue.postal service is like our goverment,need to do a do over

    August 19, 2011 at 8:32 am | Report abuse |
    • Which Is It?

      You want the Post Office to be smaller or eliminated all together, yet you complain when stuff has to be sent further for processing because local plants are closed or being closed. Good logic.

      August 19, 2011 at 9:08 am | Report abuse |
  6. steve

    Completely wrong.

    Public companies are required to record as a liability the present value of any future obligations. They don't have to fund with cash, but the future liability, if promised now, is reflected on the books as a reserve the same as money spent.

    It is the RIGHT way to account for things, showing the costs of promises made now, whether they are paid at this moment or the bill deferred.

    August 19, 2011 at 8:34 am | Report abuse |
  7. Postal1

    First, to set things straight I work for the PO. The problems are the way they are due to many things and mostly technology. Things will happen as they will, we are too small to make a change or undo the damage already done. For the people with the wize cracks, remember who we are the next time you send something via mail to family or a sweetheart. I'm positive everyone in your life does not read email or has electronic deposit. And yes, we have to right to retire like everyone else. Not everyone is in Management so blaming one perticular office and assuming the rest are the same is stupidity. Most countries charge way more to mail a letter and if we raised costs it would probably help but see, what most people don't understand is that we can't do that. Congress tells us what to do. Thats why we are bound to the Government as we are. I just hope the storm blows over without too many families paying the price on both ends. We are all human and care.

    August 19, 2011 at 8:35 am | Report abuse |
    • James

      Postal 1, I totally agree in what you are saying. I am a retired military vet and now I'm a city letter carrier. I love my job except for a few things. We have way too many chiefs and not enough indians. I'm sick and tired of hearing about management bonus and if we don't get the mail out in time or if we go into overtime, it will affect their bonus. Get rid of some of these management positions and the people that sit at computers and call post offices to tell post masters their carriers aren't doing their jobs, just by looking at a computer screen. No matter what, you can't walk the route in the exact same time every day, you have weather, vehicle, packages, and certified letters that will affect your time. Get rid of those useless jobs, all you hear is cut down but they are actually creating more jobs that are just plan stupid.

      August 19, 2011 at 8:59 am | Report abuse |
    • Tee Ballin

      Exactly, we ARE NOT subsidized by the gov. How bout telling the public where the profit went before the "pre-funding" issue. Which the USPS has always done in non-contract years. The USPS needs to be operated under ALL the existing rules it does now but management should be cleared out and privatized. Then the american public would be thanking us for this cheap service and be able to actually see the profit we generate which, in effect goes to keeping taxes lower.... Unless they'd like to pay for black ops out of pocket that is.

      September 5, 2011 at 8:54 pm | Report abuse |
  8. James Dugan

    This is a good policy in the end because it doesn't have the Federal governments and courts decide on how much the workers actually get. All pensions should be fully funded or you have what happend to TWA and Bethlehem Steel, companies that went bankrupt, and were spending the pension money along teh way. This is a promised benefit and should be secured. Most of the people who complain about this argue that Fed has spent the Social Security money on wars and services - the deficit in the program is caused by IOUs. Keep the policy

    August 19, 2011 at 8:38 am | Report abuse |
  9. Former USPS worker bee

    Privatize USPS

    August 19, 2011 at 8:39 am | Report abuse |
  10. Mike

    I'm the first person to see that lower mail volume (e-mail, less advertising, less paper bills) will equal lay-offs and closed Post Offices, BUT the USPS was a great example of a successful "government" program until 2006. When Congress required they cover future pensions, they made an asinine request that no business would be able to cover.
    Lay-off and close where you really don't need them, bump up postage a bit, and let it continue.

    August 19, 2011 at 8:40 am | Report abuse |
  11. Sebas56

    Why would the government want the USPS to wholly pre-fund its retirement health package? Oh because the government wants to stick their hands in that cookie jar and leave some IOU receipts.

    August 19, 2011 at 8:42 am | Report abuse |
  12. Kevin

    Another thing over looked here is they said the USPS had 8.5 billion in debt last year. The prefunding for retirement was 5.5 billion. They are still operating at 3 billion over budget. Cuts still have to be made.

    August 19, 2011 at 8:42 am | Report abuse |
  13. Walter Lee in Texas

    This may be the only sane law that Congress has passed. It says that pensions must be fully funded. Thank God that mine is (Presbyterian Church). If everything shut down tomorrow and no more contributions were paid into our system, every dime promised to members would be paid. What people are objecting to is not allowing the Post Office to run a ponzie scheme like Social Security in which the retirement of a half a million people have to be paid out the day to day proceeds of the Post Office. Ain't it awful that Congress has told somebody that you have to pay as you go, in contrast to kicking the can down the road. The whole government is going down because it is borrowing 40% of every dollar it spends and now they're crying because the won't let the Post Office do it to. Bottom line, we are in for hard times and hard adjustments, but we're in better shape to make them now than we will be when the debt is 25 or 50 trillion. Balance the budget. Pay down the debt. Stop doing things we can't afford, no matter how good they are.

    August 19, 2011 at 8:42 am | Report abuse |
    • Havildar

      Hey Walter Lee from Texas the land of tall tales Bush/Perry does your company prefund retirement at 100%??? Maybe you do not work. The law is ONLY applied to the U.S.Postal Service not Congress, Not anof the other agencies, Not UPS, or FedEx , or any other Corporation Private of Government. This fund is running a huge SURPLUS unlike anything this republican congress has soiled.

      August 19, 2011 at 9:09 am | Report abuse |
  14. ELH

    Charge a price for junk mail that returns a 10% net profit. If the businesses don't like that, they can use UPS or FedEx.

    August 19, 2011 at 8:43 am | Report abuse |
  15. JackInNH

    At least 75% of what shows up in my mailbox every week is advertising that I did not ask for and is simply tossed in the trash. Waste of paper for sure. USPO is up against the internet for email and media downloads, competing shipping companies and a huge benefits package for all those workers. Welcome to reality.

    August 19, 2011 at 8:48 am | Report abuse |
    • Postal1

      The waste of paper is not the fault of the USPS. You probably sort through more electronic spam mail anyhow. FYI the USPS offers many electronic services these days as well. UPS and FedEx will never handle letters btw.

      August 19, 2011 at 8:51 am | Report abuse |
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