How Healthcare Expenses Cost Us Saturday Postal Delivery

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Christine Balderas / Getty Images

Wednesday’s announcement that the United States Postal Service would halt Saturday delivery to help fix its financial mess sounded like a good move for the deficit-laden agency. After all, Postmaster General Patrick Donahoe says it will save the post office $2 billion a year.

But put in the context of $20 billion projected annual deficits, that $2 billion savings starts to look a lot less substantial.

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A number of factors are behind the post office’s deficit problems: More of us use e-mail and text messaging to stay in touch, driving down mail volume; private competition from carriers like UPS and FedEx has chipped away at the Post Office’s package delivery service business; and USPS processing and distribution facilities have long been considered bloated and inefficient compared to private shippers. But the biggest obstacle to postal reform, by far, is the problem of funding Congressionally mandated pre-retiree health benefits.

Since 2006, the Post Office has been legally required to pre-fund health benefits for future retirees at a cost of around $5.5 billion a year. For the first time last year, it defaulted on its annual payment.

When Congress imposed those mandates in 2006, the Post Office was doing just fine. Digital communication had yet to take such a huge bite out of the amount of mail the USPS processed and delivered. First-class mail volume was about 97 billion pieces in 2006. So there wasn’t much of a backlash when Congress decided that the Post Office was healthy enough to lock in health benefits for future retirees — for the next 75 years, mind you, something no other public or private agency does.

Two years later, the U.S. was hit by the Great Recession at around the same time  that mobile communication and things like online bill payments were growing at explosive rates. The Post Office began reporting massive deficits from which it has yet to recover. Last year it delivered only 68 billion pieces of mail.

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So far the Post Office has placed about $44 billion in that pre-retiree account. Without the mandate, the Post Office’s financials — while still not completely healthy — would be much more stable.

In a sense, the problems facing the Post Office are a microcosm of what’s happening with retiree benefits in the U.S. more generally. As a nation, we’ve promised benefits to retirees that either we can’t afford or aren’t willing to fully fund.

On Wednesday, Donahoe did mention the billions that the postal service is required to set aside each year, saying that the proposal to drop Saturday delivery is only part of a long-term plan to get the agency back in the black. While Donahoe believes he can change postal delivery schedules without Congressional approval, restructuring the pre-retiree health fund is a different matter altogether.

If the proposal moves forward and Congress allows the post office to go to 5-day rather than 6-day delivery, expect Saturday delivery to stop in August — and you can largely thank that Congressional mandate for your empty mailbox.

Correction: A previous version of this story reported that the post office had placed about $21 billion in the pre-retiree health fund. According to the U.S.P.S. Office of the Inspector General, about $44 billion is currently in the account.

73 comments
kevinrkosar
kevinrkosar

This is a popular misconception: "private competition from carriers like UPS and FedEx has chipped away at the Post Office’s package delivery service business." No, no, no. USPS is carrying more parcels in recent years---Priority Mail is very popular, and FedEx and UPS pay USPS to carry small parcels the final mile. So, USPS's financial condition is not being hurt by its parcel business. USPS is hurting because mail volume has fallen 25% since 2008, and the mail being sent mostly is advertising mail that is not very profitable. First class mail, long a cash cow for USPS, has tanked. And, of course, the overly aggressive prefunding  schedule for future retirees' healthcare benefits bled USPS of cash, but it has not paid into the fund in 3 or 4 years. 

DavidLilley
DavidLilley

If it has to be five days,why not Mondays instead of Saturdays.All government holidays are Mondays except Thanksgiving,Christmas and New Years.It seems to make more sense and there a lot of Monday Holidays.

zelskid1
zelskid1

The prefunding of pension healthcare is the issue

k145a
k145a

So billions are being put into an account where, i assume, someone is making money off of it. So if the USPS goes bankrupt, or is dissolved by congress because they were set up to fail, what happens to the pension fund? Since the fund is composed of future employees that will no longer be hired, who gets the money?

Tonaaay
Tonaaay

@k145a

That's actually a fantastic question! It's obvious that this was partially engineered to sink usps further and make a case for privatization. But could this war chest of healthcare money be part of the move?

kevinrkosar
kevinrkosar

@k145a Hi! The fund is a govt held fund in the U.S. Treasury. By law, it cannot be removed (by law) except to pay for benefits promised to postal employees. Thus, the itterest earned by the bonds in the account is helpful to postal employees. 

ValNostdahl
ValNostdahl

here are some links for researd on the postal situation: American Postal Worker Union 3800, PA first area tricounty local, library online, search in stress in the workplace articals, regarding the passsing of the PAEA and effects on postal employees in the post offices, called " how the ongoing violation of the USPS guiding principles of the USPS are creating a toxic work environment.' 21 page thesis by clerk joy goldberg, copywriiten 2008. , go to www.billburrasjounral.org- misc, in search and find elevator page, and scroll and read ' phoney excuses for diverting usps revenus, and myths versus facts, 2010, go to search , type in ALEC/Koch Cabal the Privitiazation of USPS for Ups and FedEx, bob sloan, vltp.net, april 2012, go to examiner.com, Tim McCown author, ' behind all the schemes and lies of the privitization of USPS, june 2012, go to Michigan Amercian Postal Workers Union and look up the truth about the postal crisis, and go to www.savethepostoffice.com

ValNostdahl
ValNostdahl

In 2006 the PAEA was passed or the Postal Accountibilty and Enhancement act taking 5 billion from the operating profits of the USPS, becasue of the overpayment or overfunding of the retirement systems , due to deficit concerns of congress( gop) so then this is the escrow account places aside for workers not employed yet by the USPS or born yet, for the next 75 years to cover retirments , for 10 year period from 2006 until 2016 with payments made by the USPS out of profits. The PAEA gave bonues to the top 12 exeuctieves also for pay per performance bonues to keep good executive help, and gave a raise to the PMG potter at that time of 72 thousand a year, increased and doubled his 400,000  a year salary with benfiits to 800,000 and gave him a retirmeent package of 5.5 million in 2010. Meanwhile postal employees in the craft unions were told non replacement of retireee when they retired due to the PAEA taking money from the profits, making the workers left behind work harder for same pay and benifits sometimes one 3 to one ratio.

ValNostdahl
ValNostdahl

In 2000, 2001, postal letter carriers , clerks and rural route assoicates were made to pay in an extra 15 percent to their retirement systems under the 1997 budget reconciliation act, both the President and Congress thanked the postal employee for sacrificing and paying a tax increase while others in American were getting tax cuts. The increase was paid in for 2 years and was for budet reasons only. The increase was removed in 2002 from the President budget . ( the USPS was created in 1970, and is considered by law off budget since 1989 by law) Then new legislative law was put in effect after the USPS brought actuaries in to testify to the fully paid retirment systems fers or federal employee retirement system and CSRS or Civil Service Retirment Ssytem ( made for employees employed before 1989 without social security ) fers was overfunded or overpaid by 15 billion dollars and CSRS was overfunded or overpaid by 140 billion, see postal comments to the Federal Trade Commision , august 6, 2007 online.

ValNostdahl
ValNostdahl

In 1917 congress was ignoring the working conditions of postal employees, so a march on dc took place and collective bargaining was formed for a peaceful way to negotiatie labor and managment decisions  , in 1935 the right to unionize was also passed in to law . In 1970 congress was again ignoring the plight of postal employees working conditions, pay and wages not keeping up with the rest of america progress, most were working 3 jobs or on welfare while working for the USP0 , a great postal strike took place and collective bargining was reenforced, and the no strike law ensued for union postal employees.

ValNostdahl
ValNostdahl

the post office , its past record, it present condtion and its potential relation to the new world era, by Daniel Calhoun Roper, chairperson of the united states tarriff commision, first assistant post master general, 1913 -1917 can be found on amazon.com , to read parts of, or go to free google book to read also.

Green Tabs
Green Tabs

Kandice, the Post Office is not facing a problem because they stink. The Post Office is facing a problem because they are owned by the U.S. Government. ANY organization run by our wonderful government is wasting tax payer money. There is no way on earth that bureaucrats will EVER understand or care about the profit principles involved in business. The only thing they care about is 1) their pay check, 2) their retirement plan, 3) how they can increase the amount of health insurance costs we citizens cover and 4) the number of vacation-holidays they have. One of these days we should get around to passing a new amendment to the constitution that forbids the federal government from getting into anything that remotely smacks of business. Nothing. Na da. Not subsidizing mortgages for the for the hopeless, not delivering mail, not insuring our health care. NOTHING!

Kandice Dillow
Kandice Dillow

Deli weed???? Omg this flipping auto correct on an iPhone is for the birds!!!! :/

Kandice Dillow
Kandice Dillow

Post office is facing problems because they stink!!!! I mailed a package last month that still hasn't reached its destination was said to have been deli weed through confirmation yet told the other day it was undeliverable address and was scanned to come back to me. When? They don't know!!!

Turin Gonzalez
Turin Gonzalez

We can't blame capitalism, we haven't had capitalism

Larry L. Cunningham
Larry L. Cunningham

Congress wants the Post Office to be run like a business ...... question which business are they talking about?

Kathleen K Springer
Kathleen K Springer

US has the best postal system in the world. Just so people know - no tax dollars pay for the postal service - it is funded totally by postage. There is really no reason the post office should be having these issues except for what Congress did to it in 2006 under a Republican Congress and the Bush Administration passing a law to require the postal service to fund the pensions of all their employees for the next 75 years within the following 10 years (by 2016) - seems more like an attempt at Union busting and should be reversed. Start saving by firing Post Master Donohoe for his bad decision which will cost the post office even more when millions flock to pay by phone or email. The greeting card industry will suffer and many others as well.

Pat Collender
Pat Collender

Please in the USA don't mourn about the cessation of Saturday post. Here in Ireland we had no Saturday post for the past 40 years.

Bob Packett
Bob Packett

Real problem is requirement to fund retirement accounts out 75 years. The USPS wanted to go to electric vehicles, RepubliCONS rebelled, always looking to privatize.

ChrisJeffery
ChrisJeffery

I do not understand why people can not grasp the fact that when you give really bad customer service you will go out of business sooner or later. The post office clearly dose not understand this. I would gladly pay the extra cash and use fedex. 

Bill Hunt
Bill Hunt

Time magazine should know better. Are they going to turn into Fox News?

Bill Hunt
Bill Hunt

Michael Clementine is correct about what happened. It was a Republican privatization scheme that they got away with. Next to go are the public schools and the line of attack was to defame the teacher's unions. So the rich get richer and the poor get less mail delivery and less learning K-8.

Lindsay Elmore
Lindsay Elmore

70% of people don't care if we get rid of Saturday mail delivery. And the pm general stepped up and said they would get rid of it before congressional approval. Congress will probably vote it down like everything else that makes sense. The post office would do better without congress trying to have their fingers in everything.

Joe Baxter
Joe Baxter

We have the lowest mail service in the world. Maybe conservaties and liberals pay the same

Michael Everest Dominguez
Michael Everest Dominguez

So Republicans in their great and wise thinking thought it would be cool to make the Post Office fund health benefits for future retirees who AREN'T EVEN BORN YET. Another bit of chicanery brought to you by the GOP, like when they short staff or end early voting at voting polls in places that lean Democrat.

Jeff Miller
Jeff Miller

How soon until Congress dips into that pool of funds to help spread around the pork? Er, I meant, "Earmarks."

JasmineGibbs15
JasmineGibbs15

If you think Norma`s story is unimaginable..., last week mom in law basically brought home $7712 sitting there a fourteen hour week from there house and their buddy's mother-in-law`s neighbour was doing this for six months and broght in more than $7712 parttime on there labtop. the guidelines from this address, Fox76.comTAKE A LOOK

misoyoung
misoyoung

USPS NO MORE SATURDAY DELIVERY!  WHAT IS THIS REALLY MEAN?


BobJan
BobJan

All the problems of this country right now result from the stupidity of the US Congress. All 535 of them try and please each of their individual donors. At least 12,000 plus the rest of the country 300,000,000 strong. The country is just too big to govern with the system set up 250 years ago. Needs to be changed plain and simple. Doesn't work anymore. Maybe it never worked. Who knows?

M_OH
M_OH

 @C_Ryback Do you find that substituting an X for ESS in Congress makes you look smarter? USPS isn't bankrupt, they just have negative net income. learn the difference. Second, the only reason the federal government is losing money is because they're selling their GM shares now, while the stock is below the IPO price. Canada isn't sell its shares and will probably profit eventually. BTW, Govt Motors made BILLIONS of dollars in 2012. Billions.

His math is right, you though...have no math, just erroneousness statements making you sound like a crazy. Because seriously, if every government entity, pubilc and private company had to PRE-PAY it's retiree pension and health-care costs like the post office does and not just add a note to an ever increasing liability on their balance sheet, you would see a lot more "bankrupt" companies. Compare the USPS loss to underfunded liabilities from similar sized entities.... the Post Office is just a canary for the rest of the country. We can't afford promised pensions and the sooner that's accepted by the public the easier it is to fix.

romerjt
romerjt

A little perspective is needed here . .  these generous pension deals didn't seem to be a problem back in the 1980s and 90s when, in NYS school districts were SAVING money and the state was giving people incentives TO  RETIRE and get them into the pension funds and off the tax roles . . .  BECAUSE between 1980 and 2000  the DJIA went from 800 to 14,000 (not a misprint) or an increase of about 1500%! and the funds were flush with cash.  The DOW then went to 6000 in 2008 and is finally back to about were it was in 2000.  I'm trying to remember, who was in control of the government from 2000 - 2008?  And nobody went to jail.  

http://stockcharts.com/freecharts/historical/djia19802000.html

C_Ryback
C_Ryback

Sir: given the tone of your writing -- are you suggesting that Congress is to blame? To demand that USPS mgt actually try to live up to their promises? That Congrx "butt out?"

Bruth truth-time: 

like most GSEs and the federal govt, USPS is really BANKRUPT. Spending more than they are taking in. Like Govt. Motors -- which, BTW, was a LOSS for taxpayers.

By your reckoning, should USPS just declare BANKRUPTCY? And be able to legally quit their contracts? And not involve Congrx.?

Next time, please be more frank and direct, and get the math right. Thanks.

kandw101
kandw101

Stop Sat. delivery, close locations that are redundant and last but certainly not least raise the price of a stamp so you guys can break even. Now go back to sleep!!                     IMO

wrathbrow
wrathbrow

If a person works for the postal service for 30 years, they can retire at at 55 with full benefits. Wish you and I could do the same, but we need to work until 67 for Social Security that we paid in to for 100% of benefits. Most police have it even better, and in some placed they can retire in their early 40's.