As you may have heard, President Biden signed the Postal Service Reform Act into law. This historic legislation is expected to stabilize the U.S. Postal Service’s (USPS) finances and enable it to modernize its services.
The Pain of the Post Office
The Postal Service Reform Act eliminates the USPS’ unusual and onerous legal requirement to pre-fund retiree health benefits of current and retired employees for decades in the future. What? Yes, the USPS has been held back from financial health for years. Here’s what happened.
The USPS was actually profitable until 2006, when Congress passed the Postal Accountability and Enhancement Act (PAEA). It required the USPS to calculate all of its retiree pension and healthcare obligations for decades in the future, including people it hadn’t even hired yet. Under the PAPE, The USPS was obligated to remit approximately $72 billion over ten years. This burden applied to no other federal agency or private corporation and significantly contributed to the enormous losses reported on USPS’ balance sheet.
As reported by the Institute for Policy Studies in 2019, if the costs of this retiree healthcare mandate were removed, the USPS would have reported operating profits for a number of years. The USPS Office of Inspector General explained this painful situation well in their blog back in 2015. “What if your credit card company told you: ‘You will charge a million dollars on your credit card during your life; please enclose the million dollars in your next bill payment. It’s the responsible thing to do.’ Doesn’t seem quite right, does it?”
Special Delivery for USPS
The Postal Service Reform Act frees the USPS from the burdens under PAEA. The House Oversight Committee estimates that the USPS will save $50 billion over the next decade with the passage of this new legislation.
Critical parts of the legislation include:
- Eliminates $57 billion in past-due liabilities to the USPS’ retiree health benefits fund
- USPS is no longer required to pre-fund retiree health benefits for its employees, which led to past-due liabilities (estimated $27 billion in savings over next ten years)
- Future USPS retirees will be required to enroll in Medicare (estimated $23 billion in savings over next ten years)
Removing the PAEA requirements allows the USPS to reinvest in its workforce and infrastructure. The new legislation also institutes three additional improvements:
- USPS will maintain a 6-day a week delivery service
- USPS will create a public online dashboard to track national delivery times
- The USPS can contract with state, local, and tribal leaders and governments to offer non-mail services, such as hunting and fishing licenses
This legislation releases USPS from an unsustainable business model, allows the USPS to invest in capital projects, research and development and increases its flexibility to take on future challenges.