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For four days at the end of June, retired letter carrier Jamie Partridge and nine other current and former postal workers didn’t eat. They were on a hunger strike to protest what the group saw as the biggest threat to the U.S. Postal Service’s continued existence: Not e-mail’s steady encroachment on snail mail’s territory, not a prolonged economic downturn or the growing popularity of corporate shipping services, but government-mandated payments to pre-fund health care benefits for postal retirees—75 years into the future.

“To call out that Congress was starving the postal service, we were starving ourselves,” Partridge says. Private-sector companies—and even most other branches of the federal government, like, say, the Army—aren’t required to fund their health benefits so far in advance. It’s an albatross of a financial burden on the Postal Service, hidden beneath the more striking headlines about shrinking mail volume—down more than 21% since its 2006 peak—and plummeting revenue. Indeed, in the first three quarters of 2012, the Postal Service lost $11.6 billion, more than twice what it lost during the same period in 2011.

“There is red ink, but the overwhelming share has nothing to do with mail volume, the Internet, or other factors related to the mail,” says Fredric Rolando, president of the National Association of Letter Carriers. The retiree health payments account for nearly 80%, or $9.2 billion, of the first three quarters’ losses, and they “not only have exhausted the Postal Service’s profits, savings and borrowing authority, they also have distracted the USPS from addressing the structural issues that do indeed exist as society changes,” says Rolando, adding that there are “plenty of opportunities” in mail, including e-commerce shipping. “The prefunding of retiree health benefits for future retirees is a major cause of our financial crisis—but not the only cause,” says a USPS spokesman, citing decline in first-class mail as another major cause.

While many industry groups, including the Postal Regulatory Commission, have recommended that the health care payments—the result of a congressional mandate passed in 2006, before the Postal Service’s problems started—be reduced to alleviate the burden, there is one massive roadblock: the federal budget. Because the retiree health prefunding payments are counted in federal funds, they are tied into the nation’s budget, which some experts say amounts to the USPS subsidizing government operations. “So the Postal Service has been a kind of cash cow for the federal government for the last 40 years,” says Postal Regulatory Commission chairman Ruth Goldway.

On Aug. 1, for the first time since the 2006 mandate, the Postal Service did not pay its $5.5 billion annual retiree health benefits bill, and announced that it’s likely to default on the next payment too, due Sept. 30. While the announcement raised red flags of concern for the welfare of retiring postal workers, experts, including postal employee unions, contend that the retirees will be fine—or may even be better off—if the USPS doesn’t pay another cent into the fund for a long time. Indeed, Postal Service inspector general David Williams wrote a letter to the Senate earlier this year recommending just that: eliminating the annual payments and letting the $44 billion fund grow with interest.

Despite the Postal Service’s debt, its retiree benefit coffers are beyond full. Its pension funds are more than 100% funded, compared with 42% for all federal pension funds and 80% for the average Fortune 1000 pension plan. That “astonishingly high figure,” according to Williams, amounts to a “war chest” of resources that will take care of older workers for decades to come.

“The irony,” says the NALC’s Rolando, is that “today’s postal retirees, and future retirees, are well protected,” while the Postal Service’s financial status is in jeopardy. If it continues to struggle financially, it will likely cut back on post office locations and hours as well as delivery service—which some experts say could disadvantage retirees and other Americans who rely on the Postal Service for efficient correspondence.
LOTS more at http://www.marketwatch.com/story/10-things-the-postal-service-wont-tel
l-you-2012-08-27

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