USPS Halts Pension Contributions

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The United States Postal Service is suspending employer pension contributions for workers beginning Friday, citing a looming cash shortfall, the agency announced Thursday.

The move, which affects the Federal Employees Retirement System (FERS), comes just weeks after the Postal Service warned Congress it could run out of cash in under a year without significant reforms, including changes to pension funding and stamp prices.

USPS has previously reported mounting losses over the years, totaling $118 billion since 2007, as volumes of its most profitable product, first-class mail, fell to their lowest levels since the late 1960s.

The financial strain was further exacerbated by global tariffs, high inflation and recent spikes in gasoline prices, along with growing competition from private carriers such as Amazon, which now delivers many of its own packages.

In March, Postmaster General David Steiner told a House Oversight subcommittee that the Postal Service could run out of cash within a year without major changes.

Steiner outlined potential cost-cutting steps, including reducing six-day delivery, raising first-class mail prices from 78 cents to $1 or more and expanding borrowing authority after USPS hit its $15 billion debt cap.

"In order to survive beyond the next year, we need to increase our borrowing capacity so that we don't run out of cash," Steiner said in prepared testimony. "The failure to do this could lead to the end of the Postal Service as we know it now."

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including reducing six-day delivery, raising first-class mail prices from 78 cents to $1 or more

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The Postal Service Reform Act of 2022 (PSRA) contains several provisions designed to affect the Postal Service's finances and operations. One of the most significant changes in the law has to do with the Postal Service's requirement to fund its retirees' health benefits costs out of its revenues. The PSRA removed the requirement for USPS to fully prefund this obligation by making multi-billion dollar advance payments into a dedicated fund each year to cover premium payments for retirees that might be decades in the future {Specifically 75 YEARS years in to the future **}. The Postal Service though is still ultimately responsible for covering the cost of these premium payments when they are due. In general, individual federal agencies are not responsible for prefunding or paying for these costs.

PSRA makes two changes that should result in cost savings for USPS and the Government. It creates a Postal Service Health Benefit program within the Federal Employees Health Benefits (FEHB) program. It also requires most new retirees from USPS and their families to enroll in Medicare Part B when they are eligible in order to keep their retiree health coverage. These changes started in 2025.

PSRA also has provisions intended to improve the transparency of how USPS reports its service performance. In response to requirements in the law, the Postal Service has introduced a new service performance dashboard. Other PSRA provisions include the regulator reviewing the methodologies used to attribute USPS costs and examining how USPS can process flat mail — items like newspapers and magazines — more efficiently.

There are many other important parts of PSRA, including requiring USPS have an integrated network to deliver letter, flats, and parcels, as well as mandating six-day-a-week delivery.

One PSRA change that affected us here at the OIG is that it made us the Inspector General of the Postal Regulatory Commission.

To read more about the provisions in the law and how they could impact the Postal Service, please read our Primer on Postal Reform.