The money-losing U.S. Postal Service is hoping the Justice Department will resolve a dispute with the Office of Personnel Management (OPM) over the fate of billions of dollars in overpaid retirement payments for postal workers.
The rare request for the Justice Department’s intervention will affect not only postal retirees, but also billions of dollars that postal officials say they need to free up cash to pay contractors, suppliers and employees. The Postal Service said Wednesday it will suspend its contributions to its employees’ pension fund.
“Basically we have a dispute with OPM,” Tony Vegliante, chief human resources officer for the Postal Service, said in an interview. “We believe they should apply our overpayment to our current bills.
“When two agencies have a dispute, the Department of Justice will adjudicate,” he said.
In a statement Wednesday, OPM officials said they, too, want the Justice Department’s office of legal counsel to help resolve the dispute over pension contributions.
“The U.S. Postal Service is facing serious challenges,” OPM officials stated. “OPM is sympathetic to the situation in which the Postal Service finds itself, and we stand ready to help the Postal Service in whatever way we can, consistent with our legal obligations as the fiduciary for the Retirement and Disability Trust Fund.”
In announcing plans to suspend the transfer to OPM of employer contributions to the Federal Employees Retirement System, which come to $115 million per week, because of ongoing money woes, Sen. Thomas R. Carper, Delaware Democrat and chairman of a subcommittee overseeing postal issues, called the move “drastic” and likened it to a “canary in the coal mine moment.”
“If we don’t heed this warning and act quickly, the Postal Service as we know it will cease to exist in the very near future, possibly by the end of the fiscal year,” Mr. Carper said.
“This would effectively shut down the U.S. mailing industry that depends on the Postal Service,” he said. “A shutdown of an industry of its magnitude, with some 7 million employees and more than $1 trillion in revenue, would be catastrophic to our fragile economy.”
He said pending legislation that he introduced would help avert a financial crisis by allowing the Postal Service to use overpayments made into the Federal Employees Retirement System, as well as more than $50 billion in overpayments to the older civil service retirement system, to meet other postal expenses.
Postal officials also want permission from Congress to eliminate home delivery on Saturdays.
The Postal Service doesn’t accept tax dollars for operating expenses, relying on revenue it produces, but it has accepted billions of dollars in loans from the U.S. Treasury. It is nearing its borrowing limit of $15 billion from the Treasury Department’s Federal Financing Bank, but postal officials have no plans to ask to be allowed to borrow even more money.
In May, the Postal Service announced a net loss during the second quarter, from Jan. 1. to March 31, of $2.2 billion, compared with $1.6 billion during the same period last year. Officials attributed the losses to a sluggish economy and continued drops in mail volume.
Cliff Guffey, president of the American Postal Workers Union, urged Congress to allow the Postal Service to apply pension overpayments toward meeting billions of dollars in payments to prefund retiree health benefits.
“We will take every step necessary to ensure that retirement benefits are protected,” Mr. Guffey said. “We are currently evaluating the best course of action. Postal workers did not cause USPS financial problems and their retirement benefits should not be jeopardized to solve them.”
Mr. Vegliante said the Postal Service would suspend making employer contributions to the Federal Employees Retirement System starting Friday, a move he estimated would free up about $800 million this fiscal year.
Postal officials said they are working to reduce costs by cutting the workforce and closing smaller post offices. The officials said the suspension of payments to OPM would not affect current or retired postal employees.