Future postage rate increases could be delayed until 2006, Postmaster General John E. Potter said today.
The delay depends on Congress changing the law that controls how the United States Postal Service funds its employees’ retirement.
If the law is not changed, the USPS will likely file a new rate case with the Postal Rate Commission next spring that could lead to higher postage rates in 2004.
In comments at the Postal Service’s monthly Board of Governors meeting, Potter said that a new financial analysis by actuaries at the U.S. Office of Personnel Management found that retirement payments for postal employees and future retirees were miscalculated.
The review found that the current retirement formula used overly conservative interest assumptions the USPS contributes for its employees' retirement, which created an overpayment of pension liabilities.
The Postal Service maintains a deferred liability of $32 billion to pay for postal employees’ retirement. Annual payments are budgeted to fund the liability over 30 years.
The new analysis found that the funding gap is only $5 billion.
Changing the formula would require an act of Congress. Potter said he believed the Administration would support the law change.
"[The new analysis] enables the governors of the Postal Service to look at rapidly approaching rate-making decisions in a new light if the legislation were enacted in the near future," Potter said, in a statement.’’
A new law would result in a reduction of postal costs of $2.9 billion in fiscal year 2003 and another $2.6 billion in fiscal year 2004.
The USPS would be able to fully fund all of its future pension liabilities and correct its payment schedule for past liabilities.
The Direct Marketing Association supports the law change. "Congress would, in effect, be helping to keep a lid on otherwise rising postal costs," said a DMA statement, applauding the USPS announcement.
"I look forward to working with Congress, the Administration, the Postal Service, postal employee groups and all mailing groups to make certain that the Postal Service's retirement formula is changed very quickly," said Jerry Cerasale, senior vice president, government affairs at the DMA.
"No one should be lulled into a sense of complacency that all is right with the nation’s postal system," Potter said in a statement. "That’s simply not true."
If the law changes extending the rate cycle, "customers will be able to focus on growing their use of the mail," Potter added.
