Struggling under the weight of mandatory future retiree benefit payments, the U.S. Postal Service said it would move to a five-day schedule in August to save $2 billion a year.
It would still drop off packages on Saturdays and mail would be deposited in post office boxes. The agency contends that it has the authority to reduce service, but some in Congress argue that legislators should make the decision.
In November, the agency reported a record annual loss of $15.9 billion for the last budget year and forecast more shortages in 2013. Since 2006, the USPS has cut annual costs by about $15 billion and reduced the size of its career workforce by 28 percent, or 193,000 employees, officials say.
The agency’s biggest problem was not due to reduced mail flow but rather to mounting mandatory costs for future retiree health benefits, which made up $11.1bn of the losses. Without that and other related labor expenses, the mail agency sustained an operating loss of $2.4bn, lower than the previous year.
The health payments are a requirement imposed by Congress in 2006 that the post office set aside $55b in an account to cover future medical costs for retirees. The idea was to put $5.5bn a year into the account for 10 years – $5.5bn the post office doesn’t have.
No other government agency is required to make such a payment for future medical benefits. Postal authorities wanted Congress to address the issue last year, but lawmakers finished their session without getting it done. So officials are moving ahead to accelerate their own plan for cost-cutting.