Obama Proposes Deferral of USPS Retiree Health Plan Payments

September 20, 2011 (PLANSPONSOR.com) – As part of President Barack Obama’s deficit-reduction plan, the payments from the U.S. Postal Service (USPS) to its retiree health plan would be deferred for the next two years. 

According to an article from Bloomberg, by deferring $13.8 billion in retiree health benefit payments the money could then be used for postal operating expenses.

Also as part of the plan, the service would be allowed to stop delivering mail on Saturdays, and be refunded $6.9 billion it paid into a federal retirement program (see Postal Service Wants to Withdraw from Federal Retirement Plan). The proposal would also allow the agency to enact a one-time rate increase of 5.6%.

USPS also is looking into closing as many as many as 252 mail-sorting plants and 3,700 post offices and eliminating 220,000 jobs.

President Obama’s plan aims to give USPS $20 billion over several years and reduce the federal deficit by $19 billion over 10 years.

The article states, ending Saturday delivery will save at least $2.5 billion a year once it is fully implemented, or $19.4 billion over 10 years. A 5.6% rate increase could also bring in $1 billion a year in additional revenue, and $9.5 billion over 10 years.

Without the enactment of legislation by the end of this month, the USPS will face default on the congressionally mandated $5.5 million payment to pre-fund retiree health benefits. (See USPS On Brink of Default on Payment to Pre-Fund Retiree Health Benefits).