Retirement Plan Contributions Could Lead to Postage Increase

March 4, 2003 ( - The postage rate increase threat has been raised to orange in the past several weeks, because of Congress' refusal to back legislation allowing the Postal Service to make lower retirement plan contributions.

A Treasury Department audit revealed that the Postal Service has nearly paid off obligations for some current and future retirees, bringing liabilities on this retirement account down to an estimated $5 billion, as opposed to the previous $32 billion estimate (See  Post Office “Delivers” Extra Pension Funds ). However, Congress’ refusal to approve lower postal worker retirement contributions may lead to yet another hike at the stamp machine, according to a Wall Street Journal report.

Rubber Stamped?

Under the proposed amendments, the Postal Service would be able to reduce contributions for workers in the Civil Service Retirement System fund, currently used to provide benefits for employees who joined the service before 1983.   Allowing the agency to make the smaller contributions would then free up enough extra funds to reduce the Postal Service’s debt by $3 billion by the end of the fiscal year and postpone the next rate increase until approximately 2006.

Additionally, Postal service employees who joined after 1983 have been on a different retirement plan.   Current contributions and future benefits will not be affected by the discovery.

The Postal Service has previously said it plans to use the extra money to reduce debt and preserve current postage rates.   However, if Congress continues to stalemate on the issue, Postal Service officials may begin the process of requesting their next rate increase as early as next month, almost two years earlier than anticipated.