USPS Suspends Pension Payments Amid Financial Woes

The U.S. Postal Service has suspended contributions to the federal pension program on behalf of postal employees as it grapples with financial difficulties and uncertain long-term stability.

The USPS informed the White House Office of Personnel Management on Thursday that it will stop making payments to the Federal Employee Retirement System on Friday, according to the National Post Mail Handlers Union, and confirmed by a USPS spokesperson. The USPS has not made such a move previously.

“The United States Postal Service is heading toward a cash crisis,” a USPS spokesperson said in a statement to PLANSPONSOR. “The step we are now taking to suspend FERS payments helps conserve cash for our operations and other necessary payments. Given the enormous scale of the Postal Service, $400 million in monthly savings by this action provides only a small financial cushion.”

The move, which postal officials said would conserve cash in the face of a looming liquidity crisis, reflects a broader pattern of deferring obligations to keep operations running. The agency has warned that without structural changes, it could run out of cash as soon as early next year.

“Suspension of the employer portion of USPS FERS payments will not affect the benefits of future or current retirees,” the USPS spokesperson said, without specifying why the suspension will have no effect.

The decision to suspend employer contributions is the latest sign of a deepening financial crisis years in the making, driven by declining mail volume, rising operating costs and a business model deemed unsustainable by federal auditors.

The postal service, which has accumulated roughly $118 billion in losses since 2007, has increasingly relied on temporary measures, including delaying payments for retiree benefits, to remain solvent, according to a recent report by the Government Accountability Office. That report, delivered to Congress last month, warned that the agency’s financial condition is at a “critical point,” noting that it has exhausted its $15 billion borrowing authority from the Department of the Treasury and faces billions in additional obligations in the coming years.

“To avoid a worst-case scenario of illiquidity and inability to fund operations, we are urging Congress to act this year to expand the Postal Service borrowing authority and enact other public policy changes,” the USPS spokesperson said.

To bridge the gap, postal leaders have turned to a combination of cost-cutting, operational changes and price increases. Last month, the agency announced a temporary 8% increase in shipping rates for priority and package services, citing higher transportation expenses and the need to better align prices with market conditions.

Officials described the surcharge as a short-term measure intended to “ensure that the actual costs of doing business are covered,” while preserving the postal service’s universal delivery mandate.

But such steps have done little to address the agency’s underlying challenges. The volume of first-class mail, historically its most profitable product, has steadily declined for decades, even as the number of delivery points continues to grow, stretching the system thinner and raising per-piece costs.

At the same time, the postal service faces intensifying competition in the package-delivery market and rising expenses tied to labor, transportation and infrastructure. Federal auditors noted that total expenses climbed to about $90 billion in 2025, outpacing revenue gains despite repeated price increases.

The agency’s mounting liabilities, including the cost of pensions and retiree health benefits, remain a central pressure point. By the end of 2025, those unfunded obligations—combined with the agency’s debt—reached about $166 billion, more than double its annual revenue, according to the GAO report.

The crisis has also begun to affect service. Despite lowering delivery standards in recent years, on-time performance has declined, falling to roughly 86% in 2025 from about 91% in 2022, according to the GAO.