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Posted at 11:00 AM ET, 03/ 1/2011

Postal Service aid plans would jeopardize federal retirement funds, watchdog says

By Ed O'Keefe

Image by Michael Robinson-Chavez/Post

Updated 2:27 p.m. ET
Helping the cash-strapped U.S. Postal Service by drawing money from federal retirement and health insurance funds could jeopardize those accounts and result in an indirect taxpayer subsidy to the independently funded mail agency, according to a new watchdog report.

Despite declining mail volume and the sagging popularity of snail mail, most of the Postal Service's financial woes stem from growing labor costs, including billions of dollars required to fund active and retired postal workers' health-care and retirement benefits -- part of the same retirement and health-care funds used by civilian federal employees.

President Obama's recent budget proposal and a series of reports by the Postal Service and postal regulators have concluded that USPS over the years has overpaid into federal retirement and health insurance programs, perhaps by as much as $142 billion.

Obama's 2012 budget proposal recommends allowing the Postal Service to pay $4 billion less this year toward future retiree health benefits than otherwise required. The mail agency would have to pay about $1.5 billion of those costs in 2011 and make up the difference in later years.

The budget proposal would also adjust the size of the annual payments by taking into account a smaller postal workforce and would refund about $6.9 billion in estimated overpayments that USPS made to fund future annuity costs.

But Patrick McFarland, inspector general for the Office of Personnel Management -- which oversees the federal retirement and health insurance funds -- said Monday that drawing funds from those accounts to help USPS would amount to subsidizing it with general tax revenue, contrary to its role as a self-funding entity.

"The proposals would cause the government to assume responsibility for USPS retiree benefit expenses without a corresponding increase in government oversight," he said.

Worse, "if this became common practice, the financial soundness and integrity of the trust funds would be severely compromised," McFarland said in a 56-page report on the issue.

The Postal Service is set to lose about $7 billion in the fiscal year ending in September, and McFarland's office concluded USPS isn't likely to return to profitability, potentially impacting its contributions to the health insurance and retirement funds.

OPM -- and by extension, the Obama administration -- should continue to support the 2006 law requiring USPS to prefund its future retiree health benefits, McFarland said, because the law protects the federal health insurance fund against any risk of the Postal Service going broke. Unless Congress passes a law stating otherwise, OPM also shouldn't allow the Postal Service to adjust the size of its annual payments based on its smaller workforce, he said.

Moira Mack, a spokeswoman for the Office of Management and Budget said Obama's budget requests support requiring USPS to continue prefunding retiree benefits "because this helps to protect taxpayers from the risks associated with large, unfunded retiree liabilities."

"Both the Budget and the new report acknowledge that it will take more than those steps to ensure a viable Postal Service for the long haul," Mack said in an e-mail. "The administration looks forward to working with Congress and key stakeholders on the broader array of questions that concern the future of USPS."

Lawmakers are likely to raise the report's conclusions during a House Oversight subcommittee hearing scheduled for Wednesday on the future of the Postal Service's finances.

Staff writer Eric Yoder contributed to this report.

Leave your thoughts in the comments section below.

By Ed O'Keefe  | March 1, 2011; 11:00 AM ET
Categories:  Postal Service  
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What needs to be done is to figure out WHO got paid extra and get the money back. Yes, those who got more even accidentally should be FORCED to give it back.

Posted by: Bious | March 1, 2011 12:36 PM | Report abuse

I paid thousands to my congressman to keep our post office off the closing list.

Posted by: blasmaic | March 1, 2011 1:09 PM | Report abuse

because of the credits crisis all retirement funds are in crisis...
the unions will soon turn over the pensions funds to the feds to manage and pay...
and they will walk away with billions...
another obama giveaway...

Posted by: DwightCollins | March 1, 2011 1:15 PM | Report abuse

The funds for the employees retirement programs should not be played with in some Madoff style shifting of funds between accounts. The Pot Office is a Federal responsibility, regardless of how the politicians want to play their games.

What can be done to clean up costs a bit is to stop Saturday deliveries now. They are really not needed, except for Express Mail, which carries a higher cost.

We can also start looking at the retirement health programs for retired government workers. Cheapest alternative? Medicare. Maybe the politicians can start looking at that as a cost reduction - as long as the private insurance companies allow the conservatives to cut that cost.

Posted by: KHMJr | March 1, 2011 1:24 PM | Report abuse

Two years after my daughter-in-law's father had retired with a pension, his former company was purchased by buy-out specialists. Because pensions are unprotected, the buy-out specialists were able to take the pensions, sell off parts of the company, give themselves huge bonuses, and take the the remainder of the company into bankruptcy. The union had nothing to do with his company pension disappearing. My daughter-in-law's father was very fortunate to get a job as a janitor in a local elementary school so he could pay some of his bills and have some health insurance.

Posted by: jmjm1 | March 1, 2011 1:29 PM | Report abuse

President Obama's recent budget proposal and a series of reports by the Postal Service and postal regulators have concluded that USPS over the years has overpaid into federal retirement and health insurance programs, perhaps by as much as $142 billion.
So I don't understand; why can't these funds be used to make up any shortfall in USPS contributions in the future? What a terrible article.

Posted by: lafayette89 | March 1, 2011 1:51 PM | Report abuse

This sounds much like the raiding of the Social Security trust fund.
By design, boomers have been pre-paying their retirement by paying more in FICA payroll taxes. This has amassed a $2.54 surplus, enough to fund benefits through 2037.
Only problem is since 1983 every Congress and administration has been siphoning off the surplus payments to fund general operating expenses.
Now the Social Security trust fund sits empty, and there is no provision for restoring our 'borrowed' retirement funds.
We have a retirement crisis in the making, thanks to our elected officials making off with our savings.

Posted by: mtpeaks | March 1, 2011 2:29 PM | Report abuse

This is what has gotten the states in so much trouble.

So Obama, seeing how screwed up Wisconsin and everybody else is, decided to.... DO THE SAME THING?

C'mon. I thought he was the guy who was going to act like the adult in the room?

Posted by: Skeptic1 | March 1, 2011 3:42 PM | Report abuse

Dear Mr. O'Keefe, It appears , for quite some time ,you have a personal vendetta against the USPS. While there are many problems at USPS,Congress owes us enough money to solve the great majority of the USPS's financial problems, it is NOT a bailout as you seem to enjoy, falsely, to call it. You are not telling the truth about the Postal Service or Congress, and neither is OMB. I have been a Washington Post reader my whole life, (51 years) and a hard working Postal Service letter carrier for 33 years. You, sir, could not do our job for a week.I will no longer read the Post Fed Page, as you are not reporting news, just your own agenda, Mr. O'Keefe. Brenda Cullen, Silver Spring, MD

Posted by: brenmik | March 1, 2011 5:40 PM | Report abuse

I would like to hear the USPS OIG weigh in, especially since OMB has declined to testify at the House Reform hearing Wednesday, "Looming Crisis at USPS." I think there is a serious disagreement bewteen the OPM and USPS OIG reports on this subject, and I tend to favor the USPS OIGs take.

Posted by: nonprofitpostal | March 1, 2011 6:57 PM | Report abuse

Stop ragging on the Post Office. That entity has created 10 times more jobs that all of Obama's Stimulus Bills.

100,000 jobs at Fed-EX; 100,000 jobs at UPS.

Posted by: fregameeate | March 1, 2011 7:09 PM | Report abuse

This article and the statements attributed to Mr. McFarland do not make any sense. The only explanation: the armies of paid lobbyists representing special interest groups, i.e, the private sector competitors of USPS, such as UPS and Fed Ex, are once again hard at work on Capital Hill to try to thwart USPS from being run like the business it is.

USPS was overcharged for its retirement benefits and apparently this will not be stopped, and, illogically, will continue according to Patrick McFarland. Even as the USPS work force is being reduced by tens of thousands of workers through retirement, streamlining and other reorganization efforts.

I agree with another poster, WaPo hack Ed O'Keffe seems to have an ax to grind against USPS. I guess he does not rely on mail delivery like the rest of us. His articles are not objective, nor does he understand the scope and complexity of the USPS organization. USPS is the largest employer in the Federal government and deserves far better analysis than this. To quote my Dad, a disabled senior who relies on mail delivery, "Where would we be without the Post Office"...

Posted by: Annabelle3 | March 2, 2011 7:41 AM | Report abuse

The fact remains that the USPS has BAILED OUT the Congress of the United States of America in the sum of $82,000,000,000.00 over the last 40 years. Another fact is that the Postal retirement funds are fully (thats 100%) funded even if the Congress of the United States of America paid back the $82,000,000,000.00 they owe them. What's the best record in the private sector? Somehow I think there have been more than a few executive golden parachutes funded with worker pension monies. So lets not make this a political football for the t-party to try to make points with. Pay the money back!

Posted by: kg1636 | March 2, 2011 1:25 PM | Report abuse

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