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US Postal Service Reducing Workforce, Slashing Benefits

US Postal Service Reducing Workforce, Slashing Benefits

The U.S. Postal Service, which is trying to save itself from financial insolvency, is cutting over 121,000 jobs and asking Congressional approval to break free of costly government regulations and privatize its employee health and retirement systems.

A statement released by the USPS stated the agency has been struggling through a 20 percent decline in the volume of first-class mail over the past four years due to the increased popularity of email. The postal service is facing the equivalent of Chapter 11 bankruptcy. In order to bring itself back from the brink of insolvency, the service is asking congress to allow it to adjust the size of its workforce to meet operation needs and determine the frequency of mail delivery.

An Austrian Post employee sorts letters in the main post letter logistic hub in Vienna, November 15, 2010. The Austrian Post letter logistic centre in Vienna handles an average of 4.2 million letters a day and rises up to about 9 million letters during Christmas time. | REUTERS/Leonhard Foeger

So far it has reduced the number of career employees to 563,401 by laying-off over 121,000 employees since 2007. The agency has reorganized itself by streaming its work force and eliminating 7,500 administrative positions. Work hours have also been cut down by approximately 35 million hours this year, adding to past reductions brings the total to 240 million hours.

USPS also has plans to close 3,700 post offices and replace them with alternate mail access facilities.

The postal service is also is seeking to pull its workers off Federal Employees Health Benefits (FEHB) and the Federal Employees Retirement System (FERS).


  • Postal Service Making Cutbacks

As a business that is, in part, a governmental agency, it is subject to offer its workers health care and retirement benefits through both FEHB and FERS. It is also obligated, under the Postal Reorganization Act to provide wages and benefits comparable to those provided by the private sector.

USPS asserts it is impossible to fully meet the requirements of the Postal Reorganization Act through FEHB and FERS.

The postal service states in a national release, "The private sector is adjusting constantly to changing market conditions with changes in plan design, care management, eligibility, cost management (including the availability of network discounts), and a host of other factors that reflect 'best practices' in compensation and benefit policies."

As a result the agency wants to administer its own health and retirement benefits programs.

If the postal service is allowed to administer its own health benefits, it would be able to escape a requirement mandating that it pre-pay billions in retiree benefits.

The Postal Accountability and Enhancement Act requires the agency pre-fund retiree health benefits to the tune of $59 million by 2016 in addition to its premium contributions. The postal service's premium contributions are approaching $2.5 billion according to the release.

As of fiscal year 2010, the USPS has produced a retiree health benefits fund balance of $42.5 billion in retiree health benefit contributions plus accumulated interest. The FY2010 balance is more than 100 percent of the liability for the postal service's 480,000 annuitants and their survivors.

USPS could save $16.5 billion in contributions through 2016.

Additionally, the USPS have been in disputes with the Office of Personnel Management (OPM) since 1971 concerning the fair accounting of its retirement funding obligation compared to that of the rest of the federal government.

OPM asserts that the post service owes $7.3 billion in retirement payments. USPS asserts that it has exceeded its requirement by between $50 and $75 billion.

USPS hopes to resolve the dispute by offering its own retirement benefits as well as receive a repayment of $ $6.9 billion in overpayments it has made in Federal Employment Retirement System.

USPS officials say the 20 percent decline in first-class mail has led to losses total $8.5 billion in last year's budget. As a result, USPS is focused on reorganizing, making cuts and generating revenue with new products such as the flat rate first-priority envelopes and the Forever Stamp.

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