What to Know About the U.S. Postal Service’s ‘Severe Financial Crisis’

An American flag flies above signage outside U.S. Postal Service headquarters in Washington, D.C., on Aug. 17, 2020. —Erin Scott—Bloomberg/Getty ImagesThe U.S. Postal Service announced on Thursday that it’s pausing its payments to a federal pension plan and moving to increase stamp prices in the midst of its “severe financial crisis.”USPS said that it has informed federal budget officials of its plan to temporarily halt its employer contributions for the defined benefit portion of the Federal Employees Retirement System (FERS). That same day, the Postal Service also said it filed notice with regulators to raise postage rates, including increasing the price of a First-Class Mail Forever stamp by 4 cents.The agency attributed both changes to the financial challenges it’s currently facing. Last month, Postmaster General David Steiner said that, if no significant changes are made, USPS is set to run out of cash in 2027.Here’s what to know about the Postal Service’s announced changes and its ongoing financial crisis.What changes is USPS making to its pension contributions?The Postal Service said it will be temporarily suspending its employer contributions for the defined benefit portion of FERS, a retirement plan for USPS workers and other federal government staffers, “to conserve cash and preserve liquidity due to its ongoing, severe financial crisis.” A defined benefit plan is a retirement plan that provides fixed, monthly payments to an employee once they retire, the amount of which are determined by a formula based on various factors, including the employee’s salary and the number of years…

Continue reading →