Cartons of mail ready to be sorted sit on a shelf on Aug. 12 at the U.S. Postal Service's sort center in San Francisco. The Postal Service is planning to cut 220,000 employees — roughly a third of its workforce, and half of those through layoffs — by 2015. (Justin Sullivan / Getty Images)
The U.S. Postal Service is planning to cut 220,000 employees — roughly a third of its workforce, and half of those through layoffs — by 2015.
It also said it wants to set up its own health benefits plan for employees and stop offering pensions to new employees.
The Postal Service is essentially bankrupt and will run out of cash next month, which is forcing it to take drastic steps to cut costs. Federal Times obtained draft documents outlining the agency's plans, which were first reported by The Washington Post.
"If we were a private company, we already would have filed for bankruptcy and gone through restructuring — much like major automakers did two years ago," the Postal Service said in one document.
The Postal Service said attrition will cut 100,000 employees, but layoffs will be needed to eliminate the other 120,000 and bring its total workforce down to 425,000. However, unions' collective bargaining agreements have for decades banned layoffs, and the Postal Service said it has been unable to convince them to give up those protections during contract negotiations. So the Postal Service is asking Congress to step in and pass a law removing those layoff protections.
Fredric Rolando, president of the National Association of Letter Carriers, objected to the Postal Service's plans in a statement.
"The Congress of the United States does not engage in contract negotiations with unions and we do not believe they are about to do so," Rolando said. "Contract negotiations for NALC open Thursday, Aug. 18. USPS is free to bring these issues to the table. If they do so, we will bargain in good faith."
Cliff Guffey, president of the American Postal Workers Union, said he will "vehemently oppose" any attempt to weaken collective bargaining rights or change union contracts.
"Crushing postal workers and slashing service will not solve the Postal Service's financial crisis," Guffey said. "Postal employees are not the cause of the crisis."
But the Coalition for a 21st Century Postal Service, a lobbying group of leading private-sector mailers that advocates for streamlining postal operations, said it is encouraged to see the Postal Service aggressively confronting its problems.
"It will undoubtedly be controversial, but desperate times may require desperate measures," coalition director Art Sackler said. "There are 8 million private-sector jobs that depend on the Postal Service, and these jobs may be threatened if action isn't taken soon."
The Postal Service also proposes to speed up plans to close and consolidate facilities to cut costs. If it closes facilities but can't lay off employees, thousands will be left idle and the Postal Service won't be able to bring its expenses in line with revenues.
The Postal Service also said the Federal Employees Health Benefits Program doesn't meet its needs, and said it will ask Congress for permission to pull its 600,000 active employees and 480,000 retirees out of the program. The Postal Service would set up its own health plan instead, which it said would be simpler, more cost effective, and more in line with the private sector.
The Postal Service also wants to pull employees and retirees out of the Federal Employees Retirement System and the Civil Service Retirement System and put them into a new Postal Service Retirement Program.
But future employees would no longer receive a defined benefit pension, as CSRS and FERS employees do. They would only have a defined contribution plan, similar to a 401(k) or the current Thrift Savings Plan. It is unclear whether postal employees would remain under the TSP or would have their own defined contribution plan under the postal plan.
Existing retirees would continue to receive the same level of benefits. Current CSRS and FERS employees near retirement would receive the same level of benefits when they retire as they would have if they had stayed in their old plans.
The Postal Service said it may reduce future benefits for current FERS employees who are not near retirement.
The problems leading up to this last-ditch effort have been well-known for some time. Mail volume — especially highly profitable first-class mail — has plunged in recent years, largely due to the rise of the Internet. The 20 percent decline in volume between fiscal 2007 and 2010 cost the Postal Service $20 billion — including an $8.5 billion loss in fiscal 2010 alone. Fiscal 2011 results are even worse than feared, and the Postal Service expects to lose $9 billion.
"It has become apparent that our financial situation is becoming even more precarious," the Postal Service said in the draft documents. "The volume decline and change in mail mix outpaced even the most pessimistic forecasts. Going forward, the first-class mail volume that has been lost will not return."
The Postal Service has also been making annual prepayments of roughly $5.5 billion into its Retiree Health Benefits Fund since 2007. That fund now has $42.5 billion, but in March the Postal Service warned it would not have enough money on hand to make this year's legally required payment. The Postal Service said it would need that $42.5 billion to help set up its own Postal Service Health Benefits Plan.
In a March interview with Federal Times, Postmaster General Patrick Donahoe said the Postal Service planned to cut 30,000 positions this year and pare down to a total workforce of roughly 400,000 in the next five years.
And in June, the Postal Service suspended its FERS contributions to free up money for other expenses. Ë
email@example.com?subject=Reader Question">Andy Medici contributed to this report.