The House of Representatives voted Feb. 5 to remove a mandate that the U.S. Postal Service prefund its retiree healthcare, a requirement that has been responsible for significant financial losses at the agency.
“This mandate has cost the postal service billions of dollars since it was first imposed 14 years ago. The Postal Service has not made a payment into this fund since 2012,” Rep. Carolyn Maloney, D-N.Y., said on the House floor.
“Without major structural reforms, the Postal Service will run out of cash in about four years. At that point, it will not be able to pay its own workers and mail delivery would simply cease.”
USPS has reported consistent losses in recent years, most recently a net loss of $8.8 billion for fiscal year 2019. Much of those losses can be attributed to the defaulting on prefunding payments, which amount to about $5 billion per year.
The mandate to prefund retiree health insurance was put in place by Congress in 2006 and is a requirement that has been placed on no other federal agency.
The U.S. Postal Service projects that it will need to dramatically increase spending to meet needed updates like replacing the outdated delivery vehicle fleet.
“People who have not yet been born, people who have not yet gone to work for the Postal Service for a career and then might retire, we’re paying for their healthcare now,” said Rep. Peter DeFazio, D-Ore.
“The money isn’t being put into a trust fund to pay for their health insurance; it is going into the maw of the Treasury. Who knows where it goes? It maybe makes the debt look a little smaller, that is why President [George W.] Bush pushed for it. But it is accounting for a majority of the losses of the Postal Service.”
Though the bill received broad bipartisan support, some Republican members argued that the removal of the prefunding mandate would ultimately be insufficient to bring financial solvency to the agency.
“Even with this, the Postal Service continues to lose money every single day,” said Rep. Mark Meadows, R-N.C.
“They want relief from a payment they’re not making, and it’s going to make zero difference in the viability.”
Though the Postal Service still has financial challenges beyond its prefunding mandate, proponents of the bill argue that simply removing the prefunding total from the agency’s net loss each year will provide a more realistic picture of where the agency’s revenue and expenditures diverge.
“For too many years, the United States Postal Service has been operating under an unprecedented, unnecessary and unfair prefunding mandate that only serves to steer cost-cutting strategies, prohibit investments and limit options for legislative reforms. In fact, rather than protecting health benefits, the prefund requirement for future retirees has led to legislative proposals that threatened the benefits of current retirees,” said National Active and Retired Federal Employees National President Ken Thomas in a statement.
“H.R. 2382 will not solve all of USPS’ financial problems, but it does provide a common sense first step by rescinding an unnecessary and unreasonable mandate and providing breathing room for future reforms. I urge members of the House to pass the legislation.”
According to Rep. Gerry Connolly, D-Va., because the mandate was first placed on USPS by Congress in the first place, it is up to lawmakers to start on this one fix, before working out more cost-saving reforms.
“We have an obligation, having created this problem, to fix it,” said Connolly. “This may not return the Postal Service to solvency, but it takes a liability off the books that’s real.”
Due to USPS financial insolvency, the Trump administration has proposed prepping the agency for eventual privatization, a move that postal unions and many members of Congress have vehemently opposed.
Lawmakers and employee groups have also argued that less drastic measures — such as requiring retirees to enroll in Medicare, lifting the price caps on USPS products and expanding the revenue sources for the agency — would go a long way to putting USPS back on solid financial footing.