Following is a summary of the impacts on postal employees and operations of a bill that is ready for a vote in the House, the latest of many such proposals but one whose prospects are considered more favorable due to its bipartisan support.
H.R. 3076, the Postal Service Reform Act, eliminates direct financial liabilities of the United States Postal Service by requiring eligible Postal Service retirees to enroll in Medicare and repealing the requirement to prefund retiree health benefits. Additionally, H.R. 3076 requires transparency in Postal Service performance data, codifies aspects of the Postal Service’s operations, and requires additional reporting on and reviews of various facets of the Postal Service’s operations and finances.
BACKGROUND AND NEED FOR LEGISLATION
A number of factors have caused the Postal Service’s financial condition to deteriorate over the past decade, including a decline in first-class mail, expenses increasing more rapidly than revenues, and the requirement to pre-fund retiree health benefits. The Postal Service is expected to provide affordable, quality, and universal postal service to all parts of the country while remaining self-sufficient.
As a result of being unable to fund its current level of services and financial obligations from its revenues, the Postal Service faces challenges in maintaining sufficient cash on hand to conduct its operations. For these reasons, the Government Accountability Office (GAO) has placed the Postal Service’s financial condition on its ‘‘high-risk’’ list since 2009. The provisions included in this bill are essential to helping the Postal Service remain financially viable going forward.
Section 101—Postal Service health benefits program (i.e., Medicare Integration)
While Postal Service employees currently pay into Medicare and are eligible to enroll when they reach the age 65, roughly 25% of the Postal Service workforce never enrolls. Requiring Postal Service employees to enroll in Medicare when they become eligible to do so would help improve the long-term financial viability of the Postal Service. This requirement already exists for most private sector employees. If all Postal Service employees were required to enroll in Medicare when eligible, the Postal Service estimates that it would save roughly $36 billion over a 10-year period.
This section creates new Postal Service-only medical plans with a separate risk pool from the current Federal Employee Health Benefit (FEHB) plans. While the majority of existing employees would be required to enroll in these plans and enroll in Medicare when they become eligible, there are several exceptions for current annuitants and employees approaching retirement to protect them from being forced into changes to their health benefits late in their careers or retirement. Current annuitants would retain the option of not enrolling in Medicare, as would current employees age 64 or older.
Section 102—USPS Fairness Act (i.e., Eliminating requirement to pre-fund retiree health benefits)
In 2006, Congress enacted the Postal Accountability and Enhancement Act (PAEA) (P.L. 109–435). The PAEA required the Postal Service ‘‘to start fully ‘prefunding’ retiree health benefits’’ by making ‘‘annual prefunding payments to a newly established fund to build up funds to cover the Postal Service’s share of future retiree health benefit costs’’ for all employees—not just those who are eligible to retire.1 No other federal agency is required to pre-fund retiree health benefits, and it is not a normal practice in the private sector.
The PAEA required the Postal Service to pay annual amounts ranging from $5.4 billion to $5.8 billion into the Postal Service Retiree Health Benefit Fund between 2007 and 2016. At the end of that 10-year period, these pre-funding payments ended, and the Postal Service was allowed to return to lower annual payments based on a 40-year amortization schedule for Postal Service retiree health benefits and the ‘‘normal costs’’ of retiree health benefits for current employees.2 Before 2006, the Postal Service maintained a pay-as-you-go system for retiree health benefits, under which it paid its annual share of premiums for employees participating in the FEHB Program.
Since 2007 the Postal Service has been struggling to comply with this requirement to make billions of dollars of payments each year to pre-fund retiree health benefits.
The PAEA was enacted in 2006 after the Postal Service had earned ‘‘modest profits from FY2004 through FY2006,’’ with the expectation that the Postal Service would continue to be on relatively sound financial footing.3 Unfortunately, that has not been the case.
The Postal Service currently has approximately $35 billion in unfunded retiree health benefit liabilities and has not paid into the fund for a decade. Eliminating this requirement would eliminate the liability and improve the Postal Service’s financial picture.
This section eliminates the prefunding requirement put in place by the PAEA, which eliminates these outstanding debts from the Postal Service’s books. It requires the Postal Service to pay a single yearly ‘‘top-up’’ amount to account for the costs incurred by actual usage by Postal Service annuitants. These payments will increase the longevity of the Retiree Health Benefit Fund while still protecting the Postal Service from carrying substantial unpaid liabilities on its books.
Section 103—Non-postal services
This section enables the Postal Service to enter into agreements with state, local, and tribal governments to provide non-postal services to increase revenue for the Postal Service. Services must provide enhanced value, not detract from postal services, and provide reasonable contributions to the institutional costs of the Postal Service. The bill would require any new program entered into by the Postal Service to be approved by the Postal Service Board of Governors.
TITLE II Section 201—Performance targets and transparency
The COVID–19 pandemic caused widespread Postal Service workforce sick leave and led to an unprecedented rise in package volume due to a rapid increase in e-commerce demand. The Postal Service also implemented operational changes in mid-July 2020 that negatively impacted service performance. The combination of these events exacerbated existing problems within the Postal Service’s operations and further stressed an already strained delivery system. Overall delivery performance remained historically low for 2020 and the early part of 2021, with on-time delivery of first-class mail falling below 63% the week before the 2020 holiday season.
While service has rebounded to around 89% of first-class mail being delivered on time as of the week ending on July 3, 2021, first-class mail service has still not returned to pre-July 2020 levels.
This section would require the Postal Service to establish and provide the Postal Regulatory Commission (PRC) with reasonable performance targets based on its service standards at least 60 days before the start of each fiscal year. The Postal Service would also be required to provide the PRC with the previous fiscal year’s performance targets to allow the PRC to review them for compliance.
The Postal Service would also be required to post weekly updates on its service performance at national, regional, and local levels for market dominant mail products on a publicly available online dashboard.
This provision would ensure greater performance trans parency and enable Congress, the public, and industry stakeholders to hold the Postal Service more accountable.
Section 202—Integrated delivery network
Since 1983, the Financial Services and General Government Appropriations Act has included an annual rider requiring the Postal Service to deliver mail six days per week. This section of the bill would put that requirement in statute. The section includes an exception allowing the Postal Service to not deliver six days a week during weeks with a federal holiday or during unforeseen emergencies such as natural disasters.
In addition, this section would require the Postal Service to operate using an integrated network for both mail and packages.
Section 203—Review of Postal Service cost attribution guidelines
This section would require the PRC to perform a review of the allocation of Postal Service costs that are attributed to competitive and market-dominant products to ensure that these allocations are accurate. The review shall consider the underlying methodologies used to determine cost allocation and, if necessary, consider options to revise these methodologies. If the PRC determines that revisions are necessary, it shall make necessary modifications. These changes will be subject to a public notice and comment period.
Section 204—Rural newspaper sustainability
Local newspapers sent within the same county in which they are printed can currently take advantage of a statutory provision that allows a special rate lower than first-class mail to send sample copies.
Currently, up to 10% of these newspapers can be sent to nonsubscribers.
This section would raise this number to up to 50%.
This would allow local newspapers to increase revenue through advertising and reach possible subscribers at a time when local newspapers are disappearing at a rapid rate.
Section 205—Funding of Postal Regulatory Commission
The PRC currently has its funding, which is derived via a transfer from the Postal Service Fund, approved through the annual appropriations process, and PRC cannot operate when the federal government shuts down. However, the Postal Service continues to operate during a government shutdown, as it does not receive federal funding. As a result, the Postal Service continues operating without oversight from its federal regulator during a government shutdown.
This section would allow the PRC to submit its yearly budget request directly to the Postal Service Board of Governors, which would then have the authority to approve the budget with or without adjustments, but not make changes to any allocations within the budget. Should the Board of Governors make changes to the overall budget request, the PRC would make changes to suballocations within the request to ensure compliance. The PRC’s budget would be paid directly out of the Postal Service Fund, allowing it to continue operating regardless of the federal government’s appropriations status.
Section 206—Flats operations study and reform
This section would require the PRC, in consultation with the United States Postal Service Inspector General (IG), to conduct a study to identify the causes of inefficiencies in the collection, sorting, transportation, and delivery of flats—a category which most prominently includes magazines. Within 180 days after the enactment of this bill, the PRC would have to submit to Congress and the Postmaster General a report on the findings of this study.
In addition, within six months of completion of the PRC study, the Postal Service would be required to develop and implement a plan to remedy inefficiencies identified by the study. The implementation plan would have to be approved by the PRC, and a period of public comment would be required.
Section 207—Reporting requirements
This section would require the Postal Service to submit reports to Congress every six months on a number of Postal Service operations, as well as its financial performance, including the actual and projected volume of mail and packages, the effects of any rate changes, the allocation of employees in career and non-career status, and planned and actual investments by the Postal Service in its network. These reports will help enable Congress to know what changes are being made and their impact on the Postal Service.
Section 208—Postal Service transportation selection
This section would make minor adjustments to the considerations the Postal Service must make when deciding which modes of transportation should be used to deliver mail. Specifically, the section would add the requirement that transportation not only be prompt and economical but also consistent and reliable.
Section 209—USPS Inspector General oversight of Postal Regulatory Commission
There is currently a Postal Service Inspector General as well as an Inspector General for the PRC. This section would create a single Inspector General of the United States Postal Service with authority over both the Postal Service and the PRC.