USPS asks DoJ to solve FERS dispute with OPM

The Postal Service will stop funding the defined benefit portion of the Federal Employees Retirement System in an effort to free up cash to pay its bills. Offic...

This story was updated at 5 p.m.

By Jason Miller and Ruben Gomez
Federal News Radio

The cash-strapped Postal Service is taking matters into its own hands to increase its solvency.

USPS intends to suspend its employer payments for the defined benefit portion of the Federal Employees Retirement System (FERS) as of June 24, thus saving it $230 million a month.

“This will keep us solvent and let us pay our bills to our employees and our suppliers,” said Anthony Vegliante, the Postal Service’s chief human resources officer and executive vice president, in an interview with Federal News Radio. “We still have to make the $5.5 billion payment to the retiree healthcare payment that is coming at the end of the year so this by no means gets us out of troubled waters. It’s an interim step to keep cash reserved.”

USPS will continue submitting FERS contributions made by employees, in addition to employer automatic and matching contributions and employee contributions to the Thrift Savings Plan (TSP).

The financially-struggling Postal Service has repeatedly claimed that it has a FERS account surplus of $6.9 billion and suspending employer FERS contributions will save about $800 million in fiscal 2011.

Vegliante said the decision to suspend payments comes despite the Office of Personnel Management’s refusal to credit USPS’s overpayment to the fund.

He said if USPS has overpaid, another agency has not paid enough.

“We are saying we need not to pay right now because of our cash problems,” Vegliante said. “So we are overfunded. We don’t believe that we are part of the problem as far as funding this. If there is a mechanism to collect from someone if they are underfunded. A logical next step should you not be able to credit someone if they are overfunded?”

In a statement, OPM said it understand USPS’s challenges.

“OPM is sympathetic to the situation in which the Postal Service finds itself, and we stand ready to help the Postal Service in whatever way we can, consistent with our legal obligations and role as the fiduciary for the Retirement and Disability Trust Fund,” OPM said in a release.

Vegliante said OPM and USPS will bring their disagreement before the Justice Department’s Office of Legal Counsel for Dispute Resolution.

“We will see what happens when we get a ruling back,” he said. “It’s a very deliberative process. It’s not something that happens in weeks. It hasn’t even started yet. It could take months.”

If Justice rules against the Postal Service, Vegliante said USPS will make up for the missed contributions to the fund.

“When you look at it, the consideration is the cash,” he said. “The second is our employees. We want to be in the position to conserve cash, but not impact our employees. So we are making payments for other two parts of FERS program. In this particular part where we believe we are overpaid, it’s a matter of our cash conservation and we have to do something. So we decided that we needed to challenge this overpayment and stop overpaying and conserve cash.”

USPS’s decision received a mixed response from Capitol Hill.

Several members who have introduced bills to help alleviate the Postal Service’s financial woes, said this move is a perfect example of why legislation is needed.

“Today’s announcement from the U.S. Postal Service is even more evidence of its dire financial condition,” said Sen. Susan Collins (R-Maine), ranking member of the Homeland Security and Governmental Affairs Committee and co-sponsor of one of the Postal reform bills, in a statement. “Our economy simply can’t wait much longer for Congress to enact critical legislative reform of the Postal Service – failure to act threatens not only postal workers and their retirement benefits, but the taxpayers who underwrite the Postal Service debt, and the industries and postal customers who rely on the Postal Service.”

Rep. Dennis Ross (R-Fla.), chairman of the Oversight and Government Reform Subcommittee on the Federal Workforce, the Postal Service and Labor Policy, said USPS must solve their financial woes by wholesale structural and financial changes, including staff reductions, office closings, delivery changes and responsible benefit funding.

“The USPS needs to accept the reality of reorganization for the 21st century,” Ross said in a statement.

Reps. Elijah Cummings (D-Md.) and Stephen Lynch (R-Mass.), ranking members of the Oversight and Government Reform Committee and subcommittee on the federal workforce, respectively, issued a joint statement calling for a quick decision from DoJ.

“While a suspension of FERS payments may help now, the Postal Service will be unlikely to regain financial stability absent legislative action,” the two congressmen said in a release.

The Obama administration also is trying to push through help for USPS, requesting about $11 billion in relief for the agency in the 2012 budget request.

Vegliante wanted to make it clear that the decision to suspend part of the FERS contribution will have no affect on current or former USPS employees.

“Everything continues as it was for employees,” he said. “This is a dispute between two agencies and whether or not to give us credit for overpayment. Our retirees have no impact, they already are fully funded. People who are going to retire in the short term or long term will not be impacted on any part of FERS. This is not about employees being hurt or not hurt. This is about us resolving a payment dispute.”

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