(This story was updated Wednesday at 5:15 p.m. with more information about the hearing).

The Senate Homeland Security and Governmental Affairs Committee debated an updated version of postal reform legislation Wednesday that would allow the cash-strapped U.S. Postal Service to restructure its health benefits program.

Included in the revised postal reform bill from Sens. Tom Carper (D-Del.) and Tom Coburn (R-Okla.) is a proposal that would create a new postal-only health plan within the broader Federal Employees Health Benefits Program (FEHBP).

“If the Postal Service is going to be a viable, self-sustaining entity and not continue to be a drag on the Treasury, we need to work things out on the retiree health care side,” Carper said in his opening statement ahead of the bill markup. “And wonder of wonders, I think we’ve done that.”

The postal-only health plan is just one piece of a major effort to set the troubled agency on firmer financial ground. The committee recessed Wednesday afternoon without a vote and after debating and approving only 11 of about 30 proposed amendments to the underlying Carper-Coburn bill.

A second hearing to finish marking up the bill has not yet been scheduled.

Postal-only plan solution to health funding riddle?

U.S. Postmaster General Pat Donahoe has been pushing over the past few years for the agency to carve out its own health plan, saying it would ease the burden of prefunding future retirees’ health care costs. Currently, the agency is required to make fixed, massive payments to prefund health costs — payments which USPS has repeatedly defaulted on over the past two years.

The program, as envisioned in the bill, would cover all postal employees and retirees and would require Medicare-eligible postal retirees to also enroll in Medicare parts A, B, and D which cover hospital stays, doctor’s visits and prescription drug coverage, respectively.

FEHB insurers with more than 5,000 postal enrollees — that currently covers more than 90 percent of postal employees and retirees — would be required to participate in the new postal-specific plan and provide plans that are “actuarially equivalent in value to those policies that they offer for other federal employees who receive FEHBP coverage,” according to a Senate summary of the bill.

Employees currently in plans that won’t be offered in the new program will be allowed to opt out of the new postal-only plan but only until they reach retirement age, at which point they will be required to shift to the new postal- only plan and enroll in Medicare.

Current retirees who are enrolled in plans that won’t be offered in the new program will be allowed to opt out entirely.

Bill includes new prefunding requirement

The revised legislation aims to solve the longstanding problem of prefunding — the requirement that the agency set aside billions of dollars each year for the payment of future retirees’ health benefits. The 2006 Postal Accountability and Enhancement Act first mandated prefunding, which Carper said Wednesday had been a “huge drag on the Postal Service” and has contributed significantly to the increasing red ink on the agency’s balance sheet.

The revised bill significantly modifies the prefunding requirement for future retiree health care costs, eliminating the current onerous payment schedule and setting in place a new schedule to be amortized over 40 years with a reduced pre- funding goal of 80 percent of projected obligations.

But the updated bill creates a new prefunding requirement to shore up unfunded liabilities in the workers’ compensation trust fund, which USPS recently estimated exceeds $17 billion. That prefunding requirement would only kick in when the Postal Service’s net income exceeds $1 billion in order “to make sure that this new process does not create new financial difficulties for the Postal Service,” according to the bill summary.

But, in a letter to the committee sent earlier this week, the four major postal-employee unions called the new prefunding requirements “totally unfair and unnecessary.”

The unions said the revised bill included some of the recommendations the unions made after Carper and Coburn first introduced their bill last August. But the updated legislation “retains the misguided service cuts and unfair employee hits contained in the original bill,” according to their letter.

Bill delays five-day delivery

Senators on the committee defeated an amendment to the bill that would have allowed the Postal Service to move immediately, upon the bill’s passage, to end Saturday first-class mail delivery.

As it stands in the revised Carper-Coburn bill, USPS would able to shift to five- day delivery only after mail volume drops below 140 billion pieces of mail annually.

But that wasn’t soon enough for Sen. John McCain (R-Ariz.), who introduced the amendment.

“According to recent projections from the Postal Service, mail volume won’t drop below that level until 2017 or 2018, and I believe we should not wait four or five years for this common-sense approach to save billions a year,” he said.

Last year, lawmakers blocked a short-lived plan by the Postal Service to move to five-day delivery without congressional assent. At the time, Donahoe estimated that ending Saturday delivery would save about $2 billion a year.

Coburn said he agreed with McCain’s amendment in principle but including it in the final version of the bill would ultimately hamper the bill.

“This bill will not come out of committee, as I count votes, if we take this to five-day (delivery),” Coburn said.

In their letter to committee members, however, the postal-employee unions remained unsatisfied with the revised bill, called the proposed mail-volume threshold “arbitrary,” saying it would only delay, not halt, harmful service cuts.

“At a time when the demand for date-specific marketing and for same-day and next- day delivery service is growing, and at a time when and we are introducing Sunday service, legislated service cuts that would eliminate Saturday delivery, slow delivery times and reduce the demand for mail make no sense,” the letter stated.

Workers’ comp cuts stay in bill

The Carper-Coburn bill would also allow the Postal Service to bargain with labor unions over retirement benefits for newly hired postal employees.

Up for discussion, according to the bill, would be whether new employees would even be covered by the Federal Employees Retirement System (FERS), how much the Postal Service should kick in toward employees’ annuities and how much the agency will match on new employees Thrift Savings Plan contribution.

On the issue of TSP contributions, the committee’s bill would require joint bargaining between USPS and the four postal unions and would have to result in a single postal-only alternative TSP contribution amount.

But the unions, themselves, said the bill threatens to create a “morale-damaging two-tier pension system” for current and future postal employees.

The latest version of postal reform also proposes benefit cuts under the Federal Employees Compensation Act (FECA) program. The bill would cut workers’ compensation benefits in half once enrollees reach full retirement age and would reduce the rate of FECA compensation to 66.7 percent of workers’ pre-injury salaries, regardless of dependents. Under current law, FECA enrollees with dependents are eligible to receive 75 percent

The FECA section of the bill is nearly identical to proposals included in the Senate’s last attempt at comprehensive postal reform in 2012, which were championed by the committee’s then-ranking member Sen. Susan Collins (R-Maine). The Senate approved the 2012 postal bill — and the FECA changes it included — with 62 votes.

Federal-employee unions and groups decried the reintroduction of the FECA cuts, and Sen. Jon Tester (D-Mont.) proposed an amendment that would strip the FECA changes from the larger bill.

Tester said there hasn’t been sufficient debate about the proposed FECA overhaul this Congress. The last hearing on the issue was in 2012.

But in a close 7-6 vote, the committee rejected Tester’s amendment, meaning the FECA changes are still a part of the bill.

The Republican-controlled House Oversight and Government Reform Committee passed its own version of postal reform last summer entirely along partisan lines, but it has yet to see a vote in the full House.

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