The Postal Service said Wednesday it is temporarily suspending its employer contributions for the defined benefit portion of the Federal Employees Retirement System, a move that took effect April 10 and will free about $2.5 billion in the current fiscal year.
The agency said the step is meant to conserve cash and preserve liquidity as it tries to navigate an ongoing severe financial crisis. It will keep sending employees' contributions to the Office of Personnel Management, and it will continue employer automatic and matching contributions and employee contributions to the Thrift Savings Plan.
Luke Grossmann, speaking for the Postal Service, said there will not be any immediate detrimental impact to current or future retirees if normal FERS cost payments are temporarily withheld. He said the risk to the Postal Service and the American public from not having enough liquidity for postal operations outweighs any longer-term risk to the pension funds from skipping the payments that are due now.
The Postal Service pays about $200 million every other week to OPM for the FERS annuity, so the suspension removes a sizable cash drain at a moment when the agency says every dollar matters. The Postal Service also said its pension systems remain much better funded than those of other agencies.
The tension is in the choice the agency is making: protect day-to-day operations first, or keep making one of its regular retirement payments while the balance sheet stays under pressure. Grossmann tried to narrow that gap, saying, “It must be noted that our pension systems remain much better funded than other agencies.”
For retirees and workers, the immediate message is simple: the money going into their own contributions and the Thrift Savings Plan keeps flowing, while the employer side of one retirement program is on pause. What happens next will depend less on the pension system itself than on whether the Postal Service can steady its finances before the suspension becomes something more lasting.