The U.S. Postal Service will default this week on a $5.6 billion congressionally mandated obligation to pre-fund retiree health benefits, marking the second time in two months the cash-strapped agency has done this.
The Postal Service last month failed to pay $5.5 billion for its fiscal 2011 prepayment obligation, which originally was due in September 2011 but was deferred by Congress until Aug. 1. That was the first time it ever defaulted on a payment to the Treasury Department. The $5.6 billion due this week, on Sept. 30, represents this fiscal year’s obligation.
Before this year, Congress helped USPS defer pre-funding payments required by a 2006 congressional mandate. Postal reform has challenged this Congress. Lawmakers warn that when they revisit the issueafter the November election they likely won’t reach agreement on as major an overhaul as some deem necessary. USPS lost $5.2 billion in the third quarter of fiscal 2012, $2.1 billion more than during the same time period in 2011.
Health care for current retirees is paid for from the Postal Service's general operating budget and will not be affected by the default. The agency’s inability to make its payments will not affect mail delivery or employee pay, said USPS spokesman David Partenheimer.
The Senate passed a postal-reform bill this spring and its architects have derided the House for stalling on a vote on its version of the bill. The two bills have some similarities, but would address retiree health care prepayment obligations differently. The Senate bill restructures the prepayments to make them more manageable; the House bill, which passed out of the House Oversight and Government Reform Committee earlier this year, requires the agency to pay $1 billion of its fiscal 2011 prepayment obligations and make up the remainder in fiscal 2015 and fiscal 2016.
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