WASHINGTON – The Postal Service does not anticipate another postage rate hike until 2006, two years later than previously predicted, because of extra money from a retirement fund.
A new financial review revealed that the Postal Service had been paying too much into the Civil Service Retirement System fund, which provides benefits for employees who joined the service by 1983. Postal workers who joined after that year were enrolled in another retirement system.
The review examined retirement payments since 1971 and determined that the post office has nearly paid off what it owes the fund for current and future retirees. The analysis revealed that the Postal Service's liability to the retirement account is about $5 billion, rather than the $32 billion it believed it owed.
"The findings are the result of a number of factors, but the change was primarily driven by higher than expected yields on pension investments made by the Department of the Treasury,'' Postmaster General John E. Potter said at Tuesday's Board of Governors meeting.
Current retirement contributions or future benefits to the employees won't be affected by the changes, the postal service said.
In addition to help to keeping postage rates stable, the extra money will reduce Postal Service debt. The post office now has about $3 billion for debt reduction, rather than $800 million.
Congress must approve the money transfer.
Potter warned that the additional funds should not lull people "into a sense of complacency that all is right with the nation's postal system. That's simply not true,'' Potter said. "The nation still faces a long-term challenge to continue postal services to everyone, everywhere, while financing the costs of our growing nationwide delivery network.''
The post office entered the fiscal year beginning Oct. 1 anticipating a loss of $1.35 billion. Last year, after the terrorist attacks and the anthrax-by-mail episodes, officials feared losses would climb to $4 billion.
The faltering economy also hurt, sending mail volume down by 6 billion pieces, the biggest drop in history, Potter said.
Volume is starting to climb again, and the post office expects that a modest increase next year will help boost the agency into the black.