The Postal Service is temporarily suspending payments to a governmentwide pension plan, after warning Congress that it’s less than a year away from running out of cash.

USPS told the Office of Personnel Management on Thursday that it will hold off paying its contributions to the Federal Employees Retirement System (FERS), a move that’s expected to conserve cash in the near term.

The mail agency, which has posted billion-dollar net losses almost every year since 2007, has relied on these extraordinary measures before to conserve cash. USPS also announced that it plans to raise the price of a first-class forever stamp on July 12, from 78 cents to 82 cents. Since 2020, USPS has raised mail prices nearly every January and July. But its regulatory agency recently limited USPS to a single price hike for mail each year through September 2030.

Postmaster General David Steiner told members of the House Oversight and Government Reform Committee last month that USPS is set to run out of cash in less than 12 months — if it paid all its bills on time — and that lawmakers need to act soon to keep the agency running.

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“Less than a year from now, the Postal Service will be unable to deliver the mail if we maintain the status quo,” Steiner told the government operations subcommittee.

Without help from Congress, Steiner warned USPS may have to consider cutting delivery days or closing post offices — proposals that faced intense public opposition in the past. Legislation signed four years ago wiped away billions of dollars in USPS debts, but requires the agency to maintain six-day delivery for mail and packages.

USPS Chief Financial Officer Luke Grossmann said in a statement that the temporary withholding will have no “immediate detrimental impact to our current or future retirees.”

“The risk to the Postal Service and the American public from insufficient liquidity for postal operations dramatically outweighs any longer-term risk to the pension funds from not making the currently due payments,” Grossmann said.

USPS is only withholding its employer contributions to FERS, and will continue to provide OPM with employees’ own contributions to FERS, as well as all regularly scheduled payments to the Thrift Savings Plan, a 401(k)-style retirement savings and investment plan available to all federal employees.

Every other week, USPS pays OPM about $200 million for the FERS annuity. By pausing some of its FERS contributions, USPS expects to free up about $2.5 billion this fiscal year to cover its other costs.

USPS will be able to postpone payments through September 2030, freeing up to $15 billion in cash that would normally be spent on regularly scheduled FERS payments. The agency is normally required by law to make these payments, but the Postal Regulatory Commission granted a waiver giving USPS flexibility to make up these payments later. USPS must notify the Treasury Department and the regulatory agency every year it decides to use the waiver allowing it to defer pension payments.

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The Postal Regulatory Commission said the waiver gives USPS some “breathing room” to continue to cover its operating expenses and invest in improvements to its vehicle fleet and nationwide delivery network.

The waiver buys USPS some additional time before it runs out of cash. The regulatory agency said Congress and the Trump administration should use this time to address long-term financial problems with the Postal Service’s business model.

“The commission urges all stakeholders to treat the breathing room provided by the Temporary Conditional Waiver as an opportunity to work toward meaningful and lasting change,” the commission wrote.

USPS used these same extraordinary measures before. Over the past 10 years, USPS has frequently failed to make legally required payments to cover retiree benefits, and over the past four years, it has only made partial payments to cover its FERS obligations.

USPS previously suspended its employer contributions to FERS in June 2011 to retain as much cash as possible during another acute period of financial stress. That suspension, however, only lasted for several months, and USPS resumed biweekly payments and paid back what it owed OPM.

“While there is precedent for this type of move, concerns remain, and we will continue monitoring the situation and will keep the membership informed,” the regulator wrote.

The Postal Service has received extraordinary financial relief from Congress. Lawmakers passed long-awaited reform legislation in April 2022 that saved USPS $107 billion in total costs — including eliminating $57 billion in past-due payments to cover health benefits for postal retirees.

USPS warned lawmakers that it was also on the verge of running out of cash at the height of the COVID-19 pandemic, and received $10 billion in pandemic relief funds.

Don Maston, president of the National Rural Letter Carriers’ Association, said in a statement that USPS acted unilaterally in its decision to pause FERS payments and did not negotiate with the union ahead of time.

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“This move by Postal Service management and the board should not be taken lightly — Congress needs to take action to address the Postal Service’s financial challenges,” Maston said.

Maston said the NRLCA supports legislative reforms to “strengthen the Postal Service without undermining service or earned benefits.” USPS has proposed that Congress extend its currently maxed-out $15 billion borrowing limit with the Treasury Department, give USPS flexibility to invest its pension funds in anything other than low-risk, low-reward Treasury bonds, and adjust its contributions to the Civil Service Retirement System, which predates FERS. covers most federal and postal employees hired before 1984.

USPS and its inspector general’s office both claim the agency has overpaid into the CSRS fund since 1971, when the U.S. Post Office was moved out of the president’s Cabinet and was reorganized as the self-funded Postal Service.

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