The U.S. Postal Service said Thursday it has informed federal budget officials it will temporarily suspend its employer contributions to Federal Employees Retirement System annuities, allowing it to keep making payroll, paying suppliers and delivering the mail.
The Postal Service also wants to increase postage rates, including raising the price of a First-Class Mail Forever stamp from 78 cents to 82 cents. USPS filed notice Friday with regulators,
who still need to approve the changes.
The step taken by the Postal Board of Governors to forgo the pension payments is meant to preserve cash and liquidity due to the Postal Service's "ongoing, severe financial crisis," Postal Service Chief Financial Officer Luke Grossmann said in an internal message to USPS employees. Officials have warned the USPS is on course to run out of cash by around February 2027.
Despite the suspension of employer contributions, effective Friday, current and future retirees will not be immediately impacted, Grossman said.
“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,” he said in the statement. USPS deferred payments in 2011 during another financial crisis.
The Postal Service said it will continue transmitting employees’ retirement contributions to the federal Office of Personnel Management, along with Thrift Savings Plan contributions, including employer automatic and matching funds, and will also maintain its employer contributions to Social Security.
Brian Renfroe, president of the National Association of Letter Carriers, said the temporary suspension of annuity payments is “not ideal" but it doesn't immediately impact his members, who he said understand the Postal Service's financial challenges.
“Given a menu of options, none of which are overall positive, they would certainly prefer the Postal Service making a move like this as opposed to something that immediately impacts them or immediately impacts in a negative way the service that we provide to the American people.”
Ninety-nine percent of career USPS employees are covered by the Federal Employees Retirement System.
In a related matter, the Postal Regulatory Commission on Thursday granted the Postal Service a temporary, multi-year waiver allowing it to redirect billions of dollars in revenue previously earmarked for retiree benefits, providing “some breathing room and flexibility” to execute contingency plans and avoid running out of cash.
Last month, Postmaster General David Steiner told The Associated Press and later a congressional committee that the 250-year-old service needs to have a decades-old $15 billion cap on borrowing raised to $34.5 billion so the independent agency can have access to more cash.
“That will buy us the time to make the fixes we need to make, and we can sail on down the road,” he told the AP. Steiner has called for other changes as well, including greater flexibility in how retirement funds are invested and the authority for USPS to raise postage prices high enough to cover losses.
Keep Us Posted, an advocacy group representing consumers, catalogs, greeting card publishers and others, has urged Congress to ensure any rate increases would be limited to once a year. The group also wants to ensure six-day-a-week mail service remains and that USPS regulators have greater control over any service changes.
USPS said the proposed price increases requested Thursday, which also affect postcards and international letters, will still make rates among the most affordable in the world. The Postal Service relies mostly on the sale of postage, products and services to finance its operations.
The Postal Service has seen annual volume plummet from about 220 billion pieces in 2006 to about 110 billion today as more people pay bills and communicate online.
USPS’s net losses for the 2025 fiscal year totaled $9 billion, even though total operating revenue increased by $916 million or 1.2%, due largely to its Ground Advantage shipping service. Net losses in fiscal year 2024 were $9.5 billion.
