Postal Service plan proposes own health plan, workforce cuts

Friday - 2/17/2012, 10:27am EST

The Postal Service's strategic five-year plan proposes cutting the workforce by 155,000 and creating its own health benefit program for employees and retirees.

Without these changes and others, USPS will lose $18.2 billion a year by 2015. More "shockingly," its debt will grow to more than $92 billion by 2016, said Joe Corbett, USPS chief financial officer, in a press call Thursday.

The Postal Service lost $5.1 billion in fiscal 2011 and $3.3 billion in the first quarter of fiscal 2012 alone. The agency forecasts a record $14.1 billion loss by the end of this year.

"We do not want to become a burden on the U.S. taxpayers. We want to execute against the plan and execute it fully so we return to profitability," Corbett said.

In a letter to Congress, Postmaster General Patrick Donahoe described the updated cost-cutting plan put together in coordination with Wall Street adviser Evercore Partners Inc. It reiterates many of the mail agency's proposals to switch to a five-day delivery schedule, raise stamp prices and close up to 252 mail-processing centers and 3,700 local post offices.

Workforce reductions are needed to reflect decreased mail volume levels, Corbett said. He said the reductions will primarily come from attrition with possible early retirement incentives to speed up attrition in the first two years. USPS has projected a reduction of 66,000 employees by the end of fiscal 2012 and 51,000 more by the end of fiscal 2013.

Over the last five years, attrition has totaled about 30,000 employees a year, he said. Currently, half of career employees — about 283,000 employees — are eligible to retire.

Any incentives would have to be delayed "in order to accrue the benefit opposed to cause additional cash pressure," Corbett said.

Corbett added, "The Postal Service has never had significant layoffs, and layoffs are not part of our plan going forward. We believe we can achieve this through other means."

USPS health program

In its letter, the Postal Service also renewed an idea to pull its employees and retirees out of the Federal Employees Health Benefits Program and administer its own health program. By doing so, the Postal Service would limit the number of insurers offering plans.

"It allows us to execute and use our leverage in the marketplace to bring down the cost of overall health insurance," Corbett said.

Switching to its own plan would save the Postal Service $7.1 billion a year, he said.

"We expect that the vast majority of our employees will pay a lower cost for the same or better coverage in a new program, and that we will save and so will the employees," Corbett said. "This is not, I repeat, this is not a program that takes benefits away."

The health program proposal would eliminate the need for USPS to pre-fund its retiree health fund by $5.5 billion a year.

"Ultimately, down the line perhaps, other benefit programs will follow," Corbett said.

Legislative action needed

About half of the Postal Service's cost-cutting proposals require legislative approval. Some congressional proposals have focused on providing short-term relief via a cash infusion to prevent the mail agency's bankruptcy but also postpone major decisions on cuts until later.

At an event in November, Donahoe warned Congress will have to act quickly.

"Lack of speed will kill the Postal Service," he said.

Corbett said USPS is grateful that Congress is willing to take up some measures but added, "Unfortunately, not one of the proposals incorporates all the changes we have in our business plan in order to return to financial stability."

The Associated Press contributed to this story.

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