USPS halts pension contributions after warning of looming cash crisis

The United States Postal Service is suspending employer pension contributions for workers beginning Friday, citing a looming cash shortfall, the agency announced Thursday.

The move, which affects the Federal Employees Retirement System (FERS), comes just weeks after the Postal Service warned Congress it could run out of cash in under a year without significant reforms, including changes to pension funding and stamp prices.

USPS emphasized that the pause will have no immediate impact on current or future retirees.

"There will not be any immediate detrimental impact to our current or future retirees if normal FERS cost payments are temporarily withheld," Postal Service Chief Financial Officer Luke Grossmann said. 

POSTAL SERVICE SAYS CASH COULD RUN OUT IN UNDER A YEAR WITHOUT CHANGES

USPS has previously reported mounting losses over the years, totaling $118 billion since 2007, as volumes of its most profitable product, first-class mail, fell to their lowest levels since the late 1960s.

The financial strain was further exacerbated by global tariffs, high inflation and recent spikes in gasoline prices, along with growing competition from private carriers such as Amazon, which now delivers many of its own packages.

USPS said it typically sends the Office of Personnel Management (OPM), which oversees federal retirement accounts, about $200 million every two weeks to cover pension costs.

By suspending the payments, the agency expects to free up roughly $2.5 billion in the current fiscal year. 

While the agency has suspended its employer contributions, it said it will continue transferring employee payroll deductions into retirement accounts.

USPS COULD SLOW SERVICE IN CERTAIN AREAS AS IT SEEKS TO CUT COSTS

Separately, the agency said its Thrift Savings Plan (TSP), a separate retirement savings program similar to a government 401(k), remains unaffected.

USPS will continue processing employee-funded contributions and matching funds into the Thrift Savings Plan (TSP), and noted that workers will be able to contribute more in 2026 under new IRS limits.

In March, Postmaster General David Steiner told a House Oversight subcommittee that the Postal Service could run out of cash within a year without major changes.

Steiner outlined potential cost-cutting steps, including reducing six-day delivery, raising first-class mail prices from 78 cents to $1 or more and expanding borrowing authority after USPS hit its $15 billion debt cap.

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"In order to survive beyond the next year, we need to increase our borrowing capacity so that we don't run out of cash," Steiner said in prepared testimony. "The failure to do this could lead to the end of the Postal Service as we know it now."