USPS to suspend pension contributions, seeks 4-cent stamp price hike

U.S. Postal Service Suspends Pension Payments Amid Financial Crisis, Proposes Stamp Price Increase

The U.S. Postal Service announced Thursday it will temporarily halt employer contributions to Federal Employees Retirement System annuities as it grapples with a severe financial crisis that threatens to deplete its cash reserves by early 2027.

The emergency measure, which took effect Friday, is designed to preserve liquidity and ensure the agency can continue making payroll, paying suppliers, and maintaining mail delivery operations, according to USPS Chief Financial Officer Luke Grossmann.

“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 stated in an internal message to employees. He assured that current and future retirees would not be immediately affected by the suspension.

This isn’t the first time the Postal Service has resorted to such measures. The agency previously deferred retirement contributions in 2011 during another financial crisis.

In a parallel move to address its financial challenges, USPS filed notice Friday with regulators requesting permission to raise postage rates. The proposal would increase the price of a First-Class Mail Forever stamp from 78 cents to 82 cents, along with adjustments to rates for postcards and international letters.

The agency emphasized that despite the proposed increases, U.S. postal rates would remain “among the most affordable in the world.” Unlike many government entities, USPS operates primarily on revenue from postage sales and services rather than taxpayer funding.

Brian Renfroe, president of the National Association of Letter Carriers, described the temporary suspension of annuity payments as “not ideal” but acknowledged it was preferable to alternatives that might directly impact postal workers or service quality.

“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,” Renfroe said.

He added that the situation stems from “continued inaction by Congress” to address legislative constraints on the Postal Service.

The financial situation at USPS has become increasingly dire. Last month, Postmaster General David Steiner told The Associated Press and a congressional committee that the 250-year-old service needs its decades-old $15 billion borrowing cap raised to $34.5 billion to access more cash.

“That will buy us the time to make the fixes we need to make, and we can sail on down the road,” Steiner said. He has also advocated for greater flexibility in retirement fund investments, changes to pension obligation methodology, and authority to set postage rates sufficient to cover operational losses.

In a related development, the Postal Regulatory Commission on Thursday granted USPS a temporary multi-year waiver allowing it to redirect billions of dollars previously earmarked for retiree benefits. This measure provides “some breathing room and flexibility” for the agency to execute contingency plans while avoiding a cash shortage.

The financial challenges facing the Postal Service reflect broader changes in how Americans communicate. Annual mail volume has plummeted from approximately 220 billion pieces in 2006 to around 110 billion today as more people rely on digital platforms for bill payments and communication.

Despite increasing its total operating revenue by $916 million (1.2%) in fiscal year 2025, largely due to its Ground Advantage shipping service, USPS still reported net losses of $9 billion. This followed net losses of $9.5 billion in fiscal year 2024.

Meanwhile, advocacy group Keep Us Posted, which represents consumers, catalogs, and greeting card publishers, has urged Congress to limit rate increases to once annually while ensuring six-day-a-week mail service continues and USPS regulators maintain control over service changes.

The Postal Service’s retirement funding adjustment impacts the vast majority of its workforce, as ninety-nine percent of career USPS employees are covered by the Federal Employees Retirement System. The agency noted it will continue transmitting employees’ retirement contributions to the federal Office of Personnel Management, along with Thrift Savings Plan contributions, and will maintain employer contributions to Social Security.