Under the law passed in 2006, the postal service must pay at least $5.5 billion a year into a retiree health benefit fund, a steep “prefunding” requirement that doesn’t apply to normal corporations. Although the agency has suffered a significant drop in first-class mail over the last five years, the prefunding payments have accounted for most of the postal service’s losses in recent quarters.
At midnight Wednesday, the U.S. Postal Service is expected to default on a multi-billion dollar payment owed to the Treasury, highlighting financial struggles that could affect not only mail service but hundreds of thousands of jobs.
The agency’s failure to make good on a $5.5 billion payment toward retiree health benefits comes as no surprise, and the default won’t have any immediate effects on the postal service’s day-to-day operations, the agency assured in a statement. But the missed payment — reportedly the first of its kind in the post office’s history — will no doubt ramp up the debate over how best to address the agency’s growing red ink.
On Tuesday, some proponents of reform blamed not the postal service but Congress itself for the default, citing a controversial 2006 law that increased the agency’s financial obligations and lawmakers’ failure so far to pass legislation this session that would address the agency’s problems.
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