USPS skipping pension payments to keep operating

The U.S. Postal Service is warning it is skipping pension payments to stay afloat as it runs out of cash for day-to-day operations.

In a move demonstrating the severity of its financial crisis, the Postal Service announced it will suspend employer contributions to its federal pension plan, freeing up billions in cash just to keep basic operations running.

“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,” Postal Service Chief Financial Officer Luke Grossmann said.

Grossmann also noted the Postal Service pension system is better funded than those of other federal agencies.

The agency said the decision is necessary to maintain payroll, pay suppliers and continue delivering mail.

The numbers are stark.

The Postal Service has been hemorrhaging cash for years, including a roughly $9 billion loss in fiscal 2025 alone, while first-class mail volume – the agency’s most profitable product – has fallen by roughly half since 2006, the Associated Press reported.

Previously, officials said the Postal Service could run out of cash as soon as early 2027 without major intervention, the AP reported.

“We have to have a conversation with the American public,” Postmaster General David Steiner told the AP in an exclusive interview. “If you want us to deliver everywhere, every day, we’ll do it. That’s not a problem. But who is going to pay for it?”

Steiner said a number of problems unique to the quasi-public agency prevented it from breaking even or making a profit.

“In fact, we are regulated worse than a monopoly, because even a monopoly is allowed to make money,” he told the House Committee on Oversight and Government Reform.

Not allowed to profit

He said the service had all the drawbacks of being a federal agency, with none of the benefits of being a private company, such as the ability to earn a profit.

The postmaster general noted its postage rates are lower than those of any other industrial nation and it delivers mail farther, but it is still holding up comparatively well.

“Take those 110 billion and put a 78-cent stamp on them. That’s $86 billion of revenue that evaporated in 15 years,” he told the AP. “If either FedEx or UPS lost $86 billion of revenue, they would have no revenue.”

The postmaster general said the Postal Service should be allowed to deliver packages to “the last mile” like other delivery services, but Congress has not allowed it.

Steiner testified raising the price of first-class stamps from 78 cents to 95 cents would largely wipe out the Postal Service’s “controllable” losses.

“And the stamp price would still be the lowest in the industrialized world by a lot,” he added.

The postmaster general then narrowed the options for Congress to get the Postal Service in the black.

“As you all know, there are only three things that any company can do to improve financial performance – sell more products, raise prices or cut costs,” Steiner said in his congressional testimony. “On the pricing side, we need to look for higher prices on both our package and mail products.”

Postal officials said retirees will not be immediately affected by the latest move to conserve cash and that employee contributions will continue flowing into the system.

The Postal Service has lost $118 billion since 2007, a staggering figure driven by structural decline in mail usage, rising delivery costs and a business model increasingly outpaced by digital communication and private-sector logistics competitors, Reuters reported.

Its first-quarter loss so far in 2026 is $1.25 billion.

A 2022 congressional reform package already relieved some cash pressure on the Postal Service by delaying prepayment of liabilities for retirement-related benefits by about $18 billion.

But this so-called reform delays costs that taxpayers will have to meet beginning in 2032.

The Postal Service has already skipped about $60 billion in prepaid health care benefits, liabilities that were transferred to Medicare.

But now that it is delaying funding pension obligations, there is no similar fiscal option Congress can use to offset those liabilities.

Congress, for example, cannot transfer those liabilities to Social Security the way it transferred health benefit liabilities to Medicare.

The underlying crisis is clear: The Postal Service cannot meet all of its future obligations and keep the lights on at the same time.

“How long are employees going to work and vendors going to show up if we’re not paying them?” Steiner told the AP in the March interview.