Treasury officials contend that the law required the Postal Service -- rather than the Treasury Department -- pay for military pensions for some workers.
That practice is being followed, although the Postal Service said the payments are causing financial hardship.
The law's congressional sponsors, House Government Reform Chairman Tom Davis, R-Va., and Rep. John McHugh, R-N.Y., and Senate Homeland Security and Governmental Affairs Chairwoman Susan Collins, said additional studies mandated in the law have proved that military pensions should be shifted back to the Treasury Department, which covered them before the legislation passed.
The dispute has been a sticking point in negotiations over a new postal overhaul bill, sponsored by Collins and Sen. Thomas Carper, D-Del., in the Senate, and McHugh in the House.
Davis and Collins said the studies have convinced them that transferring payment of the pensions is the best option.
"The 2003 legislation was a stop-gap measure, and the intent was always to transfer the military pensions back to the Treasury. The President's Commission on the U.S. Postal Service agrees with Chairman Davis that the military pension obligation shouldn't rest with USPS," said Davis' spokesman. "The Postal Civil Service Retirement Act of 2003 was the finger in the dike ... now we're trying to rebuild the whole dam."
An aide for Collins agreed, saying, "Sen. Collins and Rep. Davis added language that would allow them to revisit the issue" and have concluded the Treasury Department should cover pensions.
In testimony before the Senate Homeland Security and Governmental Affairs Committee last week, Assistant Treasury Secretary Timothy Bitsberger said the 2003 law "effectively converted" the Postal Service to the Federal Employee Retirement System, which was developed in the 1980s to replace the Civil Service Retirement System. Bitsberger explained that in 2002, the Postal Service had rapidly raised its rates to cover debt, largely because of its high pensions cost.
The Office of Personnel Management audited the agency and downplayed the dire predictions for the Postal Service's financial situation. When calculated using the newer FERS model, it turned out the agency had been overpaying its pension obligations by about $78 billion, Bitsberger said. Although using the newer system might have helped the agency wipe out most of its debt, he argued, it also meant it was now responsible for covering the pensions of its military retirees, something all agencies must do under FERS.
Bitsberger said the Collins-Carper bill creates a "hybrid" of the two systems, something the administration does not support. Collins and others, however, contend that the administration is making an exception for the Postal Service, as the Treasury Department funds the military pensions of pre-FERS retirees for all other agencies.