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Deadlines loom for Postal Service retiree health benefit prepayments

Avoiding default hinges on slow-moving congressional reforms.

With lawmakers deadlocked over how best to enact comprehensive U.S. Postal Service reform, the agency is in danger of missing its two retiree health benefit prefunding payments due this year, risking default.

A 2006 law requires USPS to pay $5.5 billion annually to prefund retiree health care benefits. Its fiscal 2011 payment deadline was extended from last September until August 2012, and its fiscal 2012 payment is due by Sept. 30. Postal officials say they do not have that money.

“We have never defaulted before and it is not something we want to do,” USPS spokesman David Partenheimer said. “That is why it is so important that Congress passes comprehensive legislation that resolves this issue once and for all.”

But reform doesn’t seem to be too close on the horizon. Just last week, the Senate Appropriations Committee advanced a spending bill that includes a provision that’s at odds with postal reform legislation the Senate passed earlier this spring. The provision, proposed by Sen. Dick Durbin, D-Ill., would ensure that six-day delivery continues and would prohibit some post office closures in 2013. The Senate postal reform bill allows for the possibility of switching to a five-day delivery schedule if the agency cannot improve its finances through other cost-cutting measures within two years.

The House’s version of postal reform, which would restructure USPS’ health prepayment obligations, is not slated for consideration in the full chamber until after July 4.

That bill, shepherded by House Oversight and Government Reform Committee chairman Rep. Darrell Issa, R-Calif., would increase the amount the agency owes in health benefit prepayments for fiscal 2015 from $5.7 billion to $7.95 billion and would increase USPS’ 2016 payment from $5.8 billion to $8.05 billion. The Office of Personnel Management estimates this would decrease the remaining payments required by the 2006 law between 2017 and 2022 by $260 million annually. The bill allows the agency to pay what it can, about $1 billion, for its obligation this year.

Issa’s spokesman, Ali Ahmad, said it is important to note there is no “statutory penalty” for the agency if it misses its prepayments.

The Senate reform bill also would restructure the agency’s prefunding requirement, reducing its total liability for funding by 80 percent.

USPS’ plan would allow it to operate its own health care program, similar to the Federal Employees Health Benefits Program, which it says would offer employees health care at a lower cost.

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