Refund would not save US Postal Service-GAO

Thu Oct 13, 2011 10:20am EDT

* Postal Service says overpaid into federal pension fund

* Seeking refund as a way to cope with huge losses

* GAO says refund could endanger federal worker benefits

By Emily Stephenson

WASHINGTON, Oct 13 (Reuters) - Returning up to $75 billion the U.S. Postal Service believes it overpaid into a federal pension fund would not solve the agency's long-term financial problems and would force the government to pay billions more for worker pensions, the Government Accountability Office said on Thursday.

The Postal Service has recently lost billions of dollars each quarter as consumers use email and pay bills online.

The agency is trying to cut costs, looking at closing thousands of post offices and asking Congress for permission to end Saturday delivery.

A refund would "provide some temporary relief from the pressures USPS faces due to declining volume, revenue and inflexible costs, but would not by itself address USPS's long-term financial outlook," the GAO said in its report.

The government watchdog said it did not believe the Postal Service could cut costs fast enough for a transfer of funds from the pension fund to cover the agency's debt and address current and future operating losses.

The overpayment controversy stems from the 1970s, when the Postal Service was formed as an independent agency. The USPS and the U.S. Treasury Department agreed on a method for sharing workers' pension costs, but the Postal Service has since argued its share of the payments was too large.

The agency hoped the return of money from the Civil Service Retirement System would solve its financial problems long enough to allow it to cut costs and return to profitability.

A consulting firm determined in a 2010 study for the Postal Regulatory Commission that, while the allocation of pension funds was legal, it did not match current actuarial practices.

Postal worker unions have pushed for the refund in hopes it would prevent the agency from moving forward on a proposal to eliminate 220,000 jobs by 2015.

The refund idea is featured prominently in postal overhaul bills offered by Democrats in Congress. Senate staffers have said lawmakers were waiting to see the report before acting on postal legislation.

Republicans including Darrell Issa, whose House of Representatives committee will debate his postal bill on Thursday, have said a refund could increase federal government liabilities for workers' pensions.

GAO said transferring billions of dollars away from the fund would leave the government on the hook for between $55 and $85 billion dollars and could lead to pressure to cut pension benefits for federal workers.

"The disagreement among the experts over the Civil Service Retirement System overpayment is significant enough that I believe it would be more prudent to set aside this question...to focus on the areas of postal reform where we have more consensus," Senator Tom Carper, a Democrat, said in a statement.

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