Postal Service proposes cutting 120,000 jobs, pulling out of health-care plan

By Joe Davidson, Published: August 11

SEATTLE — The financially strapped U.S. Postal Service is proposing to cut its workforce by 20 percent and to withdraw from the federal health and retirement plans because it believes it could provide benefits at a lower cost.
The layoffs would be achieved in part by breaking labor agreements, a proposal that drew swift fire from postal unions. The plan would require congressional approval but, if successful, could be precedent-setting, with possible ripple effects throughout government. It would also deliver a major blow to the nation’s labor movement.
In a notice informing employees of its proposals — with the headline “Financial crisis calls for significant actions” — the Postal Service said, “We will be insolvent next month due to significant declines in mail volume and retiree health benefit pre-funding costs imposed by Congress.”
During the past four years, the service lost $20 billion, including $8.5 billion in fiscal 2010. Over that period, mail volume dropped by 20 percent.
The USPS plan is described in two draft documents obtained by The Washington Post. A “Workforce Optimization” paper acknowledges its “extraordinary request” to break its labor contracts.
“However, exceptional circumstances require exceptional remedies,” the document says.
“The Postal Service is facing dire economic challenges that threaten its very existence. . . . If the Postal Service was a private sector business, it would have filed for bankruptcy and utilized the reorganization process to restructure its labor agreements to reflect the new financial reality,” the document continues.
In a white paper on health and retirement benefits, the USPS said it was imperative to rein in health benefit and pension costs, which are a third of its labor expenses.
For health insurance plans, the paper said, the Postal Service wanted to withdraw its 480,000 pensioners and 600,000 active employees from the Federal Employees Health Benefits Program “and place them in a new, Postal Service administered” program.
Almost identical language is used for the Civil Service Retirement System and the Federal Employees Retirement System.
The USPS said the programs do not meet “the private sector comparability standard,” a statement that could be translated as meaning that government plans are too generous and too costly.
“FEHB may exceed what the private sector does in certain areas,” said Anthony J. Vegliante, USPS chief human resources officer and executive vice president. “It may not meet what the private sector does in other areas. So cost may be above the private sector, while value may be below the private sector.”
Bills that would rein in employee benefits or have workers pay more for the benefits have been introduced in Congress and met with vigorous opposition from federal employee organizations. Intentionally or not, the Postal Service’s proposal provides support for such legislative initiatives.
The proposals are the USPS’s latest money-saving effort in a series of moves, some as recent as a few weeks ago and others stretching over a decade.
The Postal Service has reduced its workforce by 212,000 positions in the past 10 years and recently announced it is considering the closing of 3,700 post offices. It also has asked Congress to allow it to deliver mail five days a week instead of six and to change a requirement that it pre-fund retiree health benefits.
The USPS said it needs to reduce its workforce by 120,000 career positions by 2015, from a total of about 563,400, on top of the 100,000 it expects by attrition. Some of the 120,000 could come through buyouts and other programs, but a significant number would probably result from layoffs if Congress allows the agency to circumvent union contracts.
“Unfortunately, the collective bargaining agreements between the Postal Service and our unionized employees contain layoff restrictions that make it impossible to reduce the size of our workforce by the amount required by 2015,” according to the optimization document. “Therefore, a legislative change is needed to eliminate the layoff protections in our collective bargaining agreements.”
The layoff protection, however, does not apply to employees with fewer than six years of service, which presumably would include thousands of workers.
Postal union leaders quickly and sharply rejected the plans.
“The APWU will vehemently oppose any attempt to destroy the collective bargaining rights of postal employees or tamper with our recently negotiated contract — whether by postal management or members of Congress,” American Postal Workers Union President Cliff Guffey said.
“Our advisers are not encouraging us at all to even consider it,” said National Rural Letter Carriers’ Association President Don Cantriel.
“We are absolutely opposed” to the layoff proposal, he said. “We are opposed to pulling out of the Federal Employees Health Benefits plan.”
National Association of Letter Carriers President Fredric V. Rolando said: “The issues of lay-off protection and health benefits are specifically covered by our contract. . . . The Congress of the United States does not engage in contract negotiations with unions, and we do not believe they are about to do so.”
How Congress will respond to the proposals, however, remains to be seen. Many Republicans, including those who have sponsored legislation that labor considers anti-union, may support the plan. Some Democrats, for which organized labor is an ally, could back union opposition. But the Postal Service’s critical financial situation could make some Democrats have second thoughts.
Two members of Congress who have introduced separate postal reform bills were noncommittal on the USPS plan.
A spokeswoman for Sen. Thomas R. Carper (D-Del.) said, “He is particularly interested in learning whether these proposals would be fair to employees and effective in reducing the Postal Service’s costs.”
Rep. Darrell Issa (R-Calif.), chairman of the House Oversight and Government Reform Committee, said: “These new ideas from the Postal Service are worth exploring. Options for reform and cost savings that will protect taxpayers from paying for a bailout, now or in the future, need to be on the table.”