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Will the USPS Default? Should We Care?

Kurt Ruppel

As you have likely heard by now, the House of Representatives has postponed consideration of its postal reform bill (H.R. 2309) until after its August recess. This is a great disappointment to those of us who had hoped to see legislative assistance for the struggling Postal Service pass before the end of the year.

Although H.R. 2309 contrasts sharply with the postal reform bill passed by the Senate in April (S. 1789), it is essential that both houses of Congress pass their respective measures. Once both bodies have passed bills, the legislative process can move forward, and a conference committee can be appointed to work out a compromise. Until that happens, the Postal Service must do the best it can within the limits of its current business model.

As has been widely reported, the immediate impact of this legislative delay is that the Postal Service will likely default on two upcoming retiree healthcare pre-payments. The first payment of $5.5 billion, due August 1, is for FY2011 and was originally due September 30, 2011. Payment was deferred by Congress to allow itself more time to address comprehensive postal reforms. The second payment of $5.6 billion is due September 30 for the current fiscal year.

What impact will this USPS default have on marketers using direct mail? Not much.

The Postal Service will not cease operations on August 1. USPS management has said repeatedly that while they will not have the cash to make either pre-payment, they will have the cash to continue processing and delivery operations. The mail will keep moving. It will be business as usual.

Nor will healthcare benefits for USPS retirees be in danger. The Postal Service has amassed more than $40 billion in its retiree healthcare benefit fund and continues to pay current retiree healthcare obligations from current revenue.

The real damage from such a technical “default” will be the continued uncertainty surrounding the Postal Service’s future. Congress needs to remember that the Postal Service is an important part of our nation’s economic infrastructure and the hub of a $1 trillion mailing industry that employs more than 800,000 people. It deserves the focused attention of lawmakers to ensure its ongoing financial stability, not just another kick of the can down the road.

We urge you to remind your lawmakers that a financially viable, self-sufficient Postal Service capable of satisfying our nation’s postal needs is essential to your business and to our nation’s economy as a whole.

-Kurt Ruppel
Marketing Services Manager

link https://www.iwco.com/blog/2012/07/25/usps-default/
Kurt Ruppel


Kurt Ruppel

Kurt Ruppel is Director Postal Policy and Marketing Communications. He educates clients on postal regulations and rates, helps ensure mail packages meet spec, and develops postal strategies that achieve in-home delivery targets at the best possible postage rates. Kurt has brought the “all of us know more than any of us” business philosophy to IWCO Direct for more than 30 years (oy!). He is a three-time IWCO Direct President’s Award winner, Chairman of the EMA Board of Directors, graduate of Utah State University, gardening enthusiast, and Ohio State Buckeye Football fan.

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