IT.tv Episode 421: The Internet Killed The Post Office

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  • http://twitter.com/post406 Jeff Egnaczyk

    The biggest reason the Post Office is losing money right now is the Postal Accountability and Enhancement Act of 2006 which requires the USPS to prefund its future benefit payments. No private corporation does this from what I’ve heard. That’s not to say the changes in mail volume wouldn’t be hurting them, but they wouldn’t be in the crisis they’re in now. 

    • http://www.insignificantthoughts.com Vinny

      That’s not the problem.  The problem isn’t that they have to fund the plan, it’s what the plan is.  The plan in question is a defined benefit plan which, without fail, bankrupts or financially breaks the organization providing it as retirees grow and fewer workers exist to fund the retiring ones.  A defined contribution plan, which they have asked to switch to, would work, but the Postal Union isn’t having it.

      Funny, that.

      Prepaying the pension benefits is the right thing to do, especially since the costs are spiraling out of control so quickly.  Imagine if they just decided one day they would no longer pay the pension?  Then what?  Oh, right.  Bail out time.  I forgot; that’s how we do things now.

      You can’t run a defined benefit plan on a large work force with a large number of retirees.  Period.  The private sector learned that a long time ago; it’s about time the government and non profit sector learned it as well.  If the postal service wants to get out from under this pension, here’s what they can do:

      Do a NPV transfer of funds, divied up, to all employees, tax free with a window to transfer that into their own accounts at their leisure, or allow the postal service to go private and allow those employees an ESOP style plan.  Sound familiar?  Sure it does; that’s how IBM restructured its pension years ago and it never looked back.

      The pension is what’s breaking the postal service more than the mail volume, I think, but prefunding it isn’t the problem.  The structure of the plan itself is what’s the issue.