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House OGR leaders introduce and mark up bipartisan postal bills

On July 12, the House Committee on Oversight and Government Reform (OGR) advanced two postal reform measures: the Postal Service Reform Act of 2016 (H.R. 5714) and the Postal Service Financial Improvement Act (H.R. 5707). The bills were formally introduced earlier in the week by a bipartisan group of leaders of the OGR Committee: Chairman Jason Chaffetz (R-UT), Ranking Member Elijah Cummings (D-MD), and Reps. Mark Meadows (R-NC), Gerry Connolly (D-VA) and Stephen Lynch (D-MA).

The introduction followed a couple of weeks of consultations with stakeholders, groups that provided written comments on earlier discussion drafts of the bills. No amendments to either bill were formally proposed or adopted, and both received committee approval by unanimous voice votes.

Before the bills can be considered by the full House of Representatives, the Congressional Budget Office (CBO) must analyze the bills to determine their costs—their “CBO scores.” That analysis will occur over the summer recess, and Congress could take up the two bills when it returns to Washington, DC, after Labor Day.

Summaries of the bills are provided below, along with NALC’s initial evaluations:

Postal Service Reform Act of 2016

Summary: H.R. 5714 is a comprehensive postal reform bill that includes many of the consensus reform provisions backed by NALC, the Postal Service and a business coalition representing a cross-section of the mailing industry. It also embraced a number of NALC’s suggested changes to the discussion draft released in June.

The committee-passed measure contains several key provisions, including:

Medicare integration: Seeks to reduce the unfunded liability for future retiree health benefits (under the Federal Employees Health Benefits Program, or FEHBP) by increasing participation in Medicare. The bill would create a separate risk pool for postal employees and postal annuitants within FEHBP and within their current plans.

The bill provides low-cost prescription drugs authorized by the Medicare Part D law to FEHBP plans covering postal annuitants enrolled in Medicare, while mandating enrollment in Medicare Parts A and B for postal annuitants. For eligible annuitants (65 or older) who have not enrolled in Medicare Part B, the bill waives the late enrollment penalty. Together, this integration with Parts A, B and D of Medicare will significantly reduce the cost of FEHBP health insurance premiums paid by all active and retired letter carriers.

Retiree health care benefit funding reform: Reduces pre-funding costs by amortizing the Postal Service’s unfunded retiree health benefits liability over 40 years (instead of 15 years, as will be required under current law).
Pension funding reform: Directs the Office of Personnel Management (OPM) to use postal-specific demographic and economic assumptions in its valuations of the Postal Service’s Civil Service Retirement System (CSRS) and Federal Employee Retirement System (FERS) pension accounts. (Currently, OPM uses federal government–wide assumptions that artificially and inaccurately inflate USPS liabilities.)
Converting door delivery to curb-line or centralized delivery: The bill requires the Postal Service, within one year of enactment, to identify residential and business delivery points that are suitable for conversion to centralized or curbside delivery. It would then mandate the conversion of identified business addresses to centralized delivery (cluster boxes) over a five year period—requiring 20 percent of conversions by 2018, 40 percent by 2019, 60 percent by 2020, 80 percent by 2021, and all identified business delivery points by 2022. Conversions of residential door delivery points to other modes would be voluntary.
Non-postal services: Authorizes the Postal Service to provide non-commercial, non-postal services to state, local and tribal governments and other federal agencies.
Governance and oversight: Reduces the USPS Board of Governors from nine members to five, but retains the board’s authority to appoint the postmaster general and the deputy PMG.
Exigent rate: Restores half of the recently-expired exigent rate increase—2.15 percent of the 4.3 percent emergency surcharge that ended in April.
Other provisions: A study of cost-allocation guidelines for competitive products; the establishment of a chief innovation officer to manage the development and implementation of innovative postal and non-postal products and services; a measure to allow some non-bargaining unit employees the right to appeal to the Merit Systems Protection Board; and a provision clarifying the factors to be considered in the Postal Regulatory Commission’s (PRC) scheduled review of the rate-setting system for market-dominant products.

NALC evaluation of H.R. 5714:

Unacceptable door delivery cuts. The bill proposes significant cuts in door-to-door delivery, a major reduction in the quality of service that would undermine the Postal Service’s health in the future. It would give USPS the discretion to mandatorily convert 5.5 million business delivery points from door delivery to centralized delivery. It also would allow the Postal Service to convert a significant number of residential door deliveries to cluster-box or curb-line delivery on a voluntary basis. Such conversions not only would place the Postal Service at a competitive disadvantage in the delivery of parcels, but it also would undermine the value of direct mail. Indeed, read-and-response rates are four times higher for Standard Mail pieces delivered to doors rather than to cluster boxes. The resulting loss of package and direct-mail volume, and the associated revenue loss, likely would overwhelm any cost savings.

NALC will mobilize its allies on Capitol Hill to oppose these door delivery cuts. More than 200 representatives in the House of Representatives have co-sponsored a resolution (H.Res. 28) calling for the preservation of door delivery services. We will seek to increase this number over the summer recess and work to pass an amendment to remove the door delivery provision (Section 202) from the bill.

Medicare hardship exception needed. More than 90 percent of Medicare-eligible retired letter carriers already enroll in Part A (hospital insurance), and more than 80 percent enroll in Part B (medical insurance). The bill would require the 10 percent to 20 percent minority to enroll in Parts A and B of the Medicare program (except for those covered by FEHBP plans with fewer than 1,500 postal participants).

Although there is no cost to enrolling in Part A, and while many non-enrolled Medicare-eligible retirees will welcome the chance to enroll in Part B with no late-enrollment penalty (which is to be waived under the bill), NALC has urged the OGR committee to do more for the minority of non-enrolled seniors to ensure that no retiree will face a financial or medical coverage crisis as a result of the mandate. Indeed, we will urge Congress to provide for a “hardship exemption” process that would allow the Postal Service to grant waivers to the requirement to enroll in Part B to current non-enrollees under special circumstances. 

A hardship exemption would complement the bill’s Medicare Transition Fund, which will subsidize (over three years) the Part B premiums of current non-enrolled Medicare-eligible seniors who would be required by the bill to enroll.

Excessive pre-funding target. Under current law, USPS is required to amortize 100 percent of its unfunded liability. NALC has urged the committee to adopt an 80 percent funding target, as proposed by the Senate’s legislation (S. 2051). This would lower the cost of pre-funding.

Investing the PSRHBF. Although a separate legislative proposal to better invest the Postal Service Retiree Health Benefit Fund (PSRHBF) was adopted by the oversight committee on July 12 (see below), NALC had hoped it would be included in H.R. 5714. We will continue to push for that.

Postal Service Financial Improvement Act

Summary: H.R. 5707 was introduced by Reps. Stephen Lynch (D-MA) and David McKinley (R-WV) prior to the committee markup. The legislation would authorize the Treasury Department to diversify the investment of the Postal Service Retiree Health Benefits Fund (PSRHBF), which covers the Postal Service’s premiums for retiree health insurance.

Specifically, the bill would allow 25 percent to 30 percent of the PSRHBF to be invested in private-sector stocks and bonds through index funds such as those offered by the Thrift Savings Plan (TSP). The legislation also would establish a PSRHBF Investment Committee to advise the Secretary of the Treasury on investments made from the fund.

“We have a unique opportunity to put the Postal Service on a path to a more stable financial footing and ensure a secure future for postal employees, the mailing community, and the American people who depend on this trusted government institution,” Lynch said.

“This important legislation will provide the Treasury Department with the flexibility to keep the Postal Service Retiree Health Benefits Fund strong,” McKinley added, “so these workers can get the health care coverage they earned for their retirement.”

NALC evaluation of H.R. 5707: The union applauds the introduction of H.R. 5707, although we hope to strengthen it by raising the percentage of assets in the PSRHBF that may be invested more sensibly.

Under current law, 100 percent of the PSRHBF must be invested in low-yielding Treasury bonds that are now earning just 1 percent to 2 percent annually—far below the rate of health care inflation. Over the past 10 years, the long-term Life Cycle Funds in the TSP have earned 6 percent to 7 percent annually on average. Investing the PSRHBF in a diversified portfolio of stocks and bonds, following best practice in the private sector, would make sense. Doing so also would reduce the burden of pre-funding in the future by reducing the PSRHBF’s unfunded liability.

“The committee’s action on H.R. 5714 and H.R. 5707 is step one in a very long process for Congress,” President Rolando said. “As it is currently drafted, we would oppose final passage of H.R. 5714, and we definitely want to improve H.R. 5707. But there will be plenty of opportunity to address the deficiencies in these bills. NALC will remain intimately involved in their progress, and we will continue to work with stakeholders and committee leaders to achieve sensible legislation.”