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The U.S. Postal Service is in financial trouble, and in response, it's temporarily suspending contributions to pensions, which could impact your retirement plan. The Postal Service has experienced billion-dollar net losses nearly every year since 2007, and has warned Congress that it will run out of cash within a year.
In an attempt to cut costs, the Postal Service has paused employer retirement contributions and is seeking to increase the cost of postage. These efforts might help the USPS survive, but they could also have a significant impact on consumers and employees.
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Why the USPS is in financial trouble
Postmaster General David Steiner highlighted the reasons why the USPS is running out of cash in a written statement to Congress. He explained that from a peak of 213 billion pieces of mail per year in 2006 to the 109 billion pieces of mail the Post Office handles today, the USPS has suffered a loss of 104 billion pieces of mail per year, resulting in a major financial hit.
Additionally, by law, the Post Office cannot borrow more than $15 million, a limit that the USPS reached years ago. The limit was established over 30 years ago, and the Post Office has grown significantly in size since then. Thanks to inflation, that cap is lower proportionately than it was 30 years ago, leaving the USPS strained for funds.
Why the USPS suspended pension contributions
On April 9, the USPS announced that it will suspend paying employee contributions to the Federal Employees Retirement System (FERS). The USPS suspended FERS contributions in June 2011 to retain cash when it faced another financial crisis. That suspension lasted several months, and the USPS resumed payments and repaid what it owed.
According to the USPS, the current pension suspension is also temporary, and it went into effect on April 10. The suspension will save the USPS approximately $2.5 billion in the current fiscal year.
What the pension suspension means for employees and retirees
In a statement, Postal Service Chief Financial Officer Luke Grossmann explained that the financial challenges the Postal Service faces are of greater risk than the impacts of temporarily suspending pension contributions.
"There will not be any immediate detrimental impact to our current or future retirees if normal FERS cost payments are temporarily withheld," he said. "The risk to the Postal Service and the American Public from insufficient liquidity for postal operations dramatically outweighs any longer-term risk to the pension funds from not making the currently due payments."
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How employee pensions could be affected
Grossman explained that the Post Office will continue to transmit employees' FERS contributions, and will transmit employer automatic and matching contributions and employee contributions to the Thrift Savings Plan, which is another retirement plan available to government employees. However, the USPS employer pension contributions will temporarily cease.
If the pause is temporary and the USPS makes up those contributions as it did in 2011, the impact on pensions should be minimal. The Post Office has not identified an estimated timeline for when contributions would resume.
The pause could have a widespread effect, since 99% of USPS employees participate in the FERS.
How the proposed postage rate would work
At the same time that the USPS announced the pension contribution freeze, it proposed a postage rate change that would increase mailing service prices by approximately 4.8%. Among other services, the cost of First-Class Mail Forever stamps would increase from $0.78 to $0.82.The $0.82 Forever Stamp rate is lower than the $0.95-per-stamp rate that Reiner proposed in his March written statement to Congress.
The new postage rate is yet another price increase. In 2020, Forever Stamps were $0.55 each. In July 2025, the USPS raised its price to $0.78. If approved, this additional increase would raise the stamp price again to $0.82.
Pending regulator approval, the new rates are scheduled to go into effect on July 12.
How the new postage rate could impact consumers
The increased rate comes on top of an 8% increase to the base postage prices on Priority Mail Express, Priority Mail, USPS Ground Advantage, and Parcel Select. Prompted by increased transportation costs, the 8% surcharge will go into effect at midnight Central Time on April 26 and will remain in effect until January 17, 2027.
During this time of inflation, when budgets are already strained, especially for seniors and retirees, paying higher postage rates can be a real struggle. Consumers might change their habits and send less mail and fewer packages, and retailers might be forced to change shipping policies and increase shipping rates to make up the difference.
What Congress could do
In his written statement to Congress, Steiner highlighted the importance of increasing the Post Office's borrowing cap beyond the current $15 million. Doing so could allow the USPS to access the cash it needs to continue to operate. Steiner noted that failing to increase the USPS borrowing limit could lead to the end of the Post Office.
Keep Us Posted, an advocacy group that represents consumers, catalogs, greeting card publishers, and more, has also spoken out about the issue. The group has urged Congress to limit Post Office rate increases to once a year. Additionally, the group wants to ensure that mail delivery continues six days a week.
Bottom line
The proposed pension freeze and stamp price hike are short-term solutions to increase the USPS's cash reserves, but they won't solve the fundamental problems the Postal Service faces.
Knowing that stamp prices are likely going to increase, now is the time to purchase additional Forever Stamps. You may want to revisit your mailing and shipping habits, and if you sell items online, be sure to verify that you're charging appropriate amounts for shipping.
If you're a Postal Service employee whose pension will be affected, consider speaking with a financial advisor who can evaluate all of your retirement funds and help you check up on your retirement readiness.
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