WASHINGTON - The financially troubled Postal Service is suspending its contributions to its employees' pension fund.
The agency said Wednesday it is acting to conserve cash as it continues to lose money. The post office was $8 billion in the red last year because of the combined effects of the recession and the switch of much mail business to the Internet. It faces the possibility of running short of money by the end of this fiscal year in September.
Sen. Tom Carper, D-Del., called the announcement "the canary in the coal mine moment for the Postal Service."
"If we don't heed this warning and act quickly, the Postal Service as we know it will cease to exist in the very near future," said Carper, chairman of the Senate subcommittee with jurisdiction over the agency.
The mailing industry echoed his comments.
"This move underscores the need for Congress to make bold, quick and substantive reforms to the Postal Service. The USPS is hanging by a thread, along with 8 million private sector jobs that depend on the mail," said Art Sackler, coordinator for the Coalition for a 21st Century Postal Service, a group representing the private sector mailing industry.
The post office said it has informed the Office of Personnel Management that the $115 million retirement payment made every two weeks will be suspended effective Friday. The action is expected to free about $800 million in the current fiscal year. The post office's Federal Employee Retirement System account currently has a surplus of $6.9 billion, the agency said.
Because of that surplus the suspension should not have any effect on current retirees, postal spokesman Dave Partenheimer said.
He said no decision has been made about how long the contributions will be suspended but "it is not a long-term solution. The long-term solution is getting legislation passed."
Anthony Vegliante, chief human resources officer, said the post office will continue to send employees' contributions to the retirement system, as well as employer and employee contributions to the workers' savings plans, which are similar to a 401(k).
Over the last four years the Postal Service has cut its staff by 110,000 and reduced costs by $12 billion. The agency has also proposed eliminating delivery on Saturdays to save money and is working on closing small post offices and consolidating sorting and other operations.
The post office, unlike other federal agencies, is also required to make an annual payment of more than $5 billion as an advance contribution to future retiree medical costs.