Postal worker buyouts deliver $500M in savings

Agency offers total of $450 million in deals to 30,000 employees, as advanced technology and the recession reduce the amount of work available.

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By Julianne Pepitone, staff writer

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NEW YORK ( -- The Postal Service is making a total of $450 million in buyouts available to as many as 30,000 employees who agree to resign or retire this year.

The agency said Tuesday it struck a deal with two postal workers' unions, in which eligible employees would receive $10,000 this October and $5,000 in October 2010.

The buyout plan is the latest effort on the part of the USPS to "get to where we can at least break even," said spokeswoman Yvonne Yoerger. The agency is slated to lose $7 billion in fiscal 2009, which ends in September.

Advanced mail-processing technology and lighter mail volume means that there is simply less work for employees to do. More than 280,000 employees are potentially eligible for the buyout, according to Yoerger, which aims to save $500 million during fiscal 2010.

Most employees who are eligible for a buyout work in mail processing facilities, and their salaries average about $50,000. Those who do elect to retire under this plan will still get whatever pension they would have otherwise qualified for; there are several options. The Postal Service offers an early retirement program for employees 50 years old with at least 20 years of service, or for any worker with at least 25 years of service. Three other retirement options, each with different age and service requirements.

Letter carriers are not eligible because the number of addresses that require mail delivery is growing by about 1.5 million each year, USPS said.

Other cost-cutting actions during fiscal 2009 are expected to save the USPS more than $6 billion, the release said. These measures include a nationwide hiring freeze, executive and officer salary freezes and halting construction of new postal facilities.

Technology and the recession

There is less mail to be processed these days because of the way individuals and businesses use the Internet to communicate, and thanks to the recession, which has forced some companies to cut back their direct-mail advertising budgets.

Consequently the USPS reported a $2.4 billion loss in its third quarter. The Postal Service funds its operations strictly with postage revenues -- which hit $75 billion in fiscal 2008 -- and not taxpayer dollars. However it is exempt from taxes and antitrust law like other tax-funded government agencies.

The USPS is experiencing an unprecedented drop in mail volume: a decrease of 20 billion pieces in the first nine months of the fiscal year. The agency expects a further decline of 10 billion to 15 billion pieces in fiscal 2010.

Yoerger said the buyout deal is just one in a series of cost reductions. It does not necessarily remove the possibility of canceling Saturday mail delivery. However, only Congress can approve a move to 5-day delivery, she noted.

The 2006 Postal Reform Act required USPS to begin "pre-funding" future retirees, which costs USPS about $5.4 billion per year, Yoerger said. That accounts for a large chunk of the agency's expected $7 billion loss this fiscal year, she added. To top of page

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