What Does the Postal Service Reform Act Mean for Mailers?

The Postal Service Reform Act of 2022 was passed by both the House and Senate, and the President signed it into law on April 6. It has been over 15 years since Congress passed a major piece of postal reform legislation. The Postal Service is one of the oldest government institutions, established in 1775 to promote the free exchange of ideas across the colonies. It does not receive taxpayer funding and relies on revenue from stamps, postage, and package deliveries. Congress has also mandated that it deliver to every address in the U.S., including remote, hard to reach areas regardless of the financial consequences.

Hopefully, this legislation will greatly improve the Postal Service’s financial situation, make their operations and financials more transparent, and help keep costs under control for the mailing community. Highlights from the bill include:

USPS Financial Reforms. The bill eliminates a provision from the 2006 Postal Accountability and Enhancement Act that required USPS to pre-fund retiree health benefits 75 years in advance. This provision will save $50 billion or more over the next 10 years, drastically improving the agency’s financial status.

Healthcare. A Postal Service Health Benefits Program will be established which will contract with carriers to offer health benefit plans for USPS employees and retirees. Retired postal employees are required to enroll in Medicare when eligible.

Six Day Delivery. This act includes a requirement that the USPS provide six day a week delivery of the mail. It must “maintain an integrated network for the delivery of market-dominate (First-Class Mail, Marketing Mail, etc.) and competitive products (services offered by private companies like overnight package delivery)” and continue to deliver six days a week.

Service Performance. USPS must set service performance targets for each product within 60 days of the start of each fiscal year. It is also required to develop an online dashboard accessible to the public and updated weekly with national and local level service performance data, as well as financial information. This will help modernize the postal service, provide transparency, and promote on-time mail delivery.

Non-Postal Services. The USPS can now increase its net revenues through specific nonpostal products and services on behalf of state, local or tribal governments. For example, state hunting or fishing licenses or services for state departments of motor vehicles can be offered. This will make these services more easily available for those living in remote areas, away from major towns. These non-postal services must provide enhanced value to the public, not interfere or detract from the value of postal services and must cover at least 100% of the cost of the services.

Will this Act, especially the financial reforms eliminating the pre-funding of retiree health benefits, hold down future postage price increases? Postmaster General Louis Dejoy has praised the passage of the bill but has not commented on its potential effect on price increases. DeJoy’s 10-year plan includes semiannual price increases that have been as large as legally possible.

The last postal increase was in August 2021. Ironically on April 6th, the day the President signed the Postal Reform Act, the USPS filed for another price increase and opted to use nearly all available rate authority. The next increase is scheduled for July 10, 2022. Based on the February CPI, and the other sources of rate authority the July increase will be slightly less than the August 2021 increase. Last August direct mailers experienced an average increase in Marketing Mail rates of $0.017 each (7.2%), while Commercial First-Class letters increased an average of $0.026 each (6%). Our friends at Mailers Hub indicated in this week’s newsletter that Marketing Mail letters will have an average increase of 6.15% and First-Class letters will increase an average of 6.8%.

At this point, the Postal Service Reform Act seems to have no effect on curbing the upcoming postal price increase. Stay tuned as we know more on the proposed new postage rates, and future increases.

Sources:

Mailers Hub News – March 14, 2022 and April 11, 2022

CNN.com – Feb. 14, 2022, USPS Reform Act Explained

FederalNewsNetwork.com – March 2022, USPS Reform Bill Offering Much Needed Reset on its Finances Passes Senate

PIWorld.com – March 9, 2022, Keep Us Posted Applauds Senate Passage Postal Service Reform

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