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USPS Update: 7 Issues Mailers Need to Know

September 9, 2013 By Kurt Ruppel
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Direct mail remains an important part of many marketers' multichannel mix, capable of cutting through the electronic messaging clutter and driving strong ROI. However, direct mailers must adapt to the rapid changes taking place in the U.S. Postal Service, including evolving technology requirements and cost-cutting measures. Marketers also need to be aware of the financial challenges facing the USPS, and the Congressional support of Postal Service needs. Here are seven key issues forcing it to evolve.

1. USPS Finances - How Bad Is It?

The financial health of the USPS has gained attention since the decline of mail volume and revenue during the Great Recession. Through the third quarter of FY2013, the USPS reported a loss of $3.9 billion, however only $241 million of that was operational loss. The balance was driven by accelerated retiree healthcare prepayments and non-cash workers compensation adjustments.

Thankfully, revenue is showing year-over-year gains. Although mail volume is down 0.9 percent for the year, driven by a 4 percent decline in First-Class (transactional) Mail, Standard (advertising) Mail is up 1.9 percent for the year.

The Postal Service's biggest financial challenge is cash flow. It is currently operating with less than eleven days cash on hand and that is expected to dip to five days. But the situation should improve, as the first postal quarter (the fourth quarter of the calendar year) is typically the strongest for the USPS.

2. The Elephant in the Room - Healthcare and Pension Payments
Retiree Healthcare Prepayments
: Although the Postal Service is paying current retiree healthcare from current income, it is required to prepay more than $5 billion into its Retiree Healthcare Benefit Fund (RHBF) each year. The RHBF currently has more than $44 billion—nearly half the amount it needs to fund retiree healthcare for the next 75 years. A longer term payment plan would put the Postal Service on stronger financial footing without obligating the Treasury for future payments.

Pension System Overpayments: All parties agree that the Postal Service has overpaid into its Federal Employee Retirement System (FERS) pension account. Since the Postal Service is funded almost exclusively by postage fees, this overpayment is being funded by postage ratepayers—not taxpayers. Refunding the overpayment would provide the Postal Service with working capital needed for debt reduction, capital investment or restructuring costs.

 

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