June 28 (Bloomberg) -- The U.S. Postal Service’s suspension of contributions to an employee pension plan is a “willful violation of the law,” the chairman of the U.S. House committee overseeing the service said.
The Postal Service’s decision last week to halt payments as of June 24 to the Federal Employees Retirement System, which covers about 85 percent of career postal workers, “sets a dangerous precedent,” Representative Darrell Issa, the California Republican who is chairman of the House Oversight and Government Reform Committee, said in a letter to the U.S. Office of Personnel Management that was released today.
“It is troubling that OPM would allow the lapse in payments pending further review by the executive branch,” Issa told OPM Director John Berry in said in the letter, dated yesterday. “Attempting to preserve cash by missing required payments” violates the law, he said.
OPM and the Postal Service agreed to seek an opinion on the pension payment decision from the Justice Department’s Office of Legal Counsel, with the Postal Service saying it will resume payments if the ruling goes against it.
The Postal Service says it has overpaid the federal retiree fund by $6.9 billion. Issa says the overpayment is temporary and caused by low interest rates.
‘Sound Business Judgment’
“Our decision was based on a sound business judgment that prioritizes our competing obligations in a rational manner to conserve as much cash as possible so we can keep delivering the mail,” David Partenheimer, a Postal Service spokesman, said in an e-mail.
Issa last week introduced a bill that would expand the agency’s borrowing authority by $10 billion, allow it to end mail delivery on Saturdays and create a control board for additional Postal Service oversight if it defaults on obligations to the federal government for more than 30 days.
The Postal Service has said it will reach its $15 billion statutory borrowing limit by the end of its fiscal year on Sept. 30, following a fiscal 2010 loss of $8.5 billion. It has said it needed to suspend the pension contributions to save $800 million this year.
Brittney Manchester, an OPM spokeswoman, had no immediate comment.
To contact the reporter on this story: Angela Greiling Keane in Washington at email@example.com
To contact the editor responsible for this story: Bernard Kohn at firstname.lastname@example.org