Bill to stave off postal hikes until '06

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Congress passed legislation last week that should keep postal rates steady until 2006, according to the Postmaster General.

The bill allows the Postal Service to scale back some of its pension payments, a move that will save the organization $2.9 billion this year alone.

Last year, the Office of Personnel Management discovered the U.S. Postal Service was overpaying into the Civil Service Retirement System Fund, which covers employees who joined the USPS before 1984.

The current payment formula was determined in the Postal Reorganization Act of 1971, and was based on a 5% rate of return on contributions. Because of higher-than-expected rates, Congress approved adjusted pension payments, provided the savings are used to pay down the agency's $11 billion debt, said Postal Service spokesman Gerry Kreienkamp.

The Direct Marketing Association-whose members send 80% to 90% of all the Postal Service's standard mail volume-rallied to get the legislation passed.

"As soon as we saw this irregularity [in the funding] we thought, we have to jump on this," said Louis Mastria, DMA director of public and international affairs. "[The rate increases] affect everyone, from business mailers to those mailing a birthday greeting card."

The bill is expected to be signed by the president before the end of the federal government's fiscal year, Sept. 30, which means the lower fund payments would be immediate. Had the legislation not passed, the Postal Service was prepared to file for a new rate increase, Mr. Kreienkamp said.

The President's Commission on the U.S. Postal Service is reviewing changes to the agency's business model and is expected to make its recommendations in July.

"There are several fundamental structures that need to be looked at," Mr. Mastria said. "Should the post office be allowed to discount as private mailers like [United Parcel Service] do? No one anticipated the competition it would be facing from faxes, e-mail and private mailers."

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