Previously credited to the Postal Service Retiree Health Benefits Fund, Steven T. Mnuchin, the Treasury Secretary for the United States, has now suspended investments temporarily. In a letter to Nancy Pelosi, Speaker of the House, the news was released and is a direct impact of the returning statutory debt limit.
In addition to the postal retiree fund, the Civil Service Retirement and Disability Fund has also been affected. With the letter dated to March 4th, Mnuchin has said the investment suspension would continue until June 5th.
Back on March 2nd, the Congress federal borrowing limit was set, and this meant freezing current debt at the new record-high, $22 trillion. For many, there’s fresh concern since lawmakers don’t have clear plans to extend this limit.
For the next three months, the Treasury Department will keep these payments suspended. According to Mnuchin, no federal employee or retiree will be affected by this change, and the retirement funds in question will resume normal action when the debt limit is either suspended or extended.
Postal Service Financial Difficulties
In a system that’s entirely unique, the Postal Service is required to offer its retiree benefits in advance, and this has proven to be a huge expenditure and one reason why the financial position of the agency is questionable. While the 2006 Postal Accountability and Enhancement Act remains in place, this prefunding of benefits will continue.
In August 2018, it was suggested that the Postal Service had failed to make payments to the fund for around eight years. According to the US Government Accountability Office, the required payments haven’t been met since 2010. With this in mind, the Treasury Department has been forced to step in and take what they consider to be ‘extraordinary measures’ in order to stop defaults for the US.
As was explained by the department itself, there are four extraordinary measures available to them;
For the Postal Service Retiree Health Benefits Fund and Civil Service Retirement and Disability Fund, the first is to suspend new investments and redeem existing investments.
Secondly, all State and Local Government Series Treasury security sales can be stopped.
All reinvestment of the Exchange Stabilization Fund can be suspended.
Finally, the same step can be taken for the Government Securities Investment Fund.