Outgoing Postal Chief's Advice: End Pensions, Overhaul Feds' Health Care

Postmaster General Patrick Donahoe is ending his 39-year career at the U.S. Postal Service next month, and he has some advice for those he is leaving behind in the federal government: do away with pensions.

In a farewell speech reflecting on his career long service with USPS, the embattled Donahoe, who announced his retirement in November, said he hoped the cash-strapped Postal Service would serve as a breeding ground for initiatives that can later be expanded to all federal agencies.

“I would encourage Congress to view the Postal Service as a test bed or laboratory of change that might be applied to the rest of the federal government,” Donahoe said at his speech in Washington Tuesday. “When we look at the workforce we’ll need in 20 or 30 years, what we are doing today will have to evolve.”

He added it might no longer “make sense” to promise a 22-year-old just entering the workforce a defined-benefit pension they would not be able to cash in on for 50 years.

“And how reliable is that promise?” Donahoe asked.

Congress should begin experimenting by moving federal employees exclusively to a defined contribution benefit, like the Thrift Savings Plan, instead of the hybrid system currently in place, he said. Such a structure would provide a better fit for the modern, more mobile, workforce. The government should also overhaul the health care system for federal employees and retirees, Donahoe added.

“I don’t think anyone would argue that the federal government isn’t massively overpaying for employee and retiree health care benefits,” he said.  “Let the Postal Service develop a more cost-effective approach.” The Federal Employees Health Benefits Program was an effective system “in 1962,” he added.  

Donahoe has for years advocated moving USPS employees out of FEHBP and into their own health care system. He has also pushed for postal retirees to receive wrap-around Medicare coverage. Donahoe said the Postal Service is the perfect place to try out new ways to provide employee benefits.

 “The Postal Service has the kind of management that would appreciate being at the front edge of change and would make good use of opportunities,” he said.

Donahoe’s critics will surely call his recommendations yet another example of draconian cuts by a postmaster general who has slashed services and employees more than any postal leader in the agency’s history. The postal lifer, however, has no regrets, saying the changes were necessary to adapt to the evolving nature of the business.

“We made a lot of tough decisions that were based on a long-term view of what was right for the organization,” Donahoe said. “We used every bit of flexibility we had -- as we should have.”

That flexibility was a key theme for Donahoe, who argued the savings he was able to achieve with the tight constraints under which USPS currently operates serve as a “strong argument” for more of it. Donahoe was never able to capture his white whale of a legislative overhaul, but remains optimistic his successor -- current Chief Operations Officer Megan Brennan -- will finally oversee a major reform. Donahoe blamed Congress’ inability to pass any meaningful legislation on “myopia,” but held out hope unions and interest groups will come together with one, long-term view.

“The narrow interests can’t continue to get in the way of the broader national interest,” he said.

Postal reform will ultimately serve as a “win” the new, Republican-led Congress will be looking for, Donahoe predicted. Starting in February, however, he will no longer be leading the fight to achieve it.