Key Notes Vol. 02 No. 19

USPS Turn Profit, but Still Loses Money Congress in 2006 adopted the Postal Accountability and Enhancement Act which forced the USPS—which does not receive money from the federal budget—to prefund its health care benefit payments to retirees for the next 75 years. That prefunding takes $5.5 billion a year off the Postal Service’s books. So even though the USPS has made $1.4 billion in controllable income this year, partly due to increased package delivery services and in part thanks to a temporary postage increase that might soon go away, it’s still in the financial weeds because of the benefit prefunding. The Postal Service would like that requirement removed, but it also wants to move its retirees from the USPS benefit system onto Medicare and make other changes to its personnel structure. Source: AllGov

USPS Hammered on Late and Undeliverable Mail The USPS has touted its efforts to cut costs, but it’s also getting hammered on the issue of slow and undeliverable mail. A bipartisan group of senators told Postmaster General Megan Brennan that slow mail delivery and poor service was hitting rural America hard. And a new report is out from the USPS Office of Inspector General (OIG) saying the Postal Service is failing to stem the rise in undeliverable mail. Source: eCommerceBytes

Major Printers Keeping Clients Informed on Rates The major printing operations around the country are working feverously on updating their mailing and software systems for the implementation of the new postage rates on May 31st. One of their biggest concerns is the mandatory FSS preparation and the impact it will have on their co-mail operations. This concern was expressed by several of them on a MTAC Mail Prep and Entry focus area telecom. Another concern is having enough time to install and evaluate the presort software before live production. So what do we know so far about these rates? Joe Schick, Vice President of Postal Affairs at Quad Graphics, said there will be a wide range in Flat-Size Standard Mail rates due to the transition to FSS pricing. Joe said FSS price is greater than the non-FSS carrier route price, so clients that have large percentages of carrier route and/or high density volume will realize increases of about 4-6% for that portion of the mail (about 20% of the total volume on average). However, the 3/5 digit portion will see decreases of about 1-2% because that mail will also be paying the FSS price which is lower than non-FSS 3/5 digit prices. As for Periodicals, Joe feels the same scenario plays out for the FSS portion, but there is an added consideration related to bundle and container prices. The USPS greatly reduced the pound rates, but they increased bundle and container prices by double, and in some cases triple digits. The resulting impact is that lighter weight Periodicals will experience the largest increases while heavier weight Periodicals could see decreases. And lighter weight with little or no advertising will be in line for the extreme increases of up to 15%, something the Non-Profit Periodicals community has been very vocal about. Mr. Schick is quick to point out every client and every mailing has to be analyzed on its own merits, and depending on which price cells the volume is currently in and the price cells it will end up in the new structure, the impact can and will vary greatly. [Editors Note: A big thanks to Joe for his insight.]

Direct Mail Outperforms All Digital Channels Combined By Nearly 600%The 2015 DMA Response Rate report includes a lot of information that can be hard to absorb. But, bottom line, the report’s key findings are that direct mail continues to be a very strong and successful channel, both in terms of response rates and cost-per-acquisition. It may be more expensive on a “per piece” basis than digital channels, but its’ response cannot be duplicated with a digital channel alone. Source: Dataman Group

Innovative Idea for Rejuvenating USPS A panel of key stakeholders gave their views on the “challenges and opportunities facing the US Postal Service in the digital age” at a briefing convened by Senator Tom Carper, the ranking member of the Homeland Security and Governmental Affairs Committee. James Sauber, chief of staff of the National Association of Letter Carriers (NALC), had a suggestion for dealing with one of the USPS’s most persistent financial headaches: the retiree healthcare fund. Sauber recommended that the Office of Personnel Management should stop buying Treasury bonds and “invest the fund in something more sensible”. “Healthcare costs are growing five to seven percent annually and Treasury securities are yielding two to three percent,” said Sauber, adding that other organizations such as the Pension Benefit Guaranty Corporation and Amtrak had established safeguards to allow them to invest healthcare assets in low-cost index funds that provided higher returns. He argued that the Postal Service should do the same. Source: Post and Parcel