The postal retiree health fund is now spending its principal

Postal workers used to buy health coverage through the same federal program as every other civil servant.▸ Since January 2025 they haven't: the 2022 Postal Service Reform Act (PSRA) split them into their own program, the Postal Service Health Benefits Program (PSHB), with its own trust fund for retirees and its own premium math for the people still working. Two years in, both halves are under strain — the fund is drawing down faster than it's refilling, and the workers who fund it are shrinking in number while paying more per paycheck.

The PSRA's bargain was straightforward: in exchange for ending the old requirement that USPS pre-fund decades of future retiree health costs — and cancelling the prefunding debt already on the books — the Postal Service Retiree Health Benefits Fund (PSRHBF) would run on a pay-down basis, drawing on its existing balance to cover annuitant premiums until that balance runs out.▸ It would also require most PSHB-covered retirees to enroll in Medicare, shifting a share of their costs off the fund entirely.

That balance is now dropping faster than expected.▸ Per USPS's FY2025 Form 10-K, Note 13, OPM's actuarial valuation of the PSRHBF shows the fund balance fell from $28.4 billion to $24.2 billion between September 30, 2024 and September 30, 2025 — even as the underlying actuarial liability edged down slightly, from $54.9 billion to $54.1 billion. Because the balance fell faster than the liability did, the unfunded obligation grew from $26.5 billion to $29.9 billion in a single year.

Figures per USPS's FY2025 Form 10-K, Note 13, OPM valuation.

That drawdown trips a mechanism written into the PSRA itself: once OPM's annual calculation shows the fund can't keep covering annuitant premiums on its own, USPS owes a "top-up payment" into it.▸ The 10-K states plainly that USPS "will not incur additional retiree health benefit costs until OPM's annual calculation results in a top-up payment, expected to first occur in 2026 and estimated to be $700 million" — the first payment of its kind since the 2022 law cancelled USPS's old prefunding debt. OPM's own preliminary five-year estimate, also disclosed in the 10-K, shows that payment isn't a one-off: it climbs every year through the decade.

And because USPS is a self-funded agency, that bill — like nearly all its costs — comes out of stamp and shipping revenue, not appropriations: the 10-K is explicit that top-up payments will be funded "primarily through the sale of postal products and services."▸ An agency that lost money on operations in FY2025 now has a new, growing bill with no taxpayer backstop.

The other half of PSHB covers people still on the job, and that side is shrinking.▸ USPS employed 531,000 career employees and 93,000 pre-career employees at the close of FY2025 — 624,000 total, down 15,000 from 639,000 a year earlier, per the same 10-K. USPS's employer-side health-benefit spending on that workforce was $5.7 billion in FY2025, up 1.5% from FY2024's $5.6 billion — split between PSHB/FEHB premium contributions and Medicare taxes for career and PSHB-eligible pre-career staff, and a separate, smaller self-insured plan USPS runs for pre-career employees not yet eligible for PSHB.

USPS's own share of that bill is shrinking as a percentage even as it grows in dollars: the 10-K reports USPS paid 71% of active employees' healthcare premiums in FY2025, down from 72% the two years prior — which means employees are absorbing a growing slice of premiums that are themselves rising.▸ OPM's Federal Benefits Open Season Highlights for Plan Year 2026 puts PSHB's overall average premium increase at 9.0% for 2026 (up from 6.9% in 2025) and the average enrollee's own share increase at 11.3% (up from 11.1% in 2025) — both faster than the prior year's pace. OPM's PSHB premium tables show what that means in a single paycheck: for 2026, the program-wide weighted-average biweekly enrollee share is $118.47 for Self Only coverage, $255.69 for Self Plus One, and $277.00 for Self and Family — with the government paying roughly 72% of the total premium in every tier.

Fund, workforce, and spending figures are from USPS's Form 10-K for the fiscal year ended September 30, 2025; 2026 premium and rate-of-increase figures are OPM's official Open Season figures for the PSHB Program and apply to the plan year beginning January 2026.