The U.S. Postal Service proposed to raise its prices on Thursday due to a “severe financial crisis.” It also announced it would suspend employer contributions to Federal Employees Retirement System annuities. Here’s what’s happening.

USPS could soon raise prices on mail products and services

On Thursday, the agency sent out a proposal to the Postal Regulatory Commission that would increase pricing to mail letters and postcards by 4.8% if approved, according to CNBC. A price hike would also affect mail products with a four-cent increase on First-Class Mail Forever stamps, raising their prices to 82 cents starting July 12.

The USPS also announced it would suspend employer contributions to Federal Employees Retirement System annuities in order to be able to keep making payroll, paying suppliers, and delivering the mail. Although the suspension is effective on Friday, current and future retirees won’t be impacted right away.

“The risk to the Postal Service and the American public from insufficient liquidity for postal operations dramatically outweighs any longer-term risk to the pension funds from not making the currently due payments,” Postal Service Chief Financial Officer Luke Grossmann said, according to the Associated Press.

Brian Renfroe, the president of the National Association of Letter Carriers, confirmed the change won’t impact members immediately.

“Given a menu of options, none of which are overall positive, they would certainly prefer the Postal Service making a move like this as opposed to something that immediately impacts them or immediately impacts in a negative way the service that we provide to the American people,” he said, per the Associated Press.

The USPS has deferred payments during another financial crisis in 2011.

USPS is experiencing a financial crisis

Several factors have contributed to the USPS proposing a price hike and temporarily suspending payments. According to CNBC, the agency said it is experiencing a “severe financial crisis facing the Postal Service and continued rising operational costs.”

“The Postal Service is using all available tools, including available regulatory pricing authority, to ensure we can continue to fulfill our universal service obligation and serve the American public,” USPS said in a press release.

The agency has experienced a sharp decline in mail volume. Mail has decreased by over 104 billion pieces of mail per year since 2006, according to CNBC. This represents about $81 billion at the current stamp price of 78 cents.

The news also comes amid rising fuel costs due to the Iran war. Recently, USPS also proposed an 8% fuel surcharge for package and express mail deliveries.

Although it is a federal agency, USPS isn’t funded by tax dollars. It relies on the sale of products and services to fund its operations. Last month, Postmaster General David Steiner said it would run out by February 2027 at current spending levels.