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Postal Service’s Benefits Delays Will Cost It

(CN) - Because it "dawdled" for decades on paying beneficiaries, a federal judge slapped the U.S. Postal Service with interest on underpaid life insurance benefits.

An arbitrator first ruled in 1986 that the U.S. Postal Service had underpaid thousands of families of its deceased workers by failing to calculate their salaries with cost-of-living adjustments (COLA).

Nevertheless it was not until 2008 that USPS paid Pamela McKinney, the daughter of a USPS worker who died in 1982.

In a federal class action for interest, McKinney alleged that the USPS' payment delays amounted to a violation of the arbitration award and its union contract.

So far, the USPS has paid over $70 million in COLA-adjusted benefits to 16,575 survivors of deceased employees using the addresses it had on file, the phone book and a commercial database.

Since the USPS could not locate another 1,142 survivors, however, it argued that the delayed payments did not violate the collective bargaining agreement because no time frame was specified for the payments.

U.S. District Judge Christopher Cooper called this "plainly wrong" in a Dec. 4 ruling.

"When life insurance initially became due and the postal service did not adjust payment for the deferred COLA, it breached the CBA," the ruling out of Washington, D.C., states.

Beneficiaries who were paid late, like McKinney, are also entitled to interest, according to the order.

"The delay of years or decades harmed the paid beneficiaries by depriving them of the use of the money over that extended period," Cooper wrote. "Interest here is simply the damages owed for the Postal Service's breach-by-delay."

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