Well, there is one easy answer – 7.385% overall. It’s right there in the rate documents, right? Well, sort of. That is indeed the nominal increase overall, but the regulations accompanying it have an impact as well. Probably the biggest change is the elimination of the DNDC drop-ship discount. For smaller mailings, this may force a lot of mail from NDC entry to origin entry. Mail that would have qualified for the DNDC will have to choose between origin entry or commingling. Either option will cost more. Some of our clients have performed preliminary analyses and expect an effective increase of more than 10%. Mailings of more than a million pieces will be largely unaffected.
What happened to the 11.6% increase everyone was warning you about?
It didn’t happen as planned. The Postal Service had planned on applying the revenue forgone in the mail growth incentives to gain more cap space so they could use it to increase other rates more. Turns out it wasn’t that simple. There were some conflicts between Rate Cap Space and Rate Authority, as well as uncertainty about how much of the awarded credits would actually be used. So…7.835%.
But don’t worry. In subsequent communication with the PRC, the Postal Service clarified what they would need to do to apply the funds forgone in future rate increases. They will not make that mistake again. If you do not take advantage of a promotion or incentive, you will be paying for someone else to do so. Discounts given on promotions and incentives will be recaptured in subsequent rate increases. It kind of takes the fun out of a discount.
What will 2026 look like, rate-wise?
Excellent question! There are a lot of competing forces that may have an impact:
- Since 2020, there have been two rate increases a year: One in January that has been based only on CPI for the prior six months, and the doozy in July when they took the CPI and added a retirement factor, density factor, and any unused rate authority. These increases were the ones that hurt, anywhere from 5% to 9%.
- In 2025, out of the kindness of their heart or some other organ, the Postal Service did not raise rates in January. This gave mailers and software providers a chance to catch their breath, although it really just pushed the CPI increase that would have happened in January into the July increase.
- Their hearts having returned to standard size, the Postal Service has made it clear that there will be an increase in January 2026. To accomplish that, they will need to present their case to the PRC in October. They are working overtime to accomplish that. This rate case will have enormous classification changes included in it – zoned Marketing Mail and other substantial changes.
- Complicating all of this, the PRC has indicated that they may be limiting USPS to one increase a year. There is a lack of clarity as to when this might take place, but it is possible that whatever rate changes are imposed in January will be the only case USPS will implement in 2026. There may not be a July 2026 increase.
- There is a potpourri of available rate justifications that the Postal Service could have for 2026. Will they try to put it all in the January increase?
- Any increase in CPI will certainly be there.
- The density adjustment may be available.
- Recapture of discounts given in the growth incentives.
- Any unused rate authority in the “bank.”
- Will they go for all of these in January? If they are not able to get another crack in July, they just may try.
This is a time of great change at USPS. The delivery network is changing as part of the Delivering On America plan; some workshare discounts are threatened, zone rates are proposed for Marketing Mail and Periodicals, and more. Not only will these changes impact postage, but they could have impacts on service as well. Be sure to stay tuned as details unfold, and of course, track your mail.