Panel revisits FECA reform

A House panel conducted a hearing July 10 to examine proposals aimed at cutting the cost of providing benefits to disabled federal workers under the Federal Employees’ Compensation Act.

A House panel conducted a hearing July 10 to examine proposals aimed at cutting the cost of providing benefits to disabled federal workers under the Federal Employees’ Compensation Act.

The Labor Department, which administers FECA, has put forward plans to encourage long-term disabled employees to move off FECA rolls at Social Security retirement age and into the regular retirement system. The department says some current FECA beneficiaries stay on FECA rolls past retirement age because FECA benefits are higher than those beneficiaries would receive by entering the Federal Employees Retirement System.

Currently, total-disability beneficiaries with an eligible dependent are compensated by FECA at 75 percent of gross wages at the time of injury. Beneficiaries without a dependent are compensated at 66 2/3 percent. Those benefits are adjusted for inflation, are not taxed, and are not subject to age restrictions.

According to the Government Accountability Office, which has done several studies on the program, FECA doled out more than $2.1 billion in wage-loss compensation to federal workers in 2012. U.S. Postal Service employees comprise a large share of long-term disabled receiving FECA benefits, accounting for 43 percent of all FECA beneficiaries in 2010, GAO said.

Rep. Tim Walberg (R-Mich.)—who chairs the House Education and Workforce Committee's Subcommittee on Workforce Protections, which held the hearing—said that comprehensive changes to the program are needed.

"Creating a program that prevents abuse by bad actors, reflects the realities of the 21st Century, and provides adequate support to workers will require policymakers to make some tough choices, but we all agree maintaining the status quo is not an option," Walberg said.

Under the Labor Department's proposal, FECA would be revised for future total- and partial- disability beneficiaries by setting initial FECA benefits at a single rate of 70 percent at the time of injury regardless of whether the beneficiary has eligible dependents. Another proposed revision would lower FECA benefits to 50 percent of applicable wages at time of injury, adjusted for inflation, once beneficiaries reach full Social Security retirement age.

At the hearing, GAO presented the results of simulations comparing FECA benefits to retirement benefits under the Federal Employees Retirement System. GAO found that under the current FECA program, the median FECA benefit package for total-disability retirement-age beneficiaries was 37 percent and 32 percent greater than the median 2010 retirement benefit package for USPS and non-USPS beneficiaries, respectively.

GAO also found that the proposal to cut FECA benefits at full Social Security retirement age "would result in a median FECA package roughly equal to the median FERS retirement package in 2010."

The agency noted, however, that the median years of service for the FERS annuitants it analyzed was about 16 to 18 years, "so these simulations did not capture a fully mature retirement system and likely understated the future FERS benefit level."

To address that, GAO then simulated a mature FERS system that reflected future benefits of workers with 30-year careers and found that the median FECA benefit package under the proposed change would be from 22 percent to 35 percent less than the median FERS retirement package.

GAO also studied potential effects of the proposed changes on partial-disability beneficiaries, which GAO said are "fundamentally different" from total-disability beneficiaries because they receive reduced FECA benefits based on a determination of their earning capacity. GAO said case studies of partial-disability beneficiaries revealed that the effects of the proposed revisions on those individuals varied based on individual circumstances such as earning capacity and actual level of earnings.

Among the case studies GAO examined, beneficiaries with high earning capacities likely would elect to retire under FERS because their potential retirement benefits were substantially higher than either current or proposed reduced FECA benefit levels. On the other hand, partial-disability beneficiaries with low earning capacities had potential retirement benefits that were lower than their current FECA benefits—and the proposed FECA reduction would reduce those FECA benefits at retirement age.

But the real issue lies elsewhere, according to one union leader who blasted the Labor proposal in testimony she submitted to the subcommittee.

National Treasury Employees Union President Colleen Kelley said the proposed changes overlook a major fact: Once injured federal workers start receiving FECA benefits, they accumulate no further retirement credits or contribution matches, and they are not able to make elective contributions to the Thrift Savings Plan.

"Forcing an injured worker at retirement age to give up benefits under the Federal Employees Compensation Act to live on retirement savings put aside prior to the on-the-job injury would cause grave economic hardship to many disabled employees,” Kelley said. Instead, Kelley said, policymakers should look for ways to cut the costs of FECA other than reducing benefits, such as reducing injuries by improving workplace safety.

Kelley also recommended a "change in management practices and culture," saying that the union had encountered "management resistance or disinterest in light duty assignments, alternative worksites, disability accommodations and other actions that could allow FECA recipients to return to work. "

Many injured employees workers would like to return to work, she said, and could begin working again with more cooperation from agencies.

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