By Melissa Dawkins
Special to Federal News Radio

Some House members are concerned that the Department of Labor’s (DoL) proposed changes to the Federal Employees’ Compensation Act (FECA) will negatively impact injured federal workers, especially those workers with dependents or those who are approaching retirement age.

A House committee hearing July 10 focused on DoL’s proposals to set a uniform FECA benefit rate of either 66.6 or 70 percent of a worker’s pre- disability wage for those injured on the job. The committee also focused on DoL’s proposal to set the FECA benefit rate at 50 percent of a worker’s pre-disability wage once workers reach full retirement age.

The current base rate for FECA beneficiaries is 66.67 percent of a worker’s pre- disability wage. Workers with dependents — children or a spouse — are eligible for augmented compensation increasing the total rate of benefits to up to 75 percent of a worker’s pre-disability wage, according to testimony from Scott Szymendera, an analyst in disability policy at the Congressional Research Service. The newly proposed single rate does not augment benefits for workers with dependents.

“We also found that wage-replacement rates under the current FECA program are slightly higher for beneficiaries with dependents, but that under the single-rate compensation proposals, they will be higher for beneficiaries without dependents, and the differences will be greater,” said Andrew Sherrill, director of education workforce and income security at the Government Accountability Office. “This reflects the fact that FECA benefits are not taxed whereas wages are, allowing individuals with dependents to keep a greater portion of their earnings and have greater take-home pay.”

GAO recently completed a report examining the effects of Labor’s proposed changes.

FECA benefits are currently payable for the duration of a worker’s disability or lifetime. Workers have the option, but are not required, to convert from FECA to the benefits offered to them under the Federal Employees Retirement System at the age of retirement. Setting the benefit rate at 50 percent is intended to ensure FECA recipients are not overly favored in retirement compared to their non-injured counterparts, said Gary Steinberg, director of office workers’ compensation programs at the Labor Department.

“Because returning to work could mean giving up a FECA benefit in favor of a lower OPM pension amount at eventual retirement, injured workers may have an incentive to consciously or unconsciously resist rehabilitation and, in certain cases, may adhere to the self-perception of being ‘permanently disabled.’ In any event, the considerable difference between FECA benefits and OPM retirement benefits results in certain FECA claimants receiving far more compensation in their post retirement years than if they had completed their federal careers and received normal retirement benefits like their colleagues. This disparity also suggests that a statutory remedy is needed,” Steinberg said.

Legislators expressed concerns about the ramifications of these proposed reforms.

“There’s an element of human nature that expresses itself when you’re injured,” Rep. George Miller (D-Calif.) said at the hearing. “And so, what, if you take away support for their dependents and lower the overall benefit, you’ll drive them to work?”

Steinberg said the proposals are intended to increase equity and efficiency while reducing costs.

“The proposal to reduce the benefit is twofold. One is a matter of equity, that in many situations we have individuals who are on workers’ comp who are receiving more than their colleagues who are working,” Steinberg said. “And then, the second factor is the disincentive. The fact that there are certain situations where individuals would rather stay at 75 percent tax-free than to go back to work.”

The House passed legislation to strengthen the FECA program in 2011 with strong bipartisan support, but the legislation did not become law.

DoL does not have a set timeline to introduce the new proposals as legislation, Steinberg said.

During FY2012, FECA paid $3.025 billion in benefits, of which $1.956 billion went to disability compensation, $929 million to medical and vocational rehabilitation services, and $140 million to survivor benefits, according to Szymendera’s testimony.

Melissa Dawkins is an intern for Federal News Radio.

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