Feds with families hardest hit by proposed changes to workers' comp

Tuesday - 11/27/2012, 7:11pm EST

Disabled federal workers with dependents would be among the hardest hit by proposed changes to federal workers' compensation benefits, according to an analysis by the Government Accountability Office.

Currently, federal workers that are injured on the job are eligible to receive 66.7 percent of their pre-injury salary under the Federal Employees Compensation Act (FECA), which is administered by the Labor Department. Federal workers with dependents are eligible to receive benefits equal to 75 percent of their salaries at the time they were injured.

The department has proposed setting a uniform level of compensation — 70 percent of the pre-injury salary — regardless of dependents and further reducing benefits to 50 percent when employees reach retirement age.

But in its report that simulated those proposed changes, GAO raised concerns about the effects on beneficiaries.

"Our analyses demonstrated that there are policy levers that can be adjusted in order to achieve reform," GAO auditors wrote in the report. "However, consideration needs to be given to the impact the change will have on the adequacy of benefits and the ensuing fairness across beneficiaries, both at the time of injury and over the lifetime of the beneficiary."

Effect on beneficiaries with dependents

Currently, the wage-replacement rate — the percentage of take-home pay that is replaced by FECA benefits — is 80 percent. That would drop to 77 percent if the Labor Department compensated all beneficiaries at the uniform rate.

FECA beneficiaries with dependents would be the most prone to a drop in FECA compensation.

Now, FECA recipients with dependents have a median wage-replacement rate that is 3 percentage points higher than for recipients without any dependents, according to GAO's analysis. Under the proposed changes, that gap would widen but in the opposite direction. Beneficiaries with dependents would have a wage-replacement rate 6 percentage points less than those without dependents.

Proposed changes would affect retirement

Similarly, the GAO report raised concerns about reducing FECA benefits when beneficiaries reach retirement age.

At retirement, FECA recipients continue to receive their workers' compensation benefits and can also draw on their Thrift Savings Plan annuity. Regular retirement under the Federal Employee Retirement System consists of the FERS annuity, TSP benefits and Social Security payments.

GAO's simulation showed that after a 30-year career, median FECA benefits, as currently administered, are about equal to or 10 percent less than median FERS retirement benefits, depending on TSP contributions.

But under Labor's proposed changes, the median FECA benefit package would be significantly less — about 31 to 35 percent — than the FERS retirement package, according to the report.

NTEU: Report supports union position

The push to reform the federal workers' compensation has also been driven by lawmakers who say the program is prone to abuse.

Congress has debated proposals that go even further than the Labor Department's suggested changes. Last spring, the Senate passed a postal reform bill that included a measure to limit benefits to 66.67 percent of employees' pre-injury salary, regardless of dependents.

The National Treasury Employees Union blasted that proposal at the time. NTEU President Colleen Kelley seized on the GAO report, saying it "underscores and supports the position of NTEU regarding the serious negative impact on recipients of federal workers' compensation benefits from postal reform legislative language strongly opposed by NTEU and approved earlier this year by the Senate."

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